China ponzi collapse follow up

coverage picks up

About a month has passed since I wrote the Ponzi has crashed and now the reports are coming in. Whether it is China’s biggest private shipbuilding company seeking a bailout on account of its 20,000 employees, or the lovely ghost city of Ordos, perfect for skateboarding, seeking help to cover their payroll (it is difficult when their debt of $39B is 6.5 times greater than their annual revenue), reports concerning the aftermath of extremes of debt are now arriving on a daily basis.

No doubt matters will get worse.

But while the now rather monotonous reports of China’s crash continue I would point out World Business Report, from the BBC, and their 9 July 2013 edition podcast titled “China’s slowdown.” Most curious is their description of the internal growth and favourable demographics of Indonesia. Yes emerging markets are falling apart at the moment, but of the various countries of the future surely Indonesia, with its young population and internal growth, not dependent on state supported exports, may prove to be of interest if for no other reason than as a reminder of what real economies once looked like, a long time ago. Rising incomes are also interesting from an investment point of view. Infrastructure is apparently almost non-existent, with road trips even along main highways taking ridiculously long, but given the fundamentals of an economy with 240M people, the fourth largest in the world, such problems may be fixed over the course of ten or twenty years baring a massive leadership failure. They certainly could have the critical mass to become a very large economy. 

If China is heading down over the course of the next ten years due to demographics, corruption, pollution, unsustainable debt, unsustainable and unrewarding export driven dictates then Indonesia may well be heading up with its young demographics, internal growth and rising incomes. 

Also, as nothing ever goes in a straight line, if world trade declines in any way it may be the economies that are less export dependent that may prove to be more robust.

The US of course is the other large economy with a critical mass of people, slightly over 300M, and an ok demographic profile that could be more resilient in a trade constrained environment.