China Suffers “Delusion” like 1980s Japan, Faces Long Stagnation

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Sudden Financial Meltdown is less likely.

The Chinese government has the situation under control and will do whatever it takes to keep it under control — that’s in essence what Premier Li Keqiang said today in a speech at the World Economic Forum in the Chinese city of Dalian.

“We are fully capable of achieving the main economic targets for the full year,” Li said. The mandated growth rate this year is 6.5%.

“Currently, China also faces many difficulties and challenges, but we are fully prepared,” he said, according to Reuters. He said this because everyone from the IMF and the New York Fed on down has been pointing at and fretting about the debt powder keg that China keeps filling with ever more volatile compounds.

“There are indeed some risks in the financial sector, but we are able to uphold the bottom line of no systemic risks,” he said. “We are fully capable of preventing various risks and making sure economic operations will be within a reasonable range.”

So the powder keg isn’t going to blow up. As ever more debt is added, the government is pursuing the shift to a consumer-driven economy, while trying to tamp down on excess and outdated capacity in some select industries such as steel and coal. These cuts, Li said, would continue.

“No development is the biggest risk for China,” he said, so China wants to “sustain medium- to high-speed economic growth over the long term.” But given the size of China’s economy, it “will not be easy.” In other words, come hell or high water, credit creation will continue in order to maintain this mandated growth.

So when will this powder keg blow up?

It might not blow up; China might be able to prevent that kind of event, and it is less likely that China will melt down financially despite its terrific credit expansion, and there are no signs of an immediate crisis. But China, like Japan in the 1980s, is suffering from a “delusion” about how to fix its economic problems.




That’s what Richard Jerram, chief economist at the Bank of Singapore, the private banking arm of the Singapore-listed Oversea-Chinese Banking Corporation Limited Bank (OCBC), said after a press conference on Monday in Hong Kong, according to the Nikkei.

By avoiding real economic reform, and by continuing with this credit creation to paper over all problems, Jerram said, China will likely face long-term economic stagnation, similar to what Japan experienced after its 1980s bubble. The Nikkei:

Instead of pushing reforms to transform its economy to consumption-based growth, he [Jerram] expected that the nation would continue to rely on a government policy-supported growth model with credit continually expanding at “whatever number necessary to maintain the acceptable growth rate at 6-7%.”

He pointed out that growth fueled by cheap credit is the opposite of how China should approach its problems. “What you have to do is clear,” he said. “You have to choke cheap credits to inefficient companies.”

“You need a very broad range of reform if you are going to fix this,” Jerram said, but “we haven’t seen any signs of that scale of reform happening.” Real reform, Jerram said, would be politically and socially “very difficult.”

But dodging painful reform and papering over problems with more debt will likely result in a long-term economic stagnation, as it did in Japan. The Nikkei:

China’s current delusion resembles what he saw in Tokyo in the late 1980s when the nation was going through an economic bubble, which eventually burst in the 1990s. Most of Japan’s growing credits were held domestically, just like today’s credits in China, he said, and this is another reason why he believed that what awaits China is most likely long-lasting economic stagnation.

Economic reform will likely remain a focus of the Chinese government, but there are so many conflicting interests in the economy that Jerram sees the government’s willingness to tackle real reform as low. “I don’t know if it’s really possible,” he said. Even if President Xi Jinping were given another 15 years, “I still don’t know if you can fix it.”

The difficulties for China to reform will even be greater, Jerram said, because the role of government in the economy is much larger and China is poorer than Japan was in the 1990s.

This theory – a long hard stagnation as a result of the debt boom rather than a sudden debt meltdown – is not universally shared. For example, the New York Fed was somewhat less sanguine about the chances of China being able to avoid a “Financial Crisis,” though it also thought that the government had some capacity “to absorb potential losses from a financial disruption.”

And so, if the government uses this capacity every time to dodge the big event without really solving the underlying economic problems, Jerram’s long stagnation scenario would then kick in.

But the data points the New York Fed found in its China study can give you the willies. Read…  Debt Boom in China Could Lead to “Financial Crisis,” But Maybe Not Yet: New York Fed




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  74 comments for “China Suffers “Delusion” like 1980s Japan, Faces Long Stagnation

  1. Willy2
    Jun 27, 2017 at 11:34 am

    – I disagree. Japan (some 100 million people) was – after the bubble of the 1980s – able to postpone “reforms” in the 1990s because there still was a strong demand from the US, Australia and Europe (some 750 million people). Otherwise Japan would have been forced to “reform” the “hard way”. That’s why I don’t share the notion that China faces a “long stagnation”.

    (Of course, I could be wrong but this is my opinion at this moment when I look at the facts.)

    • d
      Jul 1, 2017 at 12:08 am

      Market economy Japan and most of the Western World V central Command economy, china.

      Two rule book’s.

      The question you should be asking is how much longer will the west allow china to continue gaming the system, at the expense of the west.

      When the west says no more, (Dump bludgeoning tax and trade war idiocy, and German Reciprocity) which is slowly happening china will have a very big problem.

      Brexit is going to be a factor in this.

      The British will again become a low tax manufacturing, and shipping hub. With robotics and a welfare cuts, which will send many Asian and ME immigrants back where they came from when their benefits are cut.

      Once out of the Eu England will cut all benefits to immigrants, or go bankrupt.

      • Tom Kauser
        Jul 3, 2017 at 12:26 pm

        The city will facilitate the transfer of management to China to insure every grain of gold gets transfered the Frankfurt and yes it is going to be multiple generational.

    • Tom Kauser
      Jul 3, 2017 at 12:21 pm

      Wall street stands ready to transfer the gold from China into Frankfurt bank vaults?

  2. memento mori
    Jun 27, 2017 at 11:45 am

    China being China, me thinks it will muddle through for longer than you can afford to wait. People shorting China will lose money , not because they made the wrong bets, but because time is not in their side. Their bets will pay off long after they are forgotten in the abyss of eternity. China could care less, time does not flow at the same pace on that side of the planet.

    • Duke De Guise
      Jun 27, 2017 at 12:09 pm

      “… time does not flow at the same pace on that side of the planet.”

      Characterized by the famous quote attributed to Zhou En Lai when Nixon and Kissinger visited China in the early 1970’s: asked whether the French Revolution* had been a success, he reportedly answered, “It’s too soon to tell.”

      * The story’s been challenged, with the claim that Zhou in fact was asked and was referring to the youth/worker uprisings in ’68… but if it isn’t true, it should be.

      • RD Blakeslee
        Jun 27, 2017 at 2:40 pm

        Story of my life …”If it’s not true it should be” …

    • nick kelly
      Jun 27, 2017 at 1:57 pm

      ‘We are amazed how many analysts cling to the idea of Chinese Exceptionalism’

      REAL China expert Anne Stevenson- Yang

      She lives there, is fluent in Mandarin, and founded her company there that specializes in the very difficult task of getting China’s real numbers.
      Her outfit was one of the first to use electric consumption as a gauge, but now the CCP manipulates that number.

      In early 2015 she estimated growth as flat to negative.
      In mid 2015 the Chinese stock markets fell by 50 %, and the government arrested short sellers. It printed massively to plug the hole. Visitors report that all the paper notes seem brand new.

      In her opinion a fundamental problem are the SOE’s (State Owned Enterprises) which are at the top of feudal mechanism supporting the Chinese Communist Party (CCP)

      To see her masterful presentation to a US blue- ribbon bunch of suits enter her name and look for her Youtube photo.

      All heavy industry is in over capacity. steel, concrete, etc.
      Aluminum is possibly the worst with 2 trillion $ invested.
      She mentions one aluminum plant that tried to close but the SOE bank wouldn’t let it because it would have to report a bad loan.

      Moving on to my opinion, the SOE’s are the financial arm of the CCP.
      The key problem facing China is what to do with the CCP.

      (About 80 % of China’s health care budget is consumed by 8.5 million CCP members and their families)

      • Rates
        Jun 27, 2017 at 3:42 pm

        We are even MORE amazed by the idea of American exceptionalism.

        Analysts A, B, C, D, etc live in America, all of them came from the best American schools, speak perfect English, and use numbers all the time for their analysis and yet very few of them could see the mortgage debacle or any debacle whatsoever.

        And even people who saw the mortgage debacle like John Paulson and Kyle Bass, what’s their track record nowadays? Did you say poor? Yeah that’s about right.

        What does speaking any particular language and having a head for numbers buy you nowadays? None.

        • nick kelly
          Jun 27, 2017 at 5:21 pm

          Did you gather that I thought the US was immune to the debacles that actually happened?

          Obviously not. but for some reason a number of people seem to think it CAN’T happen in China, because the CCP won’t permit it or some such rot.

          The reckless expansion of credit in China, that enabled it to pour more concrete from 2008 to 2015, than the US did in the ENTIRE 20 th century, is not a magic wand.

        • John Doyle
          Jun 27, 2017 at 5:34 pm

          Nick, the credit problem is easy to wipe out as far as the sums go. The numbers in accounts are just wiped, a computer keystroke operation. Obviously not without consequences, but less so than trying to pay them back. It’s mostly in the financial sector. In the real world the sums loaned are today largely asset inflation related. Assets would have to be revalued down right across the nations. It may still not be enough but it may give us some breathing space before the whole economy, and our civilization itself bombs. It cannot be avoided, so see if we can manage some of it.

        • Rates
          Jun 27, 2017 at 9:50 pm

          @nickkelly, I didn’t think so, but my point was that pedigrees matter little in this strange times. And quoting cement statistics does not help either. At one point in time during the height of the Japanese bubble, the entire grounds of the Imperial Palace in Tokyo was worth more that the entire state of California. Ok that bubble has deflated, but people betting against the Japanese Yen always end up being carried away in body bags.

          And talking about hubris, no one can beat this: http://www.zerohedge.com/news/2017-06-27/yellen-i-dont-believe-we-will-see-another-crisis-our-lifetime

          This is it guys. Call your banks, your brokers, your friends, the P2P network, maximize your credit card. You can only win from this point forward.

        • intosh
          Jun 28, 2017 at 2:28 am

          Rates,

          lol when I saw this yesterday, I almost fell off my chair… almost because I then remembered who these people were. It’s not the first time they think one thing but say the complete opposite. Lying in your face is what they do best.

      • d
        Jul 1, 2017 at 12:25 am

        Anne Stevenson- Yang

        Has the same issue as Meredith Whitney

        WHEN???????????????????????????

        Unlike Whitney, she is smart enough not to put a time frame on it.

        That the CCP suppress: Electricity, Rail Car Movement,, and as much as they can, Container Movement data, is a screaming indicator that official chinese Economic #s are major BS.

        CCP china is a bigger, eviler and more corrupt monster than Imperial china ever was. The crunch will come when the “Havenot’s” can not be kept controlled.

        Or convinced that they are haves, as they own a worthless overpriced naked apartment, in a ghost city ,as a store of “wealth”

        china has greater income inequality now ,than imperial china ever had.

        Its very big, if you have contacts it is easy to make money.

        Two of my chinese friend’s, just returned From Shanghai , again.

        “Good to vists” “NOT GOOD TO LIVE IN”

    • Thor's Hammer
      Jun 27, 2017 at 6:40 pm

      “Time does not flow at the same pace on that side of the planet” What utter nonsense. There is only one Planet.

      The coal that China extracts from Australia and burns in its furnaces to power its industries exports its CO2 into Wyoming’s atmosphere and Tahiti’s ocean. The concrete and steel used to build China’s ghost cities will never again be used for homes that people will live in. Cedars do not grow in the deserts of Lebanon, and fish do not grow in a plankton-free ocean.

      If China’s economic targets were truly met yielding the “acceptable”growth rate of 6.5%, within a couple of centuries every square meter of the planet would be occupied by a Chinese person holding 500,000 smart phones in each hand. Exponential growth is mathematically impossible in a finite world– a simple deduction that any 13 year old can perform, but beyond the grasp of any politician or economist.

      “Delusion is the opium of the People”

  3. Rates
    Jun 27, 2017 at 11:54 am

    Yep everything is unlikely to blow up because new economic techniques are continuously being employed.

    China can piggyback on Wolf’s insight about Federal debt. I mean in the end, China can issue enough state money to redeem the debt of the private sector. And then cancel it.

    US, Japan, Europe all can do it as well. Since everyone is debasing currency, the relative exchange rate will be the same.

    LOL at people looking at “facts”.

    The slaves will agree to this:
    1. Debt free.
    2. Some people will own houses outright.

    It just makes too much sense not to be done.

  4. subunit
    Jun 27, 2017 at 11:57 am

    The Japan/China comparison only makes sense if you look at a handful of financial parameters. China is facing an additional suite of limitations on its growth that make a “long stagnation” increasingly unlikely- even a no-growth China will be destroying its arable land at an alarming rate, for instance. Beyond that, China constitutes a much larger share of global economic growth/positive credit impulse now than Japan did then- a Chinese slowdown will a have a much greater impact on the global context than the Japanese crisis did. Systematic thinking is needed to understand that a Chinese crisis will look much different from what went before. Seems to be in short supply among financiers.

    • nick kelly
      Jun 27, 2017 at 5:29 pm

      Japan rapidly shifted from exporting cheap toys etc. and moved up the value chain.

      China has made progress but nothing like Japan’s.
      From the get-go, Japan offered higher quality than the customer was paying for.
      China has tended to conceal low quality and sell on price.

      (Anyone who wants to disagree may reflect that the CCP has given its industry several tongue lashings over low quality.)

      You will find little from Japan or Germany in Walmart.

      • Petunia
        Jun 28, 2017 at 8:16 am

        The millennials have a term for when the cheap Chinese crap breaks. They blame it on Chineseium, a substance that infuses all of the crap from China.

        We need a movement to add Chineseium to the periodic table. The stuff is everywhere.

        • John Doyle
          Jun 28, 2017 at 3:12 pm

          This perception that China produces substandard stuff is not right. China produces to order, and that order came from us in the West. We wanted cheap goods. The Chinese obliged. We set the bar low and got the cheap goods. This is not China’s fault. we refuse to see we created this monster. If we set the bar high we would get top quality. They can do that too.
          Sheer hypocrisy on our side.

  5. Maximus Minimus
    Jun 27, 2017 at 12:12 pm

    China isn’t alone in creating economic growth by credit-on-the-loose by a long shot. Interest rates in China are still above 4%. Try to raise rates to that level in NA and EU, and see what happens.

    • kam
      Jun 27, 2017 at 12:33 pm

      From the article “You have to choke cheap credits to inefficient companies.”

      In a ZIRP world that is exactly the objective. “Too Big To Fail (Jail)” has nothing to do with efficient companies and everything to do with who gets to the front of the line.

      The people that produce value (not paper flipping) are sitting on the sidelines watching the world go by.

      For China the question is- can Totalitarian political control be happily married to market forces?

  6. JZ
    Jun 27, 2017 at 12:25 pm

    The west includin Japan is boom-bust-boom-bust … but without regime change.

    The article is simply saying China, unlike the rest will have 1 boom and 1 bust, and then regime change.

    The one-boom-one-bust-regime model suggest the boom and bust must be spectacular. So far, the boom has been.

    People like to talk about paper problems like debt and liabilities written on paper because there are theories models to guide the forecast of outcome.
    China’s true strength as well as weakness is that it is one party system without internal conflict. They do not need to convince people, they just tell people what to do. Chinese folks do NOT go on street for gay rights or abortions. The only time they revolt is when they are starved to death. China is far away from getting there so all paper problems are just paper problems.

    • Jim Graham
      Jun 27, 2017 at 6:21 pm

      JZ wrote “”The only time they revolt is when they are starved to death.””

      Not true. Seldom does any news speaking about oppression of citizens get out of China.

      One did – BIG time..

      Remember the Tiananmen Square protests of 1989 – and the aftermath.. That action sorta dampens any vocal or overt protests aginst the Party of Power by the rank and file (slaves?).

      • JZ
        Jun 27, 2017 at 10:43 pm

        True. How ever 89 was NOT due to any debt or economic problems. It started with a bunch of students who got some west thinking in their heads and thought they can push some regime change by talking and convincing without using violence and they learnt their lesson. Point is, debt is an economical problem, and the Chinese can tolerate deep economical problems before they say NO to the party.
        I am NOT saying the for ever boom with only one bug bust model will turn out true. Nobody knows.
        What I am saying is thatNO matter what kind of debt/paper problem there is, it is still far away from the Chinese folks getting starved. With all the production efficiency gained through the past 30 years, the dragon can surely feed itself.
        If there is anything that goes wrong, it is unlikely to be economic related. It is most likely to be caused by internal party issues.

  7. Kent
    Jun 27, 2017 at 12:43 pm

    China is not a capitalist country. Financial debt is a legal construct, not something based on the real world. The Chinese government can absorb all of the debt it wants as long as the debt is in Yuan. And because China can now make just about everything it needs, it doesn’t need much dollar denominated debt.

    Private debt dynamics as it exists in the capitalist west does not exist in a real way in China. It is not going to blow up.

    China can actually grow until it runs out of customers and new things to make. That will be a long, long time from now. Yes they make a lot of stupid stuff. But that is money that goes into people’s pockets and is used to increase purchasing power.

    • Drango
      Jun 27, 2017 at 1:55 pm

      “The Chinese government can absorb all of the debt it wants as long as the debt is in Yuan. And because China can now make just about everything it needs, it doesn’t need much dollar denominated debt.”

      You forget about the trillions of dollar debt they already have, that hasn’t gone away, and is getting more and more expensive to service every day. And no matter how hard they try, they can’t keep the Yuan from weakening. The only question is, how expensive do dollars have to get before China can no longer afford them?

      • roddy6667
        Jun 27, 2017 at 8:46 pm

        In my time here in China (2009-2017), I have seen the RMB:USD vary from 8:1 to 6.2:1. Nothing changed, despite the alarmists who write political and financial columns predicted.

        • Drango
          Jun 28, 2017 at 7:19 am

          Take a look at a graph of the USDCNY rate. It’s obviously being manipulated. Somewhere in China there is a room with people staring at that graph, and contacting whatever agency in the government is responsible for maintaining “stability” in the exchange rate when the Yuan falls too far or fast. This is not something a healthy financial system needs to do. And the fact that China recently changed the way it calculates the exchange rate makes me think that whatever problem they’re having, is only getting worse.

        • Kent
          Jun 28, 2017 at 7:51 am

          @Drango,

          My point exactly. The Chinese government will manipulate whatever it needs to manipulate to keep growth going. It has the power to do so, and doesn’t care about debt or creative destruction.

    • intosh
      Jun 28, 2017 at 2:46 am

      “And because China can now make just about everything it needs, it doesn’t need much dollar denominated debt.”

      You are limiting yourself to the tangible, material view. There are non-tangible aspects that are more powerful, such as confidence. The government may absorb debt but it cannot contain panic or fear. China is no isolated from the financial systems of the rest of the world. Private Chinese capital have spread all over the world. It is not immune to a contagion of a lost of confidence or panic. Government can control numbers but in this day and age, it cannot control emotions.

      • Kent
        Jun 28, 2017 at 7:55 am

        Panic happens when people who are owed a lot of money don’t trust that they will be able to get their money back. China will step in and make sure everyone in China gets their money. Panic will end. They don’t care about malinvestments.

        • Drango
          Jun 28, 2017 at 9:13 am

          If the Chinese government could do that, it would have done it already. You are thinking that China can print its way out of its problem because it has its own currency, but China pegged its currency to the dollar a long time ago, so China is completely at the mercy of dollar conditions. China built up a mostly useless pile of foreign reserves by focusing on exports, but it won’t be anywhere near enough to pay all the dollar denominated bills that are coming due.

        • intosh
          Jun 29, 2017 at 10:13 am

          Assuming the China can even print enough money to contain a global selloff, and that takes a huge stretch of imagination, it cannot print it fast enough. Besides, doing so will only accelerate capital flight and make itself uncompetitive in its own foreign investment expansion.

    • John Doyle
      Jun 28, 2017 at 3:17 pm

      That’s correct Kent. China’s only real problem is resources. They waste resources at an alarming rate and the waste and pollution is seriously damaging the country.
      Financially, they could pull down all those empty cities and rebuild them. The CCP will do it if it keeps the people working. That’s their safety net. But resources will tell in the end.

  8. walter map
    Jun 27, 2017 at 1:40 pm

    “China is not a capitalist country.”

    Of course it’s a capitalist country. Lots of capitalists, public, private, and crony. But it is also a syndicalist state totalitarianism, inaccurately designated ‘communism’. You need to make a distinction between its economic system and its political system.

    It certainly isn’t a democracy, but then, so very few countries are, and those tend towards socialism. Capitalism and democracy tend to be antithetical. Capitalists naturally prefer empires, monarchies, and dictatorships, whereas People Power tends to regulate avarice and compromise profiteering.

    • Mary
      Jun 27, 2017 at 3:47 pm

      Useful comment that says it all with admirable brevity. Thanks.

      • nick kelly
        Jun 27, 2017 at 6:32 pm

        You are both commenting using computers that would have cost a million dollars 30 years ago. Now your’s for less than a thousand, courtesy of capitalism.

        Re: ‘monarchies’ another hot- button simplistic mantra.

        Every year the UN rates countries on quality of life, including a bunch of tests: medical, life expectancy, standard of living, RULE OF LAW etc.

        BTW: equality per se is not hard to get. There are lots of places where almost everyone is poor. Communism is great at creating equality.

        Every year the same countries compete for the top five. One year Sweden takes the cup, followed by Holland or Denmark, sometimes Australia, or Norway, or Canada. (The best the US has made is 14th)

        The top five are nearly always constitutional monarchies- and never a ‘Peoples Republic’

        • walter map
          Jun 27, 2017 at 8:28 pm

          Capitalists didn’t invent computers, Nick. Computers were developed by scientists and engineers. Capitalists merely exploited the market for them. So no, capitalists don’t deserve their vast riches because they gave us computers.

          Generally speaking, capitalists do little more than find ways of exploiting the work of others. They don’t make the sun come up in the morning and our lives don’t depend on them. And I for one won’t be getting down on bended knee and genuflecting.

        • Wilbur58
          Jun 27, 2017 at 8:58 pm

          “You are both commenting using computers that would have cost a million dollars 30 years ago. Now your’s for less than a thousand, courtesy of capitalism.”

          What on earth makes you think that financial capitalism is a prerequisite for manufacturing?

          You are now paying 70% of your W2 income on shelter, transportation, healthcare, food, and communications… courtesy of capitalism.

        • nick kelly
          Jun 28, 2017 at 9:53 am

          Ever hear of Microsoft or Apple?

          Neither were started by scientists or engineers- in fact those types at IBM sneered at micro computers.

          The micro computer is an extreme example of capitalist creative destruction. So what is it? It’s a computer where the Central Processing Unit or CPU is a single chip. In main frames and minis the CPU is an assembly of components.

          The first Apples used the 6502 CPU which is exactly the same one in the first hand held calculator. These crazy nerds Jobs and Wozniak took the chip designed for a hand
          held calc and added memory chips and a clock chip. The latter replaces your finger that hits the button on the calc for the answer- but it hits it thousands of times per second.

          A lady dropped off an early early Apple at a thrift store a few months ago. It was on plywood with components visible and APPLE hand lettered. It sold for 175, 000.

          By the 70’s you could buy a computer kit from Altair.
          Only prob was you had to enter your instructions in machine language or binary, a string of zeros and ones.
          Altair put out a request for a compiler or translator program that would translate the BASIC language into binary that would operate the 6502.
          When Bill Gates and gang showed up for the demo Altair’s secretary thought they were the kids of the engineers.

          So Gates enters 2 + 2 and the result is 4.

          The Altair execs all smiled- no one had seen the machine do anything before.

          To wrap this up, IBM later hires MS to write DOS, for its piddly little computer, which it doesn’t take seriously.
          Then after paying MS to write DOS, it loses interest and GIVES it to MS. Big Mistake.

          But to end by agreeing on something, the chip that kind of launched Apple, the 6502, had to be designed by engineers and built in a very special capital intensive factory.

          hterMS was founded by

    • Cynic
      Jun 28, 2017 at 1:48 am

      Quite good, but I would modify that by saying that ‘capitalism’ (itself largely a Left ideological construct) is perfectly compatible with bourgeois, middle-class democracy.

      It is also compatible with active citizenship and a free press criticising government – hard won freedoms, now being lost in the West, but real.

      In a totalitarian ‘socialist’ system, people – although ostensibly equal ‘citizens’ and ‘comrades’ (and all that nonsense ) and enemies of ‘capitalist privilege’ and inequalities – compete for privileges in a complex hierarchy composed of public official status and unofficial private crony-ism – favours owed, regional and personal loyalties, etc. See the Soviet Union. See Cuba. See also Hitlerism.

      Because these privileges and networks of favouritism are unofficial, they too are not subject to scrutiny and limitations, until there is a power struggle withing the Party structure.

      Then one suddenly finds that ‘criminals’ and ‘anti-Revolutionaries’ have been discovered and are being executed or sent to camps and psychiatric institutes…..

      • walter map
        Jun 28, 2017 at 9:39 am

        Something like that. Under a totalitarian state syndicate there are no “rights”. There are only “privileges”, granted according to how one is perceived to serve the state syndicate.

        As such there are no “laws” either. Businesses can swindle and police can kill with impunity. The only “crime” is opposition to the state syndicate, or to a lesser degree failure to properly support its policies or to implement its directives. Other than that, anything goes. Corporatists love this kind of arrangement, as they do in modern China and did in 1930s Germany, and obviously they all still very much aspire to it.

  9. JB
    Jun 27, 2017 at 2:33 pm

    china faces the same demo-graphical issues japan does as most developed nations do , that is , how to take care of their aging/retired population that are no longer in the work force.

    • roddy6667
      Jun 27, 2017 at 8:49 pm

      China already has a working system in place to handle this. If you spent time in China as a non-tourist, you would know that.

      • Cynic
        Jun 28, 2017 at 1:50 am

        Please enlighten us on the working system…….

        • roddy6667
          Jun 28, 2017 at 3:24 am

          In China, the elderly are kept living with their families, where they serve a useful social function and the families take care of them. They are not shipped off to a rest home that costs more than a person makes in a year.
          For exampled, my 90 year old mother-in-law lives with us 6 months a year. Other family members contribute money every month to her care. The typical Chinese citizen saves 36% of his income. Only 18 % of households pay a mortgage or rent because they own outright. There is no property tax. They elderly provide daycare as long as they are able to. In short, The Chinese can afford to take care of their elderly. They don’t need a massive government program to do what they are already doing. Changed demographics are not a problem. They can afford a lot more.

      • jb
        Jun 28, 2017 at 10:16 am

        thank you for your enlightenment and insight . Both the Japanese and Chinese foster a culture of family elderly parental care . It does however seem to be an more of a social issue in japan . So much so that Japan is a leader in robotics, automation, vending machines to fill the lack of younger workers not entering the work force. Perhaps china has not approached this demographic “cliff ” as of yet. China has been an enigma for many us. For many years it was a “closed” society. We only have the internet to glimpse into its workings and then
        much of the info is edited by the central party.

  10. sinbad
    Jun 27, 2017 at 4:28 pm

    Japan stagnated because the US forced Japan to revalue the Yen to an uncompetitive price at at Plaza accord. China has resisted US pressure to revalue, and with the new markets it is creating in Central Asia and Africa, seems to have a fairly rosy future.
    However I’m sure its economy will be damaged by the upcoming US collapse.

  11. Meme Imfurst
    Jun 27, 2017 at 4:37 pm

    What happens when China runs out of breathable air and drinkable water. They pay no attention to the famous Paris Accord anymore than India does, it is all lip service and caviar (by the way our congress, even when it had the votes to do it in 2015, never ratified it, so it has always been a moot point in the USA). A friend in Shanghai had to buy a $5,000 (that’s right) advanced air purifier for his apartment…for inside his apartment… because the air was that bad, choking him and his wife.

    Money, debt, politics, none of it matters when you have advanced COPD, the highest cancer rate in the world, and that is starters. This is China’s crisis, and may have a great deal why so many Chinese who can get out of the country…do.

    • Petunia
      Jun 27, 2017 at 6:02 pm

      A Chinese billionaire was profiled on a popular cooking/food show and he bragged that China had bought one billion bottles of wine. I guess when the water is undrinkable like in Flint, MI, the Chinese will be drinking their wine.

    • roddy6667
      Jun 27, 2017 at 8:54 pm

      Never mind individual stories. The air here in China is visibly and measurably better every year. Progress is being made. America had air this bad when they had heavy industry. I am almost 70 and remember it well. Most people are too young to remember.
      BTW, the citizens of Shanghai, Beijing, HK and other polluted cities now live longer than Americans. Of course, the resident of rural areas outside th cities fare less well. Air quality is only part of the longevity equation.

      • nick kelly
        Jun 29, 2017 at 12:22 am

        You just blew your credibility. Lots of people travel to Beijing, including my sister, who has traveled world wide for a university.

        No one has seen ANYTHING like its pollution on a bad day.

        No other country has ordered steel mills to shut down for events where foreigners will be present. No other major capital has so many people wearing air masks, in fact only Beijing has anyone wearing them to this extent.

        China is still building coal fired plants rapidly with vague plans to taper ‘shortly’
        All CCP announcements on pollution are propaganda, which like a clock that doesn’t run, is right twice a day.

        • d
          Jul 1, 2017 at 1:28 am

          The ID roddy6667 suggest paid pro china troll.

          Two of my chinese friends just came back from Shanghai.

          Their first comment at the destination airport was that it was good to breath air and see the sky again.

          And on a cold day at the airport, you can taste the Jet-fuel in the air.

    • walter map
      Jun 27, 2017 at 8:56 pm

      “What happens when China runs out of breathable air and drinkable water.”

      They probably won’t. China has massive renewable energy and water management projects underway, so they’ll probably be okay there.

      A totalitarian state like China can probably pull it off: such governments have shown themselves to be capable of extraordinary feats: Germany’s economic recovery under Hitler, the industrialization of the USSR, the revolutionary transformation of ancient Chinese society – these are outstanding examples of totalitarian achievement. Naturally the human costs are proportionately vast, but that is another story and shall be told another time.

      On the other hand, crop failures, mass starvation, and related events due to catastrophic climate change will not be so easy to avoid, but in that respect they’re no different than the rest of the world. Humanity is well on track not only for the collapse of civilization but to become the pièce de résistance in the present mass extinction event of its own making. It is no longer possible to reverse present trends in time to prevent it.

  12. IdahoPotato
    Jun 27, 2017 at 5:50 pm

    Well, the Chinese have their a multi-trillion dollar infrastructure stimulus plan than encompasses the world – BRI (Belt and Road Initiative).

    https://www.ofwealth.com/chinas-staggering-global-project/

    • mean chicken
      Jun 28, 2017 at 11:22 am

      So much for global warming!

  13. R2D2
    Jun 27, 2017 at 5:51 pm

    I’m not an expert to comment on the macro economy, but one thing I’ve know is how much desperate Chinese sellers on Alibaba are; each seller spends a huge amount of time to sell even $600 worth of products at the cheapest price.

    I haven’t been Alibaba in the past to judge whether this is a recent behavior, or that they always behaved this way. But if it is a recent behavior, it implies that they have no customers for their products and they are so desperate for customers that they’d put enormous amount of time into selling even a few hundred dollars worth of products; remember that these are whole sellers, and not retail sellers. In wholesale world $600 should be like nothing; certainly not worth putting so much effort into it.

    • MC
      Jun 28, 2017 at 2:28 am

      Chinese exporters have been behaving like this for a few years now, at least since 2013.

      There are many Chinese manufacturers offering chainsaws (usually Zenoah and Husqvarna clones, albeit lately Stihl’s have started to surface as well). These saws are offered in two flavors: either with generic colors and markings or in the “your brand and colors here” variety.
      To get the latter you once had to order at very least 3000 pieces (more often 5000) so it was really the preserve of distributors and other big shots. But these days? You can get your branded chainsaw if you order as few as 100 pieces. That’s where all those ultra-cheap eBay specials come from: an enterprising guy with a rented garage and a computer and a small starting capital.
      These saws can be bought for as little as €70 shipped, which tells you all you need to know on how much the aforementioned enterprising guy paid for them.

      Which leaves me wondering on how much the Chinese companies which built those damn things (and damn things they are, but at least they are priced about right, unlike their big box store cousins) paid for them.
      Because even if they used slave (read: free) labor it would make no economic sense.
      But, here’s the interesting twist, these manufacturing companies have massive margins, at least massive by our “pot polishing” standards. So it means they pay components pretty much nothing… and their vendors have massive margins as well, meaning it costs them next to nothing to cast pistons and rings. A good Made in Europe aftermarket piston with rings (Meteor) costs €50, and that means your margins are a couple microns thin. Or you are Greek. ;-)

      • nick kelly
        Jun 29, 2017 at 12:31 am

        I have read ( no proof ) that the Chinese engines are so sloppy that if you remove the s plug and insert a thin taper, you can move the piston back and forth.
        Repeat: no first hand knowledge.

        • d
          Jul 1, 2017 at 1:44 am

          No, but they are not very durable at all.

          20 year old Still, Muccloch, and Husky, still working.

          In less the 20 months chines saw is scrap with commercial use.

      • d
        Jul 1, 2017 at 1:41 am

        “Which leaves me wondering on how much the Chinese companies which built those damn things (and damn things they are, but at least they are priced about right, unlike their big box store cousins) paid for them.
        Because even if they used slave (read: free) labor it would make no economic sense.”

        CCP STATE SUBSIDY’S

        of Electricity, components, Transport, and Finance (Every time the company is about to go bankrupt the stae instructs the lenders to convert the loans to Equity)plus EXPORT subsidy. Rent (What dat) Building costs ?? State owned building.

        Then there are the state owned companies THAT ARE NOT EVER REQUIRED TO MAKE A PROFIT.

        CHAINSAWS ARE ANOTHER INDUSTRY THE CHINESE HAVE STOLEN, BUY DUMPING PRODUCT GLOBALLY.

        It is not possible for a western capitalist to compete with a CCP owned producer, that is never required to make a profit.

        Western nations growing unemployment, china, shrinking unemployment, due to chinese CCP theft of western manufacturing by CCP subsidy and dumping, simple.

    • Meme Imfurst
      Jun 28, 2017 at 6:47 am

      I bought four PCM1704 DAC chips, expensive and no longer made, for Alibaba. All counterfeit, the site too so long to reply to the complaint I had to get me credit card company involved to cancel the charge.

      The site is worse than ebay for spam, although ebay is only a day behind.

  14. Lee
    Jun 27, 2017 at 7:37 pm

    The ONLY thing you have to know about China to understand it and everything they do is that the CCP will do anything to stay in power.

    End of story.

    It is a communist dictatorship run by a bunch of people that won’t hesitate to lock up, execute, or torture anyone who gets in their way. If they need a ‘reason’ they’ll make up one.

    Western companies and people just can not seem to get that though their heads and here in Australia the power elite and certain politicians are blind to that fact although that hasn’t stopped them from taking donations from the Chinese. It hasn’t stopped the government from selling assets and infrastructure to state to state owned companies either.

    Here are a couple of articles about that:

    http://www.theage.com.au/federal-politics/political-news/political-networking-the-chinese-way–a-sydney-mp-and-his-community-adviser-20170621-gww0k6.html

    http://www.theage.com.au/comment/smh-editorial/chinas-influence-peddling-should-be-subject-to-public-scrutiny-20170614-gwr2m2.html

    http://www.theage.com.au/federal-politics/political-news/greens-ratchet-up-pressure-on-major-parties-for-corruption-probe-20170614-gwqwci.html

    http://www.theage.com.au/nsw/labor-mp-filed-documents-for-billionaire-alp-donors-chinese-business-association-20170618-gwtg5b.html

    http://www.theage.com.au/federal-politics/political-news/alp-reels-after-resignation-and-calls-for-china-donations-inquiry-20170613-gwq0yo.html

    Or you can ask James Packer about running casinos in Macau and what happens when the CCP decides that it doesn’t ‘like’ you anymore:

    http://www.theage.com.au/business/chinas-message-to-asias-casinos-place-your-bets-elsewhere-20170627-gwz877.html

    Anyway the jawboning has helped send iron ore futures up and the A$ topped out above 77 US cents last night – up about 10% so far this year as the price of everything we export has fallen and economic growth has gone down.

    So much for fundamentals.

    • roddy6667
      Jun 27, 2017 at 8:59 pm

      Any time I see somebody use a bunch of URL’s for “proof” of their opinion, I know I am dealing with somebody who is clueless. They have NO first hand knowledge. They are harboring intense feelings and beliefs based on 2nd and 3rd stories, most of it propaganda to promote somebody’s agenda.
      God forbid they shut off their PC, get a passport, and experience the world for real.

      • Jun 27, 2017 at 10:54 pm

        Lee could you say a couple of things about the countries you’ve lived in and been to?

        • Lee
          Jun 28, 2017 at 6:55 pm

          Yeah roddy,

          I’m really ‘clueless’: I been to a number of countries as a tourist, as an graduate exchange student in two, and lived in a number as a US Army officer, a former long term permanent resident of Japan and now living in Australia for the past 22 years.

          I’ve spent more of my adult life outside of the USA than in it.

          So I guess that after 22 years of being here in Australia I am “clueless” as to what is going on here in regards to the politics and economics of Australia and the interaction between China and Australia.

          Oh, and FYI, roddy, some of those interesting countries I’ve been to in one capacity or another include China, Pakistan, Korea, Mexico, and Grenada………………

      • Cynic
        Jun 28, 2017 at 2:00 am

        Of course it’s easy to be an armchair expert on the world.

        But there is another rule, however, when reading about authoritarian and corrupt countries:

        Take anything a ‘foreign correspondent’ who actually lives there permanently, with family ties, etc, says about it with a pinch of salt as they are compromised in everything they put into writing by virtue of those ties and permanent settlement.

      • intosh
        Jun 28, 2017 at 2:55 am

        Blank statements are hardly “proof” either.

    • d
      Jul 1, 2017 at 1:52 am

      “It is a communist dictatorship”

      NO

      Not even close.

      What it is, is a Mafia State.

      Just like Russia.

      The CCP runs china, and is made up of Mafia clans. The FSB Mafia clans, run Russia.

      Xi’s Anti Corruption drive, is in fact a Mafia War, against the supporters of other clans. Within the CCP.

      Mao was a “Communist” of Convenience.

  15. BobT
    Jun 28, 2017 at 12:07 am

    Expat in Asia for 33 years, my own business, lived in 5 different countries here, been a China watcher for all of that time, and feel I have consistently underestimated the ability of the Chinese govt to get things done. Plenty of mistakes yes, possible big potholes ahead, but what has already been achieved is remarkable.

    When I first came here it was because I felt that Asia was the future and I still believe that.

    • mean chicken
      Jun 28, 2017 at 11:33 am

      Good post, my observation is you’re bang on.

  16. KiwiinCanada
    Jun 29, 2017 at 10:03 am

    If you generate savings each year of 30% plus of GDP you require “investments” each year of the same amount to balance. You also build a huge balance sheet which has portfolio management issues. If you have 30 T US in accumulated savings and you only have 3 T in FX reserves you have limited capacity to diversify globally. The attempt to do so can result in the situation where a country running a 500 B US trade surplus is experiencing currency weakness. The details of this domestic use of this huge savings pool leads one to suspect that NPL’s are buried everywhere with the implicit understanding that they will eventually be written of against domestic savings. Because the savings are forced into domestic use and because they are very likely to incur losses there is a desparate speculative element to economic activity with the need to manage real estate, stock market and commodity bubbles on a continuing basis. How long can this go on? Perhaps a very long time.

  17. Kevin
    Jul 3, 2017 at 12:24 am

    Problem with China is the same as that of the US. It’s so big, so many people, that you can prove any thesis you set out to. I’ve been living in Shanghai 5 years. And I find myself in total agreement with the posts above, even the ones where they’re arguing with each other.

    Is California full of brain-dead progressive morons? Sure. Is California the home of the most creative industries; i.e. high tech, genetic engineering, moviemaking? Also yes. And on it goes here too.

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