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AMZN 220.66+1.6%Nov 21 9:30 AM EST
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To: Lizzie Tudor who wrote (151462)1/11/2003 4:00:23 PM
From: GST  Read Replies (1) of 164684
 
"I hate to say it but this looks like overinvestment to me"

Overinvestment? If you are talking about the millions of modern new condominium units that have been built and put on the market in the last few years you could be right -- real estate development all over the world follows boom-bust cycles, although we still seem in the boom stage in China. If you are talking about manufacturing in China, much of this is still for global markets -- and if there is global overcapacity then where do you think multinational companies will cut? The cuts in capacity are not going to be in their low cost production base in China. One of the implications for people in the US, Europe and Japan is that multinationals are going to reduce capacity in these high cost countries and move it to China -- which in part explains the $100 billion in foreign-direct-investment expected this year in China and the $300 billion in exports and growing at over 20% per year.

If you are talking about capacity for local consumption in the consumer market it depends on the market. For example, KFC is opening a new location every second day in China -- and they are packed with people (a 'gold mine' as described by the company in an article I posted). This is not overcapacity -- it is just scratching the surface of the market. If you are talking about cars, China is ga-ga over cars and more and more people can afford them. I don't think this is a sensible way to transport people and it is an area where I think the Chinese are making a mistake by building the equivalent of the US Interstate highway system, but the decision to build thousands of miles of roads all over the country is already well into the implementation stage. People in China are buying cars. It is unlikely that more than ten percent of these will be luxury cars -- but it is a market that is growing at 50% per year in an industry where there is no growth in the rest of the world.
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