

China Tries Japan's Approach to a Stock Bubble - chollida1
http://newsletters.briefs.bloomberg.com/document/25z1bq1xnb2zkmlet8/view-china-tries-japans-approach

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sharetea
The similarity between China now and Japan 1990 is very noticeable. That is,
they're both exporting country that has an aging demographic which likes to
save, has a small consumer base compared to export, and is losing export
shares as production moves out of country to other cheaper countries. And they
both choose to save the banking system instead of letting it self correct.
This means that China will likely see 10-20 years of deflationary decline just
like Japan. However, because China suffers from massive capital outflow from
rich leaving the country, and it already has reached very high debt to GDP
ratio (something Japan reached only years later after 1990), I would say China
is in even worse shape than Japan in 1990.

~~~
jpatokal
There are other differences: Japan was essentially a fully developed nation by
the time the crash hit, while large parts of China are not. Also, Japan has a
more or less functioning democracy capable of letting its people changing
those in power peacefully, while China does not.

~~~
peteretep

        > Japan has a more or less functioning democracy
    

I note that the same party was in power for 55 years prior to 2009.

~~~
digi_owl
Same can be said for many (western) European nations...

~~~
peteretep
Many? If we're talking the last thirty years or so, I can think of Luxembourg
and Ireland, although if you're going back 20 years, I guess there's Italy
too. Where did you have in mind?

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chollida1
China's been in the news for the past week and we've had alot of stories
posted about it. This is the best summary of the Chinese stock market that
I've seen.

This particular thread:

[https://news.ycombinator.com/item?id=9849360](https://news.ycombinator.com/item?id=9849360)

Is what made me post this. I understand that most people don't understand the
markets but that thread in particular has alot of embarrassing and flat out
wrong ideas in it.

 __EDIT __it turns out I posted a link to the middle of the document. Below is
what the link should be:(

[http://newsletters.briefs.bloomberg.com/document/25z1bq1xnb2...](http://newsletters.briefs.bloomberg.com/document/25z1bq1xnb2zkmlet8/front)

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LiweiZ
It's just a Casino operated by rulers. Many in China know it. But average
people just can not resist the lure. This has happened in China several times.
The new generation (perhaps those were born after 1985) is getting their own
lessons and pay the tuitions this time.

[edit]: to downvoters, reason for downvoting my comment? If you are not
familiar with average people in China, please do your homework.

~~~
vardump
Upvoted, because you hit the core issue. A lot of money is just betting and
doing no research past staring at stock valuation chart.

Sell if stock is going down, buy if it goes up. That tends to amplify random
noise to a high level of volatility.

Contagion risk to the rest of Chinese economy is what the people should be
worried about. A lot of the bets have been done with money loaned from
somewhere. This will affect the rest of the economy.

~~~
LiweiZ
Many average investors just watch what's said on media and friends and take
the follower strategy. Actually rulers are taking advantage of it, though it
seems hard to believe at first.

------
hackuser
In 2013 it was revealed that Bloomberg censored China reporting that was
objectionable to the Chinese government. I'm not sure why anyone trusts their
reporting now.

[http://www.nytimes.com/2013/11/09/world/asia/bloomberg-
news-...](http://www.nytimes.com/2013/11/09/world/asia/bloomberg-news-is-said-
to-curb-articles-that-might-anger-china.html)

EDIT: Whey I say, "I'm not sure", I mean it. Is there more to the story?

~~~
rahimnathwani
Bloomberg's web site (including this article) are blocked in China.

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holdenc
Let's get real about the China stock market "crash" \-- all major China stock
indices are still up between 30% - 70% from 12 months ago. Somehow the run-up
in prices was business as usual, but the slide down is a catastrophe. A real
crash has much further down to go. (scroll down to the China indices)
[http://www.bloomberg.com/markets/stocks/world-
indexes/asia-p...](http://www.bloomberg.com/markets/stocks/world-indexes/asia-
pacific)

~~~
valarauca1
The issue is 80% of investors are _retail_ / _mom and pop_ investors. Not
banks, funds, etc. Likewise most stock is purchased _on the margin_ with loans
leveraged against potential (and expected) growth of the stock. This is
literally what happened to the US before the Great Depression. Not only are
people losing their life savings, but they're immediately shackled to debt
they have no means to pay off.

So now a larger number of brokers/banks are tied to toxic debt, which is in a
quantum of state of both being/not being an asset (if you think it is the
crash of 2008 wouldn't have happened). While I doubt we will see bank failures
(The CPC will step in), it will resonant.

~~~
tptacek
According to the Economist, a very small fraction of Chinese households are
invested in the stock market.

~~~
valarauca1
<1% of Americans owned stock when the market crashed in 1929. But its slightly
beside the point. The depression was more triggered by a perfect storm of
incompetence/environment debt.

-Hawley-Smoot Tariff did not work at all, and made things MUCH worse.

-Farmers burning their crops in protest of rock bottom prices post crash instead of selling them.

-The Dust Bowl worsened the situation greatly.

-Wide spread bank failure.

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jakozaur
"The real fallout from China's troubles would be regional." I wish that was
true... though I wouldn't treat it as obvious fact.

China is big enough that it woes can cause global impact. Given that a lot of
indexes (e.g. S&P500) are all time high, central banks have close to 0
interest rate, there is little room for maneuver...

Economist's recent article:
[http://www.economist.com/news/leaders/21654053-it-only-
matte...](http://www.economist.com/news/leaders/21654053-it-only-matter-time-
next-recession-strikes-rich-world-not-ready-watch)

------
weeksie
On the upside, the AUD will probably shit the bed now. Which is nice, because
I'm more than happy to come back in a year or two and pick up a little terrace
in Newtown for something resembling a sane asking price.

~~~
spacehunt
Yes, this plus the impending US interest rate climb means the AUD will
probably drop like a brick. Good for those of us not in the country, but with
most everything except food being imported nowadays I can't imagine how people
down there will live...

~~~
weeksie
Yeah, I'm feeling that it'll be a bit like the late 90s/early 00s at least
from an exchange perspective. But coupled with a pretty inevitable housing
bust on a massively inflated market. . . . It's going to be tough going for a
while.

That said, it'll be a good time to be selling to the US market.

------
avodonosov
Maybe a year ago this was posted at HN: [http://qz.com/198458/zombies-once-
destroyed-japans-economy-n...](http://qz.com/198458/zombies-once-destroyed-
japans-economy-now-theyre-infecting-chinas/)

An interesting article comparing China today and Japan in 1980-s, and
predicting problems for China.

~~~
positr0n
It's not that impressive considering an article positing doom and gloom for
China's economy has been in the mainstream news about once a week for the last
decade. :-)

~~~
avodonosov
I wasn't aware of that :)

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eloy
The title sounds very clickbait, or is that just me?

~~~
chollida1
Sorry, that's what the actual article's head line is. I didn't want to change
it.

Scroll to the top of the article. I accidentally linked to the middle somehow.

~~~
ctdonath
Then apparently Bloomberg did, because now it reads "China Tries Japan's
Approach to a Stock Bubble".

~~~
auntienomen
This is par for the course with Bloomberg. "Stocks Down After Blah" frequently
changes to "Stocks Up After Blah".

------
hackuser
Here's an interesting analysis from The Economist:

[http://www.economist.com/blogs/freeexchange/2015/07/chinas-s...](http://www.economist.com/blogs/freeexchange/2015/07/chinas-
stockmarket-crash)

Quick summary: The market isn't in such horrible shape, and it's impact on the
economy is much smaller than in more advanced economies, so why the panicked
response?

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yalogin
Will this effect the US economy/stock market?

~~~
simonh
No. The Tokyo stock exchange crash in the 80s didn't, nor did the Asian
financial crisis in the 90s. It's a local issue. Unless you or your company
have direct exposure to China you should be fine. For the USA and Europe,
Greece is a much, much bigger deal because it's much more heavily integrated
into our financial systems.

~~~
jandrese
I wouldn't say that there will be no effect, but I don't think the US stock
market is going to be too severely impacted. It's kind of crazy to think that
because China is our largest trading partner and we manufacture so many goods
over there, but most of what we do isn't tied that heavily into their stock
market.

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dschiptsov
It is a classic speculator's Ponzi Scheme, based on social contagion and mass
hysteria, what else?

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harry8
Rest easy, Goldman's assure us there's no bubble. Where there is major
government fraud, Goldman's are there. Goldman's assured the world that
Greece's immediately doubling debt value to cheat the EU rules was fine so
they've given themselves a reputation in these matters.

Where are Goldman's involved? Short it.

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paulpauper
So in other words, an asset class that has been run-up very quickly is falling
very quickly. The media acts like this is unusual, when those who actually
study markets see that it happens all the time.

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powerapple
Should we go to reddit to read news like this? Look at the frontpage, we have
two entries for the blooding Chinese stock market. Please let's get away from
these stories and stay with what Hacker News should be.

