I recognize the fact that there is a property bubble in China, and a rather big one at that. But, long-term isn’t China as well as many other countries in Asia much better off in the long-term than the US?
I’d say they are much better off, if only because of the fact that the average Chinese citizen is not under water in term of debt as far as I know. Maybe I´m just unaware of it, but I don’t think the Chinese housing bubble is being driven to as great an extent by banks extending no-money-down, adjustible rate mortages to people who cannot afford it. If they are, they wil be in trouble soon, however.
Even if much of the assets of the Chinese state(foreign debt) is poised to decline dramatically in value, and their own housing bubble is set to pop, I think China is positioned to bounce back far faster than other nations, because global contraction or not, they will still have a comparative advantage in terms of most manufacturing.
Also, and the libertarian in me hates to type this, but China’s authoritarian regime, and the people’s seemingly tacit compliance with that regime, will probably mean that any remission in living standards and economic growth will probably not spark the kind of general dissent and political turmoil we are seeing in the west. If the Chinese could stick with the communist party in charge through the Great Leap Forward and the Cultural Revolution, the great unwashed masses would probably just take a vanilla recession in their stride and keep on toiling for less money.
It does not bode well for the USA. The USA depends on these Chinese lenders for its existence. If there is a drop in lendable funds in China then the USA and rest of the Western World will see the full force of all this inflation.
China has far less regulation, virtually no welfare, and greater security of property and person than the U.S. or most of Europe. They have much more of a real productive base compared to the paper-economy of the U.S.
What info can you direct me to? I am curious about the basis for these bold statements.
21 of China’s 22 Fortune 500 companies are state-run. China’s government is building ghost cities - huge skyscrapers and apartment buildings with no one living in them. Jim Chanos thinks China is a huge bubble economy, you can read an interview he did with Charlie Rose here.
Here’s another presentation by Vitaliy Katsenelson about the China bubble. China - The Mother of All Black Swans - By Vitaliy Katsenelson
Peter Schiff is familiar with Austrian Business Cycle Theory, capital formation, etc. I don’t know why he underestimates the obvious ABCT problem in China. He seems to lean on the fact that China is “producing stuff” (his words), that somehow “producing stuff” will minimize the effect of ABCT. He seems to ignore malinvestment when it comes to China. These malinvestments will be exposed, then the Chinese government will either keep printing more money to prevent the collapse of these bubble activities, or will allow the collapse to continue. I say they will print, which will only lengthen and deepen the problem.
When China explodes, who will be left to buy U.S. debt? The Fed will have to accelerate its own printing…
China has a property bubble, and also the local governments encourage splintered and unprofitable industrial companies.
Yes, China still has a large state sector of the economy, but the actual proportion of money that goes through the economy that is from the State is higher in the U.S. than in China; most of China’s economy is in the millions of independent tradesmen, contractors etc.
Links
I can’t find Russ Douthat’s article on China’s steel industry, but there are several polls that find people in China much more favorable to trade and markets than Americans, sometimes by like 30% of respondants.
Yes, China still has a large state sector of the economy, but the actual proportion of money that goes through the economy that is from the State is higher
in the U.S. than in China; most of China’s economy is in the millions of independent tradesmen, contractors etc.
help a brother out? where are the evidence/statistics that demonstrate this?
Way too lazy to dig it all up. Wrote a paper on it several months back.
In general, China has very little environmental or safety regulations, and it pretty much ignores international treaties. Welfare provisions (and the amount of people eligible) are very low, and usually depend on your employer. A lot of regulatory and control in politics is geared towards the provincial and city level, the central government in China does not have a lot of direct intervention in enterprise.