CR

A few days ago you mentioned that the Chinese RE market will not have far to fall if there is indeed a bubble because the large down payments. [CR Note: If I incorrectly wrote something that came across as Tim suggests - that isn't what I meant. Please see my response]

Did not the Japanese put down large down payments in the 80's? The savings rates are similar over 20-30%. What seems to be feeding the prices for RE CRE and other Chinese assets is the high degree of reinvestment back into the Chinese economy.

We are alone...

Eurostend and Greecetend.

The Chinese Rings Puzzle

Rob Dawg wrote:

Google trend

and?

This is a global macroeconomic issue, but for China it is a domestic issue: There is a labor shortage in China, and those workers want to be paid. “Migrant workers are a lot more fussy than before,” He Suwei, chairman of Hangzhou Weibang Airflow Spinning Co in Zhejiang province, told China Daily. “They don’t just talk money; they talk about working environments, holidays and other fringe benefits we have not even heard of before. Workers have more say than us now because they have a wider choice.” Workers at the factory are now being paid about $270 per month, up 40% from the beginning of the global recession. At a nearby textile mill, the owner came back from the Lunar New Year holidays to find that many of his skilled workers didn’t return to work. He reluctantly had to raise wages. “I had no choice but to raise the salaries of my less experienced workers from 750 yuan a month to 960 yuan,” said the owner, Cao Yakun. “Also, to make sure the workers who did return stayed, I boosted my skilled workers’ pay by 10 to 15 percent.”

Untenable, unsustainable, indefensible, unsound « Annaly Salvos

Jon

From what I know most of China's economy is being driven by over investment. Not unlike Japan in the 80's.

CalculatedRisk wrote:

I find China very difficult to understand.

Hu and everyone else.

also in the wsj: Asked about the U.S. authorities' decision to let Lehman Brothers' fail in September 2008—which sent shock waves through the global financial system—Ms. Lagarde reiterated that she considered this decision at the root of the global turmoil. Had the decision not been made, she said, "the trauma might have existed but would have been tempered over time without the brutality and depth of the recession that we've experience around the world."

Dammit, it was the one decision I thought they got right, and the world has settled on the opposite interpretation.

I'm just misunderstood.

BEIJING -- Premier Wen Jiabao Sunday warned other countries not to pressure China over its exchange-rate policy, and argued strongly that the yuan is not undervalued.

Mr. Wen said the past two years have been extremely challenging for China and that the country still faces difficulties ahead. The government must stay vigilant over these difficulties over the next few years, he said.

Looking outside of China, Mr. Wen said the world might face a "double dip" recession amid risks in financial systems and continued high jobless rates in many countries.

WSJ

Jonathan wrote:

Building better factories, education... nah

That has been a big part of their 'speculation'... factories at least, offices too.

In what way? And I'm curious... Struggling to frame a question.

Is this 'foreign investment' going into production facilities and 'trickling down' to people spending on housing?

And if not that, where is the money powering the Chinese housing boom coming from?

Jonathan wrote:

I read something recently that basically said the Chinese savings rate hasn't changed

Check the comments on that thread near the end.

Edit: memmel wrote: (at 7:01pm my time)

Now you don't have to be a genius to figure this out if it was really cash then people would be draining their savings accounts to buy homes and the savings rate would be plummeting banks would be unable to meet reserve requirements and lending would dry up rapidly. Thats not happening therefore its borrowed money.

Well then again, maybe Greece has some Repo 105 transactons which will make everythig good till next quarter.

Spent some time reading this: http://lehmanreport.jenner.com/VOLUME%203.pdf

And, well, who knows where it will go. More importantly are there more?

Rob Dawg wrote:

Tim 2012 mentioned a double dip and I thought it relevant.

A previous trend can leave a dead spot or a sensitized spot..

I can't prove it but I think that the "SARS" virus left a sensitized spot which re-activated for "Avian" flu.

Look at how much faster avian flu spikes up.

The reaction time is almost HALF.

http://www.realmeme.com/roller/page/realmeme/?entry=sars_versus_avian_flu_meme

The internet changes constantly..

There's no guideline you can go back and test against.

I'm off to the Vogue. I've mostly resurrected previously failed projects for the past five years but I haven't had 60-hour workweek projects since 2005. This newest thing is in the same vein but bigger and earlier in the failure process, I imagine I'll be pretty busy for the rest of the year. You take it easy, Dawg.

JimPortlandOR wrote:

I find that VERY hard to believe.

I do not know but it is on the intertubes
Link from link
Workers call the shots

Heard it somewhere else but could be from the same source

"Sooner or later, labor is no longer going to be cheap in China and manufacturing companies will start to move elsewhere, just like what happened in Japan and South Korea," said business leader Liu Yonghao. "Companies have to upgrade their technologies and produce goods with more added value. Governments also must work with companies to solve migrant workers' problems with housing, medical insurance and education. This will help them to feel safer when working in cities."

Like Japan you Say?

tg wrote:

Greece, U.K. give views of debit crisis coming to United States - MSN Money''

Including the part where the French declare it a ?

JP wrote:

French

known for cuisine snobbery

Whats Happening to China's Migrant Workers? A New Generation Coming and Going - The China Sourcing Blog

poic

Rising wages is harder to fudge though possible. Are calling this bogus too?

"Rising wages is harder to fudge though possible. Are calling this bogus too? "

What does that have to do with me pointing out that there are and have been for years ways around work-permit restrictions?

I don't really believe anything coming out of the mouth of the government there. But it's not just the government saying there are rising wages, there's a lot of anectdotal evidence as well.

China's already in danger of running a trade deficit this year. A rise in the yuan would crush Chinese exports and put them in a huge trade hole. I just don't see that they get enough benefit out of it to let the yuan rise. Everyone thinks it should rise. But I hear very little about how China would benefit it if did rise. And I don't think they're about to destroy their own economy just because the US and EU are whining about currencies.

tg wrote:

China’s Wen Rebuffs Yuan Calls, Opposes ‘Finger Pointing’ - Bloomberg.com

From the article:
Wen said... “A stable renminbi exchange rate in the midst of the global financial crisis has played an important role in the global economic recovery.”

Can we all have a group "WTF?" here?

Oxtail wrote:

But I hear very little about how China would benefit it if did rise.

They would be getting paid for the work they do - paid in real purchasing power.

You like working for nothing?

dryfly wrote:

They would be getting paid for the work they do - paid in real purchasing power.

You like working for nothing?

And how much work would they lose after they kill their competitiveness against all the other emerging markets?

Oxtail wrote:

And how much work would they lose after they kill their competitiveness against all the other emerging markets?

Not a lot - and what went SHOULD go. State manipulation of currency to keep people working in poverty is akin to slavery. Manipulation is a FAR cry from letting the Forex & Comex sort it out. Then they [and we] would find where we are really competitive and not what their central bank & planners think should be competitive.

And it would do Chinese workers a world of good, promote domestic consumption in China [and resultant jobs] and at the same time take some pressure off EU & NAFTA Zone mfg & their workers. It would produce the closest thing to a win-win we are likely to ever get in these tough times.

"And how much work would they lose after they kill their competitiveness against all the other emerging markets? "

Most likely when someone is making $1/hour they're thinking one day ahead, not one year ahead.

Rob Dawg wrote:

group "WTF?" here

is that legal?

poic sorry hard to follow all the comments

tim, np

dryfly,

I don't really have any contacts in the business arena. Most of my wife's family was/is in academia. What I saw in Beijing back in 2004 left a bad taste in my mouth to the "vaunted" free capitalism idea though.

Just a bigger version of the screw-you attitude you see now here with even less regulations and less workers rights etc..

I can only imagine what it's like in the industrial zones.

"I doubt the people making a dollar a day in renminbi have been able to save very many."

I don't know exactly what it's like now but I do know that back in the 80s my wife's parents were each making 100 yuan each a month, gave 10-15 yuan each month to their parents and her mother still managed to save enough for train tickets for two on the trans-siberian express when they left.

The older generation could really make their money last. I am pretty sure that migrant workers still have an amazing ability to save despite their low wages.

1 currency now -yogi wrote:

I doubt the people making a dollar a day in renminbi have been able to save very many. On net, China has a claim to several trillion dollars. Any appreciation in renminbi destroys the purchasing power of those dollars by a like amount.

Its like crying over 2000 NASDAQ 5000 stocks - they loaded up on 'trillions' they'll never get or see. And the PBOC didn't buy them for 'saving' - they bought them to manipulate the exchange rate - period. They had dollars pouring in and monetary inflation pressure so lock them up. They could have let the CNY rise and had the same effect EXCEPT they'd be 'less competitive' - if wage slavery is 'competitive'.

Plus they have a much larger number of yuan in circulation than their reserves - that all goes up as reserves go down. Just doesn't benefit the state organs or the party - explains why Wen & Co. are so opposed to something that would benefit their people.

And lastly you'd be surprised how much they save - dollar a day is pretty low - not hearing much of that anymore in export mfg anyway. More like a $1/hr working 8-10 hrs a day. And they are saving TONS. They all don't live in $2000/sqft Shanghai condos.

Chinese Plants Starting to Feel Labor Shortage - NY Times

It appears that China's stimulus program is leading to wage inflation.

Wen's line is from the 1998 playbook. Back then, the Chinese yuan stability gambit worked, and it probably did help ease tensions, reduced risk and transaction cost of uncertainty, and so on. Think about hte period - Russia had just melted down, LTCM had shown something wasn't that cool in finance, and the Asia crisis was in full swing. Devaluation was an option, but they chose to hold. As time went on the costs of doing so appeared lower, so economically it was easier, but the political payoff was higher: about 3 years plus of prancing around the global stage saying how China had basically fixed the Asia crisis by holding the RMB stable.

This time, the situation is different, but if you read closely, it's far more hubristic. China has played an important role in the global economic recovery by not contributing to the alternative, ie more chaos, risk, disruption etc. Forestalling chaos, or luan, is not a small thing in chinese statecraft. However here it means China has really arrived, because the stability of the world, and of a base on which to recover, is up to China.

How that factors in final demand for an export-led growth strategy (that's you, 'Muricans!) is a little unclear.

Ok, WTF was briefer and made just as much sense.

C

So any significant revaluation of the yuan vaporizes China's trade surplus. And would prompt shifting of production to other countries (Vietnam?)

Demographically China is close to Japan in terms of an aged population that is a drain on resources rather than producers; it's possible that PRC could experience a very severe crash once the currency floats.

From rosethorn link...

Some manufacturers, already weeks behind schedule because they can’t find enough workers, are closing down production lines and considering raising prices. Such increases would most likely drive up the prices American consumers pay for all sorts of Chinese-made goods.

I was in a factory here in teh US trying to get product out of China and they can't for that very same reason. The Chinese mfgr said they'd ship but only if the US customer paid more so they can pay more for the labor. The US firm said... but we have a contract. Chinese in effect said... 'so'?

The longer this goes with pegs the more broken it gets.

dryfly wrote:

Chinese in effect said... 'so'?

They really aren't sufficiently mature to take their place at the adult table.

Rob Dawg wrote:

They really aren't sufficiently mature to take their place at the adult table.

I learned of the story because the US firm asked me if I knew people who could make the parts instead - looking into that now - meetings on Monday.

"dryfly wrote:
Chinese in effect said... 'so'?
They really aren't sufficiently mature to take their place at the adult table."

you're looking at it from a Western view of what is/isn't appropriate in business.

Which isn't to say I agree with that line of thinking.

Believe me they're also looking at some of our ways of doing business and thinking exactly the same thing.

Rob Dawg wrote:

------ Chinese in effect said... 'so'?

They really aren't sufficiently mature to take their place at the adult table.

The next step in maturity is to demand a floating hard index to set the price, even week-to-week.

Then it's finally game over for the currency printing ponzi. I wouldn't use a loaded term like "mature". "We signed a contract at $100. We just printed the note. Why won't you honor it?"

Does that sound mature?

dryfly wrote:

Result is there will price increases for some labor intensive products - not the end of the world.

Makes some countries with manufacturing containing lower labor content look better. The long march doesn't include the dimunition of cheap labor as a competitive advantage.

Labor goes up enough in China, etc. then doesn't that shift the balance back to lights-out U.S. solutions? Seems to me that absurdly cheap labor has undercut even our best automated solutions.

TJ and The Bear wrote:

Labor goes up enough in China, etc. then doesn't that shift the balance back to lights-out U.S. solutions? Seems to me that absurdly cheap labor has undercut even our best automated solutions.

Yes and yes.