Understanding China, One Blog at a Time

An American in China

China, Price Controls and More

Posted by w_thames_the_d on October 29, 2011

Great Comment from Brewskie
“What’s more is Shanghai home owners have been rioting over price discounts. Indeed, property developers are in deep trouble, as roughly 1/3rd reported negative growth in the third quarter; sales of Vanfound Real Estate, Yihua Real Estate, Hianan Haide Industry and Binjiang Group dropped more than 40%.


I also found out China’s in bigger trouble than I originally imagined. The crux the optimists like to lean on is the “$3 trillion in currency reserves crutch.” Yeah, the banks are in big trouble, and I figured the CCP would bail out the Big 4′s asses (for real this time, too, not shuffle it around debt as the last 2 times), but it wouldn’t cure the underlining suffrage at the base of the economy: namely, death in real estate, lower revenues collected by local governments as a result – along with the armies of people with money stuffed in property market related-vehicles – nor the wazillion suffering SMEs choked by dirty shark loan bastards. Historical case in point: did bailing out Wall Street banks cure America’s underlining economic problems – will employment and Main Street be revitalized soon? And $3 trillion in currency reserves is no Miracle Grow formula that’s going to shake Playdough-srength freeway ramps into titanium shape quickly, either.

However, leave it to “Genius” Jim Chanos to throw down the gauntlet: the reserves have liabilities, meaning, exporters who collected dollars exchanged transferred them for RMB at the PBOC, which they spent, meaning when China has to bail out the banks, she’ll have to print currency to save them (and what’s already suffocating many Chinese?). In a video linked below, this gets spelled out around 1:44; most of the video pertains to information China bears already know.


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