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Two More Myths About Business in China

This author does not understand the real meaning of saving rate. If you want a much less superficial understanding of how this concept works I suggest Mike Pettis's blog China Financial Markets. Pettis explains that the "savings" of households are not really a choice to put money in the bank per se but a function of an industrial policy that subsidizes capital, energy, etc for SOEs and large connected enterprises though such state directed policies as the overvalued currency, direct subsidies, low interest rates, large interest rate spreads and low wage growth.

No doubt what the author says about young spenders is true. In Chinese they are called the 月光族, the tribe that spends all their monthly income, but that doesn't matter because voluntary household saving are NOT the reason for China's high saving rate. Rather it is industrial policy that, in effect, taxes households to fund investment in export, manufacturing and infrastructure. Often such investments are actually value destroying, but they do make the books look good in the short term.

Two More Myths About Business in China

"The desperation that marked the lives of many Chinese over the last century is gone. "

Sorry, but that is BS. I have lived in China for about 10 years and there are still many people whose lives are filled with desperation. Sure, over all things are much better, economically, than they have been, but statements like that above betray a truly superficial knowledge of the country.

I think I will never forget the man in line behind me Peking Union Medical Center in Beijing. My wife, father-in-law and I had all gone there at about 4AM to stand in line to get an appointment for my wife. Of the three of us one got an appointment. But the man in line behind me, like me did not get an appointment. I do not know his story. Maybe he came from somewhere far from Beijing or maybe not, but he simply lost it when he realized that he was not going to be able to see the doctor. In a way it was annoying. So many other were in his same shoes. But I can see why he started to scream and shout; why he simply could not accept that he, or whoever in his family was in need, was simply not going to have a chance to get medical care.

That man felt desperation. No doubt about it. We got an appointment and my wife went on to get needed surgery. But if we had not I have the financial and citizenship status to take my wife to Bangkok or the US and get proper medical care. Most Chinese are not in that position.

Sure things here are better than they have been in the past but it is not as rosy as analysts of the urban middle class consumer might have you believe.

Recent Intervention Helping the Shanghai Composite

Good article and a good point: look under the hood and know what you are buying. This goes for ETF and other funds too, not just non-US indexes.

One point on the PRC market, in the A shares the is no way to go short. I think being able to short would have made the whole bear market here very different.

Surprise Shocks for US Earnings Mean Trouble for Asia

alphadisclousre, your comments seem confused. First, there were no nations, in the sense that we know know them 4000 (or even 400) years ago. It is an apples vs.oranges type problem.

I am not sure what you are getting at about Pettis, but I assume that you mean to make some sort argument of guild by association with the recent Bear Stern mess. I suggest that such an argument is not warranted on factual or logical grounds. So the logical problem is that just because someone worked at Bear does not mean that that person is responsible for the problems that made Bear go belly up. You might argue that about the head of the company or some other major manager or partner involved in some crucial policy that lead to the failure, but to tar everyone there with that brush is simply silly, and foolish. Second, as far as I know Pettis has been in Beijing for some 4 or 5 years, so that should distance him from the recent problems at Bear.

Tibetan Unrest and Economic Implications: 'Nancy Pelosi's War'

As for Mr. Zhao's comment that "Tibet enjoys substantial religious freedom." That is utterly preposterous. No one in the PRC enjoys real religious freedom. All international religious organizations are banned and the only official (not banned) religious organizations are “patriotic” one directly regulated by the party-state.

As for user 168752’s comments, statements like “Tibet which has been part of China since the 12th century” parrot overly simplistic party-state rhetoric – that dominates the public sphere and educations systems in the PRC – and is based on the highly dubious assumption that state and ethnicities are the same sorts of entities now that they were in the very distant past. It does, though, reflect the view of the “man on the Beijing bus,” along with the idea that Tibetans don’t bathe, carry knives and are in need of being “civilized.”

On the other hand, as user 168752 points, righteous indignation at China over the Tibet issue is sort of selective. I suspect that the Sikkim issue actually has more to do with the fact that the vast majority of the Sikkim population was similar to groups in India and different from the Sikkim monarchy. However, one might ask why Myanmar gets all the bad press it does while China is spared this level of Western critical comment. Perhaps it has something to do with the potential money to be made in China and its sheer size.

I think the only value for investors this discussion has is to remind them that China’s political economy is NOT like that in the West or Japan, despite superficial similarities in the physical appearance of urban financial centers. While the HK markets are at an international standard of transparency and operation, companies based in the PRC, wherever they are listed, have to deal with this aspect of political risk. Of course, this is not qualitatively different from many other investing environments. Even in the US one has to now worry about how the Fed might next change the rules of the game

Tibetan Unrest and Economic Implications: 'Nancy Pelosi's War'

Paranoid, lacking subtly and of no use to investors or those just wanting to better understand China and Tibet.

China Will Feel the Brunt of This Demographic Shift

While I normally like your posts Optima is correct here and the idea that "non-religious women in China don't want to have kids" is nuts. Certainly, as women become wealthier, more educated and more urban ideal family size tends to drop, but that is not the same as not wanting to have kids. What is more, there is still quite a bit of pressure to have a son, even among the wealthy urbanites. We can see this in the fact that some groups are allowed to have a second child only if the first child was a girl! While the propensity of girls to send money back to the rural family from factory jobs (and that of boys to drink, gamble and whore it away) has made female children's status somewhat better in the eyes of rural Chinese, the need to produce a son in rural families is still truly compelling. People run from their homes and face fines, persecution and all manner of hardships so that they can have a son. And there many, many, many unregistered second and third children all over the country. Just downstairs at the little barbershop near my building the (migrant) owners have two or three daughters, but their youngest is a son. The dependency ratio in China is going to be a problem, but as Mike Pettis pointed out recently (linked in the article above) eliminating or further relaxing the one-child policy might make it worse in the short run.