rlirph

The Differences Between Chinese and U.S. Economic Recoveries

FYI the government does own stocks in many companies. That is because the country started out as a communist country, in which the government owns everything.

It is true that the government does try to interfere with the free market with its own political and economic objectives. That is no different that the $787 billion stimulus package that our government just approved. It is not true if you imply that the government trades in and out of stocks to move the market higher. What the government does is to instruct the social security fund to buy more stocks when the market is down. Hey that is much better that our social security system because all we have is IOU's from the US Treasury.

I have lived in the US most of my life and now live in China for two years now. The government they have now is more sensitive to people than our government. When the Sichuan earthquake hit last May the Premiere was in the disaster area in seven hours. Where was our President when New Orleans was flooded? I was moved to see their Premiere worked day and night for one full week urging the soldiers(they were the only relief workers) to work harder and faster. This government has learned from the US that you need good PR to win people's hearts.

A US Expat in Guangzhou




On Feb 15 01:26 PM Aalan wrote:

> Comment stream has gone in a different direction from the headline--that's
> where I want to check in.
>
> Signals from China are mixed. The SSE index is one indicator, but
> since the government controls the bulk of stock shares, the prices
> can be easily manipulated. Therefore, I wouldn't rely on that alone.
>
>
> Areas that were booming with the export economy are in a serious
> slump, but that's not the whole story either. I like the author's
> approach of looking at resource utilization, commodities and energy,
> as a more persuasive indicator of the overall economic trend.

11 Reasons Why It's Time to Invest in China and 5 Ways to Play It

Most people forget that China lives on exports. When the economy of US and Europe declines China has farther to drop.

As to the Chinese shares selling at 8x earnings we have to deal with transparency and accuracy. In addition analysts here and in the US are alike - look at how much cheaper US stocks are now - but they have not marked down the more realistic earnings. When one factors in the 'real' earnings stocks in US and China are no longer cheap. I like to see specific examples to show how many company's earnings are increasing and not decreasing.

Because the Chinese have traditionally saved 40% of their income when the economy contracts the consumers are the first one to defer buying. Just look at their automobile sales in 2008. The sales figure has hit a wall long before the US did.

Locals so far are somewhat optimistic because they still have jobs. When more jobs are eliminated in Southern China (called Pearl Delta, the Shenzhen-Guangzhou-Zhu... triangle) which is happening now those optimism will fade fast.