Hi Kayco:
Good comments!
At the risk of putting a few ideas out there that may not be "politically correct", here are a few of my own modest observations about the current state of China..... taken from an investor's point of view:
- China's governing officials may be "Communist" in entitlement, but the Chinese people sure as heck have gone capitalistic. Most young Chinese couldn't care less who government leaders are or what their backgrounds might have been.... they just want "government" to stay out of the way of their ability to "do business".
- The Chinese government is well aware of this attitude.
- Historically, Chinese leaders have always worried about "unemployed peasants" (who have been known to revolt and knock off leaders).
- The Chinese banking system does not necessarily lend only to those with good businesses or solid business plans. The Chinese banks frequently lend on the basis of government edict. Currently, thousands of Chinese factories have been closed and large numbers of workers are at a loss as to what to do. It is a fact that some of those factories have been loaned serious money to re-open and produce, even though the market for the produced goods is soggy (does this sound familiar?). The balance sheets of many Chinese banks appear to be as "messy" as are our own (if not worse... and of course we are doing very similar dumb things over here).
- China's recent "progress" has been based on a questionable "export-driven" business model.... to wit:
buy commodities (with a hard currency,... their own), finance a huge explosion of manufacturing capability (again, with hard currencies), even though that expansion provides far more goods than the world can digest, and then top it off by taking payment for the goods so manufactured, in a weak, falling currency (US dollars and US treasuries). So far, the actual aggregate losses stemming from this business model are staggering and it will get worse as the depression deepens.
- How do you dump the huge accumulation of treasuries without furthering the accumulating losses and/or further depressing the economy of your largest customer?
- Depressions tend to accentuate criminality, warfare and balkanization..... can China survive this depression intact? The USSR broke up under less onerous economic conditions.
One could go on and on..... Suffice to say that I don't see China as a great place to invest over the near term, even though the Chinese people are well educated, industrious, etc. To me, serious problems are being swept under the rug over there...... in much the same way as is occurring here.
Got gold? (g)
Comments welcomed, as I am working diligently to try to understand the evolving global scene just like everybody else.
Best,
Earlie
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