Is China's Economy a House of Cards?
How long can any nation sustain high economic growth rates without a correction?
Who would know better than the Chinese that things are not so good?
How would Chinese "investors" signal that they did not think things were good?
As noted in todays WSJ ( HT:Instapundit), the Chinese stock markets have plunged in the last few months. The story reveals some very juicy details that is just bad and disturbing news to this cowpuncher who has seen drought and cattle cycles destroy a lot of people.
First, the Chinese Communist Government owns 2/3 of the shares on the market. Second, neither the listed firms nor the Chinese version of the SEC are transparent or accountable. Third, Chinese state-owned banks have provided most of the capital outside of the stock market to the tune of over 2.3 trillion dollars. Fourth, the Chinese government admitted that "we dont know" what we are doing. And fifth, most of the firms listed on the exchanges are dinks that got there by cronism. Sixth, it was the PRC media that pushed the stocks.
Who loaned out 2.3 trillion in China? I did not know China had so many homegrown Goulds and Morgans and Carnegies. Does something sound funny? How can a nation that was once Communist and is still dominated by the Communists make prescient investments?
I sense a lot of hat here, but still dont see a lot of cow..
If the Chinese government cannot run something as simple as a stock market, then what kind of oversight is there in the banking sector? If the majority of firms getting listed on the exchanges are dogs, then which firms are getting the bank loans today? If the majority of investors got duped on the exchanges, then who is duping whom in the bank offices? If the PRC media is pushing useless stocks, then where else is it cheerleading becoming empty and hollow?
Take China Aviation Oil for instance. This firm was touted as among the best and now they are belly up. How does an energy firm go under in a sellers market for fuel?
Does anyone remember the Japanese Economic Miracle? It was driven by an expansionary monetary policy that invested in state-guided ventures which led to massive speculation in non-productive assets - ie stocks and land, both in Japan and overseas.
If this sounds familiar its because the Chinese have been investing heavily overseas in many business ventures.
Could this "investment" be driven by loose banks at home?
Consider this - The Chinese as a nation have little experience in building and sustaining busineses over the long run. Most of the firms in China are either state owned or state sponsored in some way. And the banks are not independent. Does it seem weird that they are "investing" all that money?
Finally, there is the huge foreign reserves that China has amassed so quickly. Up over 50% in one year?
Doesn't this seem unsustainable?
Could all the little protests be the canary in the coal mine?
I am glad I am in the cow business.
Who would know better than the Chinese that things are not so good?
How would Chinese "investors" signal that they did not think things were good?
As noted in todays WSJ ( HT:Instapundit), the Chinese stock markets have plunged in the last few months. The story reveals some very juicy details that is just bad and disturbing news to this cowpuncher who has seen drought and cattle cycles destroy a lot of people.
First, the Chinese Communist Government owns 2/3 of the shares on the market. Second, neither the listed firms nor the Chinese version of the SEC are transparent or accountable. Third, Chinese state-owned banks have provided most of the capital outside of the stock market to the tune of over 2.3 trillion dollars. Fourth, the Chinese government admitted that "we dont know" what we are doing. And fifth, most of the firms listed on the exchanges are dinks that got there by cronism. Sixth, it was the PRC media that pushed the stocks.
Who loaned out 2.3 trillion in China? I did not know China had so many homegrown Goulds and Morgans and Carnegies. Does something sound funny? How can a nation that was once Communist and is still dominated by the Communists make prescient investments?
I sense a lot of hat here, but still dont see a lot of cow..
If the Chinese government cannot run something as simple as a stock market, then what kind of oversight is there in the banking sector? If the majority of firms getting listed on the exchanges are dogs, then which firms are getting the bank loans today? If the majority of investors got duped on the exchanges, then who is duping whom in the bank offices? If the PRC media is pushing useless stocks, then where else is it cheerleading becoming empty and hollow?
Take China Aviation Oil for instance. This firm was touted as among the best and now they are belly up. How does an energy firm go under in a sellers market for fuel?
Does anyone remember the Japanese Economic Miracle? It was driven by an expansionary monetary policy that invested in state-guided ventures which led to massive speculation in non-productive assets - ie stocks and land, both in Japan and overseas.
If this sounds familiar its because the Chinese have been investing heavily overseas in many business ventures.
Could this "investment" be driven by loose banks at home?
Consider this - The Chinese as a nation have little experience in building and sustaining busineses over the long run. Most of the firms in China are either state owned or state sponsored in some way. And the banks are not independent. Does it seem weird that they are "investing" all that money?
Finally, there is the huge foreign reserves that China has amassed so quickly. Up over 50% in one year?
Doesn't this seem unsustainable?
Could all the little protests be the canary in the coal mine?
I am glad I am in the cow business.
posted by Red River at 8:04 PM
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