Talk of China economy collapsing in 3rd/4th Qrt 2014 reaching Fever Pitch

[Bitcoinpro]

This will make Crypto's stocks explode in price.

China will try to print themselves out of trouble just like every country has tried to do.

What we are seeing here is the entire global credit bubble manifesting itself in China's real estate market.

House prices are at 50 times yearly earnings.

[klintay]

i don't know why theft of IP is there...that must be a benefit if anything...

[ak84]

i don't know why theft of IP is there...that must be a benefit if anything...

Truth. Theft/pirating/copying of technology is a tremendous benefit for them. The rest will lead to collapse of China though.

[kwest]

I recently read a report about Chinese millionaires leaving the country, and it's increasing at a rapid rate. I can't find the link right now, but I wonder if the fear of a massive sell off before January 31 is overblown.. I don't think the rich Chinese that know about bitcoin are going to be in a hurry to get their yuan back. Rather, I expect them to slowly convert their BTC to USD/EUR over time and move them abroad.

[Johnny Bitcoinseed]

Where did you get the image?

For many countries now, it is a race to the bottom - trying to see who can devalue their currency the fastest by printing money out of thin air that is backed by less than nothing.

Ever since the dawn of civilization wise men have prepared for tough times while the sheeple go about their days believing things will always be the same.

[BTCisthefuture]

I agree that china has a lot of long term (and some short term) problems.  It's debatable how many China can fix and if China will have a hard fall or a soft fall but it's a topic many people discuss all the time.  I wouldn't expect the economy to collapse in 2014 though.  China's economy is still growing at a nice enough rate that even with the problems it's facing if I had to make a guess I wouldn't expect a collapse for another 20-50 years , these things typically take time.  For example, the 2008 crash in America was decades in the making.


I would add a couple more things to the list of China's long or short term problems.....

People with money/education fleeing China. I've seen this personally with friends and family in China. It's even more true if they have children.

Poor education system.  I won't get into all the details but depending on where you are born in China it really messes up your odds of going to a good university.  In china it's based on where you were born..... even if you spent the majority of your life in a city like beijing, own property there, own a company, pay taxes, etc etc  if you weren't actually born in beijing then you aren't allowed to go to the top schools (unless you bribe the right people of course).  I know quite a few people who go to highschool/college abroad instead of china because of this  (again it's an example of people with money leaving).

An economy too heavily based on export instead of consumer spending , while exporting companies/industries are currently starting to leave china as wages go up, pollution increases, and dealing with the government is a pain.  Alot of companies have found even cheaper worker wages to exploit in other countries now.

These are in addition to things already shown in the picture, which are accurate things.

[ko2a]

There is a bubble in china.. however if they let their currency expand like it naturally should and if they didn't try to centrally "plan" everything.. these things woul naturally take care of themselves more..  However since this is not happening i would agree that we will see a tremendous slowdown in the china economy..

Here is some proof of a so called failed "Planned Economy"

Chris Mayer Visits Creepy Empty Mall in China
http://www.youtube.com/watch?v=a-uh6nx-m5E

the gov. can't do a good job at planning crap when it comes to the markets it would seem, however it is somewhat entertaining to watch.. although "not" entertaining to see all of the money that is wasted...

[cr1776]

If true, this won't be a positive for China either:

Mega Default in China at end of January. 

http://www.forbes.com/sites/gordonchang/2014/01/19/mega-default-in-china-scheduled-for-january-31/

[zeetubes]

Another interesting rumor is that china will soon announce that it has the second biggest store of gold in the world, overtaking Germany (who can't even collect their gold from the fed anyway). Plus it is very likely that in order to distract chinese citizens' attention away from the economy, the government will pull off the standard text book strategy of declaring war on one or more countries. It is certainly moving in that direction with Japan and the Philippines right now.

[empoweoqwj]

But if China collapses, what happens to the US? Isn't most US debt owned by China???

[BTCisthefuture]

But if China collapses, what happens to the US? Isn't most US debt owned by China???

It goes both way, either country collapses and it impacts the whole world.

[zeetubes]

If China collapses, the US still owes the debts to China. The US is obligated to protect both Japan and the Philippines so things could get interesting if China makes moves on either of those territories. In the event of war, the US could decline to pay its debts. But America is so broke, it would have to borrow money from China to intervene.

[Kungfucheez]

If China collapses, the US still owes the debts to China. The US is obligated to protect both Japan and the Philippines so things could get interesting if China makes moves on either of those territories. In the event of war, the US could decline to pay its debts. But America is so broke, it would have to borrow money from China to intervene.

Well, because of the nature of international trade and commerce, when I large nation has rough economic trouble, it tends to effect other nations as well. Same thing happened in the 1930's because countries tend to rely on each other for sources of labor, raw materials, production, and so on. Although the growth of radical political factions and movements didn't really help during those times.

Also as a side note, I think many people might be a bit misinformed on what debt actually means for a country, it's not really a bad thing.

[practicaldreamer]

Well, because of the nature of international trade and commerce, when I large nation has rough economic trouble, it tends to effect other nations as well.

Agreed - I certainly can't see the Chinese economy "collapsing" - rather, its (till now) rapid rate of growth will decline. The west can't afford quite so much of that which it has been previously importing from China. The Chinese knew/had forecast this themselves and are trying to turn their economy around to a more home consumer demand driven type of setup. This combined with their growing stature and dominance in the global oil and gas market  ( and the US being up to its neck in debt to China ??) seem sure to avert any sort of economic "collapse".

Just my tuppeneth (2 pence worth for all none UK dwellers of this forum)

[cdog]

I was under the impression their currency was artificially deflated via govt monetary policy

[qiwoman]

The housing Bubble is one of the primary concerns within the Chinese Economy and the size of China in comparison to Greece or Dubai is humongous..What this will bring if it comes to pass is the collapse of the Global Economy as we know it because China is holding most of the US debt / Gvt Bonds so then US dollar will go down the tubes affecting everything else. Greece will look like a fairy tale. Let's hope the Chinese invest plenty in BTC so they can rebuild their economy in a sound and solid way. I am sure the Chinese Govt is monitoring the Financial sector closely because it knows it's survival is based on a sound Economy otherwise there will be revolutions and revolts like the World has never seen, especially in the Countryside as they will be deeply afflicted. I hope this does not come to pass and they can find a way to integrate digital currencies into their economic infrastructure.

[tabnloz]

For me, the Chinese aren't stupid. They seem a lot more calculated than the West. Still, they have a few other problems

1) its about jobs - as long as the people can put food on the table the risk of rebellion is kept in check but as US/EUR economies shrink, demand is muted (see large infrastructure projects as response to this)

2) historically a nation of savers. transforming to a consumer society will be difficult in the face of a few thousand years of habit.

3) China have had a few large spikes in the o/night rate in the last year but every time the central bank has provided liquidity eventually. It reads like shadow banking system is unregulated and very wild west like.


I wonder what the Lehmann moment could be?

my2c.

[Lloydie]

If China collapses, the US still owes the debts to China. The US is obligated to protect both Japan and the Philippines so things could get interesting if China makes moves on either of those territories. In the event of war, the US could decline to pay its debts. But America is so broke, it would have to borrow money from China to intervene.

America owes all its debts in US dollars which it can print more of at anytime. The really dumb thing is why China and Japan would send real goods in exchange for US dollars. The US has long controlled oil, which makes US dollars valuable. China is trying to diversify by buying oil and gas elsewhere, plus establishing direct RMB swaps with 21 countries.

The days of US dollar dominance are numbered. So the US will always be able to pay its debts. But going forward China will try to accumulate less US dollars.

[Lloydie]

Well, because of the nature of international trade and commerce, when I large nation has rough economic trouble, it tends to effect other nations as well.

Agreed - I certainly can't see the Chinese economy "collapsing" - rather, its (till now) rapid rate of growth will decline. The west can't afford quite so much of that which it has been previously importing from China. The Chinese knew/had forecast this themselves and are trying to turn their economy around to a more home consumer demand driven type of setup. This combined with their growing stature and dominance in the global oil and gas market  ( and the US being up to its neck in debt to China ??) seem sure to avert any sort of economic "collapse".

Just my tuppeneth (2 pence worth for all none UK dwellers of this forum)

China's economy in 2013 is as follows: 50% fixed asset formation, 50% consumption.

Half the economy is involved with building things and it has a massive property bubble which the government is happy to maintain with more and more credit. The rich are super rich and the poor are dirt poor. Very unequal.

In 2013, the construction part grew at a rate of 19.3% fuelled by more credit.  Consumption grew a little bit.

The construction bit is so big now that the steel, cement, glass and related industries make zero profits due to chronic overcapacity, as they kept building during the GFC to anticipate a global economic recovery.  The global recovery never happened. Now these companies carry massive debt burdens.

If China cuts credit, these industries will collapse and cause unemployment to rise. Consumption will also fall as unemployment rises. If China does not cut credit, it will worsen the overcapacity problem and choke its population to death with pollution.

Beijing's pm2.5 measure is over 600 when the safe level recommended by the World Health Organisation is 45.

China will run aground at some point due to massive social inequalities and horrendous pollution.

[Lloydie]

For me, the Chinese aren't stupid. They seem a lot more calculated than the West. Still, they have a few other problems

1) its about jobs - as long as the people can put food on the table the risk of rebellion is kept in check but as US/EUR economies shrink, demand is muted (see large infrastructure projects as response to this)

2) historically a nation of savers. transforming to a consumer society will be difficult in the face of a few thousand years of habit.

3) China have had a few large spikes in the o/night rate in the last year but every time the central bank has provided liquidity eventually. It reads like shadow banking system is unregulated and very wild west like.


I wonder what the Lehmann moment could be?

my2c.

The Chinese are not stupid but the west is every bit as calculating. The Chinese economic structure is heavily top down and is prone to corruption and flaws in economic strategy.

There is now the problem of social injustice in addition to unemployment. The rich are too rich and the poor cant even see the sun anymore. Literally.

Chinese people are not historically a nation of savers. They are savers because people had no access to credit until recently. Moreover, credit growth in China is the highest of any nation on the planet right now at 49% of GDP according to Fitch. Most of the debt is corporate and local government.

The shadow banking sector is very well regulated in that every trust issuer must be registered. The problem is that investors have never suffered losses and they invest without fear of loss. This is because they expect banks to make good on trust products or that the central government will bailout local governments. It is a risk pricing problem not a regulation problem.

As the Chinese government adds liquidity each time there is a problem, they are building a bigger, and bigger, and bigger economic bomb for themselves. All the bad loans are now stored within the financial system just ready for a "Lehman" type spark.