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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: TobagoJack who wrote (2205)11/15/2003 8:56:24 PM
From: russwinter  Read Replies (3) of 110194
 
Very thorough review.

Just five things I'd add to illustrate my point that China is a horrific overhyped model headed for a fall/major bust.

1. There is very poor transparency on how much has been loaned and lost by state owned banks subsidizing export oriented production. Is this reported? I submit it's a shocker (effectively wipes out banking there), and will bite those pouring capital into the country.

2. You may call it low "legacy costs", but a key component of China's "comparative advantage" is the use of defacto slave labor, that establishes a false unsustainable cost structure. As wealthy as China is becoming, they should be doubling wages annually (or setting a minimum wage suitable for their situation). No excuse not too, if there's any sense of social justice in the country.

3. Hyperstimulated speculative economic and speculative bubble: mostly from excess dollar based liquidity. China is now severely infected by the American disease (runaway credit excess).

4. Artificial pegging of it's currency, unfair trade practices: this won't matter until the first three situations are strongly reformed.

5. Overheated economy relative to it's infrastructure. May be correctable in time, except for the baggage of points 1-4.
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