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Strategies & Market Trends : The Financial Collapse of 2001 Unwinding -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (1175)	10/8/2018 11:08:13 AM
From: Elroy Jetson	Respond to of 13805

Wu Xiaoping, who described himself as a veteran of the financial industry in China, in reality quit his position as a mid-level apparatchik in the state-owned China International Capital Corp to found a peer-to-peer lending platform that later went bust. The fact that China's heavily censored internet has not removed Wu Xiaoping's screed which has caused a wave of terror in the business community, is strong evidence that his startling Maoist views are at least a trial balloon for Emperor Xi Jinping. Wu's September 11 blog states, "China's private sector has basically fulfilled its task of assisting the state-owned economy in achieving its rapid development." "China's private sector should not blindly expand. A new form of more concentrated, unified, and scaled-up economy of mixed ownership ... may gain a greater share." "If we fail to concentrate the power of the state but instead allow the market to dictate and move toward a path of complete economic liberalization, China's economic and social reform and opening would face unimaginable pressure and resistance, and the advantages and results we have gained could be gradually lost." Business conditions for private firms in China, measured by costs, sales, and profits, are the worst since 2014, according to a survey by the Cheung Kong Graduate School of Business. - asia.nikkei.com Wu's outburst is but the latest incident that undermines the confidence of Chinese private entrepreneurs in Beijing's economic policy. Despite the Chinese Communist Party's pledge to implement market-oriented reforms in late 2013, economic trends have been moving in the opposite direction in the past five years. While state-owned enterprises (SOEs) continue to engorge on privileges and subsidies, private companies have borne the brunt of China's campaign of "supply-side reform" (the official euphemism for reducing excess capacity). According to a recent study by the chief economist of China Merchants Bank, nearly all of the 11,000 businesses that disappeared as a result of "supply-side reform" between 2016 and the first half of 2018 were privately owned. At the same time, the cost of deleveraging has fallen also mostly on private companies. While SOEs' leverage fell slightly between 2017 and 2018 (from 61.1% to 59.4%, due to higher profitability), the debt-to-asset ratio for private companies rose from 52.2% to 55.6% and their interest expenses rose 11.8% year-on-year in the same period. This suggests that the financing costs of Chinese private businesses have risen significantly as Beijing tightens the flow of credit while the benefits of reduced overcapacity have accrued mainly to SOEs. China's foreign trade ($4.28 trillion in 2017) may seem a critical engine of growth, but in reality exports stopped being a net contributor to GDP growth starting in 2009 (with the exception of 2012). Domestic consumption and investment have accounted for all of China's growth, with the private sector contributing most, all financed by mountains of debt.