Chinese Bubble

[Jacob]

CNN says there may be a Chinese bubble and if it bursts the US is fucked.

http://money.cnn.com/2009/07/29/markets/thebuzz/index.htm?postversion=2009072914

My question is to the people who know economics somewhat: how likely do you consider it that there's a significant bubble in China's economy and how likely is it to burst?

Though really, this article seems like alarmist hogwash.

[Jacob]

How will we stock all of the Pound shops / Dollar stores ?

Maybe bundle your posts into 50s and sell bundles at a $1 each?

[Eddie Teach]

I'm not convinced it's a bad thing for us. All the article came up with was Chinese cashing in treasury bonds.

[CountDeMoney]

My question is to the people who know economics somewhat: how likely do you consider it that there's a significant bubble in China's economy and how likely is it to burst?

Though really, this article seems like alarmist hogwash.

The problem with their market is the Chinese IPO system is totally fucked;  like breakingviews.com wrote yesterday, money is too cheap, and stocks are too expensive, and that's the government's fault. 
The article mentioned the Shanghai Composite;  both China State Construction Engineering Corp. and Sichuan Expressway (a fucking toll-road operator) had their IPOs triple their value in one day...but the max drop in one day session is only 10%.  Buy, buy, buy all you want, but a stock can only see a capped 10% selloff a day? In addition, underwriters can't issue extra shares, and they don't allow short-sellers in their markets, and the government won't get on the stick to control the fund supply.  You can't run a railroad like that.

So yeah, investors over there are going to have to learn the meaning of the word loss the hard way.  In their closed system, they really haven't learned how to run a stock market.  But I doubt that would really affect all our paper they have, since they won't require the liquidity, even with a pop.  Or several market pops.

At least, that's what I read on the cereal box this morning.

[Jacob]

Interesting.  Thanks Money.

[Monoriu]

It is not like the Chinese haven't seen bubble bursting.  The Shanghai composite index reached 6,000 in Oct 07.  Then dropped to below 2,000 in 08.  Now it is back to about 3,200. 

One key difference between China and the US is that Chinese household and consumers are not heavily indebted.  In fact, they have too much money that they don't want to spend.  There is no sub-prime mortgage on the mainland.