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The Great China Hype Thread
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Kuros



Joined: 27 Apr 2004

PostPosted: Thu Feb 04, 2010 10:04 pm    Post subject: The Great China Hype Thread Reply with quote

Here it is, a thread to place all China Hype articles. I more than suspect these kinds of articles, almost all of which come from Westerners, embarrass Chinese with their outrageous predictions of success.

-----------------------

Here's $123,000,000,000, as in China's GDP will be $123 trillion by 2040, an article destined to go down in infamy like Dow 36,000:

Quote:
In 2040, the Chinese economy will reach $123 trillion, or nearly three times the economic output of the entire globe in 2000. China's per capita income will hit $85,000, more than double the forecast for the European Union, and also much higher than that of India and Japan. In other words, the average Chinese megacity dweller will be living twice as well as the average Frenchman when China goes from a poor country in 2000 to a superrich country in 2040.


My favorite part of the article has to be the demographic argument: Fogel argues that European and U.S. demographics are going to force a decline. The problem is China faces the same issue, and almost certainly to a more serious extent than the U.S.. The One Child Policy, although relaxed in certain jurisdictions and basically toothless in the rural areas, is still in place, and has already left its mark. China's 1.79 women/children is significantly less favorable than the U.S.'s 2.05. Although who really knows, because even Fogel admits Chinese statistics are unreliable (if only because the country is so vast).

Quote:

The first essential factor that is often overlooked: the enormous investment China is making in education.


Its true that China's education system is strong. But its also impoverishing its students at the secondary level. In turn, recent graduates come out of the colleges and very few get jobs, and many have to resort to internships (figures, many didn't get job experience during college, as they weren't encouraged by their parents). Lastly, China's education system is incredibly centered on tests and test-taking. Westerners have to be imported to teach the Chinese such skills as critical thinking. Its a good education system as far as the world goes, but Fogel is wrong to think that simply pumping money into education will produce an exponential productivity increase. That kind of logic is so, as my friend would say, Nintendo.

Quote:
Moreover, history seems to be moving in the right direction for China. The most tumultuous local dispute, over Taiwan's sovereignty, now appears to be headed toward a resolution. And at home, the government's increasing sensitivity to public opinion, combined with improving living standards, has resulted in a level of popular confidence in the government that, in my opinion, makes major political instability unlikely.


What? Hello, U.S. arms sales to Taiwan provokes Chinese self-destructive, reckless protectionist backlash!

There's also no accounting for the hidden costs of pollution and the tolls for cleaning it up. In a word, such a poor China article, but par for the course as far as Western efforts on the subject are concerned.
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mises



Joined: 05 Nov 2007
Location: retired

PostPosted: Mon Feb 08, 2010 8:58 pm    Post subject: Reply with quote

Not exactly a 'hype' article, but really interesting none the less:

http://www.economist.com/businessfinance/displayStory.cfm?story_id=15453014&source=hptextfeature
Quote:

FROM being a rounding error a decade ago, the financial clout of China now trails only that of America. By market capitalisation, it has three of the four largest banks, the two largest insurance companies, the second-largest stockmarket and a lengthening list of investment funds. Yet who makes the decisions in China is barely understood. The government and the Communist Party are intimately entwined with the managers of China’s financial institutions. Working out who is really in charge is almost impossible.

Even attempting to do so takes you into sensitive territory. Disclosing information about how the Chinese government works risks violating nebulous secrecy laws or sacrificing business opportunities. Many China-watchers will only speak face to face, concerned about using e-mails or phone calls to discuss what, in the West, would be standard chatter about the status of bankers and their supervisors.

Almost all of the credit for Chinese companies is raised through its commercial banks. The country’s bank chiefs are powerful men whose careers have been meticulously managed. But none has the freedom of their peers in the West, not even those managing state-infested firms like Citigroup and RBS. Perhaps the only Western equivalents of a Chinese bank are the two American housing agencies, Fannie Mae and Freddie Mac—vast institutions with political mandates to expand credit, and protection from the consequences of their role in fostering bad debt.

Big credit decisions in China are not advanced by any one bank, nor any one banker. Credit is infused and withdrawn by central diktat. That process has extraordinary appeal to state planners but is horribly inefficient for individual institutions. In recent weeks, for example, as the screws on lending have tightened, favoured industrial companies have been getting urgent calls from their bankers demanding that they immediately scoop up their credit needs for months to come, or be subject to a freeze of uncertain duration. Firms that manage to load up on credit still suffer because they bear interest costs long before the money is actually needed.

“The Chinese banks are pure utilities,” says one banker. “The State Council [the government’s chief administrative arm] tells them to lend, and they lend.” Overt controls increase in line with the amount of credit. Loans above $500m are said to be directly vetted by the State Council.

Something like four-fifths of the assets in the banking system are controlled by 17 institutions. In many ways, China Development Bank is easiest for an outsider to understand. It is vast, run by a powerful government official, Chen Yuan (son of Chen Yun, one of the “eight immortals” who created modern China), and supports projects that the government favours. Most of the other big banks are not explicitly run by the government, but regulators attend board meetings and senior management often includes a person with the title “head of discipline”, who represents the Communist Party.

Executives are rotated between institutions by government decree. HSBC was stunned in 2006 when Zhang Jianguo, the president of Bank of Communications, in which it had taken a 20% stake, turned up as president of a key competitor, China Construction Bank, the country’s second-largest financial institution. There was no consultation, nor even notification of the move. China Construction Bank’s chairman, Guo Shuqing, is rumoured to be in the running for a top political position: the move could have been succession planning. Shifts of this kind have gone into high gear since the start of the year.

etc etc
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nautilus



Joined: 26 Nov 2005
Location: Je jump, Tu jump, oui jump!

PostPosted: Tue Feb 09, 2010 6:04 am    Post subject: Reply with quote

What irritates me a touch is all the claims to have invented everything first, long before anyone else did. I mean...soccer? really?
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The Happy Warrior



Joined: 10 Feb 2010

PostPosted: Thu Feb 11, 2010 5:27 pm    Post subject: Reply with quote

All China Hype in other threads will be redirected here.

RufusW wrote:
pkang0202 wrote:
Must be painful to know that the richest, most powerful country in the history of the world is the USA.

Oh yeah, that's not going to chance in your lifetime.


I would certainly expect China to become 'more powerful' than America within 30 years. Maybe also India.


It won't happen.

By Eastern standards, during most of the last decade the CCP oligarchy has pursued sound gov't and fiscal restraint. Its had mercantilism and US support at its back. Deng Xiaoping's counter-revolution has led to 30 years of rapid economic progress and technological development. But its just run out of steam.

Neo-Maoism is rising up and even penetrating the gov't. The essence of this movement is less salient for this post than the effects. Neo-Maoism means aggressive protectionism, burdensome regulations on employers, and (now I'm guessing here) stepped up espionage and infiltration against Western gov'ts.

This new year will see the CCP riding the tiger; there's nothing they can do about the massive real estate bubble or the stock market bubble, so why try?

Anyway, the Happy Warrior approves of the resilience of his upper-middle class Chinese brothers and sisters, and knows to rely on their wisdom and judgment on how to manage their personal affairs. But in the short-term, its the last great year for China, then a plunge into depression economics. The public policy is getting pretty bad here.

乐武士说:新老虎年快乐
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Old Gil



Joined: 26 Sep 2009
Location: Got out! olleh!

PostPosted: Thu Feb 11, 2010 6:26 pm    Post subject: Reply with quote

That article was pretty ridiculous, I think the guy just wanted to get his name in the papers.

The Chinese CIA put out a report in 2000 estimating its Comprehensive National Power (zonghe guoli) would be exactly half of that of the United States by 2020, and the pessimists put it closer to 40%. These articles are just fluff mostly. I prefer to read whatever James Fallows writes and repeat it.

Not hype but still good:

http://www.foreignaffairs.com/articles/65947/the-end-of-the-beijing-consensus


Quote:
How, then, has the Chinese government been able to adopt the principles of neoclassical economics while still claiming Marxism as its ideological anchor?.... the state is often predatory toward citizens, but its predation is "identity-blind" in the sense that Beijing does not generally care about the social and political status of its chosen prey -- unlike many governments elsewhere that act to protect and enrich specific social or political groups
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bacasper



Joined: 26 Mar 2007

PostPosted: Fri Feb 12, 2010 10:54 pm    Post subject: Reply with quote

This article is more level-headed, predicting short-term cooling in the economy but long-term health.

January 21, 2010

China's Economy is Not a Bubble

It was announced today that China's GDP grew 10.7% last quarter over a year ago, its fastest pace since 2007. There is now speculation that China's central bank will start raising their benchmark interest rate in order to tighten lending in the country. In fact, China's central bank last week raised reserve requirements and Chinese authorities have ordered some of China's largest banks to curb lending for the rest of January.

NIA believes China's moves to tighten bank lending will strengthen the long-term future of their economy. In the short-term, interest rates will inevitably rise and their GDP growth will decline, but we won't see a collapse in asset prices in China.


Certain pockets of the Chinese economy may have mini-bubbles, such as the Real Estate markets in Hong Kong and Shanghai. However, even if Real Estate prices in certain major Chinese cities were to decline substantially, it won't be enough to send China's economy into a tailspin like Dubai. Dubai's economy was built on Real Estate speculation, while China's economy has been built on a solid foundation of manufacturing and savings.

There are some claims being made by people like James S. Chanos that China is in danger of producing huge quantities of goods that it will be unable to sell. NIA believes China's population of 1.3 billion people will be perfectly capable of purchasing their own goods that they produce, if the Chinese government abandons their currency peg to the U.S. dollar and allows the yuan to appreciate. China's currency peg is responsible for most of the global economic imbalances that exist today. It is forcing the Chinese to acquire U.S. treasuries, fueling the 'dollar bubble' in the U.S. and artificially suppressing the standard of living of Chinese citizens.

When China first chose to peg their currency to the U.S. dollar in 1994, China had a much smaller, less-mature economy. Due to a lack of population centers and distribution networks, China was dependent on the strength of its exports. Today, China is investing heavily into its infrastructure by building high-speed rail lines, dozens of new airports, and high-tech power distribution systems and electricity grids. At the same time, our infrastructure in the U.S. is decaying and we don't have any savings to repair it.

China is not trapped into maintaining its currency peg to the U.S. dollar. China's exports to the U.S. and Europe now account for less than 1/2 of their total exports. China has been rapidly increasing exports to countries like Australia, that can purchase their goods by trading valuable commodities instead of printed money.

It is impossible for China's economy to be a bubble when the Chinese stock market is still about 50% lower than its all time high. There are many Chinese stocks that have 20%+ revenue growth and trade with price/earnings ratios below 10, with comparable companies in the U.S. that have zero or negative revenue growth yet trade with price/earnings ratios of 20. These valuations should be the other way around, but the perception today is that China is still a "risky" emerging market.

China's economy is still in its infancy. China's oil consumption per capita is less than 1/10 the U.S. and most Chinese households don't own a car, while the average American household has 2.3 cars. China has saved and lived below its deserved standard of living, allowing Americans to live beyond their means for an extended period of time. This imbalance must soon be dramatically corrected.

China has many of the same characteristics the U.S. had just before it took its world superpower status from the U.K. in the 1920-30s. The U.S. was propelled to its superpower status because it was the world's largest exporter of goods and the world's largest creditor nation. Today, China exports the most goods and is the world's largest creditor nation with $2.3 trillion in foreign currency reserves. China will have many ups and downs in the decades ahead, but over the long-term we believe China is positioned to capture the U.S.'s status as the world's superpower.
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Mr. Pink



Joined: 21 Oct 2003
Location: China

PostPosted: Sat Feb 13, 2010 2:54 am    Post subject: Reply with quote

As someone living in China I can say: it is a bubble.

I really cannot wait for it to burst. The RMB is way too highly valued versus the US dollar.

What you are having is a hell of lot of people getting rich and most people staying poor. The rich have no restrictions on how much property they can buy. Housing is way over priced because of this. I really don't want to be in China when the bubble does burst though. I can see foreigners getting blamed for it...sure why not. They would never blame corruption and incompetence first.
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The Happy Warrior



Joined: 10 Feb 2010

PostPosted: Sat Feb 13, 2010 11:37 am    Post subject: Reply with quote

bacasper wrote:

It is impossible for China's economy to be a bubble when the Chinese stock market is still about 50% lower than its all time high. There are many Chinese stocks that have 20%+ revenue growth and trade with price/earnings ratios below 10, with comparable companies in the U.S. that have zero or negative revenue growth yet trade with price/earnings ratios of 20. These valuations should be the other way around, but the perception today is that China is still a "risky" emerging market.[/b]


Who cares what the stock market is at? We've literally got prices here in urban China equal to U.S. real estate, but the urban per capita income is just 1/7th of the U.S. national average.

Anyone who has personal experience with China here has concurred that there's a massive real estate bubble.
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bacasper



Joined: 26 Mar 2007

PostPosted: Sat Feb 13, 2010 7:48 pm    Post subject: Reply with quote

The Happy Warrior wrote:
bacasper wrote:

It is impossible for China's economy to be a bubble when the Chinese stock market is still about 50% lower than its all time high. There are many Chinese stocks that have 20%+ revenue growth and trade with price/earnings ratios below 10, with comparable companies in the U.S. that have zero or negative revenue growth yet trade with price/earnings ratios of 20. These valuations should be the other way around, but the perception today is that China is still a "risky" emerging market.[/b]


Who cares what the stock market is at? We've literally got prices here in urban China equal to U.S. real estate, but the urban per capita income is just 1/7th of the U.S. national average.

Anyone who has personal experience with China here has concurred that there's a massive real estate bubble.

If you read the full article, you'll see it mentions real estate mini-bubbles in urban areas. They just do not constitute a full economy big bubble.
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mithridates



Joined: 03 Mar 2003
Location: President's office, Korean Space Agency

PostPosted: Sat Feb 13, 2010 8:15 pm    Post subject: Reply with quote

Okay, here's mine:

(the original New York Times article is here)

You see these articles all the time where China is now the leader in X, but has only become a leader in X by having maybe a fifth of the investment per capita that actual leading countries invest but end up coming out first due to the population.
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caniff



Joined: 03 Feb 2004
Location: All over the map

PostPosted: Sat Feb 13, 2010 9:47 pm    Post subject: Reply with quote

nautilus wrote:
What irritates me a touch is all the claims to have invented everything first, long before anyone else did. I mean...soccer? really?


Yeah, like soccer is so complicated. Two guys start kicking a ball at each other, and PRESTO! SOCCER!

It's like arguing about which nation first invented the staring contest (that and soccer being about equal in terms of excitement).
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Old Gil



Joined: 26 Sep 2009
Location: Got out! olleh!

PostPosted: Sat Feb 13, 2010 10:19 pm    Post subject: Reply with quote

caniff wrote:
nautilus wrote:
What irritates me a touch is all the claims to have invented everything first, long before anyone else did. I mean...soccer? really?


Yeah, like soccer is so complicated. Two guys start kicking a ball at each other, and PRESTO! SOCCER!

It's like arguing about which nation first invented the staring contest (that and soccer being about equal in terms of excitement).


I just watched that Mean Streets clip. Great movie.
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caniff



Joined: 03 Feb 2004
Location: All over the map

PostPosted: Sat Feb 13, 2010 10:28 pm    Post subject: Reply with quote

Old Gil wrote:


I just watched that Mean Streets clip. Great movie.


Yeah, it's a good one. Later I might have to switch my location over to The Bad Lieutenant - just to mix it up, you know?

http://www.youtube.com/watch?v=Ir8Y4iFrWk8

edit: ^ most def nsfw
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On the other hand



Joined: 19 Apr 2003
Location: I walk along the avenue

PostPosted: Sun Feb 14, 2010 8:23 am    Post subject: Reply with quote

Based on a holiday stay at one middle school, a Canadian writer concludes that China's education system is superior, and will propel China way ahead of everyone else in the years to come.

I wouldn't neccessarily rule out there being some validity to the writer's observations. However, you could probably make the same sort of general observations about a Korean middle school(kids are more disciplined, work better in groups etc). Yet most people who have spent a lot of time working in that system, or in close proximity to it, would have a more balanced view of the pros and cons.

Plus, articles like this always seem like they're pandering to old-fogey nostalgia for the good old days of hard work and discipline, but wrapping it up in a hip orientalist gloss.
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Old Gil



Joined: 26 Sep 2009
Location: Got out! olleh!

PostPosted: Sun Feb 14, 2010 8:54 am    Post subject: Reply with quote

On the other hand wrote:

Plus, articles like this always seem like they're pandering to old-fogey nostalgia for the good old days of hard work and discipline, but wrapping it up in a hip orientalist gloss.


Absolutely. It has the 'foreign menace' and the 'bootstraps=the way" angles that the older demographic eats up.
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