Every analyst and his dog is bearish on China. Europe and US has started to financially stabilize (somewhat) and now the attention turned on China. However - China is not that easy to short, so Australia is the best proxy.
In regards to the real-economy (as opposed to capital markets) - there is a tendency for markets to over-react. For example - 'Chinese economic data is notoriously unreliable', 'the economy has to fail because it is a command-control/centralized system, etc. The reality is - i have checked some data - EZ trade data reported by OECD against the Chinese reported figures. Surprise - there was only slight difference!
Korea is the best proxy for Chinese economic data, Korean reporting is one of the most reliable in Asia/world.
In my opinion - financial uncertainty coupled with political uncertainty (due to the change at the top) is creating the hysteria.
One thing about China - traditionally the 'young' respect the 'old' - so the Chinese government unlikely to radically alter its major policies.
In regards to Australia - i am not worried about the government's budget as yet. Still holding government securities and intend to do so.
However, until the Chinese economy has not stabilized, i expect that capital markets will attack it. As a proxy of China, international investors will continue to short Australian resources.
