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The Definitive Guide To China - Must Read

Tyler Durden's picture





 

“After a great deal of time spent travelling in China, reading about China and thinking deep thoughts about China, I have come to the conclusion that the most profound thing one can say about it is this: China is exceedingly big.”

David Pilling, Financial Times

Following up on the earlier news of more Chinese rate hike speculations, we present what is arguably the most comprehensive summary of the country that conventional wisdom sees as becoming the world's biggest economy within a decade, and less than conventional wisdom sees as the biggest bubble in the history of the world. As report authors HSBC point out: "What emerges from this guide is a more complex picture of China than even many experts have assumed. For anyone hoping to conclude a business deal in China it offers this message: don’t assume you only have to deal with decision-makers in Beijing. You must also make sure local officials are on your side. Whether you are a China expert or a mere beginner, we hope you enjoy what follows." Must read for everyone (especially Americans) to get a sense of what the future rulers of the world will be like.

Some of the key observations:

  • This “bottom up” perspective on China, rather than the usual “top down” one, has thrown up some extraordinary statistics.
  • By 2020, China will have six provinces with an annual GDP of more than USD1 trillion, equal to six countries the size of Russia (or Spain or Canada).
  • With 47% of the population now living in cities, eight Chinese cities have a population of more than 10m, and 93 have more than 5m. By comparison, in the US only New York City has a population of more than 5m.
  • Beijing, China’s Washington DC, is also China’s Silicon Valley. Its Zhongguancun area saw 23 high-tech IPOs in 2009, against just one for Silicon Valley. There have been another 35 IPOs so far in 2010.
  • Kunshan, one of 2,000 county-level cities, produces more than half of the world’s notebook PCs, or 85m units – and yet IT manufacturing is not even its top-ranked industry.
  • Suzhou, one of 280 prefecture-level cities, has a per capita GDP which is 70% and 46% higher than Beijing and Shanghai, respectively.
  • Jiangsu, a province little known to outsiders, is poised to overtake the much better-known southern province of Guangdong to become China’s largest provincial economy as early as 2012.
  • The 1.5m inhabitants of Erdos, a city rich in natural resources in the otherwise poor western part of the country, will have a higher GDP per capita than Hong Kong in three years time.
  • Among the 1m villages – the lowest unit in the administrative chain – there are some extraordinary contrasts, for example, between the fiercely-capitalist Huaxi, where every ex-farmer is a millionaire, and the communist Nanjie, where collective interests still prevail over those of individuals.

What are the report's implications in a nutshell:

What does it mean for China’s future when local officials have widespread powers over land sales, infrastructure, commercial and residential property construction, natural resource exploration and foreign direct investment?

First, sizzling growth should continue for at least another five years. Local governments have managed to beat Beijing’s growth targets by a few percentage points every year since 1980. Published data for the coming 12th Five-Year Plan from 2011 to 2015 show most provinces remain ambitious in their targets.

Second, these growth ambitions have increased inter-regional competition. Provinces have far more ambitious plans for the expansion of their rail networks and clean energy activities than those stipulated by national targets. In some cases, the local target is double the national one. One reason for this is that to get promoted in China, you have to outperform your peers.

The danger, however, is that over-investment leads to overcapacity. For example, Kunshan’s strong position in IT is being challenged by the municipality of Chongqing. Together they could soon supply 80 per cent of the world’s notebook PCs – raising concentration risks as well as oversupply concerns.

Third, overcapacity may lead to bad credits. For example, a recent report submitted by the China Academy of Science to the State Council raised concerns about unsustainable debt levels and the risk of loss-making activities. It noted that the 1,000km Wuhan to Guangzhou bullet train, which started operating earlier this year, was running at less than half its capacity and would never make enough money to pay off the loans used to finance it.

Fourth, policies at the centre risk being less effective if they are quietly resisted by local authorities. Beijing launched its fierce crackdown on property speculation in April – and yet eight months on, not only have prices barely moved downwards, volumes actually rose again in September and October. Not a single city has rolled out the much expected property tax. Vested interests have also blunted Beijing’s repeated calls for consolidation in the country’s iron and steel industry.

All this and much more inside:

Inside the growth engine: A guide to China’s regions, provinces and cities

 

h/t Paolo

 


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Thu, 12/09/2010 - 00:22 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Thanks TD !!!

 

A few China stocks/watch ~

JOBS, HOLI, AMCN, HEAT, AMCN, SOLF, HOGS, HEAT ...

Thu, 12/09/2010 - 00:23 | Link to Comment gwar5
gwar5's picture

Thanks for the tips on stocks.

Thu, 12/09/2010 - 08:57 | Link to Comment pyite
pyite's picture

Is there a non-flash version of this?  If it's a PDF why not just link to the pdf?

Thu, 12/09/2010 - 11:30 | Link to Comment infotechsailor
infotechsailor's picture

the pdf (and several other very nice China Report PDFs) here, but it required signing up:

http://bbs.futu.cn/t-1120

Thu, 12/09/2010 - 00:29 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

..."On Dec. 2 in Beijing the Chinese government declared a strategy of promoting solar photovoltaic power generation across the country through various demonstration projects, which coincides with the U.N. Climate Change Conference in Cancún, Mexico.

The initiative is sponsored by four departments: the Ministry of Finance, the Ministry of Science and Technology, the Ministry of Housing and Urban-Rural Development and the National Energy Administration.

Thirteen development zones around the country have been recognized as the first demonstration projects for the solar power generation. Zhang Shaochun, vice minister of finance, said that the effect of the existing demonstration projects, which was put into operation in 2009 and 2010, would be further exploited so that the application would reach at least 1,000 megawatts annually since 2012. A stable solar power market will be in place and expand as a result.

Reuters reported on Friday that China's central government is considering allocating 1.5 trillion yuan to support seven strategic industries, including alternative energy"....


BEIJING — China is considering investments of up to US$1.5 trillion over five years in seven strategic industries, sources said, a plan aimed at accelerating the country’s transition from the world’s supplier of cheap goods to a leading purveyor of high-value technologies. The targeted sectors include alternative energy, biotechnology, new-generation information technology, high-end equipment manufacturing, advanced materials, alternative-fuel cars and energy-saving and environmentally friendly technologies.

Thu, 12/09/2010 - 00:38 | Link to Comment tom a taxpayer
tom a taxpayer's picture

I wonder if the Ministry of Truth was also a sponsor of the Chinese initiative.

Thu, 12/09/2010 - 00:50 | Link to Comment revenue_anticip...
revenue_anticipation_believer's picture

SUCKERS, you NEED to believe THAT China is already on the way to BUST...

good, stand out of ways SUCKERS...i have actionable investment needs, and TRUTH finding is FUNDAMENTAL to that...

tis article is very stimulating, finally i have a 'handle' and a proper 'attitude' to enable real truth seeking ABOUT China...

Thu, 12/09/2010 - 00:58 | Link to Comment revenue_anticip...
revenue_anticipation_believer's picture

SUCKERS, you NEED to believe...

Thu, 12/09/2010 - 12:20 | Link to Comment Dr_Dazed
Dr_Dazed's picture

Suckers the Chinese LOLIPOP will burst with FULL flavor in your portfolio!  WHEN not if the NAMED names go Hyper-PARABOLIC.

Thu, 12/09/2010 - 03:41 | Link to Comment tom a taxpayer
tom a taxpayer's picture

 

"Reuters reported on Friday that China's central government is considering allocating 1.5 trillion yuan to support seven strategic industries, including alternative energy". Given the U.S./China balance of payments pours $ into China, and assuming 1$=.15 yuan, another way to say this is: "Reuters reported on Friday that China's central government is considering allocating $225 billion of trade surplus from the U.S. to support seven strategic industries, including alternative energy, in their effort to further bury the U.S.".

 

Thu, 12/09/2010 - 05:16 | Link to Comment Miles Kendig
Miles Kendig's picture

+1

Thu, 12/09/2010 - 02:57 | Link to Comment George Orwell
George Orwell's picture

China will not be investing trillions in infrastructure or alternative energy.  It takes oil to build infrastructure.  And it takes oil to make solar panels, wind turbines, etc.  

There is not enough oil in the world for China to build out the same way Europe and North America did.

We are on a collision course with destiny.  That destiny is nuclear war with China.  We will have already started 2 wars in the middle east to secure oil.  We will start 3rd, 4th, 5th, etc wars to secure even more oil.

It's a fight to the death.  You drive to work.  You drive to drop off/pick up your kids.  You drive to go grocery shopping.  You will NOT give up driving without a fight.

Our nuclear submarine fleet will converge around China's coasts and launch the ICBMs that will wipe out all the major coastal cities in less than 10 minutes.  They will not have the capability to strike back when this scenario plays out within 10 years.

Think it won't happen?  Think it's bad?  Why the fuck can't you stop driving your car?  Yes, because you cannot stop burning oil for your car China will have to be nuked.  So that you can continue to burn the oil to get your ass around town.

It's thunderdome at a planetary scale.  Two countries enter.  Only one country can survive.  Get it?  Either you give up driving or you nuke China.  There is NO OTHER WAY.  Are you going to give up driving?  Yeah, I didn't think so either.

 

George Orwell

 

 

Thu, 12/09/2010 - 03:47 | Link to Comment Quixotic_Not
Quixotic_Not's picture

Is the US gonna evacuate Japan before this *preempitve* nuking of the PRC?

If not, Japan will be dead too from the fallout.

Did you think up this hyperbole all by yourself?

Thu, 12/09/2010 - 04:13 | Link to Comment Seer
Seer's picture

So, I take it that your response is a "No" (you won't give up driving)?

But, it matters not, nuke or not, you WILL end up NOT being able to drive in the future (not unless you're very wealthy, and then at that point one would want to ask why one would want to be a big target).

China is perched on the precipice of the world's biggest tipping point.  For that which cannot go on forever won't.  The growth levels have been achieved via fossil fuels.  FACT.  In order for China's growth to continue it would have to suck up a greater percentage of the world's diminishing fossil fuel reserves.  No, it's not hyperbole at all, it's easy logic...

Thu, 12/09/2010 - 04:58 | Link to Comment fajensen
fajensen's picture

There is good and bad "news" rolled into the same thing: "Five Year Plans" - Anyone who believe that targets are achieved the way "management" who requested the figures be met are one of:

1) managers,

2) fucking retarded,

3) never worked at all above the level of "facilities service manager",

As Soon As some idiot introduces target figures in an organisation then the purpose of the organisation instantly mutates into providing the desired numbers - anything else is not "strategic", therefore "Fuck It"!!

Mix in a communist dictatorship where noone can actually check or limit what government can do and you will get dazzling target figures - every time (even though they have to produce only left-shoes to meet them).

Thu, 12/09/2010 - 05:56 | Link to Comment AnAnonymous
AnAnonymous's picture

Anyone who believe that targets are achieved the way "management" who requested the figures be met

 

You did not read the article closely enough. The answer is in. Read the extract where it states about regions beating national plan expectations since 1980.

The Chinese are parading virtues of plans for something that comes naturally with the stage of developpment they are in. Same drivel as parading the absence of plans as the enabler of the something.

Plans/no plans, it would not matter much at present times. Come back in 100 years and the chinese will no longer be able to do what they are doing, plans or no plans.

As the West is unable to mimic what is happening in China, plans or no plans as the origin of the phenonemum, the stage of developpment, is way behind in the Western world.

Thu, 12/09/2010 - 06:10 | Link to Comment Seer
Seer's picture

"Mix in a communist dictatorship where noone can actually check or limit what government can do and you will get dazzling target figures - every time (even though they have to produce only left-shoes to meet them)."

I wish people would get it, that it's not "communism" or any other ism other than BIG-ISM that results in such distortions (from which the elite hide).  The US is hardly a paragon of truthfullness: yes, people will say all sorts of things why it doesn't work, most because the theoretical isn't being met, as though the theoretical, when made up by and operated on by humans can EVER be met!).

Thu, 12/09/2010 - 10:47 | Link to Comment BigJim
BigJim's picture

This prediction seems to ignore the fact that China is a nuclear-armed state, and if the US were to nuke it, it would respond in kind.

Even if the US were to somehow pre-emptively destroy all China's nuclear retaliation capacity - a very big if, it seems to me - a sufficient amount of China's industrial and military capacity would be left to harm US interests all over the world. Iran getting nukes and ballistic missile technology? It's a dead cert. Unless the US nukes the entire China landmass.. in which case we'll all die from fallout and nuclear winter.

So, to recap, the US wouldn't nuke China. It would be suicide. That's the whole point of having a nuclear arsenal - no other state can inflict serious damage on the homeland without facing annihilation in return.

Thu, 12/09/2010 - 11:01 | Link to Comment financeguru500
financeguru500's picture

Your exactly right Jim.

Consider that China now has a larger Naval fleet than the U.S. and is continuing to grow. Also I don't even want to comtemplate the standing army they have. Probably 10 times the size of ours. And they are advancing technologically faster than the U.S. Everything points to a bad situation.

Oh, and to the people who say "They can't do anything without oil." Consider the fact that China has kept their currency debased because they don't need it to be valuable for their current growth. Once they hit the "wall" where they cannot import any more oil due to other countries such as the U.S. using oil, all they have to do is let their currency rise in value which will in turn diminish the value of the Dollar preventing the U.S. from importing as much oil thus allowing China more oil. It is so easy to see coming and one day it will. My prediction will be $10+ gasoline in the U.S. as soon as China's growth is impaired by the U.S.' stagnation. Possibly 2011? Who knows, but its almost guaranteed.

Thu, 12/09/2010 - 05:50 | Link to Comment AnAnonymous
AnAnonymous's picture

If not, Japan will be dead too from the fallout.

 

US PR mindset: consider that the job started in WW2 is over at last.

Can you think of one opportunity when the US citizens shied away from this type of collateral damage? I cant think of one single case.

But the US will be generous enough to offer depolluting schemes to the surviving Japanese people, funded on debt schemes extracted from the Japanese people. US generosity type.

Thu, 12/09/2010 - 04:46 | Link to Comment fajensen
fajensen's picture

Pop a MIRV on Saudi and the US military grinds to a surprisingly sudden stop. Everyone knows that - even China and Iran.

Thu, 12/09/2010 - 06:05 | Link to Comment obelisks
obelisks's picture

Even Nostradamus predicted that the Eagle and the

Bear would fight the  Dragon in the final nuclear war

Thu, 12/09/2010 - 06:12 | Link to Comment AnAnonymous
AnAnonymous's picture

There is not enough oil in the world for China to build out the same way Europe and North America did.

 

Pyrrhic victory. The problem is that the West hit the line of unsustainability of the various Ponzi  scheme it has been built on before China started its dream of rising up its population welfare.

 

Thu, 12/09/2010 - 08:47 | Link to Comment Die Weiße Rose
Die Weiße Rose's picture

you're not going to Nuke no-one George Orwell, because you are broke !

owing your Uranus to the Chinese Emperor,slaving in some old China sweat shop factory punching holes into cheap Donuts at 6.66 Yuan per day, to pay back all those Loans to China,for when you went ballistic on QE and Stimulus.Your great US dream of World domination is truly over and gone, because you lost the plot and you're broke and besides; no-one will put up with your crap for much longer. No need to drive anymore either when you have no Work or Job to go to,you wont even need a computer to cry to,and no booze to get drunk either, posting garbage

cause the US of A..ss is BROKE...BROKE...BR©ƒ®  :P

Thu, 12/09/2010 - 09:03 | Link to Comment dussasr
dussasr's picture

The good news is that the US is only TEMPORARILY broke due to dreadfully misallocated resources.  If you default on the debt, cut government in half, and eliminate un-Constitutional "services" then what you are left with is a country with vast resources, resiliency, and potential.  10 years later and you are looking great!

Thu, 12/09/2010 - 09:32 | Link to Comment pan-the-ist
pan-the-ist's picture

Sorry bud, but when the people take the country back you can expect more socialism this time around.

We won't have employer based health care to drag the economy down, and social security will be paid for up front.

In short, we will be like Canada.

http://www.cbc.ca/canada/story/2010/03/22/canada-economy-desjardins.html

Thu, 12/09/2010 - 10:06 | Link to Comment Vaccaro
Vaccaro's picture

 

 

...then what you are left with is a country with vast resources, resiliency, and potential.

 


The Gaza - ization of the USSA.

 

V

Thu, 12/09/2010 - 09:05 | Link to Comment YHC-FTSE
YHC-FTSE's picture

Call me a wishy-washy liberal with flowers in my hair, but I would rather lick gum off the pavement than be responsible for murdering a billion people. 

I know the figures are daunting, but the transition to sustainable energy may not be as bad as you think (In some places). The incredible pollution of China's cities is being used as an impetus to move to wean off fossil fuels, but the irony is, they have to use coal and oil in order to do it. This peak use has been predicted for as long as I can remember, and hopefully there will be a significant reduction for fossil fuels in line with depletion and increased competition. 

Thu, 12/09/2010 - 11:11 | Link to Comment goodrich4bk
goodrich4bk's picture

False choice.  People will not give up transportation but they will give up expensive transportation. If it costs $20 to go 5 miles to the store and back, people will combine trips, car pool, take a bus.  I don't predict nuclear war.  I predict that within 5 years many people in suburbs will be using a Google/Iphone app that organizes "flash carpooling".  You start your day by inputting the names of your destinations (the app automatically pinpoints their location and your present location) and the times you need to arrive (for example, if you have an appointment you put in the time, otherwise you put in a range).  A central computer then gives you a list of possible rides being offered, ranked by closest in distance.  If you accept an offer, the driver is paid automatically through a PayPal account so many cents per mile.  Members to this "flash carpooling" are prescreened and given a passcode, texted to you, that is good for that one ride.  This way, the driver and passenger know more about each other than you presently know about your neighbor (with whom you would probably drive to the store without worry).  This will start with young people who are not able to earn enough to afford a car, and they will combine it with ZipCar (when they really need their own wheels) and mass transit (for longer distances).

Go ahead and rant about how people are too set in their ways, but I think young people are not.  And the benefits of meeting new people (free networking opportunities) who, by definition, live in your own community, will be valued more than you may think.

 

Thu, 12/09/2010 - 21:15 | Link to Comment thefatasswilly
thefatasswilly's picture

Orwell, have you considered the contingency of new, slightly less (LOL, the IRONY) destructive weapons, such as biochemical weapons?

Would nukes even be necessary?

Thu, 12/09/2010 - 00:40 | Link to Comment 66Sexy
66Sexy's picture

Emerging markets are priced up and already missed for investors. China is sitting on a real estate bubble that includes property titles that are not even fee; they are leases. Now, along with interest rate hikes, the government is "discovering" property taxation.

Property values are propped up because real market fundamentals are not expressed. For example, usually when a building is 90% empty, rents would come down to spur demand. However, when wealthy speculators own 90% of these units and dont need the income generation now, the rents are artificially high. But what about when they need the income generation? True market forces become a reality, and rents get suppressed downward.

And then theres the stories of how chinese men cannot even get married unless they own a home. Now, homeownership of a leasehold property is a cultural necessity.... sound familiar? Like USA circa 2003/2004? Or the fact there are stagnant high rise development projects from 2005, and old western marketing bilboards reflecting prices of a pre-collapse era...

Point being, after all the sexy sizzle and smoke and mirrors, fundamentals always win.

Thu, 12/09/2010 - 00:47 | Link to Comment malek
malek's picture

You cannot own land in China, you can only lease it for 99 years.

Or so a Chinese woman told me...

Thu, 12/09/2010 - 00:53 | Link to Comment gwar5
gwar5's picture

"Why lease land for 99 years when you can lease 33 women for 3 years each?" --- Bang Dae-Ho

Thu, 12/09/2010 - 01:00 | Link to Comment spekulatn
spekulatn's picture

:)))))))))

 

Great stuff gwar5.

Thu, 12/09/2010 - 01:22 | Link to Comment Bananamerican
Bananamerican's picture

"man with 33 women is like man with 33 penises...all fucked up"-Go Long Wang

Thu, 12/09/2010 - 08:18 | Link to Comment Jupiter
Jupiter's picture

 

 

Absolutely hilarious hahahah.

 

 

Thu, 12/09/2010 - 00:56 | Link to Comment revenue_anticip...
revenue_anticipation_believer's picture

SO!  in London, during the big property/rent bust, in Oct 74-Jan 75 there were for sale, for lease signs on COMMERCIAL BUILDINGS all over, never saw such a thing...AND 999 year leases too! never heard of that...but 999 lease is, of course, the same as ownership...

and China IS a Communist Country, officially still, and the concept of private ownership of REAL ESTATE is probably still verboten...JUST lease 99 year makes sense...its about the concepts of Henry George Usa REGARDS socialist economies must not allow private land ownership to be a distinct 'rent' advantage...tax to the max, thereby confiscating 'passive rental income/profits'...

 

Thu, 12/09/2010 - 00:37 | Link to Comment Biggus Dickus Jr.
Biggus Dickus Jr.'s picture

I'm not impressed.  margins are getting crushed from higher input costs and lower final sales prices.  Even slave labor has its limits.  I think Krugman is right on this one.  The only way to shake them loose from their dollar peg is to choke them with dollars.  Yes there will be collateral damage.  Innocent investors will be killed, and there may be riots in china when Rice shoots up 30 percent in a year.  This old wily empire still has some mojo.

Thu, 12/09/2010 - 00:51 | Link to Comment malek
malek's picture

You forgot to mention the vicious Chinese savings glut as one of the main causes for all US troubles. </irony>

Thu, 12/09/2010 - 04:17 | Link to Comment Seer
Seer's picture

Exactly!  Why others should see this as so hard to figure is beyone me...

Thu, 12/09/2010 - 00:49 | Link to Comment drnovinnamu
drnovinnamu's picture

Can anyone please get a link to be able to download this report as a PDF?

 

Would be greatly appreciated.

 

Thanks

Thu, 12/09/2010 - 02:25 | Link to Comment Locodonkey
Locodonkey's picture

Hey I hate scribd too. I found a work around. Basically download doPdf and print the scribd file to that. It took about 3 minutes and I ended up with a 47mb pdf but it looks great. 

 

how to here: http://www.dailytut.com/tips-and-tricks/how-to-download-protected-pdf-from-scribd.html

Thu, 12/09/2010 - 03:37 | Link to Comment Z
Thu, 12/09/2010 - 04:56 | Link to Comment jahbless
jahbless's picture

thanks!

Thu, 12/09/2010 - 09:40 | Link to Comment Z
Thu, 12/09/2010 - 19:20 | Link to Comment jules from aus
jules from aus's picture

+1

thanks!!

Thu, 12/09/2010 - 00:48 | Link to Comment reader2010
reader2010's picture

In the financial history, every massive credit binge all ended up in tears. This time is different in China?

Thu, 12/09/2010 - 00:56 | Link to Comment gwar5
gwar5's picture

I need to visit China before the window closes. One of the places still in my bucket list. An amazing place it must be.

I recently read a very brief snippet of something similar, perhaps here at ZH, indicating how diffferent provinces are in their economic rates and rates of housing inflation -- like comparing different countries. This confirms it. Perhaps chronic Chinese leader paranoia about stability always being paramount, to keep the whole thing from flying apart, is well founded. 

Meantime the locals: What happens in Yunnan Province, stays in Yunnan.

Or, as one internet star was overheard to say right before he went down on Anhui (Province),  "The sky is high and the Emporer is far away" -- Bang Dae-Ho

Thu, 12/09/2010 - 01:37 | Link to Comment KTV Escort
KTV Escort's picture

Go, amazing it is, been there many times. And if you're single, line up a "tour guide" or two a month before you visit... ChineseLoveLinks should do the trick.

In Shenzhen recently I picked up a China Daily. 2 articles stood out. 1 mentioned China will need 15 trillion (US) to fund infrastructure build out in the next 10 years as so many are moving to the cities. The other said Guangdong Province (Shenzhen, Guangzhou, etc) is experiencing a shortage of workers, thus wages are rising.

Thu, 12/09/2010 - 01:02 | Link to Comment RoRoTrader
RoRoTrader's picture

With 47% of the population now living in cities, eight Chinese cities have a population of more than 10m, and 93 have more than 5m. By comparison, in the US only New York City has a population of more than 5m.

 

i was working in NY and met a Chinese. i asked about China and where he was from. he smiled and said Chengdu........do you know it? i said no. he told me it was larger than NY and there were many other cities in China larger than NY that Americans had never heard of.

 

that was more than 10 years ago.

Thu, 12/09/2010 - 01:37 | Link to Comment trav7777
trav7777's picture

yes because Americans can not use maps.

The PMSA data would seem to suggest he is lying or in error.  NY Metro is one of the most populous metropolises on the planet.

Thu, 12/09/2010 - 01:29 | Link to Comment DisparityFlux
DisparityFlux's picture

Couldn't help but read the Disclosures and Disclaimer first.

Was this document Wikileaked?

Ok, jumped to pages 238 and 239:

238 - All change on the IPO stage

239 - Losing control ...

Wild west time, investment banker's wet dream -- money and little regulation.

 

Thu, 12/09/2010 - 05:23 | Link to Comment Miles Kendig
Miles Kendig's picture

Which is why the opium is flowing

Thu, 12/09/2010 - 08:11 | Link to Comment LFMayor
LFMayor's picture

Not to China it isn't.  Mao took that shit off at the knees.

Thu, 12/09/2010 - 10:02 | Link to Comment Miles Kendig
Miles Kendig's picture

What to ya call the Bernanke fueled flow of funds to China, prudent consumption?  New flavor of dope, still dog food (slang for heroin).  Please try to keep up.

Thu, 12/09/2010 - 01:03 | Link to Comment jimgcpa
jimgcpa's picture

This garbage is nothing more than linear extrapolation of unsustainable trends.  China will experience a Great Depression and the predictions in this report are worthless.

 

Thu, 12/09/2010 - 06:03 | Link to Comment Seer
Seer's picture

"This garbage is nothing more than linear extrapolation of unsustainable trends."

Sometimes, just when I think that there's some intelligence out there I see perfectly respectable extrapolations junked!

Thu, 12/09/2010 - 01:05 | Link to Comment williambanzai7
williambanzai7's picture

Unfortunately, the prospect of keeping up with this, much less catching up with it, is something that seems to have receded way beyond the American horizon.

The long line of dimwits running our country have no clue what to do and those that have a clue are too busy pillaging.

The amount of raw human energy that goes into everything in China is truly awe inspiring. Just when you think you have seen it all, you get knocked out of your sox again and again.

 

Thu, 12/09/2010 - 04:30 | Link to Comment Seer
Seer's picture

"The amount of raw human energy that goes into everything in China is truly awe inspiring."

That energy comes from somewhere... let me see... FOOD?

China is increasingly locking in Ag land elsewhere to feed these "energetic" souls.  The road is pretty clear here.

China is making the very same mistake that was made in the US (OK, ALL western countries)- de-diversification and centralization; and these models are based on fossil fuels.

“I tell you that the great cities rest upon these broad and fertile prairies. Burn down your cities and leave our farms, and your cities will spring up again as if by magic. But destroy our farms and the grass will grow in the streets of every city in this country”.

- William Jennings Bryant

Thu, 12/09/2010 - 06:53 | Link to Comment Lord Koos
Lord Koos's picture

Having been there, I can assure you it is not the food -- it's the culture.  The Chinese I've met work harder are ferociously focused. 

Thu, 12/09/2010 - 09:43 | Link to Comment pazmaker
pazmaker's picture

I think you are both right.  Yes it is their culture but in order for them to continue hard work ferociously focused the masses need food.

Thu, 12/09/2010 - 08:44 | Link to Comment Ricky Bobby
Ricky Bobby's picture

Love that Bryant quote!

Thu, 12/09/2010 - 05:24 | Link to Comment Miles Kendig
Miles Kendig's picture

I'm sure.  Absurdly dynamic is like that.

Thu, 12/09/2010 - 01:16 | Link to Comment jimgcpa
jimgcpa's picture

This is my favorite part...."Income has nothing to do with consumption".  China is a joke.

 

 

Thu, 12/09/2010 - 01:18 | Link to Comment linrom
linrom's picture

As Jim Kunstler would say, happy motoring idiots? They must have very good city planners and infinite energy supply?

Thu, 12/09/2010 - 01:25 | Link to Comment Caviar Emptor
Caviar Emptor's picture

In 1950 the US produced half the world's goods

Thu, 12/09/2010 - 02:52 | Link to Comment Rusty Shorts
Rusty Shorts's picture

In 1950 the US had fuel, genuine food, milk delivered to your front door daily, family operated farms, massive steel mills, WMD's, remnants of old growth forest, the Korean War, Chevrolet, Ford, Dodge, etc., etc...

Thu, 12/09/2010 - 03:24 | Link to Comment Rusty Shorts
Rusty Shorts's picture

 - did I mention Baseball and Apple Pie?

Thu, 12/09/2010 - 07:51 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

In 1950 the other half of the world still lay in rubble.

Thu, 12/09/2010 - 08:26 | Link to Comment spinone
spinone's picture

China is in their industrial revolution.  They will play out what happened in the US, including child labor, pollution, civil war, unionization, rising wages, etc.

Thu, 12/09/2010 - 01:35 | Link to Comment steveo
steveo's picture

As one reader wrote....I don't know why but I keep thinking about joining the Army. This set of charts from Doctor J who has insightful posts on Daneric usually will spice up the Christmas season. What charts? They are spicy, keep your eyes on the fractals now..... http://oahutrading.blogspot.com/2010/12/doctor-j-charts-of-interest.html

Thu, 12/09/2010 - 01:41 | Link to Comment trav7777
trav7777's picture

the vaunted high speed rail will NEVER be profitable.

That is China...massive projects with no possibility of real profit - ever.

Think of all those unprofitable commercial projects, unprofitable factories, unprofitable rail, roads...and then think of the cancer rates.  The last time there was this type of wanton abuse of labor and pollution of the environment, we had the gigantic union and national socialism movements all throughout Europe.  China is on a collision course with destiny.

Thu, 12/09/2010 - 01:58 | Link to Comment GoinFawr
GoinFawr's picture

"China is on a collision course with destiny."

Aren't we all; "on a long enough timeline...", and all that cal.

Thu, 12/09/2010 - 03:06 | Link to Comment Quixotic_Not
Quixotic_Not's picture

Yep, the *permanent* revolution isn't over for the PRC by a long shot!

China is almost ripe for a proletariat revolt...

Thu, 12/09/2010 - 05:25 | Link to Comment Miles Kendig
Miles Kendig's picture

China isn't the only place for that

Thu, 12/09/2010 - 02:07 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

China has become what is gross about America and the rest of the "First" World; obsessed with over consumption, and overt luxury.  I don't know if the world can handle both the West and East's high maintenance.

Thu, 12/09/2010 - 07:55 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

The world can not in the present form.

Thu, 12/09/2010 - 02:00 | Link to Comment Rotwang
Rotwang's picture

There is that slight illusion, that what stands before your lying eyes is not fully paid for.

Thu, 12/09/2010 - 02:06 | Link to Comment AUD
AUD's picture

From Doug Noland, www.prudentbear.com, last week;

The bubbling Chinese economy faces its own issues.   Entrenched Bubbles scoff at “tinkering” and timid policymaking – and China’s Mighty Credit Bubble is proving no exception.

It is the nature of Bubble economies that they become Credit gluttons.  Credit growth and financial flows grow increasingly unwieldy – and the greater the inevitable imbalances the greater the overall Credit expansion required to sustain the boom.  Efforts to sustain boom-time prosperity – while at the same time attempting to harness asset inflation and suppress increasingly destabilizing speculation – are prone to spectacular failure.

Chinese authorities recognize they have a problem – a serious monetary dilemma compounded and complicated by our QE2.  Today’s Politburo statement adds further evidence that more aggressive tightening measures will commence in 2011.  Yet the markets have turned numb to such warnings.  And I’ll be the first to admit skepticism that the Chinese will administer the necessary harsh medicine.  Chinese authorities have waited too long and allowed “terminal” Bubble excess to gain a powerful foothold.

Thu, 12/09/2010 - 02:06 | Link to Comment bankonzhongguo
bankonzhongguo's picture

For whatever its worth, I started my China career in the mid 1980's in high school.  China is a grand tapestry of feudalism.  You can talk for weeks/months/years with senior people to get things done and then find you have to restart negotiations with a new group of folks ten miles down the road, only to have someone else come in from the province or Beijing to kill, grease the deal or cookie cutter your model with new local brand. I've seen millions of dollars in capex rot so that some middle manager brother in law of some PLA whoever can put $10,000 in his back pocket without anyone knowing it while visiting Vegas and Disneyland.  Most people are living in the margins. Some white guy with money in his pocket and an MBA on the wall is no different than a Saturday night drunken bum waiting to be rushed in a dark alley.  There is money to be made, but learn the language and respect a very old culture and hunker down for 10 years.

Anything is possible. Nothing is easy.

Thu, 12/09/2010 - 07:49 | Link to Comment snowman
snowman's picture

+1,000 on yr comments, and it is how I see it (although you got a head start, my 1st visit there was 13 years ago).

China will still be a place where they make stuff. There is no innovation, whatsoever. Innovation, sharing of ideas, debate is what makes nations powerful. The communists have successfully bred out innovative thinking via the educational system, and of coruse control sharing of ideas and debate. They can grow all they want, but they aren't any smarter for it. Quite the opposite, the bigger they get, the dumber they become.

Thu, 12/09/2010 - 09:41 | Link to Comment YHC-FTSE
YHC-FTSE's picture

Can't agree with both of you. I started telling my China horror stories 15+ yrs ago when I set up joint venture projects, but things are so different nowadays, I would have to go way into the unpaved regions of the countryside to encounter the same difficulties that you describe. You sound exactly like the unwashed guys in economy who start weeping with relief when the plane leaves China. 

 

I doubt whether either of you have any experience in higher education, because if you did, you would know that there have been a huge number of Chinese innovators in universities all over the world who work for major Chinese manufacturers for the past ten years. The brain-drain the UK experienced when most of our smartest went to the US for work in the 80/90's is happening again in a different direction. 

 

The trick to success in China, as with anywhere else, is knowing the right people and your intention to bring value to the relationship. If you go there thinking that you need to "break in", get rich, grease the wheels, and so forth - you are merely creating and adding to the mass of foreign problem makers they have to deal with on a daily basis. 

Thu, 12/09/2010 - 12:56 | Link to Comment bankonzhongguo
bankonzhongguo's picture

I generally agree with you.  China graduates a million new engineers a year.  Many China grad students/phd in US schools go back to China because that is where the opportunities are.  If I need something built, I start with turn key manufacturers in China.

"Foreign problem makers"  That's funny.

Thu, 12/09/2010 - 13:25 | Link to Comment YHC-FTSE
YHC-FTSE's picture

:). It's a phrase I keep hearing more and more from the Chinese and unrelated to the political stuff. Oddly enough, as you know, most Chinese actually like to discuss politics even if its extremely critical of their ways.

Mostly it's the guys who go there who think screaming at the workers and treating them like crap is going to make them productive. Guys who don't pay for goods. Guys who go there for illegal kicks like prostitution (And end up in jail). Guys who keep asking for counterfeit goods. Guys who think everyone takes bribes. etc. They just hamper the efforts of the rest of us who are trying to do legitimate commerce. 

Thu, 12/09/2010 - 02:46 | Link to Comment Misean
Misean's picture

I've said it many, many times...in a history rhymes kinda way...

Look at Great Britain/US monetary shennanigans from 1919 to 1929.

Think about that China peg.

Think about the US v. Great Britain economically. How the citizens lived. The land size.

Cheers,

Thu, 12/09/2010 - 05:29 | Link to Comment Miles Kendig
Miles Kendig's picture

Terrific that Chef Ben's efforts seem most designed to benefit asset accumulation in China rather than the US.  Ben must believe that exporting assets is the way to domestic growth.  wow

Thu, 12/09/2010 - 06:14 | Link to Comment GoldbugVariation
GoldbugVariation's picture

The scary thing is 1/6th of the world's population, and apparently soon more than 1/6th of the world's economy if that report is anything to be believed, all in an area of land which is something like 1/60th of the world's landmass - and a good part of that, even, consists of mountains and desert.

That is what I call unsustainable.

Thu, 12/09/2010 - 06:23 | Link to Comment BigDuke6
BigDuke6's picture

Don't be underestimating the human hive.

While the west seems to be electing bigger and bigger fools to lead them the chinese are running a pretty good race so far.

Real estate has boomed but no sub-prime as cash pays for houses.

its the over-capacity that concerns me but people have predicted china's demise for over 5 years now and it aint happened yet.

Thu, 12/09/2010 - 08:06 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

I'm predicating that it will be dark here tonight ...

The big question for China is whether or not it can transition its share of GDP driven by exports and mercantilism towards greater consumption, which is now estimated to be 35% of GDP, the lowest in the industrial world bar none.

There are many many obstacles given the gross imbalances developed in its quest for hyper growth. Imbalances politically, economically, environmentally and dare I say, spiritually.

And yes, we are living in a glass house as well.

Thu, 12/09/2010 - 11:29 | Link to Comment goodrich4bk
goodrich4bk's picture

Be careful with the "cash pays for houses" concept.  I've read several reports confirming what I've seen in the San Francisco Chinese community: real estate is often purchased with multiple, fractional interests that remain unrecorded.  And with the median income about $4k a year, how is it possible that so many buyers, if they are, indeed, using their own cash, saved that much cash in such a short period of time?  I'd submit that with median prices now 22 times median income (vs. less than 5 in California at its peak), we're looking at an unsustainable bubble. 

Thu, 12/09/2010 - 06:49 | Link to Comment PrDtR
PrDtR's picture

hehe..

Thu, 12/09/2010 - 07:02 | Link to Comment solgundy
solgundy's picture

TD....how many ID's does Jim Chanos have?

Thu, 12/09/2010 - 07:13 | Link to Comment Tommybee
Tommybee's picture

Hey, my first post!  I'm not going to lie.   I really struggled with the math question.....

Thu, 12/09/2010 - 09:35 | Link to Comment bobert
bobert's picture

I think the answer to something minus something equals a negative # is part of computer programming 101. I didn't take the class either :)

Thu, 12/09/2010 - 07:46 | Link to Comment primefool
primefool's picture

Chinese are no different to "americans". In the late 1980s there were several books about the Japanese - basically like some of the commentators here today observing that the Chinese are "ferociously hard working blah blah" - in the late 1980s the Japanese were a superior race, you see even the Japanese language uses the left hemisphere - same hemisphere that does math - wow man - we can never compete with that shit!!

OK - what is common between Japan in the late 1980s and China today? ......

Give up? OK - PROPERTY BUBBLE.

Property bubbles make people feel on top of the world, superior, invincible. Endowed with superior racial characteristics.

propertry bubbles pop.

Thu, 12/09/2010 - 07:57 | Link to Comment primefool
primefool's picture

Propert bubbles make magic happen. Peasants who used to watch every penny - suddenly - because they owned property on 10X leverage find themselves driving BMWs. Wow. Great stuff. No more of that peasant stuff for me - Iam a BMW kinda guy now .

 

I repeat - property bubbles pop. They always do. Every single one in history has popped. The aftermath? Well.. it typically sets the economy back by 5-25 years. thats all.

Thu, 12/09/2010 - 08:04 | Link to Comment primefool
primefool's picture

Can anyone here name ONE product - invented and made in China that they use in their personal lives ( Please dont say Apple Ipods!!!- Iam crazy but not stupid) - I am talking about a product that the Chinese designed , commercialized and sold to the world - to ..umm.. make the world a better place. It can be a small thing ( a fizzy drink) or just a sandwich type deal ( McDonalds) - but it must have Chinese origins.

Anyone wanna play?

Thu, 12/09/2010 - 08:13 | Link to Comment sabra1
sabra1's picture

lead paint, improved drywall, malamine flavoured milk, cadmium jewellery, rice!

Thu, 12/09/2010 - 08:13 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

The I Ching is pretty good, but those yarrow sticks are harder and harder to come by.

Was at the range on the weekend. Tough to get lead 200 yards without gunpowder.

Oh, Marco Polo brought noodles back to Italy so technically speaking spaghetti is Chinese ...

Oh, lately? Hmmm.

Thu, 12/09/2010 - 09:01 | Link to Comment Big Corked Boots
Big Corked Boots's picture

Firecrackers.

Thu, 12/09/2010 - 09:06 | Link to Comment sharkbait
sharkbait's picture

Those kitzschy little birthday cake candle things that shoot sparks and play music

Thu, 12/09/2010 - 12:09 | Link to Comment financeguru500
financeguru500's picture

What does it matter who invents it?

Just because inventors in the U.S. created things doesn't mean you or I are seeing a dime of that money. It also doesn't mean the U.S. will benefit at all from the invention of that item.

China has effectively become the manufacturing powerhouse of the world. End of story.

The U.S. can become a manufacturing country again but only at competing costs to China. That means either U.S. employees will have to make wages similar to chinese workers or resources to make the goods have to be cheap enough to make the products a similar price.

 

Thu, 12/09/2010 - 08:08 | Link to Comment primefool
primefool's picture

Britain owned the 19th century because - well they invented the steam engine etc and commercialized large scale production of textiles etc

America owned the 20th century because we invenyted and commercialized among other things: the autimobile, the aircraft, TV, Computers, Internet and packaged foods. Thats all .

China owns the 21st century because...... Are folks willing to play? fill in the blanks for me here? Because I just cant think of even ONE thing.

Thu, 12/09/2010 - 09:23 | Link to Comment Sabremesh
Sabremesh's picture

"Because all your minerals are belong to us". China.

Thu, 12/09/2010 - 09:38 | Link to Comment bobert
bobert's picture

Because the Saudi's swing to their side for some reason and our military machine grinds to a halt (?)

Thu, 12/09/2010 - 17:17 | Link to Comment BigDuke6
BigDuke6's picture

Now, finally, someone is really thinking.

The inventing argument  is a false hope for the usa.

and anyway the number of patents is dropping off a cliff in usa and going parabolic in the east.

goddam crazy false sense of security will get us all in deep shit.

Thu, 12/09/2010 - 08:15 | Link to Comment primefool
primefool's picture

OK so My conclusion is - Why are the people who invented steel, ships and textiles in the 19th century and the people who invented cars, aircraft , TV , computers and internet in the 20th century petrified of a new dominating force in the economic life of man?

beacuse of a lack of testosterone - we have become wudssies. We cant even name ONE reason why the supposed fearsome rival is in fact fearsome.

I mean comeon - I can gets shirts tailored cheaply in any one of a dozen countries - so dont give me THAT.

Thu, 12/09/2010 - 08:20 | Link to Comment primefool
primefool's picture

Beaten down wussies we are. Petrified of rivals that dont really even exist. Roibbed blind by a bunch of little thieving financial tricksters and worried abou who is gonna mug us next. We dont even have the energy to put an end to the thieving in our midst. No we are weak, very weak.... we are wussies.Wussies.

Thu, 12/09/2010 - 08:54 | Link to Comment spinone
spinone's picture

I'm not afraid of the Chinese.  They make our stuff for cheap.  I like the cellphones and underwear.

We will fight low intensity proxy wars with China over resources.  Not too scary. 

Thu, 12/09/2010 - 08:30 | Link to Comment Dadoomsayer
Dadoomsayer's picture

According to Chanos we will have a Chinese implosion shortly

Thu, 12/09/2010 - 09:02 | Link to Comment junkhand
junkhand's picture

primefool -

 

this the kind of thing you are looking for?  granted, i've only ever heard of the rice and insulin.

cheers,

the hand

 

 

4 great modern inventions selected

(Xinhua)
Updated: 2007-02-10 14:23

 

China's four great modern inventions are hybrid rice, laser photocomposition system for Chinese character typesetting, total synthesis of bovine insulin and compound artemether, according to the country's netizens.

More than 100,000 netizens contributed to the debate and 51,442 valid votes were cast in an election jointly organized by the Guangdong Association of Invention (GAI), Nangfang Daily, Beijing News and sohu.com, said Zhou Zhaolong, vice GAI director.

Zhou said originality, global influence and social benefits were the three key criteria for the inventions chosen.

Hybrid rice developed by famous Chinese agronomist Yuan Longping since the early 1970s is widely grown in China, with yields up to 12,000 kg per hectare. It has greatly increased yield on China's limited amount of arable land and been introduced to some Asian and African countries.

The computerized laser photocomposition system for Chinese character typesetting has transformed China's printing from letterpress printing to electronic publishing.

The new system invented by late Peking University Professor Wang Xuan in the 1980s has been described as the second invention of the printing system for Chinese characters after Bi Sheng's invention of movable clay type in the Northern Song Dynasty (960-1127). Bi Sheng's invention ushered in a revolution in the history of printing.

The complete synthesis of bovine insulin -- the first time that human beings have synthesized protein -- is a huge breakthrough in the life sciences. The procedure was carried out in 1966 by a team headed by late academician Wang Yinglai.

Compound artemether is a medicine invented in China in the late 1970s which has proven itself to be effective in treating malaria patients worldwide.

The compass, gunpowder, paper-making and printing are regarded as ancient China's four great inventions. "Electing four great modern inventions will encourage the new generations to press forward on the road of discovery," said Wang Yusheng, former director of the China Science and Technology Museum.

Guo Jun, vice-director of the Guangdong Academy of Sciences, the Guangdong branch of the Chinese Academy of Sciences, said the election will focus people's attention on China's scientific and technological innovations and enhance national esteem.

Thu, 12/09/2010 - 09:16 | Link to Comment YHC-FTSE
YHC-FTSE's picture

+1 Thanks for the post

Thu, 12/09/2010 - 09:32 | Link to Comment Ese Pinche
Ese Pinche's picture

FACE  +2

Thu, 12/09/2010 - 09:23 | Link to Comment chinaguy
chinaguy's picture

I'd take this report with a few grains of salt. They quote a bunch of (mostly) true growth & demo statistics and then make sweeping complex political and economic calls based on them. Shoddy analysis IMO

Thu, 12/09/2010 - 09:39 | Link to Comment The Pierogi King
The Pierogi King's picture

Ya but where can you get some good sushi?

Ok it's big; but if you cannot trust the info coming out of China how do you gage your investment or define whether there is actually a bubble (let alonoe when it will burst)

Thu, 12/09/2010 - 10:02 | Link to Comment TexDenim
TexDenim's picture

I have heard this so many times before.

Last year, there were 100,000 demonstrations throughout China protesting various actions of the PRC government. It is not going to be a smooth or easy road. China investments will continue to be very, very volatile.

 

Thu, 12/09/2010 - 10:46 | Link to Comment deepsouthdoug
deepsouthdoug's picture

Stupid Commie Centralized Planning with money.  That's all China is.   

Thu, 12/09/2010 - 17:00 | Link to Comment SmittyinLA
SmittyinLA's picture

We wont nuke China, that would be counter productive, and China wont be taking that much more oil either, they'll be going greener than us (no not solar panels but good insulation).

Their auto industry is already maxxing out do to lack of roads, (people wont buy cars to park in their living room or park on the local freeway) and they can't build more roads where they need them because there's too many people, where there is space for roads there isn't any need for roads or drivers or gasoline or diesel because there isn't any population or jobs there.

China's military wont keep expanding either, they'll be downsizing soon-just like Russia, they'll need the public funds for more pressing needs like food & medical care for their elderly necessitated by their 1 child policy.

The elderly wont be able to follow the tradition of families caring for their parents in their old age because the families dont exist and they can't rely on some US style Social Security benefit because their state funds were invested in FNM bonds as well as US treasury bonds which are fiscally uncollectible.

They'll be able to buy limited US grain crops, meat & medical technology but our food exporting capacity is rapidly declining while our political demographics are shifting Socialist, this means eventual food export tariffs and limits on food exports.

America today is a net food importer, and as our population grows through mass immigration our capacity and willingness to export food will decline.

Nebraska farmers have to export through NOLA & CA ports and if NOLA & CA are broke & starving they'll face a huge tax if they're even allowed to export food while Americans go hungry.   

The Chinese baby boomer retiree bubble (following ours by 20 years) will force a huge political shift, all the folks that made the promises of Socialism will be removed and probably shot.

China will break up into smaller states based on ethnicity like Eastern Europe, the whole commie concept of "we're all in this together" crap will go out the window when the "have nots" start asking for their "cut" and the "haves" whom all happen to be HAN Chinese say "no thanks".

The "have nots" are OTH "other than Han", the Han will not want to "share their wealth" and the OTH will not want to "share their resources" or labor, this is our plan for dealing with China, and its more than half completed.  

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