From my readings of online Chinese newspapers and my observations, I gather as such:
1) Condition along the Chinese coastal provinces in particular Guangdong is the hardest hit. Since last October, many factories were close overnight without notice. Leaving thousands and thousands of migrant workers without pay, sometimes for over upward of 3 months. These factories mostly were located in DongGuan (东莞); over the last few weeks, the local gov't has been paying back wages to the out of work workers. Last estimated was about RMB 8billions or so. Wonder how deep a pocket the local gov't will have. One note, cigarette sale will not drop that's for sure. The local brands are particular popular. This overnight closing of factories will not stop and will continue as credit crunches on the factory owners; most are from Hong Kong. They can just close up shop and leave.
2) Hong Kong is coming to a slump. DBS, the development bank of Singapore has announced layoff of about 900 employees in HK and elsewhere. That was a big contrast to the strategy it laid out back in May and June of this year. Banks in HK are now suggesting layoff will be happening along with paycut of staff starting at 10%. Here's the kicker, the HK banks refuse to lower borrowing cost for locals but their interbank rate has been lowered much. HK banks are tightening. Nowadays, locals are asking "if they can get a mortgage loan" rather than "what is the rate I can get". Banks are making excuses to delay loan or just trying to make you "give up" on your own. HSBC is the worst, last week or so, it raised the borrowing cost of the locals. This bank is milking people because it is so huge. It's doing both sides of the fence. To recover its blunder in sub-prime mortgage losses, it had introduced 8 more new service charges, raised its borrowing cost of locals and provided lower time deposit rate on foreign currencies sometimes 1% point lower than industry; then the foreign exchange, everything has to be settled in HK$ first. Last look, its share has dropped from HK106 to HK92 in over 3 weeks. Actually it was down below HK70 at one point last week or so then recovered. If cannot fight it, join it by buying its share now? Ummm.....
3) In Hong Kong right now, there are lots of restaurants closing overnight; putting sign up saying "renovation", "power box change, close for the day". Employees are left out in the cold. Scary. There were some high profile suicide of late as well. People were jumping to their death because their bets on the continuing rise in the stock market caught them. Some were losing over HK10Million plus. Then there are all those high flying execs in the investment banks and big multi-national companies. They were doing "accumulators" on foreign exchange; getting kill. One apparently has lost over 25millions.
4) Prices in new apartments are dropping in HK. Since last month, some are being slashed by HK1million at a time. No one could get a mortgage even new apartments are getting cheap; this has created a problem. If one cannot buy, he/she has to rent. Being in Hong Kong, things are built on "greed". So, owners are jacking up rent rate, sometimes over 100% compared from last year. But this probably will come to an end if no one can afford and layoff continues. Macro-economics, don't think the HK people understand. Stanley Ho two days ago has suggested in newspaper to people do NOT buy new apartments as price will drop some more. And Li, the billionaire, has announced his company will stop expanding and review all expenses for this year and next year. They see it coming. And then, this so called "Asian stock god" has locked in his profit at the Chinese Ping An Insurance company (HK6billions profit and that was done by a side way)and re-invested to some other HK-based bank apparently. I can see the move in HK in the billionaires circle, either they are consolidating to see who crashes first or try to support each other during the hard time. Right. What do u think?
5) Shanghai is different so far compared to the rest of the country. It is still booming. As I have observed, the city gov't will not let it fall as World Expo is coming. Hence, it has been doing a lot of infrastructure work around the city. Have not figure out which companies that do that. Most are within their own and hence not a chance getting into the action. Anyway, the only things slowing down in Shanghai are: property pricing and stock prices. Both are down; the latter are basically "toasted". Property pricing, the same places we looked at are starting to come down. The last two weeks, per sq meter pricing has dropped by as much as RMB 10,000 per sq meters. I say, keep dropping. The logical level should be about RMB 15,000 or so at the downtown core (rather than RMB42,000 currently). Whether it gets to that point, I do not know. There are multi-national companies are now cutting back on rental properties. Canceling existing rent agreement and moving to cheaper outlining office area. Rent subsidies for expats sometimes are cut by half. Polling of some locals common folks, people that I talked to, they are not expecting a good economy for Shanghai. Expecting next year will be a bad year. Well, 5 years up with a bubble, it should burst. I believe Shanghai will be the last hold out of this economy downturn. More and more companies are looking into doing business in Shanghai rather than in Beijing. HR area will be the first thing to be cut from an economic downturn; however, based on my iron-wife's experience so far, business actually has gone up. We are in a somewhat insulated environment.
6) China and Taiwan have signed more "co-operative" agreement. This included adding more direct flights between the two "countries". This will hurt is Hong Kong and Macau. As now, passengers do not require to touch down in these two places and catch another flight. Airlines that used to facilitate the "transfer" will lose a golden egg steady income. Hurting Macau Airline, Cathay Pacific and Dragon Airline during an economic downturn.
All in all, I can see this developing:
1) Hong Kong will be crushed for a while. I don't believe there are "talented" people within the gov't to weather the storm. As I have observed over the last while, the so called "leaders" need to be led. Hate to say this but Hong Kong was better off to be a British Colony govern by British. A better knowledgeable people at the top. I am not saying there are not "smart" people locally; but the smarter locals are all foreign trained. But some are so confident in their abilities that they got caught up with the "up" market and now in a crunch to sell speculative apartments. Good luck with that.
2) The Chinese gov't will have a head-ache dealing with the Guangdong province economic downtown; as that entire area is export-based. How does it manage to ease the difficulties facing thousands and thousands of out of work migrants. Crime rate certainly will go up as people struggle. The "rough" of Zhuhai and Shenzhen will become rougher. Pickpockets, robbery and white taxi driver turn robber, these I can see will go up. Even with the "trusted" regular drivers, cannot really be trusted. He can just drive somewhere and rob you. Desperate time.
3) Macau's crime rate will certainly go up. The Chinese gov't has just announced a reverse course of action from restricting Chinese citizens to HK and Macau to "loosen" again. Right, if the coastal people have no money what kind of incentive can they do to help Macau? Gambling. The industry is experiencing downturn. People are getting laid off by the Casinos. One thing for sure, the service sector will change from a "employee demand" condition to "employer favoured" condition. Before, cannot hire any qualified people, now it can hire with less pay. The easy going with "non-performing" employees will be the time of the past. The saying "even dumb asses can get a job" will cease to exist.
4) The Chinese citizens, if the stock and real estate markets continue to free fall, they will demand or put more pressure on the central gov't to assist. This is a big problem. As most people invested have no investment knowledge. Their so call knowledge are based on "hear say" and "luck". When time was good, they flaunt. When time turns bad, they ask for assistance. And of course, it was never their own fault for "investing" stupidly. If we can call that investing.
5) More direct trade between China and Taiwan. With the economy going poorly, Taiwan might do better with a closer Chinese relationship. Chinese airlines will benefit from the flights shutting out the once dominated Hong Kong-based airlines. China Eastern, Shanghai Airlines, China Airlines from mainland China will gain. These airlines are mostly Chinese gov't own. The signing of more agreement this week will save airlines fuel cost as they do not require to fly south toward Hong Kong and then do a U-turn back up the Taiwanese coast like they would have done currently. Stay tune on that.
6) China will use its power both as an singular gov't and as financially deep pocket (US$1trillion or so I think) will dictate rules to ensure its economic engine not sputtering. There probably no choice for the American bankers but to "ask" for a Chinese bailout.
7) Macau economy may need a shift from Casino to something else. Not sure what because the qualification for other things seems to be nothing for this former Portuguese colony. Stanley Ho will be the victor as all his Casino competitors are tanking left and right. Sand will be the first to go. I expect Ho will bid his time to buy into his competitors. You see, he has the Chinese connections. He knows how the Asian like to gamble. The Americans, they don't. Also the Americans leverage too much and pay too much for the locals to work. At one point, they were paying MOP5,000 just for people sweeping the floor. Right. At normal time, it should have been MOP1,500. The American driven up the price, gone busted and crashed the local economy. Gee, isn't that a page out of the play book from the US investment banks?
Shanghai seems to be a cocoon. Other than that, everywhere else seems to be falling apart. Will be in Singapore from Nov 22 to Nov 25, let see what is up there since the gov't has announced Recession has hit.
India, the land of call centres have been hit by the US slump already. Lots of small to medium size IT companies in Bangalore have collapsed. What's next, not sure. My impression of the infrastructure there is not stable. One of the biggest democracy countries in the world, but also the most corrupted I dare say. From the outside in observing, not sure how to value the "true" cost of an item. This might be deep in grain in its culture. You can never get a straight answer. You ask something, the reply always is with the most friendliest smile and a shaking of head from side to side. Does that mean the person understood? Or pretend to? 45% former and 55% the latter.
