"I think that will be the surprise going into this year, and into 2012 - that it is not so strong. The property market is hitting the wall right now and things are decelerating. The CEO of Komatsu said last week that he is having trouble getting paid for his excavator sales in China. Developers are being squeezed. They're turning to the black market for lending, this shadow banking system that is growing by leaps and bounds like everything in China.
"We are short Chinese banks, the property developers, commodity companies that sell into China, anything related to property there is still a short."
Here are the predictions by Pettis (Please see article for detailed explanations regarding China).
To summarize, my predictions are:
1. BRICs and other developing countries have not decoupled in any meaningful sense, and once the current liquidity-driven investment boom subsides the developing world will be hit hard by the global crisis.
2. Over the next two years Chinese household consumption will continue declining as a share of GDP.
3. Chinese debt levels will continue to rise quickly over the rest of this year and next.
4. Chinese growth will begin to slow sharply by 2013-14 and will hit an average of 3% well before the end of the decade.
5. Any decline in GDP growth will disproportionately affect investment and so the demand for non-food commodities.
6. If the PBoC resists interest rate cuts as inflation declines, China may even begin slowing in 2012.
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