the_unlettered_tellurian

An short article titled Experts Divided Over China’s Post-Olympic Hangover has just appeared in The Korea Times. Key points in the article are listed below…

1. China is bound to suffer the post-Olympic “valley effect”; what is important is how long the slowdown will last.
2. The Chinese government has been taking some steps (like increasing garment export tax rebates) to boost confidence.
3. Moderate pullback in the Chinese stock markets are good for the country in the long run.
4. Beijing accounts for just 4% of China’s GDP. So any direct “Olympic Hangover” in the Chinese capital can be offset by overall growth in other parts of the country.
5. Earlier host cities like Seoul, Barcelona, and Sydney were bigger in proportion to their national economies resulting in bigger setbacks to their nations’ economies after the Olympics.

Activity on the Olympic Bubble seems to be picking up again. I came across this post on Seeking Alpha that stresses that the Chinese Olympic Bubble is the next “true” bubble after the Nasdaq Tech bubble and the Japan Nikkei Bubble.

Talking about those two bubbles, the author says “Valuation was in the stratosphere. Participants were fully convinced on the ideas of the Technology Miracle and Japanese Miracle respectively. And resources were severely misallocated.”

He thinks the same is happening in China now “Here we have all of the ingredients for a classic bubble – massive hysteria on faulty facts.”

Don’t forget to go through the comments on the post… they are as interesting (if not more) as the post itself.

Your might also be interested in what the pro-China folk had to say (back in 2007, kind of in response to Alan Greenspan’s comment) about the possibility of a post-olympic crash in this post I made earlier.

Looks like the Chinese had put up this interview as a reply to all that talk about a post-Olympic China crash.
In the interview, Chinese economist Li Yining says strong domestic growth has ensured that China has a lot more good projects that need investment so all the talk about bubbles is just talk. He does not make any direct reference to the Chinese stock markets, nor does he directly comment on any of the problems being forecast about them.
While most of the article has a very “everything-is-fine-in-China-” feel, in response to the final question he does highlight these five problem areas as major obstacles to the country’s sustained economic growth:

1. industrial monopolies
2. slow transformation of the government’s functions
3. slow growth of farmers’ income
4. an insufficient supply of resources
5. pressure on the environment

I must have been asleep for too long… how else could I have ignored all the articles about a possible post-Olympic downturn in Asia that had come up since last year! I was completely unaware of the development till I made this post!

Here’s an article about the topic in Forbes, posted a few days after Alan Greenspan commented on the issue.