Message Of China's Meltdown: The Growth Miracle Is Over

Investors Busniness Daily ^ | 07/27/2015 | IBD Editorial

[expat_panama]

Markets: China's stock market retreat has turned into a panic and, despite massive intervention, its government is helpless. Fact is, after a long period of super economic growth, China is downshifting to a much lower speed.

China's benchmark Shanghai Composite plunged 8.5%, the biggest daily loss since 2007. Of course, the market is largely retracing its extraordinary 150% surge over the last year or so. Still, since their June peak, Chinese stocks have plunged 28%, or roughly $1.9 trillion.

Reuters calculates that the government of Xi Jinping has spent close to $800 billion — or nearly 10% of China's total GDP — trying to halt the market sell-off. But if anything, by increasing investor uncertainty, it's made things worse.

"When Xi Jinping came to power, there were a series of hints that market-based capitalism would be allowed to move forward under his leadership," Evercore Partners founder and former U.S. Treasury No. 2 Roger Altman told CNBC's "Squawk Box." However, "at the first real threat, they've fallen over themselves to impose government control."

We've disagreed with Altman on many things over the years, but on this he is dead-right. Goldman Sachs estimates $761 billion in capital has left China over the last year. That's not exactly a vote of confidence. But behind it all, China's stunning market decline holds a bigger message: The nation's long growth miracle is over.

[expat_panama]

Related story from Chinese stocks destroy $39.8B in U.S. wealth

The Chinese stock implosion is starting to get serious. It's costing U.S. investors real money.

The 144 China-based stocks with primary listings on major U.S. exchanges have erased nearly $40 billion in paper wealth since the Shanghai Composite index peaked on June 12. It's an enormous destruction of wealth that in effects wipes out the market value of a company the size of cruise ship operator Carnival.

The Shanghai composite index' losses are only getting worse. The much-watched measure of Chinese stocks fell 8.5% in overnight trading Monday. The index has dropped more than 27% since hitting its peak this year back on June 12.

Shanghai Composite (Photo: Bloomberg)

Some of the stock-specific shredding of value is getting noteworthy. Chinese e-commerce stock, Alibaba, has been

[snip]

CHINESE STOCKS WITH PRIMARY LISTING ON U.S. EXCHANGES DOWN MOST IN MARKET VALUE SINCE 6/12/2015

Company	Symbol	$ ch. market value ($ billions)	% Ch. market value since 6/12/2015
Alibaba Group	BABA	-$7.6	-6.1%
JD.com	JD	-$4.5	-15.3%
Vipshop	VIPS	-$2.9	-21.5%
Youku	YOKO	-$1.8	-35.3%
58.com	WUBA	-$1.4	-18.8%

Sources: S&P Capital IQ, USA TODAY research

[snip]

[Sirius Lee]

Remember in 2008 when it was all over for America, and the world now belonged to the BRICs?

[Alberta's Child]

Some of us have been saying for years that China’s future wasn’t nearly as strong as many Americans have been making it out to be. It will be interesting to see how far they plunge before it’s all said and done.

[The_Republic_Of_Maine]

I think what China is doing is driving down the price of Gold since they are, I believe, due to receive this years payment on our debt to them, in the billions, in gold.

[expat_panama]

A lovely Tuesday morning to all waking up from the fifth straight drop in stocks and a week of new bases for gold'n'silver ($1,096 and $14.68).   They all look good now --at least to futures traders who see stock indexes up +0.55% and metals also upbeat to +0.10%  Reports coming up today are Case-Shiller 20-city Index and Consumer Confidence.  Then again:

Stephen Moore: Clinton Cap-Gains Plan — We'll All Be Poorer

What an economically deranged debate we have going on in the race for the Democratic nomination for president. In one corner is an unapologetic socialist, Vermont Sen. Bernie Sanders, who wants to raise individual income tax rates on the rich to 70% or more — apparently because it worked so well in the 1970s.


Read More At Investor's Business Daily: http://news.investors.com/ibd-editorials-perspective/072715-763619-hillary-clinton-capital-gains-tax-hike.htm#ixzz3hBSjvdF4

[1010RD]

We live in the Age of Distrust. Once lost trust is hard to restore. Which politicians do you trust to run the country?

[Patton@Bastogne]

somebody needs a war ... quick ...

[Tucker39]

And who’s to say that The Donald’s pointing out China’s crookedness with their currency, and his pledge to jerk the slack out of their one-sided trade lashup didn’t influence the start of the divestiture of ching chang stocks?

And once it started, the herd mentality did the rest.

[proxy_user]

In the long run, communism is not compatible with capitalism. You may get by if you’re in the rapid development phase, but after that, it’s really tough. No big command and control economy has ever made the jump.

[allendale]

China sits on the granddaddy of all real estate bubbles. Its real estate is artificially valued and many loans and mortages are made against these psudo assets. Also Chinese Central bankers, still controlled by the Party, directed the squandering of $3 trillion of lost capital building huge ghost cities that sit empty, decaying, and have no return on investment. The days when productive, intelligent Chinese will work for $40/month plus room and board are over. Chinese factories and the markets they serve are shrinking. One reason that China supports Iran and the lifting of sanctions is because it views Iran not only as an energy source but Iran’s 75 million citizens as a big market for its export driven economy.

[Ghost of SVR4]

China has a big time gold bug right now..

[killermosquito]

Just imagine what our country woulld be like if we had a conservative patriot in the White House. Our economy would be booming.

[RipSawyer]

“In the long run, communism is not compatible with capitalism.”

In other news oil and water still don’t mix easily.

[Bluewater2015]

Some of us have been saying for years that China’s future wasn’t nearly as strong as many Americans have been making it out to be. It will be interesting to see how far they plunge before it’s all said and done.

---

Yup. The big fear in the 1980s was that Japan was this economic behemoth that was going to conquer the world. The people who ran MIDI were geniuses etc. Then came 1997. Next it was China, going to be world’s largest economy blah blah blah. World’s largest bubble it may be. Stay tuned.

[Bluewater2015]

“One reason that China supports Iran and the lifting of sanctions is because it views Iran not only as an energy source but Iran’s 75 million citizens as a big market for its export driven economy”

---

That’s a parasitic economy, like Japan’s was, only worse. Relies on the outside world buying its stuff to keep it afloat.

[Shane]

” due to receive this years payment on our debt to them, in the billions, in gold.”

Your belief is incorrect. This is nonsense.

[Brooklyn Attitude]

“Remember in 2008 when it was all over for America, and the world now belonged to the BRICs?”

Before that in the 80’s or 90’s it was over for America and the world was going to belong to the Japanese. To paraphrase “we look for performance over the next quarter but the Japs look at performance over the next quarter CENTURY”.

[L,TOWM]

Real Estate bubbles are still the biggest cause of economic distress in modern economies. Japan in the late 1980’s - us in 2008 - maybe it’s China’s turn now.

The article does speak a lot of demographics and that is certainly a huge root cause of Japan’s 3 decades worth of stagnant performance.

[The Working Man]

Some of us have been saying for years that China’s future wasn’t nearly as strong as many Americans have been making it out to be. It will be interesting to see how far they plunge before it’s all said and done.

---

I’m one of those voices. Personally if I was an ‘investor’ and I don’t mean in the stock market but one who has ‘real property’ that resides in China. I would seriously look into divesting myself of it before the CCP leadership resort to confiscation.

Why you ask? At it’s core the CCP believes EVERYTHING in China belongs to the state. They just let others use it for awhile.

Also I wouldn’t be surprised if the leadership takes a good hard look at what China’s ‘leap forward’ to first world status has cost it in pollution and destruction of farmland. And that is very important to China’s future, because in the past their history of famine has lead to major political upheavals.

There’s a lot more to look at too and as time goes by it’ll become very apparent to us all.

[VTenigma]

Very interesting take. Other than Obama’s destruction of the world economy something smells about this decline. Also China was not happy about the US devaluing the dollars meant to pay them back.