Yes, At Some Point China Will Implode

Business Insider ^ | 6-17-2013 | Henry Blodget

[blam]

Yes, At Some Point China Will Implode

Henry Blodget
June 17,2013

If there has been one prediction made more than any other over the past couple of decades, it's that China's miraculous economy is headed for a fall.

China bears have pointed to a long list of disasters-in-the-making, from questionable economic statistics to skyrocketing real-estate prices to ghost cities to centrally planned growth to corruption to pollution to civil unrest to debt.

And yet, despite all of these concerns, China's economic machine has just kept chugging along.

But this time it's going to be different!, says an analyst from Fitch. This time, China really is screwed.

According to Ambrose Evans-Pritchard of the Telegraph, Fitch analyst Charlene Chu has concluded that China's growth is being fueled by a credit bubble that is unlike anything the modern world has ever seen. This debt bubble is leading to massive overbuilding, Chu says. And when it finally bursts, as debt bubbles always do, China will be looking at a Japan-style depression and deflation.

Given the number of China doom prophesies that have been made over the past two decades, you can be forgiven for rolling your eyes at this one and moving on. But Chu does cite some startling statistics, including the claim that China's debt-to-GDP ratio has quietly shot up to more than 200% and that each additional yuan borrowed is producing ever less growth. If there's any hard law of finance, it's that what can't go on forever won't. And borrowing at this rate relative to economic growth can't go on forever.

That said, as always, the key question is "when?"

At some point, China's economy is almost certainly going to go through the same sort of violent setbacks that every economy goes through...

(snip)

[bert]

So what?

Nothing continues for ever. A downturn is as sure as the sun rising in the morning. Predicting a downturn is as easy as falling off a log

[SeminoleCounty]

Communist China is proving that Free Trade does not work.

Free Trade is the Global Warming of Economics

[wonkowasright]

If they have truly implemented the 1 child policy they will have internal issues that make our Social Security Crisis look like childs play.

[catfish1957]

If they have truly implemented the 1 child policy they will have internal issues that make our Social Security Crisis look like childs play.

I can only think of one solution for the Chicoms..... They will need to build up a huge cash reserve, and then allow immigrants to supplement society as this generation ages. Otherwise you are right. They have a future demographic curve that will court disaster.