Comments on: UBS Lays Out Their China’s Big Four Themes. Forgets One

By: Rich

Rich — Wed, 21 Oct 2009 06:33:06 +0000

@ Yair.

Long time!

Jon is perhaps one of my favorite economists, and the first time I saw him speak about economics I was immediately angry that I got such a crap Econ professor. He, and his team, have a huge pool of data, and have some of the best all around analysis I have seen.

That being said. Economists at major banks have an audience that is a bit different from that of All Roads, and I am trying to translate how a manufacturer (long term investor) or retailer (long term investor) should be reading the news and analysis.

Were I a short term investor, equities/ commodities, I would find the data valuable and I highly suggest ST investors look at these reports… but again for my readers the context is different.

Will respond to your email in a few – gotta run into a meeting

By: Rich

Rich — Wed, 21 Oct 2009 04:26:41 +0000

@ Duncan.

Thanks for addding some of what yo uare seeing.

The point you made adds further concern for me about overbuilding:

Their taxes have also plunged, so of course they’re trying to push up the land sales. It’s the only source of real income they have! I think the key figure to watch will be the housing sales number

For me, it is not just about housing sales… it is about laundry and lights. How many people are living in these units (as investment or owner/ occupy), and what the returns are. Will these end up being none performing investments? Investments that the banks ultimately will have to write off?

Or… will growth on a level like we have never seen before occur and eat up all the extra capacity?

By: Rich

Rich — Wed, 21 Oct 2009 04:23:28 +0000

@anon – thanks. I made a quick update to your comment to embed the link, nad have it on my to do list (to read the report).

How is STL weather (sorry.. I peaked at your ISP).

By: Y Crane

Y Crane — Wed, 21 Oct 2009 04:16:53 +0000

Rich,

Like Jon – whom I have known for many years and deeply respect – you offer consistently accurate perspectives on the enigma known as the Chinese economy. Thanks for this post.

I suggest you look at Stephen Roaches latest on Asia as well:
http://nextglobalstage.com/roach1.pdf
http://nextglobalstage.com/roach2.pdf

I also add a links to China DSP and AllRoads – FYI

Best regards and hope to connect with you soon.

Y. Crane
(Currently in So. California – go Dodgers and go Angels)

By: Duncan

Duncan — Wed, 21 Oct 2009 02:10:07 +0000

This is something I’m trying to work my head around at the moment too. It’s really no surprise that the property market has taken off again, as on top of the liquidity dynamics the regional authorities have a big interest in inflating the real estate market. Local governments have gone on this wild spending spree (debt held by the local government vehicles set up to finance infrastructure build-out had risen from Rmb1trn at end 2008 to around Rmb5trn by the middle of the year – which really puts the November 08 stimulus package into perspective). Their taxes have also plunged, so of course they’re trying to push up the land sales. It’s the only source of real income they have! I think the key figure to watch will be the housing sales number. As you say, you can build this stuff but if noone’s buying then the boom is not going to have legs. My own feeling is that once the pent up rush of demand from buy-to-live buyers has eased (and there are already some signs of that), it’s going to be mainly the speculators again, and they’re not the most stable source of demand.

By: anon

anon — Tue, 20 Oct 2009 17:59:56 +0000

great stuff…thanks for the post

speaking of over-capacity (yes, the pettis post was awesome)…here is another study that rips apart a lot of the “china is a layup” investment themes…

China’s Investment Boom: the Great Leap into the Unknown from Pivot Capital – download here