4 ms·

I don't see how China's demand for commodities could be a bubble. They are building in huge volumes, but they have a huge volume of people. There is a middle

by mrtron 16y ago

I don't see how China's demand for commodities could be a bubble. They are building in huge volumes, but they have a huge volume of people. There is a middle class developing. Check out Hans Rosling's talks about it. There may be a temporary bubble in the stock market, but China is undergoing an incredible shift towards becoming North American in every way. Beijing is the best example of this - the entire city has been bulldozed and redeveloped in a North American big box way. Shanghai is even further 'ahead'. Traditionally Chinese have been very conservative with spending, preventing quick economic growth. Credit cards are almost non-existent. You pre-pay your bills, even electricity! But for some reason - perhaps the Internets media influence, perhaps the one child policy, people are now spending money quickly. Starbucks is extremely popular and more expensive than in Toronto, NYC or SF! For the price of a coffee you could easily get a great meal with a few drinks, yet coffee shops are filled. If all of it is a bubble - it is so firmly entrenched at ground level that the momentum of this bubble will burst through and last for decades. New industries are developing rapidly. The insurance industry was almost non-existent a decade ago, and is growing quickly in different ways there. One thing is part of what is fuels the growth is international companies spending a lot of money trying to establish new business in China. These companies are risking money and bringing expertise into a really unknown market and often losing money. China in the end benefits as they just sit their with their vast market and allow foreign companies to try to create new industries. If anything starts doing really well, the government could always regulate that industry and take it over themselves. I don't see anything stopping both China and India both developing a large middle class. That will snowball growth for decades. Premium brands will likely dominate - these folks want iPhones and Mercedes. I think this Australian iron ore example is just the beginning of the scale at which we will see commodities shifting to China. I expect timber to happen at an enormous scale as their foresting practices seem quite unsustainable.

btilly 16y ago
The first problem that China has right now is that government policy has made it easier to bring money in than to take it out. This has caused a significant asset bubble. If that asset bubble pops, it will be painful. That's exactly what happened to the Japanese juggernaut that everyone was scared about 20 years ago. The longer term problems are demographic. The one-child policy means that the upcoming generation is smaller than the previous. Their work-force will soon be shrinking. Furthermore many parents chose to abort girls to make their one child a son. But a generation with a significant surplus of men is bound to have interesting social problems. If I had to bet, I'd bet that 30 years out we'll be hearing more about India than China.
- riffer 16y ago
  30 years out we'll be hearing more about India than China I have that bet on, and in good size Everything we know about top-down vs. bottom-up design says that China is supposed to appear to be doing better than India, until eventually it suddenly becomes clear that it is not.
jakarta 16y ago
http://www.scribd.com/doc/28824145/GMO-White-Paper-China http://www.scribd.com/doc/28824145/GMO-White-Paper-China Here's a white paper with some possible red flags that point to a bubble in China.
c1sc0 16y ago
Most of what you are writing was true, like a year ago. Never forget that China develops at internet speeds. Here's an update as far as I can tell. Credit-cards are very much existent right now, to the extent that I know people who got into nasty trouble with them. That's a thing of the last year or so. Overall credit is a lot easier to get now, which makes the real estate market feel pretty bubbly, but there does seem to be a never-ending demand for new property. First reason is that in the cities you don't marry without an appartment. Second reason is that people are still moving in from the countryside & those that get lucky end up in a position to buy after a few years. I thought Starbucks was 'out' and the Coffee Bean was 'in' last time I visited. Same story that happened with McDonalds a few years ago: a western brand gets popular just because it is 'new', then people realize that they are eating/drinking crap & come up with their own alternative. Ever noticed how western fast-food joints sinicize (is that a word) their menus? That's not about concessions to the chinese tastes, it's about survival. You're totally right on the copycat factor though & I actually think that's a great asset of chinese entrepreneurialism. It's a cut-throat world with lots of competition & they know how to stack the cards to their benefit. And why should they not? Unlike the western world they have a massive internal market to develop and cherry-picking 'the best from the west', then copying is a very valid strategy. There's lots of cash to be made in luxury products I think. Just like the Japanese developed a taste for expensive watches 2 decades ago, I see the same happening in China. Over here in Switzerland jewellers / watchmakers are now openly catering to the asian market. I was in Luzern last weekend and just for fun started looking at the customers in the watch shops: almost all asian faces. And that makes sense, because most of my Chinese relatives will smuggle back a multiple of the allowed $10K worth of watches/jewellery every single time they visit europe. And those people are by no means 'fuck-you' rich in the Chinese sense of the word.
- mrtron 16y ago
  Credit cards are in existence now, but what percentage of people own one and use it regularly? The credit limits they give you are laughable - like 80$ US. Like everything else you need to prepay to use it. I think you are discussing the fringe edge of China. Don't forget that there are a billion people there. A few rich folks are starting to get credit cards over the last YEAR. But imagine if 200 million middle class new customers get them this decade. The difficulty moving money out of the country is an interesting problem. It is no doubt feeding the bubble, as you suggest almost everyone of modest means manages to get a substantial amount of money out of the country regularly. It is also interesting to see the speed at which China develops. They build entire blocks of condo towers at once. They moved the steel factory of how many hundred thousand workers completely out of the city. Nowhere else has the liberty of wiping the old out and moving forward in the same way they do. It does seem that it does come with the perils of moving too fast and wiping out historical and natural progressions.
iamelgringo 16y ago
re: China Bubble In building http://Newsley.com http://Newsley.com, I've been reading a lot about the Chinese economy, and the potential bubble there over the last 9 months. No hard numbers, I just know this must be true, because my gut tells me it is true. #tongue_in_cheek My gut tells me that 10% GDP growth year on year is simply not sustainable over the long term for any country. There will be an economic contraction at some point. I'm also very leery of the lack of transparency in the economic numbers that are coming out of China. It's hard to build a capitalistic society without financial transparency. Perhaps China will pull it off, I have my doubts. And... <shameless plug> http://newsley.com/k/Tag/economic-bubble/8167/ http://newsley.com/k/Tag/economic-bubble/8167/ http://newsley.com/k/Tag/economy-of-the-peoples-republic-of-china/5305/ http://newsley.com/k/Tag/economy-of-the-peoples-republic-of-... </shameless plug> I'm building results pages for Newsley, before I have the search piece of the site built out. But, as I eat my own dog food, I find these results pages to be rather interesting for drilling down into specific topics.

by mrtron 16y ago

btilly 16y ago

The first problem that China has right now is that government policy has made it easier to bring money in than to take it out. This has caused a significant asset bubble. If that asset bubble pops, it will be painful. That's exactly what happened to the Japanese juggernaut that everyone was scared about 20 years ago. The longer term problems are demographic. The one-child policy means that the upcoming generation is smaller than the previous. Their work-force will soon be shrinking. Furthermore many parents chose to abort girls to make their one child a son. But a generation with a significant surplus of men is bound to have interesting social problems. If I had to bet, I'd bet that 30 years out we'll be hearing more about India than China.

riffer 16y ago
30 years out we'll be hearing more about India than China I have that bet on, and in good size Everything we know about top-down vs. bottom-up design says that China is supposed to appear to be doing better than India, until eventually it suddenly becomes clear that it is not.

jakarta 16y ago

http://www.scribd.com/doc/28824145/GMO-White-Paper-China http://www.scribd.com/doc/28824145/GMO-White-Paper-China Here's a white paper with some possible red flags that point to a bubble in China.

c1sc0 16y ago

Most of what you are writing was true, like a year ago. Never forget that China develops at internet speeds. Here's an update as far as I can tell. Credit-cards are very much existent right now, to the extent that I know people who got into nasty trouble with them. That's a thing of the last year or so. Overall credit is a lot easier to get now, which makes the real estate market feel pretty bubbly, but there does seem to be a never-ending demand for new property. First reason is that in the cities you don't marry without an appartment. Second reason is that people are still moving in from the countryside & those that get lucky end up in a position to buy after a few years. I thought Starbucks was 'out' and the Coffee Bean was 'in' last time I visited. Same story that happened with McDonalds a few years ago: a western brand gets popular just because it is 'new', then people realize that they are eating/drinking crap & come up with their own alternative. Ever noticed how western fast-food joints sinicize (is that a word) their menus? That's not about concessions to the chinese tastes, it's about survival. You're totally right on the copycat factor though & I actually think that's a great asset of chinese entrepreneurialism. It's a cut-throat world with lots of competition & they know how to stack the cards to their benefit. And why should they not? Unlike the western world they have a massive internal market to develop and cherry-picking 'the best from the west', then copying is a very valid strategy. There's lots of cash to be made in luxury products I think. Just like the Japanese developed a taste for expensive watches 2 decades ago, I see the same happening in China. Over here in Switzerland jewellers / watchmakers are now openly catering to the asian market. I was in Luzern last weekend and just for fun started looking at the customers in the watch shops: almost all asian faces. And that makes sense, because most of my Chinese relatives will smuggle back a multiple of the allowed $10K worth of watches/jewellery every single time they visit europe. And those people are by no means 'fuck-you' rich in the Chinese sense of the word.

mrtron 16y ago
Credit cards are in existence now, but what percentage of people own one and use it regularly? The credit limits they give you are laughable - like 80$ US. Like everything else you need to prepay to use it. I think you are discussing the fringe edge of China. Don't forget that there are a billion people there. A few rich folks are starting to get credit cards over the last YEAR. But imagine if 200 million middle class new customers get them this decade. The difficulty moving money out of the country is an interesting problem. It is no doubt feeding the bubble, as you suggest almost everyone of modest means manages to get a substantial amount of money out of the country regularly. It is also interesting to see the speed at which China develops. They build entire blocks of condo towers at once. They moved the steel factory of how many hundred thousand workers completely out of the city. Nowhere else has the liberty of wiping the old out and moving forward in the same way they do. It does seem that it does come with the perils of moving too fast and wiping out historical and natural progressions.

iamelgringo 16y ago

re: China Bubble In building http://Newsley.com http://Newsley.com, I've been reading a lot about the Chinese economy, and the potential bubble there over the last 9 months. No hard numbers, I just know this must be true, because my gut tells me it is true. #tongue_in_cheek My gut tells me that 10% GDP growth year on year is simply not sustainable over the long term for any country. There will be an economic contraction at some point. I'm also very leery of the lack of transparency in the economic numbers that are coming out of China. It's hard to build a capitalistic society without financial transparency. Perhaps China will pull it off, I have my doubts. And... <shameless plug> http://newsley.com/k/Tag/economic-bubble/8167/ http://newsley.com/k/Tag/economic-bubble/8167/ http://newsley.com/k/Tag/economy-of-the-peoples-republic-of-china/5305/ http://newsley.com/k/Tag/economy-of-the-peoples-republic-of-... </shameless plug> I'm building results pages for Newsley, before I have the search piece of the site built out. But, as I eat my own dog food, I find these results pages to be rather interesting for drilling down into specific topics.