June 4th thread

About to visit the square as I did yesterday. Talk about anything that has to do with incidents that have occurred on past June Fourths, or anything else. And it’s hot here in Beijing today. A good day to wear white. Not to change the world, but just to show we think it’s better to remember than forget.

[Moving this up to the top of the page.]

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Update: Just received this photo a friend took at the remembrance vigil in Hong Kong and had to share. People do care and do remember. They can’t wipe out everyone’s memory by pointing to the economy

The Discussion: 124 Comments

“The landlord replied that China is the world’s second largest economy and the growth engine of the global economy during the financial crisis…”

Classic. As much as apartment hunting sucks in China (and in general), hopefully you’re friend will find a new place at an honest market price (is there such a thing in China for anything besides commodities?), as opposed to one determined by “CCP talking points”.

BTW, just saw Paul Krugman on CCTV2’s “Duihua” program saying that considering the size of China’s economy, it is ridiculous to think that China can single-handedly pull the world out of the financial crisis, so at least your friend has another economist to help counter her landlord’s nonsensical illusions of China’s “superhero” economic status.

Sigh…it must suck to have done all that work researching local market prices etc., only to have it blow up in your face with a truly ridiculous response, I mean if the landlord’s gauge for pricing is what the Renmin Ribao Op-ed page is saying about China’s economy, how can you possibly win? (actually in my business, I’m quite used to this sort of letdown) I guess we all would hope that losing a tenant/customer would clue the guy into his ignorance, but I have feeling these type of messages don’t always get through over here…

June 8, 2009 @ 5:31 pm | Comment

The problem is the infrastructure spending represents more bleeding with no revenues to balance it. China has more cash reserves so it can do this more easily than the US, but without those export dollars coming in from the taxes on exporting businesses, China’s going to face serious budgetary problems sooner than many realize. The hope everyone is focued on is that the deficit spending on infrastructure combined with various rebates and in some cases simply handing out money – the hope is that all of this will lead to the dream of increased domestic consumption.Getting people to part with their money, especially traditionally high-saving Chinese people in an extremely uncertain financial time, is a challenge I wouldn’t wish on anybody.

Absolutely

All landlords here (and probably everywhere) are dicks

And again, correct. Landlords tend to understand bugger all about economics, that’s why they are landlords. It is the absolute bottom feeding “investment”, except it isn’t really an “investment” it is a job, if done correctly.

June 8, 2009 @ 5:56 pm | Comment

@Serve

I must recognize that that Hummer deal could be more profitable than many think.

It has broken a Taboo. A CH brand, no matter what, has been able to get a significant foreign brand.

Even if the deal is a total economic disaster it has open the door to more, and some may be profitable ones.

It may even help to improve awareness of CH auto brands in international markets.

June 8, 2009 @ 6:01 pm | Comment

@serve
” I am expecting see a Hummer in every garage.”
I think it is time to start investment in Oil markets and companies…..

June 8, 2009 @ 6:02 pm | Comment

Si, and the landlords cry all the wayt to the bank. Wasn’t it Shakespeare who said, “The first thing we do is kill all the landlords”? (It was “lawyers,” actually, but landlords are even worse.)

June 8, 2009 @ 6:16 pm | Comment

@Richard..without TBD.. ha! Shibby!

@Serve the people – I tend to agree, I also do not sense any weakening in the Chinese consumer spending.

June 8, 2009 @ 6:25 pm | Comment

richard, i understand that in the us you can hand back the keys and walk away. is this true? this is not an option in the uk, where the mortgage lender can pursue defaulters for up to 12 years. so a lot of people who thought a city centre flat at 6/7 times average wages was a great “investment” are currently taking a very nasty bath, with their flats being repossessed and sold at 50% plus discounts from purchase price and the wannabe property tycoons being pursued for the difference.

i have had one landlord who was good. bizarrely it was a student house – he left us alone, was prompt with dealing with any difficulties and was also the model of all patience when one of my housemates was routinely tardy on the rent. but then this was pre-bubble, he actually saw it as a job and owned numerous properties. other than that Chairman Mao was right – shooting is too good for the vast majority.

June 8, 2009 @ 6:36 pm | Comment

@Writer from Hell
” I also do not sense any weakening in the Chinese consumer spending.”

But how strong it is to begin with? And it is enough now to have any effect against the contraction of export markets, and/or how much should it grow to have any?

June 8, 2009 @ 6:39 pm | Comment

@AndyR: Not sure Krugman is much of an authority with local landlords… capitalists don’t normally appreciate the advice of communist commentators.

@Serve/Writer: The problem is that the CCP claims that local consumption will grow (is growing?!) quickly and dramatically to save the local (and global) economy. Not going to happen. In addition, the fact that so much new cash has been poured into the market by the government during the last 9 months, directly or through the banks, and the fact that private consumption is stable/down/or even slightly up… means that local consumers are actually saving more than before.

June 8, 2009 @ 6:49 pm | Comment

@Dror

“The problem is that the CCP claims that local consumption will grow (is growing?!) quickly and dramatically to save the local (and global) economy. Not going to happen. In addition, the fact that so much new cash has been poured into the market by the government during the last 9 months, directly or through the banks, and the fact that private consumption is stable/down/or even slightly up… means that local consumers are actually saving more than before.”

Absolutely. In the longer term it is possible that China can be an engine of growth, if education, healthcare and social security can be improved/created. Without a viable safety net, the Chinese will continue to save, not spend. The stimulus appears aimed at increasing China’s overcapacity, rather than dealing with these issues. When you consider the above, plus the ageing population and environmental issues China does not look a particularly brilliant bet from the current standpoint.

June 8, 2009 @ 7:00 pm | Comment

@ecodelta, thats a good question. Got me thinking what the split between domestic and exports is in the Chinese economy? Do you have the nos by any chance.

@Dror, Good point. Yes the CCP’s claims may not hold true. Everytime governments have increased direct spending, it has tended to deepen depressions (FDR’s new deal included). Let us see if the theory can hold good in China. But on the contrary, I somehow have great confidence in the CCP’s abilities to mastermind anything; if they claim they’ll save the world, I fear they just might. Hail the CCP!

June 8, 2009 @ 8:06 pm | Comment

ok data readily available(wiki) so let me regurgitate – GDP components, exports 39% (Imports 31 so reall net just 8) Domestic 36%. Ya that is small. 36% of 3 or 4 trln whatever the fig is so size of domestic about 1 trillion. World GDP I think is about 45 trillion. Ok so China’s domestic economy can not uphold the global economy. (looks like it). But lets see when CCP claims it can do it, logic defying that may be, but I would leave some room for doubt .. time will tell!

June 8, 2009 @ 8:17 pm | Comment

@Writer: at the moment, China can hardly uphold it’s own economy. If they manage to do that, it would be enough. The world will be ok.

June 8, 2009 @ 8:54 pm | Comment

@writer

I somehow have great confidence in the CCP’s abilities to mastermind anything; if they claim they’ll save the world, I fear they just might. Hail the CCP!

I suspect you are not joking. Please tell me I am wrong.

@dror+everyone

Found this on China Translated. Dunno who Tom Orlik is but the post is fascinating.

http://www.chinatranslated.com/?p=397

“One of the issues we have been following here on China Translated is provincial debt. With tax revenue down, social spending obligations up, and high costs for funding their part of the economic stimulus, many local governments are finding that their budgets are strained. One response is to issue debt to make up the shortfall.”

Interesting times.

June 8, 2009 @ 10:09 pm | Comment

@dror..ha! ..true that!

June 8, 2009 @ 10:23 pm | Comment

@Si, don’t worry sleep easy, I was only joking.

June 8, 2009 @ 10:27 pm | Comment

@Writer

“ok data readily available(wiki) so let me regurgitate – GDP components, exports 39% (Imports 31 so reall net just 8) Domestic 36%. Ya that is small. 36% of 3 or 4 trln whatever the fig is so size of domestic about 1 trillion. World GDP I think is about 45 trillion. Ok so China’s domestic economy can not uphold the global economy. (looks like it). But lets see when CCP claims it can do it, logic defying that may be, but I would leave some room for doubt .. time will tell!”

Rather surprised that there are still “it’s GDP that all matters” fundamentalists lurking around. Despite all your painstaking task of regurgitating GDP components, the Gini coefficient of China, which stands at a high of 0.47, was conspicuously missing for some strange reasons.

June 9, 2009 @ 1:10 am | Comment

@Writer

Oh, for all your regurgitation of those GDP components, you haven’t account for the “negative externalities” of environmental destruction (Chinese has 7 of the 10 most polluted cities in the world, the economics of corruption and the ruthless exploitation of rural migrant workers and the resulted simmering social tensions.

June 9, 2009 @ 1:20 am | Comment

Objective reality is a foreign construct aimed to destabilize China…

The only objective reality is the real market price for the rent — not your friend’s argument, not the landlord’s argument, hell certainly not your argument, with or without that “5000 years” bit. If the tenant can find a better price with everything else being comparable, then s/he should move; if the landlord can get another tenant to pay comparable rent, then s/he should hold firm the price. Normally between tenant/landlord in price dispute I’ve found landlords are far more in tune with the market price since the landlords have a shit load more capital in stake. Any wishful thinking will hurt their bottomlines far more than some casual renters. BTW, if you can’t walk the walk, but only talk the talk, you are just a wishful thinker, with or without the smart to use “5000 years”.

Domestic 36%. Ya that is small. 36% of 3 or 4 trln whatever the fig is so size of domestic about 1 trillion. World GDP I think is about 45 trillion. Ok so China’s domestic economy can not uphold the global economy. (looks like it).

What you called “domestic” is private consumption expenditures (PCE). Some argue that it’s understated because services are undercounted, and some lumped under gross fixed investment should really be durable goods under PCE. But anyway foreign products and services go to all categories including gross fixed investment (no breakdown of private or government) and government consumption. Obviously China wouldn’t hold up the whole global economy especially the part of the economy including Ponzi schemes sorry I meant financial services, $150 hair styling, 8 pounds London congestion charge, etc. But if you have something that China wants and needs, like oil (e.g. Russia), minerals (e.g. Australia), agr-products (e.g. Brazil), autos (e.g. Germany), you will be fine. Everybody else… tough luck from China. But Uncle Ben will continue his Ponzi scheme sorry I meant quantitative easing to make sure you’ll be alright.

June 9, 2009 @ 5:49 am | Comment

@JXie: As I noted in my post, she quoted market prices of comparable properties.

That said, you are aware of the fact that property (and everything else’s) prices have been driven up by foreign investment in RMB assets. One of the main reasons for this investment is the belief that China’s currency is undervalued. So, it’s hard to rely on market prices in an economy that does not allow the market to operate. You can add that to the fact that most land deals are done by the government, and that the media is not free to report on any problems with such deals, and you get a market price that is quite far from what it ought to be.

June 9, 2009 @ 6:24 am | Comment

@Dror, All you are saying is a bunch of wishy-washy, nebulous and unquantified “reasons” why you believe the market price should be at a different and presumably lower level. The biggest problem as I see, is lack of real facts and figures by you. What’s “not free to report” mean? If you read the buy/sell-side financial reports and analysts’ reports, you will realize your lines are like 5th-grade essay. Quite a few mainland Chinese RE developers are publicly tradable. Read their annual reports. While you at that, read the analysts’ reports on them. There is a shit load of information available about them in the Internet. Chase it down. Mind you, a lot of opinions are bearish, but at least informed bearish.

In the time of the worldwide RE markets from Hungary to Spain to Las Vegas at levels far depressed from their prior highs, a lot of speculative RE money has left China already, but somehow the levels are reasonable held up. So some strong hands are buying up the market. Who are they? What are their reasons? What are the ins & outs in numbers (millions, billions)…? If you have had a few chips in the middle, you will figure out in a massive panic selling environment, the assets/stocks holding up the best, are likely the leaders of the next upswing.

Can I be wrong? Of course. The cardinal sin of investing is assuming other market participants are stupider than you. If the market tells me that I am wrong, I will have to adjust.

June 9, 2009 @ 7:53 am | Comment

@JXie: Did you hear? There is no free press in China. The state has a monopoly on land. Connect the dots.

Whether or not I ‘believe the market price should be at a different and presumably lower level’ is irrelevant. The point is that prices are not determined by a real, free market. A perfect market relies on perfect flow of information. No market is completely free. China’s is considerably less free than most others.

BTW: I read analyst reports and annual reports of Chinese developers on a regular basis. Don’t even go there. Have a look at the ones from 12 months ago. See where we are today.

June 9, 2009 @ 10:11 am | Comment

@sp, “GDP Is everything lurkers”.. ? what ok why? I’m obviously a poor communicator.

I was supporting the point ecodelta made about ‘how big is the domestic Chinese economy to begin with’. I hadn’t realised it till he asked and I looked for those nos. I was quite willing to believe (naively) that CCP’s confidence must be real. Like Dror pointed out that let them worry about themselves and the world will be ok.. ok I am wiser after this discussion (that I guess is the whole point of having it).

Yea GDP or its components are just one set of nos. I agree – there is much more to a nation – Gini HDI environmental impact.. Sure thing. no arguments there whatsoever!

June 9, 2009 @ 10:31 am | Comment

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June 9, 2009 @ 3:06 pm | Pingback

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