

China growth fuelled by cheap debt rather than corporate profits - cwan
http://online.wsj.com/article/SB10001424052970204619004574319261337617196.html

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jhancock
In my dealing with China's economists, I have found them to be very well
educated and conservative. Just what you'd want/expect from an economist. I
also found the government leaders listen to them. Possibly more so than we
have done in the U.S.

I doubt they have any choice at this point but to leverage debt to keep the
economy fueled. Lets hope they find a better balance and know when to reign it
it than the U.S. did. All said, its probably a good thing they are in the debt
game as it keeps the playing field leveled.

They have reigned in the housing market a bit. For example, they keep
adjusting the amount you have to put down on a home. What used to be 15% to
30% in some areas has gone to 30 or 50%. Yep, you could never buy a home in
China for 5% down!

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trevelyan
Here in Beijing it's been interesting to watch the effects of stimulus on the
housing market. The government is promoting growth by giving lots of cash to
larger organizations and entities, which in turn give them to a couple of
people who quickly buy real estate. The result is that prices are rising and
falling in large amounts quickly depending on what the government is doing.
(On a side note, most of the Party members I've known have been involved in
real estate, so I don't think it's accidental that there are systemic
pressures to support the real estate market.)

That said, home ownership is still out of the reach of most of the common
people.

I think the article is about dead wrong. China has a problem with its banking
sector, And the stock markets are ridiculous since corporate profit is tied to
real estate prices. But China still does not have a problem. The four big
banks will be bailed out of their losses by the center (the last giveaway was
54 billion) and when you think of it this way, China isn't leveraging debt so
much as spending credit to keep itself afloat.

The ignorance at the WSJ is hilarious. Who is keeping them in business?

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philwelch
"The ignorance at the WSJ is hilarious. Who is keeping them in business?"

Rupert Murdoch.

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asdlfj2sd33
What this article is saying is that in the future, I'm guessing 2 to 5 years,
China could see a credit bubble and misguided investments.

If you're an economist this is obvious. And as the article states, the Chinese
leadership knows it as well. They had been tightening credit before the recent
downturn.

Therefore it is a very reasonable assumption that China will start tightening
again in 2 to 5 years when the global economy recovers.

In other words, this article gives no new or insightful information.

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tokenadult
You are correct that the author argues that restrictive government policies
ameliorated some of the effects of very low interest rates. But on a close
reading of the article, even this author, who seems to think government
control of the economy is doing very well so far, concedes that there is
already "misguided investment."

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cwan
Private Chinese firms are already complaining that they're being squeezed out
by their state owned counterparts (who are getting the bulk of the bank
financing and government stimulus funds):
[http://www.chinastakes.com/2009/8/china-stimulus-plan-
critic...](http://www.chinastakes.com/2009/8/china-stimulus-plan-criticized-
for-crowding-out-private-sector.html)

