The United States had 1929, Japan 1989, and south-east Asia 1997. Will China face a similar moment of reckoning a few years from now?

The question is crucial, not just for those investing in Asia today, but for the wider global market. For as investors around the world reel from the recent financial crisis, many have clung to the idea of a Chinese boom, as the one bright spot of hope in an otherwise grim world. The trouble is that history suggests that much of this optimism may be misplaced.

Financial markets have a way of working themselves into a frenzy during rapid economic development, which ends up leading to disaster. It is the ultimate testimony to the gross inefficiency of markets. The problem is the unique mix of extreme optimism and rampant liquidity that occurs during periods of rapid economic development.

Economic development, especially in a large country like China, generates exceptional optimism for many reasons. Nothing brings out the animal spirits in humans like watching the economic pie expanding.  And it is natural to buy risk assets such as stocks to express one’s optimism over the future. 

The problem is that market competition tends to depress capital returns and give the fruits of economic development to workers and consumers rather than investors. High asset prices incentivise companies to over-invest, which depresses returns on capital. This is why investors tend to do poorly during periods of rapid economic growth.

A low income base and favourable demographics help promote successful economic development.  Both tend to lead to excess liquidity due to a high savings rate on incremental income growth. When a population is urbanising, even though its productivity is shifting from the agricultural to the industrial level, consumption habits remain rural that is, anything beyond necessities is viewed as luxury and is minimised. The widening gap between the labour productivity increase and the consumption preference leads to the excess liquidity that feeds bubbles.

China’s one-child policy brings the ultimate demographic dividend but probably makes the country the most bubble-prone in modern times. The situation is made worse by the revenue dependency of local governments on the property market.  Local government officials who change every five years or so have strong incentives to juice up the property market to maximise their revenues. This political incentive sows the seed for a great property bubble. 

Similarly, China’s stock market will remain overvalued, although it will deflate from time to time during panics and temporary liquidity shortages. The combination of low returns on capital and high share prices means businesses turn to the stock market rather than to their customers for profit. 

But when businesses make profits from, rather than for, the stock market, it becomes a negative sum game.  It needs continuing liquidity inflows to sustain it. This is why high growth and a high savings rate are vital. 

On the other hand, such a market essentially subsidises capital formation. The capital subsidy leads to overcapacity and low returns on capital. This is why poor profitability, high asset prices, and high economic growth rates can coexist.  Indeed, they must exist together.

China’s economic development is undoubtedly going to be the most important economic event for the next decade or two. But the semi-permanent bubble situation makes it extremely difficult for financial investors to participate in this story.

“Buy and hold” simply won’t work. Value investing doesn’t work because value investors base their decisions on price/earnings ratios and price/book value ratios falling below certain levels. 

Chinese stocks never get there.  If you are Warren Buffett, you can create your own bubble. He recently bought a stake in BYD, a maker of mobile phone batteries. The stock has since risen 8 times. If you are not Warren Buffett, I suggest “buy low, sell high”. The problem is working out what is high and what is low.

The day of reckoning will come when the high economic growth rate finally falters. This could happen either when the favourable demographic trend worsens or urbanisation ends. When either or both occurs, liquidity or savings do not grow any more. At that point, the stock market can not be subsidised anymore.

China’s final day of reckoning is probably 10 years away. 

By that time, half of China’s babyboomers who were born between 1950 and 1978 will have retired. And the Chinese urbanisation rate will be about half what it is today. The good news is China will be a developed country by then. The bad news is there will be no cheap money for supporting overvalued asset prices any more. 

 The writer is an independent economist based in Shanghai and former chief economist for Asia-Pacific at Morgan Stanley

Nearly forgot I have boots here...and also a football...three ticks together, lol

I will definitely play football after back home, I miss the feeling of running on the grass, miss the feeling of cheering by teammates when scores...

Well, I guess what I really miss is my friends

Growing up together, football joins us. Remember the time when I was from GK to SC...remember the time when score classic goals...remember the time we laugh together and enjoy the happiness football brings us together...

" I Love London ", really? Or just miss here, not love here?

If you want me to say "I Love Guangzhou", no problem, but "I love London"? Nah...

Can't believe I didn't see any football match in London, but I guess I really wanna go is the 越秀山 Stadium, not Stanford Bridge, not Highbury. I can shout in 越秀山, I can say fucking words to the opponents...well, to be honest I will say all kinds of dirty words when related to football...

I admit I HATE PACKING!!...especially packing all my stuff back home...gosh...

Mass...like a mass...it is a mass...

Luckily I don't have too many stuff, and most of them are already shipped this afternoon...

============================================================================

Always confused about the lamp in my room...what the hell it is??

Looks like a lantern but it's not...well have to say it looks like a big water melon...oh, I think I miss home again, lol

Stupid Royal Mail, after 10 days, finally got my SHN2500 earphone. Hum...it is said "NOISE CANCELING"....bought it for the 12 hours flight back to China, well, hopefully it will work...

However, test it after I got it...I can easily hear the noise from the street...er...it is a little bit better than original earphone...at least seems to be...

=====================================================================================================

Microsoft X5, well this big guy came with me for around 3 months...

First of all, it looks cool, secondly, it is cool....well I have to admit it is quite large for my small hand...but the touching is ok, and well it looks cool....

上周无意中路过我们这边的小球场，听到里面气氛超好，就有点动心想去看场球了。回家一查，Exeter City在第三级联赛排第4，下赛季升上英冠的机率很大，问了问球会，球票大概10多磅的样子，再问了下个主场就是今天，于是今天下午，我完成了在英伦的第一场现场足球。 

球赛是三点钟开始的，我住的地方离球场挺近的，走过去也是10分钟不到。（想起在广州...我走过去越秀山看广州队也是这个距离） 走到球场，发现今天来的人很多，可能是因为bank holiday大家都没啥事做，而且今天是第二与第四之间的较量，直接决定赛季排名吧。

  

 

开场前的气氛非常好，虽然有时插播广告，但是主持人的水平就是比国内的高。相比越秀山单调的播放歌曲，这边都是播放一些欢快的歌曲，主持人不断的介绍联赛的状况，球队近况，然后又鼓动大家一起搞气氛。场地中间的吉祥物狮子也不断的跑来跑去，拿两个很大的充气足球和场边的观众一起玩，整个球场的气氛非常非常好。相比这点，越秀山的确逊色很多...难得看见一次啦啦队表演，虽然这边也没有，但是这边调动起来的气氛就完全不一样。

比赛在三点钟开始，双方都非常有礼貌的，全场为双方鼓掌，在例行公事的握手之后，球赛开始了。

这时狂热看台那边展开了一幅超大的主队球衣，感觉非常的英伦，哈哈哈

就比赛本身而言，双方都踢得有点谨慎，但是的确双方队员都非常敬业，攻防速度非常快，这点和让人昏昏欲睡的中超相比还是很大的区别。让我觉得惊讶的是，其实英格兰人里面也有很多技术非常不错的球员，不过可能是传统的原因，他们都喜欢直来直去。Exeter City的7号中场其实技术非常好，大局观也很好，可是他的处理球速度明显和其他队员不同，显得有点慢，这时球迷就在埋怨教练为什么让他上。其实我觉得这就是英格兰球迷的观点，转换速度一定要快，打得一定要激烈。其实我很欣赏这个7号，除了因为他和我一样是7号以外，他在中场的镇定和处理球，都让整个Exeter City的中路攻防更加的清晰。如果在西班牙的话，估计这个球员的模板就是xavi那种，可是这里是英格兰，没人吃这套，呵呵。

整场比赛都非常激烈，球员也是尽心尽力，不过都是冲球去，所以整个场面也没有很火爆的场面，都是精彩而激烈。给我留下很深印象的就是40号的速度（让我想起Bellamy...），14号的中场控制力（有点像Gerrard），还有15号中卫的防守稳定（模板球员太多了...）

在这里要赞一下英格兰球迷的素质，比国内的懂球很多。什么时候该鼓掌，什么时候该骂人，简直就是一致的，而且相当的准，国内的很多就是起哄而已，哈哈。

这边的裁判也是，虽然不断的被主队球迷骂，但是其实素质非常的高，判罚也挺准的，虽然尺度中间有点摇摆，但是整场比赛控制的非常好。印象最深的就是球员犯规了之后，裁判会过去说明白为什么吹罚，甚至有时会安慰球员，然后一起笑嘻嘻的继续开球。所以球员也非常尊重裁判的判罚。

沉闷的上半场之后，下半场刚开场就由4号（貌似是后腰）进球了，场面一下子沸腾了，整个球场都在欢呼，一起跳一起唱，老人小孩都一起，非常的好玩，而且非常有气氛。狂热看台那边就更夸张了，舞围巾的，甩球衣的，整个场面简直就是沸腾的。 

下半场主队还有几个很好的机会，都差点，现场也是一阵阵的叹息之后响起一阵阵的掌声，那种好像电视直播一样的感觉非常的震撼 。

比赛结束后，老老少少脸上都挂着笑容，有秩序的离开，输了球的那边也没有什么很大的动静，只是有点沮丧，但还是给双方献上掌声，毕竟双方的球员都尽力了。

经过这次看球，虽然只是英格兰第三级别的联赛，但是气氛非常非常好。现在我打算毕业后去看一场英超（希望来得及...），还有就是，下个Exeter City的主场，再来捧场！哈哈哈

 

不得不说，中国的崛起已经强烈的让某些国外的势力感到害怕，不断的在鼓吹所谓的中国威胁论。中国人之所以在上下五千年的历史里都屹立不倒，就是因为中国人本身就是勤劳、谦虚、宽容、临危不乱的。虽然近代受到了一些屈辱，但是每当中华民族重新寻找到自己的中华魂的时候，中国的崛起就是必然的。

平静的看待温总理这次的事件，就像总理一样的宽容、临危不乱，这就是中国魂的所在。

这样的行为当然是可耻的，但是，这也正正反映了中华民族的强大，中华民族的宽容，中华民族的大度。

老实说，在英国的这段时间，一直很思念自己的祖国。不是不能适应这里，而是觉得自己就是一个中国人，血液里流淌的就是中华民族的血，这是永远不会改变的。

在外国人眼里，中国人是低调的（一些摆阔的富家子弟除外）、谦虚的、勤奋的。虽然他们会认为中国人都是被压迫的，限制言论自由的，可是这不是他们的偏见，而是他们从小就是在这种舆论的环境中长大的。在这边的媒体，基本的报道层面就是相对中立，但是绝对是偏向负面的。他们看不到中国发展的成果，只知道一个伟大的民族正在复苏，而在外国人眼里，复苏就意味着侵略，就意味着掠夺，因为这就是欧洲人在工业革命之后发生的事情。他们害怕有一天中国会强盛到取代了欧洲人的地位，害怕又回到几千年前的世界格局一样。

无可否认的是，中国当今面临着相当多的挑战，相当多的隐患。可是，这就是成长过程中必须承担的。

我觉得，温家宝总理遭遇飞鞋事件，其实就是一个必然，不是在剑桥，也会在其他地方。因为中国的崛起已经让某些人觉得恐怖，而中华民族的崛起，已经让他们因为恐惧而失去了理性。

反观我们的总理，临危不乱、镇定自如，脸部还始终保持着微笑。我想当时英方人员一定会紧张死了，担心努力建设好的中英关系就此破坏，因为在他们想象中，根本不会认为一个来自中国的总理，会这么平静的说出：“这种卑劣的行为，阻挡不了中英友谊的发展。” 这种高姿态、宽容的行为，简直就不是西方人可以想象的。而正是这种中华魂，深深的震撼了在场的每一个人，也通过电视震撼了全世界每一个人。

温家宝总理，是我懂事以来最敬佩的一个总理。周总理在的时候，我也没出生，而朱镕基总理的风趣幽默、坚韧不拔也给我留下了深刻的印象。但是，慢慢长大之后才发现，温总理体现的，就正正好是中华民族的灵魂，是中华民族几千年来屹立不倒的特质。这就是一个大国领导人应有的风度、应有的品质。

以前曾经认为温总理太柔了，不够强硬。但是经历了雪灾、地震、奥运，再到这次欧洲之行，我才深深体会到，温总理是承受着怎么样的压力和希望，负担着整个国家、整个民族的希望。而就是这种亲民的感觉，温和的作风，让人深深的震撼，让人深深的感动。

对内温和、对外坚韧，这就是中国人，这就是中华魂

我很放心、我很自豪、我很感动，因为我们国家有一宝

总理，您辛苦了！

Background:    China sees ‘initial success’ in effort to offset crisis

Wen Jiabao declared China’s efforts to offset the effect of the global economic slowdown an “initial success” on Sunday as the economy performed “better than expected” last month.

The premier’s hints that the country’s economy might not be locked in a downward spiral will be seen as good news in the rest of the world, where Chinese growth is viewed as a potential palliative for the global recession.

Speaking during a three-day visit to industrial regions in eastern China, Mr Wen said sales at some companies had begun to rebound, stockpiles were falling and electricity consumption was rising.

“We have achieved initial success from the policies we adopted to counter the financial crisis,” the premier said, according to China National Radio.

最近看到温家宝总理表明了中国政府应对金融危机的原因，而我刚好最近趁着放假也看了很多金融管理方面的书，觉得想谈谈自己的一些看法。因为感觉会写很长，所以慢慢的每天写一点吧~

这次的金融危机，是百年来最严重的，雷曼倒闭了，无数投行不是关门大吉就是深受重创。其实每次的金融危机，都是因为现金流断了，至于这次为什么现金流断了？这次危机的关键在于两个字：信用。

在美国，很多东西都是提前消费的，人们习惯了贷款去买东西。而在美国，很多人都是贷款买房子的。记得我毕业前就看到一则新闻，底特律的房子，买一送一，房价大跌。联想起现在的情况，这无疑就是这次金融危机的征兆。

所谓次贷危机，次贷就是次级贷款。在美国，除了我们正常理解的贷款外，还有次级信贷，次级信贷就是信用低，还款能力低，但是次级信贷是一个高收益的行业。当一个还款能力低的人，想买房子，却从银行里贷不到款的时候，他只有向次级信贷借钱。这一切如果在房价一直走高的情况下，根本不会有问题，但是如果房价下跌了，利率又不断上升，借款人就是无力偿还，最终破产。而造成大量次级信贷出现问题，就在于信用评估出了问题。例如说，一个人本来没有能力偿还贷款，可是他通过财务公司，改动一下账目，最终使得自己可以借到需要的款项，拿到钱买房子。可是一但危机降临，这些人就会因为没有贷款能力而破产。

而当大量的死帐坏账出现，银行被迫收回房屋，而房价又不断下降，使得银行大面积亏损，引发了次贷危机。更糟糕的是，为了对冲风险，基本上所有银行都有或多或少的涉足次级信贷业务，这样一来，当次贷危机发生的时候，就变成一个无法回避的大海啸了。

而在中国，因为根本不存在次级信贷，所以中国在这次金融危机里面受到的影响也是间接的。98年的东南亚金融危机，中国落后的外汇管制制度救了自己一命，而这次，又是相对落后的制度使中国不至于被次贷危机一同拖进漩涡？也许落后保守的金融制度，有时反而更加稳定一些。

未完待续…