The coming China crash (Asia Times)

[katty]

Dec 5, 2007

THE BEAR'S LAIR
The coming China crash
By Martin Hutchinson

more: http://atimes.com/atimes/China_Business/IL05Cb02.html

article excerpt:

To see why a crash may be coming, it is worth examining the behavior of the China Investment Corporation, the US$200 billion sovereign wealth fund set up by the Chinese government in September. Now $200 billion is a fair chunk of cash; you could almost buy all but three US corporations with that (at today's prices, ExxonMobil, General Electric, Microsoft – there are four or five others including Google that barely top the bar.) Six weeks ago, the power of sovereign wealth funds was celebrated and China Investment's moves into the market were awaited with bated breath.

Well, so much for that. A third of China Investment's portfolio is to be invested in Central Huijin Investment Company, a purchaser of bad loans from the Chinese banks, and another third will recapitalize China Agricultural Bank and China Development Bank, to shape them up for privatization. About $3 billion of the fund was invested in the private equity manager Blackstone in May - that may have bought China useful political contacts, but it is now worth $2 billion. And the remainder is being invested very carefully, primarily in US Treasury securities - which are also losing money steadily in yuan terms.

The lackluster investment strategy of China Investment exposes a central flaw in the Chinese economy, its lack of a rational system of capital allocation. For more than a decade, Chinese state-owned companies have made losses and have been propped up by the banking system.

[stillcool]

1. Who is this guy?

http://atimes.com/atimes/China_Business/IL05Cb02.html
In China, there can be no assurance whatever that a populace whose living standards have suddenly stopped improving will not turn to violent nationalism and/or counterproductive economics. Since the country is not a democracy and not likely to become one, the authorities are likely to react to hardship as did Vladimir Putin to the chaos of late 1990s Russia, imposing even more draconian repression and seeking a military adventure abroad to occupy the masses of disaffected youth and distract the public from its new poverty. That too would produce a future in the West far worse than would be cased by a mere domestic recession.

Bears who weary of observing the chaos in the US financial markets can cheer themselves up by looking at China. There will be more than one source of the oncoming world downturn!

Martin Hutchinson is the author of Great Conservatives (Academica Press, 2005) - details can be found at www.greatconservatives.com.

March 7, 2003, 9:50 a.m.
Unmitigated Disaster
Next time, ignore the U.N.
By Martin Hutchinson

The arguments for and against war with Iraq are fairly finely balanced, in my view, with the decision depending on information about Iraq's capabilities that we don't have but hopefully President George W. Bush does. Whether or not one supports war with Iraq, however, it is now clear that taking the Iraq problem to the United Nations was an unmitigated disaster.

http://www.nationalreview.com/comment/comment-hutchinson030703.asp

[paulk]

2. does that invalidate his article?

China has some huge problems coming down the road at them, and I think this guy makes a good argument.

[stillcool]

3. doesn't invalidate anything..

opinions are what they are. I just like to research my sources..especially when the tone of an article sounds a little off.

[katty]

4. writer, just do a search he comes up, financial articles, book

I have read his articles from time to time.

[stillcool]

6. actually I provided links..

To the "National Review" and the "Great Conservative"...kind of my point.

[bemildred]

5. I think China has serious "issues", and could suffer civil unrest as a consequence.

(More than they are already, that is ...).

But not because this guy is convincing. He lost me with the bullshit about "rational system of capital allocation".