M.R. Henderson

Yet Another Huge Economic Number Coming out of China. Hard to Believe

Chinese data has never been accurate, but has always implicitly or explicitly served the purposes of those who report up the ladder. Recently a team of 1st tier western demographic economists were told not to come to China this fall to help design the first real household survey here. I would take this to mean that data is not becoming more transparent. There are some statistics we can use to get closer to China's economy, but they are most definitely not internally generated numbers, but rather estimates of oil imports, reports by foreign run franchises, imports and protectionist measures.

As for those looking to invest in this incredibly volatile and opaque market, more people are getting sick here, as could be expected with no regulation. And while the stimulus has pushed up the stock market, a number of medical suppliers have been red-flagged, pushing down their prices even while hospitals are being build across the country. A basket of flagged hospital suppliers could deliver a nice return.

A note to boot: along with money and relationships, health care has become a very important gift between business men, like gifts of Wisconsin ginseng, or reclusive qi gong doctors who can heal anything, medicine has become the preferred medium of Chinese business bribes.

Krugman to China: Go Green or Pay the Price

Reading Krugman's column, I believe there is an argument to be made that it is irresponsible of him at this time to suggest "green" means by which rising global protectionism could be implemented against China. A China without growth could disintegrate into a larger polluter than it is currently.

I'm reminded of an essay that detailed how the Chinese might diplomatically outflank global protectionism (and specifically a US consumption tax) making use of "green" arguments. To level the playing field, as it were, I leave the link below.

sinocircle.wordpress.c.../

Krugman to China: Go Green or Pay the Price

Thanks for the update on Krugman.

However the world's current views will remain in history, the argument that the U.S. wiped out the native americans and the British used child labor should not be an indignant explanation for the destruction of cultures and the exploiting of childhood in 2009. I believe this goes for pollution, too. Not to mention the scale on which industry is now working. That said, of course the name of the game is push and pull, talk loud, talk soft, but it is also a strategy of moves within moves.

I would note a slyness to Krugman's actions in the face of a nation that uses diplomatic tactics not unlike a five year old throws temper tantrums.

Death of the Asian Development Model: Exporters Chasing a Failing Strategy?

If he is wrong, and now jobs are created, while consumption levels return in a year to levels that allow factories to turn a profit running under capacity, and as just happened (largely unreported) the government quietly pays off the bad loans of its banks allowing them to continue with little adverse affect, then China will have in place a more efficient infrastructure with which to develop the internal economy that it also knows is strategically necessary in the case of a war. Most of China's stimulus projects have been on the books for years. They are being accelerated, with 1/3 of the stimulus leaking, which arguably isn't that bad a thing right now in the face of declining domestic demand for goods and property. We call this corruption, Keynes would call it demand. It doesn't really matter where it comes from, if it takes cars off the lot and liquefies overbuilt apartments. And that's not even considering the deflationary effects of increased savings amidst over capacity. So this first salvo of stimulus is not necessarily a mistake for China.

But if demand from the world for China's goods does not come back to a certain level, if as Soros and others suspect, we are at a paradigm shift, and savings rates around the world increase, then China will need to rapidly increase long term employment, possibly through health and other public safety initiatives to help control things at a simmer for awhile. However, the Chinese consumer, fed by Hollywood, may need little stimulus to increasingly recycle its earnings, the Chinese multi-child boomers (1970-1981) are now coming into peak profit earning age. They do not save like their parents, indeed they spend their parents savings.

The Death of the Asian Development Model

Would holding the currency steady aid the under performing factories that had a product to sell - yes. After some years the strong would survive. Would collapsing it help employment, well, yes, for a few months of growth. China has taken a middle road at this point, and unavoidably now the question asked should be who else has tried to appease all suitors at once. What year and when has this happened?

China Investor Update

To have China pay for expensive Brazilian deep-water exploration which no one else would pay for, can only open up cheaper supplies to everyone else. Even if China takes all the oil, it is oil they are not taking from somewhere else. This is clearly a win for Brazil, for China, only time will tell if they are spending too much.


On Apr 22 10:44 AM CautiousInvestor wrote:

> Chinese corporations and the state owned sovereign wealth fund are
> striking keen deals across the globe and and are securing long-term
> access to needed resources at bargain prices.
>
> The Chinese have what nobody else has at the moment: cash. This gives
> them tremendous leverage as does their willingness to strike deals
> with countries that have strained relationships with the US, e.g.
> Venezuela.
>
> They appear to be focusing upon oil and minerals, both essential
> to the Chinese economy. In the literature there is a debate of sorts
> whether these deals will expand supplies or simply give China secured
> access at the expense of other buyers such as the US, Europe and
> India.
>
> However it unfolds, China is doing whats best for China..........and
> I wish the US would follow its example.
>
>

China Investor Update

Regarding interesting articles, a (subscription) FT article on Chinese property (quoted here: sinocircle.wordpress.c...) has a comment I found interesting, that even if Chinese lending is being fraudulently diverted into dead mortgages, this will serve the purpose of shoring up demand in the near term.

Also, an article in the WSJ (online.wsj.com/article...) suggests Chinese bank regulators may retroactively ask banks to reappraise their short term loans, which have been leaking into stocks. If this happens, in the next few days and weeks there may be quite a bit of selling of Chinese stocks as these short term loans are repaid or reallocated out of domestic equities.

With exports still contracting - falling 17% in march - this is not yet bottoming. FXP, anyone?

China's Stimulus Effect: Bounce or Recovery?

can you point to any "farm land resident" financing programs? how are these working? the domestic consumption stimulation i see is through work units.


On Apr 20 01:14 PM huangthomas wrote:

> The impact of the current world financial crisis on China is mainly
> due to plummeting export to developed countries. The external demand
> is beyond Chinese control and it takes time to whip up domestic demand
> and consumption. Since export accounts for 20 to 30% of GDP growth,
> the GDP growth drops from official goal of 8% to 6 - 7% range is
> to be expected. Q1, 2009 GDP growth of 6.1% is still a healthy and
> respectable number. It always takes time for the society to adjust
> to a new situation. In a time like this, higher expectation is unrealistic.
>
>
> GDP number does very little to the unemployed, low-skilled migrant
> workers. There are 20 to 25 million of them. Chinese government carried
> out a series of social welfare programs, such as subsidy and financing
> for purchase of electric appliance, water heater, air-conditioner,
> bike, motor bikes.....etc. These benefits are only for the farm
> land residents to make them happy while waiting for the economy to
> recover.

China: Why It Can't Be a Global Leader

as a country brings the world move value, the value of its currency should rise. so trade is heavily manipulated here, with much of the current stimulus even going into export subsidies. this model looks good for a developing nation, sucking cash into the country. but it is unbalanced, and it will lead to other countries' resentment, inevitably. Already protectionist measures are being put in place targeting china.

economists have been running china, and it shows. unfortunately, they have continued to hold all the money in government - in state owned banks - holding back domestic consumption, creativity, innovation. the lack of domestic economy is now china's greatest weakness, and what it should aggressively seek to unleash. there is latent creativity here but it is focused on unproductive measures due to the lack of laws, police, and general stability. this is not japan. this is a country all its own, with many cultures interacting now, creating mini-melting pots all over the country... but which is going to have a very hard year, i believe, when the tail end of consumer drop off catches up.

and this is natural and good, and it will hopefully force the government to unleash the incredible entrepreneurial spirit and hunger for shopping that exists here.

Collapsing Global Trade: Alive and Well

On a Happiness Index: my father is a population health economist and sometimes we get into discussions on inevitably flawed papers that endeavored to examine things like love and happiness. While we can agree that we value above GDP things like universities and museums and nature preservation, after development begins, GDP is a precursor for these higher value items. I do not know of a study yet that quantifies these testaments to true wealth, and it seems there hasn't yet been serious advances in the methodology for assessing what in fact is happiness. Judging by the number of people who insist they are happy and break down crying after a bottle of tequila (or baijiu), it is no wonder GDP is still king. And while the idea of a rabid consumer is not pleasing, having one's salary go up enable us to pursue what we wish, be it happiness or otherwise. So there must eventually also be a statistic that is paired with GDP, potentially identifying its sources, sustainability, health, age, and present development, is not easy in our MTV world, I suspect, to convince a population what is in fact happiness.


On Feb 03 03:12 PM Larrysyr wrote:

> I read somewhere that money doesn't buy happiness - the person with
> $10 million is probably no happier than the person with $9 million.
>
>
> As an American who consumes, I have to say I have plenty of junk
> already. I'm not sure there's much I need to buy for a while, except
> for the necessary consumables like food and gas. And I can waiting
> until the plasma TV gets down below $200 before springing for that
> luxury.
>
> Most people I know are in similar situations. There haven't been
> any shortages or civil unrest (yet), and we seem to have plenty to
> feed, clothe, and shelter pretty much everyone. It's actually a
> relief to stop buying stuff - we're running out of room for storage
> at my house.
>
> Maybe we should create a happiness index and work off of that and
> forget about consumption-based measures like GDP.
>
> Just a thought.

Momentum for Infrastructure Is Building in Both U.S. and China

In reference to China's stimulus, we cannot repeat this huge ghost number without repeating that Beijing has now said it will only pay 1/4 of this amount, relying on municipalities, banks, and companies to pay the rest. Municipalities for one will NOT be footing this bill. And Chinese companies, far from being helped, will likely be forced to milk themselves to pay for these "projects". Finally, much of this stimulus has already been spent. Once and only once these characteristics of China's stimulus have been addressed, can we begin to discuss China's stimulus effect.

Will U.S. Growth Beat China's in 2009?

Or will China continue to juice its stimulus package of export rebates by devaluing the RMB, and the rest of the world, fearful of depression, will not respond with tariffs but rather swallow, sinking deeper into debt, while China accumulates more savings and continues to expand?

Germany Is Fighting With Europe - Can China Be Far Behind?

It is rarely acknowledged in the press, or clearly elucidated, why the RMB should appreciate hand-in-hand with Chinese efficiency in so many export markets. In a simplified manner of speaking, as a country begins to be valued more by trading partners, the currency becomes more valuable, appreciating, making their goods more expensive. This creates sustainable development. China (and also Japan and others) have tried to pump the system for all it is worth by keeping their currencies weak, and while pointing a finger at a single nation does not work, hopefully the economic minds in the next US administration will point toward a basket of nations that must play their part in the global economy or risk undermining free trade. As far as free trade goes, if we are to rule out tariffs to respond to this type of "dumping", then what other options are open to us? WTO?

Chinese Stock Market Bottoms: What Should U.S. Investors Do?

The Chinese government has been buying heavily on the SSE. Will it catch on, as they hope, or will it be like the rally the US saw last spring? That is the question.

China, Brazil: Cashing In on Higher Food Prices

Data from the past January is no longer very useful, and mentioning 2050??? With petrol way down and Australia likely back, where is a present catalyst for grain price appreciation in the next year?

Also, regarding China, from where did you source that with "the government controls lifted, farmers and traders can resume to set market-driven prices without permission from the government." I have read and heard the opposite, that Grain prices are being more tightly controlled, have increased a little because the sharp drop in prices this fall made a lot of rural populations violent.