Tuesday, July 5, 2011

China is the next great story - not

30 billion sq. ft. of commercial space under construction in China (May 2011). That is, as Jim Chanos explains, 5x5 sq. ft. for every person in China (1.2 billion people) Approx.
This video is wonderful, absolutely brilliant. He says it simply, slowly and articulately. He says that there is clear evidence of diminishing returns in China, China is preparing for the future but the GDP growth cannot be sustained and domestic consumption is not existent.
One thing he said very well was (to the effect) : "Normally, economic activity increases or influences GDP growth. In China, it's the other way around. Investments in fixed assets is spurring economic activity."
Jim Chanos does a great job of showing what is happening, why it is happening and where it ought to lead to... we, of course, don't know when whatever is going to happen.

A takeaway from all this, for me, is that deflation, suddenly, seems to be a very real possibility. Chinese 'centralized' consumption is going to reduce dramatically; this ought to put significant pressure on commodity prices and global manufactured goods demand. However, monetary expansion in Europe, US and China seems to conflict with what I have written above. For me, this points to a great grinding stagnation of the global economy.
"Alright! Let's just stop international trade, unless I am comfortable with my trade partner."

No comments:

Post a Comment