Jim Chanos on China, Hong Kong and Australia

Famous shortseller Jim Chanos was in Hong Kong and Australia and reported back on what he saw to Bloomberg Television. Copy provided below including a link to the video

Charts of the day: Understanding the latest economic data out of China

The weak November HSBC PMI for China has added to market bearishness. This is not the official PMI but we do note that while the HSBC measure has been below 50 for 4 of the 5 past months, the official PMI has yet to fall below 50, but it was reported at 50.4 in October, the lowest since February 2009. A further drop in the official PMI below 50 seems hard to avoid. Slowing in the Chinese economy is inevitable given the deteriorating external environment as well as PBOC tightening measures taken in 2010-

Foreign News: Commerzbank capital, Portuguese bailout, Franco-Belgian problems

Here is the second version of this foreign news links post that I am starting. The feedback yesterday was good. You all said it makes sense to see what the press in country are saying in Europe since that is the locus of the sovereign debt crisis, so I will continue this

Will Greece unravel by Christmas?

Without a credible intervention this process almost always ends the same way. There is in my opinion a very high probability that within weeks, or months at most, Greece will be forced to freeze bank deposits as a prelude to leaving the euro. Mexico in 1994 and Argentina in 2001 chose the Christmas/New Year holiday season to announce their devaluations. Will Greece follow suit? “If history repeats itself,” footballer Andrew Demetriou once pointed out, “I should think we can expect the same thing again.”

Chart of the Day: China’s Credit Bubble

This chart from the IMF illustrates how China was able to skirt — in relative terms — the deep economic contraction by generating a huge expansion in domestic credit and increase in its money supple. This, while credit was contracting in the rest of the developed world

Downgrading the US in China

This video is about the Chinese view of America’s budget battles. The US congress has until November 23rd to figure out on how to reduce its public debt. If it doesn’t, eventually mandatory budget cuts will go into place. As a result, Guan Jianzhong, the head of China’s only independent credit rating agency, has warned Dagong Credit might have to downgrade the US again

Dancing with Contagion

Markets have shifted back to crisis mode amid uncertainty over Italian economic reforms. Three likely scenarios remain after Berlusconi’s upcoming departure; Italian 10-year above 7%. UK September trade data unexpectedly widened, on imports; China’s October CPI eases

Chinese coal now costs over $150 per ton again – huge gap to Australian prices

The Ministry of Finance is pumping money like mad into the weakened Chinese financial sector, over 1 trillion yuan, in order to shore it up from the souring of loans from all of the malinvestment over the past few years. If the Chinese succeeded in engineering a soft landing, Andy Lees believes the record premium for Chinese coal would disappear as Australian coal prices started to play catch-up

Germany must do it, not China

So how do we explain the European crisis? One theory is that the European crisis was caused by the moral turpitude and spendthrift habits of lazy Europeans along the periphery, in sharp contrast to the hard-working and thrifty countries of the center. According to this theory it is unfair to demand that Germans clean up the mess.

If you believe this theory, you are going to have to explain what happened in 2000 that turned thrifty Italians, French and Irish into spendthrifts, and that turned ordinary Greeks, Portuguese and Spaniards into even worse spendthrifts. You will also have to explain why spendthrift Germans in the 1990s suddenly morphed into the stolid, thrifty creatures of legend.

An alternative theory is that the imbalances were caused by internal policies – perhaps the creation of the euro and the gearing of monetary policy to German needs at the expense of the periphery? – which led to the severe internal imbalances. These imbalances created employment growth in the countries that suppressed consumption, and forced the countries that didn’t to choose between debt and unemployment. Of course since the latter countries had no control over monetary policy, the choice was largely made for them by the ECB with its excessively low interest rates, and their debt levels surged.

I find this alternative theory a lot easier to understand, and if it is true it places responsibility for saving the euro squarely in Germany’s hands. The only way to save the euro (and incidentally to prevent Germany’s banks from being forced to absorb huge losses on peripheral European debt) is for Germany to spur consumption and investment enough to reverse the current account surplus. Only this will allow peripheral Europe to grow and to earn the euros needed to repay the debt

Sixty percent of China’s rich want to leave the country

Sixty percent of the rich Chinese people have said they intended to migrate from China in a recent poll. What would that mean for FX reserves, interest rates and the economy

Andy Xie: Europe’s is a money distribution problem

Europe has an enormous productive capacity, Greece included. Debt introduces a money distribution problem that becomes a flashpoint during periods of economic weakness because the inability of large debtors to pay imperils both the debtor, the creditor and everyone whose income is derived from those sources. If the debtors are large enough as in the sovereign debt crisis in the euro zone, you get a systemic crisis that often leads to depression.

The European sovereign debt crisis is all about apportioning losses between debtors, creditors, and taxpayers from debts that simply cannot be repaid in real terms

Expect a lot more trade intervention

The currency may well be undervalued, but a significant rise in the RMB, especially if it is countered domestically by an increase in credit at lower real rates, might actually make the global imbalances worse and, more worryingly, cause China’s debt burden and capital misallocation to rise. This would make China’s eventual adjustment far more difficult.

The focus should be on shifting China’s economy towards the more labor-intensive and efficient sectors, and an appreciating RMB might actually make things worse, especially if it encourages hot money inflow. It is much better, I think, for China to raise interest rates than to raise the value of the