I disagree with your comment that: Alas the easy money has been made. I see many sectors of the China/HK markets where prices are still cheap. Companies in a business where the equivalent US/EU company p/e runs at 30+ and the China company sits at a p/e of 11-15.
The growth is just beginning, driven by the 80% of the global population who do not live in the West/G7. Billions of people who want what so many of us take forgranted. They live in countries that can never reproduce the economies of China manufacture.
Your approach is top down. And short term. In the Chinascape, 5 year horizon is short term. For the West, lead is gone, follow is disappearing, get out of the way is all that is left.
Thanks for the post, wouldn't it be interesting to look at it from a Minsky perspective where falling asset prices are the root cause of a debt-deflation spiral now China faces?
Thanks for your comment. I think the ultimate issue comes down to expectations of future income growth as opposed to asset prices.
Keep in mind, when house prices were rising, wealth effect and associated increased propensity to consume was offset by the crowding out effect (people needing to save up to buy houses) of higher prices. As such, when this reverses, the effect reverses.
In this framework, the policy pivot happened because deflating asset prices and deflation was starting to impact wage growth and hiring (you can see this in the high frequency data).
I disagree with your comment that: Alas the easy money has been made. I see many sectors of the China/HK markets where prices are still cheap. Companies in a business where the equivalent US/EU company p/e runs at 30+ and the China company sits at a p/e of 11-15.
The growth is just beginning, driven by the 80% of the global population who do not live in the West/G7. Billions of people who want what so many of us take forgranted. They live in countries that can never reproduce the economies of China manufacture.
Your approach is top down. And short term. In the Chinascape, 5 year horizon is short term. For the West, lead is gone, follow is disappearing, get out of the way is all that is left.
JFC. God forbid I update my views from almost a year ago and not tell you about it.
Thanks for the post, wouldn't it be interesting to look at it from a Minsky perspective where falling asset prices are the root cause of a debt-deflation spiral now China faces?
Thanks for your comment. I think the ultimate issue comes down to expectations of future income growth as opposed to asset prices.
Keep in mind, when house prices were rising, wealth effect and associated increased propensity to consume was offset by the crowding out effect (people needing to save up to buy houses) of higher prices. As such, when this reverses, the effect reverses.
In this framework, the policy pivot happened because deflating asset prices and deflation was starting to impact wage growth and hiring (you can see this in the high frequency data).