Emergence of 'China' noise

The Chinese property sales jumped by 75.5% to $644bn in 2009. The prices in Dec'09 went up 7.8% officially. The private numbers suggest that this might have gone up by more than 20-30%. The country's cabinet has imposed has imposed a sales tax on homes sold before five years of their purchase. Banks are being asked not to lend more than 60% for second homes. Infact, some of the banks have stopped lending for rest of January.

Mr. Jim Chanos, the king of shorts and the person who got the calls on Enron & Sub Prime right has been holding a negative view on China for quite sometime. Though Mr. Jim Rogers says he doesn't know a thing about China, history is on Chanos's side. Chanos says that the numbers do not add up. The growth in car sales do not tie in with no increase in petrol consumption. He opines that the largest exporter of the world has grown its GDP by 9.6% when the world's trade collapsed in 2008.

It is not only Mr. Chanos who has been pointing out to China's doom but also Mr. Stephen Roach of Morgan Stanley. Mr. Roach points out that China is a supply driven economy more than demand led. The lacuna created by global downturn was lapped up by domestic consumption which is driven by government stimulus of about $900bn, 25% of its GDP.

Bill Gross is another famous personality that is sounding caution on China. Forbes carried a cover story about the Chinese Bubble. http://www.forbes.com/forbes/2009/1228/economy-ponzi-debt-peking-china-bubble.html

The solace is that China is sitting on $2.3 bn of cash. But if US does not fire its economic cylinders, China would have to put this pile to work. Well, leading to further inflation of assets probably.