Andy Xie (谢国忠)
Xie is one of the few economists who accurately predicted
economic bubbles including the
1997 Asian Financial Crisis[citation needed],
dot-com bubble (1999)
[citation needed] and
Subprime mortgage crisis(2008)
[citation needed]. Xie considers himself as one who has had a reasonably good record at calling bubbles in the past. "I wrote my doctoral thesis arguing that Japan was a bubble in late 1980s, a long report at the World Bank in the early 1990s arguing that Southeast Asia was a bubble, research notes at Morgan Stanley in 1999 calling dotcom boom a bubble, and numerous research notes from 2003 onwards arguing that the U.S. property market was a bubble. On the other hand I have never called something a bubble that turned out not to be a bubble."
[5]Xie's economic views are influenced by the Austrian School.
Xie described the Chinese economy as a "Panda Economy", which is named after "
Kung Fu Panda" -- a popular Hollywood cartoon movie.
[6] He argued that the Chinese economy was not as "nice and juicy" as most people thought and that China has enough space to adjust its political and economic policies to boost its economy only if it decides to reform the income distribution system and stir consumer demand. However, the real estate bubble might kill consumer demand in China. He also criticized economic policy makers across the world as being guilty of replacing an old bubble with a new bubble without real structural reform. He warned that if no structural reform is initiated, the world economy will go back to a 1970's era stagflation. Xie coined the term "Panda Put", in reference to the popular phrase "
Greenspan put", to describe the situation where investors in China believe that the government will not allow the stock market to go down before important dates in the Chinese calendar, like the 60th anniversary of the PRC or the 17th Party Congress.
[5]Xie believes that to keep China from being an export dependent economy, the PRC government will need to redistribute the wealth to its citizens.
[7] It can do so via distributing shares of the State-owned companies (SoE) to its citizens and lowering housing costs.
[8]Xie has suggested that to cool property speculation in China caused by excess surplus liquidity, the central government can consider imposing an 80% capital gains tax on property flipping, decreasing 10% each year afterwards.
[9]Xie comments that Japan's low birth rate (1.4%) is partially due to the real estate bubble in the 1980s where China currently is following in the same track. Chinese land policy and short term government behaviors provide the perfect ground for a semi-permanent property bubble. An economic crisis similar to the Great Depression might happen in China within 20 years when Chinese baby boomers (born between 1950 to 1978) start to retire.
[10][edit]Important calls
In 2003, Xie warned that China needed to free up capital markets to avoid losing potential economic growth
[11]On 14 August 2008, Xie released his post "Apocalypse Soon" (末日启示录)
[12] on his blog, detailing how the entire U.S. financial system would soon unravel. On 15 September 2008, Lehman Brothers filed Chapter 11 Bankruptcy, and Merrill Lynch was sold to Bank of America in a shot-gun deal.
On 11 April 2009, Xie wrote on his blog that a bear market rally was underway. He suggested that stimulus, inventory cycle and capex spending would provide tailwind for the rally. He also wrote that a second dip would occur in 2010.
[13] As of 26 August 2009, the S&P 500 has risen 20.0% to 1028 from 858 on 13 April 2009.
On 4 May 2009, Xie wrote in the
Financial Times that if China loses faith in the U.S. dollar, the dollar will collapse.
[14] Commenting on United States' exploding deficit, Xie said that "Any other country with America's problems would need the Paris Club of creditor nations to negotiate with its lenders on its monetary and fiscal policies to protect their interests". "America's policy is pushing China towards developing an alternative financial system. China is aware that it must become independent from the dollar at some point. Its recent decision to turn Shanghai into a financial centre by 2020 reflects China's anxiety over relying on the dollar system."
On 3 August 2009, Xie wrote that "Chinese asset markets have become a giant Ponzi scheme". He wrote "I want to make myself perfectly clear on China's asset markets today. They are a big bubble. Its bursting will bring very bad consequences for the country."
[edit]Criticism
Xie's bearish calls of Chinese asset bubble brought broad criticisms from local Chinese "Pundits" and domestic retail investors. These local Chinese "pundits" include scholars from universities, local governments and investment advisors. Some Chinese "Pundits" claim that there is no bubble in the Chinese asset market and high P/E is an indication of strong future growth of Chinese economy. Some suggest that the Chinese asset market is deeply undervalued and return on equity (ROE) analysis is not applicable in China.
It is hard to estimate how many Chinese "pundits" make these bubble-free statements based on their independent analysis or under the influence of the Chinese government. Some scholars intend to attack Andy Xie's personality and seldom challenge his methodology behind the bearish calls. Xie commented that there is no reasonable logic behind these criticisms, especially on his nationality, and that he would ignore these personal attacks.
