7 ms·

This should really terrify us all. The Chinese economy is not just inflated, it's now an enormous chunk of the world economy. Throw in their really wild housin

by mabbo 8y ago

This should really terrify us all. The Chinese economy is not just inflated, it's now an enormous chunk of the world economy. Throw in their really wild housing bubble [0] and it's a time bomb. Globalization has made everything cheaper, but it's tied us all together in many ways. They won't fall over alone. Hiding news that the economy isn't doing well distorts incentives. Those with political connections will know what's really happening and take full advantage. Those without will make poor choices. Like buying a 4th unfinished condo as an investment. [0]https://www.bloomberg.com/view/articles/2018-06-24/why-china-can-t-fix-its-housing-bubble https://www.bloomberg.com/view/articles/2018-06-24/why-china...

nscalf 8y ago
Absolutely this. For all of the benefits that come along with globalization, there is very little talk about all of the risks that come along with it. And you can see this on many scales---when European nations "globalized" to include all of their neighbors, they exponentially increased the risk that they would undergo economic stress. They let go of their tight control over their own economy and their ability to quickly and sharply respond to problems. I went to college for economics during the recovery from 2008, and one of my professors was a very well respected economist managing large funds. One conversation I had with her stuck with me. We had to read the Wall Street Journal for some assignments, and I asked her why it seemed that Quantitative Easing wasn't have anywhere near the result we expected it to have. She said she thought it was because everyone was doing it. I remember reading articles about concerns that Japan was also doing QE and that it might belittle the efforts of the Fed over here. I think globalization is a huge step forward and really beneficial overall, but it's not a panacea and it does come with some drawbacks.
- Chris_Chambers 8y ago
  The reason QE “didn’t work” is because it was a trick meant for the Federal Reserve’s cronies to steal (“buy”) a ton of our property and rent it back to us. QE worked perfectly.
rqs 8y ago
Actually, before the trade gone bad, many local governments in China already installed some limits on the housing bubble. For example, in some place, you can only buy house, but unable to sell it. This will limit how many money can flood back to the economy. So far, that policy is effective. After all, nobody want to play the Japanese character during what's after the "Japanese economic miracle"[0]. And the housing bubble thing is like textbook example of "How not do your economy". [0] https://en.wikipedia.org/wiki/Japanese_economic_miracle https://en.wikipedia.org/wiki/Japanese_economic_miracle
- seanmcdirmid 8y ago
  This has always been true though. The government basically controls the real estate companies, and they won’t list/show your house beneath a certain price. When prices weaken, volume simply plummets as no one can sell because the real estate companies won’t allow for discounting. That isn’t a really a new thing, it has been going on for at least a decade. In many cases, what we have in China is much worse than japan since artificial intervention is much deeper and prolonged.
  - rqs 8y ago
    > what we have in China is much worse than japan since artificial intervention is much deeper and prolonged I think it's the question of whether or not it's going to pop. If the housing bubble did popped, then we are screwed a big time, worse than what Japanese once had. But if it didn't, then the leverage is still there and economy maybe low at worse, but stable. I don't think everything is concluded at this point, because SSE 000001[0] is showing sign of very slow recover. And the censorship on economic news in my opinion is rather one effort to preventing domino effect. [0] https://www.google.com/search?ei=P3KzW_6LF4fUwQKM77uYAg&btnG=Search&q=SSE+000001 https://www.google.com/search?ei=P3KzW_6LF4fUwQKM77uYAg&btnG...
    - seanmcdirmid 8y ago
      If the property bubble doesn’t pop, you are more screwed as the asset and real economies further diverge. China can’t be world competitive if a 70sqm apartment goes for a million bucks, people/companies will start relocating to cheaper places like say San Francisco. A lot of economic potential is directed toward real estate and away from more productive endeavors. I remember the shops outside of my old office in zhongguancun all concerting to real estate offices. Cafes, restaurants, stores can’t compete. If China wants to take the next step in their economic development, they have to give up on this bubble. It will suppress a lot more economic activity than it stimulates, even if capital is preserved it isn’t doing anything useful.
malloryerik 8y ago
"There is no question that China will have a difficult adjustment, but it is likely to take the form of a long process rather than a sudden crisis." -- Michael Pettis, professor of finance at Peking University https://carnegieendowment.org/chinafinancialmarkets/77178 https://carnegieendowment.org/chinafinancialmarkets/77178
- mistermann 8y ago
  From the original article: "A government directive sent to journalists in China on Friday named six economic topics to be “managed,” according to a copy of the order that was reviewed by The New York Times." From everything I've read, I would be extremely surprised if journalists are the only ones who receive implicit or explicit "suggestions" on what is acceptable to say, and what is not. http://www.baldingsworld.com/2018/07/17/balding-out/ http://www.baldingsworld.com/2018/07/17/balding-out/ (It's an excellent article overall.) I am leaving China. After nine years working for the HSBC Business School of Peking University Shenzhen Graduate School as a professor teaching international trade, negotiations, and ethics, I am leaving China. In early November 2017, the HSBC Business School informed me they would not renew my contract. In March 2018 they informed me they wished to sever all ties by April 1, 2018. One of my biggest fears living in China has always been that I would be detained. Though I happily pointed out the absurdity of the rapidly encroaching authoritarianism, a fact which continues to elude so many experts not living in China, I tried to make sure I knew where the line was and did not cross it. There is a profound sense of relief to be leaving safely knowing others, Chinese or foreigners, who have had significantly greater difficulties than myself. There are many cases which resulted in significantly more problems for them. I know I am blessed to make it out. I'd also be surprised if China is the only country where messaging "suggestions" are made by the government, although the degree and exactly how it is done is far more opaque some places than others. Of course it may be pure confirmation bias, but I've detected a distinct change in the nature of MSM China articles in the last 2 months or so in the US, as well as a change in public sentiment in social media and forums.
deleted 8y ago
[deleted]
bitxbit 8y ago
This is the Opium Wars all over again.
NicoJuicy 8y ago
This was their plan all along, said the same 11 months ago: https://news.ycombinator.com/item?id=15523954 https://news.ycombinator.com/item?id=15523954
TheM00se 8y ago
I wonder if thats why tons of chines are buying houses in the US and Canada since they know that China house bubble has actually burst and they need to move their money elsewhere. They know it's a timebomb, the news will someday come out, but hey that house you bought in Canada still got value, as it'll take time for those markets to correct, but if you've got the Jump you can sell it.

by mabbo 8y ago

nscalf 8y ago

Absolutely this. For all of the benefits that come along with globalization, there is very little talk about all of the risks that come along with it. And you can see this on many scales---when European nations "globalized" to include all of their neighbors, they exponentially increased the risk that they would undergo economic stress. They let go of their tight control over their own economy and their ability to quickly and sharply respond to problems. I went to college for economics during the recovery from 2008, and one of my professors was a very well respected economist managing large funds. One conversation I had with her stuck with me. We had to read the Wall Street Journal for some assignments, and I asked her why it seemed that Quantitative Easing wasn't have anywhere near the result we expected it to have. She said she thought it was because everyone was doing it. I remember reading articles about concerns that Japan was also doing QE and that it might belittle the efforts of the Fed over here. I think globalization is a huge step forward and really beneficial overall, but it's not a panacea and it does come with some drawbacks.

Chris_Chambers 8y ago
The reason QE “didn’t work” is because it was a trick meant for the Federal Reserve’s cronies to steal (“buy”) a ton of our property and rent it back to us. QE worked perfectly.

rqs 8y ago

Actually, before the trade gone bad, many local governments in China already installed some limits on the housing bubble. For example, in some place, you can only buy house, but unable to sell it. This will limit how many money can flood back to the economy. So far, that policy is effective. After all, nobody want to play the Japanese character during what's after the "Japanese economic miracle"[0]. And the housing bubble thing is like textbook example of "How not do your economy". [0] https://en.wikipedia.org/wiki/Japanese_economic_miracle https://en.wikipedia.org/wiki/Japanese_economic_miracle

seanmcdirmid 8y ago
This has always been true though. The government basically controls the real estate companies, and they won’t list/show your house beneath a certain price. When prices weaken, volume simply plummets as no one can sell because the real estate companies won’t allow for discounting. That isn’t a really a new thing, it has been going on for at least a decade. In many cases, what we have in China is much worse than japan since artificial intervention is much deeper and prolonged.
- rqs 8y ago
  > what we have in China is much worse than japan since artificial intervention is much deeper and prolonged I think it's the question of whether or not it's going to pop. If the housing bubble did popped, then we are screwed a big time, worse than what Japanese once had. But if it didn't, then the leverage is still there and economy maybe low at worse, but stable. I don't think everything is concluded at this point, because SSE 000001[0] is showing sign of very slow recover. And the censorship on economic news in my opinion is rather one effort to preventing domino effect. [0] https://www.google.com/search?ei=P3KzW_6LF4fUwQKM77uYAg&btnG=Search&q=SSE+000001 https://www.google.com/search?ei=P3KzW_6LF4fUwQKM77uYAg&btnG...
  - seanmcdirmid 8y ago
    If the property bubble doesn’t pop, you are more screwed as the asset and real economies further diverge. China can’t be world competitive if a 70sqm apartment goes for a million bucks, people/companies will start relocating to cheaper places like say San Francisco. A lot of economic potential is directed toward real estate and away from more productive endeavors. I remember the shops outside of my old office in zhongguancun all concerting to real estate offices. Cafes, restaurants, stores can’t compete. If China wants to take the next step in their economic development, they have to give up on this bubble. It will suppress a lot more economic activity than it stimulates, even if capital is preserved it isn’t doing anything useful.

malloryerik 8y ago

"There is no question that China will have a difficult adjustment, but it is likely to take the form of a long process rather than a sudden crisis." -- Michael Pettis, professor of finance at Peking University https://carnegieendowment.org/chinafinancialmarkets/77178 https://carnegieendowment.org/chinafinancialmarkets/77178

mistermann 8y ago
From the original article: "A government directive sent to journalists in China on Friday named six economic topics to be “managed,” according to a copy of the order that was reviewed by The New York Times." From everything I've read, I would be extremely surprised if journalists are the only ones who receive implicit or explicit "suggestions" on what is acceptable to say, and what is not. http://www.baldingsworld.com/2018/07/17/balding-out/ http://www.baldingsworld.com/2018/07/17/balding-out/ (It's an excellent article overall.) I am leaving China. After nine years working for the HSBC Business School of Peking University Shenzhen Graduate School as a professor teaching international trade, negotiations, and ethics, I am leaving China. In early November 2017, the HSBC Business School informed me they would not renew my contract. In March 2018 they informed me they wished to sever all ties by April 1, 2018. One of my biggest fears living in China has always been that I would be detained. Though I happily pointed out the absurdity of the rapidly encroaching authoritarianism, a fact which continues to elude so many experts not living in China, I tried to make sure I knew where the line was and did not cross it. There is a profound sense of relief to be leaving safely knowing others, Chinese or foreigners, who have had significantly greater difficulties than myself. There are many cases which resulted in significantly more problems for them. I know I am blessed to make it out. I'd also be surprised if China is the only country where messaging "suggestions" are made by the government, although the degree and exactly how it is done is far more opaque some places than others. Of course it may be pure confirmation bias, but I've detected a distinct change in the nature of MSM China articles in the last 2 months or so in the US, as well as a change in public sentiment in social media and forums.

deleted 8y ago

[deleted]

bitxbit 8y ago

This is the Opium Wars all over again.

NicoJuicy 8y ago

This was their plan all along, said the same 11 months ago: https://news.ycombinator.com/item?id=15523954 https://news.ycombinator.com/item?id=15523954

TheM00se 8y ago

I wonder if thats why tons of chines are buying houses in the US and Canada since they know that China house bubble has actually burst and they need to move their money elsewhere. They know it's a timebomb, the news will someday come out, but hey that house you bought in Canada still got value, as it'll take time for those markets to correct, but if you've got the Jump you can sell it.