Strangewalk

International ETF Update: China, India

As the consumer driven Euro and Dollar zones continue to severely weaken, havoc will visit China's export sector--a full 75% of its economy, with massive layoffs occurring even now in the prison factories sprawling over the Pearl River Delta. I'm also wondering how enthusiastically the denizens of Beijing will welcome a return to normal, after they've actually been able to breath air that's only rated 50% carcinogenic for three weeks. Of course, you can always follow Mr. Roger's lead and invest in the world's most technologically advanced counterfeiting, illegal copying and copyright infringement infrastructure--good returns there indeed.

China's Global Impact: Inflation Exporter or Deflation Trendsetter?

Most of China's output comes from foreign firms 'on wheels'. In fact there has recently been a small but significant transfer of production from China to lower wage Vietnam and Indonesia, a trend that possesses a lot of potential depth. In addition, in some production categories there is really not that much of an advantage to manufacturing in China as one might think, after factoring in shipping and other costs, along with almost certain future tariffs being imposed by China's largest export markets. These factors together with a stronger RMB, fast rising domestic inflation, and contraction/falling demand from abroad, will force China's factories to increase efficiency just to maintain current pricing on exports, or even to reduce prices. Unfortunately, the move toward automation in a manufacturing sector structurally dependent on exports will negatively impact China's ability to create new jobs, which even now are only being generated at half the rate which govenment planners deem necessary to insure social stability.

Should I Invest in China?

I will stand by my comments except the one about the insolvent banking system (I'm basing that on a credible information source however.) I've taught English all over several provinces. Most of the people in China's countryside are poor. Even in the richest cities there is a tremendous level of poverty. Corruption personified--from what I've witnessed yes, although I'll certainly agree that China's system has no monopoly on corruption and may even be a runner up to the USA. Yeah...showcase is the right idea. Much of what happens in China today is for show, it doesn't have depth. Social unrest--how's over 75,000 recorded demonstrations against government corruption and unfairness in the last year alone?? Artificial value of the RMB...are you kidding? Oh, you forgot to mention my comment about pollution...

Should I Invest in China?

Mr. Mulligan's observations on the Chinese economy tediously echoes a theme common to many foreign journalists. It seems likely that much of the analysis of China's economy takes place from the vantage point of the Sheraton Grand Plaza in Shanghai, with those surmising being attended to by elegantly dressed hostesses serving 5-star fare and (lots of) drink. For example, where did Mr. Mulligan come up with the "only 8% below the poverty line" number? Something dropped by a government bureaucrat while he was gazing out at all the new Mercedes and Lexus sedans flying by? (most of these are assigned to corrupt officials with connections, purchased by financing schemes arranged through a banking system known to be insolvent). Mr. Mulligan, get on a bicycle and tour the countryside where at least 70% of the masses eke out an existance. Then you'll know not to necessarily believe everything doled out by the propaganda ministry. Most of the people in China outside of the showcase urban centers frequented by foreign news reporters and business analysts are indeed, actually, poor, and in no position to consume even the most basic of stuff churned out by the vaunted export machine. Add to that, the pollution in China is so dreadfully, horribly awful that many see serious social unrest as an almost inevitable result. China is not only hampered by government and business corruption, it personifies it. China will soon face either hyperinflation brought on by the artificial value of its currency, or a huge reduction in exports as a result of revaluation. And speaking of bubbles, where I live in Shenzhen (bordering Hong Kong), residential real-estate was last year hopelessly out of reach to the average working professional couple, but has more than doubled in the past year!