Here’s a really good post from Business Insider. It is written by Sprach Analyst, and he takes some quotes from Jim Rogers.
Whatever causes the drought, some people raised concerns on the China drought situation and its impact on the economy. At the moment, quite frankly, I have very little idea on how serious the problem can be, except that I suspect it is not going to help with the inflation situation, particularly the food prices inflation in near term.
This is absolutely true. I hear from some connections in China that food prices have risen 20% in the past month.
In his own words, Jim Rogers said:
I don’t mind if China has civil wars, epidemics, panics, depressions, all of that. You can recover from that. The only you cannot recover from is water… China has a horrible water problem in the North… If China doesn’t solve its water problem, there is no China story. I’ve been around the world for a couple of times. I see whole societies, cities, countries, disappeared when the water disappeared.
He added that “they are hundreds of billions of dollar to solve the problem”.
Of course, I have long pointed out some of the important problems that the Chinese economy is facing, including the real estate bubble, inflation, demographics, reliance on fixed-asset investment as growth driver, and over expansion of money supply and credit. The water problem is probably going to make things more difficult.
This is 100% true.
The Chinese leaders, in my view, are very intelligent. As always, I trust that they have a very good understanding of the problems, and are trying very hard to tackle the problems. My concern is that too many people are overly confident in the Chinese leadership’s ability to solve all these problems. The fact China bears and sceptics have been wrong for 20+ years gives people huge confidence that China can muddle through. Hugh Hendry said 10 years are enough to create a cult of belief in the capital market. Now, we have 20+ years.
It is true that Chinese leaders right now are smart, but they’re weak as hell. They try to appease the American and European governments (disgusting).