After spending time in China I also remain very bullish on China.
It still has huge growth prospects which is why I believe Australia can boom to at least 2050 and beyond.
If we had a more competent Government we would outperform.
Jamie McIntyre CEO of 21st Century Education
China’s growth story not over yet
By Andrew Main, Original Article from The Australian
IF you’re betting that the China slowdown is a harbinger of disaster, you’re in for a nasty surprise, according to a French analyst who has 10 financial researchers in Beijing and another 20 in Hong Kong.
Louis-Vincent Gave, a former French army lieutenant who arrived in Asia with the Paribas bank two weeks before the 1997 Asian financial crisis, wants investors to realise it’s actually the Chinese government that’s hauling on the brakes.
“The Chinese government’s spent much of the last two years trying to crush asset prices, both in terms of real estate and equity values,” he said, indicating that aside from collecting the scalps of some of the more over-extended speculators, it would help rein in inflationary pressure and redirect investment. On Thursday, the HSBC Bank’s China flash Purchasing Managers’ Index, a key measure of confidence, dropped from last month’s reading of 49.6 to a more pessimistic 48.1. Anything below 50 is technically a bearish indicator.
He said a lot of investors in Europe and the US were using his organisation, Marshall Wace GavKal Asia, of which he is chief executive, as their “eyes and ears” in China.
It also operates as a fund managed with about $US1.2 billion ($1.14bn) under management, of which about half comes out of Australia as the Certitude Asian Opportunities Fund managed in joint venture by Certitude Global Investments, based in Sydney.
He’s a full-scale bull on China with the heaviest equity weighting he can remember, on the basis there are a number of financial positives about China that haven’t been adequately understood, that have emerged only in the past year.
Not least is the massive financial power of both the government and retail savers, he said.
Because real estate and equity investments have been discouraged in the past two years, “there are now around $US5.2 trillion in retail deposits in Chinese banks”, he said, “that are currently earning negative rates of interest after you factor in inflation”.
“That is bigger than the combined GDP of Brazil India and Russia.”
And the hard landing-soft landing debate?
He’s not even greatly concerned. “In Hong Kong that 7 per cent growth, 8 per cent growth question doesn’t matter that much,” he said, noting that there was “no correlation for instance between growth rates and stockmarket returns”.
But his biggest point is that the Chinese government has its hands on a big number of levers that it can move back to “growth”, taking investors with it, when it feels there’s a need to do so.
“They have what they call the three R’s,” he said. “Roads, real estate and railways.”
He said that the first one had been well covered in that China had built more motorways in the past decade than there existed in the US. “That’s pretty much done now.”
He said that the real estate question was much understood because of ghost towns such as Ordos in inner Mongolia, the subject of spooky YouTube clips. “For every one ghost town, you’ll find there are 10 new towns that are full. When you’re moving 20 million people from the country to the city every year, you have to plan ahead or you get cities like Rio or Lagos with shanties everywhere. And if you build ahead, you can make mistakes.”
He said there was still a net shortage of housing in China and that central government spending could quickly be mobilised to rectify that.
But it was rail, he said, where more needed to be done. “Most coal in China is still carried by truck,” he said, conveying the image that many travellers would recognise of the overloaded truck belching diesel particulates in stifling quantities, groaning uphill.
In 2005, China’s railways reportedly met only 35 per cent of the demand for commodities, such as coal and industrial goods.
Yes, he said, the high-speed rail development had seen too much happen too soon and “there was a massive amount of corruption”. “There were accidents involving 20 dead here, 40 dead there that were barely reported in the West.”
But, he noted, former railway minister Liu Zhijun, who was jailed for corruption in February last year, made history by being the first member of the Politburo to suffer that fate.
“With both real estate and rail, if the economy slows too much, they can both be turned back on.”
But where he saw the best news for the future was in how China was liberalising its financial system. “First they liberalised state-owned enterprises, cutting the number from eight million to two million. Then they liberalised real estate, and then mining.”
He reeled off a list of recent changes to financial rules, such as easier initial public offerings, the arrival of foreign credit card companies and foreign insurers, but said the biggest change would be making capital cheaper for private enterprise.
“Around 90 per cent of bank loans go to state, provincial and municipal enterprises,” he said.
He said there were two giant productivity leaps China could make, in labour and capital, and while the former had so advanced that China was moving away from exporting low-value goods, the latter was just beginning, he said. And where does that leave Australia? He marks our card, “try harder”.
“Australia has done very well out of China in the last 10 years exporting commodities but won’t do so well in the next 10 as growth rates slow and prices plateau,” he said, looking at coal, iron ore and copper.
“You didn’t have to leave home to do well before, but now you’re going to have to get some dirt under your fingernails.”
Yep, we don't run outta diggable dirt 'til some time like maybe 2065 or even 2075 BP. 'N supposing OS nations keep wanting it 'n having the loot to pay for it all the way through 'til then, our lives could just be easy peasy? - Comparatively speaking.
Though our guvs'll gut us with taxes ta buy themselves votes all the way through any such blessed scenario.
It ain't gunna be easy ... Is my suspicion. Though it could surely be easier here than elsewhere - Maybe? 'Cause one's gotta bear in mind that resource economies CAN tend ta get RIGHT ROYALLY RODGERED in major 'n protracted global downturns ...
A Professional Demographer to an amateur demographer:"negative natural increase will never outweigh the positive net migration"
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy
