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A Hard Landing For China?
Ben Chow's profile photoLee Samaha's profile photo
Wary for commodities, yes. Hard landing, I doubt at this point but I am sure if any hard landing occurs it will be the mother of all hardlanding, because nobody is prepared for that, not Chinese and not others...
Hi +Ben Chow I think China has huge foreign exchange reserves and budget surplus, from which it can invest to stimulate the economy. I guess the question is, how will they invest it? And what areas of the economy will start to outperform? Perhaps healthcare and social infrastructure? Hospitals etc
China is a large and complicated country. The policy of central government has to be carried out by provincial governments which always leads to chaos because for provincial governments, the investments in infrastructure (disregarding whether useful or not) are counted as GDP which is the major if not sole KPI for the province performance. That lead to over investment in sub par return projects which hit back to the bank system (becoz the loan is not going to perform) last time 2008-2009 4 trillion yuan grand plan end up like this, that's why this time Premier Wen is more cautious in stimulus package. there seems limited impact on tuning the direction of economy towards more consumption.

By the way, social and medical sector are the two corrupted sectors, meaning any policy on it will not get fast result. My feeling.

So the problem of china facing is that it has the bullets to make huge investment to jet up GDP and employment, but whether it is sustainable for long and how much value is added to strengthen underlying economy is a big question mark...
+Ben Chow Thanks so much for this insightful view. I share your opinion!
What do you think about Chinse consumers and Gold? Indian demand actually fell in the last quarter but China's went up 30%+. It seems that China is holding up the price,
Given the lack of alternative assets to invest in and, the poor trend of property prices, will the Chinese keep buying gold as an inflation hedge and/or a way to store wealth? Or will falling property prices cause them to cut back on gold? Any thoughts?

Actually if you look at sales in gold and jewelry retailers, the sales is stagnant which reflect the worsening of economics of China consumer, so why is China gold buy rises? I suspect it is the Chinese government building their reserve as this is a sensible move in a world where everybody print money (or will print) to solve problem...
+Ben Chow I've just put an article on Gold up. The data is sourced from the World Gold Council. It will be interesting to see how China's demand develops in future.
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