Jim Jubak on China’s Future if the US Economy Sinks

Thursday, November 29, 2007 4:34
Posted in category Invest in China

Here is an excellent clip of Jim Jubak on some macroeconomic things to consider. you may remember that I covered a piece of his on logistics last year, and like that piece, he has some things that I agree and disagree with.

Currently working on a few posts to address some of the underlying issues he mentions, I done have time to do a full writeup at this point as I am in the middle of cutting a nightmare of a spreadsheet…

What I can say is that the questions he asks are ones that we are asking more and more in China. what happens if the US economy flushes itself like many (including myself) see happening. Is China strong enough? Some say china has decoupled (in part or whole), while others say if US goes down, so does China.

Anyway, watch this and let me know what you think. I will be back with more soon.

[youtube width=”425″ height=”335″]http://youtube.com/watch?v=ojEGqeI8dsI[/youtube]

Update 1: be sure to read  Global Inflationary Pressures Likely If Yuan Unties From Dollar and China to Let Market Forces Weigh on Value of Yuan While not a direct tie into the above, some of the fundamentals discussed are very pertinent to the ongoing discussion

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4 Responses to “Jim Jubak on China’s Future if the US Economy Sinks”

  1. Will Lewis says:

    November 29th, 2007 at 12:42 pm

    The Economist calls this a fierce debate amongst economists. Check out Dizzy in Boomtown. The pertinent stats are: “The share of China’s exports going to America (including re-exports through Hong Kong) has fallen from 34% in 1999 to 24% now”; and “this year for the first time emerging economies are likely to have bought slightly over half of America’s exports, helping to prop up the economy of the United States.” And they finish with: “Some years into the future, economists may instead ask: “Can America decouple from China?” This suggests that China has not completely decoupled from the US. Plus, 24% of China’s exports is a lot.

    There are many markets, the US is the biggest, and they’re all very interconnected. Any serious financial trouble in the US should cause worldwide trouble. At least for the near future.

    Also, James Zimmerman spoke at our school a while back and he says that the US manufactures highly technical goods and provides highly technical services that China, and most of the world, are as of yet incapable of providing. Until they catch up, the rest of the world should have a problem decoupling.

  2. Jay Boyle says:

    November 29th, 2007 at 8:54 pm

    Well one thing I will certainly agree with his comment “we don’t know the risks.”

    And I would say that market has severely under priced the risk in the Chinese market or you would not see the valuations we are seeing.

    I would also agree that we don’t know the size of the economy as local statistical bureaus are part of the local governments and they are notorious for trying to make the powers that be look good.

    However, keep in mind there is a very large underground economy because of the Chinese obsession with tax evasion. In my experience in the smaller areas 30% of transactions are through barter and the rest are cash. Most people do not provide Fa Piao’s

    I firmly believe that the economy is NOT export driven but that does not mean it is driven by a middle class consumer either. The Fiscal spending and investment in infrastructure in China is a very large sector.

    Jay

  3. Jay Boyle says:

    November 29th, 2007 at 11:29 pm

    And to confirm my point about infrastructure projects:

    Read this FT report

  4. Rich says:

    December 2nd, 2007 at 3:05 am

    Will/ Jay

    Great comments from both of you.

    Will – Just saw a report (need to find the link) that shows the EU is now actually China’s largest market.

    Jay – I think the underground economies and the role of government spending needs to be a focus of a lot of people. It is not well measure or understood outside of the borders.

    R