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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (25267)	3/10/2005 4:29:25 PM
From: Earlie	Read Replies (1) \| Respond to of 116555

Hi Yiwu: We agree on many points. But I disagree with you about the impact of the coming slowdown on China. From my perspective, whether the companies that make the goods are Chinese owned or foreign owned, once the buying peters out, lots of Chinese workers are going to be laid off. Additionally, while much of the money that has been invested in China in the last five years has flowed in from foreign hands, nevertheless, Chinese investors and Chinese banks also have massive exposure to them. Irrespective of source, those with money at risk in these situations are likely to take a very consequential hit as the American consumer pulls in his horns. Many of China's banks are already in precarious shape so I suspect that they will be badly mauled by the coming scale-back. I worry that many Chinese workers and investors, new to the ups and downs of capitalistic cycles, may turn away from the path the country seems to be taking when the losses come. While my research leads me to believe that the US is going to suffer more than most other jurisdictions when the dam breaks (as the US has by far the largest debt loads), nevertheless, just as Japan got killed by being over-invested in specific markets as they reached saturation (and has still not recovered), in a like fashion, I believe that China will be similarly hit. In the coming bloodbath, some will consider it "just" and "fair" that countries that have lived way beyond their means gets bashed, and unfair/unjust that other countries are equally as devastated as a result of investing their savings into plant and equipment at the wrong time. Indeed it WILL be unjust and unfair, but that is what is likely to occur. To me, China currently has massive downside risk as a result of its aggressive move into export-dominated markets..... at the wrong time. By the way, I want to applaud your excellent contribution to the thread, especially your knowledge and observations about China. I for one, look forward to them daily. Best, Earlie