Touching down in a hot and steamy Hong Kong
Posted on 27 July 2009 with no comments from readers
Touching down in Hong Kong on my way back to Dubai and the weather is a complete contrast to Vancouver: humidity is 70-90 per cent and the temperature 27-31C. It is also raining heavily.
So this is not a place or time for a long stay. But then again it is always an interesting time to be in Hong Kong. This is the most densely populated city on earth and the cradle of Chinese capitalism.
China crisis
What I want to ask the old friends and economists that I am seeing over the next 24 hours is whether the Chinese recovery is the real thing or an artificial piece of political skulduggery to cover up for the collapse of trade from the world’s largest exporter.
My strong suspicion is the former and not the latter. But with the Hong Kong stock market powering through 20,000 points last week the spin doctors appear to have the upper hand. I will go and have a chat with one of them.
The collapse of trade is not a secret: an unprecedented nine month slump in exports by around 25 per cent, and exports account for a thumping 38 per cent of Chinese GDP, the largest percentage of any country on earth.
Logically then the Chinese economy ought to have imploded. No business can see a quarter of its revenues go without dramatic consequences, not least of which profits which would vanish. Moving from a boom to a bust can surely not be achieved without some pain.
And yet the Chinese stimulus package equivalent to 14 per cent of GDP appears to have done just that. I don’t buy it. This just has to be an illusion.
Bad loans, bad banks
At the very least it must mean a great deal of money is being badly invested far too quickly with consequences for bad loans and the banking sector in the future.
Of course, if China had not done its thing then the picture would be far worse at this moment in time. But to think this represents a durable recovery seems wildly off the mark.
The reality is surely another bubble – and the 80-odd per cent stock market rise makes it obvious. China is heading for a nasty emerging market crash and the day of reckoning has only been postponed. But then that is in the nature of these emerging economies and it is strange how everybody seems to have forgotten that.
