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

The last article of year 2011

Dear All, This is my last article for 2011. Hope you have enjoyed my articles during the year. 2011 is a very difficult one for everyone. The first half of 2012 may be worse. There is just so many baggage from the past yet to be cleared out. The past cannot be covered up anymore.I'm in Zhejiang now, talking to bankers about unique credit risks here associated with businessmen gambling in Macau. Bankers literally try to take away their borrowers' pass for entering Macau. But, somehow, they manage to get into without the pass. This is such a big deal that threatens the health of China's economy. Macau threatens China's stability.High interest loans are a bigger destabilizing force yet. Its fall impact is yet to be felt. So many still count on land price coming back to save them. The land bubble...

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Posted in: BRIC

Shattered illusions

Andy Xie forecasts escalating volatility in the global economy next year as the West begins to pay for its past excesses and the emerging economies, led by the BRICS, try to pick up the pieces after the credit bubble bursts Andy Xie December 14, 2011 Next year may be the most volatile year in two decades. A political crisis may engulf major countries in transition. The financial crisis that began in the United States and is now raging in Europe could take down some major emerging economies that have been relatively stable. The BRIC economies may experience serious difficulties next year. Some may suffer an old-fashioned currency crisis. The major central banks in the developed economies loosened monetary and fiscal policies to cope with the financial crisis in 2008. A significant...

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Posted in: BRIC

Usury and monetary policy

2011-10-17  / Andy Xie Summary ------------- The bankruptcies of many private enterprises, especially in Wenzhou, are mostly due to speculation with borrowed money gone bad. It is totally wrong to characterize this phenomenon as monetary tightening squeezing SMEs. Normal businesses don't go bankrupt because they cannot borrow. Only money burning speculation needs to borrow constantly to stay afloat. Loosening monetary policy now to ease the liquidity crunch for speculators would do enormous harms to the economy. Indeed, the excessive monetary expansion between 2008-10 squeezed real businesses through cost push and rewarded speculation through asset inflation. Another wave of excessive monetary expansion will magnify manifolds the speculation in China's economy by proving again that...

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Posted in: monetary policy

Start the international board now

A country becomes a financial center because it has succeeded in becoming the trade center. Germany's plight today should remind everyone that, when the financial center and the source of money are disconnected, bad things happen to whoever has the money. Even though Germany amassed the biggest trade surplus in the past decade, its financial system was woefully underdeveloped and relied on London bankers to recycle its money into other countries. With the benefit of hindsight, it would be natural that the London bankers wanted to screw Germany, because they were paid to do so. In a decade or two, Germany may become a poor country. When people look back then, they would conclude that its decline was due to the combination of a hyper competitive manufacturing sector and a woefully inadequate...

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Posted in: China,finance,stock market