- Thursday May 27, 2010
China crash unlikely but India’s outlook less rosy
CAPITAL TALK
WE all know that there is an endless list of people, at least based on what is being reported in the Western mass media, forecasting that China’s economy will crash soon.
Based on the latest April data on China’s property price, bank lending and inflation rate, it would appear that all the dire forecasts for China are unfolding right in front of our eyes.
As i Capital has advised repeatedly, it does not see China crash landing this or next year. In fact, it continues to see a soft landing in the coming months.
By focusing on China, what the China bashers have not shown is that between the two emerging Asian giants of India and China, India should be the economy that is heading for a crash.
The three charts above show key economic statistics for these emerging giants.
India’s situation is somewhat similar to Greece. She has persistent and high levels of budget deficit, external trade deficit and also a high inflation rate.
In contrast, China’s economy is better managed. Despite such contrasting economic performance, why is it that China is forecast to crash and not India?
Is it because China has some problems with some minorities? The China bashers love to highlight Tibet and Xinjiang as China’s major trouble spots. This cannot be because the social problems that India faces are even more serious than China’s.
In 2006, Prime Minister Manmohan Singh called the Naxalites “the single biggest internal security challenge ever faced by our country.”
In 2009 he said that India was “losing the battle against Maoist rebels.” The Naxalites are very popular and growing in popularity in India. So why zoom in only on China?
The answer is simple.
To the China bashers, India is seen as a rare Asian democracy which they will go all out to portray as the model nation.
In contrast, China is still portrayed as a communist country and they would go all out to discredit her as a successful nation, and if possible to cause the country to break up.
Unfortunately, the facts of the matter do not support such a conclusion.
No matter how one looks at it, China’s economy is not ready to crash.
Based on anecdotal evidence, the property bubblet is already being busted. Property prices are already peaking.
The numerous measures need time to take effect.
The economic and housing data in the coming months will be more reflective of the underlying trend and thus more accurate.
See also Possible Sign Of China's Manufacturing Slowing?
China still portrayed as a communist country?
Why divert attention to India?
The article never addresses the economic issues that are facing China right now such as property prices and credit expansion. Rather, I Capital try to talk about Western conspiracy as if Western politicians and economists are the same person. I do not see respectable investor such as Chanos talk about shorting China because China treat its minorities badly.
ReplyDeleteI have to agree that India have some super high inflation but to compare India to Greece is not right. India government EXTERNAL debt to GDP is just around 5%, it is nowhere near Greece 100-odd% level.
India also has a rather resilient economy as they do not depend on trade as much as China does.
The fact that India PM openly admit their problem is because it is a democracy. Does it mean that they are no problem in China if their leaders do not admit any problem? I mean, since when we see China admit their mistake?
I feel it is more apt for I Capital to address issues such as the sustainability of Chinese-growth model that is very much trade dependent. How can the Chinese economy maintain its sizzling growth when its biggest customers are in trouble. I don't think that the growth of emerging market can replace the demand of Chinese goods from the developed country as these emerging market is very much trade dependent too.
Perhaps, the economic issues have been edited out by the editor. Let's give I capital a benefit of doubt, shall we?
iCap's other article can be read in this other blog posting.
ReplyDeletehttp://whereiszemoola.blogspot.com/2010/05/possible-sign-of-chinas-manufacturing_05.html