Debunking the China Growth Myth

Virtually 95% of all the evidence of economic recovery has stemmed from China in one way or another. Whether it’s the rise in price of commodities (China stockpiling), the global economy (the “China” growth miracle will lead us into a recovery), or even retail numbers (China producers lowering prices in an effort to move inventory), China is linked in one way or another to the “green shoots” nonsense.

Unfortunately for those of us living in reality, the view that China will bring about a new era of growth is a total fraud through and through. The Chinese government, unlike its US counterpart, can force China’s financial industry to do anything it says. And China’s government has been screaming “lend, lend, lend!!!”

Indeed, Chinese banks have lent out $1.1 trillion in the first half of 2009: an amount equal to one third of the country’s GDP. Over the same time period, loan-deposit ratios at Chinese banks have only increased from 65% to 66%. Put another way, only the tiniest fraction of the money being lent out has actually gone into deposits.

So where has it gone?

Well, China’s exports (about 40% of its economy) in July were down 23% Year-over-Year. China’s industrial production is up, but only back to 2001-2002 levels: hardly a sign of major investment.

Meanwhile China property values are exploding. According to Andy Xie, formerly of Morgan Stanley, property in China now costs roughly the same per square meter as in the US. The only difference is that your average Chinese worker makes 1/7 as much money as your average US worker.

And then of course, there is the Chinese stock market which exploded higher starting with the stimulus plan in November.

What I’m trying to say is that China’s “boom” has almost entirely been the result of financial speculation. China’s economy is not growing anywhere near what its “official” numbers claim. Instead, the boom in commodities and the Shanghai Stock Exchange have come from Chinese investors taking out loans and piling into the markets. There are stories of Chinese college graduates taking up day trading instead of looking for jobs.

Will China become the next economic super-power?

Probably in a decade or so.

Is China’s economy stronger than the US’s now?

They’re certainly throwing a lot more money around relative to GDP.

Can China transition from an export-focused economy to a standalone entity within a year by pumping hundreds of billions of dollars into its system?

Absolutely no chance whatsoever.

So what happens when China’s credit bubble pops?

US stocks finally catch on two weeks later.

As you can see, the Shanghai Index (dotted line) rolled over in earnest at the beginning of August. They did a quick bounce last week, but look primed for more trouble in the near future.

Keep your eyes on the Shanghai Index. It lead the US markets up… it will lead them down as well.

Comments

[Adam Sharp:]

Good points. But Chinese equities still seem vastly preferable to US ones, for the foreseeable future. Everyone is book-cooking these days. The US is relaxing accounting standards, bailing out on an unprecedented scale, and focusing on "operating earnings" to make P/E ratios palatable.

China's cooking GDP #s, sure. But GDP is increasingly irrelevant as government spending makes up a larger and larger percentage of it, worldwide. GDP won't increase productivity when it's made up of military spending, social programs, etc. In the US or China.

China's government may be spending beyond their means now, but at least they have the reserves to do so. We're just writing IOUs. Both markets will be manipulated and cooked, but I'm leaning eastwards for longs.

Aug 26 07:22 PM

[Wisdom vs. ...:]

just because someone thinks china is in store for some short-term pain does not mean he does not believe in the long-term china growth story; you fundamentalist china bulls need to open your minds because there are no facts to back up your arguments.

fact: exports are going to be down 30% YoY; what percentage of that do you think chinese consumerism can replace? not 100%! fact: all that stimulus money that went into the stock market? ditto, real estate? thus inevitable contraction. then, monstrous growth again. the point is, sell high, buy low, make bank, but certainly expect to see some lows

Aug 26 07:56 PM

[Alan Young:]

There's no resemblance between modern China and 1917-1960 Russia, but you'd never know it from the way some people harp on the term "communist."

Whenever someone pretends to be talking about the economy but then starts ranting about politics, you know they aren't objective. It's certainly true about US political comments, and no less true here.

If the *name*of the ruling party gets your blood boiling, how objective are you going to be about the effects of their *policies*? And if you hate the policies just on principle, how does that make you a better-informed investor?

I don't pretend omniscience, but let's be pragmatic. A prosperous China will be better for *everyone* than a desperate China.

Aug 26 08:05 PM

[PVizzle:]

"Meanwhile China property values are exploding. According to Andy Xie, formerly of Morgan Stanley, property in China now costs roughly the same per square meter as in the US"

HUH!?!?!? I stopped reading after I read this. Perhaps real estate in Shanghai and Beijing is inflated but this claim is absurd. Have you ever been to rural China? Yikes...

Aug 26 10:03 PM

[ic:]

Let's see --
books cooked: check
one party rule: check
corrupt officials: check (China calls paying politicians bribery, we call ours campaign contributions; China's are corrupt kickbacks, ours are earmarked porks. We are capitalists for over two hundred years, we are master in spinning and laundering our language. The Chinese will learn. Give them time.)

Communist China: privatizes health care,
Capitalist US: socializes health care (someone is trying anyway).

Communit China: govt. controls banks,
Capitalist US: banks control govt. (more specific: Goldman Sachs controls govt.)

Communist China: govt. induced stock market speculations,
Capitalist US: Goldman Sachs (again!) churns up trading volumes with High Velocity Computer trading. (Remember the guy who stole their proprietary trading software? Seems Goldman is hush hush now.)

The difference between China and the US: one has the money, one has the debts.

Aug 27 01:39 AM

[chennian:]

China has many problems, but China has one hope. Consumers in China is spending and they have money. Wake up guys, China will be the biggest automoblie market in the world this year and the biggest air travel market in the world this year. Consumption only accounts for less than 40% of GDP, but it is growing at more than 15% per year. Chinese government is just buying time to get to the point that domestic consumption can make up the gap left by falling exports. At the meantime, Chinese government is trying hard to avoid any side effects may be incurred by lending explosion.

Aug 27 04:45 AM

[TeresaE:]

I have been studying China since I tried to do business with Walmart in the mid 90s. Then, I got my master's degree in "competing" with China when I married into an industrial fastener family with multiple companies owned by various family. While American wages and costs were skyrocketing, China was constently under-bidding us - usually selling for less than we could buy the raw material for. We were told to "compete." Then after we "won" a low margin American contract, the big companies (this started with Walmart then spread to the Big 3 and other American manufacturers) turned around and demanded "rebates" from their suppliers.

So, around 3-4 years ago, I began researching my "competition" in earnest. The main problem in research on China is that you can only find the "official" government facts and anecdotal evidence. I also had access to two Chinese IT people that were on H1-B visas in the US.

So, you need to apply human nature and cultural history to what the "facts" to even begin to understand the sleeping giant.

This is what I know.

China, at least the government line, hates the west, always has, always will,.and have repeatedly vowed our destruction.

China has an official population of 1.3 billion, personally I think they are lying. My Chinese friends think so too.

Chinese middle class is around 700 MILLION people. That is our population twice. Once all of them get a taste for the products they produce this will be the world's largest customer. Sadly it won't help the US much.

The Chinese government has little regard for their citizens. They feel there are just too many poor farmers and the like. The government has shown us time and again that a few thousands deaths here and there really does not bother them. Proven by the government reaction, or overlooking until forced to bring to light, to disasters. Or the government just outright declares war on their citizens. For god's sake people China EXECUTES business guys for getting caught! My friends know their communications can, and probably will be listened to. People still disappear in the middle of the night, it is a common occurrence.

Chinese government screws with the true trade value of their currency, then props up companies in order to sell products in US below their costs. This destroys American companies with our government's blessing.

Then China comes to the failed/closed business auction and buys up all the assets to ship back to China.

So, American companies greedy to get the huge profits they created by paying the Chinese worker instead of their American customer, went to China and gave them a fast track education on manufacturing and more recently design and research/development. There are many horror stories of American workers training their third world replacements, only to find a pink slip in their mailbox.

Then, China used the American capital to build the factory to build the products we used to build.

Then, they brought in the American experts to train their Chinese counterparts in high efficiency manufacturing without that pesky EPA or worker type regulation.

Then they gifted the factories and Chinese companies their prints and trade secrets.

The American companies trusted bogus quality reports from China and ramped up diligence on redundant and worthless paperwork in America.

Come to find out China fakes a lot of lab reports, no worries though they never do things like put lead in kids' toys or melamine in dog food.

China has few worker or environment protections, playing lip service at best to talk of fixing these issues.. There are places in China where the soot has to be cleared away to harvest the plants. China is building coal burning electrical plants at levels the earth has never seen before. So even if they say they will "curb pollution" they have to be lying.

China is buying up the world's natural resources on the cheap thanks to the collapse of the American consumer. They are banking it for their own growth and forging alliances with the world's corrupt & evil leaders and West haters to boot.

China is buying Western companies on the cheap thanks to our government and financial system taking our jobs, wealth and to the edge of the abyss.

China does NOT buy many American imports, unless they use them to make into something else and send back here. China does not need to, they have the capabilities, patents, experience and the machines to make everything they could possibly need.

China has schooled many of their experts in the West, we can't pretend that they didn't see this crash coming, they helped to create it by stripping an entire strata of our economy and moving it to their shores.

We can't pretend that China does not fully understand what the words "Ponzi" and "check kiting" means, and we know from rumblings stretching back two years that they fully understand.

China is using their stimulus to build the members of their middle class, unlike ours which is being used to thank voters and slaughter millions economically.

China is building more new warships than any other country on earth.

China is not our friend and their government is swift, and highly erratic.

China is silently raising prices on the necessities that only they make. While "experts," the Fed and DC are "worried" about deflation, China is raising the prices of the things we have to have.

As I hate to shop, and only shop for food every 6 weeks or so and clothing no more than twice a year, I can see with my own eyes the constant shrinkage of package contents, cheapening of quality and increase in prices. Meanwhile American perishables are dropping in prices. So, Chinese processed food up, American farm food down. Doesn't take a genius to figure out where that will end up, Americans can't cook.

The reason I wouldn't invest in Chinese manipulated stocks is that we have no way of knowing, and no control, of China and their currently semi-open borders. What happens to my cash if China devalues the dollar (in one of a million ways) or outright confiscates foreign monies and investments?

I know my feelings aren't popular, but they are reality as I see it, with compelling evidence of the absense of the US small business, proof is beginning to stack up.

Then, we need to remember that our government is writing massive, crushing rules & regulations for our businesses. Every massive law will unfairly burden our small & mid sized businesses in "competition" with China.

Our small businesses, and their former owners, were responsible for over 50% of jobs, and tax revenues. They are on life support and our government keeps blacking out the electricity.

These small businesses used to be the worlds best customers.

China soon will not need us. Then what? You think they will continue to grease the palms of the American CEOs and Treasury coffers after we crash?

If you stuck with me this far, thanks. And believe me, or not, I SEE what has been happening for the past decade

Too bad our "experts" and citizens do not. You can't stop, or fix, that which you chose to ignore.

Aug 27 09:20 AM

[Jade Bond:]

It seems everyone is confusing politics with economics. China stinks as a bastion of free market economics. But that has nothing to do with commercial growth except in 100-year increments. It seems western cultures don't have the capacity to think beyond 12-month cycles and so we impose generational truths into seasonal economic time frames.

China IS booming economically, and doing so by manipulation. That's unquestionable. It won't be sustainable in the long run, but it took America and Russia both more than two generations to destroy their economic systems through government manipulation of banking, credit, and industry.

China will suffer the same fate if politics don't change, but it won't be soon, and it will destroy everyone else around them as they consume the world's resources and put a choke-hold on natural market prices for the rest of the world who have over-burden their productive capacity by socialist politics and fiat fiscal policy.

China will get themselves into the same hole, but the West is far ahead of them at the game of economic manipulation and currency corruption. Jake Towne here at Seeking Alpha has plenty on that theme, and one can get all kinds of historical evidence at mises.org and fee.org.

Meanwhile, there's lots of money to be made on China's growth while we wait. The alternative is to impoverish oneself in a cocoon of altruism by blindly embracing Western economic capitalist facades destined to ruin Western economies.

The epitome of hubris is to think one can layer capitalist finance over socialist policy and raise the standards of living for the poor to bring about the Utopian society. East and West are doing exactly the same thing with different methodologies. For crying out loud, there's nothing about Bernanke, Geithner, Paulson, Bush, and Obama policy that comes from capitalist theory. It's market manipulation of the highest order, different from China only in the taste it leaves in your mouth.

The fact of the matter is, all nations are corrupt, just corrupt in different ways. There is no "opt-out" alternative short of living as a hermit in a cave.

China's growth is as real as it gets, even if it's artificially produced. Smart money will win big by recognizing that fact and using one's domestic systems to take advantage of it before each of our economies fall into the ash-heap of history.

Aug 27 11:04 AM

[jacago:]

All lies. period. You don't study China just staying in US. Go there and live there for a few months then talk about China.


On Aug 27 09:20 AM TeresaE wrote:

> I have been studying China since I tried to do business with Walmart
> in the mid 90s. Then, I got my master's degree in "competing" with
> China when I married into an industrial fastener family with multiple
> companies owned by various family. While American wages and costs
> were skyrocketing, China was constently under-bidding us - usually
> selling for less than we could buy the raw material for. We were
> told to "compete." Then after we "won" a low margin American contract,
> the big companies (this started with Walmart then spread to the Big
> 3 and other American manufacturers) turned around and demanded "rebates"
> from their suppliers.
>
> So, around 3-4 years ago, I began researching my "competition" in
> earnest. The main problem in research on China is that you can only
> find the "official" government facts and anecdotal evidence. I also
> had access to two Chinese IT people that were on H1-B visas in the
> US.
>
> So, you need to apply human nature and cultural history to what the
> "facts" to even begin to understand the sleeping giant.
>
> This is what I know.
>
> China, at least the government line, hates the west, always has,
> always will,.and have repeatedly vowed our destruction.
>
> China has an official population of 1.3 billion, personally I think
> they are lying. My Chinese friends think so too.
>
> Chinese middle class is around 700 MILLION people. That is our population
> twice. Once all of them get a taste for the products they produce
> this will be the world's largest customer. Sadly it won't help the
> US much.
>
> The Chinese government has little regard for their citizens. They
> feel there are just too many poor farmers and the like. The government
> has shown us time and again that a few thousands deaths here and
> there really does not bother them. Proven by the government reaction,
> or overlooking until forced to bring to light, to disasters. Or the
> government just outright declares war on their citizens. For god's
> sake people China EXECUTES business guys for getting caught! My friends
> know their communications can, and probably will be listened to.
> People still disappear in the middle of the night, it is a common
> occurrence.
>
> Chinese government screws with the true trade value of their currency,
> then props up companies in order to sell products in US below their
> costs. This destroys American companies with our government's blessing.
>
>
> Then China comes to the failed/closed business auction and buys up
> all the assets to ship back to China.
>
> So, American companies greedy to get the huge profits they created
> by paying the Chinese worker instead of their American customer,
> went to China and gave them a fast track education on manufacturing
> and more recently design and research/development. There are many
> horror stories of American workers training their third world replacements,
> only to find a pink slip in their mailbox.
>
> Then, China used the American capital to build the factory to build
> the products we used to build.
>
> Then, they brought in the American experts to train their Chinese
> counterparts in high efficiency manufacturing without that pesky
> EPA or worker type regulation.
>
> Then they gifted the factories and Chinese companies their prints
> and trade secrets.
>
> The American companies trusted bogus quality reports from China and
> ramped up diligence on redundant and worthless paperwork in America.
>
>
> Come to find out China fakes a lot of lab reports, no worries though
> they never do things like put lead in kids' toys or melamine in dog
> food.
>
> China has few worker or environment protections, playing lip service
> at best to talk of fixing these issues.. There are places in China
> where the soot has to be cleared away to harvest the plants. China
> is building coal burning electrical plants at levels the earth has
> never seen before. So even if they say they will "curb pollution"
> they have to be lying.
>
> China is buying up the world's natural resources on the cheap thanks
> to the collapse of the American consumer. They are banking it for
> their own growth and forging alliances with the world's corrupt &
> evil leaders and West haters to boot.
>
> China is buying Western companies on the cheap thanks to our government
> and financial system taking our jobs, wealth and to the edge of the
> abyss.
>
> China does NOT buy many American imports, unless they use them to
> make into something else and send back here. China does not need
> to, they have the capabilities, patents, experience and the machines
> to make everything they could possibly need.
>
> China has schooled many of their experts in the West, we can't pretend
> that they didn't see this crash coming, they helped to create it
> by stripping an entire strata of our economy and moving it to their
> shores.
>
> We can't pretend that China does not fully understand what the words
> "Ponzi" and "check kiting" means, and we know from rumblings stretching
> back two years that they fully understand.
>
> China is using their stimulus to build the members of their middle
> class, unlike ours which is being used to thank voters and slaughter
> millions economically.
>
> China is building more new warships than any other country on earth.
>
>
> China is not our friend and their government is swift, and highly
> erratic.
>
> China is silently raising prices on the necessities that only they
> make. While "experts," the Fed and DC are "worried" about deflation,
> China is raising the prices of the things we have to have.
>
> As I hate to shop, and only shop for food every 6 weeks or so and
> clothing no more than twice a year, I can see with my own eyes the
> constant shrinkage of package contents, cheapening of quality and
> increase in prices. Meanwhile American perishables are dropping in
> prices. So, Chinese processed food up, American farm food down. Doesn't
> take a genius to figure out where that will end up, Americans can't
> cook.
>
> The reason I wouldn't invest in Chinese manipulated stocks is that
> we have no way of knowing, and no control, of China and their currently
> semi-open borders. What happens to my cash if China devalues the
> dollar (in one of a million ways) or outright confiscates foreign
> monies and investments?
>
> I know my feelings aren't popular, but they are reality as I see
> it, with compelling evidence of the absense of the US small business,
> proof is beginning to stack up.
>
> Then, we need to remember that our government is writing massive,
> crushing rules & regulations for our businesses. Every massive
> law will unfairly burden our small & mid sized businesses in
> "competition" with China.
>
> Our small businesses, and their former owners, were responsible for
> over 50% of jobs, and tax revenues. They are on life support and
> our government keeps blacking out the electricity.
>
> These small businesses used to be the worlds best customers.
>
> China soon will not need us. Then what? You think they will continue
> to grease the palms of the American CEOs and Treasury coffers after
> we crash?
>
> If you stuck with me this far, thanks. And believe me, or not, I
> SEE what has been happening for the past decade
>
> Too bad our "experts" and citizens do not. You can't stop, or fix,
> that which you chose to ignore.

Aug 27 11:18 AM

[Tony Daltorio:]

Remember that many people have been doubting China's growth for nearly three decades now.

I'm sure they will be wrong again.

Aug 27 02:40 PM

[mna:]

There's not enough talk about one of the biggest reasons about why China will have major growth going forward: historical precedence. Look at all the other east asian economies. Japan, South Korea, Taiwan, Hong Kong, Singapore.

When Japan developed post WW2, it was called the Japanese Post war miracle.

When Taiwan developed, it was called the Taiwanese Economic Miracle.

When South Korea developed, it was called the Miracle on Han River.

We're seeing a "Chinese Miracle", as millions have been lifted out of poverty in an astonishing short amount of time.

Look. Miracles only happen once. If it happens more than once, then it's not really miraculous. There must be a reason behind the rapid development. What is that reason? Some may try to point to culture, others may point to a mercantilist system (which I happen to disagree with). In any case, I don't really care what the reason is. All I know is, when I look beyond the latest economic indicators and fashionable trends in investing, I see a definite pattern. *ALL THE EAST ASIAN NATIONS HAVE INDUSTRIALIZED IN RECORD TIME*, no exceptions. To me, that's a powerful indicator of China's future growth potential. Add to the fact that historically, China has been one of the most economically prosperous places on earth, it gives me a reason to believe in China's long term growth story.

Aug 27 04:16 PM

[ArtfulDodger:]

Mr. Summers:

This is by no means your best article. You seem to have a visceral negative feeling toward China, thereby making some of your statements veer far off the right path.

You say that the US Government cannot tell its banks what to do, as the Chinese Government can?

Well, I must have been living in a dream world for the last thirty years.

Just last year did the US Government not force 25 of our largest banks to take TARP money, whether they wanted it or not; and then were not going to allow them to pay it back until there was an outcry across the nation. Which I believe was an obvious attempt to nationalize our banking system.

Did the US Justice Department and HUD not sue and fine hundreds of banks in the 1990s for "discriminatory lending practices," forcing them to lend to people who could not afford to repay the money, thus causing banks to invent the Subprime Loan?

Did Fannie & Freddie not encourage these loans right up until they became insolvent?

Did the US Government not sue and fine banks and S&Ls back in the late 1970s for "red-lining" certain areas that they considered too risky to lend money in, forcing them to put money in those areas at reduced rates, and even forcing them to donate money to those areas?

In many ways there's no more than a hen hair's difference between the two governments, and the way it's going will be no difference before long: one is that China demands its business leaders run ethical businesses; the US does not. We have laws that we enforce, indeed, but not ethics.

China has no tyrannical tax collecting agency as the US does. China has no forms of socialized medicine, as the US does. They have have only 1/100th the number of bureaucrats per capita that the US does. Their military stays within its own boundaries; ours has troops in over 120 areas around the world—protecting who?

The Chinese Government is on the side of China (true, they're where the US was in the 19th Century in some areas, but overall they look out for the Chinese first); the US Government is on the side of Internationalism, illegal aliens, and goes abroad to protect other nations that wouldn't blow a breath of air our way if we were suffocating.

Please, with the grammar, Mr. Summers, if you're going to write such highly charged articles to a sophisticated audience as SA has.

China leads today.
China led last week.
China has led all year long.

lead, led, led.

Moreover, you're dead wrong about where the money is going in China.

My small investing group sends a young man to China every year to check a few things out for us. He just returned.

Here's some of what he informed me of:
China's money is going to building railroads, new roads (and improving others), to new and improved docks, to small new businesses, to older, proven businesses, and to infrastructure in general. Their docks are backed up with ships filled with hard and soft commodities.

Some money obviously is going into its markets, but of all the markets around the world, the Shanghai looks to be the least frothy of all that have had upward runs. I believe you may have meant the Hang Seng Market.

Many of the factory provinces are shut down, but according to the guide we've used for the last several years, China is not interested in starting them back up.

China has a cash horde of close to $3 trillion with very little debt; the US has no cash and $12 trillion of debt. Even though China's exports are way down from their highs, the nation still has a huge trade surplus; the US has a huge negative one.

Your opinion is old and worn, and I believe mostly wrong, but thank you for it, nonetheless.

Aug 27 04:21 PM

[ic:]

Heck, Obama has just signed an agreement with the Chinese that our FDA will help them keep their drug making up to safety standards, and they provide us with cheap generics. That is a $300+ billion business. Remember Loral? Clinton gave them go ahead to give the Chinese our missiles technology. When things blew up, Loral folded, Clinton was scotch-free, the Chinese went to space, and stockpiled ballistic missiles. We can't blame the Chinese, can we? We are the junkies. They supply us the junks. We still believe we are free and democratic, conveniently ignoring the fact that the politicians have been doing what they please to enrich themselves and sell us out.


On Aug 27 09:20 AM TeresaE wrote:

> I have been studying China since I tried to do business with Walmart
> in the mid 90s. Then, I got my master's degree in "competing" with
> China when I married into an industrial fastener family with multiple
> companies owned by various family. While American wages and costs
> were skyrocketing, China was constently under-bidding us - usually
> selling for less than we could buy the raw material for. We were
> told to "compete." Then after we "won" a low margin American contract,
> the big companies (this started with Walmart then spread to the Big
> 3 and other American manufacturers) turned around and demanded "rebates"
> from their suppliers.
>
> So, around 3-4 years ago, I began researching my "competition" in
> earnest. The main problem in research on China is that you can only
> find the "official" government facts and anecdotal evidence. I also
> had access to two Chinese IT people that were on H1-B visas in the
> US.
>
> So, you need to apply human nature and cultural history to what the
> "facts" to even begin to understand the sleeping giant.
>
> This is what I know.
>
> China, at least the government line, hates the west, always has,
> always will,.and have repeatedly vowed our destruction.
>
> China has an official population of 1.3 billion, personally I think
> they are lying. My Chinese friends think so too.
>
> Chinese middle class is around 700 MILLION people. That is our population
> twice. Once all of them get a taste for the products they produce
> this will be the world's largest customer. Sadly it won't help the
> US much.
>
> The Chinese government has little regard for their citizens. They
> feel there are just too many poor farmers and the like. The government
> has shown us time and again that a few thousands deaths here and
> there really does not bother them. Proven by the government reaction,
> or overlooking until forced to bring to light, to disasters. Or the
> government just outright declares war on their citizens. For god's
> sake people China EXECUTES business guys for getting caught! My friends
> know their communications can, and probably will be listened to.
> People still disappear in the middle of the night, it is a common
> occurrence.
>
> Chinese government screws with the true trade value of their currency,
> then props up companies in order to sell products in US below their
> costs. This destroys American companies with our government's blessing.
>
>
> Then China comes to the failed/closed business auction and buys up
> all the assets to ship back to China.
>
> So, American companies greedy to get the huge profits they created
> by paying the Chinese worker instead of their American customer,
> went to China and gave them a fast track education on manufacturing
> and more recently design and research/development. There are many
> horror stories of American workers training their third world replacements,
> only to find a pink slip in their mailbox.
>
> Then, China used the American capital to build the factory to build
> the products we used to build.
>
> Then, they brought in the American experts to train their Chinese
> counterparts in high efficiency manufacturing without that pesky
> EPA or worker type regulation.
>
> Then they gifted the factories and Chinese companies their prints
> and trade secrets.
>
> The American companies trusted bogus quality reports from China and
> ramped up diligence on redundant and worthless paperwork in America.
>
>
> Come to find out China fakes a lot of lab reports, no worries though
> they never do things like put lead in kids' toys or melamine in dog
> food.
>
> China has few worker or environment protections, playing lip service
> at best to talk of fixing these issues.. There are places in China
> where the soot has to be cleared away to harvest the plants. China
> is building coal burning electrical plants at levels the earth has
> never seen before. So even if they say they will "curb pollution"
> they have to be lying.
>
> China is buying up the world's natural resources on the cheap thanks
> to the collapse of the American consumer. They are banking it for
> their own growth and forging alliances with the world's corrupt &
> evil leaders and West haters to boot.
>
> China is buying Western companies on the cheap thanks to our government
> and financial system taking our jobs, wealth and to the edge of the
> abyss.
>
> China does NOT buy many American imports, unless they use them to
> make into something else and send back here. China does not need
> to, they have the capabilities, patents, experience and the machines
> to make everything they could possibly need.
>
> China has schooled many of their experts in the West, we can't pretend
> that they didn't see this crash coming, they helped to create it
> by stripping an entire strata of our economy and moving it to their
> shores.
>
> We can't pretend that China does not fully understand what the words
> "Ponzi" and "check kiting" means, and we know from rumblings stretching
> back two years that they fully understand.
>
> China is using their stimulus to build the members of their middle
> class, unlike ours which is being used to thank voters and slaughter
> millions economically.
>
> China is building more new warships than any other country on earth.
>
>
> China is not our friend and their government is swift, and highly
> erratic.
>
> China is silently raising prices on the necessities that only they
> make. While "experts," the Fed and DC are "worried" about deflation,
> China is raising the prices of the things we have to have.
>
> As I hate to shop, and only shop for food every 6 weeks or so and
> clothing no more than twice a year, I can see with my own eyes the
> constant shrinkage of package contents, cheapening of quality and
> increase in prices. Meanwhile American perishables are dropping in
> prices. So, Chinese processed food up, American farm food down. Doesn't
> take a genius to figure out where that will end up, Americans can't
> cook.
>
> The reason I wouldn't invest in Chinese manipulated stocks is that
> we have no way of knowing, and no control, of China and their currently
> semi-open borders. What happens to my cash if China devalues the
> dollar (in one of a million ways) or outright confiscates foreign
> monies and investments?
>
> I know my feelings aren't popular, but they are reality as I see
> it, with compelling evidence of the absense of the US small business,
> proof is beginning to stack up.
>
> Then, we need to remember that our government is writing massive,
> crushing rules & regulations for our businesses. Every massive
> law will unfairly burden our small & mid sized businesses in
> "competition" with China.
>
> Our small businesses, and their former owners, were responsible for
> over 50% of jobs, and tax revenues. They are on life support and
> our government keeps blacking out the electricity.
>
> These small businesses used to be the worlds best customers.
>
> China soon will not need us. Then what? You think they will continue
> to grease the palms of the American CEOs and Treasury coffers after
> we crash?
>
> If you stuck with me this far, thanks. And believe me, or not, I
> SEE what has been happening for the past decade
>
> Too bad our "experts" and citizens do not. You can't stop, or fix,
> that which you chose to ignore.

Aug 27 04:56 PM

[Sluggo:]

Sounds like someone read "The coming China Wars" by Mark Navarro! Anyone with an interest in China should read it. Scary stuff!


On Aug 27 09:20 AM TeresaE wrote:

> I have been studying China since I tried to do business with Walmart
> in the mid 90s. Then, I got my master's degree in "competing" with
> China when I married into an industrial fastener family with multiple
> companies owned by various family. While American wages and costs
> were skyrocketing, China was constently under-bidding us - usually
> selling for less than we could buy the raw material for. We were
> told to "compete." Then after we "won" a low margin American contract,
> the big companies (this started with Walmart then spread to the Big
> 3 and other American manufacturers) turned around and demanded "rebates"
> from their suppliers.
>
> So, around 3-4 years ago, I began researching my "competition" in
> earnest. The main problem in research on China is that you can only
> find the "official" government facts and anecdotal evidence. I also
> had access to two Chinese IT people that were on H1-B visas in the
> US.
>
> So, you need to apply human nature and cultural history to what the
> "facts" to even begin to understand the sleeping giant.
>
> This is what I know.
>
> China, at least the government line, hates the west, always has,
> always will,.and have repeatedly vowed our destruction.
>
> China has an official population of 1.3 billion, personally I think
> they are lying. My Chinese friends think so too.
>
> Chinese middle class is around 700 MILLION people. That is our population
> twice. Once all of them get a taste for the products they produce
> this will be the world's largest customer. Sadly it won't help the
> US much.
>
> The Chinese government has little regard for their citizens. They
> feel there are just too many poor farmers and the like. The government
> has shown us time and again that a few thousands deaths here and
> there really does not bother them. Proven by the government reaction,
> or overlooking until forced to bring to light, to disasters. Or the
> government just outright declares war on their citizens. For god's
> sake people China EXECUTES business guys for getting caught! My friends
> know their communications can, and probably will be listened to.
> People still disappear in the middle of the night, it is a common
> occurrence.
>
> Chinese government screws with the true trade value of their currency,
> then props up companies in order to sell products in US below their
> costs. This destroys American companies with our government's blessing.
>
>
> Then China comes to the failed/closed business auction and buys up
> all the assets to ship back to China.
>
> So, American companies greedy to get the huge profits they created
> by paying the Chinese worker instead of their American customer,
> went to China and gave them a fast track education on manufacturing
> and more recently design and research/development. There are many
> horror stories of American workers training their third world replacements,
> only to find a pink slip in their mailbox.
>
> Then, China used the American capital to build the factory to build
> the products we used to build.
>
> Then, they brought in the American experts to train their Chinese
> counterparts in high efficiency manufacturing without that pesky
> EPA or worker type regulation.
>
> Then they gifted the factories and Chinese companies their prints
> and trade secrets.
>
> The American companies trusted bogus quality reports from China and
> ramped up diligence on redundant and worthless paperwork in America.
>
>
> Come to find out China fakes a lot of lab reports, no worries though
> they never do things like put lead in kids' toys or melamine in dog
> food.
>
> China has few worker or environment protections, playing lip service
> at best to talk of fixing these issues.. There are places in China
> where the soot has to be cleared away to harvest the plants. China
> is building coal burning electrical plants at levels the earth has
> never seen before. So even if they say they will "curb pollution"
> they have to be lying.
>
> China is buying up the world's natural resources on the cheap thanks
> to the collapse of the American consumer. They are banking it for
> their own growth and forging alliances with the world's corrupt &
> evil leaders and West haters to boot.
>
> China is buying Western companies on the cheap thanks to our government
> and financial system taking our jobs, wealth and to the edge of the
> abyss.
>
> China does NOT buy many American imports, unless they use them to
> make into something else and send back here. China does not need
> to, they have the capabilities, patents, experience and the machines
> to make everything they could possibly need.
>
> China has schooled many of their experts in the West, we can't pretend
> that they didn't see this crash coming, they helped to create it
> by stripping an entire strata of our economy and moving it to their
> shores.
>
> We can't pretend that China does not fully understand what the words
> "Ponzi" and "check kiting" means, and we know from rumblings stretching
> back two years that they fully understand.
>
> China is using their stimulus to build the members of their middle
> class, unlike ours which is being used to thank voters and slaughter
> millions economically.
>
> China is building more new warships than any other country on earth.
>
>
> China is not our friend and their government is swift, and highly
> erratic.
>
> China is silently raising prices on the necessities that only they
> make. While "experts," the Fed and DC are "worried" about deflation,
> China is raising the prices of the things we have to have.
>
> As I hate to shop, and only shop for food every 6 weeks or so and
> clothing no more than twice a year, I can see with my own eyes the
> constant shrinkage of package contents, cheapening of quality and
> increase in prices. Meanwhile American perishables are dropping in
> prices. So, Chinese processed food up, American farm food down. Doesn't
> take a genius to figure out where that will end up, Americans can't
> cook.
>
> The reason I wouldn't invest in Chinese manipulated stocks is that
> we have no way of knowing, and no control, of China and their currently
> semi-open borders. What happens to my cash if China devalues the
> dollar (in one of a million ways) or outright confiscates foreign
> monies and investments?
>
> I know my feelings aren't popular, but they are reality as I see
> it, with compelling evidence of the absense of the US small business,
> proof is beginning to stack up.
>
> Then, we need to remember that our government is writing massive,
> crushing rules & regulations for our businesses. Every massive
> law will unfairly burden our small & mid sized businesses in
> "competition" with China.
>
> Our small businesses, and their former owners, were responsible for
> over 50% of jobs, and tax revenues. They are on life support and
> our government keeps blacking out the electricity.
>
> These small businesses used to be the worlds best customers.
>
> China soon will not need us. Then what? You think they will continue
> to grease the palms of the American CEOs and Treasury coffers after
> we crash?
>
> If you stuck with me this far, thanks. And believe me, or not, I
> SEE what has been happening for the past decade
>
> Too bad our "experts" and citizens do not. You can't stop, or fix,
> that which you chose to ignore.

Aug 27 05:31 PM

[realold:]

Although I am not qualified to speak on China, it is clear that they are much more organized and successful than we have been in recent history, especially in the last ten years.

Our leaders (oxymoron in America) are not qualified to manage the economy, but bound to try, and not inclined to stop the selling out of the country for quick profit. What is next, farm land?

The latest administration seems to embrace the decline and is obviously working to get their backers the last few pieces of the moldy pie via wealth transfer and government control of everything in our lives.

No one is working to improve the country, only tax it, spend our grandchildrens' money and regulate us out of existence in the name of global warming and protecting us from ourselves.

Worse, Americans voted them all in. We get what we ask for. In this case, living in poverty and breathing China's smog.

We need real leaders. Anyone seen one lately?




On Aug 27 09:20 AM TeresaE wrote:

> I have been studying China since I tried to do business with Walmart
> in the mid 90s. Then, I got my master's degree in "competing" with
> China when I married into an industrial fastener family with multiple
> companies owned by various family. While American wages and costs
> were skyrocketing, China was constently under-bidding us - usually
> selling for less than we could buy the raw material for. We were
> told to "compete." Then after we "won" a low margin American contract,
> the big companies (this started with Walmart then spread to the Big
> 3 and other American manufacturers) turned around and demanded "rebates"
> from their suppliers.
>
> So, around 3-4 years ago, I began researching my "competition" in
> earnest. The main problem in research on China is that you can only
> find the "official" government facts and anecdotal evidence. I also
> had access to two Chinese IT people that were on H1-B visas in the
> US.
>
> So, you need to apply human nature and cultural history to what the
> "facts" to even begin to understand the sleeping giant.
>
> This is what I know.
>
> China, at least the government line, hates the west, always has,
> always will,.and have repeatedly vowed our destruction.
>
> China has an official population of 1.3 billion, personally I think
> they are lying. My Chinese friends think so too.
>
> Chinese middle class is around 700 MILLION people. That is our population
> twice. Once all of them get a taste for the products they produce
> this will be the world's largest customer. Sadly it won't help the
> US much.
>
> The Chinese government has little regard for their citizens. They
> feel there are just too many poor farmers and the like. The government
> has shown us time and again that a few thousands deaths here and
> there really does not bother them. Proven by the government reaction,
> or overlooking until forced to bring to light, to disasters. Or the
> government just outright declares war on their citizens. For god's
> sake people China EXECUTES business guys for getting caught! My friends
> know their communications can, and probably will be listened to.
> People still disappear in the middle of the night, it is a common
> occurrence.
>
> Chinese government screws with the true trade value of their currency,
> then props up companies in order to sell products in US below their
> costs. This destroys American companies with our government's blessing.
>
>
> Then China comes to the failed/closed business auction and buys up
> all the assets to ship back to China.
>
> So, American companies greedy to get the huge profits they created
> by paying the Chinese worker instead of their American customer,
> went to China and gave them a fast track education on manufacturing
> and more recently design and research/development. There are many
> horror stories of American workers training their third world replacements,
> only to find a pink slip in their mailbox.
>
> Then, China used the American capital to build the factory to build
> the products we used to build.
>
> Then, they brought in the American experts to train their Chinese
> counterparts in high efficiency manufacturing without that pesky
> EPA or worker type regulation.
>
> Then they gifted the factories and Chinese companies their prints
> and trade secrets.
>
> The American companies trusted bogus quality reports from China and
> ramped up diligence on redundant and worthless paperwork in America.
>
>
> Come to find out China fakes a lot of lab reports, no worries though
> they never do things like put lead in kids' toys or melamine in dog
> food.
>
> China has few worker or environment protections, playing lip service
> at best to talk of fixing these issues.. There are places in China
> where the soot has to be cleared away to harvest the plants. China
> is building coal burning electrical plants at levels the earth has
> never seen before. So even if they say they will "curb pollution"
> they have to be lying.
>
> China is buying up the world's natural resources on the cheap thanks
> to the collapse of the American consumer. They are banking it for
> their own growth and forging alliances with the world's corrupt &
> evil leaders and West haters to boot.
>
> China is buying Western companies on the cheap thanks to our government
> and financial system taking our jobs, wealth and to the edge of the
> abyss.
>
> China does NOT buy many American imports, unless they use them to
> make into something else and send back here. China does not need
> to, they have the capabilities, patents, experience and the machines
> to make everything they could possibly need.
>
> China has schooled many of their experts in the West, we can't pretend
> that they didn't see this crash coming, they helped to create it
> by stripping an entire strata of our economy and moving it to their
> shores.
>
> We can't pretend that China does not fully understand what the words
> "Ponzi" and "check kiting" means, and we know from rumblings stretching
> back two years that they fully understand.
>
> China is using their stimulus to build the members of their middle
> class, unlike ours which is being used to thank voters and slaughter
> millions economically.
>
> China is building more new warships than any other country on earth.
>
>
> China is not our friend and their government is swift, and highly
> erratic.
>
> China is silently raising prices on the necessities that only they
> make. While "experts," the Fed and DC are "worried" about deflation,
> China is raising the prices of the things we have to have.
>
> As I hate to shop, and only shop for food every 6 weeks or so and
> clothing no more than twice a year, I can see with my own eyes the
> constant shrinkage of package contents, cheapening of quality and
> increase in prices. Meanwhile American perishables are dropping in
> prices. So, Chinese processed food up, American farm food down. Doesn't
> take a genius to figure out where that will end up, Americans can't
> cook.
>
> The reason I wouldn't invest in Chinese manipulated stocks is that
> we have no way of knowing, and no control, of China and their currently
> semi-open borders. What happens to my cash if China devalues the
> dollar (in one of a million ways) or outright confiscates foreign
> monies and investments?
>
> I know my feelings aren't popular, but they are reality as I see
> it, with compelling evidence of the absense of the US small business,
> proof is beginning to stack up.
>
> Then, we need to remember that our government is writing massive,
> crushing rules & regulations for our businesses. Every massive
> law will unfairly burden our small & mid sized businesses in
> "competition" with China.
>
> Our small businesses, and their former owners, were responsible for
> over 50% of jobs, and tax revenues. They are on life support and
> our government keeps blacking out the electricity.
>
> These small businesses used to be the worlds best customers.
>
> China soon will not need us. Then what? You think they will continue
> to grease the palms of the American CEOs and Treasury coffers after
> we crash?
>
> If you stuck with me this far, thanks. And believe me, or not, I
> SEE what has been happening for the past decade
>
> Too bad our "experts" and citizens do not. You can't stop, or fix,
> that which you chose to ignore.

Aug 28 12:59 AM

[markeetomarket:]

Ten years ago, my grandfather, who grew up as a young man during the great depression on a sugar beet farm in Nebraska, looked me straight in the eye and said, "Markie, the chinese will own this country!".

As with many things he said, he was right. He also made a lot of money in the stock market in the 80's and 90's. I wonder what he would think about the fact that people in the US cant afford to buy all the chinese junk now?

I predict that the chinese market is going to go down for a while and that it will lead the US market down. We are all doomed.

Aug 28 02:59 AM

[coreopsis:]

Plato would have been delighted to see that your comments are as simplistic as your brain is simple.


On Aug 27 01:39 AM ic wrote:

> Let's see --
> books cooked: check
> one party rule: check
> corrupt officials: check

The fact that Yanks don't know what 'cooked books' means (even on an ersatz economic website) really suggests doom for the cowboys in the years and decades ahead.

Aug 29 10:14 AM

[doubleshortetf:]

More sober data on the "great" China for those in adoration of China and it's not to high WEALTH:

China would have to triple the size of its economy - and the US would have to stand still - if China were to pull even with the US in GDP.

Consider the following numbers, culled from official Chinese statistics:

1. About 65 million Chinese people live in households with more than $20,000 a year in income.
2. Around 165 million make between $2,000 and $20,000 a year. 3. About 400 million Chinese have household ­incomes between $1,000 and $2,000 a year.
4. About 670 million have household incomes of less than $1,000 a year.

As you see China is a land of extra­ordinary poverty. Mao made the Long March to raise an army of desperate peasants to rectify this sort of extreme imbalance. The imbalance is there again, a volcano beneath the current regime.

Aug 29 04:40 PM

[coreopsis:]

Don't suppose the trend is worth looking at...duh, doubleshortbrains.


On Aug 29 04:40 PM doubleshortetf wrote:

> More sober data from my data processing mid-brain

Aug 30 10:16 AM

[Strangewalk:]

Mark Anthony: I think Graham is more right than wrong simply because I've been in China for 7 years and can verfiy what he says. 30 years ago China was a backward, poverty stricken totalitarian wasteland. Growth didn't happen until massive foreign investment and transfer of manufacturing capacity on an unprecedented scale. Even today, 75% of China's exports are produced in foreign factories and 95% of its technology exports. Further, the Chinese government is fearful of a huge, consumer driven middle class and carefully limits its expansion. The profits, and control it brings, mostly go to the government, which means the corrupt bosses, favored industries and the military. Something else--if you spend time in China you can sense that much of the vaunted growth is somehow illusory and phoney--much of the massive construction projects with gaudy architecture will crumble in 20 years (I've spoken with foreign civil engineers who've inspected it), and I've known building inspectors in China with monthly incomes of 3000 RMB (about US $400), who had multiple homes, new German sedans, kids attending Stanford and foreign bank accounts. Wait until a major earthquake strikes a city like Chongqing, Chengdu or Tianjin--it will be an unimaginable disaster! Finally, on the last road trip I took from Shenzhen to Guangzhou (1 1/2 hours), the pollution was so awful-ghastly-horrible I almost felt I would develop a malignant cancer before I reached my destination.

On Aug 26 03:50 PM Mark Anthony wrote:

> Graham:
>
> Your article is completely wrong. China's growth has been going on
> for more than 3 decades now and you think that China growth is just
> a "myth"? You are the one living in illusion, not reality. You probably
> know China only from typical Hollywood movies and horror stories
> about the Cultural Revolution. Frankly if you have not visited China
> at least once every three months, or read Chinese news medias on
> a daily basis, it is hard for you to keep track of what's going on
> in China.
>
> The growth in China is real. The potential is still huge. China's
> economic development is still at an extremely low level, if you calculate
> per capital quantity. China is not catching up with the USA. China
> is merely catching up with global average right now. And China still
> has a long way to go even to reach the global per capital average,
> in terms of vehicle ownership, housing square footage, food consumed
> and other measurements of the living standard.
>
> The only problem with China's growth, is that I am afraid this planet
> simply do NOT have enough natural resources to satisfy China's insatiable
> demand. Just remember, there are 1.3 billion people in China. These
> people are just as educated or even better educated than the average
> Americans. They work just as hard and just as productive as an average
> American worker. So what stops them from achieving a living standard
> as good as the American ones? The only real limitation to China's
> growth is the natural limit of the planet earth:
>
> seekingalpha.com/autho...

Sep 21 05:12 AM