The Beijing Bubble: Continue the Rise or Ready to Pop?

For some time now, China has been an economy on the boom, maintaining GDP at levels around 10 percent, and soaking up demand for oil, coal, and food as more of China's population move into the middle class and buy cars, own better houses, and do business. This demand has done wonders for countries rich in natural resources - once such example is Australia where China has large holdings in coal, where huge amounts of investment have continued to keep the Australian economy buoyant, even with the recession following the 2008 financial crisis. China's growth is keeping the global economy on its feet. However, many are inclined to wonder if China's growth is really sustainable like has been the case in the past, as real-estate loans come into question. Recently, the government has been ordering stress tests on such loans by China's big banks. The picture is increasingly not looking good with trillions of dollars of loans being put as "questionable repayment capacity" and government officials issuing a statement this week say that "the sustainability of development of China's macro-economy faces uncertainty". As a result, investors have seen downgrades in expectations of investments in China. This has created wide speculation that China may be on the wake of something along the lines of the 2008 financial crisis. But is this really China's symptoms of it being on the edge of something big, or is this simply just a country showing growing pains, but not a financial meltdown around the corner?

Speculations have run rapid that something is brewing, not just with the status of many real-estate loans in China at question, but also with the continued chain of supply of what is being called 'easy' or 'cheap' money, keeping the housing market afloat. Much of this investment has accumulated from the state, where huge investments which were made with the recent 2008 financial crisis in the United States, threatening to dampen growth in China. Interestingly enough though, many are inclined to see this as the key ingredient to how China may be generating a financial housing 'bubble'. One such article was written by Vikram Mansharamani in The Korean Times, and talks about the growth of China's housing market having an intrinsic link to such 'cheap' money, with over-investment from the Chinese government leading to huge amounts of unnecessary consumption and waste. Examples of such have been sighted by others, with Time Magazine pointing that malls seem to exist in China, that with even all the investment it took to make them, remain largely empty of shops. To many this is alarm bells, not only because of the wasted investment, but also because this seems similar to the prime ingredient that many are inclined to point to as causing the 2008 financial crisis in the United States. With the Clinton Administration willing to set up huge funds in banks to help more people buy homes at lower deposit rates, they creating an oversupply of loans, which many see eventually leading to a culture of defaulting that lead to the crisis of 2008. But is Mansharamani really on the mark here, and the same thing is happening in China? Oversupply might be a fair issue at hand, but I think Mansharamani has it wrong here; it isn't the only one, nor is it the most important 'bubble' symptom here.

I remember reading an article in The Economist back before 2008 and the financial crisis happened, that reflected on the huge amount of growth that had happened globally, and considered that recent sparks in inflation might cause a minor blip in growth, as the United States and the worlds markets adjusted to the huge amount of growth. I cannot help think back to that article now with relation on China. Inflation has been astronomical in China as of recent, with consumer prices rising 5.4 percent, according to recent data, the highest ever experienced by the country. Rising prices of fuel and food, with swarming demand, have left prices on a constant rise, and many in China left trying to keep up. Recently, I noted a protest in China of truck drivers, saying they with such high prices of oil they could not afford to do their jobs, and make a profit. Inflation should be the key consideration, because it might make a number of people unable to afford paying their mortgages, whilst also squeezed with increasing food and fuel prices as well. If that happens, we could see a huge amount of defaulting of people who own homes in China, which could lead to fluctuations in house prices and loss for investors in the housing market. But I really wonder if we will see it like we did in the United States, it may be the case that a lot of demand still exists for homes and that any drop in prices would be halted with continued home buying of those who can afford to. There still remains a lot of pressure to own homes, particularly amongst young Chinese men trying to impress their potential wives - which with help of the 'one child policy' - are in the few compared with men, making the expectation that a potential male husband-to-be has a home high.

As far as I'm concerned a few empty malls or over-building of houses doesn't prove that China has a 'bubble' in its real-estate market. With growth that remains unimaginable to many in the United States, there is the possibility that all this building is only access and left empty for the time being, as China's real-estate industry struggles to try and keep ahead of demand from a growing middle class population. But if interest rates go up as the government tightens the supply of the yuan, they are going to have to do something about inflation. Yang Yao in a recent article for Today Online points this out, suggesting that the Chinese authorities need to look to loosen restrictions on imports - particularly in the case of food - and make customs procedures simplier, and try and lower inflation. However, this may not be as easy solution, with China's want to import deflation potentially leading to an export in inflation, as more of global food supply gets clogged with China's demand. All on all, I think whether China's real-estate market goes 'pop' depends on whether inflation is really slowing growth, if their is a 'tug of war' when it comes to the global food market, China could have a real problem on its hand if inflation doesn't slow to the pace of wages. My prediction would be, along the lines of 'The Economists' optimism back in 2008, China will go threw a brief adjacent with inflation. But be warned, like the weather man, I could be wrong. As for if China really does have a 'bubble' on its hands, I think we will really just have to wait and see. Even if this 'Beijing Balloon' is full of helium and continues to rise, eventually all balloons go 'pop'; assuming there is a bubble in China's market that is.  

The Obama Doctrine: "Long Term Policy Change Or Short Term Policy Pitch?"

The recent events in Libya and Ivory Coast have to many woven a new thread on how humanitarian efforts are meant to unfold, and whilst it might be unfair to put the Obama Doctrine on trial just yet, I think we need to take a look at a presidency that which preached such high hopes, specially when it came to foreign policy, and humanitarianism. The Obama Doctrine can be summed up as pretty much everything the Bush Jr. Doctrine wasn't, less about just fighting Islam as a force for evil in the world, and more about winning the hearts and minds of those in Middle Eastern nations. It also means being a fair minded and assertive ally of groups at the throats of each other, specially in the case of Israel and Palestine. And really, all this isn't bad, even with conservatives in the United States quick to suggest that this is a toothless proposal, and that America needs to put troops on the ground when it comes to fighting terror; but the war isn't that black and white, specially when it comes to making democracies out of Muslim nations, so new to the idea, and divided nations along ethnic or religious lines. Those who cry out for action from US forces on the ground, need to go back to Afghanistan and Iraq and count the civilian casualties: that isn't the way to win hearts and minds. It admit there should be a time and a place for troops on the ground tho, saying that he would support those freedom seeking people's of the world, who needed America's hand in his inauguration speech. Just this week tho we have seen how America doesn't necessarily want to follow along with Obama vision for foreign policy, with the burning of the Quran in the United States sparking an uproar in Afghanistan and elsewhere. Alot of Americans are again wondering, "didn't interfering in the Middle East like we are in Libya put us in the mess we had with Afghanistan and creating the monster of Islamic terrorism?" and "why aren't we more focused on issues at home rather then what is going on in Africa or Libya or Qatar?". This really makes we wonder, as much  hope there really is in a lot of what the Obama Doctrine includes, is American really willing to go along with this new type of foreign policy for America, and is the rest of the world really seen any differences in America's way, along the lines of "Hope" and "Change"? 

Take for example what has been going on in the Ivory Coast as an example, and let me explain what I mean. This nations has been threw hell and back in recent months, with a civil war cast of the election of a new leader Alassane Ouattara, and the previous president - Gbagbo - unwilling to step down. The fighting has ensued for some months, and the blood shed has been great, not to mention the atrocities of soldiers taking what the want and raping whomever women they please. Recently tho, attacks of forces loyal to Gbagbo went too far, and having attacked the hotel where United Nations forces were stations, and attacking UN peace keepers protecting civilians, the UN turned from enforcing a cease fire, to taking actions against Gbagbo in the interest in toppling his power, and brining his crimes against his own country to a stop. It didn't take long for French special forces to be called in, and whilst their role was paved as simply support, its clear that they were involved in capturing Gbagbo and letting the democratically elected leader Ouattara take charge in the Ivory Coast. He was quick to say that all those whom have committed crimes will be brought to justice, and it didn't take long for the fighting to stop, with images of Gbagbo seen wiping himself with a towel on national television putting the nail in the coffin for the movement in support of him. But that isn't the happy ending of this story folks. Because I am sure there were many watching the same pictures in Libya, and Qatar, caught with similar atrocities and the same ruthless type dictator were thinking "hey, what about us?". Hillary Clinton issued a statement saying that this specks to dictators all around the world, but really does it, specially considering it has taken so long, with the United States and United Nations doing nothing? I'm sure instead the rebels in Libya were thinking "so really we have to wait until Qaddafi starts blowing NATO aircraft out of the sky, until the United Nations will take action against Qaddafi". And the dictators of Libya, Syria, and Qatar took away the lesson that: "Ok, as long as we don't attack UN forces when and if they arrive, then we are fine". Many might also be looking at the strong connections that Alassane Ouattara has with French President Nicolas Sarkozy and that really, this humanitarian demonstration amounts to a re-invention of colonialism, just in a different form: particularly considering how French special forces were involved. Now I know, as I am sure it is apparent to you, that America isn't the one in the wrong here, but I am concerned that instead of doing something and leading the way, America is not leading, and now showing with example, cause all this leaves me thinking: What on earth happened to winning hearts and minds? 

I know I have a habit of painting these recent posts on the Middle East with interpretation, and trying to understand what others are thinking, but too often I see a lack of this, we want to see how what is happening in the world is relevant to me, in the United States or Britain, but really what about these other Middle Eastern countries? I am not trying to encourage terrorists, nor am I trying to say it how it is, I am trying to example, this is how people will take what is going on, cause this is what it looks like. No one can doubt there is a huge amount of audacity in what Obama has proposed, but really does it amount to what the world and America wants, it seems in reality these are two separate things, which is the contradiction of thoughts and minds on the one hand, and sitting on the side lines trying to tell it like you want it to seem on the other. I know that there might be those who reflected on America using Afghanistan as a spring board to fight the Russians and Communism way back when, which sparked the extremism the world is currently having to put up with. But in reality, those who point that out, should really go listen: because I suspect the most frustrating part was when American assistance to fight the Russians packed up, and left, and those in Afghanistan who fought, felt portrayed and used. Toppling Qaddafi's leadership might be in a way making Libya a spring board for democracy, and make America worried they cannot commit in the long term, but this Administration needs to have a think: You cannot win the hearts and minds of anyone from the sidelines! This kind of sidelining, really creates a bleak picture for a president who won the Nobel Peace Prize; makes him look more and more like the Clinton Presidency with a failure to act in Bosnia after the Black Hawk Down embarrassment of how to enforce humanitarianism. America can build on its fear of interfering in African countries, and Middle Eastern ones, and  a want for regional bodies like the African Union to call the shots, and let America keep its aid dollars at home, but really now is the time to lead. The hearts and minds are still out there, and still waiting, in Libya, Qatar; waiting, and wondering: "Short Term Policy Change or Long Term Policy Pitch?". Because a new administration can pitch all they like, but they should remember: its the action that really counts.