beijingpaddy

China: Consequences of the Sleeping Lion Awakened

Besides ETFs and B shares, US retail investors can buy into many Chinese stocks via the Hong Kong Exchange using Etrade's Global Trading Platform. I have been using it for a long time and like its smooth process. Most times I find it cheaper (as fewer people are chasing the stocks) to buy in HK than buying ADRs on the US exchanges. Also often stocks trade cheaper on the HK exchange than the same company does in Shanghai.

disclosure: I don't work for Etrade and am not in the stock business
but do own lots of Chinese stocks.

Monetizing China's Stimulus Package

This company does not have good long term potential. One of the largest railroad stations in China has been built for Guangzhou city to replace the older one (sort of what Beijing did a few years back with the mammoth new Beijing West station, leaving the old station to serve smaller destinations) and GSH is not going to have a rail link to it. It will continue using the old station that is in the older less affluent part of the city, hence its commuter terrific to Shenzhen (main revenue maker for GSH) will be adversely effected as time goes on. In addition, the new high speed train linking HK with Guangzhou (and the high speed HK-Beijing long distance train) will hurt the Guangzhou-HK revenue stream (not significant but growing) when it is finished in a few years. Too top it all off, Guangdong province is on a road building spree and Chinese are buying cars like there is no tomorrow. This will reduce rail commuter traffic when these roads are finished. Unless the Guangdong Railroad Ministry transfers some worthwhile assets to GSH as hinted a few years back, GSH will become the victim of the provincial and central governments development plans for the Pearl River Region.

BRIC Nations: Buddy, Can You Spare a New Reserve Currency?

I posted this elsewhere but thought it was relative to the discussion on this thread too.

Some thoughtful comments upthread. thanks.

Last night while making something to eat, I listened to the Evening News in Chinese on a local Beijing radio station. This was for the domestic and not foreign audience. They interviewed some economics professor from one of the universities in town. There has been a lot of pressure from ordinary citizens and mid-level government Ganbu (cadres) to sell off some of the US Treasury holdings these last months, so it was interesting the spin the professor put on the news of the sell down. Basically he pitched the long-term desire to move to some alternate sources such as the IMF reserves. But he also made it clear that there was not going to be any rapid and broad sell off any time soon. He was obviously trying to walk both sides of the street. These kinds of folks don't get on the news in China without official blessing, so I would have to imagine his comments reflect the consensus within the State Council.

The Chinese are not famous for doing bold things suddenly. They are constantly quoting Deng Xiaoping's famous saying about the need to make one's way across the stream by feeling for one stone at a time. This reflects nicely the Chinese temperament. But I think we can get a sense from recent government comments where they want to go long term, conditions allowing. The best thing would be for the US government to begin preparing for this and start the orderly transition to an internally accepted alternative. This way they would be coming from a position of strength and keeping some overall control of the process. But this is not likely. We should instead expect the US to fight the entire global transition away from the USD, forfeiting good will and wasting both US taxpayers time and money. Too bad.

China's Treasuries Holdings Decline: Time to Start Worrying?

Last night while making something to eat, I listened to the Evening News in Chinese on a local Beijing radio station. This was for the domestic and not foreign audience. They interviewed some economics professor from one of the universities in town. There has been a lot of pressure from ordinary citizens and mid-level government wonks to sell off some of the US Treasury holdings these last months, so it was interesting the spin the professor put on the news of the sell down. Basically he pitched the long-term desire to move to some alternate sources such as the IMF reserves. But he also made it clear that there was not going to be any rapid and broad sell off any time soon. He was obviously trying to walk both sides of the street. These kinds of folks don't get on the news in China without any official blessing, so I would have to imagine his comments reflect the consensus within the State Council. The Chinese are not famous for doing bold things suddenly. They are constantly quoting Deng Xiaoping's famous saying about the need to make one's way across the stream by feeling one stone at a time. This reflects nicely the Chinese temperament. But I think we can get a sense from recent government comments where they want to go long term, conditions allowing. The best thing would be for the US government to begin preparing for this and start the orderly transition to an internally accepted alternative. This way they would be coming from a position of strength and keeping some overall control of the process. But this is not likely. We should instead expect the US to fight the entire global transition away from the USD, forfeiting good will and wasting both US taxpayers time and money. Too bad.

Soaring Retail Sales in China Demonstrate Economic Shift

Amen! This article is right on the money, for those that is that have money to invest and are smart and brave enough to put it in China. Actually, it does not take an IT PhD to know that China is a good investment.

The Chinese government strategy before all the turmoil was to ride the Flying Tiger in imitation of the other Dragons. And why not? It worked for them, why not bet the bank just one more time. But that dragon ran out of fire last year. So the Chinese have put forth something of their own making, lets just call it Chop Suey (even though there is no such creature in China): Promote exports to the developing world and provide easy financing terms to make it easier to buy Chinese than say Indian, make home a better place by building the infrastructure to make the citizens happy (and more competitive), keep an eye on the old export economy to gleam whatever can be had from it in the future, work down the USD assets by buying hard ones all over the world, gain clout with the neighbors (especially Taiwan), work on the environment by signing on to international treaties, investing heavily in alternate energy and clean coal, battery powered cars etc., and continue to work ones butts off. Sounds like a plan to me. Ever wonder why Ivy League Schools have informal quotas on the number of Chinese they will accept each year? Now you have a good clue.

Return of the 'Decoupling' Myth

Lots of truth in this article. Today's situation is more about how the world integrates than dealing with issues of decoupling. National economies no longer run in isolation of each other. We are witnessing the first global economic adjustment since globalization got real legs.

China is using this downtime to spend money building its infrastructure so that when things get more back to normal it will be in better shape to compete. More than what developed countries are doing. China is also preparing for the future by spending their hard earned USD buying commodities. Also smart and also what developed economies should be doing and are not.
Both of these are signs of preparation for a future time and not of any decoupling. This strategy is taken right out of the Chinese traditional playbook for waging war. When in a weaker position, use the time when the enemy is distracted to build your fortresses and stockpile goods. (Actually Mao did the exact same thing during the Sino-Japanese war. He used the cease fire with the Nationalists (KMT) to build his army in preparation for the day he knew would come when the civil war would resume).

Think this one through. If by some odd chance the world has changed and the US, Europe. Japan, etc. never recover and if they do, become totally self-sufficient in manufactured goods, commodities etc., then yes, the Chinese miscalculated and are in deep chou dofu (a form of stinky tofu). But otherwise, as expected, when the world recovers, they will emerge from this crisis stronger than before. What decoupling?

Looking for Growth? Invest in China Green Agriculture and China Automotive Systems

Apart from the technical reasons for buying CGA, I can attest that in China there is an organic foods revolution of sorts taking place at the consumer level, to some degree driven by the food scares over the last two years or so. Now, almost every supermarket of any size offers both the internationally recognized organic certification and/or a Chinese indigenous certification system titled "green foods". The demand for clean food increases as incomes rise. So this is truly a growth industry.
Just make certain you are investing in the right companies in this sector as some I have reviewed are involved in trading activities of various sorts, (often not made clear in their annual reports), that will increase the risks of losing money or even going out of business. Unrelated to core business trading often is done by Chinese small caps (and once in a while larger caps but is rare) as a way of risk spreading and capital raising. Don't know about CGA as I have not done any domestic (China) research on them.

As most Chinese stocks should be considered long term buys for the smaller retail investor, my humble suggestion is to wait to see if and when the market declines, and then buy (and hold).
Buy cheap, sell dear.

Who Cares About U.S. Economic Reports - Look to China

The China Economic Observer has been in the business of trashing China for a long time. It is good for business. While many of the items they report in this article may be true, there are hundreds of other positive economic indicators they somehow forgot to mention.

Reminds me of an American missionary type I knew who was hanging out in China a few years back. His funding came from evangelical churches in the USA. When his money got low he would make a trip to HK and buy some English language bibles. He then would make it a point to get caught smuggling illegal contraband while re-crossing the border into China . They would confiscate the bibles of course and on a good day he would be forced back to HK. He used the news of the bible confiscation (and his deportation if he had been lucky) to raise money. Worked like a charm, so he said. He did not bother to inform the folks back home that Chinese could go to any church and buy a bible, one they could even read in their own language.

When it comes to China, because most foreigners don't have a clue what it going on, it is easy to mislead them. Like I have said before, they know us better than we know them. It is just another of their competitive advantages.



On Jun 12 12:55 AM storm999 wrote:

> For all you China bulls who think the grass is greener on the other
> side of the world, here are the top three headlines from China's
> Economic Observer:
> At least 800,000 unofficial bankruptcies and inadequate bankruptcy
> laws. Local governments can't match stimulus funding and face "debt
> bombs" and bank loans are being misused for stock market speculation
> fuelling systemic risk.
> Sound familiar?
> Check it out:
> www.eeo.com.cn/ens/

China Becomes Global Green Leader with Massive Solar Projects

Renewable energy, battery powered cars, lots of new nuclear power stations using the latest imported high tech reactors, and an increased use of domestic clean coal. Sound like a plan to me. Somebody is preparing for the day when oil is going to be too costly to run an economy on. And America?

China Unicom: A Play on China's Telecom Potential

Recently my barber here in Beijing got married and came into a little cash. He said he intended to invest it on the Shanghai Stock Exchange (he only has Chinese RMB so he has no other choice for the moment). He asked me for some stock picks since he knows I play the market. I said just close your eyes and pick any on the Board (kind of like pin the tail on the donkey). Of course, I was only kidding. But just slightly. Everyone needs to do their homework before investing. But I think you get the point. CHU is a wonderful play. This article is right on the money. And so are a score (or more) on the HK and other exchanges. Many are sector leaders in a fast expanding economy. Most are going to continue to soar with the growth in the Chinese economy. These are long-plays for the most part. But if you've got the money, China has the honey.

Chinese Economy Is Strong, Despite Media Claims

There are princelings (and princesses) of fairly high Chinese officials working for western based investment banks all over the world. It is illegal to report on the families of government leaders in China. It is a "state secret", and will result in one of the few remaining areas for a secret trial if one reports on it. So unless you are in China and working in that sector, you would never know.

The media in the west is capitalist and has been angry about "Red" China since 1949. Nothing new. The average Chinese is already wise to it. They often ask why the western media hates China so much, to the point of lying about it (which is sadly true). Keep in mind that most university educated Chinese read English (how many university educated native English speakers can read Chinese?) and can access most (not all) foreign media reports via the web. So they know first hand. It is simply viewed as propaganda, just as westerners view the Chinese media as the same.

Please be very clear about something, there is no threat of social unrest in China, as one of the comments suggested. This was the most overused piece of fantasy the western media trotted out at the beginning of the crises. If anything, the opposite held true. Because of the perceived crisis, the Chinese people rallied around the flag. Natural response. There is the on-going unrest in the rural areas due to local issues (abuse of power etc.), but this is as old as China itself. Poses no threat to government stability.

China's Car Sales Jump 47% Year over Year on Subsidies

Iggy,

Do the math comrade:

Germany has a population of about 80 million
China 1.4 billion.

Most Germans already own cars
Only a fraction of Chinese do.

In China, even if sales increased 100% for the next 20 years there is still room for first car buyers, let alone replacements for ones already purchased.

Time to buy stocks in Chinese car companies while they are still cheap.



On Jun 09 02:36 PM igggy wrote:

> At least the American proposal is better than the German stimulus.
> They just gave money to trade in any car for a new one. Who is going
> to buy new cars in Germany next year? The Chinese might have the
> same problem next year actually. I hope some of that money is finding
> it's way back to the US. They did buy the Hummer.

China's Economic Ascendancy (Part 2)

For the record: the Chinese invented the world's first steamboat during the Song dynasty, and not Mr. Fulton.

I started to teach myself Chinese in the early 1970's via Radio Peking's shortwave service.
My first trip to China was in 1985.
I moved to Beijing in 1992, married a Chinese and settled down.

I have seen lots of changes to say the least.

The American experience worked because (in my humble opinion) because of the laize- faire policies of the government. Coming from an environment of government oppression or at least heavy handiness, the European immigrants were ready for a change. Hard to have these kinds of policies in the modern era.

China has done well because they were able to create, after some initial failures like the Great Leap etc,. a Chinese version of socialism. I know most of you will find this hard to believe, but it is really true, this government enjoys lots of support. The people are very patriotic. They don't want a change. They also realize that they know much more about us than we do about them (and this is largely a fact sadly. How many dynasties can you name?)
There are not many similarities between the American political and economic system and the Chinese. But in a globalized world, one where everybody is chained together in one boat, either we will all float together or we will sink together. The Chinese talk about this all the time on their radio and TV programs, the need to be tolerant and to try to get along in spite of the differences. We had better begin this education process too. The longer we cling on to the notion that we are the kings of the world (very unlike 1800's Americans by the way), the harder will be our fall.

We need to understand (not agree necessarily with) our differences and work together on areas of common interests. We can't live with them, we can't live without them. That is just the way it is. We are not going away as a strong nation anytime soon. We are not the UK of former times. But neither are the Chinese. Peace and making money are the real secret to a happy life. This much I have learnt from the Chinese!

BYD: The Next Auto Giant?

BYD is a global pioneer in the battery powered car category. But that is not to mean that other Chinese auto manufactures are trailing too far behind. The Chinese government (who owns 90% of the auto industry by various means) has decided to skip the gas engine powered car generation and go directly to the next generation of battery powered ones. They did something similar in the telecommunications sector a few years back. Instead of laying lots of expensive land lines first as had been done in the west, they directly leapfrogged into cell phone use. China is now number one in cell phone ownership in the world. China has been number one in battery powered motorcycles (dian dong che) for some time and anyone who has visited the major cities (and secondary ones too) with the exception of Guangzhou will see what I mean. They are a clean energy alternative to gas powered motorcycles (and cars). So now they want to use this battery technology expertise to power cars. Every major auto company is now investing a large part of their R&D into battery technology. The goal is to have this up and running in 10 years time. And you should already know, when the Chinese government sets a goal like this, you had better go along if you are management, unless you are not too interested in promotions.

The downside for BYD is that have not been making cars for that long and does not have a good reputation for quality on the domestic market (I don't have one Chinese friend who is even considering purchasing one in the near future), while others are doing better in the quality category. So as the other major Chinese car companies get their battery technology up to speed (pun intended), (see Cherry's decision last week to sell to domestic PE investors of a chunk of itself to help fund their battery R&D), expect some heavy competition for BYD. I think it is a safe bet to buy almost any of the bigger players, many are listed on the HK EX. You can purchase HK EX stocks through a variety of on-line brokers these days. I use E*TRADE Global Trading. (I have no investments in E*TRADE).

What's Killing the U.S. Dollar and Its Impact on Income Investors and Markets

Concerning the patient in the ER, the underlying disease is not cancer but high cholesterol and clogged arteries from living too well for too long. A disease of the rich. A diet and change in lifestyle is in order. Hard for the patient to accept, MDs unwilling to prescribe.

The basis of wealth is not finance but production. Wealth finance is created largely from production and not the other way around. Production has moved east. America and Europe are hollowing out. Both (include here also Japan, and the Asian Dragons) are all trying to move into high end, high tech, high margin, products. Too many competitors. Not enough to go around. Result: squeeze the home workers (wages, pensions, etc.), move more production east, and a take the money and run, you only live once kind of mentality among the top tiers (excessive bonuses etc.). To make things worse, the current occupant in the White House is a creation of the mass market media (no wonder they are fading fast, we already have one Disney and that's enough fantasy). So the media will not begin a national discussion (loss of face) on what changes and sacrifices have to be made to leave some money for the surviving family.

This scenario has no long term solution. Patient will surely have to endure a slow and painful death.

If you have any money left, invest in China. Although China has problems of its own to solve, at least these are doable (not systemic), and there is the national and political will to make whatever sacrifices are needed in order for China to develop and prosper. In fact if every American and even the US government invested in China while valuations are still reasonable, most of its financial woes could be solved in a few short years. What would happen to the USD then?

Sad ending. Must be a better solution.