I was delighted to see the China topic appear in great length which I think has been underrepresented on this site thus far.
Gordon Chang has a wealth of knowledge and information on the Middle Kingdom and the functioning of its political system and I enjoyed the discussion.
In parts of the conversation, though, some of his analysis of the situation leads me to different conclusions regarding especially the direction of China's economic development.
Many times in media the difference between a slowing economy and an economy with a slowing growth is not appreciated. None of them positive, but we do differenciate between stagnation and recession, so we need to be careful about slowing and slowing growth which I think Chris also noted in the discussion.
Officials stealing money and expatriating their wealth and family is not obvious to me to be a phenomena of chinese elite fleeing from home.
If you are an official stealing money, obviously you want that money to disappear from China as fast as you can. Isn't this everywhere the case all around the world? In my view this has little to do with the growth prospects of China or the lack of it.
Others moving their wealth and families are not necessary bailing out or fleeing. It is an insurance similar to what HK's elite had been showcasing before the handover to China and serves as a diversification tool with auxiliary benefits such as education to children. Measuring the outflow of wealth vis-a-vis the accumulation of wealth domestically is a task hard enough to become a base for broader conclusion.
I could not easily summarize the political reforms 'everybody knows have to be made', and which current and next leaders are too weak to make.
We have to accept that China operates a political system in tandem with an economic governance that none has tried and tested before. How and how fast to reform this operating system? In my view it is rather anybody's guess than being a question of leadership courage or power.
In time of peak oil, making bad strategic acquisitions in the fossil fuel industry is difficult. Noting that most of these energy sources are already factored in into the peak equation, I think instead of these assets becoming a burden, they rather serve as an advantage to power the creation and acceleration of new markets.
If we live in a world where we need less resources and they are plentiful, yes, they are a burden, though I think we live in a different world.
The striking energy inefficiency of a nation which understands it in fact is a tremendous reserve in the system, and this is what gives hope that the environment will not entirely give up on this transformation, because clearly keeping the status quo would be unsustainable.
Regulations to curb demand for property have been ranging from soft to extremely harsh during a period of a year, and this process cannot make buyers just disappear.
Hence stopping an undesired property value nosedive seems to be a question of measures.
Property prices skyrocketed to the extend not welcomed by central government, even if local government income heavily relies on land sales (leases, indeed) a lot. Given the low loan to value ratios, a 30% drop does not send owners underwater. I can't now define a reason why the central leadership, having engineered a stop of price growth and a start of price decline, were doomed to fail at an attempt to further manage prices as need be, under strong demand circumstances given continued high level of urbanization.
Property for rich Chinese is a store of value and an investment, I assume not very different from other parts of the world. The real question is the development of vacancy rates and of property investment yield in China.
Vacancy rates in key cities are low and declining, rental market is strengthening as sales market declines, hence rental yield increases. These are signs of a functioning property market in good health. Home price decline is not necessarily a cause or a sde product of a hard landing.
Housing loan practice is much stricter in terms of loan/value ratio than in the western world, and because of the multi-year run-up in prices, the proportion of mortgages on banks' balance sheets going underwater after a 50% price drop will not be entirely unmanageable.
The constant support for property price is the increase of productivity. We should not worry about whether there is room for productivity increase, rather their ability to apply the necessary pace of increase in productivity and energy efficiency.
Growth of china's export has been only partly driven by the growth of the markets in
Europe and the US; the bulk of their export growth come from their increase of share in those export markets, coupled with the entry of new export markets. China is well set to walk further down that path. The continuation of China's economic efficiency drive will need to step in to compensate for the stagnation or decline of export market sizes.
China has tons of problems to solve and tackle ( I name environment and corruption as their key dilemmas), but in my view a hard landing is not prescribed yet.
It's growth should not be labeled as threat as it often is. A threat is normally fought against, whereas a competition is competed against.
A friend of mine always reminds me: whatever you say about China, the opposite of that is also appropriate. Indeed a complex enough system for the full understanding of which our perspective sometimes proves insufficient.
thanks for reading
Rokorea
