GoFuckYourself.com - Adult Webmaster Forum - View Single Post - The next stock crash might come from a place you LEAST SUSPECT (hint: not Russia or US)

Paul · 01-14-2015, 11:31 AM

Watch this BBC documentary about China

BBC Two - This World, How China Fooled the World - with Robert Peston

Here are the cliff notes

China will have replicated the entire US commercial banking sector in the span of half a decade.

China's boom is ending, it's probably around 2004 - 2005 in comparison to our 2007/08 crash

A debt explosion that dwarfs what we've experienced in the West

Most of the money for China's growth since 2007/08 was borrowed from banks which was the start of their credit orgy.

Shadowing banking system emerged and took over what the state owned banks where lending,

Off balance sheet entities where able to go to the banks, borrow copious amounts of money so that they built themselves up into enormous borrowing entities which is all very similar to our own off balance sheet vehicles

So lending isn't happening through the local state owned banks and the Chinese government has lost control of lending, the problem is a huge proportion of China's debts are hidden

In some Chinese cities house prices are still rising up to 20% per year and their housing bubble is just as bad if not worse than our own in the west.

So the rich are buying the high priced homes and keeping them empty as investments, massive oversupply of property and estimates are around 15% of all Chinese property are empty

Whole thing boils down to corruption and why the government have been unable to stop it, the building boom has made 1000s of local officials very rich, so they allow project after project, local officials oppriate the land and then sell it on to local developers and big backhanders are involved.

In 2008 the chinese banking sector was $10 trillion in size now (2014) it's around $24 - $25 trillion that increase is equivalent to the size of the entire US commercial banking sector which took more than a 100 years to build so that will mean China will have replicated the entire US system inside half a decade.

China's total indebtedness is around twice it's GDP up from 125% just 5 years ago, there is no example in history of that level of debt explosion not leading to a collapse

China has a massive challenge trying to transform into a consumer lead economy due to their history of poverty and a lack of a welfare state, due to this the average Chinese citizen saves around 1/3rd of their income compared to 1/20th in the west.

In 2014 credit growth is still twice as fast as GDP growth, mathematically there is no way to grow out of this problem when credit is twice the size of the economy and growing twice as fast.

George Magnus, Former Chief Economist, UBS Bank

"I don't think anyone really knows how much longer this credit genie can stay outside the bottle, my own view is that China in 2014 is maybe where the west was in 2005 - 2006, it's not an imminent danger of a financial implosion but it's drawing nearer all the time"

01-14-2015, 11:31 AM
Paul Confirmed User Industry Role: Join Date: Nov 2002 Posts: 2,637	Watch this BBC documentary about China BBC Two - This World, How China Fooled the World - with Robert Peston Here are the cliff notes China will have replicated the entire US commercial banking sector in the span of half a decade. China's boom is ending, it's probably around 2004 - 2005 in comparison to our 2007/08 crash A debt explosion that dwarfs what we've experienced in the West Most of the money for China's growth since 2007/08 was borrowed from banks which was the start of their credit orgy. Shadowing banking system emerged and took over what the state owned banks where lending, Off balance sheet entities where able to go to the banks, borrow copious amounts of money so that they built themselves up into enormous borrowing entities which is all very similar to our own off balance sheet vehicles So lending isn't happening through the local state owned banks and the Chinese government has lost control of lending, the problem is a huge proportion of China's debts are hidden In some Chinese cities house prices are still rising up to 20% per year and their housing bubble is just as bad if not worse than our own in the west. So the rich are buying the high priced homes and keeping them empty as investments, massive oversupply of property and estimates are around 15% of all Chinese property are empty Whole thing boils down to corruption and why the government have been unable to stop it, the building boom has made 1000s of local officials very rich, so they allow project after project, local officials oppriate the land and then sell it on to local developers and big backhanders are involved. In 2008 the chinese banking sector was $10 trillion in size now (2014) it's around $24 - $25 trillion that increase is equivalent to the size of the entire US commercial banking sector which took more than a 100 years to build so that will mean China will have replicated the entire US system inside half a decade. China's total indebtedness is around twice it's GDP up from 125% just 5 years ago, there is no example in history of that level of debt explosion not leading to a collapse China has a massive challenge trying to transform into a consumer lead economy due to their history of poverty and a lack of a welfare state, due to this the average Chinese citizen saves around 1/3rd of their income compared to 1/20th in the west. In 2014 credit growth is still twice as fast as GDP growth, mathematically there is no way to grow out of this problem when credit is twice the size of the economy and growing twice as fast. George Magnus, Former Chief Economist, UBS Bank "I don't think anyone really knows how much longer this credit genie can stay outside the bottle, my own view is that China in 2014 is maybe where the west was in 2005 - 2006, it's not an imminent danger of a financial implosion but it's drawing nearer all the time"