Monday, January 18, 2010

China and Enron

Thomas Friedman penned an interesting article the other day in the New York Times. The title could not have been more provocative: "Is China the Next Enron?" In the piece, Friedman writes that James Chanos, the famous short seller who foresaw Enron's demise, now believes that China represents a bubble due to burst in a magnificent way.

Friedman dismisses Chanos' concerns, and he explains why: "I am reluctant to sell China short, not because I think it has no problems or corruption or bubbles, but because I think it has all those problems in spades — and some will blow up along the way (the most dangerous being pollution). But it also has a political class focused on addressing its real problems, as well as a mountain of savings with which to do so (unlike us)."

Here is what struck me about Friedman's comments: One could have said the exact same thing about Japan in the late 1980s. How did that work out for them?


Li said...

A quantitative support can be found in "China's economy: Not just another fake"

michaeljung said...

@Li, I read he Economist article and commented there too.

@Author, Japans people had some 130% debt/income in 1990. USAs (according to the Economist) people have/had 129% debt/income 2009. Chinese people are savers, I have no numbers at hand, but some reports I read about 1/2 of income is saved bc of no edu support, no pension prospects etc. China is a developing (growing) nation.

The nation which will look better than any other in 2-5 years from now (what ever political, social or economic hiccup in Asia or the West or elsewhere might happen) is and will be China.

The picture of the World is changing in an accelerating way. We still look at the US of A and their reforms and politics, but we should look as envious towards China and India as we listen what Obama has to say.

Somehow (in 99.9% of arguments) the US elite has to blame themselves for their dilemma. They dug their own grave 5m deep and forgot the ladder to get out. It remains to be seen that the current administration can tackle all the problems while leaning over the precipice of things pushing them down towards political, social and economic hell.