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PRC Economy - New Reflections : April 20 2015

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hanumadu
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PRC Economy - New Reflections : April 20 2015

Postby hanumadu » 20 Apr 2015 23:56

x post

Published on Apr 16, 2015
By William Pesek
Why China's Numbers Are Worse Than They Seem: Bloomberg View

First, banks and companies may be borrowed out. In the first three months of 2015, capital expenditures by companies eased for a fourth straight quarter, according to the latest survey of more than 2,000 firms by New York-based China Beige Book International (the figure has now reached its lowest level in at least four years). In an interview with Bloomberg Television and a Wall Street Journal op-ed, President Leland Miller attributes the chill to overborrowing, overcapacity and a growing fear that China's debt reckoning is approaching.

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Re: PRC Economy - New Reflections : April 20 2015

Postby hanumadu » 22 Apr 2015 00:10

x-post

SSridhar wrote:China set for first state-owned firm Baoding Tianwei Baobian Electric Co Ltd's default on bond - Reuters, Economic Times
China looks set to see its first default by a state-owned firm after Baoding Tianwei Baobian Electric Co Ltd said it had not raised enough funds to make a bond interest payment due on Tuesday.

"The probability of making the payment has become highly uncertain," a notice posted by the company on the website of China's bond clearinghouse stated earlier on Tuesday

A default by the power company will also make it the third listed Chinese firm to publicly default on an interest payment to bond investors on an onshore issue, adding to evidence that Beijing is slowly withdrawing its sovereign guarantee of low-quality bonds, even if the state is part owner.

"If Tianwei ultimately ends up defaulting, there's hope it might destroy the ironclad guarantee reputation of central government-owned issuers," wrote analysts at China Chengxin International Credit Rating Co in a research note.

But they added that the low grade of Tianwei and the other defaulters limits the market impact of any defaults

The news comes shortly after a full default on both principal and interest by Cloud Live Technologies earlier this month, and a more recent offshore default by Kaisa Group , the first Chinese developer to default on dollar bonds. Investors are now eyeing developer Glorious Property Holdings, whose bond payment comes due on Saturday.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Vayutuvan » 22 Apr 2015 03:57

Just today I heard on NPR that China is doing an FDI of $43 billion (yes B not M) into Pakistan. Ayesha Siddiqua was very skeptical of the whole exercise and who will benefit.



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Re: PRC Economy - New Reflections : April 20 2015

Postby panduranghari » 04 May 2015 20:31

Will the AIIB One day matter?

Very insightful article. Highly recommended.

Touches on history showing how similar 1020 USA, 1930 Germany, 1960 USSR and 1980 Japan was to today's China. Only one succeeded in carving its niche - USA.

Also explains why RMB can never be a global reserve currency.

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Re: PRC Economy - New Reflections : April 20 2015

Postby hanumadu » 22 May 2015 01:28

Chinese Solar Maker Plunges, Losing Nearly $19 Billion in 24 Minutes

Another chinese company whose accounts are ...well...questionable.

China's richest man lost $15 billion in one hour

China is being such a tease. We want the big bang, not this trickle of a company a month going bust.

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Re: PRC Economy - New Reflections : April 20 2015

Postby UlanBatori » 22 May 2015 07:21

Two other companies in Hong Kong also nosedived. But "bust"? Looks like Hanergy gained 625%, then lost 47% of that, which by my madarssa math means still a 300%+ gain. Not like Yahoo! that went from stock price of $500+ down to $2. This is just sheer bubblenomics with uncontrolled manipulation. I think the fellow just spread rumors to bring the price down 47%, so he can buy and control 99% of the company.

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Re: PRC Economy - New Reflections : April 20 2015

Postby nandakumar » 22 May 2015 15:41

It may have gone up 625% intra-day, but the solar company (Hanergy Thin Film) lost 47% of its previous day's closing price. From a closing price of HK$ 7.51 per share on May 19th, the scrip fell to 3.91 on the following day. The trading in the stock has been suspended in the last two day. It is forecast to post a turnover of 14 billion (in US $ and not HK Dollars!) in the fiscal year ending December 2015. The company is also expected to post an earnings of 11 cents (HK) per share. That means it was being valued at roughly 67 times its 2015 earnings prior to the correction on May 20th! In contrast the blue chip Nifty stocks on the National Stock Exchange in India trade at an average of 18 times its projected 2015-16 fiscal earnings. The correction has brought some sanity in valuation. but even at 3.91 it is absurdly over valued.

hanumadu
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Re: PRC Economy - New Reflections : April 20 2015

Postby hanumadu » 22 May 2015 16:22

UlanBatori wrote:Two other companies in Hong Kong also nosedived. But "bust"? Looks like Hanergy gained 625%, then lost 47% of that, which by my madarssa math means still a 300%+ gain. Not like Yahoo! that went from stock price of $500+ down to $2. This is just sheer bubblenomics with uncontrolled manipulation. I think the fellow just spread rumors to bring the price down 47%, so he can buy and control 99% of the company.


The 625% was over a period of time and it nose dived 47% intra day before trading was stopped. I know it's still a big company, but who knows what accounting frauds it is hiding.

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Re: PRC Economy - New Reflections : April 20 2015

Postby UlanBatori » 22 May 2015 16:42

even at 3.91 it is absurdly over valued.

Of course, but that is the Yahoo! Syndrome of ~2000. One bought Yahoo at $400 a share because one expected someone else to see that and pay $410 a share, not because it was worth any more than $2. The stupid thing is that I spent hours arguing with Experts here at PeeAref that Yahoo! was only worth $2, instead of applying my own common sense to my own 0.001 shares before the crash came :(( . Same here. BTW, wonder how much google is really worth...

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Re: PRC Economy - New Reflections : April 20 2015

Postby nandakumar » 23 May 2015 10:39

According to the Nasdaq's website investors are buying a dollar of Google's current earnings at a price of 26$.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Suraj » 28 May 2015 22:14

An interesting sober article was posted in People's Daily this week by 'an authoritative insider'. Many think the person is Xi Jinping himself, following Mao's footsteps and communicating his thoughts directly to the public under a moniker as an 'authoritative insider'. Who's a more authoritative insider than Xi, after all.
This is how you know China is worried
The Chinese economy is slowing, the housing market has ground to a halt, the banking sector is laden with debt, and the Shanghai Composite is swinging wild — hitting new highs on Monday only to drop 6.5% on Thursday.

As you can imagine, the Chinese government is worried. So it's preparing its people for hard times the only way it knows how, in a way that looks like bizarre political theater to outsiders.

'An authoritative insider'
Let's take this back to Monday, when the Shanghai Composite posted its biggest single-day rise in months.

That's when The People's Daily, a state newspaper, published an interview with "an authoritative insider" who acknowledged that while an economic slowdown is coming, Chinese people still should be using their ample savings to boost the economy.

“Seen from the stage China is at right now, whether it can transfer savings to effective investment will be the key to stable economic growth," said the insider.

The insider went on to discuss the soundness of China's fundamentals, its strength in the global community, and the challenges faced by over-levered state-run companies.

You can believe that this was an absolute must-read in China, too. In an editorial note above the interview, The People's Daily wrote (emphasis added):

People’s Daily recently interviewed an anonymous "authoritative insider", presenting five most pressing questions on the Chinese economy. In the Q&A, the insider urges straightly face up to problems in the development of China’s economy, maintain strategic focus on restructuring the economy, and expresses confidence in the prospect of China’s economy.

This interview goes viral since it is believed to contain important message from the high level authority.

Subtle.

In a follow-up, The People's Daily published a story called "Who is the authoritative insider in the People's Daily?" by Xiakedao (that's a pen name).

"The stocks posted strong gains during the past two days and everyone was happy," Xiakedao wrote. "Xiakedao doesn't know why, even if he knows he wouldn't tell you, but we could discuss who this authoritative insider is - it's a figure we're familiar with."

Again, subtle.

The People's Daily has been dropping stories like this for months, shepherding people through their new ability to put money in the stock market and trying to explain that the economic downturn to come is a "new normal" — gently letting them know that unlike when the economy collapsed in 2009, no massive stimulus is coming to pump cash back into the system.

China has communicated to its people like this before
This "authoritative insider" thing is a sign of how serious this government is about this too. Mao Zedong used to write editorials as an "authoritative insider" when he wanted to get his thoughts out. Using that moniker is a signal that what this editorial says, goes.

"China should concentrate on reconstructing the economy, avoid concerns about growth rate fluctuation of one or two percentage points, and under no circumstances become so anxious as to resort to strong stimulus," said the authoritative insider.

The stimulus isn't coming because the stimulus can't come. China is carrying too much debt, and the government thinks it's time to restructure over-levered industries like housing and construction instead of piling on more.

That means things are going to hurt for a while. This is the "new normal."

The People's Daily on Tuesday prepared people for that in a subtle editorial titled "To skeptics: Chinese economy is not gonna collapse."

Here's a peek:

China's economy has now entered a new normal. The Chinese government is a capable steward and confident that it can lead the economy to overcome any obstacles that present themselves, keep steady and sustainable growth, and become a strong power to support the world economy. The confidence of the government results from an objective assessment of China's position.

In terms of the economy, though growth has slowed down, the growth rate remains stable and issues of concern such as unemployment, hyperinflation, and debt crisis have not emerged ...

So don't worry, right? Consider this thing handled.

Until it's not.

This is a very interesting sequence of articles. Clearly data available to insiders suggests difficult times coming up, and it's their standard mechanism to attempt to control the situation ahead of time.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 28 May 2015 22:49

I think China should not worry about GDP numbers but on how to build an economy in years/decades ahead based on internal consumption and not on exports. As long as it can sustain 5 or 6 % based on these internal consumption then its GDP base would alone ensure its growth will be key pillar of global economy.

The challenge to current leadership is to make this transition without affecting social stability.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Suraj » 28 May 2015 23:27

As the article states, the social contract is 'we give you high growth, you accept the political costs we impose on you in the form of an authoritarian state'. The articles in People's Daily attempt to moderate the former expectations without questioning the authority of the state. It will only work if people 'get' that significant structural changes are warranted, and if they're willing to accept the pain without complaint. History says that in China, that is not a given. They are famously inclined towards revolt and revolution if the 'mandate of heaven' is seen to slip.

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Re: PRC Economy - New Reflections : April 20 2015

Postby hanumadu » 29 May 2015 03:47

On Thursday, the Shanghai Composite fell 6.5%. An uncomfortable fall for investors who have seen their stock market climb 50% since March.


50% in 3 months. :roll: :roll:

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Re: PRC Economy - New Reflections : April 20 2015

Postby TSJones » 29 May 2015 05:13

the growth in the Chinese market is not due to fundamentals but to margin buying creating a self fulfilling prophecy.

thy are borrowing in order to buy stock and then selling the stock after it has gone up to pay for the loan. according to a source on the radio this morning, over $300 billion in the last few months. very similar to what happened before the great depression in the 30's.

I hate to be a doom and gloom Fuss Budget because so much of it is expressed here on the forum in anticipation in collapse of the American economy but the Chinese appear headed for real trouble. nobody in authority is reigning in the margin calls the way the Federal Reserve in the US does. it's crazy over there. we'll have to wait and see how they handle it. i am reducing my exposure on the stock market in the US just in case. i am not trying to tell anyone how to invest. your mileage may vary.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 29 May 2015 09:41

Suraj wrote:As the article states, the social contract is 'we give you high growth, you accept the political costs we impose on you in the form of an authoritarian state'. The articles in People's Daily attempt to moderate the former expectations without questioning the authority of the state. It will only work if people 'get' that significant structural changes are warranted, and if they're willing to accept the pain without complaint. History says that in China, that is not a given. They are famously inclined towards revolt and revolution if the 'mandate of heaven' is seen to slip.


People eventually get adjusted to things and Chinese being staunch nationalist too would get adjusted to 4-5 % growth if it hits there , Also the PR would be about nationalism.

IF the current leadership can make those glide path smoother towards slower growth it would be better for them and the people.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Suraj » 29 May 2015 09:45

Austin wrote:People eventually get adjusted to things and Chinese being staunch nationalist too would get adjusted to 4-5 % growth if it hits there , Also the PR would be about nationalism.

IF the current leadership can make those glide path smoother towards slower growth it would be better for them and the people.

I simply go by past history indicating otherwise. Of course, past performance is not an guarantor of future behavior, but in the case of social behavior, it provides a valuable background.

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Re: PRC Economy - New Reflections : April 20 2015

Postby amit » 29 May 2015 10:41

^^^^

The Chinese infrastructure building sector has so much overcapacity built into it, it's difficult to see how the country can take a glide path to adjust to lower growth rates. Suraj, you posted the steel production numbers in the Indian econ dhaga. Though I haven't had a chance to look at it, I'm sure cement and other sectors are declining as well. If there's no stimulus given to the infrastructure sector there could very well be a domino effect. Numbers, such as producing more steel than the next top 9 producers can't be sustained for ever.

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Re: PRC Economy - New Reflections : April 20 2015

Postby hanumadu » 29 May 2015 17:24

Image

Its hard to believe that China has actually been able to use all that steel for all those years. I don't know how it will use that capacity going forward when there will be a slow down. It can't export it too as there seems to be excess capacity every where. Tata steels corus steel buyout is looking a bad investment now and Arcelor Mittal too is not doing so well. At least if UPA was there in India, it could have killed our industry and bought chinese steel.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Suraj » 29 May 2015 20:03

Steel is a famously cyclic business. It's not fair to say Tata/Corus or ArcelorMittal investments were bad. It's the nature of the business that they'll go through boom and bust. It's a good deal if they get through the bust periods.

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Re: PRC Economy - New Reflections : April 20 2015

Postby panduranghari » 29 May 2015 21:54

recording for posterity

http://www.zerohedge.com/news/2015-05-2 ... a-vsnasdaq

Image

Image

Image

Image

Image

UNTIL LAST NIGHT

Image

Image


Of course, manias end just as fast as they started, and with far more tears.

Food for thought as fundamentals and valuations have been dramatically diverging, and one final observation: DB concludes with the following "fascinating statistic", namely that turnover (Bloomberg) on the two China bourses discussed above was at a record $380bn on Thursday surpassing the $248bn on US stock exchanges and just under $9bn in the UK.


Image

So for all those curious where the US "volume" has gone? Look no further than China.

In other words, in China "everyone" is now all in. What happens when "everyone" sells at the same time?

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Re: PRC Economy - New Reflections : April 20 2015

Postby Austin » 30 May 2015 17:07


member_28663
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Re: PRC Economy - New Reflections : April 20 2015

Postby member_28663 » 30 May 2015 21:34

Good interview with Anne Stevenson-Yang:

http://www.chinafile.com/reporting-opin ... -lot-worse

I’d be shocked if China is currently growing at a rate above, say, 4%, and any growth at all is coming from financial services, which ultimately depend on sustained growth in the rest of the economy. Think about it: Property sales are in decline, steel production is falling, commercial long- and short-haul vehicle sales are continuing to implode, and much of the growth in GDP is coming from huge rises in inventories across the economy. We track the 400 Chinese consumer companies listed on the Shanghai and Shenzhen stock markets, and in the third quarter, their gross revenues fell 4 percent from a year ago. This is hardly a vibrant economy.


Her book is also worth reading for those interested in China's economy.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Suraj » 16 Jun 2015 01:33

China's $358 Billion in Margin Loans Points to Next Bear Market
Stock forecasters in search of an early-warning system for the next Chinese bear market are zeroing in on the country’s record $358 billion pile of margin debt.

When that three-year build-up of leveraged positions starts to unwind, regulators will struggle to limit the selloff, according to Bocom International Holdings Co. and Rabobank International. Almost all of this year’s biggest declines in the Shanghai Composite Index, including a 6.5 percent slump on May 28, were sparked by investor concerns over margin-trading restrictions. The securities regulator announced plans Friday to limit the amount brokerages can lend for stock trading.

“There’s definitely a ceiling on margin-lending,” said Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance Co., which oversees about $3.3 billion. “Once leveraged investors begin to cut their holdings, it means they’ve turned cautious on the market and that will probably spark a correction.”

A pullback by margin traders would undercut one of the biggest drivers of the rally that’s lifted the value of shares to more than $10 trillion for the first time. With so much borrowed money at stake, market downturns run the risk of snowballing as traders are forced to sell shares to meet margin calls, said Anthony Neoh, a visiting professor at the National University of Singapore and member of the Chinese securities regulator’s international advisory body.
Previous Routs

The Shanghai Composite tumbled on May 28 after a brokerage increased its margin requirements, or the collateral put up by investors when borrowing to buy shares. The gauge plunged 7.7 percent on Jan. 19 after a regulatory suspension on new margin accounts at some of the nation’s biggest securities firms. On both occasions, the index recovered within days as margin loans kept climbing.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Karan M » 20 Jun 2015 00:08

For American pundits, China isn’t a country. It’s a fantasyland.
By James Palmer May 29

James Palmer is a writer in Beijing. His most recent book is “The Death of Mao.”

BEIJING

Whenever I want to be cheered up about the future of my adopted country, I turn to American pundits. The air here might be deadly, the water undrinkable, the Internet patchy and the culture strangled, but I can always be reassured that China is beating America at something, whether it’s clean energy, high-speed rail,education or even the military.

Over the past decade, American audiences have become accustomed to lectures about China, like a schoolboy whose mother compares him with an overachieving classmate. “That used to be us,” Thomas Friedman writes, citing the “impressive” Tianjin Meijiang Convention and Exhibition Center (thrown up in a few months) as an example of China’s greatness and glacial U.S. construction projects as an example of America’s decline. China is “kicking our butts” because the United States is “a nation of wusses,” according to then-Pennsylvania Gov. Ed Rendell, who in 2010 lamented his state’s inability to handle snow.

Rendell ignored the time snow paralyzed southern China in 2008, stranding millions of people, cutting off water supplies to major cities and killing dozens. Friedman ignored the buildings that collapsed like a soft pile of dofu across Sichuan in an earthquake that same year because they were rapidly erected by crooked contractors. I’m not talking here about arguments over China itself, like the dueling predictions of magical reform or sudden collapse so brilliantly dissected in James Mann’s “The China Fantasy,” or about the delusional fears of Chinese plots from analysts like Michael Pillsbury . The people telling these tales aren’t interested in complexities or, really, in China. They’re making domestic arguments and expressing parochial fears. Their China isn’t a real place but a rhetorical trope, less a genuine rival than a fairy-tale bogeyman.

For Chinese residents, daily life is a constant reminder of both how far the country has come and how far it has to go. One morning recently I went to the coffee shop at the end of my central Beijing alley for a superb latte, where the owner teasingly chastised me, as he has before, for paying with cash like some peasant rather than with my mobile phone through the WeChat Wallet service. That evening, I came home to one of our small compound’s regular power failures, and I wrote this in the dark on a laptop battery and a neighboring building’s thankfully unshielded WiFi signal. In heavy rain, our alley becomes a swimming pool, and even newly built Beijing streets disappear under a foot of water because the drainage is so bad; in storms in 2012, people drowned in cars stuck under bridges.

China’s mega-projects are often awesome, but they’re also often costly and corrupt. The more than 10,000 miles of recently built high-speed rail came in well over the original $300 billion budget, and all but a few lines run at a loss. The process of creating them was so crooked that the Ministry of Railways ended up broken into three parts and most of the top officials ended up in jail. It’s understandable why visitors, especially those who don’t stray beyond the metropolises, might be overwhelmed. What’s not forgivable is how rarely pundits try to look further, content with an initial vision of glittering skyscrapers and swish airports that can be conveniently shoehorned into whatever case they’re trying to make.

And because China is so vast, its successes can be attributed to whatever your pet cause is. Do you oppose free markets and privatization, like John Ross, former economic policy adviser for the city of London? Then China’s success is because of the role of the state. Do you favor free markets, like the libertarian Cato Institute? Then China’s success is because of its opening up. Are you an environmentalist? China is working on huge green-energy projects. Are you an energy lobbyist? China’s building gigantic pipeline projects. Are you an enthusiast for the Protestant work ethic, like historian Niall Ferguson, who describes it as one of his “killer apps” for civilizations? Then credit China’s manufacturing boom to its 40 million Protestants — even though they’re less than 5 percent of its 1.3 billion people.

With a massively changing country, correlation and causation are easily confused. China’s boom years in the 2000s, for instance, correspond nicely with an explosion in the number of pet dogs; perhaps some canine enthusiast is even now explaining how this is evidence that Bo, not Barack, should be making policy.

There are fields, such as education, where China’s supposed achievements are almost pure illusion. Program for International Student Assessment (PISA) statistics, which show China topping the lists in reading, math and science, are often cited by Common Core advocates in the United States and by proponents of traditional teaching methods in Britain, such as former education minister Michael Gove. Yet these PISA statistics cover just an elite group of Shanghai schools, where entry depends on bribery and string-pulling. In the rest of the country, classes average 50 students, only a third of rural children make it to high school, and I’ve found innumeracy to be just as common as in the United States.

This takes about a half-hour of research to discover, or five minutes of conversation with anyone who went to an ordinary Chinese school. But the Western educators and politicians who fawn over China’s schools can’t be bothered with the realities of crumbling rural classrooms, students forced to bribe teachers to get a seat in front, or the mind-numbing “politics” classesthat kids and adults alike sleep through. China is a lead-in anecdote to their arguments, not somewhere they’re actually interested in.

Purveying China fantasies in the service of your own vision isn’t new. Voltaire pioneered the technique 2 1 / 2 centuries ago, depicting a government of refined Confucian deists in counterpoint to the barbarities and superstitions of Europe. He took this portrayal from the missionary letters of his archenemies, the Jesuits, who themselves sought to triumph in theological argument by portraying China as moral, civilized and awaiting the Gospel. Yet the priests, working on the ground in Peking, had a greater interest in the tense and complicated political and intellectual rivalries of Qing China than the philosopher did; for him, reality was a far second to argument.

In Voltaire’s era, perhaps a few hundred Europeans had spent time in China, and the country was an arduous, months-long journey away. In the 1960s and 1970s, the few Westerners allowed into the country were almost inevitably fellow travelers with Maoism, led by the nose by guides who were trained to parrot the triumphs of socialism and who were happy to regurgitate the papthey had been fed to foreign audiences. Today there are tens of thousands of Americans in China, and millions of Chinese in the United States, but the level of nonsense seems to have only marginally diminished.

Finding China’s realities can be hard simply because lying is so common here, whether it’s fraudulent government data, false ambulances or tainted baby formula. The collapse of social trust as a result of decades of Maoism, followed by a get-rich-first ethos, has made honesty a rare quality. With no external controls from a free media or civil society, Potemkinism is an everyday skill across the country, whether directed at outside investors or official inspectors.

Some claims move from the exaggerated into the outright sinister. Take University of New Mexico professor Geoffrey Miller, who has written about the nation’s one-child-rule exceptions, which mostly benefit underdeveloped rural areas and ethnic minorities, not the elite. Miller claims that China is engaged in a long-term eugenics program to increase its national IQ, and that the United States must copy this or fall behind. No such program exists, although it’s true that China’s disability laws drew upon the language of early-20th-century eugenics as late as the 1990s before advocates campaigned for changes. Miller’s particularly ugly arguments mix a projected fantasy of Chinese super-babies with a dubious pro-eugenics agenda; in that way, they are not that different from the essential refrain of others: “China is beating us, and to succeed we must become like them.”

The damage done by such arguments goes beyond their individual cases. They reinforce the seductive, and false, notion of efficient authoritarianism. According to this vision, Washington dawdles because of special interests or democratic debate while Beijing, directed smoothly from the top, drives forward to the future.

Invisible in this is the massive role of vested interests in China and their ability to block or divert reform efforts, the contentions between local governments and the center, the authorities’ constant and fearful swinging between cracking down on and pandering to public opinion, and the intense and sometimes murderous politicking behind the scenes. Pandering to state power is exceptionally dangerous at a time when democratic states such as Turkey and Hungary increasingly turn toward Chinese- or Russian-inspired models of centralization and oppression.

In actuality, one of the great strengths of the Chinese system over the past 35 years has been cautious experimentation, from health-care reform to open markets, in a few villages; then, if successful, ramping projects up to the provincial level; then to a national scale. This is how private farming began in 1979. Some of China’s ambitious projects have been genuine successes, some abysmal failures, but most have the mixed and complicated legacies of any political scheme. If we praise Beijing for the wrong reasons, we miss the lessons it is actually trying to learn.

And when we treat China as a fantasyland of instruction for ourselves, we end up ignoring the Chinese. Like Voltaire’s mandarins or the happy peasants of Maoist propaganda, they cease to be real people and become perfect puppets deployed for rhetorical ends. The Chinese can be just as dumb, lazy and pig-headed as anyone else. They can also be just as smart, determined and empathic. They deserve better than to be reduced to examples.

washingtonpost.com

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Re: PRC Economy - New Reflections : April 20 2015

Postby panduranghari » 21 Jun 2015 12:10

Image

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Re: PRC Economy - New Reflections : April 20 2015

Postby A_Gupta » 24 Jun 2015 21:23

http://blogs.cfr.org/asia/2015/06/24/ch ... disparity/
"China’s “Back to the Countryside” Policy: A Step Toward Reducing Rural-Urban Disparity"
Earlier this week, the Chinese government announced a set of policies aimed at encouraging migrants from rural areas to the cities to return to their hometowns and start businesses. The policy guidelines direct local governments to encourage migrant workers (as well as university graduates and discharged soldiers) to take the capital, skills, and experience they’ve acquired in urban areas back to underdeveloped rural areas and engage in entrepreneurship. These policies—think of them as the newest iteration of Deng Xiaoping’s “let some get rich first”—are a solid step towards promoting genuine market-driven development.

People’s Daily reports that under the new policies local governments will employ the following five measures aimed at expanding rural entrepreneurship by returning migrants:

    1. Reduce “barriers to returning to rural areas” by providing training to returning migrants and reducing administrative fees for starting a business.
    2. Cut taxes for qualifying enterprises and individuals.
    3. Expand support for such enterprises, by providing subsidies, connecting them to local business networks, and helping them set up ecommerce platforms.
    4. Provide financial support for qualifying enterprises and individuals, by providing subsidized loans and expanding credit availability in rural areas.
    5. Increase support for entrepreneurial parks in rural areas.

The policy comes at a time when the rate of migration to the cities is slowing. While migrant wages in China continue to grow, the rate of growth of the migrant workforce has declined for several years running, dropping from 5.5 percent growth in 2010 to just 1.3 percent in 2014. Government data also show that the number of rural residents employed near their hometown has grown at a faster rate than the migrant population over that time frame.

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Re: PRC Economy - New Reflections : April 20 2015

Postby panduranghari » 24 Jun 2015 22:10

^ Sounds like 'the great leap forward' redux.

Some comments;
The main reason why chinese move to cities is for jobs. The number of riots in China especially in the western provinces have risen from 35000 odd in 1995 to over 200,000 in 2010. They have stopped reporting this now. So it could be higher. The rioting is against the CPC member which usually leads to the death of the CPC member. The cause of riots is the मनमानी behaviour of the official. A developer wants land, he comes to CPC official who tells the farmer to take a hike. The factory discharges industrial effluents into the water and when people complain, the CPC official says 'not my problem'. Another problem is the male to female ratio. We say Haryana is bad, but the scale in the rural areas of China is equal or worse. What will all the young males do, if they have no नौकरी and no chokri? Rioting is what they will do.

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Re: PRC Economy - New Reflections : April 20 2015

Postby hanumadu » 26 Jun 2015 06:28

A_Gupta wrote:http://blogs.cfr.org/asia/2015/06/24/chinas-back-to-the-countryside-policy-a-step-toward-reducing-rural-urban-disparity/


"China’s “Back to the Countryside” Policy: A Step Toward Reducing Rural-Urban Disparity"


I think the chinese went overboard with their SEZs. Ati sarvatra varjayet.

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Re: PRC Economy - New Reflections : April 20 2015

Postby A_Gupta » 05 Jul 2015 20:24

Another China doom-and-gloom story:
http://koreajoongangdaily.joins.com/new ... googlenews
"Magic can’t save China’s market"

Chinese policy makers seem to have exhausted whatever magical powers they had been using to keep their economy aloft. Chinese stocks have been plunging even as Beijing has used every trick it knows to support the market.

The truth is that the plunge in Chinese stocks was long overdue. China’s longest-ever bull market was government-driven, fueled by central bank liquidity and a public-relations bonanza. The question now is whether Beijing’s policy apparatus has lost its ability to impose its will on stock prices. And there’s good reason to think it has.

Stocks slid 3.3 percent Monday even after an aggressive three-pronged easing effort over the weekend. People’s Bank of China Gov. Zhou Xiaochuan cut the benchmark lending rate by 25 basis points to a record low of 4.85 percent, slashed the deposit rate to 2 percent and reduced required reserve ratios for some lenders. As stocks plunged anyway, China’s securities regulators tried to cheer traders by announcing they would consider suspending initial public offerings in order to increase demand for existing shares. The sell orders still accelerated. Next, government officials assured the record numbers of individual investors entering the market that the risks from margin trading are controllable. Selling ensued regardless.

Only time will tell if Beijing’s bag of tricks is empty. But if it is, the fallout on global markets could dwarf the impact of Greece’s flirtation with default. The world, after all, has had a few years to contemplate a Greek exit from the euro. But if the world’s biggest trading nation suddenly hit a wall, it would be a catastrophe of a different order, wreaking havoc on economies near and far.


Conventional stimulus measures have lost traction amid factory overcapacity and a fast-increasing number of ghost cities. The solution, of course, would be for President Xi Jinping to accelerate structural reforms to wean China off excessive investment and exports. It’s only by reining in state-owned enterprises that China can create a vibrant private sector driven by small-to-midsize services companies that generate high-paying jobs.

Instead, Xi’s team has spent the last 10 months ginning up stocks with government sorcery. The plan was straightforward enough: Companies would harness rising shares to pull off IPOs to pay down debt, while households would feel richer and spend more. If stocks got wobbly, the government could just step in and keep the party going. That lasted until June 12, when Shanghai shares topped out. Since Friday’s 7.4 percent plunge, Beijing has used all its usual policy tools with no success.

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Re: PRC Economy - New Reflections : April 20 2015

Postby habal » 06 Jul 2015 12:50

Is it so damn easy to disrupt capital markets using derivatives and 'put options' such as what morgan stanley is doing now with china capital market. $3 trillion wiped out in 3 weeks.

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Re: PRC Economy - New Reflections : April 20 2015

Postby A_Gupta » 06 Jul 2015 16:06

http://finance.yahoo.com/news/china-bla ... 01266.html
China blames the wrong parties, per Bloomberg.

Short positions on the Shanghai Stock Exchange totaled just 1.95 billion yuan ($314 million) on Thursday, or less than 0.03 percent of the country’s market capitalization, as bears closed out more than half their bets since June 12.


Under China’s quota-based programs for overseas investors, their maximum potential holdings come in around $166 billion, or about half the market value of PetroChina Co., the nation’s biggest company. International investors bought a net $2.7 billion of shares through the Shanghai-Hong Kong exchange link over the past three weeks
.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Suraj » 06 Jul 2015 21:18

The Chinese stock market is getting a lot of news lately. The meltdown there has wiped $3.2 trillion in market value in the last month or so. CPC is throwing everything and the kitchen sink at it.
China’s Stocks Decline in Biggest Three-Week Plunge Since 1992
The Shanghai Composite Index capped its steepest three-week decline since 1992 as measures to shore up Chinese equities failed to stop margin traders from unwinding positions at a record pace.

The benchmark equity measure fell 5.8 percent to 3,686.92 at the close, extending losses to 29 percent since the June 12 peak. Chinese shares have erased more than $2.8 trillion of value in three weeks, marking an abrupt end to the longest bull market in the nation’s history. Just 39 of the 1,106 stocks in the Shanghai Composite posted gains on Friday, paced by PetroChina Co. amid speculation of buying by state-backed funds.

With the Shanghai gauge tumbling more than twice as fast as any other index worldwide, regulators have pledged to investigate market manipulation and unveiled measures to revive confidence among the nation’s 90 million individual investors. The steps have so far been overshadowed by concern that leveraged traders will keep liquidating bullish bets after equity valuations exceeded levels during the country’s stock-market bubble in 2007.

“For now, the mood is verging on panic, and it is extremely hard to calm a bear who is in a rage,” said Bernard Aw, a strategist at IG Asia Pte. in Singapore. “Chinese brokers may still be looking at reducing their risk exposure by closing more margin debt.”

Bloomberg explains why CPC is trying so hard to fix the markets: despite only 10% of Chinese wealth being in equities, they championed the stock market , and therefore a market crash is a failure of the CPC. They cannot have that, so they do anything to fix the market. Of course, lessons of history are forgotten in this hubris.
China’s Xi Rushes to Boost Market Before Fall Loosens Party Grip
For Chinese President Xi Jinping, mission No. 1 has been preserving Communist Party rule. That now means stabilizing the stock market.

Xi’s government rushed out an unprecedented series of measures in recent days to halt a sell-off that wiped out $3.2 trillion in market value in three weeks. Expect more stimulus efforts as the leadership under Xi seeks to keep the collapse from devouring the savings of tens of millions of Chinese investors -- a constituency larger than the ruling party -- and from setting off broader social unrest.

“This is a real testing moment for the leadership,” said Zhao Xijun, deputy dean of Renmin University’s School of Finance. “They must rescue the market with all their means. The ’what if’ scenario cannot be allowed. The evaporation of fortunes of more than 80 million individual investors would pose unthinkable social problems for the country.”

The market rout poses one of Xi’s thorniest challenges since he took power more than two years ago and gave himself control of China’s economic reform agenda. Overcoming it will require something more than the strongman approach he’s so far employed to consolidate power. He’ll have to restore confidence in the world’s most volatile stock market, months after cheerleading by state-run media helped spark the rally.

At stake is a decades-long economic boom that stands as the party’s crowning achievement, with growth on track this year for the slowest pace in a quarter century. Failure to stabilize the market would risk derailing the administration’s effort to rebalance the economy and give any dormant party foes an opening to criticize Xi’s policies.

“China’s economic story and political stability are now very much at stake,” security analysts Gabe Collins and Andrew Erickson wrote in a report published on their China Signpost website. “Stock market down-drafts on the heels of euphoric upswings can be devastating to far more than pocketbooks. They sow fear and destroy confidence -- the lifeblood of both economic growth and political stability.”

How Do You Say ‘Whatever It Takes’ in Mandarin?
So much for China’s pledge to let markets play a decisive role in the economy. Amid the country’s worst stock slump since 1992, President Xi Jinping’s government is dusting off its Communist Party playbook and unleashing all manner of state interventions to halt the slide in share prices.

New listings have been frozen, brokerages have pledged to buy shares, and the central bank has promised liquidity support. The scale of those and other moves test China’s credibility on pledges since late 2013 to push through reforms like loosening capital controls. That’s part of an embrace of markets as China tries to convince the International Monetary Fund to grant its currency, the yuan, reserve status, a step that would entrench financial reforms and help its companies expand overseas.

For now, though, the visible hand is back, with stabilizing equity markets as priority one. The Shanghai Composite Index has fallen 27 percent since its June 12 peak, posing policy makers with a dilemma: How to maintain the kind of economic stability that underpinned 35 years of growth while liberalizing a $10 trillion economy so it can keep expanding.
“The equity market saga will hardly persuade foreigners that China’s markets are real markets,” said George Magnus, a senior independent economic adviser to UBS Group AG in London.

A massive 150 percent run-up in stock prices from this time last year through June 12 was driven in part by leveraged retail investors, egged on by bullish statements by official state media. As those gains started to reverse, authorities in Beijing began to act to stave off losses to households. And the hit has been staggering: Some $3.2 trillion in market value was wiped out from when markets peaked last month. The Shanghai Composite closed 2.4 percent higher on Monday.

“This saga shows that the leadership has not dealt with financial reform and liberalization well so far,” said Liu Li-Gang, chief China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “What they are doing now will exacerbate the moral-hazard problem.”

China’s policy makers are seeking to avoid a knock to growth stemming from losses on the share market. Bloomberg’s monthly GDP tracker shows the economy has been below the government’s targeted pace of about 7 percent all year.

A stock-market crash “would be a painful scenario, but the immediate damage should be manageable,” Yao Wei, a China economist for Societe Generale SA in Paris, said in a note. “However, the long-term harm to structural reform and debt restructuring could be much graver, if equity financing were to slow down.”

“Why stoke an equity-market boom when the economy and earnings are slowing, deflation is spreading, debt is rising and state-owned enterprise balance sheets are under stress? Because of course it’s a palliative, and a substitute for tougher medicine,” said Magnus.

China isn’t the first country to try to stem a slide in stock prices. Euro-area nations have in the past introduced temporary short-selling bans to stem market volatility. And as far back as the Wall Street crash of 1929, bankers have collaborated to put a floor under collapsing stock prices.

While it’s understandable officials take steps to stabilize markets, tinkering with them only raises the risks if asset prices fail to recover, said Fred Neumann, co-head of Asian economics research at HSBC Holdings Plc. in Hong Kong.

“Policy makers are then left with only one option, which is to ratchet up their response in a game of confidence with investors,” Neumann said. “The risk, of course, is that the market over time becomes addicted to such support measures, leaving officials, at the very least, with an exit problem.”

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Re: PRC Economy - New Reflections : April 20 2015

Postby panduranghari » 06 Jul 2015 22:11

October 2015 stock crash seems very likely considering all the news pouring in.

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Re: PRC Economy - New Reflections : April 20 2015

Postby ashashi » 07 Jul 2015 01:21

China's stock market is crashing, and the Chinese are trying to do the exact same thing America did in 1929
http://finance.yahoo.com/news/chinas-stock-market-crashing-chinese-095900183.html

China's government is now also using the same tactics as Wall Street did back then to try to prop up the markets.

The central bank is effectively becoming the buyer of last resort, printing money to buy up shares and prop up prices.

In 1929, Wall Street's banks did something similar. JPMorgan and several other top financial firms agreed to pool resources and buy up shares to put a floor under prices. It happened after a drop of about 30% for the Dow Jones Industrial Average.

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Re: PRC Economy - New Reflections : April 20 2015

Postby ashashi » 07 Jul 2015 01:40

Citi: China's 'Wall Street Crash' is going to get worse
http://www.businessinsider.com/citi-chi ... -go-2015-7


Citi say: "Despite the sentiment help, we believe continued deleverage, and possible reform concerns given recent administrative intervention, will cap index upside. We estimate one-fourth margin buys forced out, still long way to go."

One of the causes for the slump has been margin buying — people buying stocks on borrowed money. As prices fall and share holdings become worth less, investors are being asked to give banks more money to keep up the balance of their accounts — so-called "margin calls." This is forcing people to sell shares to raise cash, which in turn lowers prices because everyone in the market is a seller.

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Re: PRC Economy - New Reflections : April 20 2015

Postby Theo_Fidel » 07 Jul 2015 02:17

Is this the 'Soft' landing everyone was projecting....

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Re: PRC Economy - New Reflections : April 20 2015

Postby sanjaykumar » 07 Jul 2015 06:40

Yeah....pandamonium.


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