China's Economic Roller Coaster Ride Just Starting the Free-fall

China may have seen the best of good times. As much as the government tries to hide it, they have been in decline.

Chinese Investors Starting Down Like this Man.

More indicators are suggesting that the nation may be in a downturn. Chinese markets,public and private, stock and real estate are in a free-fall that looks much like that of the USA three years ago. Some inside sources indicate that it is more than a downturn, it is a freefall, especially in construction, development and real estate. 

Boothe Consultants http://www.benboothe.com has looked at the Chinese economy. It has great production ability with low cost labor. But, if an economic decline destroys public confidence, the results could spread to significant proportions. Chinese people have suffered economic hardships many times in their history, and can survive. But not without great pain encompassing hundreds of millions of people.

TRENDS:

1.Home prices in China fell for the third month. Developers are lowering prices to try to encourage sales. Sou Fun Holdings Ltd (China’s largest real estate website owner) reported that home values were down 28 percent.

2.Number of home sale transactions dove 53% in Shanghai according to Shanghai Deovolene Realty.

3.Chinese Premier Wen Jaibao said that the government will continue to “curb” housing sales, by increasing high down payments in 40 cities.

4.Chinese interest rates are up and the government has indicated that it doesn't intend to lower rates. The OECD said, that economic activity would be slowing by 8 to 10% in 2012. In the Global Markets, that is huge.

5.The government lowered bank reserve requirements to help the banking system 4 days ago.

6.With external demand for Chinese products shrinking, China may not be able to “export” enough products to bail out the slowing economy.

7.Chinese banks report that nonperforming loans are rising and many local governments are insolvent.

8.Millions of square feet of luxury apartments, commercial office, and new government offices are vacant in China.

9.Land prices dropped 60% September 2011 vs 2010.

If China goes into recession, how does that impact the United States?

Considering that the USA imports 3 times more from China than it exports to China, the impact may not be so bad. Certainly a “down” Chinese economy would drop demand for oil, coal, lumber, grain, poultry, cattle and raw materials, but, it should not have a major impact upon retail, multifamily, or foundation economies.

More and more American consumers are disenchanted with Chinese made goods and unhealthy foods produced there.

More and more pressure is mounting to "rebuild industry and production capacity" in the USA. Perhaps a declining Chinese Economy would create opportunities to bring manufacturing back to America.

We recall Chinese officials rebuffing Obama and his Administration suggesting that the USA did not have the credentials to give economic advice. There was a bit of smell of "snub" in the air from Chinese officials when President Obama suggested wiser business and economic policies in China. Hmmmmmmmm Chinese leaders might go back to one of their own. Paraphrasing, "Confucius says: 'What goes around comes around. Make your words soft and sweet for they are the words you will have to eat.' Or perhaps that was Mark Twain and Benjamin Franklin, both good Americans, who said it.

Well, here is some advice to you, China. Of the 9 points above, 6 are identical to what happened in the USA. Our advice to you is to hold on to your hats, because your roller coaster ride has just gone over the hump at the top. You are about to experience the “thrill” of rapid free-fall, perhaps a loop or two.

Perhaps in this global game, we will consider trading a hotel on the “Boardwalk” of Galveston, Texas for 3 Shanghai “Mediterranean” hotels and twelve houses.