

China: the coming costs of a superbubble  - cwan
http://www.csmonitor.com/Commentary/Opinion/2010/0316/China-the-coming-costs-of-a-superbubble 

======
strebler
This article is basically political bullshit masquerading as some sort of
prediction.

Where exactly is this bubble? The author's logic appears to be: "China has
defied the recession, therefore the economy is a bubble!"

China's economy has been turbulent over the past 30+ years, but with a lot of
saved money (both at the personal and government levels), they've been able to
weather much worse than the US's current situation. Massive unemployment, food
shortages, inflation, you name it, they've been there.

But for a "bubble" to be afoot as suggested, there really should be
speculation of some sort going on, which the author doesn't even go into.
Sure, the price of real estate has tripled in the past decade in many areas of
China (which he also doesn't mention), but for a nation bent on saving money
rather than massive mortgages, it's not clear whether that's really a bubble
or just what people can actually afford.

High GDP growth at this stage in China's development doesn't mean it's
definitely a bubble either, nor do they have to keep it up. It's like a start-
up who get's 80% traffic growth on their website every month for the first 6
months, it will slow down eventually and that's ok. China doesn't have to keep
this rate of GDP growth to keep people happy: a higher standard of living will
do that too.

China is complex and our understanding of their society and economy seems poor
at best. People like this author don't help.

In any case, there are valid arguments (both pro and anti bubble), but this
article is missing a lot.

~~~
echaozh
I think the logic is sound. Miracles don't always happen, and anything
miraculous deserves at least some suspicion.

The price of real estate has tripled, while the GDP hasn't. Clearly, not all
the people can afford the price.

~~~
borism
_> In any case, there are valid arguments (both pro and anti bubble), but this
article is missing a lot._

so why don't you mention some of the arguments he missed, because I can't see
any?

------
ximeng
He doesn't think much of China's infrastructure build out (based mainly on the
possibility that it is inefficient or overheating). But perhaps overseas
student numbers are more revealing - presumably education is valuable even if
infrastructure isn't.

I had a dig around for some statistics, and found the Australian government
page on this:

[http://aei.gov.au/AEI/MIP/Statistics/StudentEnrolmentAndVisa...](http://aei.gov.au/AEI/MIP/Statistics/StudentEnrolmentAndVisaStatistics/Default.htm#data)

Statistics for China:

2005 - 84,476

2006 - 93,533

2007 - 110,846

2008 - 131,210

2009 - 154,777

That's 17% growth from 2008 to 2009. (Incidentally US figures have gone down.)
Not a perfect proxy for economic growth, but then what is? There may be a
bubble here and there, but on the face of it China seems to have a lot of
advantages.

As for not having a social safety net, it appears they've thought about the
one:

[http://www.google.com/hostednews/ap/article/ALeqM5jGQDE0Z2Lb...](http://www.google.com/hostednews/ap/article/ALeqM5jGQDE0Z2LbFGRirzDQTs81WGjXlAD9EAVR800)

I don't know if China's stimulus is as distorting as the article suggests, but
it seems to me that now is as good a time as you're going to get to spend your
dollars overseas if you've got some spare. I wouldn't bet on the stories about
new investments in solar power, African minerals, and high speed train
networks drying up just yet.

~~~
liuliu
I don't think that reflects the current economic fact by evaluating oversea
student number. The way families in China to collect tuition towards college
is much like many families in the United States. They just start early. Thus,
it cannot reflect the economic status at this very moment. Besides, although
whether true or not is unclear, I do believe Asian families in general are
more willing to invest in education. The number of people who is taking
National College Entrance Exam is dropped from 2008. It is a safe bet that the
number of oversea student will drop in 5 to 6 years (due to the birth control
policy).

------
dublinclontarf
Far too short an article for such a topic, it should be at least 6 pages.
There is far more that needs to be mentioned to even give half the picture.

~~~
borism
it's just a very general and simple to understand article in a Christian
Science Monitor.

author has an interesting site and a book,

<http://contrarianedge.com>

for those like me who want to investigate further.

~~~
ximeng
I voted you up. Thanks for the link to the site, I also wanted to investigate
further.

It does look like he repeats the same story a lot on that site. Here's a very
similar story from 2008:

[http://contrarianedge.com/2008/08/21/chinese-and-
starbucks-l...](http://contrarianedge.com/2008/08/21/chinese-and-starbucks-
late-stage-growth-obesity/)

There are other presentations and interviews where he repeats these arguments.
While there is definitely a bit more detail and statistics on the site, it's
not significantly more. And articles like the one below where he is correcting
his own back-of-the-napkin estimates don't inspire confidence:

[http://contrarianedge.com/2009/07/30/reappraising-
china%E2%8...](http://contrarianedge.com/2009/07/30/reappraising-
china%E2%80%99s-%E2%80%98staggering%E2%80%99-growth/)

Interesting quote from him: "Maybe it is the pessimist in me, or maybe I’ve
written so many “China will slowdown articles” that I am looking for data
confirming my view (the confirmation bias) – that is possible, I am human
after all."

And another which I think is quite a good summary of his arguments:

"I have absolutely no facts to back up what I am about to say, but it is not
hard to imagine future stories about poverty stricken farmers that moved to
big cities for a better life and found despair; or that inland migration (from
farming to factories) only brings a onetime productivity jump as poorly
educated farmers-turned-factory-workers add little to productivity
improvements afterwards; or how weak and debt ridden the financial system is;
or the devastating impact that pollution has on health and productivity; or
how the biggest shopping mall in the world, that happens to be in China, is
almost completely empty. "

The book appears to be fairly generally about trading rather than being
focused on this particular question.

All in all, I'm still left thinking that there is not much more to this gent's
arguments than came out in the CS Monitor article.

------
metamemetics
They keep building lots of unused housing and buildings. This would be a
bubble in a western country, but I'm not so sure in China. Because they have
1.3 billion people, and the majority live in the countryside and are not even
allowed to move to the cities yet even though they want to.

------
aadvaark
Totally unrelated, but by eye was drawn to this on the page
[http://www.csmonitor.com/CSM-Photo-Galleries/Photos-of-
the-D...](http://www.csmonitor.com/CSM-Photo-Galleries/Photos-of-the-
Day/2010/Photos-of-the-Day-03-16)

------
ww520
Persistent bears will eventually be right, given long enough time, to call out
the bubbles. A broken clock is right on time twice a day. Many bears shorting
the bubble leading upto the 2005/2006 crash had lost their shirts.

------
pradocchia
The word in Shanghai circles has been good times through the 2010 expo;
uncertainty thereafter.

------
giardini
So to hedge I should buy Chinese yuan? Or better, short the U.S. dollar?

~~~
Estragon
How does one buy yuan?

~~~
giardini
Any large bank will exchange dollars for yuan.

------
aresant
Not a statement on anything, just found this interesting from article:

<http://en.wikipedia.org/wiki/New_South_China_Mall>

99% empty mall, Western Fastfood companies are only draws.

------
seymour
I am interesting in the correlation between the barrage of "China is melting"
stories recently and the recent article on how a large percentage of news
stories are given to the agencies by corporations/special interest groups
(can't find the link). As new agencies tend to parrot each other it probably
wouldn't be that expensive to start something like this.

