Trying to understand the BRICs. First question: Is China in a bubble?

A comparison among BRIC countries will have China in the podium in many aspects. It is the largest country with the fastest economic growth. But what is the quality of this growth?

Many Brazilian companies have expanded to China. Vale, Gerdau, Embraer are among them. No question that being in China is an strategic move for these companies.

Recently, at an event in Shanghai James Rickards, a former adviser to the hedge fund Long-Term Capital Management (the one that broke in 1998) said that China is in the midst of  “the greatest bubble in history.”

To explore this question, I recently posted a poll in Linked in.  Is China in a bubble? Might it be in a bubble and we don’t really know? Does it lack transparency?

Anybody can vote at http://polls.linkedin.com/p/84634/jrkhn  After you vote, you’ll be able to see results and analysis of how different types of professionals answered the question.

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About Hildete Vodopives

Hildete de Moraes Vodopives is founder of Brazil Global and of the Harvard Strategists. She is a member of the Brazilian Investment Analysts Association (APIMEC-Rio) where she served as Corporate Relations Director and later, on the board. Hildete advises companies doing business in Brazil.
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2 Responses to Trying to understand the BRICs. First question: Is China in a bubble?

  1. Rob Topping says:

    Tough question. Ironically some of the greatest collapses have come from countries running a big surplus in reserves just a few years prior. So never say never. Is all I know is China and Europe seem to be leading downside action in the equity markets. Also, China’s multi year chart doesn’t look a lot different than Naz from late 90’s into the 2000’s.

    Rob Topping

    Like

  2. I use to think like it until 2006 and then I’ve changed my mind when I saw their foreign policy. Back in 2006 China summoned all governments from Africa and offered money in exchange for open market and partnership. Being criticized by EU and US, China did not backed off and kept its strategy.

    More than 80% of the industries in Sudan are Chinese. They are creating alternative markets and alternative sources (just look to the recent agreements in South America and South Asia)

    We are talking about a country which not only have a strong foreign policy but also know how to react quickly front of difficulties. There is no care about unpopular decisions. They have a more result driven government. The slow factor called democracy has a different sound down there.

    Sure, China has huge ecological and social problems and their economy is expanding too fast with too many collateral effects but there is no Bubble -at least not like what we have experienced in the past like the Oil, Housing, Stock market. Their incredible rates increasing the prices of the houses represents the same demand which we find anywhere in the rich areas of the BRIC.
    China need to be analysed not under EU and US parameter but under a new perspective which represents the new perspective of the new capitalism.

    It is easy to me to see a strong parallel between India + Outsourced Services and China + Outsourced Industry. China has an excellent reference India and the Asiatic Tigers (specially South Korea which managed to survive the crisis in 90’s) and it is clear how fast and committed the Chinese politicians are. I am more concerned about the Chinese Reserves in Dollar and the weak situation in which we see US rather than the Chinese Bubble.

    Like

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