Australians generally refer to the Great Financial Crisis as “that thing that’s happening to other countries”.
Much of our smugness is based on our tidy relationship with
What’s that worth to us? Exports to China in iron ore and coal alone were worth more than $25 billion last year. Our next biggest export – wool, was worth a lousy billion.
In addition, our other two biggest buyers, Japan and South Korea, buy over $40 billion in minerals, but sell a hell of a lot of their finished goods to China. You start to see how much we depend on the Chinese.
So, how far can we ride the dragon?
To predict that, you have to answer two underlying questions: What is
The second question is easy: The Chinese have the world’s largest reserves of
As to where its all going, they seem to be building real estate and making exports for the
And that’s where I started getting scared.
On its face this sort of growth seems unsustainable and fueled by pure speculation, but people keep piling in.
Their other big and continuing push is exports to the
WTF? The
I suspect the answer is yet more debt for a country that already has $13.5 trillion in household debt.
So the question that should be keeping every Aussie up at night: What happens if the Chinese real estate bubble bursts or the
Pull up a chair….I suspect we’re going to find out soon.
since you predicted Dubai's problems long before anyone else I know, I will have to give this some thought. Don't forget that a very large proportion of China's economy is now not trade oriented. A major issue as we saw with the GFC is simply whether people have confidence, especially in respect of financial institutions.
ReplyDeleteHello. Big sister is watching you.
ReplyDeleteI was rather nonchalantly reading this until you mentioned Dubai. I only was there for a week but that "when the bubble bursts" thing seems to have made quite an impression on me.
Trying to imagine that happening on an economy as large and as tightly linked to ours as China's scares me. And I don't even really understand economics!
Thanks bro.
Jo
Careful - this is what might happen to you if you whistleblow and no one listens...
ReplyDeletehttp://www.thedailyshow.com/watch/mon-march-8-2010/harry-markopolos
Katie
Thanks for your comments.
ReplyDeleteRic, I'm not saying that China will collapse, but I can't see how they can keep exporting $300 billion a year to the US. If you take that much coin out of the economy there must be a contraction.
On the real estate side, generally the value of property is a combination of the NPV of rent and the estimated capital gains. Is rent moving fast enough to justify the price rises, or is speculation (and hope) of big capital gains? If the latter they have a problem.
Remember, you don't need credit crunch to trigger a collapse in the property sector, all you need is unsustainable growth. Look at Japan in the 1990s.