Contrarian Investor Sees Economic Crash in China

NY Times ^ | 1/07/10 | Daniel Acker

[mgist]

SHANGHAI — James S. Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other highflying companies whose stories were too good to be true.

James Chanos made his hedge fund fortune predicting problems at companies and shorting their stock.

[UCFRoadWarrior]

A major economic crash in Communist China will eventually happen. They are a state-run economy who has based all of its marbles on selling crap goods to the USA...at the cost of many American jobs.

Now...with America at 10% unemployment....the Americans cannot buy the ChiCom products...and the ChiCom people do not have the money to buy their own products.

Communist China sits on trillions of US debt....and there is no way the US can pay it back by continuing to redistribute US wealth to the ChiComs via Free Trade. There will come a time, real soon, that the American wealth can no longer be redistributed.

Free Trade with Communist China is an abject failure. Those who still support Free Trade with Communist China are really just Socialists and Communists.....there is not a single market reason to continue the current policy

[yefragetuwrabrumuy]

I am dubious. China is immense and complex compared to the paper simplicity of Enron. And despite a great deal of attention directed towards its free enterprise, remember that it is *not* free, but remains a command economy.

And most importantly, even if China did have an economic collapse, the west might not even be substantially aware of it, if the Chinese government decided to conceal the fact. Nor, to a great extent, would we even know what a Chinese collapse would look like.

This makes prediction just speculation.

[liberty or death]

Didn’t read the article but I can say from experience that they are scrambling to scratch up US business. I’m in the fly and tackle biz and have competed with Chinese junk from day one. In the past 10 years more and more small companies began to pop up over there all producing the same molded plastic junk and the quality continues to fall. In the US the base charge for a molding plate is 15 to 25,000 dollars. In China I can get the same plates for 4 to 800 dollars. BUT, the quality is complete trash.

[ClearCase_guy]

if China did have an economic collapse, the west might not even be substantially aware of it

Remains to be seen. A real economic collapse could result in violence and millions of deaths. Hard to hide. And economically, it would have a powerful ripple effect throughout Asia. I think the West would be very aware.

[mgist]

I was Asia during the holidays and saw freightliners/cargo ships sitting idly at every port, and in the middle of the ocean.

There is simply no way a that China won't be affected by the collapse of their biggest source of income-the US.

Now Asians claim they are focusing on their internal markets to sell goods. Yes, they have huge populations, but they are dirt poor. It will take decades for a China and India to turn their impoverished societies into comsumers societies comparable to the US. If it can happen at all.

I'm sure Americans can learn to live withouts the endless supply of chatchkas, but we will se inflation.

[randita]

Are you a retail business? Do you have an online store? If so, please Freepmail me with the URL.

[sam_paine]

Gordon Chang, The Coming Collapse of China, 2001

[yefragetuwrabrumuy]

A big problem is the ambiguity of the expression “economic collapse”.

In the last decade or two, for example, the US saw, and possibly tried to encourage “rolling corrections” in both industries and regions. That is, there was a recognition that some industries are inherently cyclical, so if you can arrange that their cycle is different than the cycles of other industries, it mitigates the overall effect.

And the same with geographical regions. If just one region had a decline at a time, instead of several at once, it would take a lot of pressure off the decline, and encourage recovery.

And the Chinese are traditionally “cyclically oriented”, often at a grand scheme, so are familiar with mitigation strategies. Whether they are wise enough to take them is another matter.

[liberty or death]

We are retail, wholesale and direct Distribution to stores both small and large. Started 8 years ago and as a testiment to how large American distribution operates our products were rejected at the retail level & wholesale level because we did not mfg overseas. Well since 99% of what I do is a tightly held secret having it manufatured overseas or anywhere for that matter was a stupid idea...period. So we built a web page and marketed direct to the customer. This in turn created local demand in this particular market and it’s finally taking off.
Now we don’t need the big distributors or trade shows as the internet is making them obsolete. That and the way they treat the small US made mfg companies by doing everything they can to keep you off the playing field they can piss off at this point.

[liberty or death]

They e-mail us weekly trying to get us to let them do our manufacturing. They can’t even send you the correct samples let alone get a truly quality product done right and consistent. However they can do it for 10 cents when it costs us a dollar.

[bert]

There is a recent article in Forbes describing the woes in the China banking system and the bookkeeping between banks and local governments and the central bank

It would seem California and Michigan and some others could learn a thing or two from hard pressed China provencial governments. They have sent out notices to taxpayers to pay taxes in advance of due date. they were collecting taxes in 2009 not really due till 2010.

[central_va]

Will you run for president?

[Noumenon]

Now Asians claim they are focusing on their internal markets to sell goods. Yes, they have huge populations, but they are dirt poor. It will take decades for a China and India to turn their impoverished societies into comsumers societies comparable to the US. If it can happen at all.

In some respects, little has changed in China for rhe last 5000 years or so. China - up until the West, empowered bu its Industrial Revolution - has always been a squat, three-layer society: The Imperial/military side, the Mandarin/bureaucratic side and the peasantry on the bottom. It worked for as long as it did because of a deliberate degree of inefficiency and a philosophical/religious world view that kept people in their place.

Something similar has reasserted itself - the Communist Party/PLA at the top, the new Mandarin/bureaucratic classes in the cities and the vast majority of the teeming poor peasantry still living at barerly above subsistence level in conditions we would find apalling.

Chinas new prosperity is a mile wide and an inch deep. They are far too dependent upon foreign markets, and when those falter - or dry up - there will be hell to pay. They are also only one catastrophe away from a general collapse: the failure of the Three Gorges dam. When - and not if - that goes down, it will take most of the country with it.

[mgist]

I agree with you. These are cultures that will have a hard time changing into consumer driven societies. America is/was truly one of a kind. Why we insisted on becoming like Europe is beyond me.

I have much more faith in the emerging economies of Latin America, than those in Asia. But in the Orwellian world of George Soros, perception is reality to most. Just look at Dubai, which has incredible money and power in the hands of a select few - they collasped.