Why Chinas Growth May Be a Mirage
By Josh Lipton Nov 03, 2009 12:15 am
Some strategists dont believe the hype.
The boys in Beijing managed to drive home a near 9% real GDP growth rate in the third quarter. More evidence that the economy over there is revving up: The latest Purchasing Managers’ Index rose to a seasonally adjusted 55.2 in October from 54.3 in September. A reading above 50 suggests expansion.
An index of export orders climbed to 54.5 from 53.3. Interestingly, there was also a jump in the import index to 52.8 from 50.7, demonstrating a pick-up in domestic demand.
Investors liked what they heard: In afternoon trading on Monday, the iShares FTSE/Xinhua China 25 Index Fund (FXI), an exchange-traded fund that tracks 25 of the largest Chinese companies, climbed 2.2%.
The FXI is up 69% in the past 12 months.
Other data coming out of China recently has been equally dramatic, economists emphasize: Real retail sales are running at 16.5%; car sales are up 78% year-over-year; 2.6 million TV sets were sold between September 26 to October 8 -- up 120% on a year-over-year basis.
Proud of the super-sized flat-screen in your living room? Don’t be. The average Chinese family now has a flat-screen TV larger than yours: 37 inches there versus 33 inches here.
Could there possibly be a clearer sign of Pax Americana’s decline?But, before signing onto the well-told story of the China miracle, we checked in quickly with a couple of contrarian investment pros that don’t believe the hype when it comes to China.
These strategists laid out what they consider the risks, as they see it, for our brothers in Beijing.
The Chinese economy is booming, no doubt, but the key question to answer is whether this growth is natural or due to massive fiscal stimulus. Indeed, this is exactly what worries Vitaliy Katsenelson, vice president and portfolio manager with Investment Management Associates in Denver.
“The government in China is afraid of the economy slowing down,” Katsenelson tells us. “Remember, there is no social safety net there. High unemployment means hunger and riots. This is why China had such a huge stimulus package.”
No positions in stocks mentioned.
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Copyright 2009 Minyanville Media, Inc. All Rights Reserved.
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Reply
2009-11-03 08:36:05
Government stimulus
The Chinese have the money reserves to pump their economy for as long as it takes to wait for the global slowdown to return to a more normal situation. It's not as if the US doesn't subsidize or stimulate all kinds of industries, all the time - it's built into the tax code for goodness sake. So I don't think we should be criticizing a government that is ensuring its populace have jobs - so leave Obama alone!!
2009-11-03 11:33:33
21st century Pax Sinica
For all you myoptic, blind,dim-witted,
math, science, engineer-challenged China doubters, bashers, haters, stop your day dreaming and try to grasp and understand the big picture and get some proper prospective of Chinese future for your own and your children's sake.
As a Chinese American, even after the 30 years of unprecendented rise of China, I have always had some doubts about the Chinese destiny expressed by the 2000 years' old Chinese Mandate From the Heaven -- sort of Chinese Manifest of Destiny -- because of the lack of innovation or originality in the last several centuries of Chinese history.
After I read a study from Reueter Thompson, I have now no doubt whatsoever about the 21st century Pax Sinica.
"The study, Global Research Report: China, informs policymakers about the
research and collaboration potential of China and its current place in world
science. .
"If China's research growth remains this rapid and substantial, European and
North American institutions will want to be part of it," said Jonathan Adams,
director of research evaluation at Thomson Reuters. "China no longer depends on links to traditional G8 partners to help its knowledge development. ."
"China's Research Output More Than Doubled Since 2004, Thomson Reuters Study Reveals Nation Stands Second Only to United States"
" -- China is heading to overtake the USA in (scientific research/ publication) output within the next decade.
-- China's research is concentrated in the physical sciences and technology. Materials science, chemistry and physics predominate.
Looking toward the future, rapid growth can be seen in agricultural
sciences and life sciences fields such as immunology, microbiology,
and molecular biology and genetics."
math, science, engineer-challenged China doubters, bashers, haters, stop your day dreaming and try to grasp and understand the big picture and get some proper prospective of Chinese future for your own and your children's sake.
As a Chinese American, even after the 30 years of unprecendented rise of China, I have always had some doubts about the Chinese destiny expressed by the 2000 years' old Chinese Mandate From the Heaven -- sort of Chinese Manifest of Destiny -- because of the lack of innovation or originality in the last several centuries of Chinese history.
After I read a study from Reueter Thompson, I have now no doubt whatsoever about the 21st century Pax Sinica.
"The study, Global Research Report: China, informs policymakers about the
research and collaboration potential of China and its current place in world
science. .
"If China's research growth remains this rapid and substantial, European and
North American institutions will want to be part of it," said Jonathan Adams,
director of research evaluation at Thomson Reuters. "China no longer depends on links to traditional G8 partners to help its knowledge development. ."
"China's Research Output More Than Doubled Since 2004, Thomson Reuters Study Reveals Nation Stands Second Only to United States"
" -- China is heading to overtake the USA in (scientific research/ publication) output within the next decade.
-- China's research is concentrated in the physical sciences and technology. Materials science, chemistry and physics predominate.
Looking toward the future, rapid growth can be seen in agricultural
sciences and life sciences fields such as immunology, microbiology,
and molecular biology and genetics."
2009-11-03 11:39:04
21st century Pax Sinica -- cont.
No empire has been built on services -- combining millions of financial black-hole derivative traders, and fat-head politicians, managers, ceos, and pretty waiters, waitresses, nurses or doctors, and IT programmers, cleaners and gardeners, this service society produce tons loads of services, and contribute nothing whatsoever to the comprehensive national power.
No empire can be built on manufacture alone -- whether it is millions of farmers or auto workers. Manufacture plus research and innovation build superpowers. the only country gets both in the 21st Century is China. On top of that, add 1.3 billion homogenious populace boasting the highest average IQ, best work ethics and highest education and earning potential in the world, you will get a general good idea of where to get into place for yourself and your children in the 21st century.
The witless, end-of-history triumphalism that shaped western attitudes in the post-Cold War era is always good for a belly laugh and is nowhere more misplaced than in regard to China. History is on the move again â and it is not the delusional, teleological, self-congratulating history dreamt up by either the dimwitted, self-righteous neocons on the right or the naive, self-glorifying liberal rationalists on the left, which somehow always meets with themselves as the winners in the middle. The 21st century Pax Sinica is the real thing, a world-changing event that marks the end of dominance of western civilizaton.
P.S. --
the 2000 years' old Chinese Mandate From the Heaven -- æ®å¤©ä¹ä¸è«éçåãçåä¹æ»¨è«éçè£ -- roughly translated to: nowhere under the heaven, does not belong to China; no people on any land, do not pay tribune to Chinese.
No empire can be built on manufacture alone -- whether it is millions of farmers or auto workers. Manufacture plus research and innovation build superpowers. the only country gets both in the 21st Century is China. On top of that, add 1.3 billion homogenious populace boasting the highest average IQ, best work ethics and highest education and earning potential in the world, you will get a general good idea of where to get into place for yourself and your children in the 21st century.
The witless, end-of-history triumphalism that shaped western attitudes in the post-Cold War era is always good for a belly laugh and is nowhere more misplaced than in regard to China. History is on the move again â and it is not the delusional, teleological, self-congratulating history dreamt up by either the dimwitted, self-righteous neocons on the right or the naive, self-glorifying liberal rationalists on the left, which somehow always meets with themselves as the winners in the middle. The 21st century Pax Sinica is the real thing, a world-changing event that marks the end of dominance of western civilizaton.
P.S. --
the 2000 years' old Chinese Mandate From the Heaven -- æ®å¤©ä¹ä¸è«éçåãçåä¹æ»¨è«éçè£ -- roughly translated to: nowhere under the heaven, does not belong to China; no people on any land, do not pay tribune to Chinese.
2009-11-03 14:30:39
21st century Pax Sinica -- cont.
My Brother
I am glad this is the writing of an individual. We all have our place in the world and having the largest chip on ones shoulder is not always healthy and tends to come across as intimidating for the average man just making his way.
All countries should be proud of their achievements big and small and China has a lot to be of proud as we know and respect.
Please be careful what you wish for as there maybe no bells ringing once you get where you think you need to be.
It is clear to me you need to increase the categories of your score card for success, history demonstrates this to all.
You are welcome in my house any time all I ask is that bring respect to my table nothing more.
Regards
Pete Sutherland
I am glad this is the writing of an individual. We all have our place in the world and having the largest chip on ones shoulder is not always healthy and tends to come across as intimidating for the average man just making his way.
All countries should be proud of their achievements big and small and China has a lot to be of proud as we know and respect.
Please be careful what you wish for as there maybe no bells ringing once you get where you think you need to be.
It is clear to me you need to increase the categories of your score card for success, history demonstrates this to all.
You are welcome in my house any time all I ask is that bring respect to my table nothing more.
Regards
Pete Sutherland
2009-11-11 16:21:47
21st century Pax Sinica
Fac Yu - In representing yourself as a Chinese American, your diatribe suggests you have not had a fulfilling or otherwise successful personal experience in the US. Those that do are not so prone to the vitriolic and xenophobic rant you contributed here. China's socio-economic development is good. The improvement in the overall quality of life in China is a hoped for blessing. I wish China well.
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