March 23, 2010 | Posted by Vitaliy Katsenelson

China: the coming costs of a superbubble

Christian Science Monitor approached me to write an article on China after they saw my presentation – China the Mother of All Black Swans. This article is a combination of this presentation and articles I’ve written in the past. It was published in the March 16th paper.

China: the coming costs of a superbubble

China may seem to have defied the recession and the laws of economics. It hasn’t. When China’s bubble bursts, the global impact will be severe, spiking US interest rates.

By Vitaliy N. Katsenelson

The world looks at China with envy. China’s economy grew 8.7 percent last year, while the world economy contracted by 2.2 percent. It seems that Chinese “Confucian capitalism” – a market economy powered by 1.3 billion people and guided by an authoritarian regime that can pull levers at will – is superior to our touchy-feely democracy and capitalism. But the grass on China’s side of the fence is not as green as it appears.

In fact, China’s defiance of the global recession is not a miracle – it’s a superbubble. When it deflates, it will spell big trouble for all of us.

To understand the Chinese economy, consider three distinct periods: “Late-stage growth obesity” (the decade prior to 2008); “You lie!” (the time of the financial crisis); and finally, “Steroids ’R’ Us” (from the end of the financial crisis to today).

Continue reading it …

Short URL: http://ContrarianEdge.com/?p=2184

yusufali

Hi Vitaliy
You are right on China. It is a dragon being slayed slowly by a 300Ib machine….blood will ooze and slowly it will then be reflected in its body – but it will take time. China now realises it is no use being the sweatshop of the world- it actually benefits the West.
Graduates are being churned out but are not being employed in the right sector ie mismatch of skills and needs. However, in the long run China will n can rise if- democracy rules and skills/educations churned out by its young people transforms into businesses, resources/environment is taken care with minimal pollution. I believe then China can then rise. Already now China is world's 2nd largest patent owner behind US. China should emulate India's domestic led economy.
rgds
Yusuf
yunkim

Once Earns & Young posted report on their Non-Performing Loan reached about 900 bn USD in 2006
but they had to withdraw this report in a few days..don't know why but there must had been some forceful stress from the Chinese government threatening by the business disadvantage to this company's biz operation in China market.

http://www.finfacts.com/irelandbusinessnews/pub…
yunkim

Chinese economy is sustained by two things ,

One is the relatively high interest rate (cool down the inflation of domestic market )
Second is the fixed exchange rate of RMB (let their products price cheap but lured many speculation money looking for the appreciation time )
dannyboyyy

Incorrect,

you can't manipulate the markets forever! artificial pegging of RNB CAN'T last forever! No artificial currency control has EVER worked forever. It's a matter of when not if!
Anonymous

I truly have a hard time seeing how economies like the USA, swimming in unemployment, can continue to consume and thus fund the Golden Dragon. Every month there is less slack in the system as debts at the federal level suck, ray-o-vac the available capital out of the savers and send it overseas to pay our debt holders. For all the talk about the debt I see a huge lack of talk about the debt’s effects. People keep talking like we can print or borrow forever. We can’t.

China: the coming costs of a superbubble

China: the coming costs of a superbubble

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