12/27/2010

Sick Man of Asia playing Santa Claus to Euro zone

The PIGS countries in Europe are counting on the Sick Man of Asia to bail them out of their financial woes. While America is spending its financial resources starting wars and fighting wars, China is extending financial aids to countries that asked for its help. And China has obliged the Euro zone by promising to buy up their bond issues. China will come to their rescue to nurse them back to economic health. Portugal, Ireland, Greece and Spain will be the first of Euro zone countries to benefit from China’s huge reserves. More Euro zone countries will soon be queuing up in Beijing for their grants. While this is taking place, some western analysts are writing articles about the impending implosion of the Chinese economy. They do not believe that the Chinese is capable of running their economy in the pink of health. It must collapse and this is imminent. China will soon become the Sick Man of Asia once again. And Europe shall rise, together with the US, to be the economic powerhouses once again. And they live happily together again. And they are pointing fingers at China as an irresponsible power. When will the responsible powers like the US, Europe and Japan coming to the aid of the PIGS?

8 comments:

Wally Buffet said...

Owning a big chunk of America and the Euro zone is enough to rule the world.

Shows you the power of the sweat shops being able to propel one's country to economic eminence.

The asset bubble in China is definitely unsustainable if they do not rein in the excesses especially in the big cities.

The next five years is crucial if the Chinese do not want to regress back to the sick old days.

Hehe.

Matilah_Singapura said...
This comment has been removed by the author.
Matilah_Singapura said...

I doubt China will become the "sick man of Asia" but they will at some point experience a severe correction. They have been very naught printing too much money, their banking sector is weak, and there is potential for lots of social unrest -- which the government is trying to avoid.

However China's strong point -- very strong point -- is that it has huge reserves of financial resources, and liquid cash. It can print -- but it is also able to "back up" those printed yuans with solid assets, unlike the US Fed which backs up the banana currency with treasury debt.

Credit bubbles in China's real estate sector are out of control. When that bursts, a few banks will be taken down as well, and also after such a "correction there is (or should be) widespread de-leveraging as people pay down debt, and deflation ensues. This is necessary for weeding out the "toxic" stuff and returning the financial system to the pink of health.

The alternative to China buying Euro bonds is Bernanke printing money to buy them. Fuck that. The US Fed has the largest balance sheet of any organisation in the world already. See how great you can do with government protection for your monopoly? Fantastic!

The Chinese are smart. I think the PIGS bonds are paying high interest...all the PIGS are increasing in their credit spreads relative to the German Bund, as the likelihood of sovereign debt/ credit default looms.

Good for China to buy up the bonds. Now they will "own" part of the Eurozone and could possibly make good money from the interest on the bonds.

The PIGS can't fuck with China imposing ridiculous trade barriers on Chinese imports, and this give China a huge leverage position.

Anonymous said...

I believe the Chinese leaders are aware of the dangers of the property bubble and they are taking action.

And I think they have witnessed and learned from the mistakes arising from the effect of the property bubble now decimating the US. A little late maybe, but still better than waiting for a bloody and severe crash that many are saying is coming.

The Chinese are not just buying up hugh chunks of America and Euro
zone. They are also foraging into South America and parts of Africa as well. That is why the West hates the Chinese exerting its influence in so wide a circle. They are doing all they could to make sure that China regress.

Matilah_Singapura said...

The Chinese government is a government and therefore will always be too late to the party, and will always try to 'tweak' the situation to benefit their policy.

The Chinese central bank (government) are the ones who caused the property/ share bubble in the first place by suppressing the value of the yuan... but one could hardly blame them as Helicopter Ben was debasing the USD and the value of the US treasuries held by China -- i.e. China was being 'cheated' outrightly and legally. If I were China I would have done the same.

But monetary inflation does pose significant risks -- China's property bubble is too far gone already. Expect lots of pain. But it will be temporary. I don't think one 'correction' as severe as it might be is going to wallop China to its knees.

China's inflation rate is over 5% and people are feeling the pressure of rising prices.

I doubt there can be an "orderly" cure for this. It is going to pop.

Chua Chin Leng aka redbean said...

China should learn from Singapore. No amount of inflation or hike in property price can hurt us. No matter how much our money is losing its buying power, Singaporeans will be able to cope and still should 'It is affordable'.

But one thing they must have first, a CPF to absorb all the inflation and bubbling property prices. The real danger will come when the CPF runs out of cash. Then everything must be cash out front.

Lucky for Singapore and Singaporeans, many still can smile when they received their monthly CPF statements. How long more to smile, who knows?

Anonymous said...

'The real danger will come when the CPF runs out of cash'

Will come or already happenning?
I believe that is the reason why they are tightening and making sure that in time to come nobody will have any lump sum CPF to withdraw, other than the monthly allowance they give out using the CPF Life scheme. All CPF will be locked up for good.

They may even make it compulsory that beneficiaries of those who died will only have the deceased CPF transferred to their account. No withdrawal, whatever happens.

In any case, housing and medisave would have cleaned out whatever CPF there is in the ordinary account.

For the moment, just enjoy the rich feeling when you receive your CPF statement soon.

Matilah_Singapura said...

Actually the Singapore Central Bank -- the MAS is the current "darling" of the hard-money people. Singapore is one of the few countries that has the discipline to reign in their "stimulus".

Even Jim Rogers is singing praises.

I don't buy it. at least SingStat can still be trusted -- at least when it comes to economic data. Inflation's the highest it has been in 2 years -- someone has been creating money and/ or allowing credit to expand. at 1.7% interest rate for housing, no wonder property is "hot".

Chinese are smart enough NOT to have a taxation-Ponzi scheme like the soon-to-fail CPF. Their cultural values are thrift and hard work.

so much of the capital which was raised for those Chinese businesses now thriving were from family and village "kong-si" --- no government intervention at all.

For sheer balls behind "it is glorious to be rich" entrepreneur culture, Singapore -- with all its scholars are academics and intellectual elites and "partnerships" international universities can take a back seat to China.

People who are driven there simply get down and do the damn things and don't complain or wait for their government to say "boo".

They are the world's #1 capitalists at the moment, and that scares the shit out of alot of governments and alot of people -- all who don't understand how capitalism is probably the most "moral" enterprise of all human activity -- because it creates value and enhances human life..