Hi Michael T

Your pivotcapital paper (which doesn't open up to non subscribers) appears to be more an advertising plug than a sound argument on OLO.

US-centric pundits were wrong about Chinese growth a year ago and likely wrong now.

The Chinese economy is flexible and has much unsatisfied domestic demand - which has not even needed to be called on.

However much Wall Street seers have hoped for failure in the Chinese economy it is the US economy that has let the world down through the mortgage debt bubble - resulting in the global financial crisis.

The good thing for us Australians is we can choose - no longer "All the way with LBJ" (slavishly following the US) now.

Pete

Plantagenet, I'm interested to know how you concluded the Pivot Capital paper was worthless without reading it.

In fact it is 10 pages of closely argued economic analysis based on the best evidence available. They too make the point that over 90% of China's growth last year was based on capital investment. They point out that the credit to GDP ratio is approaching 200%, and demonstrate that many of China's industries are reaching maximum capacity, and that even their housing and infrastructure levels are much more developed than most commentators realise.

They show that even on the most optimistic growth scenarios, domestic consumption cannot power growth to the levels seen in recent years.

They conclude that China is heading for overproduction and overcapacity and there is a high probability of a slowdown sometime in 2010.

They might be wrong, but it would be foolish to ignore this waning.

Michael T

I'm not saying that the Pivot Capital paper that you appear to be advertising is worthless.

The paper http://www.pivotcapital.com/research.html written by Pivot Capital Management way back in August 2009 appears to be unopenable by non-customers of said Pivot.

I would recommend OLO readers pursue their sources for free and not fall for fund paying manager's advice from Wall Street?

Perhaps show us evidence from the free internet.

Well spotted Michael T. For an important insight into China's property market check out the OLO article of 23 February entitled 'China's looming property bubble' by Arthur Thomas http://www.onlineopinion.com.au/view.asp?article=10083.

The assertion by P Coates that "China’s rise to being the world’s wealthiest country in the next ten years is inevitable." is somewhat naive, as is his suggestion that "As agricultural workers gradually move off the land to higher paying industrial and service sector jobs a country is on firmer ground to move from mercantilist policies to a free market “developed” economy...And ... China already has a growing free trade sector especially in machinery and high technology equipment such as computers and aircraft."

Most if not all of this latter economic 'growth' and 'progress' is restricted to Special Economic Zones on China's Eastern and South-eastern seaboards. The mis-guided assertion by P Coates regarding the 'gradual' dislocation of agricultural works into such zones into' higher paying industrial an service sector jobs is also naive. Yes, millions of displaced peasants have been forced off their collectives by corrupt Party officials to become "cheap labour' for these economic 'miracles'.

However so appallingly low are their wages and working/living conditions, that large numbers of these internal peasant migrants cannot afford to buy their dream apartments, and turn, instead, to speculation to increase their funds base, aided by developers and corrupt bank officials to circumvent government anti-speculation legislation.

At the same time vast swathes of office space lay empty and idle in major cities of Bejing and Shanghi.

All this has resulted in rising unrest among the real 'wealth creators' in the SEZ's, their empoverished kinfolk back in rural China and the young educated masses of China's major cities. The brutal 'crackdown' in Tianamin Square by China's so-called ' communist' leadership clearly demonstrated for the rest of China and the world how they plan to deal with any threat to their plans for 'unending prosperity'

As Arthur Thomas perceptively concludes, "The consequences of creating and trading in illusions are likely to surface later this year".

Thank you Mr So What for representing Mr Arthur Thomas' doubts.

Time will tell - preferably about any short term trends this week.

That is the highest truth of highly paid stockbroker advice.

US Wall Street Inc. still makes money - even when investors sell out broke and the rest of the world is forced to suffer - as in 2008.

China is doing the work not just advising about it.

P