Is the sun setting on China?

8th June 2012

These fears on China are now emerging from within the country as well. In ‘The End of the Con' on Caixin online, guest economist Andy Xie suggests that "China's economic management overly relies on juicing up confidence and encouraging speculation on the expectation of a brighter future." 

He argues that properties under construction, sold vacant properties and the inventories of commodities like steel and non-ferrous metals may exceed 100 percent of GDP at current market value. These rising inventories have exaggerated the country's economic growth. He sees no imminent crash, only a slow-motion adjustment that will act as a drag on growth.

Perversely, he suggests, a fall in property prices might actually bring about an improvement in the Chinese economy in the long-term, freeing up money that would have been spent on property to be spent in shops or in the stock market. However, Xie argues that there is widespread mistrust of equities and the country still needs reforms to support consumer growth.

The problems of China's property boom on the back of the expansion in credit have been widely explored on Business Insider and Seeking Alpha.

Mr Peabody sums up the views of many when he writes: "It was all a big ponzi and I wish them well, but the reality is that it won't end well. Central control means a faux economy propped up at the peripheries, where people really know what's going on and should be able to react accordingly, rather than tow the line"

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