canb888

China Gets It Right, But Hurts America

My opinion posted yesterday is coroborated by this news today:
"BEIJING, Nov. 14 (UPI) -- China's 4-trillion yuan, or $586 billion, economic stimulus plan is to be partly funded by a 1 trillion yuan treasury bond issue, officials said...."
Link: www.upi.com/Business_N.../

On Nov 13 04:32 AM canb888 wrote:

> JIMHO, China
> will use cash surplus and issue local currency debt if needed to
> fund the stimulus and continue to hold huge amount of US Treasury
> papers.

China Gets It Right, But Hurts America

Good reasoning except for the final three paragraphs. JIMHO, China will use cash surplus and issue local currency debt if needed to fund the stimulus and continue to hold huge amount of US Treasury papers. Maybe you should have said a bit more about the economic multiplier effect of the Chinese stimulus of new cash spending vs US bailout that goes to pay for past mistakes without much real new investments, thus little multiplier effect on the economy. China is stimulating, while the US is just firefighting. Imagine a fire and firefighters working hard to put it out, are there any new wealth created by their activities? Now compare that to China building new railways, schools, hospitals, apartments, factories, power stations, upgrade power grid lines, new and renewable energy, R&D, etc. Now you could appreciate the difference in the two plans. However, the China plan will not hurt US economy, it will increase purchases from the US like more Boeing 777 or Caterpillar earth moving machines or GE locomotives. History will be kind to Chinese rulers of today because they are doing some real good things for the country and in the process contributing to the world. Therefore, this is good news for all.

Shanghai Should Continue to Sell Off

Addendum: I do agree with the article that the banking system is a huge liability in China and I have had this view for a long time now. However, the main engine of growth is not the stock market but the real economy which has many problems but, IMHO, is not as bad as the stock index would seem to indicate as explained in my previous comment. GLTA again.

Shanghai Should Continue to Sell Off

Let me be a bit extreme to make my point:
1. How many Chinese companies with more than 500 employees are listed in China? My guess: no more than 2%. If anyone has a better guess or study, please post.
2. If the Shanghai stock market drops to zero, what would be the impact on people's livelihood, the economy and the government? My guess again, not much since the stock market, as many people pointed out, does not act as a major wealth/resource allocator yet. It is more like a casino and people go to Las Vegas to lose money without much impact on the US economy.
My conclusion: the Chinese stock market does not have the same impact on the Chinese economy as the NYSE has on the US economy. There is no reason to link the index directly to the performance of the real economy. Therefore, there is no need to worry too much about the index itself. Besides, the index is not a very good indicator of the economy at all due to the make up of its components which I do not want to elaborate here due to space/time limit. GLTA.

Can China Carry the Post-Olympic Torch?

Eowyn, you try to hijack Seeking Alpha, which is mainly a blog for investment ideas, and make it into a political battlefield. Instead of getting into your trap and debating the politics, I just want to assure you that if we want to discuss political issues, we know where to go. Copy-pasting other people's article which are mostly unrelated to the topic will not help this blog. You would be welcome to try to discuss investment ideas here. Try to write something more of your own and don't worry about spelling, we never do on blogs. TIA.

Can China Carry the Post-Olympic Torch?

I have read this article many times and have forwarded it to more than 30 good and serious investor friends. Thank you agian.

Can China Carry the Post-Olympic Torch?

Mr. Jefferson, I give you a five-star! This is one of the best articles, correction, this is the best article on investment in China I have read. As an expat working and living in China for the past 20 years, I have seen the changes and can related to the many key points mentioned in the article. I also tend to agree strongly on those points relating to the direction of the economy, again, based on my experience even though the past cannot directly predict the future, they tend to show the direction. Coincidentally, many of the stocks you recommended are already in my porfolio. I strongly recommend anyone interested in investing in China to read this article.

China: What Comes After the Olympics?

I don't know whether to laugh or to cry after reading this article. Here are why:

Quote 1: "... put together a fiscal plan to support a faltering economy..." China's economy faltering? It's growing at about 8 to 9% and people call that "faltering"?

Quopte 2: "...the tax decline would likely continue..." Tax decline really? A few lines earlier I read that the tax is growing at 13.8%. For most other countries, tax collection growing at 13.8% will not be called a decline. Yes, there is a decline of growth but not a decline in tax collected. Personally, I like the tax growth to slow down to below GDP growth or lower. The lower tax the better let alone growth.

Seems like, for some people, China can do nothing right. Growth of over 10% = overheating; less than 10% = slowdown. Tax growth = government grabbing too much from enterprises. Reduction in tax growth = proves decline in economy.

Having been in China for the past 20 years, I see the economy is better than ever before (by most measurement). There are problems probably more of a growing pain but nothing fatal. I don't see doom and gloom. I see the future being quite bright. The people appear to be very happy overall especially after hosting such an successful Olympics. Maybe I just wrote something here that is not politically correct but that is what I really believe in based on my experience. Maybe those that are viewing China from far away see things that I don't. Normally, it should have been the reverse, i.e., people close to the scene seeing the sick tree but those far away seeing the healthy forest. I think I do see both the trees and the forest - in my humble opinion.

The Great Bubble of China: Next to Pop?

nick, do you mean the dalai lama to become president of china? he will need the christian almighty to help because his holiness is not going to make it on his own. If not, any candidate you can suggest? LOL.

The Great Bubble of China: Next to Pop?

About bubble. Yes the Chinese stock market index went up from about 800 to 6200 with only minor corrections of less than 10% during the big move over two years and it has come down to about 2700 now during the past few months. However, one needs to know that the components making 800 is completely different from the ones making the 6200. For example, using rough numbers from memory to illustrate my point, when the index was 800, today's giants like Petro China (the largests market value company in the world when the index was 6200), ICBC (by far the largest bank in the world) , Chinalife (the largest life insurance company in China), etc., were not even listed. Yet at their height, Petro China and ICBC were each said to have been about 20% of the index. Note, while they maybe 20% of the index each, only a small number of their shares, at one point I read it was 5% of Petro China, was floated representing about 1% of the market while the company itself was 20% of the index. I am not knowledgeable enough to talk about the bubble because when I think of those numbers, just like China's thousands of years of history most of which were prosperous and the 1,300 million population most of whom are well fed and very free, happy and fairly rich now, I am just humbled, really humbled. I remember, when I was much younger, fascinated by the stock quote screen at my brokers place during lunch hour watching the DOW trying to conquer the great 1000 mark. Some people were calling it a peak. Look back at the DOW at 1000 and compare that to Chinese index being 2700 today. I can think of how the world would be like in another 20 years. If you want to talk about China, you first have to think BIG, really BIG. Watch the Olympics, it's going to be BIG. Since I was not able to buy any tickets, I bought a suite and invited my friends just to witness the Bird's Nest. It's going to be once in a lifetime experience. Go China.

The Great Bubble of China: Next to Pop?

You may be a Chinese decendant but your knowledge of China is quite limited based on this article. You think USA will benefit from the China bubble bursting. That could be far from the truth. Currently, economists estimate that the US consumers benefit by over $70 Billion per year due to cheap Chinese products. Who is going to replace that? Do you think the jobs will go back to USA if the China bubble burst? BTW, I would just point out another reason I think your knowledge of China is limited. You said "For a brief blip in history, China had the largest economy on the earth. " Other scholars claim that for most of the past 3000 years except the most recent 200 to 300 years, China was the largest economy on earth. That does not sound like a brief blip. Just because house prices have trippled in 5 years does not mean it will drop significantly, say even by 50%, soon. You have to know what base it trippled from and what money is available in the savings accounts to pay for them. You would be surprised to know how much cash low income earning Chinese have in the banks. National savings rate is 40% for the past dozens of years. That helps fund the growth. That is not what western economists understand easily. There are too many other Chinese things that cannot be explained by the common sense of the west. While there will be adjustments and slowdown, the great growth machine is far from being a bubble yet. One day, it may become one and your article may look great. But you would have to wait for many years before that day. I may not even see that day as I am rather old and do not expect to live that long. Having lived and worked in China for 20 years, I expect the standard of living for the average Chinese people to continue to improve for at least another few dozen years. BTW, you should have said something about air polution which I would have agreed with. I have been complaining about the air for 20 years. But the economy, it is going to be fine. Polution cleanup actually will also help the economy, this factor alone will delay your bubble bursting by at least 5 years. What is 5 years, or 50 years in China's history. That's a real blip. Being the largest economy for most of the past 3000 years is not a blip.

Bullish on China After My Recent Visit

Jeff, Five stars for your short article. I am recommending your article to many of my friends. You started it on the right note: "My favorite part of the trip was most definitely the people". I am a Canadian having been sent to China initially for three months by a Canadian government program followed by a two-year assignment by my employer. The experience was so positive that I later quit my job in Toronto and uprooted my family to come to China and have been here for almost 20 years. For the critics, I speak fairly fluent Mandarin and a little bit of Cantonese and other dialects. I have travelled to almost every corner of the country and covered all areas including the very poor and the very rich places because of my various jobs. Some of the critics seem so biased that even if I write ten more pages, it will not change their mind. One food-for-thought: In China today, the common people make fun of the government and criticize the state leaders with almost no fear, much less fear than in a democratic Singapore. Freedom is relative. As you correctly onserved, people are happy. They are happier than in 5, 10 or 20 years ago. (Regarding Tibet, it seems to be politically incorrect in the Western press to say anything good about Tibet. One statistics though: while there may be 50,000 Tibetans that are worst off today most of whom had fled China, the majority of the 2 million Tibetans are much better off today. The temples are also in better shape than any time in history as Tibet was always poor in the past with a handfull of rich serf owners similar to slavery times in the US.) I guess people in the US are also happier than 5, 10 or 20 years ago as humans are progressing and life is getting better everyday - materially (think of $$$), culturally and spiritually. Sometimes I joke with my Chinese staff/friends when having meals that we are enjoying better food than the rulers had in the palaces of yesteryears. Physically and materially it is true due to modernisation and science.

Think of the impact of tourism: 40 million Chinese went abroad as tourists in 2007 - this was unthinkable politically or financially even a few years ago. There are probably more Chinese that have been to all of Thailand/Malaysia/Sing... than there are US citizens that have been to all of those countries. Very soon, there will be more Chinese that have visited Europe than there are US citizens that did it bacause Europe is open to Chinese citizens and is a most favourite spot now. That 40 million will be surpassed this year, add to that domestic tourism in the billions of person days. Now you should start to understand why China bought more planes from Boeing and Airbus than any other country. Give China another 20 years then history could judge whether the current government is doing the right things. In my observation, they are mostly doing the right things. They do need to do much more in polution controls, energy management and medical care, and they do need to improve the checks and balances in the financial system (most people won't know what I am talking about here and I won't go into details) and construction system that critics are quick to point out correctly as exposed by the earthquake. The existence of problems do not nullify the achievements. Let's all be factual. A properous and peaceful China is in the best interest of humankind today. That's what they have - prosperity and peace. Hope it continues.

Jeff, your observation that: "Most of the wealth in China is in hands of 45 year and younger age bracket" is very real. That's one reason why "Swiss bank account" is not an issue here, the money people make is being re-invested in sharp contrast to some other corrupted countries.

Come and see China, it will be healthy for your health, mind and finance. And it will be good for peace and prosperity for all.