Courtesy of Joe Weisenthal at The Business Insider
Investor Gary Shilling is a China bear (like many others) and he just wrapped up a 5-part series for Bloomberg on why the country is zooming towards an inevitable hard landing.
In it he takes a wide-ranging look at the country, examining its growth strategy, its demographic problems, and its failures in economic planing.
We read through the piece, and plucked out the key points.
Decoupling is a myth: China is still highly dependent on the US consumer.
Image: LittleMissSilly, Flickr
China won’t easily flourish if there’s a hiccup in the west.
Source: Bloomberg: Shilling: China Heading For A Hard Landing, Parts 1-5
US total GDP of $14.3 trillion is still 3x that of China’s
Meanwhile, US GDP per capital is over 12x China.
To close that gap in 30 years would require 3 decades of 10% growth.
Source: Bloomberg: Shilling: China Heading For A Hard Landing, Parts 1-5
The country’s inexhaustible supply of cheap labor will peak as soon as 2014
Image: Screenshot
Thanks to the country’s one-child policy (now relaxes), it’s already running into demographic problems.
Another fact about Demographics: "As the Chinese population ages, the ratio of retirees to working-age people is forecast to rise from 39 percent last year to 46 percent in 2025."
Source: Bloomberg: Shilling: China Heading For A Hard Landing, Parts 1-5
Wages are already rising
More and more countries are moving form China to Vietnam or Pakistan.
Source: Bloomberg: Shilling: China Heading For A Hard Landing, Parts 1-5
Inflation is already crippling
Image: Wikimedia Commons
In Beijing, only the top 20% of income earners can afford to buy a house.
Source: Bloomberg: Shilling: China Heading For A Hard Landing, Parts 1-5
Meanwhile, the government has uncovered a huge volume of bank loans that were illegally funneled into property investments
Image: AP Images
When the property bubble bursts, watch out.
Source: Bloomberg: Shilling: China Heading For A Hard Landing, Parts 1-5
Signs of cooling are already clear
The latest HSBC PMI numbers show that economic growth is fading.
Passenger vehicle sales only grew 3% this April, compared with an annualized rate of 33% in 2010.
Money supply growth is only at 15%, down from 30% in 2009.
Source: Bloomberg: Shilling: China Heading For A Hard Landing, Parts 1-5
Chinese policies will only make the slowdown worse
The country isn’t likely to float the yuan anytime soon. Instead it’s likely to double-down on exports, creating an even bigger excess capacity problem down the road.
Source: Bloomberg: Shilling: China Heading For A Hard Landing, Parts 1-5
When it’s all said and done, the Chinese hard landing will crush the commodity bubble.
Image: By Jurii via Wikimedia
Investors around the world will be writhing in pain.
Source: Bloomberg: Shilling: China Heading For A Hard Landing, Parts 1-5
Who will get hurt when this happens?
Image: Flickr Doug Francis
