Hello Jim, <<who left the door open to allow you in?>>
Since you asked several questions, leaving the door wide open for me to come in, I do;0)
<<what is the risk of bank system failure in China?>>
The risk is manageable to nil, and here is why …
Message 16172978
“Just as an example, it has been much reported that China’s banks will blowup due to all the bad debt. What the reporters fail to analyze is that the nature of banking in China over the past 50 years was actually a money moving function of the state, with the state owning both the borrowers and the banks, and the population’s deposits are guaranteed by the state and all the population worked for the state essentially for free. This is what happens in a poor communist economy.
I had always quipped that communism requires a lot more wealth than capitalism.
In the upcoming bank IPOs, the bad debt will be absorbed by the state, funded by the sale of state-owned enterprises that had, in many cases, been the bad debt borrowers. The cleanup is mostly an accounting entry, backed up by privatization. Given the low debt level of the state, no serious private source bridge loans will be required for the IPO or conversion.
A natural question than arises, “if it is so easy, then why the wait?”. China lacks trained non-engineering people (lawyers, accountants, real bankers, etc) and the banks were not ready. Over the past 10 years, literally tens of thousands of lawyers, bankers and accountants have been cycled through the US, Britain, Japan, Hong Kong, Argentina to learn, funded by the governments and the institutions and the Chinese themselves. Laws and institutions have been adapted, and in some cases copied. Pilot schemes tried out in select cities, experiences analyzed. The banks are nearly ready.”
On <<I would love to hear your take on this subject
China is exporting deflation heavily now
anything China does, it does big>>
My earliest recorded mention of DEFLATION on SI, back in November 2000:
Message 14883919
"On deflation, and we have had some in the neighborhood, down the road, across the street and of course in China/Japan/SEAsia, most commodity prices go down. Real estate and stocks go down, but gold stayed even in local currency terms, allowing relative value to be picked up from the neighbors at the newly deflated prices. Sometimes wealth is absolute, at other times relative; ask Gate of MSFT, Son of SFTBF, and Larry of ORCL. I believe gold, physical and shares, should mostly be counter cyclical in the coming difficulty period. Deflation, should it happen in the US broadly, is uncharted for me, and so I keep my Roman gold coins handy on my desktop."
and more on China exporting are contained in same earlier sighted post, at a different spot …
Message 16172978
“China is a ‘continental economy’, and not directly comparable to Taiwan, Malaysia, Singapore, or even Japan. The structure of the Chinese economy is mostly skewed to domestic consumption, and growth of its economy is strongly dependent on domestic growth. Had China’s growth been actually dependent in the majority on export, the world would be messed up (as it is now, it is already pretty messy).
China (unlike Japan) has lots of folks (meaning just about everybody) needing to buy their first home in satisfaction of 50 years of pent-up demand. Each new home requires the ‘must haves’, from refrigerators to air-conditioners, laundry machines and of course, television and computers. Now, in embryonic fashion, even cars (along the lines of domestically produced VW Jetta, a model that was sold in the US in the late 70s to early 80s, and simpler still domestically manufactured cars of Japanese/Korean design). China is the largest manufacturer of many items, not because of export demand, but more because of domestic demand. In the cases of clothing, toys and possibly shoes, yes, China may be the largest exporter, but, simultaneously and obviously, would also be large or largest domestic consumer of such capacities.
To support the manufacturing that is required for the mostly domestic demand, there is also a 200 (two hundred) years pent-up demand for electricity, roads, water treatment plants, harbors, airports, telecommunications, …. The list simply boggles the mind; just for examples, the single, admitted largest, Three Gorges dam accounts for 50% of Norway (big hydro country) installed capacity, and there are hundreds of dams being constructed and under planning. There will be 82 new airports opened within the next 3 years, all requiring navigation/communication/safety equipment and yes, even airplanes. To enable people to get to and from work from their new homes, new metro systems are being put in. The most visible one being in Shanghai, a magnetic levitation contraction from Germany, which actually is a pilot scheme for several inter-city lines (Beijing-Tianjin, Beijing-Canton, etc). I had also noted on this thread earlier that construction of Shanghai-Tibet highway is progressing cris-crossing Beijing-Canton highway (there are at least three such highways.
China is moving up the value chain of manufacturing, and is exporting such goods in increasing quantities. Two items to note (a) China is a large consumer of tech/PC//telecommunication equipment (second/third, behind US and Japan, but over taking Japan within months in many categories), and (b) China’s export is coming at the expense of Japan, Korea, Taiwan, Singapore and EU’s export, because many of the capacity installed in China are done by companies from those regions. Some companies initially started China manufacturing to access its domestic market, some to lower the cost for their global market, but now the two flavors of investors are indistinguishable, as they incorporate China manufacturing and market into their global strategy.
…
You are right that China needs the US to keep buying, but China does not need the US to buy beyond the US’ sustainable ability to buy. A world-sized bubble in the US does no favor for the majority in the world, including China, and can only benefit to few swift footed speculators, many living in Hong Kong.
…
My business is to help folks invest in and divest from China, and my active income is totally dependent on the flow of investment and divestment. For many reasons I have my grievances against the Communist Party and the many folks that make up its membership. However, I must admit, in the aggregate, they have done OK for the majority, and have done OK compared to what the KMT could have done. The Communist won the civil war because it had the support of the majority, and this is also why the Communist Party is still in charge, much more so than the threat of and the actual use of force. To rule China by force alone is not possible, and the party members of all folks know this. Now, the Communist Party is a misnomer, an anachronism, as far as the name goes. If I were there PR person, I would advise changing the name to, oh, say “Reform Party” or some such more accurately descriptive name.
>>I doubt China can "write off" a hundred million or so excess workers<<
I do not doubt it because they have been steadily doing so over the past 20 years, converting state workers to private workers, absorbing newly urbanized farm workers, and growing the economy at the same time.
By reading the mainline western press, one could easily believe that China is forever at the precipice (which happens to be true) and will crumple at a moments notice (which is not true and given the continental nature of the country, cannot be true).
…
The reform of each and every sector has been cautiously methodical, because only one chance to succeed in a given elapse of the equation of time. Now, in thinking about the nature of the problem the Chinese government faces, think about the sectors that must be concurrently reformed: Legal, Education, Finance, Tax, Health, Social Services, Pension, Insurance, …
How far down the list do you suppose the reform of the political structure will be … yup, pretty far, and by the Russian and Indian experience, necessarily so.
Do you suppose that political structure reform is on the list at all … again yup, because the resultant home owners will demand it.
It would be wrong to think of China as simply another potential Russia, Japan or India. It is perhaps more realistic to think of China as the US in 1920 or slightly earlier.
In comparison, when Singapore boasts how brilliant it has been in setting a development model, or when Japan trumpets the economic miracle, or when the US whines about yet another “national healthcare crisis”, the Chinese must seriously ROTFLTAO. Their problems are of course much bigger, far more pervasive, but simultaneously, so are the opportunities. This is where I must sing from Maurice's playbook: combine smart folks to a reforming system, interesting wealth may result.”
Here are some additional thoughts:
Message 16178484
And then there is this recent trip note:
Message 17914187
Message 17959989
In response to your <<also, is it clear to you that the Chinese Central Bank is diversifying?
in the spring I read they are diversifying reserves from 100% USTBonds to 1/3 each -- TBonds, EuroBonds, Gold>> is this:0)
Message 17742559
Finally, concerning <<are you a closet Jackass? a Chinese Jackass? or just a Jackass Wannabee?>>
I am a … (November 2000 self-intro)
Message 14861804
Chugs, Jay
P.S. latest formal tally
Message 17888598
but physical gold/platinum and paper gold allocation is now at 7% total, edging higher with each down draft of same, and may top out at 10%.
I am invested in WAT/WOT and whatnot, and have done OK per latest update:0)
Message 17984572 |
