China’s Imminent Bust

Gordon Chang has recently written a book named “The Reasons for China’s Imminent Bust”.  His comments:

We are seeing signs of deterioration in China’s economy.  Month on month, the economy is no longer growing and energy consumption is at zero growth as car sales are down 5%.  He believes that there is real possibility of a domestic uprising similar to the “Arab Spring’ in Egypt, Libya and other countries.  The rich are moving offshore, many in Princeton, NJ.  This is an early sign of potential problems.  The Chinese leaders injected over $1.1 Trillion in 2008-2009 to prop up their $4.3 Trillion economy, a 25% injection.

China’s property prices are now dropping like a rock.  Some builders are offering a BMW to the first 150 buyers of apartments.  Ghost cities have been built and there are over 64.5 million empty apartments, enough housing for 250 million people.  The property market has been in a bubble and he expects a hard landing.

They are very nervous in Beijing.  The leadership is spending a lot of money on domestic security forces.  Food inflation in China is officially 11%, unofficially 25%.  This accounts for over 40% of the average family’s budget.  China’s growth model assumes a substantial export demand and if the U.S. and Europe reduces their exports due to economic contraction, China has a serious problem.

In the recent past, apartment ownership was used as a store value.  As problems in the economy increase, many may switch to gold as a store of value.

The U.S, Europe, Japan, and China are all having economic issues.  What is the probability that all will successfully deal with their issues and keep this interconnected global economy intact?

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