September 21, 2012 by Speakers' Spotlight

China Sneezing…

…who catches the cold?


Guest blog from Vikram Mansharamani– Yale Lecturer, Global Equity Investor, and Author of Boombustology

Boom-bust cycles. They’re occurring more frequently than ever. The most notorious ones impact financial markets, but they also impact nations, healthcare, food, energy, education, technology and many other areas as well. Vikram Mansharamani, author of Boombustology, is expert at helping people recognize and manage the risk of bubble trouble. He steps back from complex market dynamics and uses a multiple-lens framework to look at disparate data and then connects the dots to provide actionable insights. Mansharamani is also a regular contributor to financial media including Forbes, Fortune, CNBC, Bloomberg, The New York Times, The Wall Street Journal, The Korean Times, The South China Morning Post, and The Daily Beast.

The evidence of China’s economic slowdown is now overwhelming.  Numerous economic statistics have confirmed that the credit-fueled investment boom is ending and that the transition to a consumption-led economy is certainly underway (if only because investment as a % of GDP is likely to fall).  Even as the data coming from official Chinese sources reveals the deceleration of growth feared by many, the Federal Reserve Bank of Dallas issued a piece highlighting that China’s Slowdown May Be Worse Than Official Data Suggest, confirming that many Chinese numbers are indeed CRAAP (Chinese-Regularly-Accepted-Accounting-Policies) compliant.  Other stories worth your time:

China Confronts Mounting Pile of Unsold Goods
Ghost Warehouse Stocks Haunt Chinese Steel Sector

Finally, for those that have heard my argument about how skyscrapers telegraph bubbles (if not, please see my Forbes piece entitled Skyscrapers are a Great Bubble Indicator), I’d encourage you to read the recent Bloomberg Story about the likelihood of a mile-high tower.  The article notes that 9 of the 20 largest buildings currently under construction are in China.  Hmmmmm….

YaleGlobal, the online magazine for the Yale Center for the Study of Globalization, recently asked me to summarize my views of China’s slowdown and how it may impact other parts of the world.  My conclusion: Australia is in the cross-hairs of a slowdown in Chinese investment spending, industrial commodities are at risk of being oversupplied, and assets in both emerging and developed markets may disappoint as financial markets remain tightly coupled; China escapes true “casualty” status, and non-industrial commodities (such as food and fuel) may be very interesting investments as the global middle class booms.  A link to the YaleGlobal article as well as a link to an interview I did with Marketwatch last December are below: