Multi-Scenario

THINKSheet China is a Multi-Scenario System

TST China Systems meet the need of professionals to make better decisions about China by systematically – yet intuitively and dynamically – managing the scenarios that drive those decisions.  It enables you to quantify the political, social, economic and financial elements that drive China under dramatically different scenarios, such as the soft and hard landing scenarios.  You can model any scenarios using logically consistent sets of assumptions that enable you to better forecast the risk/reward of investing under the rapidly-changing conditions that characterize modern China.

TST China Systems Framework

TST China Systems simplify the process of determining the drivers and their interconnections by providing a systematic – yet highly intuitive and dynamic – framework for doing so. There are two categories of drivers – fixed and dynamic. The fixed categories are political, social, economic and financial; these categories provide a checklist of the permanent factors that drive China. The dynamic drivers categories are catalysts, risks (3), and headlines and x factors; these categories are dynamic, enabling you to respond to rapidly-changing conditions instantly!

GlobalMacroModelStructure

Soft Landing Scenario – Successful Execution of Five Year Plan

The Soft Landing Scenario depends in large part of China’s successful execution of the Five Year Plan developed in 2012. China’s structural reform is not merely about economics but, ultimately, the political viability of the Chinese sys­tem.  Beijing has delivered economic prosperity to many Chinese citizens.  But those very successes have yielded numerous problems that could undermine the regime’s legitimacy if left unresolved.

China Five Year Plan
China Five Year Plan

Hard Landing Scenario – Asset Value & Credit Bubble

The Hard Landing Scenario, popularized by Jim Chanos, of Kynikos, the largest short-seller in the world, embeds the thesis that China’s GDP growth is counterfeit because the government stimulated the development of so much real estate and infrastructure with minimal economic vale. The potential loss of wealth in China dwarfs that of the US housing crisis. The photo below gives you a sense of the potential for social unrest if the real estate bubble bursts. The Chinese are obsessed with real estate & have never experienced a multi-year downturn in prices. Any such downturn is a threat to the supremacy of the Communist Party.

Real estate owners protesting reduced prices for new buyers
Real estate owners protesting reduced prices for new buyers

China’s is famous for its ghost cities. Below are photos of the most famous one, Ordos in Inner Mongolia.

Empty high rises in Ordos

OrdosNew

Tianjin – An Empty Rockefeller Center

The financial district of Yujiapu in the port city of Tianjin was designed to be a rival to Manhattan. The government has spent billions building replicas of Rockefeller Center and Lincoln Center.  Now halfway through the 10-year project, the mega-development is empty and the streets are deserted. Over 70 per cent of apartment dwellings are vacant and investors are pulling out, leaving the $50 billion project heavily in debt.

Tianjin - A new - but empty - Rockefeller Center
Tianjin – A new – but empty – Rockefeller Center

The Largest Shopping Mall in the World: Back from the Dead

For a decade, the New South China Mall — the biggest shopping mall in the world — has been an embarrassment for its owners and China.  The mall spans five million square feet of shopping area, making it the largest in the world in terms of leasable space — more than twice the size of Mall of America, the biggest shopping center in the United States.

SouthChinaMall
SouthChinaMall2

However, like several of China’s ghost cities,  the mall is starting to fill up as you can see from the photo below left in comparison to the photo below right.   China’s huge population and the increasing wealth of its people is leading to true economic value for real estate properties that seemed to have little chance of filling up a few years ago.

South China Mall Update
South China Mall Update
SouthChinaMall2

TST Scenario Tools Prepare you for Virtually Anything

Many events, such as Nassim Taleb’s Black Swans, are difficult, if not impossible, to predict.  Our scenario tools do not help you predict everything; however, they do prepare you for virtually any set of conditions and enable you react to them much faster than using numerical models or research reports or any combination of the two.  You can set the outer boundaries of your forecasts using the Soft and Hard Landing Scenarios and move your Base Case Scenario back and forth between them with maximum efficiency due to the flexibility of the scenario frameworks.

 

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