{"id":164805,"date":"2010-01-11T05:10:00","date_gmt":"2010-01-11T10:10:00","guid":{"rendered":"http:\/\/www.businessinsider.com\/andy-xie-an-overwhelming-get-rich-quick-mentality-dooms-china-to-endless-bubbles-2010-1"},"modified":"2010-01-11T05:10:00","modified_gmt":"2010-01-11T10:10:00","slug":"andy-xie-an-overwhelming-get-rich-quick-mentality-dooms-china-to-endless-bubbles","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/164805","title":{"rendered":"Andy Xie: An Overwhelming “Get Rich Quick” Mentality Dooms China To Endless Bubbles"},"content":{"rendered":"

\"Andy<\/p>\n

Here’s some very exciting news for English-speaking readers interested in financial\/economic news out of China.<\/p>\n

The former editor of the highly regarded shuttered publication Caijing, Hu Shuli, has just launched her new publication Caixin<\/a>. (thanks @niubi<\/a>!)<\/em><\/p>\n

The feature article<\/a> is an instant-classic from Hong Kong-based economist Andy Xie on the kind of trouble facing China.<\/p>\n

He takes a little while to warm up, before getting to the meat of the problem:<\/p>\n

The overwhelming desire for getting rich quick dominates every nook, fissure and strata of Chinese society. Such desires cannot be fulfilled; the terrible logic of economics is that money must circulate. Creating bubbles can temporarily blind people to this logic, as overvalued assets substitute for money to fill psychological needs. This is why, whenever conditions permit, China seems to have asset bubbles.<\/p>\n

Bubbles exaggerate reality but are not formed out of thin air. Cheap money and strong growth are the usual ingredients for bubble-making. Both existed over the past five years. But now, China depends entirely on cheap money to support overvalued assets. Cheap money came from past exports and was warehoused in banks. Cash also came from hot money inflows due to the yuan’s peg to the dollar and weak Fed dollar policy.<\/p>\n

Neither money source is sustainable. The dollar has bottomed. The Fed will begin raising interest rates in 2010. The combination of China’s strong loan and weak export growth is reducing bank liquidity, but inflation soon may force China to tighten anyway. The cheap money may not last long.<\/p>\n

China’s exports are recovering from a low base – a trend that may last through 2010. But one should not confuse low base recovery with a revival of past trends.<\/p>\n

The high export growth era is over for three reasons. China’s market share in global trade is twice as big as its GDP share. The odds are low that China could continue to expand its market share. Second, the tide won’t rise as fast as before. The Greenspan era saw a credit bubble supercharge western consumption, but the bubble has burst. Odds are that future trade growth will be half or less as in the past. Finally, a western employment crisis will lead to protectionism targeting China. Other developing countries may gain market share at China’s expense.<\/p>\n

Read the whole thing at Caixin — ><\/strong><\/a><\/p>\n

Join the conversation about this story »<\/a><\/p>\n

See Also:<\/b><\/p>\n