Spent a bit
of time in China this past year, so the telephone and email questions are
coming in unexpected quantity.
Fortunately there are now many sources of quick and accurate expertise
(see below), however there is a compelling reason to dispel rumors and
folklore. I will try.
No, the China economy is not in
trouble. With 5-7% growth and $3
trillion in reserves there are challenges that difficult to resolve, and issues
often surfacing, but the economy is quite strong.
Yes, the data from China is not always
transparent, but neither is ours. Increasingly sources of good data emerge so
that at many levels we can actually see clear views .
No, the commodity and currency markets
will not remain stable over the near term; but that is a multi factor
phenominon only some of which involve China.
Yes there are bubbles in the China
economy, remarkably similar to the US in 2007.
The bank balance sheets are hugely inflated with poor loans and the
banks in China , like ours in 2008, must be recapitalized. The order of
magnitude, compared to available reserves, makes the recapitalization
feasible. We cannot say, however, when
and how fast this will occur.
No, the path to revaluation is not
predictable, so although over the long term we can say that the Chinese
currencies are overvalued compared to the dollar we cannot predict exact
fluctuations in timing or order of magnitude.
Yes, all the ‘smart’ money has a long
term short position on the Renminbi, but these are very long positions
indeed. Anyone advising on short term
moves should be ignored.
No, the macro view is not the whole
picture, for there are economic issues at the regional and local level that
require serious expertise. If you or your
firm is working with China it is best to do your homework.
Many reports
and webinars and television interviews are available, concise, and clear:
From
S&P https://ccraprogram.wordpress.com/2016/01/14/china-and-the-global-economy-sps-outlook-for-us-europe-and-emerging-markets-live-webcast-and-qa-jan-15-830am-et/
(slides,too) shows the basics
From
Charlie Rose, the El-Erian interview is perfect on China http://www.charlierose.com/watch/60678030
From
CNBC there was a short interview with Kyle Bass that is very poignant http://www.cnbc.com/2016/02/03/kyle-bass-china-banks-months-away-from-danger-territory.html
In general,
hyperbole concerning China is usually just that.
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