Tweeted earlier about hearing all these talks of China finally feeling its growth is unstoppable (LA times article)….it talks about 3 main issues for the Chinese economy:
- slowing GDP growth – exports are lowering….Chinese factories are struggling to survive, accepting lower margins….the small factories are getting squeezed out. They are thinking of all kinds of ways to differentiate from their competitors. USA and Europe can’t buy big quantities so easily like they used to.
- Rising public debt – Chinese are learning how to use credit cards, the younger generation is not saving as much as mom and dad. People are not afraid to buy expensive meals, expensive foreign brands….live the life that they worked so hard for. Government is spending more on infrastructure – high ways, real estate developments….creating jobs and creating excess capacity.
- Stubbornly high inflation – man…I have personally been feeling this over and over….labor rates are going up. Minimum wage is going up. I keep seeing restaurant menus tape over their price to increase it. I see basic fruits, vegetables, meats in the grocery store getting marked up again and again. Its real, and its scary.
EVERYONE IN CHINA TALKS ABOUT REAL ESTATE AS ALWAYS THE BEST INVESTMENT…seriously, its more expensive to buy in Shanghai than NYC – that is crazy to me. How can it possibly go up anymore? I remember being in Bronx, NY at a BBQ and hearing people talking about real estate never goes down and I should buy planned real estate developments, sight unseen in Florida condos – I see the same thing in China now….
I don’t want to say “told you so” but Doug just google searched about Chinese economy lowering its GDP and found my blog in 2008 discussing I / Shadstone has to reposition to sell to China….its not an easy transition.
But…as China gets more expensive…Chinese companies will need to invest more to get customers…and that is the position I’m working from.
But I still believe Chinese businesses are holding cash positions…there are still savers in this economy. But I’m not a “buyer” currently…I’m keeping my costs low, and variable in this current position.