The Coming China Crash: Are We There Yet?

Commodities related stocks are getting pole-axed today. Fortescue down 5.5%. Mt Gibson down 6.4%. Whitehaven Coal down 8%. And the big daddy of them all, BHP, down 4% and trading at a three-year low.

First Greece was to blame. Now the China slowdown hypothesis seems to be gathering credibility. Has the China crash begun?

‘Hard to say’, as my partner tells me every time I ask her a question that she can’t answer with 100% certainty. But the data is looking scary.

I’ve been tweeting all of the interesting stuff I find but here’s a selection of my favourites:

China investment boom starts to unravel from the Financial Times.

Also on the FT, Alphaville posts about China’s economic data disaster.

And the New York Times says Data signals economic trouble in china. This last one contains my favourite quote:

In a series of interviews over the last week, bankers and senior executives from provinces all over China, in a range of light and heavy industries, cited a broad deterioration in business conditions. Two of them said that some tax agencies in smaller cities had been telling companies to inflate their sales and profits to make local economic growth look less weak than it really was, while reassuring the companies that their actual tax bills would be left unchanged.

There is plenty of fudging going on with Australia’s economic budgeting but this is taking it to a new level!

We’ve been expecting a dramatic slowdown in China’s rate of fixed asset investment and the latest data is consistent with that hypothesis. I don’t know if the Chinese authorities can or will stop the economy from unraveling, but I know the adjustment is an adjustment that needs to happen, either now or some time soon.

For regular readers of Bristlemouth and members of Intelligent Investor, you should be well prepared. If not, it might be time to go back and read The coming China crash, It’s time to buy in the US and Why China’s hard landing is a certainty.