China update

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Jim Rogers Explains The Crisis That Could End The China Boom

Jim Rogers spoke to BBC's HardTalk about his investments in Asia, what he's short, and where he remains bullish.
Rogers defends his long-term position in Asia, noting that, while there are certain to be hiccups, it's a much better place to be investing than in the bankrupt countries of the west. He admits that there is a bubble in coastal Chinese real estate, but does not see it as being similar to the situation in U.S.
Rogers also spoke on what he sees as the number one problem for China's economy.
"I don't mind if China has civil war, epidemics, panics, depressions, all of that. You can recover from that. The only thing you cannot recover from is water," says Rogers. "If China doesn't solve its water problems than there's no China story." He says they're spending large amounts of money to solve this problem.
Rogers also engages in an impassioned fight over the role of speculation in the water market.

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China’s Economy Is Starting to Slow, but Threat of Inflation Looms

China’s economy is starting to slow, after two years of torrid growth achieved following the global downturn.
Chinese manufacturers’ backlogs of orders are gradually shrinking in many industries. Purchasing managers have become less optimistic about their businesses’ prospects. And after surging past the United States in car sales over the last two years, the Chinese auto market unexpectedly stalled last month, as carmakers curtailed production plans.
Because China’s cooling economy is partly a result of Beijing’s efforts to contain inflation, some economists are not worried, saying a slight slowdown could be positive. And they say that after the government eases off the brakes, economic growth should quickly pick back up.
But other experts worry that inflation is already so entrenched that the government may be forced to continue braking the economy for a considerable time.
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The problem lies in China’s extremely heavy dependence on investment in factories, infrastructure and apartment buildings to sustain growth. The slowly rising levels of debt at local governments and large companies that have financed that investment indicate it may not be sustainable.
At the same time, the economic returns on new highways and other public infrastructure projects are declining, now that the best locations have already been built up, and as planners extend construction to less affluent and more remote areas. While some economists predict this effect will take five or more years to become serious, others warn it could hit sooner.
“Growth will slow significantly in two or three years — the timing will be determined politically,” said Michael Pettis, an associate professor of finance at the Guanghua School of Management at Peking University. “And the slowdown will last much longer than anyone expects — perhaps over a decade.”