Strangewalk

Debunking the China Growth Myth

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...

Financial Meltdown: China Blames West, West Blames China

I partly disagree. The Chinese government pursued an aggressive policy of mercantilism through import restrictions and state-supported dumping in addition to actively promoting the world's largest counterfeiting, illegal copying and pirating industries that pre-empted internal demand for imported products as well as creating new markets for its illicit goods. Also, Chinese exporters paid the world's highest tax rates that built the government's massive, destabilizing foreign reserves and prevented the development of a consumer driven middle class to purchase imports. The foreign reserves in turn led to arfificially low interest rates in much of the world that allowed the bubble to form.


On Sep 18 06:03 AM Carlos Lam wrote:

> Our Western leaders' arguments are completely laughable. The problems
> were caused by China's saving and producing??? That's like an arsonist
> blaming the match manufacturer for burning down a building.

How Much of China's Export Industry Is Owned by U.S. Corporations?

"There is no reason America can't do that"...Yes, but our free zones would also need to be lawyer free to protect companies from endless lawsuits, labor union free as the Japanese transplants are...and you'd need to find people that were not too obese to work and that weren't so full of themselves that they could actually cooperate with others--good luck on those points.

Winter's Coming for the Boomers: Part 2

It should be mentioned that the coal and oil-shale deposits in the US contain the equivalent energy of all the oil that's ever been extracted in history and that are projected to be used in the next century combined.

Winter's Coming for the Boomers: Part 2

The US has by far the largest deposits of both coal and oil-shale of any country. And from everything I'm reading the technology exists to utilize it as an energy source while producing very little pollution. There has to be some kind of power-money-political game going on with oil--maybe some people understand it, I don't. The following is from Wikipedia:

Royal Dutch Shell has announced that its in situ extraction technology [of oil shale] in Colorado could become competitive at prices over $30 per barrel ($190/m3), while other technologies at full-scale production assert profitability at oil prices even lower than $20 per barrel ($130/m3).[43][55][56] To increase efficiency when retorting oil shale, researchers have proposed and tested several co-pyrolysis processes.[57][58][59]...

A 1972 publication in the journal Pétrole Informations (ISSN 0755-561X) compared shale-based oil production unfavorably with the liquefaction of coal. The article portrayed coal liquefaction as less expensive, generating more oil, and creating fewer environmental impacts than extraction from oil shale. It cited a conversion ration of 650 litres (170 U.S. gal; 140 imp gal) of oil per one ton of coal, as against 150 litres (40 U.S. gal; 33 imp gal) of shale oil per one ton of oil shale.[27]

Seven Notes on the China Wildcard

While this post may seem off topic, the point is that investing in China now is like playing craps in Las Vegas, and you'd probably have better chances there.

How did China accumulate such massive foreign reserves? Is it because the government imposed the world's highest corporate tax rates on its export manufacturers while pursuing aggressive, unfair, deceptive mercantilist policies in foreign trade along with massive copyright/patent infringement and piracy? Factories were limited in ability to pass profits on to workers as higher wages, which preempted the development of a domestic, consumer driven economy, while ensuring continued CCP control of the purse strings. China lost its golden opportunity, the death of globalization has begun with a bang and Smoot-Hawley will certainly be repeated in some form. Now all the Chinese government can do is play monetizing, speculation and bubble games while buying time from the certain inevitability of disaster that it actively participated with the Americans in making. Also, I don't think the Chinese have nearly the same ability to sustain their bubbles as the Americans did, especially in the current global atmosphere of extreme volatility and fear.

The Worst Case Scenario (Someone Has to Say It)

Gregman2: It will be a long, long....long time before it makes any sense to MFG in the US: Labor unions, armies of lawyers suing for any or no reason, over-weight, undisciplined labor pool with an 'I want it now' work ethic, shattered social fabric plagued by broken homes while awash in illegal drugs, idealism replaced by hedonism and internet porn addiction, and all of this led by corrupt and incompetent government and business leadership. Forget it USA, it's over.


On May 03 11:35 AM Gregman2 wrote:

> Jake, I love reading you--this is akin to the film "MadMax." I tend
> to a greee with a few of your points (and scenarios). I too have
> wondered what a total breakdown and Balkanization would look like
> in the U.S.
> But, in the end the single biggest problem we have is too much debt.
>
> If this ultimately is forced to be restructured we can begin to pro--
>
> gress. And ultimately if prices become cheap enough here it will
> make sense once again to manufacture in the U.S.;-)

This Is Just the Beginning

I agree with much of what Schiff says but he is just flatly in error with some of his assessments. For example, he like Rogers talks up a storm about China--the problem with this is that I lived there, and can see that they are just wrong. Rogers even went so far as to say China was the best governed country in the world. Ha Ha Ha! Why doesn't he live there then? Because there isn't any 'air'--it's a thick, carcinogenic soup leading to unprecedented rates of cancers and birth defects which will only get worse! A blacker, fouler vision of hell could not be imagined than to see some of the rivers there! Corruption levels are far, far worse than anything that exists in the US. It's estimated that 80% of the populace would vote to remove the illegitimate regime from power if they could! Most of the impressive architecture you see in Shanghai and other cities will last for 20 years before being condemned, the quality of construction is horrifying! China has run out of water, China will soon have the oldest average population in the world. China has an AIDS epidemic that is growing exponentially. China's claim to fame is entirely based on foreign investment that is now drying up and even leaving. Hey Schiff, is the world going to run from the Dollar to the RMB?...with the "greatest mass murderer of human history" Guiness award winner Mao smiling down from every note?

2009 Economic Forecasts Ignore Demographic Shift

Genuine wealth creation and sustainable recovery via American manufacturing cannot return since the same factors (unions, environmental extremists, worker's comp shake-down lawyers, etc) that forced its move to China would just drive it back there again. The only kind of recovery that's plausible is a new round of credit expansion resulting from Chinese funding of US consumption. This model hopefully won't return again, so what's left?

Low Rates, Big Problems

Peter Schiff's underlying reasoning is sound to an extent, but it is also unbalanced and short sighted. The fundamental problems threatening both the Euro and Asia zones are just as deep and serious as those here in the USA, if not more so, just not as immediate or well publicized. As one example:

globaleconomicanalysis...

Much of China's recent boom is illusory and shallow. Without US and other direct investment creating labor-intensive, sweat-shop platforms for mass exporting, there would be very little left aside from the world's preminent high-tech counterfeiting and pirating industries (and a completely destroyed environment).

Peter Schiff seems to have 20-20 vision when surveying the American economic landscape, but wears rose colored glasses with the wrong Rx when gazing out across the Pacific or Atlantic. He won't admit to his investors the truth: he can run, but there's nowhere left to hide.

The Truth About Bailouts

I agree with those who say that assisting the automotive companies at this time is a unique issue, separate from bailing out the slippery, oily crooks on Wall St. and financial industry. GM and Ford especially have been getting their act together in terms of world beating quality improvements, dealing with the unions and restructuring in a serious, responsible way to compete as 21st century industrial powers, and their management now is top rate. The desperate situation they face is a result to some large degree of the general economic collapse and subsequent commodities bubble (high gas prices) caused by the slick con artists at Lehman, Countrywide, AIG etc. Peter Schiff is advocating throwing the the baby out with the bath water, and he missed it on this one.

Jim Rogers on China

Although I really love China and the Chinese people--whom I prefer for friendship/company well over loud, arrogant Americans--Jim Rogers is wrong! The prosperity of China now or in the future is an illusion. China is perhaps good for a bubble, to be arranged by the same slippery Ph.D. con artists who engineered America's financial debacle. And if you notice, Mr. Rogers is first in line to condemn that disgraceful exploitation, but yet he was a big part of making it happen--he was and is a real estate, forex and commodities speculator.

China has no water! China will soon have the oldest population in the world, to continue trending much older! China's psychopathic ruling oligarchy is so corrupt, they teach the Russians lessons! China has no democracy, human rights, private property protection, or rule of law! One of the largest industries in the country, managed by the PLA, is counterfeiting and pirating, and they can't even enforce domestic copyright or patent law! China's environment has been degraded beyond imagination! Much of China's economy is based on low end, labor intensive, foreign invested capacity intended for export! China's civil engineered infrastructure is of such low quality it will collapse in 5-10 years! China is an avowed atheist state that has produced not one technological or scientific advance of note for 2000 years! (credit Confucionism) I'm afraid China is destined to follow American down the sewer drain--neither place has anywhere else to go.

Jim Rogers on China and Commodities

The case against China: No water (and what little there is polluted beyond imagination), most degraded environment on earth, highest cancer rate (from pollution), oldest population trending much older, not one tech or science advance of note in 2000 years, unelected, unaccountable, illegitimate government that does not tolerate dissent or criticism, institutionalized corruption (see transparancy international), unchecked AIDS epidemic, no rule of law, enforced atheist culture, GDP based mostly on export from foreign invested manufacturing, huge real estate bubble now imploding.

Case for China: bogus CCP statistics and very worried Jim Rogers talking up China while being billions long on Chinese equities down 70% for the year.

Interview with Jim Rogers, Part II: China as World’s Best Long-Term Profit Play

China has over 300 million Muslims living in countries that border its western frontier, which mostly means Xin Jiang Province. This area was mostly Islamic before being fully absorbed by China. Today, the Moslems living there have had serious restrictions placed on their freedom of worship (children are prevented from entering Mosques until they are 18 years old and their religious services are strictly monitored and required to promote patriotic loyalty to the atheist state), and they are treated as second class citizens by the transplanted Chinese.

Interview with Jim Rogers, Part II: China as World’s Best Long-Term Profit Play

Jim Rogers made a killing as a slick hedge fund manager and real estate speculator--one of those guys who leverages and makes money without producing anything while robbing from those who do. The only bet to make in China is medical companies--within 10 years every third person in the country will be in an oncology ward owing to the ghastly pollution (which is getting much worse). China has no water, it can't feed it's people, it has seriously pissed off 300 millions Moslems living on its western frontier, it will soon have the oldest population in the world, and the government is so corrupt that the warlords who manage its rapid fragmentation could teach the oligarchs in Russia a thing or two. By the way, who will the Chinese copy and pirate from in the future?...and two thirds of their economy is based on exports from factories set up by foreigners,,,