As I sit here typing comfortably from my Steelcase chair in Sacramento, CA, it may be a little presumptive for me to weigh in my $0.02 in the Chinese bull/bear debate.
Other financial gurus, like Jim Rogers, are long term China bulls.
Forbes’ Gady Epstein got me thinking about this in his recent column Why China Bears Will Never Die (and thanks Gady for the link love midway through the piece re: Marc Faber’s take!)
China bears are among the great enduring creatures in any discussions about the future of the country. I am talking about people who think that China’s economy is on a“treadmill to hell” as short-seller Jim Chanos says; that the real estate market is destined to crash, as professional China bear analyst Andy Xie has predicted; that “excess reliance on exports and investment” at the expense of Chinese consumers threatens to turn China into Japan, as Peking University finance professor Michael Pettis writes; that local governments are borrowing for infrastructure projects at an unsustainable rate, as Northwestern University’s Victor Shih has argued; and that this long credit-fueled run will slam into a wall, as Forbes columnist Gordon Chang has been arguing faithfully since he wrote his book The Coming Collapse of China almost a decade ago.
So who’s right and who’s wrong? Since the closest I’ve personally been to China is San Francisco’s Chinatown, I’m not sure I trust my internet research as a basis to accurately weigh in on the complexities of the Chinese economy. I can barely handle the complexities of my own life!
So we turn to the final arbiter of everything – Mr. Market – for a look at how China is actually doing:
Judging from the chart above, I’d have to give the bears the upper hand at this point. One tidbit that few investors realize is that the Shanghai Index actually made its lower intermediate high over a year ago – in August of 2009!
Since then, it’s been slowly drifting lower. Therefore, in order for the bullish case to be valid, we’d need to see China “break out” above those August 2009 levels. Until then, this armchair stock market observer is making the Chinese bears the favorite in this battle.