A COLLAPSE IN CHINA?

PREDICTIONS OF AN ECONOMIC COLLAPSE IN CHINA ARE IN VOGUE

Once-unbridled optimism is giving way to fears that slowing GDP growth, rising public debt and stubbornly high inflation are signs of bigger problems to come.

David Pierson

Los Angeles Times, November 28, 2011

Not long ago, those who predicted that China's economy was headed for a fall were in a lonely place.
U.S. economist Nouriel Roubini, widely praised for calling the U.S. housing meltdown, was dismissed as a serial contrarian when it came to his pessimistic China views. So was well-known hedge fund manager Jim Chanos. Lawyer and author Gordon Chang was derided as a Chicken Little for his 2006 book "The Coming Collapse of China."

Suddenly they're all Nostradamus.

Backed by data showing a slowdown in the world's second-largest economy, doomsayers have taken center stage. Unbridled optimism has given way to fears over widening cracks in the Chinese economic miracle.

The gloomy sentiment has spilled into financial markets, whose investors have been running for the exits.

The Hang Seng China Enterprises Index, which tracks the stock performance of major mainland companies listed in Hong Kong, is down 26% so far this year, making it the worst-performing market gauge in Asia.

The practice of short-selling — betting that a stock will fall in value — has become so pervasive among traders of Chinese equities that analysts at French banking firm Societe Generale deemed China the "world's most crowded short." For instance, nearly a third of the shares of China Overseas Land & Investment Ltd. were shorted in August and September, signaling doubts about the prospects of China's largest property developer.

"There's growing sentiment that the Chinese story doesn't make sense," said Chang, who is now invited to investor conferences and remains convinced of a looming crash.

Bears like Chang see slowing GDP growth, rising public debt and stubbornly high inflation as evidence China's problems are about to get bigger.

Skepticism runs especially deep when it comes to real estate, which represents about a fifth of China's economic output, by some estimates. In a pattern eerily similar to the U.S. housing boom, easy financing in recent years unleashed a Chinese development frenzy that sent prices soaring. Eager home buyers camped out for the chance to buy into planned developments, sight unseen. The typical 1,000-square-foot apartment in Shanghai costs $335,000, about 45 times the average resident's annual salary.

Now China's housing bubble is deflating. Home prices reversed in October for the second consecutive month as cash-strapped developers became desperate to unload homes. An index of 35 major cities showed 29 had experienced a decline in sales from a year ago; sales plunged more than 50% in six of them, including Beijing.

The Chinese government says it's all part of the plan. After loosening the credit spigot during the financial crisis to keep the economy humming, it's now tightening lending and clamping down on speculators.

(...) [artículo aquí]