Hot Features
Premium
Level up your trading with our powerful tools and real-time insights all in one place.
I have brought you evidence of how the China bubble is bursting in the real economy numerous times in the past months. Whether it be underpants, ships, steel, coal or electricity demand the evidence is clear for all to see: China is already suffering a very hard landing indeed. My thesis, however, is that this will be compounded by the unravelling of financial bubbles based on leverage and, it is now becoming abundantly clear, widespread fraud as well.
To read my articles on the downturn in the real economy and how Chinese growth figures have been systematically fabricated click HERE ( underpants), HERE ( electricity, Real Estate and GDP stats), HERE ( coal, oil, textiles, GDP stats and fraud) and HERE (steel).
At some stage those who have speculated with borrowed money in buying buy to (not) let apartments in vast empty Cities or – at a larger scale – in trading office blocks that will never see a tenant will come a cropper as loans are called in. That will have a clear knock on effect on precisely the sort of Chinese who invest in equities, buying Western products, utilise the rowing Starbucks empire in China and who own other enterprises which will then be sucked into the mire.
What is unclear at this stage is how widespread fraud has been in this property bubble. As such i advise you to read an excellent piece in today’s Daily Telegraph HERE. The story is how a taxi driver used fraudulent documentation to amass a hotel empire with £800 million of debt and no equity. This enterprise then guaranteed other loans. You could not make it up. In this case the Government has stepped in with funds to stop a chain reaction of disasters. But it cannot keep doing this. How widespread is the fraud? Well judging by how easy our cabbie pal found it to pile up the debt; I would suspect the scale of what will eventually emerge will be quite alarming. What is it that Buffett says about how when the tide goes out you get to see who is wearing swimming trunks? The tide in China in China is receding at an alarming rate. And investors should not delay for an instant in reducing their country exposure to nil.
