China Archives - Page 12 of 15 - the patient investor %

November 6, 2012

Is China more legitimate than the West? | BBC

Economist Martin Jacques, author of When China Rules the World, sings the praises of China in BBC Point of View.

“Even though China is still a poor developing country, its state, I would argue, is the most competent in the world. Take infrastructure – the importance of which is belatedly now being recognised in the West. Here, China has no peers…….. we are in a new ball game. With the Western economies in a profound mess and with China’s startling rise, the competence of the state can no longer be ignored. Our model is in crisis. Theirs has been delivering the goods.”

Patrick Chovanec has a different assessment:

“China’s economic miracle was result of govt getting out of way and letting people improve their lives, not planning by all-seeing mandarins.”

China is a developing country, with rapid growth fueled by massive infrastructure investment and strong exports. The country faces diminishing returns on infrastructure investment and dwindling exports — not only from an economic slow-down in the West but from rising wages as the country attempts to boost internal consumption as an antidote to the middle-income trap that is already threatening growth in its richer provinces.

China also faces push-back from the West against trade advantages maintained by suppressing their exchange rate through vendor financing — balancing trade inflows on current account with outflows on capital account. Why else would a developing country hold more than $1 trillion of investment in US Treasuries at negative real interest rates?

Jacques claims that the Chinese state enjoys popular support:

“But does the Chinese state, you may well ask, really enjoy legitimacy in the eyes of its people? Take the findings of Tony Saich at Harvard’s Kennedy School of Government……… he found that between 80 and 95% of Chinese people were either relatively or extremely satisfied with central government.”

One of the most powerful tools of an oppressive state is fear: fear of the unknown. Many of their citizens would settle for the status quo rather than risk the turmoil that accompanies change. The same is true of many autocratic regimes. That does not make them a beacon of good government.

Western democracy has many problems but the solution does not lie with increasing the size of the state, nor with greater autocracy. Rather we should examine the most successful Western democracies and learn from them. Switzerland would be a good start. Their well-managed economy enjoys low unemployment, a skilled labor force, and GDP per capita among the highest in the world — 70% above the US. The stable democratic government runs with a strong tradition of consensus among political parties, while citizens hold a collective right of veto over government policy. The country boasts a pristine environment with minimal pollution, a strong human rights record — without oppression of its citizens or minorities — and no territorial disputes with its neighbors.

Which state would you say is the most competent?

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

November 3, 2012

Middle-income traps in Asian countries | FRBSF

Excerpt from a paper by Israel Malkin and Mark M. Spiegel at the Federal Reserve Bank of San Francisco. The two believe that China’s richest provinces, Beijing and Shanghai, are experiencing a slow-down in GDP growth (per capita) as they experience a classic middle-income trap, while China’s poorer provinces continue to experience high GDP growth rates.

What evidence exists for middle-income traps in a group of Asian economies that, like China, experienced episodes of rapid growth? We pool data for Hong Kong, Japan, Korea, and Taiwan from 1950 to 2009……. growth of these economies slowed markedly after they reached middle-income status.

Growth rates for these economies are highest just below the $10,000 per-capita-income level and then slow down rapidly as income increases. …..[the] economies grew on average at a 4.8% rate when per capita income reached $17,000, down from a high of 7.2% at the $7,800 level.

Interestingly, the middle-income trap appears to arise in Asia at lower income levels than has been found for broader groups of emerging-market economies. It may be that large Asian countries with relatively low prevailing wages cause the dynamic of the middle-income trap to shift. In Asia, countries may begin to become uncompetitive for certain labor-intensive activities at lower income levels than in other parts of the world……

via FRBSF Economic Letter: Is China Due for a Slowdown? (2012-31, 10/15/2012).

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 30, 2012

Dirty money cost China $3.8 trillion | Reuters

By Stella Dawson

China has lost $3.79 trillion over the past decade in money smuggled out of the country, a massive amount that could weaken its economy and create instability, according to a new report. And the outflow — much of it from corruption, crime or tax evasion — is accelerating. China lost $472 billion in 2011, equivalent to 8.3 percent of its gross domestic product…..

via Dirty money cost China $3.8 trillion 2000-2011: report | Reuters.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 30, 2012

Chinese TV Host Says Regime Nearly Bankrupt | Epoch Times

A sobering assessment of China’s economy reported by Matthew Robertson:

Larry Lang, chair professor of Finance at the Chinese University of Hong Kong, said in a lecture that he didn’t think was being recorded that the Chinese regime is in a serious economic crisis — on the brink of bankruptcy.

The youtube audio requires translation:

http://youtu.be/comHcv7qSBg

Robertson summarizes Lang’s assessment into five key points:

The regime’s debt sits at about 36 trillion yuan (US$5.68 trillion).
The real inflation rate is 16 percent, not 6.2 percent as claimed.
There is serious excess capacity in the economy, and private consumption is only 30 percent of economic activity.
Published GDP of 9 percent is also fabricated. According to Lang, GDP has contracted 10 percent.
Taxes are too high. Last year, direct and indirect taxes on businesses amounted to 70 percent of earnings…..

via Chinese TV Host Says Regime Nearly Bankrupt | Business & Economy | China | Epoch Times.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 29, 2012

A Hard Landing Down Under | The Big Picture

Andy Xie has a bearish outlook on China and believes 2013 could be a tough year for Australia:

The market went from not believing in China’s growth story a decade ago to extrapolating past performance into the infinite future……The year 2008 should have been the end of this boom cycle. China’s stimulus misled the market into believing otherwise…..The Australian economy is probably a bubble on top of China’s overinvestment bubble. The latter’s unwinding will sooner or later trigger the former to do so, too…..

via A Hard Landing Down Under | The Big Picture.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 15, 2012

China Inc waves a red flag on economic recovery | Reuters

By Vikram Subhedar

(Reuters) – Chinese corporate profits show no sign of a second-half recovery as analysts cut earnings estimates in September by the most in 2-1/2 years, a red flag for investors who expect the world’s second biggest economy to start picking up soon……

via China Inc waves a red flag on economic recovery | Reuters.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 15, 2012

China’s export growth accelerated in September

by Zarathustra

China’s trade data for September show some improvement in growth. Export growth picked up to 9.9% yoy in September, up from 2.7% yoy in August, and better than consensus estimate fo 5.5% yoy…….

via China’s export growth accelerated in September.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 22, 2012

As the U.S. Borrows, Who Lends? – NYTimes.com

By Floyd Norris

Estimates by the Treasury Department released this week indicated that over the 12 months through July, China reduced its position in Treasury securities by $165 billion, cutting them to $1.15 trillion despite making a small amount of purchases in July. And the Federal Reserve reported that, as of Wednesday, it owned $1.65 trillion in Treasury securities, $17 billion less than it had owned a year earlier.

…..China’s selling of Treasuries over the 12-month period was offset by the actions of Japan, another country whose trade surplus with the United States remains large. The Japanese are estimated to have increased their holdings by $232 billion over the 12 months, to $1.12 trillion. Those figures include both government and private holders of Treasuries.

via As the U.S. Borrows, Who Lends? – NYTimes.com.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 18, 2012

Why is China afraid of the Louisiana Purchase? | Foreign Policy

By Joshua Keating

The buying and selling of territory between states is a lot less common than it was in the days when European powers held vast overseas empires and there was significantly more terra nullius to be claimed….

On the other hand, given how many territorial disputes China is involved in at the moment, a study of how these conflicts have been resolved peacably in the past might not be a terrible idea.

via Why is China afraid of the Louisiana Purchase? | FP Passport.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

September 6, 2012

China’s overinvestment: the problem of having too much

By Zarathustra:

How is it that an economy grows at 7.6% yoy is squeezing corporate profitability so hard? How is it that an economy growing at 7.6% yoy feel like there is not enough demand for all the goods and services being produced?…..The answer, to our mind, is quite simply that China has been investing in too much productive capacity…… The return on investments might be good before the financial crisis, yet the collapse of external demand after the financial crisis and more recently in the persistent Euro Crisis have cut external demand significantly. Meanwhile, domestic demand is not growing quite enough to pick up the slack created by collapse of external demand. Worse still, it is rather clear that domestic demand has been sustained by none other than investment itself. Thus, it should come as very little surprise that IMF’s estimate put China’s capacity utilisation at just about 60%.

via China’s overinvestment: the problem of having too much.

Hat tip to Macrobusiness.com.au

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.