The Chinese Economy

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The Chinese Stock Market’s tumble this week caused US Markets to fall as well.  The Chinese stock market is a casino for young, affluent, Chinese professionals and does not reflect the national economy as closely as it would in the USA. But, moving on…

(The Economist) The CSI 300, an index of the country’s biggest stocks, fell by 7%, the worst-ever start to a year for Chinese markets. Small-cap stocks fared even worse, many falling by the daily maximum of 10%. Monday was the first day of operation for new “circuit breakers”—automatic 15-minute pauses in trading whenever the CSI 300 swings up or down by 5%. These are intended to restore calm when the markets are in a frenzy. No such luck: less than ten minutes after trading resumed following the first such pause, the index fell by another two percentage points. That triggered another circuit breaker, prompting a suspension in trading for the remainder of the day.

LL in Shanghai
The Chinese economy has been a house of cards for the last century. Even when it had its coming out party with Pres. Richard Nixon, things were slippery. There was a time when I was considered to be an expert on China. In those days I taught classes at the People’s Public Security University in Bejing and elsewhere (Changsha, Shanghai, etc.).

Anyway, I still have friends there. We talk. 

Everybody expects that China will need to correct itself. China will just go on being China. To expect other than that is to expect too much.

There is nonsense afoot these days that China is a communist country. 

Don’t get me wrong if you are in China they will tell you that they’re communists. It’s bunk. 95% of all businesses in China are privately owned and Chinese are and have ALWAYS been rampant capitalists at heart. It’s a one-party system with an oligarchy based on raw power…not unlike Russia. Some would maintain that not unlike the USA these days. The Chinese government grabs private property without just cause and people protest in Guangzhou. The US government machinates to grab private property in Oregon and people protest. Their government isn’t clean. Neither is our Bureau of Land Management.
LL in Changsha, Hunan Province
(begin rant) The rules that govern mankind have not changed from day one, as near as I can tell. In a state of nature the biggest toughest guy knocks you over the head and takes your possessions and rapes the women. It caused us to create nation states where a bunch of tough guys come together and do the same thing to the toughest guy standing alone. 
There is no “social contract”. All of human civilization, all of it (religion, government, arts, commerce, science, architecture) was built on greed, envy, hate, lust, pride, vanity, fear, and vengeance. That’s who we are. And the Chinese understand this more clearly than do  many ‘progressive’ Westerners. (end rant)
China is capable of enduring unimaginable suffering. There are as many homeless people in China today as there are people in the US. (See Floating Population) Keeping China from balkanizing is the principle role of the People’s Liberation Army. If it wasn’t there to kill the leadership, Shanghai and Guangzhou would leave the PRC tomorrow. Trust me on this. There are four young men for every young woman in China — talk about social pressure, and on-and on-and on. They are problems that the Americans can’t even fathom.
The moves toward building islands in the Pacific to secure what China considers to be it’s maritime territory are about oil, and prestige. It wants aircraft carriers because the great power (USA) has them. If you were to ask the Chinese leadership why it wanted aircraft carriers, and if they were drunk, that’s what they’d tell you.
So China is never what it appears to be – even to the Chinese. Understanding China requires that you understand chameleons making love. And if you get it, you’ve been in China too long. 
If you owe somebody $30.00, you’re a debtor, if you owe them $3.5 trillion, you’re an ally. That’s the situation that the US finds itself in, with it’s fist around the Chinese gonads. In China you produce products in local currency (RMB) and you sell in dollars. That’s not national sovereignty. It’s a recipe for trouble until you can get your act together. And the Chinese will — in time — as it the Chinese way.
Some mandarins declare that the $3.5 trillion in foreign exchange (FOREX) reserves will be depleted within 3-5 years*

*According to the People’s Bank of China, its foreign-exchange reserves declined by $87.22 billion from a month earlier to $3.438 trillion at the end of November 2015.

That notwithstanding, you can never count out China.

The Chinese (as with all Asians that I met in Asia) are racists down to their core. All of them that I knew were shocked when we elected an American African to be president. One Chinese (thug) politician told me that he’d steal everything that wasn’t bolted to the floor and shat where he ate. I could go on, but the description of what he thought we were in for was not flattering. I thought to my self at the time that it might not be THAT bad. I was wrong.

21 thoughts on “The Chinese Economy

  1. I spent 2 weeks in China during the time we spent on our Chinese daughter's adoption. In 2002, the China I saw up close and personal was far from communist: everybody was selling something. Everywhere we looked, we saw entreprenuers hustling for Renmenbi.

    We were in Wuhan in July: over 100 degrees and humid as hell everyday. Our hotel had AC. Then we spent the last few days in Guangzhou at the WHite Swan. Nice.

    I liked China when I was there. Just like Cassius Clay and them Viet Cong, I got no beef with the Chinese.

  2. So many of their large "companies" are propped up time bombs. The good news is that the US will continue to feed the beast, and the status quo of propping them up will last the rest of our lifetimes. Or it could all come crashing down before then. But definitely one or the other…

  3. "Propped up time bomb" is more the rule than the exception. Norinko and some of the big state industrial companies are exceptions as are the big multi-nationals such as IBM, Apple, etc. who manufacture there.

    Chinese accounting methods for wholly owned Chinese companies create situations where "problems" develop. Those reasons are precisely why it is so very difficult for a Chinese company to go to Nevada and get a gaming license. (Maybe "Anonymous", my friend who posts here occasionally will add something)

  4. China is never quite what you expect it to be — even if you have spent a lot of time in China. That and history combine to my point that you can't count out China.

  5. When I was in China, one Party Thug that I knew went off on a rant one day. We were on a train somewhere in the worker's paradise and he started off on how Japanese and Russians were better than Americans. I asked him. "What about those Chinese children that nobody wants? Do Japanese or Russians adopt them, take them home, lavish them with love and affection, raise them as their own?"

    It shut him up.

  6. Oh the Chinese are absolutely capitalists. I have a Chinese business man who has stayed with me (for a few weeks at a time)for the past 6 years. He's a big business man from Xiamen city who is doing a doctorate in business English. Of course so he can get his fingers in many pies. He is relentless. He eats, sleeps and breathes business. He is also incredibly rascist but he is an interesting person. We argue a lot, in a nice way. He gives himself an English name – Frank Q – yeah…I burst out laughing when he first introduced himself.
    I like the pictures; you look very swag LL. What are you doing in the second one? Mic in one hand and….secret, tiny spy equipment between fingers in the other? Or are you counting yourself in? I love captured moments like this.

  7. hina is racist, but not because of communism… look at Japan. I do believe that the chinese are capitalists because, in most communist countries, existence is hard scrabble and you have to do whatever to survive. I don't have much experience with the ChiComs, but I do know that Cubans (CubComs?) often behave in exactly the same way.

    I think communism goes against human nature.

  8. That's on the fourth floor of the Public Security Bureau Headquarters in Changsha, Hunan. All of the respective chiefs of police in Hunan province were there to hear me puff and sputter. The photo was taken during a break by a Chinese Communist Party apparatchik.

  9. Communism is a system to gain control. The more central control, the more power. The concept underpins the problem with growing the Federal Govt. to the point where it is now. All of those government mouths need to be stuffed by people who work and pay taxes.

  10. That particular thug may have. In the US I turn to the Ministry of Truth (MSNBC) when I want a question answered truthfully.

  11. No, but Orwell would be familiar with the scene today. By the way, if anyone from the Ministry of Justice asks, I love Big Brother.

  12. My suits are custom made. Would you expect less? And while I like French cuffs and cufflinks, they're a pain in the neck.

  13. Well that's where you're going wrong, they're supposed to go in your cuffs. 🙂

    I wouldn't expect any less, no.

  14. My blog has already been banned by my friends, the ChiComs. Please let the Ministry of Justice know that I love Big Brother, as well.

  15. >The Chinese (as with all Asians that I met in Asia) are racists down to their core.
    For that alone I'll still consider you a China expert despite your past-tense self description. Anyone not Chinese is despicable, and it's not only a matter of race. Other northeast Asians are also despised or hated. The Japanese are those "dwarf rapists" (hated) and the Koreans are those "people whose reason for existence is to be beaten" (despised). Other Asians (using the American and not UK sense of the term) that Americans tend to lump in with Chinese, such as the Vietnamese or Philipinos, are even further subpar in the Chinese mind. Brown and black people needless to say are further down the rungs yet. The perjorative for whites is not "round eye" as people like to tell themselves: "big noses" is more common, and they don't mean it as a de Bergerac-esque compliment. But we like to misunderstand the Chinese in a way that makes us feel better.

    Zhongguo is always translated Middle Kingdom, but what the Chinese mean is Central Kingdom, in the same humble way that Boston calls itself "The Hub" (of the Universe).
    We fondly translate "Yang Guize" as Foreign Devils (probably because the Devil has all the good lines in Paradise Lost, i.e. there is respect for Lucifer's rebellion at some level) but guize is used more in the sense of "those bastards" or "those assholes" than chosing to rule in Hell rather than serve in Heaven. In other words, there's no implied compliment in the term.

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