High on property

Andy Xie warns that Hong Kong's dependence on the housing sector to drive economic growth is feeding another asset bubble. When it bursts, he says, the government should resolve to kick the addictionAndy XieApril 23, 2012Hong Kong did not learn from the property crash and economic collapse of 1998. Instead, it has tried hard to reinflate the bubble. After squeezing supply for over a decade and with the help of the US Federal Reserve's zero interest rate, the bubble is back. But it is a Pyrrhic victory.Hong Kong's economy is suffering. Between 1997 and 2011, nominal gross domestic product grew by 2.6per cent, per capita income by 2per cent, and the average salary by nearly 2per cent every year. Over the same period, the cost of living shot up - oil prices quintupled and food prices doubled...

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Posted in: Hong Kong,property

Beyond the bubble

February 7, 2012 / Andy Xie Andy Xie urges the Chinese government to embrace the restructuring that is needed to sustain economic growth, instead of using its financial muscle merely to delay the inevitable - a painful transition China's obsession with stability may lead to greater instability. A skilful person can keep a ball on a bigger ball only for so long. China's economy faces serious structural problems. Reshuffling liquidity to keep everything afloat for now will lead to a collapse later. The right way forward is to accept restructuring, deal with the pain, and be reborn into a more dynamic economy. This way, China could become the world's largest economy in 10 years. China has experienced a tremendous economic boom, the result of it joining the World Trade Organisation, its demographic...

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Posted in: China

Slow growth era may have arrived

January 16, 2012 / Andy Xie Summary ------------- China's economy is slowing down due to export weakness and a bursting property bubble. Unless painful structural reforms are undertaken, the slow growth may be here to stay. China has excessive debt in the corporate sector due to property speculation, excessive fragmentation of the supply side due to local government subsidies, and unsustainable dependency on investment on the demand side. Export slowdown and property bubble bursting expose their drag on growth. Unless structural reforms deal with these problems, China is entering an era of slow growth-GDP growth rate down by one third or more compared to the record in the last decade. The structural problems are unlikely to be cured in the foreseeable future. China is likely to avoid...

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Posted in: China