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XMFSinchiruna (26.54)

China Report! - Answering 2008's Biggest Mystery



December 01, 2008 – Comments (5)

The attached article represents my latest effort to keep close tabs on real economic conditions in China as well as available information will allow. Today saw a very abrupt reversal of mood towards the sectors most closely affected by the viability of China's economic growth. Commodities, in particular, were abslutely hammered after a nice rally last week. While I suspect some indiscriminate selling and forced liquidation may have contributed to today's horrible tape, there were certainly some negative developments emerging from China over the weekend. First, Chinese President Hu Jintao warned of growing obstacles to sustained growth, and then November manufacturing data were anything but confidence-inspiring.

In the face of this all these concerns, Fools still have a fascinating resource at their disposal which places recent economic data into a larger context and suggests that China may not be in such a terrible position after all. For Fools looking to dig deeper into China's economic outlook than a single comment from the President or a single datum will permit, I highly recommend a look at the World Bank's latest quarterly report on China's economy. Enjoy the report, and my article discussing its implications, and please keep the debate alive over how China's economy will fare.


5 Comments – Post Your Own

#1) On December 01, 2008 at 5:57 PM, DemonDoug (30.95) wrote:

I have to say, I do believe I've turned bearish on China, for the moment.  I am totally on the sidelines right now though, but if china goes down, that means all metals and commodities will go down.

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#2) On December 01, 2008 at 6:11 PM, johnw106 (< 20) wrote:

China is coming unglued at the seams. It is not and will never be a free society with anything resembling a free market. Soo you will see media blackouts in China as the peasants increase their rioting and looting in a search for food. As for whether to buy Chinese stocks....

The Chinese pride themselves on duping other people and taking advantage of any perceived weakness in a foe. To outwit and scam someone out of their money earns bragging rights and a badge of honor among peers. Actions in business that would get you thrown in jail in the USA will make you a hero in China. If you do business with China it behooves you to keep this tidbit firmly in mind. They can and will steal you blind and have the Chinese governments blessing in doing so.

This is one market where the adage "Buyer beware" better be your dailt mantra.

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#3) On December 01, 2008 at 6:37 PM, kdakota630 (29.41) wrote:

Excellent blog, and excellent links to more excellent blogs!

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#4) On December 01, 2008 at 7:03 PM, jgseattle (26.48) wrote:

Investing in China has a lot of challenges.  However, I think you need to be there and to buy energy, infrastruture and utilities.

The stimulus package in China is about $600B USD.  This equates to a U.S stimulus package of almost $3T if you look as a % of GDP.  I t hink a stimulus package that size has to have some affect.

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#5) On December 01, 2008 at 8:13 PM, starbucks4ever (89.25) wrote:

If China will expand its reserves to 2.5 trillion in 2009, its economy is doomed. No country can survive the loss of the amount equal to its nominal GDP, and the 2.5 trillion worth of US bonds is a bad debt, much worse than a subprime loan. If you own subprime, you can at least foreclose and sell later when the market recovers. China's currency reserve is an unsecured loan to a subprime government, and the losses can easily amount to 100% of the principal.

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