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From 2006 to 2007, the SSE tripled in value. Investors were hungry for wealth and continued to push the value of the exchange for another nine months before it bubbled and popped, wiping out 2/3 of the gains, coinciding with the financial crisis. It was a hard lesson for millions of Chinese investors - Easy come, easy go.
However, unlike the stock market, the real-estate market in China continues to shine. About thirty minutes ago, the Chinese government released data showing consumer prices rose 2.8 per cent in April from last year and property prices rose 12.8 per cent [1].
Concerns in China's real-estate market have been a hot topic for quite some time now. Chinese officials are trying to prevent a property bubble and have implemented many mandates to slow down the market without raising interest rates. China recently banned individuals from having more than two mortgages and second mortgages are charged an interest rate well above the going rate. And yet, prices continue to soar.
But with such strong economic data, what indicators are suggesting the end may be near? Recent remarks by wealthy investors and hedge funds claim that signals of a bubble ready to burst are hiding in plain sight, and we could see the fall of China occur within 9 months. Their reasons point to falling commodity prices and a skewed GDP.
Commodity prices soared in the summer of 2008 during the boom, but lowered demand from China and the rest of the globe have cut the price of oil in half, and prices of metals down 10 to 20 per cent in the last four weeks. They believe this is a clear indication that construction is slowing down in China, which is important because of the skewed GDP.
Recent data showed that approximately 60 per cent of their GDP is based directly to construction. With the Chinese government considering raising interest rates, it could put a serious halt to construction and lead to another Dubai, a country whose property bubble had burst last year. Imagine what a slow down on 60 per cent of their GDP composition would do.
A third argument that I have is that the stock market has always been a leading indicator of an economy. It is a representation of investors expected values of companies in the near future based on forecasted earnings. Investors are showing a lack of confidence in their public companies. As a result, the SSE is down over 12 per cent this year, where as North America and Europe are nearly unchanged (was up 6 per cent before that huge crash last week).
Interpreting the numbers and predicting the fate of an entire nation is a tough task. Professionals have been wrong before, and they will continue to be wrong in the future. However, it is also these same professionals who are the most qualified to paint us this gloomy picture of China's economy and one can not discount the signs as random. Nine months ago, they all said the US economy was recovering, and they were right. Can these same people be right about China as well?
[1] Bloomberg report
Today, US Congress praised Google for their actions on leaving China. I was under the impression that the majority of people had the same beliefs, until I read many of the posts on CNN's story. To my surprise, there were many people opposed to what Google was doing, with many angry at Google's supposed attempt at world domination.
I wrote the following post on my Facebook link discussing my belief that Google did the right thing.
"Congress, although they do have more important issues to work on, did the right thing. People need to see the bigger picture here. Congress is supporting a US company going against the grain by sacrificing huge market share and profits in China for their company's values, morals, and integrity.
Google is standing up for what they believe in. Many conglomerates stands up for their employees and ideals by choosing to donate to great charities, bettering the environment, and providing aid to Third World Nations. These countries are often praised for their work, yet when Google just leaves a country, without breaking any laws, they are shunned? That is absurd.
Anybody who shuns Google for leaving China has no idea what they are talking about. Google did not disobey any laws while they were there. And the fact that the Chinese government supposedly hacked their systems to oust or obtain Human Rights Activists information is itself illegal, at least in North America.
People often disassociate corporations and human beings. Do we need to remind people that corporations comprise of hundreds or thousands of employees? I believe it is fair to say that a large majority of Google staff, along with the rest of world, would like to see Freedom of Speech imposed positively in every nation. The ideals of democracy are taken for granted here."
Those who do not support what Google has done should provide me with a strong argument for your side. I believe that any company should do what they believe is best for them. Money may be a big factor in business, but it is not the only thing now.
If you opened up a company in a country and found out they were hacking your systems or stealing from your warehouse, would you honestly consider staying in that nation? I hope not. Your beliefs should trump money.
Christine Jones, executive vice president of GoDaddy.com, also told the commission today that China had asked for copies of photo identification and signatures of all registrants to their website. Privacy is an important matter to Americans. How can one argue for China in this situation?
Google is clearly standing up for the Freedom of Speech and Information. To be fair, there are 25 countries that block Google, and 40 censor the Internet. Now that a precedence has been made, Google should continue to spread this into other natinos as well. But regardless of the laws in China, they are doing what they believe is right. Would people be angry if Google donated millions of dollars to Cuban aid relief if there happened to be a natural disaster? The US does not trade with Cuba, but that should not stop people from believing in humanity and caring for others.
I for one am glad to see Google become the poster-child for Human Rights in China. This may be controversial, but China has become obsessed with growing their country with greed, with a lack of care for human and environmental rights. Those that built China into a super power in international trade will leave and subsequently submerge China back into the last century.
