China Debate - Chinese Business, Policy, Real Estate & Finance

When loans last month were lower than expected, I was surprised. I had been watching reports of fast-track infrastructure approvals for some time in the Chinese media and on economic and finance websites and thought okay, here comes the stimulus. Then, kerplunck.

Readers here know that I now attribute this to the Central Government dithering while leaders and factions faced off. Nothing comprehensive could get done. Now, it seems, as I have mentioned before, that the reform factions seem to in control and are now vigorously pressing their agenda. And, the evidence came a month late, but it came.

Here’s a good analysis from  ‘WRAPUP 3-China Loans Rise Could Show Govt Steps Gain Traction’ on Reuters: More

China’s economy. I am a very short-term bear, and so far, my predictions have been right. But, I am a little longer than short-term, as in all of 2012, bull.

My reason for the bearishness is that, while I believe that China has more than enough dry powder to juice its economy, the leadership has been distracted by scandal and no doubt a great deal of factional in-fighting; not much, if anything, was agreed on what to do with the dry powder to support the economy . The result: two crummy quarters.

My reasons for the bullishness are:

• China has more than enough dry powder to juice its economy (as mentioned)
• The recent spate of activities that cannot be named, that is, ‘stimulus,’ should be more than enough to push China over the 8% GDP mark this year
• That so many of these activities smack of attempts at structural reform leads me to speculate that the reform factions have used the recent scandals to gain, at least a temporary upper-hand, on the leftist factions, and the left should be on the ropes for some time
• Old stuff, leadership transition year; Hu Jintao doesn’t want to be remembered as the guy who drove China’s economy into a ditch; he’ll do what it takes (even some easing of residential real estate, as a last resort).

All that said, if we get to end of August and none of the stimulus activities are doing the job, then I might join the China panickers my self.

Old China Hand, Dave Miller, has again alerted to me an interesting topic that I had otherwise missed, ‘Majority of Chinese Prioritize Environment Over Economy.’ Gallup reports:

Fifty-seven percent of Chinese adults surveyed in 2011 — before the country’s economic slowdown grabbed headlines — prioritized protecting the environment, even at the risk of curbing economic growth. About one in five believed economic growth is more important. Chinese attitudes are typical of those in other emerging-market economies, where residents sided with the environment over the economy in earlier surveys.

Gallup further broke down the survey into urban/rural: More

Arthur R. Kroeber

I somehow missed Arthur R. Kroeber’s ‘Bear In A China Shop,’ until just now. Mr. Kroeber is chairman of GK Dragonomics and a fellow at the Brookings-Tsinghua Center. I have watched him often on panels and found his views provocative and generally on the mark.  And so it is with this article.

Mr. Kroeber argues and fully develops the view that:

China’s economic model, for all its odd communist trappings, closely resembles the successful strategy for “catch-up growth” pioneered by Japan, South Korea, and Taiwan after World War II. The theory behind catch-up growth is that poor countries can achieve substantial convergence with rich-country income levels by simply copying and diffusing imported technology.

Afterwards, he takes on the housing market with usual argument that downpayments are so much higher than in the U.S. that China will avoid our fate. What is of greater interest: More