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 没时间写，转一篇上周从作者处求得的好文：泡沫双星 |
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没时间写，转一篇上周从作者处求得的好文：泡沫双星 -- 游客 - (7816 Byte) 2004-4-12 周一, 16:35 (1629 reads) |
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作者：资料 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
Rising Hard-Landing Risk
Summary and Investment Conclusion
---------------------------------
China's central bank tightened for the third time and raised the deposit
reserve requirement to 7.5% from 7% for all banks and to 8% from 7.5%
for banks with inadequate capital. China's central bank understands
that there are substantial excesses in the economy and slowing the
economy is necessary to contain financial losses from the current
investment bubble. However, as the main distortion in China's economy
is the mis-pricing of risk, possibly by five percentage points or more,
the central bank's actions have had limited successes so far.
Investors started far more projects than expected, most likely with the
collusion of local governments, in the first quarter, hoping that the
banking system would have to feed what had already started regardless of
the tightening policy. This moral hazard problem has increased
substantially the risk of a hard landing for China's economy. It is
extremely difficult, if not impossible, to guide fixed investment from
50% annual growth at present to the trend rate of about 10-12%. There
are no precedents of achieving a soft landing with so much excess.
The current episode again demonstrates that, without an independent and
sound financial system, the management of economic cycles is virtually
impossible, as the distortion in credit risk pricing is too great for
interest rate policy to work effectively.
Investment Excess Escalates
---------------------------
China's investment boom escalated in the first quarter. The nominal
growth for gross fixed investment in the first two months was 55% from
last year. The industrial production at 19.4% increase from last year
pointed to equally strong investment for March. It appears that many
investors, mainly in property and commodity industries, brought forward
investment projects before the central government's tightening policy
would make such investments impossible. Local governments probably
abetted such practices by encouraging local banks to lend. The
financial institutions loans decelerated in the fourth quarter of 2003
but flared up in the first two months of 2004.
The current investment bubble is becoming bigger than the one between
1992-94. Gross fixed investment adjusted for inflation grew by 35% in
1993 but is running at about 45% now. A vast property bubble centered
on Shanghai and Beijing is driving the current investment boom. The
rapid growth of investment in commodity industries is due to the high
commodity prices driven by the property bubble. The demand for
commodities for the capacity formation in such industries is driving
commodity prices even higher. But, the current high prices of property
and commodities are artificial. When the bubble bursts, there would be
horrific financial losses from the current investments.
Exhibit 1
China: Economic Indicators (YoY % change)
-----------------------------------------------------------
1980-90 1990-00 2001 2002 2003 1Q04
IP 9.9 12.6 17.0 17.7
GFI 9.3 a/ 13.2 12.7 16.9 25.0 b/ 50.0 c/
Electricity 7.5 7.9 8.2 13.3 14.2 15.5 d/
------------------------------------------------------------
Source: CEIC and Morgan Stanley.
Note: IP stands for industrial production and GFI for gross fixed
investment
a/ The deflator for GFI-Gross Fixed Investment is estimated as GDP
deflator minus 15% as during 1990s.
b)The deflator was estimated with the data from a few provinces
available.
c) Guesstimate on the nominal growth of 55% in the first two months.
d) For the first two months.
Hard-Landing Risks
------------------
An investment bubble experiences a hard land when there is a shock to
either liquidity supply or investor confidence. I see that three shocks
could bring down the investment bubble.
1) Running out of money
China is experiencing massive inflow of capital. The current
tightening, for example, is equal to only two months of capital inflow.
Running out of money seems to be a remote possibility now. However,
history tells that capital inflow is fickle and tends to flow to
countries that have too much money. As soon as a country becomes
actually in need of money, capital flow would stop and usually reverse.
China had a trade surplus last year despite of an investment bubble.
This is highly unusual. China's trade data were quite distorted, in my
view. I suspect that the exports were exaggerated as exporters tried to
cash in on VAT rebates and the imports were understated as smuggling
flared up again. China reported $8.4 billion of trade deficit for the
first quarter. It would get much worse if investment continues to grow
at the current pace.
China's gross fixed investment was $666 billion last year. After
depreciation of about $150-170 billion, the net investment was probably
$500 billion. China's household savings grew by about $350 billion in
my estimation. The enterprises probably recycled $100 billion of profit
into funding investment. Central and local government budgetary
expenditures probably made up for the rest.
If China's investment rises at 50% in nominal value, the additional
financing compared to 2003 would be about $300 billion. It is
impossible for household savings and corporate profits to rise by that
much. China would have to run a vast trade deficit to import capital
similar to what the United States has been doing. But, without an
instrument like the US treasury bond, how could China import so much
capital?
China's capital inflow is based on the expectation of its currency
appreciation. When the market sees that China has a major funding gap,
it would kiss the appreciation expectation goodbye and may take money
out of China instead. A sudden liquidity reversal could cause a hard
landing in China.
2) Running out of electricity
Electricity rationing has become widespread. As more investment
projects come up competing for electricity, the situation may make
normal production impossible. At some point, more investment does not
increase output anymore as it could only happen by suppressing some
existing economic activities. Worse, the productive investments in the
export sector could leave China for other countries with less
competition for electricity. Thus, it is possible that electricity
shortage could cause the economy to stagnate.
3) Running out of property speculators
Hong Kong and Taiwan investors started China's property bubble in
Shanghai and Beijing first. It has spread to local people. The
perception of instant riches has triggered massive purchases by local
people with very limited income. Chinese banks lend on collaterals and
rarely check cash flow seriously. It is obvious to me that many
property buyers in China do not have the income to pay off their
mortgages and need rental income to do so. However, the supply has
severely depressed rental yield. In a number of areas rental yield is
effectively zero after adjusting for depreciation.
At some point, the declining rental yield and the rising cases of
bankruptcies could scare away new speculators. The vast supply would
cause property price to decline substantially. As what happened last
year, many developers would leave the buildings unfinished, causing a
hard landing.
Who Would Pay for the Losses?
-----------------------------
An investment bubble ends with financial losses. Because banks account
for most of the funding in China, they would be stuck with bad loans.
The local and regional banks were organized as shareholding companies.
The government expected them to perform better. However, it strikes me
that such banks would create proportionally more bad debts due to their
aggressive lending practices and lack of risk management.
Chinese government owns directly or indirectly all of the banks with one
exception. Because, there is deposit guarantee, Chinese government and,
ultimately, taxpayers would pay for the financial losses from the
investment bubble.
In the previous cycles, China always used devaluation to create
inflation to tax depositors. China has not used deflation to cover its
financial inefficiency for the past ten years. I hope that China would
focus on fixing the financial system instead of devaluing the currency
this time.
In this context, it is bizarre to see that Chinese banks are reporting
ever-lower ratios of non-performing assets. Chinese government must
hold the people who are perpetrating such acts accountable when the
bubble bursts.
Andy Xie (Hong Kong)
作者：资料 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 没时间写，转一篇上周从作者处求得的好文：泡沫双星 -- 封狼居胥 - (7816 Byte) 2004-4-12 周一, 16:35 (1629 reads) - China:Rising Hard-Landing Risk……Andy.xie -- 资料 - (8784 Byte) 2004-4-12 周一, 17:11 (485 reads)
- 谢国忠（ZT） -- 资料 - (2391 Byte) 2004-4-12 周一, 17:22 (485 reads)
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