August 13, 2012
BEARISH ON CHINA: In response to my earlier post, reader Tom Wheatley writes:
After 10 years in China, I am also leaving and taking my wonderful Chinese wife with me back to the US, for many of the reasons described in this article. I simply can’t in good conscience remain in China any longer. This article absolutely nails what is going on in China.
The whole system here is rotten to the core and can’t be sustained. The real estate bubble here is real and insane beyond belief, and when it pops all hell is going to break loose. Municipal governments are drowning in so much debt they make California look like a model of fiscal responsibility. The environment is filthy. Private enterprise is being choked. Corruption is rampant. The legal system is a joke. Property rights are non-existent. Chinese people are getting fed up and can actually connect using social media.
Chinese people like to brag that if they all jumped at the same time the whole world would feel it. Well, we’ll also feel it if they all fall down at the same time. I really hope that our leaders in Washington are preparing for when China implodes, because it’s going to cause an unimaginable amount of human suffering and misery when it does.
Get used to seeing articles like this. Many of my fellow long-term expat friends are planning to leave in the next year to 18 months. Chinese with money are getting dual citizenship and transferring billions abroad. The writing is on the wall.
I’m hoping that China’s bubble-bursting will be a gentle one, like Japan in the 1990s, and not something like the Tai-Ping Rebellion. Meanwhile, note this earlier post.
And if you’ve got a business that requires critical components or supplies that come from China, you might want to maintain a deeper stock, or plan alternate supply sources.
UPDATE: Reader Owen Johnson writes:
I’ve been noting with interest the first-hand articles on the problems in China. As an old China analyst, none of this surprises me in the slightest. Last year, I wrote a blog post on the subject at the request of some interested parties, which you might find interesting if you’d like some background to why China is where it is currently. You can find it at [link].
In closing, I will only note that China has not yet had a soft landing to a crisis in its history. Time will tell how this one plays out.
Well, maybe it’ll be different this time.
ANOTHER UPDATE: Related thoughts from Ambrose Evans-Pritchard. “None of this would have been any different if banks had been saints. The forces at work are tidal in power.”