Chinese Year of the Dragon

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Chinese Year of the Dragon

Postby kcowan » 24 Jan 2012 12:06

The Economist wrote:Returns of the Dragon. Chinese people across the world ushered in their new year on January 23, which according to 3,000 year-old Chinese astrology is the year of the dragon...Between 1900 and 2011, the nine previous dragon years have seen America’s Dow Jones Industrial Average price index increase by an average of 7.7% in real terms, the second-best historical record of the 12 zodiac animals. Such fortune may be short-lived however; next year’s animal, the snake, has the second-worst historical record.

Make hay while the dragon roars!
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Re: Chinese Year of the Dragon

Postby Shakespeare » 24 Jan 2012 12:18

Make hay while the dragon roars!
Roubini figures there's a 50% chance of another depression:

You've cited the possibility of a perfect storm – a double-dip recession in the U.S., a hard landing in China and the fracturing, if not outright collapse, of the euro zone. What are the odds of that?

Significant – close to 50 per cent, unless the world changes its economic policies. But it's a 2013 or 14 or 15 story, not 2012. Because all the players for now are kicking the can down the road.


I think it is more than 50% because of can kicking - one can's collapse is going to trigger another.
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Re: Chinese Year of the Dragon

Postby kcowan » 24 Jan 2012 16:00

Shakespeare wrote:I think it is more than 50% because of can kicking - one can's collapse is going to trigger another.
What amazes me is how resilient the markets are in the face of all the bad news...
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Re: Chinese Year of the Dragon

Postby ghariton » 24 Feb 2012 23:11

Interview with Liu Mingkang, former chairman of the China Banking Regulatory Commission, on China's economic problems:

First, domestic and external demands [in China] have taken a sharp drop, especially in the second half of 2011 and first half of 2012. I think that the pressure to increase domestic demand is picking up. That is because domestic demand is driven by business productivity.

Right now, business costs are rising. The cost of raw materials rose to between 5 and 10 percent of costs in 2011, labor costs to 25 percent, and finance costs to 50 to 60 percent. Leverage rates vary from industry to industry, but are usually above 50 percent. They are at that level due to rising interest rates and exchange rates. The yuan's exchange rate was on the rise during ten months of 2011. Only in recent months has its value begun to drop slightly.

These three factors had three results in 2011: business profits were down, losses were up and per capita income was hurt. The government came up with many measures to protect the lowest income population, but the consumption capacity of low-income citizens is limited. Demand on the part of middle- and upper-classes is dropping, especially in middle-class families. Everybody's attitude is "let's wait and see."

Second, there will be even more pressure to change our development path in 2012. For example, there will be pressure on the steel, auto-manufacturing, ship-building, textiles, machinery and other industries. Industrial structures will be further adjusted in 2012. We urgently need to transform our business development models. It has become a choice between life and death.

Third, it's hard to be optimistic about employment and stability. If some businesses evaluate market conditions and choose to close up shop or cut half of production, especially in the first half of 2012, there will be employment problems for migrant workers after Chinese New Year.

Fourth, after ten years in the WTO, China's reliance on exports is relatively high. China is greatly affected by changes in the global economy. Commodity prices fluctuate rapidly, impacting China's economy directly. It's also worth paying attention to capital flow trends. In the third quarter, net inbound capital flow became capital outflow. It's possible that such an exodus will continue into the first half of 2012.
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Re: Chinese Year of the Dragon

Postby ghariton » 24 Feb 2012 23:23

And the predictable consequence

It used to be that European carmakers opened plants to assemble their cars in China. Now the Chinese have turned the tables with the opening of their first factory in Bulgaria, an EU country with low labor costs and taxes.

<snip>

Bulgaria, the EU's poorest country, is attractive as a labor market because it is an oasis of cheap wages and low taxes. Workers are considered well educated and the country is ideal as the site for a company like Great Wall to launch. Given that wages for factory workers have risen considerably in China in recent years, assembly sites abroad have become increasingly attractive for some manufacturers.

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