User 142738

China Becoming a 'Middle-Class' Nation

If the U.S. and Canada were to use China's definition of poverty (living on 2 yuan, or $0.30 per day) the poverty rate in those countries would be near zero. I would invite you to a "refresher course in arithmetic" yourself, and possibly a remedial Social Studies course since you are confusing the U.N. definition of "poverty" with each country's independently determined definition of "poverty."


On Sep 09 11:20 AM Jeff Nielson wrote:

> Huangthomas,
>
> You obviously could use a refresher course in arithmetic. I will
> accept your figure of 100 million Chinese living in poverty - and
> point out that is SIGNIFICANTLY less than 10% of the population.
>
>
> Neither the U.S. nor Canada can match that poverty-rate, and I doubt
> there are many European nations with such a low poverty-rate.

China Looks to Electrify Our Cars

coreopsis: “In the US, the grid is not only outdated…”

False. Outdated grids have the following characteristics:
• Extremely high variable costs per kilowatt-hour.
• Large subsidies for residential users.
• Spotty coverage or unreliable voltage during non-peak hours.

In the “centralized” areas of the European Union, Asia and Europe you have any combination of those characteristics. In the U.S. and Canada there is none of that. But if you think paying 72¢ per kilowatt-hour is the sign of a great power grid, I’d love to know the name of your utility company.

Quite a Reversal - China Central Bank Cuts Interest Rates

"Inflation cooled to 4.9 percent in August..." Really? Perhaps per month, but definitely not per year.

If you believe the inflation figures from the Chinese government then I've got a trunk of money in Nigeria with your name on it.

Shanghai Should Continue to Sell Off

Selling $1T in reserves would require the PBoC to print 6.84 trillion yuan. I believe far more than 6.84 trillion yuan were lost in this correction.

Global Stock Markets: We All Fall Down!

mdmrjsds: Are you referring to Japan?

The Great Firewall of China Faces Challenge During Olympics

To make a very quick correction: China does not have a 3G network (yet), and Japan was dragged into the 3G game. The two nations with mobile networks separate from GSM (the very old, very slow 3G predecessor) are Japan and the United States. Supposedly China is going to make their own standard, despite every other country giving up on their own standards.

On a more related note, the way the Internet infrastructure is being set up in China is very “convoluted” (I don’t know any better words to describe it). There are two rival ISPs who tamper with their competitor’s Internet traffic to convince people to switch over to them. With the exception of Hong Kong, the bandwidth capacity in and out of China is on par with a small city.

I cannot recommend anything to consider investing in at this moment, but if anybody decides to expand China’s bandwidth it would have to be a company in Australia, Japan, or the United States, since those countries run the pipes coming in and out of China.

The Case for Buying China Now

The fundamentals for FXI, or any Chinese stock and/or ETF, do all the explaining. Oil is a big contributor to losses here. A large chunk of the market capitalization is in large oil companies, but unlike all the other oil producers and refiners who make money in the “crack spread,” China’s oil companies’ profits are controlled by the whim of their government.

There are several articles quoting Chinese oil company spokespeople about how government price controls are cutting into their profit margins. Profit margins, according to the quotes, range between -40% and -50%. Common sense (and a healthy dose of economic theory) dictates that if a company is losing 50% due to government price controls, it must be due to the government holding prices down 50%.

So, according to that, gasoline must retail for about ¥3.6 a liter ($1.99 a gallon), right? Wrong. It retails for about ¥6.6 ($3.66 a gallon). Even with a half-off coupon they pay almost as much as Americans do.

I see any of three events happening by June 2009:

1.) In an effort to keep the oil companies afloat, China will keep raising and raising fuel prices. Costs for industrial production will spike, resulting in a massive migration of factories to a cheaper market (probably Mexico). Economic growth grinds to a halt. Unemployment and inflation shoot up. People get angry.

2.) In an effort to keep the people happy, China will keep subsidizing fuel prices. Import tariffs go up. Growth remains high, though it will solely be due to money supply expansion. Investors move their money en masse to other countries looking for the “next big thing.” Hong Kong stocks plummet and Shanghai stocks soon follow. China goes from a net creditor to a net debtor. People’s savings disappear. It’s Japan Part II.

3.) In a balanced point of view to keep people happy and the oil companies in business, China outsources all or nearly all of their oil exploration projects to BP, Shell, and other dirty, dirty foreigners. Import tariffs remain high but are positioned somewhere between the tariffs in the eurozone and the United States. Chinese stocks with little international exposure drop, but a few make it to the top. Growth slows, but remains modest.

Jim Rogers called the bottom for Shanghai in late May, then called it again in late June, and will more than likely call the bottom yet again in late July. I’m almost reminded of the childhood tale of the boy who cried wolf.

Eventually, people won’t care if the wolf exists or not.

Global 'Oil Shock' Rattles World Stock Markets

I normally have no opinion about the "peak oil" theory, but the chart shown in the article clearly shows production, not proven reserves. The "peak" was considered to be at 1981 in 1979. Now it's predicted to be at 2010 in 2008.

I'm also incredibly skeptical about numbers coming out of China about oil consumption (as well as any other number). The Chinese Communist Party's motto should be: "If at first we don't succeed, lower the standards." The worldwide poverty line is set, rather arbitrarily, at living on less than $1 (adjusted for purchasing parity) per day. The Party defines their poverty line at living on less than $0.70 per day. I contrast this with poverty lines defined by individual first-world governments that go up to $33 a day!

Considering how notorious the "big four" emerging markets are for putting price ceilings on commodities like cooking oil and gasoline, I'd predict 1970's-style shortages and rations, not to mention riots in the streets of Peking and Bombay.

Curbing Inflation Tops China’s Priorities

Good luck with that, Wen. The only way I see inflation lowering is when the Communist Party does any or all of the following:

- Remove all subsidies on agricultural and industrial products (not likely; about 600,000,000 people could starve to death).
- Take the cap off of foreign exchange transactions (also not likely; the yuan printing machines would wear out in a matter of days).
- Let the yuan float (somewhat likely).

Book Review: Jim Rogers' "A Bull in China"

If you believe China is anything like Western civilization in terms of any kind of freedom, you’re more naïve than you look. Everything — from the stores, to the utility companies, to the television stations, to the Internet service providers — is State–owned and State–controlled. Visit a Chinese fuel station if you don’t believe me: they’ll limit you to CNY 100 worth of gasoline (USD 13.99) — at gunpoint!

Even the money system is ruled by an iron fist. Chinese banks not dealing in Hong Kong dollars will beg for your Aussies, Euros, Greenbacks, Kiwis, and Loonies, but when you try to buy some foreign currency, they’ll treat you like a pervert in a porno shop. That’s why the country has rampant inflation and rampant deflation all at the same time.

And don’t mention the stock market. Conspiracy theorists claim the U.S. government props up the Dow and S&P. Well, in Shanghai, the Chinese government really does prop up the Shanghai Index and Hang Seng! The logic that most people like George Soros and Jim Rogers (who’s been called a hypocrite by other Chinese nationals) use is the same logic used by the shyster investors who nearly collapsed the economy of Great Britain, exploited the corruption in Mexico, and overinflated the Japanese real estate market.

Get out of that five–star penthouse suite in Beijing and take a look around. It’s not a pretty place to live. Add to that the fact that the 2008 Beijing Olympics are being politicized far more than the 1936 Nazi–era Berlin Olympics were, and you’re looking at a time bomb ready to explode. Or a behemoth of lies and deceit about to collapse on itself.

Book Review: Jim Rogers' "A Bull in China"

No; the Hong Kong dollar is fully convertible into U.S. dollars because it's both pegged to and backed by U.S. dollars. The Chinese money regime applies to all currencies, not just the U.S. dollar.