Even More Evidence of a China Hard Landing

March 23, 2012
Incredibly the “sistema” is being pulled out round the clock to circle the wagons explaining how China is just fine. The truth is that China has been in steady deterioration for over a year. The problem with China lies in its overcapacity, which so severe that a mere “slow down” is not possible.  Since fixed asset investment is far more than this economy needs,  when this falls it falls big, which is exactly what is happening. Do the following charts look like a soft landing 7% GDP growth scenario to a thinking person?

The myth is that the Chinese consumer can pick up the slack. Cement and steel production would be a function of housing construction activity and local vanity projects.



5 Responses to Even More Evidence of a China Hard Landing

  1. Russ Winter on March 23, 2012 at 1:30 pm

    11:59 AM The risks to China’s banks from local government loans are greater than thought as the country’s banking regulator finds about 20% of loans have been misclassified as fully covered by cash flows. Properly accounting for them will mean lenders have to set aside greater reserves as well as demand more collateral from strapped governments.

  2. Kevin on March 23, 2012 at 4:09 pm

    Great info, thanks!

    A question, though: where are the vertical/horizontal axis to the lower six charts?

    • Russ Winter on March 24, 2012 at 1:51 pm

      They didn’t come with them, but I decided to use anyway. The 2008-2009 global recession is pretty evident as is the big Chinese stimulus. The latest downturn is about one year along.

  3. Russ Winter on March 24, 2012 at 1:49 pm

    You have only described one aide of the transaction. Unfortunately when CBs print especially nowadays they end up holding someone’s liability: very poor collateral, and riskier securities. When losses are taken on portfolios leveraged 50, 60, 70 to 1 they revert back to the sponsoring governments.

  4. Prentiss Kinley on March 25, 2012 at 1:25 pm

    Actually, yes, you might say that Japan IS “strapped.” Read the latest economic predictions for Japan.

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