The Chinese laundry is running out of steam!

Odd how you hang about waiting for a news story on China and then three turn up at once!  This morning, Sky News is running a story concerning some obscure village in China whose 10,000 inhabitants have sealed their village off in revolt against the government.  Apparently, the land around the village was, in effect, confiscated by a local property zillionaire who, with the aid of the local authority, then gained planning permission for new buildings.  The villagers were never recompensed and now they are in revolt against the government.  On orders from central government the area has been surrounded by troops as well as police called in to deal with the situation.  As usual, attempts by them to stop news of the incident spreading have failed dismally.

In addition, Joseph Sternberg in The WSJ emphasises the extreme doubts that China, whatever it says in public, will ever go near any carbon emission agreement.  The sillier little HAFs in Durban became rather excited when China announced that it might, just might, be willing to contemplate a carbon deal - in 2020!  Sternberg concentrates on just one area of carbon emission, aviation, unlikely to change soon in China.  The military control 80% of Chinese airspace thereby forcing civilian jets to proceed along illogical and time/fuel expensive corridors.  As Sternberg explains:

Would leaders in Beijing, atop a delicately balanced authoritarian system, have the stomach to take on the military in the name of helping the aviation industry meet a global carbon emissions target? Not any more than those leaders would have the stomach to take on politically powerful large industries, let alone to tolerate the economic disruption that would accompany a shift to a potentially greener, market-determined balance between services and manufacturing.

Meanwhile, the dreaded Ambrose strikes again, not this time against Brussels but instead Peking:

It is hard to obtain good data in China, but something is wrong when the country's Homelink property website can report that new home prices in Beijing fell 35pc in November from the month before. If this is remotely true, the calibrated soft-landing intended by Chinese authorities has gone badly wrong and risks spinning out of control.

Of course, regular readers of this distinguished blog (you lucky people!) will already have been warned that China, given its size, is heading not just for a train crash but for the simultaneous crash of several trains, planes and automobiles!  All the red lights are flashing but nobody seems to be watching let alone heeding (my emphasis):

Chinese stocks are flashing warning signs. The Shanghai index has fallen 30pc since May. It is off 60pc from its peak in 2008, almost as much in real terms as Wall Street from 1929 to 1933.

"Investors are massively underestimating the risk of a hard-landing in China, and indeed other BRICS (Brazil, Russia, India, China)... a 'Bloody Ridiculous Investment Concept' in my view," said Albert Edwards at Societe Generale.

As sure as night follows day, the Chinese government, already fearful of the growing resentment of their people, will do almost anything to deflect the heat.  As Ambrose suggests, they will probably start dumping their goods on the world as they raise tariffs - in fact, just this week they announced a tax on certain imported American vehicles.  In addition, it is even suggested that they might devalue! the yen next year.  This sort of thing will produce a backlash amongst its big trading partners like the USA.  As so often elsewhere, the demon in the room is property:

A fire-sale is under way in coastal cities, with Shanghai developers slashing prices 25pc in November – much to the fury of earlier buyers, who expect refunds. This is spreading. Property sales have fallen 70pc in the inland city of Changsa. Prices have reportedly dropped 70pc in the "ghost city" of Ordos in Inner Mongolia.

The credit needed to sustain the earlier property demand is unbelievably huge:

The International Monetary Fund's Zhu Min says loans have doubled to almost 200pc of GDP over the last five years, including off-books lending.

This is roughly twice the intensity of credit growth in the five years preceeding Japan's Nikkei bubble in the late 1980s or the US housing bubble from 2002 to 2007. Each of these booms saw loan growth of near 50 percentage points of GDP.

Quite where it will all end when the bubble bursts no-one can tell.  If it leads to internal unrest that might keep the government's mind off foreign adventures but, alas, all too often in those cases it is precisely  'foreign adventures' with a nice big dollop of patriotism which a desperate government believes will keep people's minds off their own problems!

Now what did that Chinese geezer say about 'interesting times'?

 

Comments

[A K Haart]

I don't think the Chinese believe our climate scientists. Their own scientists tell a very different story so they will never sign up to anything with teeth :-

http://wattsupwiththat.com/2011/12/07/in-china-there-are-no-hockey-sticks/

[David Duff]

Trouble is, AK, that I don't believe the Chinese, either.

[dearieme]

I offer you a headline, Duffers. "Brics broke".

[David Duff]

You should have worked for The Sun, my son!