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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum

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Nov 14 4:00 PM EST

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ggersh

To: elmatador who wrote (117175)	3/15/2016 1:10:23 AM
From: Elroy Jetson	1 Recommendation Read Replies (2) of 217789

You're right, China's leadership is in a box of their own making. If they cannot quickly transition to an economy based largely on internal demand, the Yuan has to decline significantly in order to reanimate their export sector in this economic climate of deflation. But in this economic climate this would inexorably be met with import tariffs, the cancellation of free trade agreements and expulsion from positions like the IMF. But China's leadership faces two significant problems in transitioning to an economy based more heavily on internal demand. The first problem is a lack if internal consumer demand. Workers from rural areas earned precious little after the deduction for their company-owned dormitories and their meals at company kitchens. Precious little of these wages have become internal demand. There is a small burgeoning Middle Class in China's cities but this number is wholly insufficient to creating the demand required for an economic transition. The second major problem is excess debt. The export sector was built largely with loans from government owned banks. As much of this infrastructure becomes obsolete for purpose, the only saving grace is a significant part of these losses will be borne by savers from the Middle Class and Elites who were allowed to use their savings to become partial shareholders in these companies. But Middle Class savers who experience major losses in the shares market will not be greatly inclined to new spending. Each provincial government is in many ways operated as an independent subsidiary of a larger company. And it is up to the wisdom and guile of each provincial government to convert their local resources and labor into enough food, clothing and housing to keep their population happy. With the central leadership having halted the fanciful "New Cities" scheme which soaked up much of the capital government cadres earned from bribes, it is now up to provincial governments or foreigners to provide the capital which will be needed in the rapid transition to an economy more based in internal demand. This comes at a time when foreign capital has become disenchanted with China's prospects - which is a significant portion of the flight capital which putting downward pressure on the Yuan. This collection of puzzles China needs to solve is truly daunting, so we'll see if necessity truly is the mother of invention.

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