An "expert" commenting from half the world away. How many times do they visit China ? Four times a year ?
These are all long term trends but the title says "crash in 2011". I can agree if they change the title to 'crash in this decade" ...
5 Reasons China Will Crash in 2011 By Michael Shulman
NEW YORK (InvestorPlace) -- According to the Chinese zodiac, 2011 will be the "Year of the Rabbit," which is considered to be a lucky sign. But I think China's luck is about to run out, and I'm not the only one who sees the writing on the wall.
Despite what you hear from the China bulls out there -- and there are plenty of them -- 2011 will not be the "Year of China" for investors ... unless they plan on shorting China stocks and ETFs, that is.
Here are five reasons to bet against China in 2011:
1. The Great Chinese Credit BubbleThe most pernicious impact China is having on world markets stems from a massive credit bubble similar to the one that blew up Japan in the early 1990s and the U.S. markets in 2007-2008. Hedge fund manager Mark Hart, who made a killing anticipating the U.S. subprime mortgage meltdown and the European debt crisis, is now focusing on China, saying in an article in The Telegraph that China is in the "late stages of an enormous credit bubble," and the "economic fall-out" will be as "extraordinary as China's economic out-performance over the last decade." Here are some of the problems Hart highlights:
a)
Property construction: Excess floor space exceeds 3.3 billion square meters, yet 200 million square meters per year is being constructed.
Winston: What 's his definition of excess floor space ?
b)
Property prices: The average
price-to-rent ratio of eight key cities is 39.4 times, which compares to 22.8 times in the United States just before the housing crisis.
Winston: Is taking averages going to give you an accurate picture ?
c)
Banking: Chinese banks are concealing the extent of their exposure to the credit bubble in shell entities that borrow from the banks and invest in fixed assets. In short, this bubble is ready to burst.
Remember, Chinese state banks are arms of the government, and their debts are assumed to be backed by the government. (Do the names Fannie and Freddie come to mind?) And, according to Hart's analysis, the government-debt-to-GDP ratio is 107%, which is five times higher than "official" numbers.
Winston: And what is the government to debt ratio of Japan and the US ?
2. The Great Chinese Labor ForceAccording to Chinese data, as well as more reliable sources such as the World Bank, in the next five years, the Chinese labor force available for industry will add the same number of industrial workers as currently employed in the United States and Europe. This
mass increase is the single greatest deflationary force on the planet.
3. The Great Chinese Commodity Gobbler China's commodity imports are driving the price of everything from iron and coal to rare earth minerals. The country's excess capacity is staggering. For example, Mark Hart's analysis states that China's steel output is more than that of the next seven largest producers combined, and their excess steel capacity is more than the EU and Japan's combined total production so far this year. Additionally, only 65% of the cement produced (after exports) has been consumed.
This has
created false prosperity and inflated asset values in exporting countries. The bulls believe the country will eventually use this capacity and consume these commodities as it builds out roads, bridges and other public works. However, this kind of public-funded consumption can only go on for so long since it is fueled by government credit, which is already overextended.
4. The Great Chinese Currency Reserve The Chinese love to remind the world about their currency reserves and drop hints about shifting away from the U.S. dollar if the United States does not do this or that. China is now in a trap of its own making by restricting the flow of capital and pegging its currency, the yuan, to the dollar.
As the value of Chinese foreign reserves diminishes, so does the capital base supporting the credit bubble, meaning China is not likely to revalue its currency, and so the trade war begins.
5. The Great Chinese Nation-State China has the world's largest population, and this has manifested itself in behavior similar to emerging nation-states in the middle of the 19th century. More and more, the country is characterized by its
bellicose gesturing and militant statements when anyone steps on its toes.
Recent events on the sea, on the Korean peninsula, in cyberspace and in Chinese prisons have laid bare China's grasp for world power, exposing the nation to harsh criticism, and with this politicians in the United States and Europe have begun to abandon a veneer of tolerance for Chinese trade policies. The trade war, if it comes, will be a trigger for major market problems
Winston: This I can agree but will the market crash because of this ?
http://www.thestreet.com/story/10955366 ... -2011.html
It's all about "how much you made when you were right" & "how little you lost when you were wrong"