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China thoughts

Spring has arrived in Beijing though the lakes are covered with a thin layer of grey ice and it is cold (2-4oC) with icy winds when you wander anywhere that has some open space. Pollution-smudged snow drifts are everywhere. Black-tailed magpies (so-called ‘happy birds’) are raucously setting up to breed in massive nests in the spartan winter-frozen trees anticipating warmer weather. The massive building/construction program that dominated the Beijing skyline before the GFC continues unabated after it although- at nominal interest rates that are lower than the current inflation rate – this last happened in 2008 when things seemed really grim.

There is a fear about this. The property boom that continues to spiral is driven by increasing-prosperity fundamentals but is currently dominated by speculation at low (indeed negative) interest rates. What will happen? Let me offer a useless, though accurate, conditional forecast.

All booms end but the durability of many booms is astonishing and for this reason typically understated.  Given the politics of China – and the official reluctance to admit any loss of control – any sign of weakness in the economy will be pounced on by the international financial community and Australia’s coal-iron ore-gas sector (these are all China bets) will be heavily punished.  Long-term the Chinese economy will continue to expand at a rapid run but the prospects of short-term problems will have a growing and serious precautionary impact. Watch, listen and have your share broker’s number on hand at all times.

My Chinese language studies and my miserably pathetic knowledge of a few Chinese characters have nevertheless created a few pleasures during this short visit. I could recognise many Chinese characters on signs and in advertisements and was delighted to be able to read the name of an elementary school near the East Gate of Peking University. With respect to ordinary conversation between Chinese speakers I pick up almost nothing.  But I am interested enough to see merit in pursuing these language studies.

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