China's Economy Isn't in the Same Boat as the 'Developed' World

There've been quite a few China experts predicting doomsday for China recently, thus eliminating the last best hope for the world economy. I beg to differ.

Yes, China is anything but detached from the rest of the world and indeed has all the major symptoms of the developed world: A housing bubble, bank bad assets, demand destruction, unemployment. But the degree of suffering for China is much less severe in every one of these respects.

The residential mortage market in China is still in its infant stage. Securitization is non-existent. Down payment routinely goes to 40%, even 50%, in most of the localities except for the few big cities like Beijing and Shanghai. Therefore, for the same 20% drop in housing prices, the impact on homeowners and lenders is much less in China. In addition, the percentage of commercial homeowners in China is still tiny in comparison to Europe and the U.S. Most city dwellers live in government and/or employer subsidized housing and owe little to nothing on them. Virtually all country folks live in houses they built with cash.

Financial reform in China had been widely critized, both domestically and internationally, for being too conservative, even paranoid. Of course, now in retrospect, the conservatism/paranoia shielded the country from disaster. Except for a few companies going through Hong Kong, there's virtually no exposure to derivatives of any kind except commodities futures, which is tiny on the macro level. Bank leverage remains very low. Commercial banks and investment banks are still strictly segregated. It's hard to make any credible estimate on the scope of bad assets in Chinese banks. But even if it turns out to be as bad as the most perssimistic estimates say, at least we can be sure there's no chain-reaction mechanism in the system.

China 'the export country' is perhaps the biggest myth in the modern global economy. Yes, they do export a lot. But unlike Japan or Korea, China's exports for the most part are more accurately classified as re-exports. To export is to buy iron ore or steel and sell $50k cars. To buy wool and sell sweaters is hardly an export from a macroeconomic perspective because the value added is so small. As a result, what happens to the Chinese economy in a demand destruction scenario is that both imports, a big part of which are the raw materials and components for its re-export industry, and exports fall more or less in tandem. This has been shown by the relatively small drop in Chinese GDP as well as overall trade balance in Q4 '08 vs. the dramatic drop in Japan and Korea.

In fact, such a proof already presented itself in 1997. Almost all of China's export competitors had their currencies devalued up to 80% while the Yuan stayed almost constant. There was tremendous domestic pressure to devlue the Yuan, and the deafening cry of a Chinese export collapse from international experts. Yet nothing happened. Export tax rebates cannot possibly be used to explain more than 10% of the cost savings. The reason is simple: the Chinese economy was mostly re-export driven. As the cost of buying raw materials and components dropped for a large portion of manufacturers, costs also went down. Yet the world continues to blindly call China 'the export country'.

Domestically, anecdotal evidence I've heard shows that what China's government, both centrally and locally, has been doing to stimulate consumption makes Helicopter Ben look like a timid amateur. They hand out cash and/or shopping certificates to whole cities of people. They order all shops to have 30% sales. Is this an overreaction? A sign of desperation? Will such draconian measures bring dire consequences later on? These are all legitimate questions. But at least you can't blame them for not trying. And the shock-and-awe Yuan carpet bombing apparently has been making some impact so far. It's much harder to make Chinese people spend than most westerners imagine.

Finally, there's unemployment. Numbers like 20 million have been thrown around in China expert circles like asteroids heading to Earth. I'm sorry, this is just plain ignorance to the vast difference in lifestyle between Chinese peasants and westerners. An average US homeowner may lose their home within months of unemployment. But a Chinese migrant worker from the countryside can easily go back to their old lifestyle and live for years, purely on the savings from the few years' city jobs they had, without as much a psychological trauma as losing one-night's sleep. Metropolitan life in China is still largely based on cash and savings. Rural life in China is still mostly self-sufficient on top of cash and savings -- you don't need much cash and savings at all to get by.

More likely than not, China will escape any severe downturn and remain one of the few growth spots throughout this global recession. And it would not be any miracle, just a combination of fundamental factors, as well as a bit of luck.

What does this mean?

1. China will probably be one of the better equity markets for 2009, and possibly beyond.

2. Chinese bonds, if you can get your hands on some, are probably cheap. CDS on Chinese sovereign debt is going for ~250 bps. It may come down a lot once the world realizes the above.

3. The commodities fall may not last as long or be as severe as doomsdayers predict.

4. Upside pressure on the Yuan will probably resume as soon as the world economy stabilizes somewhat and the USD carry trade unwind stops.

Disclosure: None

Comments

[Ricard:]

Thanks for the reply.

I went to a Korean economy seminar recently, and the speaker mentioned that even though Korea's unemployment rate seems to be one of the lowest in the world, they have a large number of 'unmotivated workers' that wouldn't show up in that statistic (couldn't get an exact figure).

I would imagine that serfs in the countryside that didn't go to the big city would also easily fit the definition of 'unmotivated'. I bring this up because while such statistics may be hard to track, their effects can become horrifyingly clear in times of crisis (think Katrina and the urban populace in New Orleans).


On Mar 03 11:59 AM Bo Peng wrote:

> Ricard, your point about the strength in rural social structure in
> sustaining the unemployment surf in a valid one. But the number is
> still tiny in percentage. I'm not seeing any sign of stress, though
> admittedly I'm talking from the 500,000 ft level.
>
> User 360916, do you have any evidence showing the extend of unwind
> of China stakes from the banks you mentioned? I know Buffet and BoA
> already pulled out big chunks, but nothing concrete about other significant
> moves. Judging by the dramatic drop in Chinese stock market since
> late 07, they would not have done their homework if they had been
> sitting on it all this time.

Mar 03 02:25 PM

[Ricard:]

Perhaps I am not correctly following this conversation. I don't see your point, nor any instance of the author's 'naivety'.

US banks are selling their stakes in Chinese banks to raise capital. Regardless of their profitability, US banks would need to justify any capital allocations outside the US to Congress, which they can't, especially with Dems in control. They're dumping anything...anything...... remain solvent, and I wouldn't be surprised if the government through TARP influence is giving them the playbook.

It's no secret that many stocks, regardless of their earning potential, are being dumped to cover margin and to 'deleverage'. Hell, even Buffett is doing it to a degree by dumping J&J and P&G. It's quite possible that this forced selling may present opportunities for the astute investor. I think that is Bo's point regarding China being a 'potential outperformer'.

I almost got out of my 'armchair' to make this comment :)

On Mar 03 11:04 AM User 360916 wrote:

> Now this is a truly disappointing statement: China is a 'potential
> outperformer'?
>
> What do Bank of America, UBS, RBS, American Express, Goldman Sachs,
> Allianz, etc have in common? They've have sold or plan to sell their
> hugely profitable stakes in Chinese banks.
>
> Bo, please do homework before making this kind of naive observation.
>

Mar 03 02:38 PM

[Billy Gee:]

Mr. Peng, fromm 500,000 ft (about 1150,000 meters) can you describe to us the effects of even more Chinese bureaucratics involved in exports promotion and imports stifling. Are the numbers broken down by those working on currency manipulation, on export credits, intellectual property dissemation, tariff creation, joint-venture schemes for technology transfer etc.? Are these growing employment numbers all lumped together as government workers or are they broken down by indivdual industry that are targeted for domininance? What are the figures projected that these workers will add to the Soverign Wealth Fund for 2009 because of their efforts?

Mar 03 03:07 PM

[Bo Peng:]

Ricard, you raised a good point. Unfortunately, I have no anecdotal evidence to say either way on it, not to mention data, which I doubt anybody has. I guess we'll have to wait and see.

Billy Gee, I tried to stay away from anything that might be used to stoke protectionist sentiment but I have to make an exception for you because your comment on Chinese government bureaucrats involved in "import stifling" goes beyond ignorance. One important factor in chronic trade imbalance between US and China is the fact that US government prohibits export of many hi-tech products to China. This is xenophobia thinly veiled behind phony ideology arguments that have been outdated since 30 years ago. National security can be a valid concern. But it needs balance and scrutiny. The list of prohibited export to China was arbitrarily drawn up by politicians two decades ago with no public debate. It has denied many American businesses tremendous opportunities and caused a lot of distrust and suspicion towards US among certain segments of Chinese society. This is stupidity beyond comprehension as far as I'm concerned.

Mar 03 09:35 PM

[JX:]

You are the one who is not thinking this thru. Beyond what Richard has said, think about this:

In this environment, only the absolutely best financial assets can have buyers, at price levels that won't cause the sellers to puke their guts out. Look at AIG's attempt to sell AIA, supposedly its best asset. It's hopeless for the American tax payers to recoup the $180 billion or a sizable portion of it.

HSBC is arguably the best large Western bank standing (It hasn't taken in any government money yet, unlike JPM, WFC and GS). It's getting out of the US market, and even taking the pain of share issuing, while holding on to all its Chinese shares, and maintaining its Chinese staff level.

On Mar 03 11:04 AM User 360916 wrote:

> Now this is a truly disappointing statement: China is a 'potential
> outperformer'?
>
> What do Bank of America, UBS, RBS, American Express, Goldman Sachs,
> Allianz, etc have in common? They've have sold or plan to sell their
> hugely profitable stakes in Chinese banks.
>
> Bo, please do homework before making this kind of naive observation.
>

Mar 03 10:14 PM

[Billy Gee:]

Mr. Peng does not deny any my assertions about illegal trade barriers. His view point has been brought out into the light. This is why I am very concerned that our once promising trade arrangement may be very much in jeopardy. Our friendship with the Chinese people will not be broken but our position as customers is not sensible now.

Mar 03 11:25 PM

[plumstupid:]

It appeared that Mr. Bo quite decidedly dealt with those assertions.

Mar 04 03:29 AM

[ArtfulDodger:]

Mr. Bo Peng:

Very good article. Thank you.

Mar 04 08:06 AM

[coreopsis:]

These purchases were all made directly from the Chinese state government -- and all are public information, reported widely in FT, Bloomberg, etc. Just use google.


On Mar 03 11:59 AM Bo Peng wrote:

> Ricard, your point about the strength in rural social structure in
> sustaining the unemployment surf in a valid one. But the number is
> still tiny in percentage. I'm not seeing any sign of stress, though
> admittedly I'm talking from the 500,000 ft level.
>
> User 360916, do you have any evidence showing the extend of unwind
> of China stakes from the banks you mentioned? I know Buffet and BoA
> already pulled out big chunks, but nothing concrete about other significant
> moves. Judging by the dramatic drop in Chinese stock market since
> late 07, they would not have done their homework if they had been
> sitting on it all this time.

Mar 04 11:52 AM

[coreopsis:]

This is really an uninformed comment but I will keep my comments brief. (1) Margin calls, etc have nothing to do with banks. Don't mix apples and oranges. (2) TARP looks at overall capital ratios and does not review by geographic market segment. (3) As one example only, at 12/31/07, BofA had an UNREALIZED investment gain in its position in CCB of USD30 billion.

Selling anything -- as you say -- does not strengthen capital ratios. Realizing unrealized accounting gains does. All the China bank positions of the global universal banks are now being unwound. Some lucky banks (such as BoA) still retain options to buy additional China bank shares later. HSBC is writing off and exiting its consumer finance (USD9 billion acquisiton of Household Finance --- an abortion) and guess what --- expanding its presence in China.

Now the Chinese and the Americans are quite alike temperamentally --- the Chinese would leverage themselves to the hilt if their government permitted. After the debacle of the US and Europe, it ain't gonna happen fast. If and when the Chinese get rich and fat and lazy, it will be a problem.


On Mar 03 02:38 PM Ricard wrote:

> Perhaps I am not correctly following this conversation. I don't see
> your point, nor any instance of the author's 'naivety'.
>
> US banks are selling their stakes in Chinese banks to raise capital.
> Regardless of their profitability, US banks would need to justify
> any capital allocations outside the US to Congress, which they can't,
> especially with Dems in control. They're dumping anything...anything......
> remain solvent, and I wouldn't be surprised if the government through
> TARP influence is giving them the playbook.
>
> It's no secret that many stocks, regardless of their earning potential,
> are being dumped to cover margin and to 'deleverage'. Hell, even
> Buffett is doing it to a degree by dumping J&J and P&G. It's
> quite possible that this forced selling may present opportunities
> for the astute investor. I think that is Bo's point regarding China
> being a 'potential outperformer'.
>
> I almost got out of my 'armchair' to make this comment :)
>
> On Mar 03 11:04 AM User 360916 wrote:

Mar 04 12:08 PM

[Ricard:]

You have lost me even more with your comment here. I am even more confused as to where you stand. You seem to be thinking that the dumping of Chinese bank stocks will make Chinese banks a relative under-performer, and then you seem to turn this position around by applauding HSBC and BofA for keeping the door open.



The point about margin calls was to demonstrate the concept of deleveraging, which would add downward pressure to shares around the world, which gives more impetus for certain weaker entities (US banks) to sell. I'm from the camp that downward near-term pressure is generally meaningless for strong firms, and simply gives buyers the opportunity to profit. US banks are unfortunately not in this position - their balance sheets are far too weak to buy or even hold these assets.



Your point about raising capital is indeed a result of my unfamiliarity with the banking industry. However, if I follow you correctly, selling these stakes DOES indeed increase capital ratio for banks in that they can realize the 'gains' and strengthen their balance sheets. As far as my comment about selling 'anything' is concerned, even the most foolish of investors would see the merit of holding on to profitable stakes in well-capitalized firms...yet, according to you, US banks are selling even these assets. Hence, they will sell ANYTHING to raise capital. I'm not sure what you find incorrect with this reasoning.



Your argument about TARP is certainly an official line. But, please tell me how many Congressmen's jaws dropped when BofA gave the slightest appearance of using TARP money to up the CCB deal. Here's a line from the International Herald Tribune (most papers reported something similar):

"There's still the pesky matter of TARP. The idea that borrowed U.S. government cash is being sent back to one of its biggest creditors is ironic at best, and could raise political hackles. Bank of America, which tapped private investors for $10 billion before getting a government injection, says it hasn't used TARP money for the purchase."

"Still, all the bank's cash is ultimately in the same pot, and this particular $7 billion won't be used to get credit markets moving in the United States, as TARP was intended to do. "

www.iht.com/articles/2...

I use this line of reasoning to debunk your statement:

"(2) TARP looks at overall capital ratios and does not review by geographic market segment. "

All roads lead to Rome, and TARP allocations will receive some sort of oversight from Congress, and they ARE looking very closely at geographic market segments.



I think this was a typo on your part - the unrealized gain on CCB is $3 billion, not $30 billion. That is a world of difference, given BofA's current market cap.



Anyway, thanks for the comment. I am looking to become more 'informed'.


On Mar 04 12:08 PM User 360916 wrote:

> This is really an uninformed comment but I will keep my comments
> brief. (1) Margin calls, etc have nothing to do with banks. Don't
> mix apples and oranges. (2) TARP looks at overall capital ratios
> and does not review by geographic market segment. (3) As one example
> only, at 12/31/07, BofA had an UNREALIZED investment gain in its
> position in CCB of USD30 billion.
>
> Selling anything -- as you say -- does not strengthen capital ratios.
> Realizing unrealized accounting gains does. All the China bank positions
> of the global universal banks are now being unwound. Some lucky
> banks (such as BoA) still retain options to buy additional China
> bank shares later. HSBC is writing off and exiting its consumer
> finance (USD9 billion acquisiton of Household Finance --- an abortion)
> and guess what --- expanding its presence in China.
>
> Now the Chinese and the Americans are quite alike temperamentally
> --- the Chinese would leverage themselves to the hilt if their government
> permitted. After the debacle of the US and Europe, it ain't gonna
> happen fast. If and when the Chinese get rich and fat and lazy,
> it will be a problem.

Mar 04 02:11 PM

[coreopsis:]

This has to brief but I suggest taking a global econ course and global accounting if it is offered at a university near you.

Let me be very simple: (1) First of all, there is NOT a typo. BoA's unrealized gain in the footnotes to their A/R was USD30 billion (actually only 27 billion to be technical in that their original investment was 3 billion). My point: investing in CCB was/is way more profitable than running their own business. Investing in Chinese companies has made everyone richer -- that's my original point in my comment to Bo Peng.

OTOH, investing in US companies (BX,MS etc) has produced disastrous losses for the Chinese. They've figured out that they've been sold a 'pig in a poke' and will no longer be the source of funds for western financial institutions.


On Mar 04 02:11 PM Ricard wrote:

> You have lost me even more with your comment here. I am even more
> confused as to where you stand. You seem to be thinking that the
> dumping of Chinese bank stocks will make Chinese banks a relative
> under-performer, and then you seem to turn this position around by
> applauding HSBC and BofA for keeping the door open.
>
>
>
> The point about margin calls was to demonstrate the concept of deleveraging,
> which would add downward pressure to shares around the world, which
> gives more impetus for certain weaker entities (US banks) to sell.
> I'm from the camp that downward near-term pressure is generally meaningless
> for strong firms, and simply gives buyers the opportunity to profit.
> US banks are unfortunately not in this position - their balance sheets
> are far too weak to buy or even hold these assets.
>
>
>
> Your point about raising capital is indeed a result of my unfamiliarity
> with the banking industry. However, if I follow you correctly, selling
> these stakes DOES indeed increase capital ratio for banks in that
> they can realize the 'gains' and strengthen their balance sheets.
> As far as my comment about selling 'anything' is concerned, even
> the most foolish of investors would see the merit of holding on to
> profitable stakes in well-capitalized firms...yet, according to you,
> US banks are selling even these assets. Hence, they will sell ANYTHING
> to raise capital. I'm not sure what you find incorrect with this
> reasoning.
>
>
>
> Your argument about TARP is certainly an official line. But, please
> tell me how many Congressmen's jaws dropped when BofA gave the slightest
> appearance of using TARP money to up the CCB deal. Here's a line
> from the International Herald Tribune (most papers reported something
> similar):
>
> "There's still the pesky matter of TARP. The idea that borrowed U.S.
> government cash is being sent back to one of its biggest creditors
> is ironic at best, and could raise political hackles. Bank of America,
> which tapped private investors for $10 billion before getting a government
> injection, says it hasn't used TARP money for the purchase."
>
> "Still, all the bank's cash is ultimately in the same pot, and this
> particular $7 billion won't be used to get credit markets moving
> in the United States, as TARP was intended to do. "
>
> www.iht.com/articles/2...
>
> I use this line of reasoning to debunk your statement:
>
> "(2) TARP looks at overall capital ratios and does not review by
> geographic market segment. "
>
> All roads lead to Rome, and TARP allocations will receive some sort
> of oversight from Congress, and they ARE looking very closely at
> geographic market segments.
>
>
>
> I think this was a typo on your part - the unrealized gain on CCB
> is $3 billion, not $30 billion. That is a world of difference, given
> BofA's current market cap.
>
>
>
> Anyway, thanks for the comment. I am looking to become more 'informed'.
>

Mar 04 04:40 PM

[Bo Peng:]

User 360916, do you have a point or are you arguing for argument's sake?

Again, this is not the place to argue about trade policy and global imbalance and social structure and political philosophy. If you'd like to talk about it, let's move to my blog and we can drill down to it. Here I'm talking about investment opportunities. Are you trying to say big US banks have yet to pull their big stakes out of China, or are you saying they're done?

My point is beyond this, however. What the US big banks have or have not done with their China stakes is irrelevant on this regard. What I'm saying is China is in a fundamentally more sound footing at this juncture. Let's stick to this here. Anything else, move over to my blog and we can talk about it.

Mar 04 11:23 PM

[Ricard:]

I'm sorry, but I really must question your number again.

The footnote you are referring to on pg 129 is in regards to total equity. The footnote refers to all "Available-for-sale marketable equity securities", of which the total unrealized gain of *all* equities are around $7.7 billion. Your $27 billion number is in regards to total shareholders equity, on page 21:

"Period end shareholders’ equity increased $30.2 billion due to the issuance of preferred stock including $15.0 billion to the U.S. Treasury in connection with the TARP Capital Purchase Program, a common stock offering of $9.9 billion, $4.2 billion of common stock issued in connection with the Countrywide acquisition, and net income...

...Average shareholders’ equity increased $28.2 billion due to the same period end factors discussed above, except accumulated OCI benefited from the fair value adjustment related to our investment in China Construction Bank (CCB) which we began to fair value in the fourth quarter of 2007."

This is all from their 2008 annual report, which you recommended I read.

I told myself I'd never look at a bank's financials again after trying several years ago. The 'trillion' numbers disturbed me quite a bit. I'm glad I stuck to that.

Thank you for the suggestion regarding what classes to take, but I believe my knowledge right now is adequate to parse through a simple financial statement.

Anyway, I am beginning to run out of patience for this discussion. Good luck with your investments.



> This has to brief but I suggest taking a global econ course and global
> accounting if it is offered at a university near you.
>
> Let me be very simple: (1) First of all, there is NOT a typo. BoA's
> unrealized gain in the footnotes to their A/R was USD30 billion (actually
> only 27 billion to be technical in that their original investment
> was 3 billion). My point: investing in CCB was/is way more profitable
> than running their own business. Investing in Chinese companies
> has made everyone richer -- that's my original point in my comment
> to Bo Peng.
>
> OTOH, investing in US companies (BX,MS etc) has produced disastrous
> losses for the Chinese. They've figured out that they've been sold
> a 'pig in a poke' and will no longer be the source of funds for western
> financial institutions.

Mar 05 12:40 AM

[Ricard:]

BTW, those were the *only* two references to CCB in BofA's entire 3-400 page 10K. You can thank me for doing your research later.

Mar 05 12:46 AM

[HaavBline:]

constructe:

I agree that in the US, people get to act out class warfare on TV. That you can not do that in China does means that social stabiltily needs to be closely monitored 'on the streets'. But western media have been working overtime on this aspect ever since they were allowed to report from the countries. So their is certainly no shortage of very timely information on this subject. But my point is: Class warfare are breaking out all over the world, and may get a lot worse.

As for China's industrial development, I think you are making a grave mistake of "not seeing the forest for the trees". Your observation that technical and managerial talents remain in the hand of Taiwan, Japan, HK investors are quite out of date. Yet it remain true in some areas, and that led you to missed the much bigger picture.

China has methodically established multiple threads of development processes in the last 20 years. It seems you are stucked with the first thread they started 30 years ago.

If you are in China as a Wallmart purchasing manager, you would see that the list of your suppliers have changed from mostly Taiwanese and HK factories in China to include a lot of mainland Chinese-owned factories.

If you are a Silicon Valley venture capitalist in China, you might have already funded some companies funded by overseas returnees (mainland Chinese) now listed on Nasdaq. (Bidu, Suntech Solar, numerous others)

If you are a procurement decision maker at AT&T or Verizon, you might have been invited to Shenzhen numerous times to visit either Huawei and ZTE, and met their home-grown or western-trained management and technical staff. These are successful hi-tech communications infrastructure equipment manufactors that were major factors in pushing some major American competitors to be sold or face bankcrupcy (Nortel, Lucent).

Not every threat has been successful of cause. There were those in China that believed that they can apply the sheer scale of the Chinese and leep frog their competition by buying western brands, technologies, management, or even customers. Like the Great Leap Forward during the Mao era, most of these attempts have failed. Most notably TCL's purchases of failed Siemans and Thompson divisions in cell phones and TV, and Legend Computer's purchase of IBM PC and instantly transformed as Leveno. Very naive mistakes indeed.


On Mar 03 02:23 AM constructe wrote:

> Hava: You may not have been in China recently. It is a boiling pot
> of dissatisfaction aides from Shanghai and Beijing which are a bit
> insular. You mistake the US. It's citizens complain and argue, that's
> democracy but it doesn't lead to overthrows of the government, military
> crackdowns, and insurrection.
>
> Clearly, centralized managed economies served Asia and India from
> getting off the ground by selling cheap labor. It is a relatively
> simple equation. This does not vindicate managed economies over free
> market developed economies. It is naive to even allude to such a
> fact. As long as China suppresses freedom of thought and its byproduct,
> innovation and creativity I see less hope for its future prosperity
> than even a economically subdued US.
>
> The dirty fact about China is that most all its technical and managerial
> expertise remains overseas in Taiwan, Japan, HK and elsewhere that
> they don't like to admit. Because of this, China can reverse all
> its gains within a matter of years. Perhaps even in a year. When
> foreigners close shop there will be nothing left.
>
> China investment is one of the most risky investments you can make.

Mar 05 02:05 PM

[Bo Peng:]

Last two day's markets have been interesting. Yesterday worldwide equity markets rallied on rumor of additional stimulus from Chinese gov. Today everything tumbled on second-thoughts on that.

To me, both are over-reactions. China will not be able to single-handedly turn world economy around, not with the massive debt in US, massive leverage (still!) in European banks, and near collapse of most all of eastern Europe in both currency and debt. And I very much doubt the 8% 09 growth "prediction" from Beijing would bear fruit. But, I stand by my view in this post: China has a good chance of staying economically sound and socially stable in 09, thus providing some support to world economy.

But if world economy stays in constant crisis mode beyond 09, then the game may need reset again.

Mar 05 02:21 PM

[coreopsis:]

Your comment is a non-sequitur.


On Mar 03 10:14 PM JX wrote:

> You are the one who is not thinking this thru. Beyond what Richard
> has said, think about this:
>
> In this environment, only the absolutely best financial assets can
> have buyers, at price levels that won't cause the sellers to puke
> their guts out. Look at AIG's attempt to sell AIA, supposedly its
> best asset. It's hopeless for the American tax payers to recoup the
> $180 billion or a sizable portion of it.
>
> HSBC is arguably the best large Western bank standing (It hasn't
> taken in any government money yet, unlike JPM, WFC and GS). It's
> getting out of the US market, and even taking the pain of share issuing,
> while holding on to all its Chinese shares, and maintaining its Chinese
> staff level.
>
> On Mar 03 11:04 AM User 360916 wrote:

Mar 07 01:16 PM

[mr freddo:]

Thanks Bo. I agree that China is going to be well positioned in the new world economy going forward. I am looking at MCHFX Mathews China. The Chinese communists have played the capitalist game well and now they will reap the rewards in the years to come as an economic superpower.

Mar 07 08:31 PM

[Bo Peng:]

mr freddo, the Chinese gov hasn't been "communist" for decades, and very few true-to-the-color communists among the general population or the elite. And it's not because they played the capitalist game so well. They happened to be conservative and prudent in a right area (financial reform) at a right time (and it doesn't mean they're right in all areas).

As I said in the post, it's not all about luck however. There're a few fundamental differences, primarily due to recent history and current stage of socioeconomic development.

Mar 08 05:00 PM