Views on China: This Is What Makes Investing Interesting

China.  There is so much news about the country in the financial news.  We will pursue a couple of viewpoints in this post.  First is the article in the New York Times about China participating in the bailout of the Eurozone.  I hope China is smarter about it than the US Government in bailing out the banks in 2008.

In a post written by Burnham Banks at hedged.biz, China's GDP growth was 9.1% for the third quarter of 2011, well ahead of the 8% needed to keep stability in the county.  It is down from a previous figure of 9.5%.  However, inflation is rearing its ugly head.  In September, it was 6.1%.  If you look at its components, you see some worrisome numbers.  The price of food is up 13.4% with meat being up 28.4%.  The government has to walk a fine line between growth and inflation.

Managers of commodities funds are more positive since the September sell-off but are cautious about China's economic growth.  They believe that the government will loosen monetary policy later this year to keep growth at the 9.3% target.  Also, the drop in commodity prices is causing certain fund managers to see value in them, such as industrial metals and crude oil.  The source for this part of the article can be accessed here.

China perma-bear, Jim Chanos, says that the hard landing for China's economy has begun with troubles in its banks and real estate.  In a nationwide survey, home prices rose in less than 50% of seventy cities.  The number of home transactions has fallen 40% to 60% in the past two months when compared to last year.  But the performance of China's banks do not support his investment thesis.  Agricultural Bank of China, Industrial & Commercial Bank of China and Bank of Communications Co. reported huge gains in the third quarter.  Chanos' replied, "Western banks reported record profits in 2007 before collapsing."  Hard to argue with someone who shorted Enron in 2001, the homebuilders in 2007 and credit-related stocks in 2007.  However, we hear a lot about his successes.  What about his failures?  The source for this part of the article can be accessed here.