Wednesday, April 18, 2012

Figures don't lie, but liars figure

Jim Chanos is still short quite a few Chinese banks and continues to believe that the rebalancing needs to happen. I still believe that China will be another Japan, where, after a sharp drop in nominal GDP, it will continue at a 0-2% type rate for a long long time. It is difficult to stimulate an economy that is not innovative.
Today I read this wonderful post based on some analysts who visited China. I hope they write some more stuff soon. The problem, as I have seen it for a while now, is that it is difficult to find liars because unlike corporations which are subject to audit, shareholder activism and regulatory bodies, countries are not liable to speak out similarly. If a bank doesn't call an NPA and NPA, there won't be any NPAs; but there will be a reduction in income. If these NPAs are backed by more loans through the central mechanism, it will cause inflationary pressures down the supply chain.
If the PBoC were to lend money directly to a corporation to build a cement factory, and if the cement factory were idle and if the PBoC decided to overlook this by just lending some more money to more corporations, the repercussions of such activities would build up in inevitable and disastrous ways. I wait. 

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