johnthebear

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  • Don't Bet Against Chinese Demand Growth Just Yet
    A drop from 10% to 9% in the China growth rate may not be all that is involved in a slowdown of China. I have read of substantial overbuilding of manufacturing capacity in China and massive real estate speculation by developers with huge bank loans that may be foreclosed. The banks in China already have large loan defaults on their books that they have not acknowledged.

    The survey out today of purchasing managers supports more than a reduction of manufacturing due to smog conditions relative to the Olympics. This is a national issue.

    You have not yet seen the effect in China of the sharp reduction of sales to Europe and USA, which are coming. Recession in both will cause lower exports from the US to Europe which has been supporting recent growth in the US. Sales outside the US have been the majority of the earning growth of US international companies.

    It seems to me that the Europe recession which is only now beginning to take hold will greatly slow US export sales and will likewise impact China. As US and Europe slow, all exports from China slow, with growing factory closings and rising unemployment while at the same time inflation grows from 7% to 12% in China. Could get real interesting to watch the China government under these conditions!

    So bottom line, China stock markets continue to fall back to the 2004-05 level. What do you think about that?
    Aug 01 18:35 pm |Rating: 0 0 |Link to Comment |View article

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