Is the Chinese Economy About to Collapse?

[ralph124c]

It is my suspicion, and now i have heard some disturbing things from a friend who has just returned from asia:
-he saw stuff piling up in docks and warehouses
-the Chinese real estate market is going craxy; property values are going in Shanghai at a huge rate
-the prosperity is NOT reaching the average Chinese-they are paying more for necessities and getting less
-the Chinese are starting to default on small loans
So, underneath it all, is there a fundamental weakness in the Chinese economy? is it all for export and is it hiding a lot of bad news?

[LonesomePolecat]

It is my suspicion, and now i have heard some disturbing things from a friend who has just returned from asia:
-he saw stuff piling up in docks and warehouses
-the Chinese real estate market is going craxy; property values are going in Shanghai at a huge rate
-the prosperity is NOT reaching the average Chinese-they are paying more for necessities and getting less
-the Chinese are starting to default on small loans
So, underneath it all, is there a fundamental weakness in the Chinese economy? is it all for export and is it hiding a lot of bad news?
And if it does tank, what does that do to the American and European economies?

[LonesomePolecat]

This guy (http://www.ameinfo.com/35739.html) doesn't seem to be worried about it.

[D_Odds]

With 230 years of experience, the U.S. finally gotten to the point where we can blunt the highs and the lows of the economic cycle (http://en.wikipedia.org/wiki/Economic_cycle). The economy will bend, but it shouldn't collapse. The Chinese will find far more foreign support, I suspect, than the U.S. did during the Great Depression.

[jjimm]

I wouldn't take prices in Shanghai as a reckoning: China's huge and there's a lot of uninflated property out there (plus it's all owned by the government anyway, and all people buy is a lease).

However, there are many many many unprofitable companies in China, and there are banks loaning money to them and each other, hand over fist, based on nothing but guanxi (http://en.wikipedia.org/wiki/Guanxi). That's what I'd be worried about. Currently it's a bubble being propped up by inward investment; but were there to be another (highly visible) human rights or foreign relations disaster, then I would fear for the new capitalism in the short term; and even in the long term, it can't go on forever.

[E-Sabbath]

I've been expecting a crash over there in about fifteen years, max, thanks to the population issues. We'll see when.

[China Guy]

depends on how you define crash, but probably not. An economy that is growing 9% annually with close to USD100 billion in annual FDI can outgrow an awful lot of problems.

Yes, the banking system has some pretty systemic issues. Most likely can grow out of them if the government keeps cracking down.

The greying of the population is a huge issue. probably the number issue facing china.

environmental concerns are pretty big too, especially the lack of water in the north.

As for the OP:
-Did your friend go to Asia - which is a really big country or just China? And where in China as it is a pretty big country.
-What kinda stuff was piling up and what docks?
-Shanghai is unique in China owing to the amount of investment from the entire world going into the property here. It's not an indicator of China. And for what it's worth, the property bubble in Shanghai has burst and the correction starting. Transactions have dried up to almost nothing and after the holiday, expect to see prices slashed
-prosperity is going to the masses for the first time in Chinese history. Yep, they sure pay a price for that. And the dualism in the economy between the city and the countryside is widening. That said, the average person in the city and the country thinks they are better off than they were 5 years ago.
-as for small loans, are you dry humping me? with all due respect, small loans aren't the issue simply because there aren't a lot of small loans. Basically, after cracking down on car loans, the only "small" loans are for residences, which isn't what most people would define as small.
-The economy is driven to a large extent by export, so a recession in the US, Europe and Japan would translate into lower growth in china or even a big problem. And the exports fund a lot of things in China and employ a lot of people. Yes, exports do allow for the postponement of dealing with certain problems.

[BrainGlutton]

-the Chinese real estate market is going craxy; property values are going in Shanghai at a huge rate

I had assumed that, even with all the pro-market reforms, the Chinese state was still Communist enough to keep title to all the land. When did that change?

[BrainGlutton]

The economy is driven to a large extent by export, so a recession in the US, Europe and Japan would translate into lower growth in china or even a big problem. And the exports fund a lot of things in China and employ a lot of people. Yes, exports do allow for the postponement of dealing with certain problems.

Would it work the other way? That is, if China's economy did collapse, how would that affect the U.S. economy?

[BrainGlutton]

I've been expecting a crash over there in about fifteen years, max, thanks to the population issues. We'll see when.

When has overpopulation ever caused an economy (as opposed to an ecosystem) to collapse?

[britboy]

When has overpopulation ever caused an economy (as opposed to an ecosystem) to collapse?

Firstly - infrastructure and employment issues. If the population isn't dynamic or educated enough to set up its own businesses or what have you, you can end up with a lot of young, angry and bored people on the streets.

Secondly, and specifically to China - the one child policy. China might be destined to "get old before it gets rich". Not to mention an increasingly pronounced shortage of womenfolk.

BB

[BrainGlutton]

Not to mention an increasingly pronounced shortage of womenfolk.

Discussed here. (http://boards.straightdope.com/sdmb/showthread.php?t=367617)

I can't think of any economy that has collapsed for these reasons -- but then, on this scale, it's a practically unprecedented problem. Europe is dealing with its "birth dearth" and "grayby boom," but I don't know of any society that has ever had to deal with overpopulation and a woman shortage at the same time.

[Quartz]

When has overpopulation ever caused an economy (as opposed to an ecosystem) to collapse?
How about when the Germanic tribes conquered Rome, ushering in the Dark Ages?

[E-Sabbath]

I wasn't talking about overpopulation. I was talking about the male/female disparity issue... combined with the 'young king' syndrome. You're going to have a load and a half of young alpha males who have to compete with each other to find women, and thanks to the age-dominance factor, nowhere to go for decades to come.

Smells like a recipie for war to me.

[BrainGlutton]

I wasn't talking about overpopulation. I was talking about the male/female disparity issue... combined with the 'young king' syndrome. You're going to have a load and a half of young alpha males who have to compete with each other to find women, and thanks to the age-dominance factor, nowhere to go for decades to come.

Smells like a recipie for war to me.

Civil or foreign?

[China Guy]

I had assumed that, even with all the pro-market reforms, the Chinese state was still Communist enough to keep title to all the land. When did that change?Land is actually leased for 70 years for residential property. Not sure on commercial but it's a fixed time. Much like in England with the 99 year leases. Of course, no one knows what will happen when the 70 years are up.

[China Guy]

Would it work the other way? That is, if China's economy did collapse, how would that affect the U.S. economy?If you're talking major recession, but a functioning economy, then the US economy would get even cheaper goods. If the Chinese economy ceases to function (can't produce and ship goods on time to the US), then the US would have a painful readjustment to try replace the off shore manufacturing. Prices would definately rise and there would be an inflationary shock. In the US, job creation would rise, wages would rise, which would also fuel inflation.

That's assuming the rest of the world can not quickly fill the off shore manufacturing gap that China would leave.

[rjung]

Assuming for a moment that ralph124c is in the United States, am I the only one who read the OP as an economic version of Dick Cheney's infamous "The insurgency is in its last throes?"

[ralph124c]

Well, my friend was in Guangdong, and observed a LOT of warhouses full of stuff for export-and it was piling up. Which makes me wonder if importers in the USA and Europe may be cancelling orders. The other serious trend: China has to find jobs for the millions of peasants who abandon their farms every year, and move to the cities. Plus, Chinese exporters will cut prices to the bone, to keep factories running. I think a LOT of Chinese factories are close to bankruotcy, only the government keeps them going with loans.
I could see a massive collapse, in a few years time. :confused:

[jimmmy]

If you're talking major recession, but a functioning economy, then the US economy would get even cheaper goods. If the Chinese economy ceases to function (can't produce and ship goods on time to the US), then the US would have a painful readjustment to try replace the off shore manufacturing. Prices would definately rise and there would be an inflationary shock. In the US, job creation would rise, wages would rise, which would also fuel inflation.

That's assuming the rest of the world can not quickly fill the off shore manufacturing gap that China would leave.

I would add to this excellent post that approximately half of the U.S. debt is held outside the United States, primarily by China, (but also Japan and Southeast Asian nations.)

If China, and it's ripple thru Asia stopped buying this debt, this global interdependency which helped to kept interest rates low and the dollar relatively strong and fueled the further consumption of Chinese goods. would end - So I would expect higher interest rates (which would fuel inflation as well) - and it might be harder for China to recover quickly through exports with a weakened dollar.

On the "I just saved a bunch of money on my car insurance" front: I think the upward pressure on oil - China is the no.2 World Importer - might ease a bit.

[E-Sabbath]

Civil or foreign?
Million dollar question, that one.

[msmith537]

I wasn't talking about overpopulation. I was talking about the male/female disparity issue... combined with the 'young king' syndrome. You're going to have a load and a half of young alpha males who have to compete with each other to find women, and thanks to the age-dominance factor, nowhere to go for decades to come.

Smells like a recipie for war to me.


China wants our women!!

I imagine a China where a large percentage of young men have little chance of meeting a woman, let alone getting married would cause a lot of internal problems. Basically I imagine an entire country essentially becoming a frat sausage party with the accompanying alchohol and substance abuse and violence.

I don't imagine war, but there could be issues like brain drain as the best and brightest migrate elsewhere to find women. Or they might be forced to provide incentives for women to come to China which I imagine would be somewhat of a cultural shift.

[mazinger_z]

I would add to this excellent post that approximately half of the U.S. debt is held outside the United States, primarily by China, (but also Japan and Southeast Asian nations.) I agree with the rest of your post, but I would like a cite for the quoted above. The best I could find was that in 2005, about 22.5% of the US debt is owned by foreigners. I read somewhere else that Canada and UK were buying US T-bills right up there along with the Chinese and APAC.

[jimmmy]

I agree with the rest of your post, but I would like a cite for the quoted above. The best I could find was that in 2005, about 22.5% of the US debt is owned by foreigners. I read somewhere else that Canada and UK were buying US T-bills right up there along with the Chinese and APAC.

Well it depends on what you mean by the "Debt" (and I am not trying to quibble because you will see later I recognize my post needs tightening) . If you include Social Security Trust funds, Then yes about 22% is held by foreigners.

If you are just talking about T-Bills and other modes of debt, not including the Social Security Trust funds, in July (http://www.treas.gov/tic/mfh.txt) (the last data available) U.S. Citizens hold about 2536 Billion and foreigners held about 2102 billion - or about 46% of the Total.

Of that 46%:
Japan, China, Taiwan, Korea, Hong Kong, Singapore and Thailand Hold about 59% of the foreign debt or:

26% of the Total U.S. "Debt" (outside the Trust Funds)

Meaning

approximately half of the U.S. debt is held outside the United States, primarily by China, (but also Japan and Southeast Asian nations.

is better stated in bold new is underlined:

46% (I said approximately half - but lets be precise) of the U.S. debt is held outside the United States, if you are not including the Social Security Trust funds and only talking about T-Bill and other direct investment modes (I said primarily by China, whicjh is a distant no.2) Primarily by Japan but also China and Southeast Asian nations.
Better?