just in in-tray
From: B
Sent: Mon, December 13, 2010 4:11:38 PM
Subject: Comments - Week of December 6
I viewed Chanos on CNBC Squawk last Friday morning show. He is adamant on the coming bust for China, in 2011 now, he is quite certain of that happening. He may be right, maybe a huge chunk of the world will be hit hard (EU especially) and he is slick as ever on TV yet his numbers, I couldn't quite follow.
For one, he was asked by Joe wasn't China having a good problem, that it was trying to orchestrate a soft landing, and that was a good problem, having to tap on the brakes et al? Chanos responded it was the nature of that growth, which was mostly real estate construction. Joe asked, really, in an export economy like China... Chanos said, no, it wasn't an export economy and he said, just take net exports, which were just reported for last month of $22bn, annualized $250bn, so that's 5% of China's $5 trillion GDP.
hold on. really?
Overall China Export/GDP Ratio, according to IAS, is about 30% of GDP (as of 2Q 2010), down from 40% in '07.
link is here: iasworldtrade.com
He is a bit misleading there. total exports are > $1 trillion, anyway.
Second, he repeatedly mentioned that real estate construction made up 60% of China's GDP, hence his bet that there is an imminent housing bust.
hold on... how can that be? 60%? I don't argue that 1H 2010's growth of 11% was augmented by growth in real estate construction (as mainlanders love real estate). Total manufacturing output and construction together are 47% of GDP, so how in the world does he get 60% of China's GDP is real estate construction?
en.wikipedia.org
Also, the Chinese don't put nothing down on real estate transactions, as the US population did pre-Subprime crisis: in fact, they use a lot more cash down payment. Comparisons to what happened in high indebted real estate countries don't work here.
China, as a nation, has less debt in its overall make-up than most countries. Public debt as percent of GDP, China is ranked 102 out of 123 countries, way behind UK, Japan and Singapore, which all ranked in top 20 of indebted nations (up there with Zimbabwe, Italy, Greece, Jamaica and Saint Kitts).
photius.com
So, if you compare the coming crunch with the debt burdens underneath those countries, that coming crunch looks a lot less onerous.
I could go on, but i don't completely buy his reasons, even though there may be the possibility of a crash (i.e. >50%) in real estate prices nationwide in China. So what, I say. Booms and busts, are what its all about with high growth, frontier investments... who cares what Italy's GDP growth looks like... China is a screaming bet (both relatively and absolutely).
My hunch he is betting on collapsing iron ore prices and weak property developers, which I don't argue. But to insinuate a total debacle, 1,000 times Dubai, as he once put it, is beyond my naivety... |
