To those who have commented on Chinas tendency to cook the books on economic growth: here is the evidence of it. Chinas supposed growth is paper thin on examination. With steel overproducing and a glut of new homes on the market, real-estate values are dropping because its so easy to find a home for sale anywhere. Dropping real-estate value is exactly the same as taking money out of every homeowners pocket and evaporating it into thin air. It means people have less money and homes sit empty. This is what happens when you inflate growth with massive credit lending. I believe that current rates of credit expansion can continue at most for another 3-4 years, says one expert who lives in China. After that? If they continue they will have an increasing likelihood of a domino-like series of defaults that will bring about a recession similar to what the U.S. suffered in 2008. In fact, we may be seeing a precursor of this in default that Huatong Road & Bridge Group Co. is currently facing as it is unable to pay a $400 yuan bill that is coming due (see Bloomberg News for more). China may say theyre growing… but they are growing in the way a balloon grows before it bursts.
Posted on: Fri, 18 Jul 2014 01:03:34 +0000