"How China fooled the world" debt 200% of GDP

paddyrg

cells wrote: »

You can't build 7.5m homes this year even if you wanted to

but we could build 450k a year which is current need. To over build would be to build at a rate above this. Say at 550k a year.
...
Also I am not suggesting that we have to over build now. Only that it is hard to over build homes in a nation like the UK or china where occupancy rates need to fall. Any over building is easily consumed by an increasing population and the need for a lowrr occupancy rate

Of course, if you did that it would relieve pressure on the housing market, so house prices would fall, so creating negative equity on a wide scale and forcing more repossession sales and completely screwing up the current 'recovery'.

All I mean by this is that it's never as simple as doing one thing to solve issues, whatever you do creates more, different issues.

TickersPlaysPop

paddyrg wrote: »

Of course, if you did that it would relieve pressure on the housing market, so house prices would fall, so creating negative equity on a wide scale and forcing more repossession sales and completely screwing up the current 'recovery'.

All I mean by this is that it's never as simple as doing one thing to solve issues, whatever you do creates more, different issues.

I think what people want is sustainable steady growth, so an increase in house building to slow the rate of housing market growth. The boom and bust roller coaster is for vocational housing profiteers that must be stopped. Housing must NOT be allowed to be a commodity to trade in, they are homes and peoples' lives we are dealing with.

There is the current young generation who have no option but to rent, they will pass through life with 1/3 to half of their income lost to greedy profiteers... profiteers who have jumped into a situation allowed to occur by the government. The current young generation will not own a home at retirement, so how will they live at retirement?

Houses for homes NOT for profiteers

chucky

paddyrg wrote: »

Of course, if you did that it would relieve pressure on the housing market, so house prices would fall, so creating negative equity on a wide scale and forcing more repossession sales and completely screwing up the current 'recovery'.

Surprisingly there are quite a few characters on here who would want this.

They would also want interest rates to go up despite the economic environment not being ready.

They were also against the banks being supported with QE causing a depression instead of the economic crisis that took place.

Sandstone

Generali wrote: »

How do you think that compares with debt in the UK or US do you think?

Chinese people save a lot (about 30% of income) so there is plenty to be lent.

Exactly. I'm not worried about it in the slightest.

1. Lots of other countries have had this.
In 2011, the UK's debt was at 492% of GDP.
In 2008, the US's debt was at 296% of GDP.
Source: http://www.bbc.co.uk/news/business-15820601

2. Let's not forget that these are the richest countries in the world, with massive GDPs (the US has double China's GDP)
Source: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29

3. China has the fastest growing GDP in the world (7.4%) representing 30% of GLOBAL growth last quarter.
Source: http://www.bbc.co.uk/news/business-27045527
and: http://articles.economictimes.indiatimes.com/2014-04-17/news/49214500_1_china-economy-global-economic-growth-yuan

Conclusion: Robert Peston does like a bit of drama sometimes.

TickersPlaysPop

"Most people are aware we've had a credit boom in China but they don't know the scale. At the beginning of all of this in 2008, the Chinese banking sector was roughly $10 trillion in size. Right now it's in the order of $24 to $25 trillion.

"That incremental increase of $14 to $15 trillion is the equivalent of the entire size of the US commercial banking sector, which took more than a century to build. So that means China will have replicated the entire US system in the span of half a decade."

Still not bothered?

All that growth is just debt, they have built things that are not used because there is no activity and business in existence to use it. The growth is not value added, or sustainable, there is no increase in business. This is all very very fast, and will end in tears for sure.....

I'm very tempted to take 10-15k out of my shares ISA's that have grown nicely, and keep in savings ready to drop back into shares after the crash.

CLAPTON

TickersPlaysPop wrote: »

I'm very tempted to take 10-15k out of my shares ISA's that have grown nicely, and keep in savings ready to drop back into shares after the crash.

given your absolute certainty that you are right then you would be a complete fool not to sell all your shares and wait for the crash

Sandstone

Tickers, you make a good point, and no one can say for sure.

However, the argument that there's no 'substance' to things in China is just as present in the West - consider (1) the US$19Bn market capitalisations for Whatsapp (exceeding many of the most well-known and established companies, many of which took a century to build) and (2) Facebook being valued at over US$100Bn - more than Disney, Nokia, Amazon, HP etc. (although that has come down a bit since the IPO). For the banks, NYC's banking sector also grew during its boom times at an unprecedented rate at the time. I would suggest that we're just seeing a trend towards things moving faster these days because of the digital era.

For China, a lot of the industry is driven by real manufacturing and infrastructure-building. Things that, if not overdue, are anticipated to be necessary soon anyway. In the banking sector, the money is as real is London's financial industry - all backed up by not much more than investor confidence. The international banks are all pretty exposed to each other these days anyway, and obviously most Western companies that sell goods are now exposed to Chinese manufacturing too (from Apple to Gap) so any Chinese crash will probably mean a global crash.

We will see, in due course, of course. You could be right (and will make a lot of money from it, by the sound of it). Or we could both be wrong, in some third possibility. China has a history of surprising those who thought they could they knew better.

But my view remains that Robert Peston is making a bigger deal out of this than it warrants. Ultimately China will do everything within its enormous power to avoid a big crash, and the rest of the world is hugely incentivised to assist its efforts to do so. "How China fooled the world"? I'm unconvinced.

TickersPlaysPop

Hi Sandstone

Thank you for your response. I agree with a lot of what you mention,

China is growing by building lots of things, roads, dwellings, railways, airports.... They are all very very busy with everything to do with this... raw material supply, logistics, man power, management, financial services, feeding the work force, utilities provision,...

What happens when this slows down and worse still stops?

They need to rapidly give these people something to do to fill the vacuum.... and you are sure the digital benefits are good enough to fill this in terms of speed and volume?

As you know, Business take time to grow, and I feel that they won't be able to fill the vacuum fast enough.

If the west can return to growth and ramp up demand for good again, maybe manufacturing can return to China replace the building activity?

CLAPTON

china is much poorer than the west and lack many of the goods and services that we take for granted.

it seem perverse to assume that demand in China will fall

and even more odd to think that the relatively rich west will be needed to fill the 'gap'

Sandstone

TickersPlaysPop wrote: »

Hi Sandstone

Thank you for your response. I agree with a lot of what you mention,

China is growing by building lots of things, roads, dwellings, railways, airports.... They are all very very busy with everything to do with this... raw material supply, logistics, man power, management, financial services, feeding the work force, utilities provision,...

What happens when this slows down and worse still stops?

They need to rapidly give these people something to do to fill the vacuum.... and you are sure the digital benefits are good enough to fill this in terms of speed and volume?

As you know, Business take time to grow, and I feel that they won't be able to fill the vacuum fast enough.

If the west can return to growth and ramp up demand for good again, maybe manufacturing can return to China replace the building activity?

Tickers, good question. I think a lot of the focus is currently on how China's economy can be more self-supporting, by increasing domestic demand. With the unprecedented lifting of millions of people out of poverty, most indicators are that this is more a question of when (and how much), rather than "if".

Clapton, I agree.