You guys are smoking crack. China is a house of cards. The reason so much investment is being made in this country is because nobody over there wants their nest eggs in a Shanghai bank when the entire Rube Goldberg apparatus finally goes belly up.
-- China's economy is not based on innovation. Unlike the Japanese, it is based on the commodity of cheap labor. With labor costs rising 15-20% a year of late, manufacturers who outsourced to China 10-15 years ago are already beginning to turn elsewhere such as Indonesia and Vietnam. Need proof? Stroll through a furniture trade show 2 years ago, and you would have seen a lot of product made in China. Stroll through that same trade show this year, and you would see a lot less product made in China and a lot more made in Indonesia. Because the companies that drive the manufacturing are Americans who then simply hand the design to factories and see who can make it the cheapest. And if someone can do it a lot more cheaply in Jakarta, then so be it. I know two different manufacturers alone who have made that shift.
-- Just because your iPod or PC was made in China doesn't mean that the country is a technological giant. 96% of China's high tech manufacturing is assembly only, where the parts are shipped in, put together, and shipped back out again. Again, labor costs drive this.
-- China's economy is also dangerously dependent on construction. Roughly 22-25% in fact. Yet, the excess supply caused by this building boom, typically more than 2 years of inventory at this moment, keeps growing because to stop building is to literally gut the economy. In other words, look at the real estate bust this country experienced in 2008 and multiply by a factor of three and you have the Chinese real estate bubble. Here's a lot more detail on the subject:
http://chovanec.wordpress.com/2012/0...-rally-part-3/
-- China's vaunted economy of savers is rapidly becoming a thing of the past. Savings as a percentage of household wealth is plummeting.
-- China's growth, while impressive, has been grossly exaggerated due to the government cooking the books. The Nobel winner Lester Thurow wrote an article a couple of years ago on this very subject, noting that increases in China's electrical production are at a rate half that of China's reported growth in GDP. This is an economic impossibility, given how economic growth requires a corresponding increase in computers, machinery, appliances, et al.
-- China is about to go right over the demographic cliff. Right now, at this very moment in history, China has the greatest working-age population that it ever will. Around 2016, the number starts its plunge from that zenith very quickly. So what you have is the same dilemma the Japanese are facing, only on steroids. If the United Nations' numbers are to be believed, by the time we reach the year 2050, the United States will have only 50 million less population of working age than the Chinese.
-- Because China's population is about to age faster than the villain at the end of
Indiana Jones and the Last Crusade, society will face enormous strain due to the fact that a) there is no sophisticated investment system for the large majority of the country and b) the government and economy will simply be ill-equipped to deal with the vast increase in the need for medical and social support of the elderly population. And given how China is a society that reveres its elderly, that will pose a special problem.
There. Can we now worry about something real and substantial again, such as the Kardashians?
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