Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (137705)	12/31/2017 4:24:25 AM
From: elmatador	Read Replies (1) \| Respond to of 217544

250 trillon what? the investments made by the Chinese government–through state banks to SOEs–make up the bulk of 'Chinese savings,' not some growing reservoir of potential consumer demand. Translation: The Chinese country si doing well. The population not as much. The hoped for growth in consumer demand will only come about if China's investments generate a return. Which I am pointing to you, there is no guarantee of the returns on the investments in OBOR and propping up Tier 2 and Tier 3 regimes. See Venezuela $60 billion default. The U.S. dollar export earnings have simply been exchanged for printed yuan and held in the reserves of the central bank. Some of these reserves have been used to purchase U.S. T-Bills, which counts as U.S. investment but is a movement on the reserve account, rather than the capital account, and is a loan to the U.S. government, rather than an investment in the U.S. economy, still less a purchase of U.S. goods and services. it is these very USD the China CB it is a pains for it not to go abroad Had this investment (in SOE) been cleverly directed into worthwhile enterprises that now formed the backbone of a manufacturing powerhouse, there might be an interesting emerging story to tell about outward capital investment and rising consumer demand. Indeed, this was the story many had been hoping to tell before now. But this money was invested under the direction of China's Five Year Planning framework, in search of headline growth, and every economist who rolls their eyes at concerns over the U.S. trade deficit, ought at least show some concern about that too. Chinese economist dirigisme is stupid. Where are these 'savings' now? What has happened to these fabled Chinese savings? Where have they gone? Well, for every bad debt written off–and estimates of the true scale of bad debts run as high as 25% of China's GDP that will need to be written off at some point–that comes off the top, and is potentially more than China's much vaunted foreign exchange reserves. For every devaluation of the renminbi–currently on a steady downward trend–the pile shrinks proportionately. And for every overvalued asset in China, every bubble blowing, every stockpile of produce with a book value larger than the market will bear, there is a share of savings waiting to evaporate in the bust. And what do we actually find when we look for the mythical Chinese saver in the real Chinese economy, rather than in the macroeconomic assumptions? Bank balances offset against enormous, rapidly rising, bad debts, a property bubble out of all contact with reality, a closed capital account to prevent money draining overseas while it still can, and an unregulated shadow banking sector where vast pools of notional value endlessly gyrate on air currents of uncertain origin. Against this backdrop, expecting the Chinese consumer to be the next big global growth driver seems like a hope destined for disappointment, for there is no Chinese saver at the end of anybody's rainbow, just an ever growing lake of unpaid bills. And then, of course, there is the Chinese government, relentlessly cracking the credit whip in search of a growth target they can neither afford, nor afford to miss.