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Fitch Analyst Charlene Chu on China's Credit Bubble


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I got a good opp to acquire a chain store for young kids education in China, and this sector has been booming recently.

Per my cash flow calculation the return is decent enough. But I am really a bear on China in general (for a while).

So really hesitating if I should start that business (will hire my sister to manage...) Nothing can be immune to the big environment, after all.

Any suggestion ?




Yes, yes, we should all ignore macroeconomic factors, but what would be the repercussions of this bubble popping.  Food for thought, anyways.  Cheers!



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Some thoughts:


Education is the only way forward with all the competition in China.


Add to that, the one child policy and the fact that culturally the family will try to ensure their child's success - I believe they will have no option but to educate their children. Parents need and try to provide their kids with all the advantages they can in such a competitive society.


Main risks that I see:

- quality of education

- a temporary over-supply of such schools

- if a slow down causes capital destruction and high unemployment - will parents stay home and teach kids

- long run demographics - in an aging society will there be enough kids to educate in the long run

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"Hong Kong, June 24, 2013 -- Moody's Investors Service has changed the outlooks for the bank financial strength ratings (BFSRs)/Baseline Credit Assessments (BCAs) of eight Hong Kong banks to negative from stable, and one bank's BFSR outlook to stable from positive"



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