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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: KyrosL who wrote (59684)	1/30/2005 2:20:15 PM
From: RealMuLan	Respond to of 74559

Thanks for the clarification, KyrosL. But from this year, China will start aggressive reform in banking and insurance sectors. And it will set up a bankruptcy system (there is none before this year). State banks will stop filling in the hole for the SOEs. As for foreign companies, still there are more which make a profit than those posting a loss, maybe not on accounting book though. A lot of foreign companies have played some accounting games in order to escape their tax obligation, even if they only pay <50% of what the Chinese companies (whether they are state owned or privately owned) do.

To: KyrosL who wrote (59684)	1/30/2005 7:40:17 PM
From: TobagoJack	Read Replies (4) \| Respond to of 74559

Hello KyrosL, <<Chinese companies are losing billions and are able to stay in business through abundant state subsidies disguised as loans ... This is not going to end well>> Do not worry too much. A few points and counter-points: (a) the proportion of state vs non-state to the aggregate economy has been steadily dropping, and is now well within parameters that can only be described as "more robust" than before, and all of before; (b) whatever Chinese state subsidies (towards securing employment for Wang3Cups) disguised as business loans, in substance, in some sense, can be compared to the subsidies in the US by the Fed and the Fiscal authorities and GSEs to J6P, disguised as refinancings; In either case, should the end be the end, the bagholders are still W3C and J6P. A detail, of course, is that J6P is also subsidizing W3C and W3C is also helping out J6P. It is a good thing, according to Maurice, that the Chinese had invented paper money, and America gave birth to Greensputin. The convolutions between the US and China is of a completely different nature than that between the US and the USSR of old. In some sense, S2B (Sake2Bottles) is financing W3C and J6P. How it will all end up, we can guess, and I have a vivid imagination. The various D words come easily to mind: Default, Dissipation, Dissolution, Deflation, Depression. Also other words, such as Inflation, Confiscation, Redistribution, Stagflation, etc. All straight ahead. For the case of China, the end, at least by the looks of now, is that the standard of living in China is mathmatically improving, and a lot of infrastructure is becoming IS, and hopefully they can switch to becoming their own customers before their traditional customers go BK and defaults. For the case of the US, a lot of folks are able to afford the Lexus SUV and a vacation home, for now, until the financing dries up. For the case of Japan, they seem to be doing OK, buying China grown veggies, and drinking American made Starbucks, earning zeroDotnought Interest rate, have their bank accounts looted, but able to carry on until the savings run out. Chugs, Jay

To: KyrosL who wrote (59684)	1/31/2005 3:29:18 AM
From: energyplay	Respond to of 74559

Think of the Government of China as a bank. They have many questionable asssets in 'loans' to SOE, many of which need some on going subsidy. They have some large liquid assets - > 50 Billion in US treasury bills, and soon to also at Euro debt to this pile. There is interst paid on these assets which helps cover the on going subsidy for the SOE. So there are assets to almost match liabilites, and assets are growing. The economy outside the SOE keeps growing as Jay points out. Now if you are the Government of China, would you like to see a sahrp devaluation of the US and thus the big assets you have for the big SOE hole ? Do you want your interest income cut ? ANd on top of that, do you want direct and indirect sales to the US to decline ? I think China will keep buying at least some US Treasuries...because it is in their econommic interest. Some point (or points) in the future, when more of the SOE employees have moved to more productive eneterprises, I expect there will ber a contained 'crisis' in XYZ industries, and they will be rationalized, employees pesnioned or retrained, etc. A few years later , ABC inudstries will be consolidated. Sort of an incremental process of moving assets to productive uses, but making it appear that 'external market forces' are at work. Meanwhile, everybody pretends not to notice the Rinocerous in the Living Room ...because it's hidden by the big pile of Treaury Bills.