copper futures, page-22

Foxy

you said, firstly quoting me.

"If you have any other concerns please raise them."
you asked...
I do..What would a macro event such as a Chinese property bubble burst do to world economics?
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Topics relevant to CDU only. I don't want my blanket statement of assisting you to extend to issues such as marriage guidance, pig insemination...just CDU related. Just wanted to clear that up.

Look at massive waste in Australia. Can't see it? Welfare, centrelink, bureaucracy. China does not have ANY welfare, the pension is a miserly 1500 RMB/month (AUD 200) and thats why there is so much corruption because at end of careers bureaucrats MUST find a way for preparing for retirement. I have seen inside Chinese hospitals - there is a basic system, but anyone, even farmers will pay the deposit of RMB50,000 (nearly two years salary for a bus driver) to go to a better one if they can. That is a whole lot of elective surgery and fancy CT scanning not done unless really needed.

The point is systems have waste. Australia's is consumptive waste, China's is excess asset building. Roads and construction, super fast railways - you have to see it to believe it and the Shanghai maglev..awesome. Overbuilt ahead of time maybe, but most will get used eventually.

Secondly, its necessary to understand the significant difference between Australian and USA property booms and collapse compared toa Chinese one. The root cause is the same..too much misallocated credit. The difference is China still have 50% of the population living in the countryside. I have seen first hand the "new" housing in the countryside that people are happy with. I shudder to think what they old ones were like, but they are clean dry and solid, just no tiled showers and F&P oven ware. I have stayed in "old" apartments were you defaecate in the same hole you then shower over. Don't drop the soap and try and retrieve it. There are millions of these old style apartments. Sections of cities are evicted, people are evicted and whole sections of city - WHOLE sections - are replaced with the newest most modern highrises, and located near the underground. The old tennants cant afford it even though they may have got twice as much compensation as they could have sold for, and move to the edges/outer rings, but it is nicer than they had.

The whole Guangzhou region down to Shenzhen is planned to be a mega city, criss crossed with every modern rapid mass transit. New population 40 million. They can't even think of a name for it. Even then its a drop in the bucket in 1,300 million. West of Chongqing into Tibet and the North west are wild frontiers yet to get anything but a modest dusting of development.

Ok, I hope you learnt something. Property bubble...there will be many of them - probably a few substantial, but this is a population with the bit between their teeth prepared to move aside for the greater good and still with Deng Xiaoping's words in their minds. See here for examples:

http://www.brainyquote.com/quotes/authors/d/deng_xiaoping.html

and this from Deng..
We mustn't fear to adopt the advanced management methods applied in capitalist countries (...) The very essence of socialism is the liberation and development of the productive systems (...) Socialism and market economy are not incompatible (...) We should be concerned about right-wing deviations, but most of all, we must be concerned about left-wing deviations.

I hope you correctly get the right impression that this is a Juggernaut - property bubbles will be occasional difficulties. The biggest issues are the transfer of political power from the pre 1989 Tianamen Square to post 1989 leaders, the issue of Party corruption and the Princelings (enriched children of leaders). Property is a nuisance compared to those.

My observation is that the current mature generation and their children won't be dissuaded any time soon from economic prosperity. There are no guns, no drug problems, certainly no graffiti anywhere.

I have seen streets with no cars chock a block with them in 18 months. A single moderately sized high school have forty first time new car owners in a year. Try and find a car older than seven years anywhere in China.

Short summary: What macro event in property? Corruption and wealth disparities will be a bigger events. Not anytime soon though, probably closer to 2020.