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Was the U.S the only country to go on a big credit binge? Reports from China are indicating that the property markets there may be set to burst.
I have been greatly fascinated with China’s ascendency from the ashes of Mao Zedong’s communism. It is a testament to the failure of this ideology that even in the midst of the Great Depression, few people actually died of starvation in the west. In Russia and in China, however, millions of people died for the glory of an ideology and for a leader worship cult. In my eyes, the crimes of Stalin and Mao are as atrocious as those committed by Hitler. All three of these dictators deserve to be demonized and remembered as the mass murderers that they were.
This is why I am so surprised by the rise of China. They have not really discredited Mao nor the ideology as a whole, even if they have moved away from it. With the reforms of Deng Xiaoping in the 1980s, the productive energy of millions of Chinese has been unleashed, and the standard of living has skyrocketed. Many companies in the west have come to China to set up businesses and open up factories, and the productive capacity of the world has greatly increased as a result.
At the same time, the west has been falling from ascendency. The U.S has moved from a creditor nation to the world’s largest debtor, and the world economy is being rocked as the nations of Europe move from debt crisis to debt crises.
However, China still has problems of its own. The free market has been released from some of its chains, but it still remains bound by corruption, illegitimate seizure of property by both the government and big businesses, and massive credit expansion which has led to a massive increase in property prices. These factors are exacerbating the divide between the haves and the have-nots. In addition to this, central planning is leading to gross mal-investments of capital, such as the now-famous “ghost cities” of China.
So, is the bubble set to burst in China? One wonders what will happen to the world economy in that case! What are your thoughts?
I’ve heard rumors of an impending China collapse for some time now. I do think that China would be able to pump out statistics for a while in a cover up, but eventually a bubble deflating would force them to face the music.
Can the world handle it – that’s the question. Without an ascendant China around to buy the debt of the world, who will finance the welfare states?
Interesting question! That might be the final nail in the coffin of the current order, but they could probably manage to keep things afloat at least on the surface. China can be amazingly productive, but rights need to be respected, and pumping wealth into building ghost cities can’t go on forever.
I’ve been following the riots by dispossessed farmers down in Wukan in the south of China. It will be interesting to track China’s progress down this road of possible devolution and breakup.
I would be rioting too if in the shoes of those farmers. Rights need to be equally respected, not only for some, and they have been stepping on these farmers for far too long now.
To me, my biggest concern with China is transparency, or more specifically, the lack thereof. It makes trying to develop smart investing decisions very difficult. BTW, I have definitely been hearing more and more about the dichotomy present in China. It’s particularly interesting how everything is playing out!
I agree that the lack of transparency is one major hindrance when it comes to China. It is why some have suggested investing in what China buys, instead of directly in Chinese companies. Perhaps it’s not a bad strategy.
Some of the small chinese food stocks look like bargains along with some of the chinese steel stocks. Unfortunately for those of you investing in stocks like Mcdonald’s and Yum brands Apple computer that do lots of their business in china you can expect only mediocre investment returns over time. The really great returns in these type of stocks were made decades ago when they were small unknow companies unlike today.