Quote:


Also, there really isn't much transparency in their economic reporting. Some of the statistics published by the Chinese government don't make a lot of sense.


They are building a *massive* bubble right now. If you liked Enron's off-books techniques for hiding bad assets you'd love local government accounting in China - it's Andy Fastow writ large.

The stats the Chinese government publishes may be true about *national* debt/GNP ratios, but local government debt is 2x or 3x that - or more - as far as I can tell.

Since local governments are severely constrained in issuing debt by the nation government, all of that local debt is issued by what we would call here "public sector SIVs" that are owned by local governments and use money borrowed from banks (i.e, a lot of demand-deposit money). The national government knows there's a problem but doesn't seem to have a handle on how big it is (given that every few months they need to issue new orders to the banks to come clean on how much money has been lent to these SIVs).

All of those Chinese consumers buying things is an irresistible thought, but it's been that for a long time and I don't know of anyone making a killing there yet. I'm waiting for someone foreign to find a way to actually make money in China before investing, and I'm also waiting for the current bubble to pop to see how the government handles it (and the inevitable bank runs, which will be a special problem in China).
_________________________
"If they can't picture me with a knife, forcing them to strip in an alley, I don't want any part of it. It's humiliating." - windsock