We at ISA are goldbugs and regularly note crazy imbalances. Where you sit is a function of where you stand. Some points of interest:
- Growth going from a three decade trend of 10% to 8% is said to be ‘slowing markedly’, not withstanding 8% is in aggregate larger than 10% growth only two years ago because of the size of the base.
- As for the whole housing bust idea, unmentioned was the hundreds of millions of Chinese peasants in the countryside who only dream of better housing. Meanwhile, in China 17% of home purchases are done with cash, and “Buyers who use mortgages have a lot of skin in the game: the minimum down payment for owner-occupiers is 30% and 60% for investors.” CLSA I’m just glad the tired 60 million housing units are empty’ line was not trotted out! (60 million? That’s everything stateside on one side of the Mississippi!)
- China’s $3.2 trillion in foreign reserves is almost equal to the Chinese national debt; that’s the great over-leverage? Yet as I dug further, Barron’s wrote “U.S. debt-to-GDP ratio of more than 80%.” Yea, like three years ago! Today it’s near 105% and rising by like 700 basis points a year (with the explicit purpose of keeping US GDP from collapsing). Now we don’t know which numbers Barron’s is making up!
- This was supposed to sound all fancy: “First, when one tallies up all the liabilities direct and contingent of the Chinese central government, indebtedness of the state-controlled banking system, various government entities like the Ministry of Railroads, state-owned enterprises, local government loan investment vehicles, and considerable cross-holdings of bond debt by SOEs, China’s government debt-to-GDP triples to about 150% and is rapidly rising.” Was the intent to compare this to a US debt to GDP of 500-1000% ratio when the social programs are considered?
- My personal favorite China complaint is the over saving meme. As if productive investments comes from somewhere else. But I give myself away as an Austrian economist.
Maybe China really is in trouble. If so, seems Western problems would be an order of magnitude worse. The set-up for the Big Print and hyper-inflationary endgame would have arrived.
Headlines like this seem spooky too: China major ports face coal oversupply at China Daily. But actually reading the article gives a different flavor: “China’s coal stocks are estimated at about 300 million tons, equivalent to the entire country’s coal consumption in one month.” Remember, as China turns to world markets for a particular commodity to be imported the whole industry sees its dynamics change: “China imported 86.55 million tons of coal in the first four months, up nearly 70 percent year-on-year.”
DEUTSCHE BANK: Actually, Chinese Economic Data Is Being Understated: Business Insider.
Rio Tinto sees 2012 Chinese growth above 8%: Mining Weekly
World GDP at the Economist.
We at ISA are not interested in steel makers. We do, however, like to sell them met coal. A primer by Peter Epstein.