pldragon

Is Shanghai Discounting the Fight Against Inflation

Hi Michael
Regarding the over-invoicing on chinese exports, based on my own experience, I would say that it is closer to 5% of total chinese exports; but of course, maybe it is just that I deal with trickier and smarter exporters.
Some are even asking for total amount to be paid in full in HK accounts.
As long as the foreign buyers trust the chinese manufacturers/exporter... enough to wire the money in another place than China to pay for their purchases, I dont see how the chinese authorities can detect this ongoing system, of course even harder to curb it...As long as the exported goods show a declared value 10% more or less close to the national average for the same kind of goods, over-invoicing (as well as under-invoicing when it comes to try to decrease the import duties and VAT on imports) is virtually untraceable.
Another interesting thing is that until now, chinese authorities have placed a much serious emphasis on controlling the outflows of money than inflows: according to my experience, it is very difficult (and controlled) to exchange RMB into US$ if you want move this money out of china, while it is much easier to bring in foreign curencies and exchange for RMB (I know: with the limit of US$ 50,000 per year but a large chinese "family" can easily turn around)

Regarding the chinese stocks "crisis valuations", I am far from being an expert on chinese stocks, but having seen in chinese banks the queues of average chinese people in august-september 2007 withdrawing their savings and jumping on the train of stocks, just by word-of-mouth, I would say that now is quite a fair level of valuation. Once all the small investors got squeezed and dried up of their money, what is left is quite the actual value of the chinese companies....
In the boom days, when a chinese company was showing actual negative financial results, often its stock would go even higher....The stock market in China (like in Taiwan) has never been realistic , because it is composed of too many small investors, who act based on rumours, guesses and even fortune-telling...
The only real problem for the chinese government now is the fear of a general social unrest if the market drops more...
I think we are going to witness interesting events starting from september-october 2008, once the Olympic fervor will have died down