Why the Stock Meltdown Doesn’t Spell Doom for China

Slate ^ | 7/8/2015 | Stephen S. Roach

[Zhang Fei]

But if growth in China is closer to 0% than to 7% or 8%, the problem is virtually insoluble. More, the cost of manufacturing in China is rendering its mercantilist advantages less attractive than the manufacturing opportunities in India and Indonesia and even in America.

India and Indonesia have much lower labor costs. The problem is that infrastructure is lousy, corruption is out of control, and the possibility of expropriation of capital assets far higher. The US is not even on the same planet, cost-wise, for labor-intensive assembly operations. China's advantage is that it is a low labor cost country that has near-First World infrastructure, and relatively honest government. Not as honest as Finland, but way more honest than India, Indonesia and probably just about every Third World country anyone's ever heard of.

[datura]

中国是所有谎言。抱歉。

[nathanbedford]

India Ranked Less Corrupt Than China for the First Time in 18 Years

[CincyRichieRich]

I didn’t look at the article source until the word, urbanization, then I figured lib.

The fear should be the amount of gold they have bought backing the Yuan vs the vapor backing USD and 0bama’s hatred for us.

[bert]

“If you build it, they will come” that was the mantra in houston around 1980 or so

regarding the stock market. the prices have declined to the prebubble level

that is, values have returned to realistic levels that for China might not be as readily determined as elsewhere

Chicap exuberance is based on tips by shoe shine boys and an intrinsic nature to gamble. It was written this week that one could collateralize stock margin with land. that is, in China where gambling is in the blood, it was legal to literally bet the farm on stocks

it might just be nearing the time to buy. Good contrarians seek out that which is shunned or in disfavor

[bert]

or not

[Zhang Fei]

“If you build it, they will come” that was the mantra in houston around 1980 or so

Stateside, the big switch from agriculture (rural areas) to industry (the big cities) had been over for decades by the time 1980 rolled around. In China, it's barely begun. Investors who have bought units in the empty cities are counting on per capita income to rise such that by the time those units are occupied, they will make a bundle based on skyrocketing land prices that tend to accompany rising incomes. Based on the 35-fold rise in Chinese per capita output (and to a similar extent, household incomes) since 1979, I'd say it's not a bad bet, if holding costs aren't overly high. And they're not, in China. Property taxes are non-existent. High rise condos can be patrolled at minimal cost in security staff. Bottom line is that housing speculation in China isn't completely irrational - property prices there are high but the holding costs are low, and continued individual income growth will likely lead to long-term appreciation. Assuming China follows the growth trajectory of its East Asian counterparts like Hong Kong, Taiwan, South Korea and Japan.