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Is China the next Enron?

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  • Is China the next Enron?

    James Chanos seems to think so.

    As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like “Dubai times 1,000 — or worse,” he frets. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.

    “Bubbles are best identified by credit excesses, not valuation excesses,” he said in a recent appearance on CNBC. “And there’s no bigger credit excess than in China.”
    Not surprisingly, Tom Friedman disagrees as he eats breakfast in Hong Kong.

    I am reluctant to sell China short, not because I think it has no problems or corruption or bubbles, but because I think it has all those problems in spades — and some will blow up along the way (the most dangerous being pollution). But it also has a political class focused on addressing its real problems, as well as a mountain of savings with which to do so (unlike us).

  • #2
    Tom Friedman is a shill of the highest order, which is compounded by the fact that he lacks original ideas.

    When oxcoug was relating his experiences at the climate summit and offhandedly mentioned Tom Friedman sitting there pulling up Wikipedia during a lecture my idea of him was only confirmed.

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    • #3
      [China] has a political class focused on addressing its real problems

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      • #4
        Tom Friedman and Malcolm Gladwell have all of a sudden turned into everyone's favorite punching bags.
        Part of it is based on academic grounds. Among major conferences, the Pac-10 is the best academically, largely because of Stanford, Cal and UCLA. “Colorado is on a par with Oregon,” he said. “Utah isn’t even in the picture.”

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        • #5
          Originally posted by Color Me Badd Fan View Post
          Tom Friedman and Malcolm Gladwell have all of a sudden turned into everyone's favorite punching bags.
          Both of them are captivating writers and present their ideas in an interesting way. I like to read them both. Friedman is just too predictable and self-aggrandizing. As for Gladwell, I'm not willing to invest the 10K hours it would require to become an expert on him. Also, I was born in May so it's hopeless anyway.

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          • #6
            China is going through an even bigger speculative real estate bubble than we suffered through. I work with a woman from China. Her parents came over last year in March, after having bought a condo/apartment in China basically as a speculative dive into the market. They were here for about 5 months, during which the value of the condo they'd purchased literally doubled. Their daughter urged them to sell it to cash-out their investment. They did, and sold it right away, and made a bundle of money. But they were part of the first wave of those doing so. Since then, huge numbers of the condos have gone up for sale - at the peak prices - and very little is selling. Sounds familiar...

            Yes - what her parents are seeing is a familiar story to us in the US, and it's also true that it's a single case in a very large country. But from what I understand, similar things are happening all over the country - at least in the urban areas where the good jobs are, and where people generally want to live.

            As indicated by the article, there's also evidence that similar speculative building of manufacturing capabilities - assuming that if they build a plant, world consumption demand will be there to buy up the plant's production. But with the global downturn, it seems very likely that they overplayed their hand. they're building plants that are constantly costing more and more to build and operate, while the actual demand for their goods is flat, or certainly not growing as it has in the past. Not a great combination of effects...

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            • #7
              Originally posted by statman View Post
              China is going through an even bigger speculative real estate bubble than we suffered through. I work with a woman from China. Her parents came over last year in March, after having bought a condo/apartment in China basically as a speculative dive into the market. They were here for about 5 months, during which the value of the condo they'd purchased literally doubled. Their daughter urged them to sell it to cash-out their investment. They did, and sold it right away, and made a bundle of money. But they were part of the first wave of those doing so. Since then, huge numbers of the condos have gone up for sale - at the peak prices - and very little is selling. Sounds familiar...

              Yes - what her parents are seeing is a familiar story to us in the US, and it's also true that it's a single case in a very large country. But from what I understand, similar things are happening all over the country - at least in the urban areas where the good jobs are, and where people generally want to live.

              As indicated by the article, there's also evidence that similar speculative building of manufacturing capabilities - assuming that if they build a plant, world consumption demand will be there to buy up the plant's production. But with the global downturn, it seems very likely that they overplayed their hand. they're building plants that are constantly costing more and more to build and operate, while the actual demand for their goods is flat, or certainly not growing as it has in the past. Not a great combination of effects...

              When I was there in November, the same thing was happening. They are at 2005-2006 of the US economy in terms of real estate, in my opinion. Places in HK are still fighting to be the most expensive slices of real estate.

              With that said, if they are successful in establishing a domestic consumer market in a shorter time frame than expected, they could overcome this. Just my ramblings and thoughts.

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              • #8
                Oh and thanks for posting this YO.

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                • #9
                  Originally posted by Coach McGuirk View Post
                  When I was there in November, the same thing was happening. They are at 2005-2006 of the US economy in terms of real estate, in my opinion. Places in HK are still fighting to be the most expensive slices of real estate.

                  With that said, if they are successful in establishing a domestic consumer market in a shorter time frame than expected, they could overcome this. Just my ramblings and thoughts.
                  Can that be done in the short term? It seems that first the social nets must be put in place and then you have to change a generational mindset away from savings into consumption.

                  On the other hand it is fertile ground for the fake hooter market...ifyaknowwhatImean!?
                  Do Your Damnedest In An Ostentatious Manner All The Time!
                  -General George S. Patton

                  I'm choosing to mostly ignore your fatuity here and instead overwhelm you with so much data that you'll maybe, just maybe, realize that you have reams to read on this subject before you can contribute meaningfully to any conversation on this topic.
                  -DOCTOR Wuap

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                  • #10
                    Originally posted by Color Me Badd Fan View Post
                    Tom Friedman and Malcolm Gladwell have all of a sudden turned into everyone's favorite punching bags.
                    I like Gladwell.
                    Dyslexics are teople poo...

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                    • #11
                      Originally posted by Coach McGuirk View Post
                      When I was there in November, the same thing was happening. They are at 2005-2006 of the US economy in terms of real estate, in my opinion. Places in HK are still fighting to be the most expensive slices of real estate.

                      With that said, if they are successful in establishing a domestic consumer market in a shorter time frame than expected, they could overcome this. Just my ramblings and thoughts.
                      I also recently ran across this article on the explosion of golf courses in Hainan, China. Tens of new courses are being built every year, but nobody seems to play. The reason for the development is to sell homes.

                      But such quibbles may be missing the larger truth about golf course development in Hainan, and throughout much of China: the number of golf courses built has very little to do with the number of golfers available to play on them. With few exceptions, golf courses exist to help sell luxury villas. Developers do not worry if a course sits empty, as long as the properties around it sell. And so far in Hainan, selling homes has not been a problem. Wealthy bosses from Beijing, Shanghai, Guangzhou and central China’s coal belt fly in and buy up the villas, sometimes several at a time, often paying in cash. In China, to own a home on a golf course does not necessarily mean you play the game. It’s more about prestige. Golf, like luxury sedans and handbags, is just another way to project your wealth.
                      As we have discovered in America, this type of luxurious consumption will someday come to a screeching halt. Vacation homes located on a golf course will always have a limited market and it will be very difficult to establish a consumer market much than currently exists.

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                      • #12
                        Originally posted by YOhio View Post
                        I also recently ran across this article on the explosion of golf courses in Hainan, China. Tens of new courses are being built every year, but nobody seems to play. The reason for the development is to sell homes.



                        As we have discovered in America, this type of luxurious consumption will someday come to a screeching halt. Vacation homes located on a golf course will always have a limited market and it will be very difficult to establish a consumer market much than currently exists.
                        I have often thought that China represents much of what is bad about the American (and western) way of life without a lot of the accompanying good stuff.

                        Take for example the outrageous consumerism you describe here. To me, this is an unfortunate byproduct of our value system, but something I'm willing to accept because I get the benefits of some of the other functions of our value system, like the ability to worship as I want without government encumbrance. I just see the Chinese as missing out on the best of our values in their quest for the worst of our system. However, as with everything else in China, I'm sure this is by design.

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                        • #13
                          I read an article a few weeks back on the explosion of golf courses in Vietnam too...

                          Until last year, according to experts who have done the calculations, licenses for new courses were being issued at an average of one a week, for a total of more than 140 projects around the country.

                          Promoters created the idea of a “Ho Chi Minh Golf Trail,” a series of eight courses whose label is as good a sign as any of where Vietnam seems to be headed — its heroic wartime past redefined as a sales pitch.
                          "Ho Chi Minh Golf Trail"? wow.

                          http://www.nytimes.com/2009/10/20/wo...ia/20golf.html

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                          • #14
                            It would give a whole new meaning to playing an explosion shot out of the bunker.
                            Everything in life is an approximation.

                            http://twitter.com/CougarStats

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                            • #15
                              I think China is overrated. It wouldn't surprise me if it went into a Japan-style multi-decade economic swoon. But I really hope not. I can't think of anything scarier than a hungry, desperate, wretched China.
                              When a true genius appears, you can know him by this sign: that all the dunces are in a confederacy against him.

                              --Jonathan Swift

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