the run on gold in the US was presaged by the european collapse that started in the late twenties but reached a tipping point when the storied Austrian/Rothschild bank, Credit-Anstalt, failed in May 1931 after everyone demanded their deposits in gold. (some of this collapse can also be attributed to the versailles treaty’s onerous payment terms imposed on the fmr Weimar Rep…totally different story, though the seeds of WWII were sown during this downturn)

This in itself poses a risk that investors will perceive China as a less friendly place to invest especially if there is evidence that chinese government expectations are not firmly footed in reality. The biggest concern would be that fragmentation and infighting start to occur within government between the different arms of government. Too much focus on internal infighting could spell trouble for the rest of the world as government becomes parralised in the glare of the headlights of the downturn.

They don’t rely on domestic consumption very much. A lot of people don’t really contribute or do much of anything beyond living in and operating their shops.

I agree, domestic consumption in China is pretty bad. I also don’t think China will ever be as rich per capita as the US (too many people). But the problem is there is no one to buy all those exports they keep churning out. They may have lots of people waiting for a chance, but this is their “baby boom” generation. Things like the one-child policy means that after this generation, their population falls off a cliff. I don’t know what China does if it can’t get rich before it gets old.

Jason, I’m not so sure. Life is not very highly valued — I’ve seen squalor and safety standards that made my jaw drop — and they don’t have any shortage of educated or ridiculously motivated workers. They don’t rely on domestic consumption very much. A lot of people don’t really contribute or do much of anything beyond living in and operating their shops. I don’t think the demographics matter very much there, as opposed to Japan, Europe, or America, where we do an excellent job of leveraging the worth of an individual. They have an immense pool of people salivating for a chance.

A unemployment rate of 4.5 is a bit lower than ours but it’s probably a false figure (like ours) .

I don’t think this number’s so meaningful for their economy because the productivity of any given individual is so low compared to their industrial base and GDP. They spend a lot of time farming, playing checkers and chess, and sitting around in shops.

Also, I should mention that I definitely agree with Prof. Cheng. There’s a lot of simmering discontent with their government. I just don’t think that that discontent matters much and certainly don’t think economic stagnation is likely to produce a rebellion against it. Don’t forget the dog that Hong Kong has in this game…

And a huge stock market bubble in which a lot of common folk were participating.

(vs. the US actually raised rates in the 30’s and waited until FDR proposed the new deal…4 years after the downturn began).

Not true. Please check your data before posting false assertions.h

It’s not a zero sum game, so it isn’t clear to me that there’s going to be a definite “winner”. I’ve been working in China/Asia for a couple of years now, and just based on what I’ve seen, I think people are discounting some of the very real risks that China faces. By 2020, China will be an old country – it needs to get rich now. Managing a transition to a consumer based economy on top of all the changes its going through is no small task for any country. I’m much more comfortable with India’s prospects.