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Guest Post: China's Runaway Chariot

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Submitted by Charles Hugh Smith from Of Two Minds

China's Runaway Chariot 

China's authorities may have lost the ability to control the increasingly complex and opaque Chinese economy.

China's economy appears to have reached a critical threshold of complexity and obscurity that renders it uncontrollable.
Recent reports of surging bank loans, real estate speculation, industrial growth and inflation triggered a sharp decline in the Shanghai stock index yesterday.

A recent comparison of food prices in Boston and Beijing found that China is now more expensive than the US.

Though the first link states that the average urban wage in China is about $3,000 a year, my sources in China report that a college-educated worker makes about $6,000 a year--about one-eighth the average U.S. income of $49,777. A mid-level manager might make $12,000 a year--an excellent salary in China.

Food eats up (sorry) about 40% of the average household budget in China, roughly in line with the percentage U.S. households devote to housing/mortgages. As I have noted here before, it's not the absolute percentage rise in essentials such as food and energy that matters, it's the relative impact on lower-income households that matters.

A 10% rise in food prices in a household that spends 10% on food (a typical upper-middle class U.S. household) results in a "statistical noise" 1% increase in the family budget. In a family budget with 40% devoted to food, a 10% increase in food meaningfully crimps household spending. A doubling of food prices would be catastrophic.

China Consumers Signal Deepest Inflation Concern Since 1999 in PBOC Survey.

The roots of China's inflation are visible to all: huge increases in bank credit and lending, and massive speculative flows into real estate:

Industrial-output growth accelerated to 13.3 percent last month from a year earlier, exceeding economists’ median estimate of 13 percent.

Urban fixed-asset investment also grew at faster pace, climbing 24.9 percent in the first 11 months of 2010 from a year earlier, the report showed. Retail sales gained 18.7 percent in November from a year earlier.

The Shanghai Composite Index of stocks has fallen 10 percent from a Nov. 8 high, extending this year’s loss to 13 percent, on concern tighter monetary policy will cut economic growth and profits.

Food prices rose 11.7 percent in November from a year earlier, the most in more than two years, and residence-related costs such as charges for water, electricity and rent were also a key driver of inflation, the statistics bureau said today.

Broad money supply, or M2, rose last month by 19.5 percent, the fastest gain in six months, the People’s Bank of China reported yesterday. M2 has surged 55 percent over the past two years and outstanding yuan-denominated loans have climbed to 47.4 trillion yuan, 60 percent more than in November 2008.

We recently spoke at length with a young Chinese friend who travels extensively in China in his engineering/design job. He reported that prices for some food items have doubled and tripled practically overnight. That suggests the official estimates of food inflation are lower than the reality facing consumers.

He bought two designer-label business suits here in the U.S. because he said they were half the price he would have paid in China. And yes, the suits were made in either China or another low-cost Eastern Asia nation.

How can workers making $6,000 a year afford food and other consumer prices that are higher than prices paid by Americans making 8 times as much? Even our Chinese friends are mystified how the average (low-wage) household manages.

One answer is that housing is often dirt-cheap in China. As part of the privatization/opening of the economy process in the early 1980s, Chinese families were able to buy a 99-year lease on their residences for very modest sums. There is no property tax in China, though authorities there are trying to impose them for the first time to dampen speculation.

So families who still live in their old 1980s-era housing pay virtually nothing in housing costs.

Everyone who can work does work in Chinese households, and so the household income often includes three or even four incomes (Grandmother or Grandfather might be receiving a government pension, or might generate income in the informal economy).

Most Chinese workers pay no income tax, so whatever they make, they mostly keep.

Despite these pluses, inflation is now so high that it has overtaken these built-in advantages.

The central illusion in the Chinese economy is that the Central State can effectively control it. When China's economy was smaller and simpler, that was possible. Now there are far more nodes of power and control, and the Central Government's control over regional and local government borrowing and spending is more nominal than absolute.

There are powerful, conflicting mixed signals throughout the Chinese economy. The Central government is certainly aware of the economy overheating, and it is making modest efforts to dampen lending and speculation by increasing bank reserves and raising interest rates.

But at the same time, its targets for local government growth--growth at any cost-- remain high, meaning the incentives and directives are still in place to build, build, build as a way of generating all-important growth and revenues.

Local governments remain dependent on land and development fees for fully 40% of their income, so slowing down real estate speculation would spell fiscal doom for local governments.

Add these factors up and it's easy to see why empty malls and towns continue to get built, regardless of final demand. The truth is that the Chinese economy is heavily dependent on massive credit and lending expansion, fixed-investment (in factories, power plants, etc.) and real estate.

In other words, it is the acme of a speculative economy. Though certain aspects of the economy are resilient, others are increasingly fragile and extended.

Rampant growth has led to increasing complexity and obscurity. The policy modifications imposed by the central government authorities have had effectively zero effect on runaway lending and speculation. That is painfully clear evidence that the authorities have lost control of the economy.

Many observers seem to see China and the U.S. as players in a zero-sum game: if one gains, the other loses. I think that is an inaccurate model; the two gain together from each other's stability, and lose together if either one is destabilized.

That's why we should hope that China's leaders manage to eliminate the mixed signals that are exacerbating the credit/inflation/speculation bubble that is threatening to destabilize their nation.

We have our own destabilizing problems, and a loss of U.S. stability is certainly not China's gain, either.

Unfortunately, "one could describe the global economy as a race between the U.S. and China, to see who goes down first."

Special note: Once again I find myself so sorely pressed for time and energy that I am unable to respond to all emails. Please know I read all emails, but I can only devote a very limited number of hours to this blog and all related correspondence. That leaves me with a deeply vexing and unsatisfactory choice: if I devote those few hours a day to responding to email, then I have no time left to write the blog. Without the blog, then there is nothing to write me emails about, so both vanish. My own core energy is heavily depleted by this constant struggle, which leaves me unhappy and feeling that I have failed my readers no matter what I do.

For better or for worse, most of my time is spent pursuing the sort of self-reliance that I promote here. I find it a peculiar conundrum that the only way I can possibly manage my correspondence would be to sacrifice the very practices which form the heart of this site and my purpose in creating it.

Unfortunately, I don't have a fixed income, pension, grant or trust fund, so nobody pays me to answer hundreds of emails. I have to make enough money in the real world to pay our health insurance, property taxes, income taxes, self-employment taxes, dental bills, etc., and have time to nurture my own network of friends, associates and family, cook 95% of our meals at home, take care of the fruit trees, garden, bicycles, etc. and have some time to devote to fitness, music and my other writing/books in progress.

I regret these limits but even workaholics have limits, and they bear down harder with each passing year. I feel old and tired much of the time, and that's not sustainable.

So please do not consider it a slight if you receive no acknowledgement; I read and value each email, as I know it comes from a real individual with pressing demands of their own. This entire enterprise, if it can be called that, is imperfect, and will always be so. I keep it afloat, but barely. That's the best I can do.

 


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Fri, 01/21/2011 - 12:31 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

Proportions and portions, bitchezzz!!!!

Fri, 01/21/2011 - 13:49 | Link to Comment 66Sexy
66Sexy's picture

I suppose being able to get away with mass producing ghost cities in the outskirts, propping up empty building rentals to keep prices up, keeping real estate values vacumed from real market forces, creating crappy, shoddily built buildings with no construction standards, and mindlessly polluting the environment (without regultaion) would boost ANY countries GDP.

 

No wonder corporate america loves china...

Fri, 01/21/2011 - 12:35 | Link to Comment TruthInSunshine
TruthInSunshine's picture

But I am junked by many when I claim Bernanke has saved his cruelest voodoo for China?

China is not part of the official establishment.

They are being given a choice by the establishment right now: Float your currency, or we'll squeeze your masses with inflation of a debilitating sort; and, so far, it has been just a taste of what could come.

Yes, China, you will see spikes in unemploment, and dislocations in your industrial base, as you lose some of your competitive advantage of cheap labor...but you'll have to figure that one out on your own, as it's a political question, and not an economic one, as far as we consider it.

Fri, 01/21/2011 - 12:44 | Link to Comment Ragnarok
Ragnarok's picture

Much like the Tsar was, he wouldn't play ball so he was overthrown.

Fri, 01/21/2011 - 14:30 | Link to Comment trav7777
trav7777's picture

yeah; they intend to make China eat the deflation.

It's like the teaser loan of all this liquidity, now you get the balloon payment at the end

Fri, 01/21/2011 - 12:37 | Link to Comment Jason T
Jason T's picture

Just grow more food.. problem solved.  Pay the farmers more money and hell, I'll be a farmer.  

Get nuclear to desalinate water ..water problem solved.  

Fri, 01/21/2011 - 12:38 | Link to Comment Almost Solvent
Almost Solvent's picture

Wait a minute, how can China central planners not have full control over a few billion people?

Makes no sense, this article must have missed something.

China will overtake the US in only a few years.

/sarc

Fri, 01/21/2011 - 12:39 | Link to Comment NOTW777
NOTW777's picture

MSM praises china as a miracle when it appears to be another ponzi scheme

How can workers making $6,000 a year afford food and other consumer prices that are higher than prices paid by Americans making 8 times as much?

Fri, 01/21/2011 - 12:41 | Link to Comment NOTW777
NOTW777's picture

how about a donald trump reality show exploring the empty cities and malls

 

empty malls and towns continue to get built, regardless of final demand. The truth is that the Chinese economy is heavily dependent on massive credit and lending expansion, fixed-investment (in factories, power plants, etc.) and real estate.

Fri, 01/21/2011 - 12:41 | Link to Comment Alcoholic Nativ...
Alcoholic Native American's picture

need moar chicken feet, everybody help out and eat all the big juicy breast at KFC.

Fri, 01/21/2011 - 13:24 | Link to Comment vxpatel
vxpatel's picture

mmm tough, dry chicken feet...and McNuggets

Fri, 01/21/2011 - 12:43 | Link to Comment JW n FL
JW n FL's picture

Hungry People ='s Angry People....

Fri, 01/21/2011 - 12:49 | Link to Comment Rodent Freikorps
Rodent Freikorps's picture

Only temporarily. Then they become dead people.

Fri, 01/21/2011 - 12:59 | Link to Comment JW n FL
JW n FL's picture

Tanks in the square, here we come!

 

http://en.wikipedia.org/wiki/Tank_Man

Fri, 01/21/2011 - 12:44 | Link to Comment hannah
hannah's picture

"A 10% rise in food prices in a household that spends 10% on food (a typical upper-middle class U.S. household) results in a "statistical noise" 1% increase in the family budget."

this isnt necesaarily true. if i am maxed out oncredit and i am skipping payment of one or two bills a month (i.e. i dont have the cash to pay all my bills each month) and my food bill goes up 10%...well now i might now be able to pay 3 bills fully...everyone acts as if americans are flush with cash. any increase cost in anything can push maxed out people into the abyss.

also who came up with only a 10% increase for america...apparently you dot do the food shopping.....

 

 

Fri, 01/21/2011 - 12:50 | Link to Comment TruthInSunshine
TruthInSunshine's picture

None of that changes the simple math that things that have inflated make up a far higher proportion of total expenditures for a typical Chinese household vs an American or even western one.

Also, Chinese do not use credit, even for large purchases. They are culturally a cash purchase society, so they can't delay the full and true pain of the type of inflation spoken of through credit gaming.

Fri, 01/21/2011 - 12:45 | Link to Comment Segestan
Segestan's picture

As the world communist revolution marches on someday the western naive love affair for China will face cold hard reality.... http://www.archive.org/details/RedChine1964

Fri, 01/21/2011 - 12:47 | Link to Comment King Durian
King Durian's picture

Fantastic article, the author really drives a clear analysis home.

Fri, 01/21/2011 - 12:49 | Link to Comment Kina
Kina's picture

Any data coming from the Chinese is always faked, even if it is good data, they have an aversion to stating the truth even when it does no harm.

Success always over stated, problems vastly understated. China only lets on about 'minor' issues when they reach the stage of massive problem. When they first talked about having to control inflation you knew that it was the a big problem.

 

My wife (HK Chinese) is complaining about the mainlanders flocking into HK and buying up 'cheap' stuff there.

 

This has implications for Australia which has its own particular problems now, on top of its private debt levels.

 

 

 

We do not even know yet and can not know - it’s not possible for anyone to know - what the damage bill is going to be, we are only going to know as floodwaters subside," said. "There may be some tough choices."

Her determination to cut in other areas to fund relief and rebuilding in Queensland was labeled "dangerous" by Reserve Bank board member Warwick McKibbin as news emerged of tumbling export earnings and a stalling of the Queensland economy.

"Look at the size of the Queensland economy relative to Australia. At the moment a fair chunk of it has just stopped," Professor McKibbin told The Age...

"If you look at the infrastructure damage and all the networks that have been broken, a hit to the economy of 1 per cent is not out of the question."

A 1 per cent hit to the economy would cost $13 billion.

Trade figures released yesterday showed coal exports slid 5 per cent in November as the wet weather gathered pace.

More than 40 mines have been affected by flooding and the Port of Gladstone has abandoned exports.

ANZ economist Katie Dean said much worse was to come with about 75 per cent of Queensland coal production already stopped.

"Our initial estimate is the floods could drive a 25 per cent fall in coking coal export volumes and around a 9 per cent fall in thermal coal export volumes in January," she said. "This could see exports alone strip 0.5 percentage points from GDP in the quarter."

Australia's trade surplus is expected to slip into deficit.

Forecasters at Rabobank sliced 8 per cent off projected cotton exports. Australia is one of the world's biggest producers. Cotton price futures jumped a further 2 per cent after earlier jumping by the maximum of 4 per cent permitted on the Chicago exchange.

Petrol price commissioner Joe Dimasi warned of soaring prices for ethanol, traditionally a cheap additive to fuel.

"Motorists may find that fuel pumps which carry ethanol-blended fuel are closed or out of order," he said.

Professor McKibbin said the entire economy would be weakened by the floods and would need government support.

"Queensland is not a little island sitting out there somewhere north of Newcastle," he said.
"It's integral. People in Queensland won't be buying as much from the south as they otherwise would, so there will be a decline of trade within Australia and there will be a decline in our exports to the rest of the world - there will be a permanent loss of wealth."

 

 

 

Overall consumer confidence: down 6%

Good time to buy household item: down 4%

Family finances next 12 months: down 6%

Economic conditions next 12 months: down 16%

Economic conditions next 5 years: steady

 

 

And the  AUD is .9903 ?

Fri, 01/21/2011 - 13:08 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Any data coming from the Chinese is always faked, even if it is good data, they have an aversion to stating the truth even when it does no harm.

I am not trying to offend anyone, as all cultures have good and not so good qualities, but try negotiating a contract, and then having the contract honored, with and by a Chinese company. You will need tons of patience, persistence and a lot of Excedrin, too.

I've never found anyone more willing to disregard the plain & clear meaning of the words they crafted and inserted into a contract, simply because doing so serves their pecuniary interest. It's the ultimate Twilight Zone experience.

Fri, 01/21/2011 - 12:47 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture


How China Really Works... ( VICTOR SHIN - Elite China Politics and Political Economy )

True, I haven't posted for a long time, sorry loyal readers. Anyway, wikileak provided even some fodder for the discussion on elite politics in the form of a cable on how China really works. As seen below, top leaders are close to various business interests, and princelings are powerful. I would say the assessment below is more or less true. Moreover, at the local level, local leaders are close to various real estate companies and construction contractors, who help finance their promotions. Now, we can understand why imposing strict monetary policy that would cut off credit to SOEs and real estate developers may be difficult to do. 

Telegraph

WikiLeaks: China's Politburo a cabal of business empires

http://www.telegraph.co.uk/news/worldnews/wikileaks/8184216/WikiLeaks-Ch...
-Politburo-a-cabal-of-business-empires.html

China's ruling Politburo is a cabal of business empires that puts vested
interests over the needs of the poor and curtails media freedoms to avoiding
having shady business deals exposed in the press, according to a leaked US
government diplomatic cable.

Peter Foster
By Peter Foster, Beijing 9:00PM GMT 06 Dec 2010

The damning description of China's secretive leadership machinations also
described how the descendants of China's Communist revolutionaries - known
as "princelings" - derided officials from less august revolutionary
backgrounds as mere "shopkeepers".

The assessment of what motivates China's opaque top-level decision-makers
was relayed to Washington in July 2009 in one of the 250,000 cables
published by the WikiLeaks website.

"China's top leadership had carved up China's economic 'pie,'" the US
embassy contact said, "creating an ossified system in which 'vested
interests' drove decision-making and impeded reform as leaders maneuvered to
ensure that those interests were not threatened." The US embassy contact
also asserted there were no "reformers" within the top Communist Party
leadership, only competing factions that sought to protect their business
empires from attack by in-coming leaderships.

The source said that it was "well known" that former Chinese premier Li Peng
and his family controlled China's "electric power interests" while the
country's security tsar Zhou Yongkang controlled the state monopoly of the
oil sector.

The wife of China's premier Wen Jiabao, a popular figure in China often
affectionately referred to as "grandpa Wen" for his feelings for the common
man, is said to control China's "precious gems" sector, while Jia Qinglin,
ranked fourth in the Politburo, has "major Beijing real estate
developments".

Further down the political food-chain, the desire of local officials to
protect current business interests also explained China's reluctance to rein
in rising inflation and take steps advocated by international economists to
re-orientate its economy more towards domestic consumption.

"They [local officials] always supported fast-growth policies and opposed
reform efforts that might harm their interests," the contact said, adding,
"As a result, the proponents of "growth first" would always be in a stronger
position than those who favored controlling inflation or taking care of the
poor." The assessment also said that economic self-preservation was one of
the key reasons why China's leaders were so resistant to increased media
freedoms.

"Vested interests were especially inclined to oppose media openness, he [the
contact] said, lest someone question the shady deals behind land
transactions." China's reluctance to engage in political reform is to be
highlighted this week when Liu Xiaobo, the dissident author of the Charter
08 petition for greater rights in China, is awarded the Nobel Peace Prize
"in absentia" after being jailed in China for 11 years for challenging state
power.

The perception inside China that the country is run in the interests of a
Party elite is also growing, with an online poll last February by the
state-run China Daily finding that more than 90 per cent of Chinese believed
that the new rich had achieved their wealth through political connections.

The web of commercial interests also forces China's modern rulers to act by
consensus, with the current President Hu Jintao likened to the "Chairman of
the Board or CEO of a big corporation", juggling factional interests, unlike
the autocratic figures of Mao Tse-tung or Deng Xiaoping who could rule by
fiat.

The man tipped as China's next leader, Xi Jinping, was selected, not for his
leadership qualities but, the contact said, because he "maintained a
non-threatening low profile and had never made enemies" and could be relied
upon not to wage political vendettas through anti-corruption investigations.

"The central feature of leadership politics was the need to protect oneself
and one's family from attack after leaving office. Thus, current leaders
carefully cultivated proteges who would defend their interests once they
stepped down," the contact said.

In the past in-coming Chinese leaders have consolidated their position by
instituting crackdowns, with Jiang Zemin, the former president, shutting
down a number of businesses owned by the associates of his predecessor, Deng
Xiaoping, when he came to power in the early 1990s.

A similar process was observed in 2003 after Hu Jintao took office, with
several high-level figures in Jiang Zemin's Shanghai power-base facing
investigations and purges that analysts said were aimed at curtailing the
power and influence of the Jiang faction.

The contact also outlined the scornful factionalism that divided the scions
of the old 'red' families - those with revolutionary lineage whose fathers
and grandfathers fought to bring the Communists to power in 1949 - and those
who had risen up the Party ranks, so-called "shopkeepers".

China's current leaders, President Hu Jintao and prime minister Wen Jiabao,
both fall into the latter category, while the putative next leader,
57-year-old Xi Jinping, is the son of a revolutionary hero Xi Zhongxun and
often referred to as a 'princeling'.

The US embassy contact said that China's princelings felt they had a "right"
to the fruits of the revolution, recalling one family deriding those without
revolutionary pedigrees by saying: "While my father was bleeding and dying
for China, your father was selling shoelaces".

Fri, 01/21/2011 - 12:50 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

"A 10% rise in food prices in a household that spends 10% on food (a typical upper-middle class U.S. household) results in a "statistical noise" 1% increase in the family budget. In a family budget with 40% devoted to food, a 10% increase in food meaningfully crimps household spending. A doubling of food prices would be catastrophic."

 

THIS is why there is no US inflation, sports fans.  THIS is why the Fed can print.  Rents Are Not Going Up.  Until they do, we don't have inflation, and sorry gold guys, this is simply the way it is.  The same math applies to gasoline and health care.  Rents are all powerful in the CPI equation -- because that's reality.

The Fed can print because of this.  

Only one thing can stop all this from continuing.  And it will.  Oil is the world's alpha asset.  

Fri, 01/21/2011 - 14:06 | Link to Comment ExpendableOne
ExpendableOne's picture

Aye, who cares that eggs and milk cost a bit more if your no longer sending in the mortgage payment...

Fri, 01/21/2011 - 14:50 | Link to Comment Calmyourself
Calmyourself's picture

Not sure how much rental proeprty you own but my unit prices are going up..  My costs go up tenants costs go up..  Oil is an input, plowing, lawncare etc..

Fri, 01/21/2011 - 15:39 | Link to Comment JR
JR's picture

The utility companies, and other government monopolies, decide what profits they want, and game the system accordingly.  Utilities for operational purposes are government entities in that government protects their monopoly. 

Case in point:

My kilowatt usage is low; I am seldom home, and, I economize.  I recently was notified by my utility company that it was raising my cost per kilowatt hour—an increase only charged to low users. The reason for the increase, according to the company, was to help spread out the costs for the high users.  The real reason, of course, is that the utility starts with its intended profit and assigns the rates accordingly.

The more you try to get away from them, the more they chase you.

In the 1930s, customer service at gas stations included numerous, uniformed attendants checking the oil, cleaning the windows, filling the radiator as well as pumping the gas…

The large scale chains used the oil embargo and the high prices of 1973 to put the nail in the coffin of classic service.  The high gas prices reduced recreational driving causing a marked decrease in overall fuel consumption, i.e., chain profits.

The chains let the service attendants go, and have never looked back. By 1982, self-serve stations became the “norm” with 72 percent of all service stations going self-serve.

Profit increases, service and quality decreases—that’s monopoly.

Fri, 01/21/2011 - 18:14 | Link to Comment SunSword
SunSword's picture

> The utility companies, and other government monopolies, decide what profits they want, and game the system accordingly.

Well and there is truth to that, but it is more complicated. Utilities are often told by state goverments to hire people, and forbidden to collect bills from "the poor". For example, in certain states as soon as it gets cold (a date in November) some people simply stop paying their utility bill. And state law prevents the utility from doing anything until it gets warm (a date in April). At which point the person signs up for a payment plan. They then make partial payments until November, then stop paying again and the whole cycle starts over.

Now as it happens this is prevalent in certain neighborhoods but you would be surprised how many sleezy so called wealthy people do the same thing. You, in effect, are paying for your freeloading neighbors.

Also remember that the utility has to pay to trim tree branches, replace poles, fix wires, maintain equipment -- and that the expectation is 100% support. People get pissed off when that power is not coming out of the socket. But. When a utility asks for a rate increase to fund maintenance, most of the time they only get a fraction of what they asked for. Thus they have to hold things together with bailing wire and duct tape.

Basically utilities are captives of state governments. Because -- they can't move. They can't outsource. And they have to do whatever the state tells them to do. For a single example: -- in a certain major city the utility had to sell one of their buildings to the public school district for one dollar. But then because they still had critical infrastructure (phone circuits, SCADA wiring) on one floor, they then had to lease back one floor from the city for several hundred thousand per year. This is a single example. There are many more.

Fri, 01/21/2011 - 12:51 | Link to Comment NOTW777
Fri, 01/21/2011 - 12:56 | Link to Comment Salinger
Salinger's picture

Margaret Brennan of Bloomberg and her co-anchor Scarlet Foo on Bloomberg TV encouraging all of us to learn more about China in the context that China is not stealing jobs from America but are actually creating jobs in America. They both feel badly for folks who have been impacted by jobs that have gone offshore but they actually said that is good for them personally as stuff they purchase is less expensive.

 

This is the same Margaret Brennan who a couple of weeks ago laughed at the idea of the constitution being read in the House.

 

She now has a union guy on and is clearly harassing him - she goes on to say the problem is that the US is not competitive 

 

Hopefully the video will not be cut like the last time when she and Ian Bremmer laughed at the constitution.

Fri, 01/21/2011 - 12:56 | Link to Comment topcallingtroll
topcallingtroll's picture

Yes...all going according to plan. Lift the peg or your economy and government collapse. Either option sounds pretty good to me.

Fri, 01/21/2011 - 13:17 | Link to Comment JR
JR's picture

“Jobs go where the markets are.  I never apologize putting a factory in China if my growth is in China.”

This is the voice of the man who now will head the President’s new Council on Jobs and Competitiveness.

Speaking of competitiveness, Jeffrey Immelt’s GE—a Too Big to Fail $80 BILLION bailout recipient—apparently wants to make U.S. based Boeing more competitive by sharing jet technology with China, perhaps leading to greater competitiveness by a police state economy with the U.S. military.

The one characteristic one notices about Immelt is that he is an unapologetic internationalist and insider banker who has no more patriotism for the U.S. than he has for China.

“I think there is a sense of arrogance and entitlement here, a complacency in the United States,” says Immelt.

Entitlement?  Just because you’re an unemployed taxpayer?  Just because your work has been shipped to a lower wage foreign power?  Just because your tech job has been handed over to a Bill Gates’ import who will work for less? 

Look up Immelt’s arrogant duplicitous view of the country where he lives and has the full protection of the American heritage of property rights and you’ll find the trail disgusting and near treasonous, such as: “You’re going to have to look people in the eye and say, ‘We’ve got to shut this factory and move it to China,’ … then in the afternoon, go out in the community and connect with people.”

There’s no doubt who Immelt is: the question is “WHO IS OBAMA?”

Fri, 01/21/2011 - 14:57 | Link to Comment trav7777
trav7777's picture

Immelt must have been lookin in the mirror when he talked of arrogance and entitlement.

It's only the PROLES who are "entitled" when they ask for $20/hr for a job that some chink will do for $1/hr until he drops dead or highdives into the parking lot.

The executive class DESERVES their compensation.

Fri, 01/21/2011 - 12:57 | Link to Comment Oh regional Indian
Oh regional Indian's picture

For a pumped up on no work economy, look no further than Japan. The road repair crews are always out, repairing perfect roads. Perfectly. bridge repair crews are always about, repairing perfect bridges, perfectly.

Since they were a small place, they did not build more, they just keep rebuilding. And they exported the hell out of the world with their perma-weak currency.

Very similar game, different scale is all. China can start a huge Chinese Development Bank and start loaning money to countries with the caveat that they can only buy chinese gods and services.

Watch that happen and the can gets kicked, a long ways.

There will be war before that transpires, but I'm sure all this aid they are doling out still works this way. buy our stuff, give us raw materials.

ORI

http://aadivaahan.wordpress.com/2011/01/21/accidental-lives/

Fri, 01/21/2011 - 20:00 | Link to Comment Quantum Future
Quantum Future's picture

OrI,

 

That is alraedy happening via the Chinese trading houses mainly in the BRI(C) infrastucture mega projects using technology sold or licensed from the shortsighted profit driven Westerners....

Fri, 01/21/2011 - 13:12 | Link to Comment Dapper Dan
Dapper Dan's picture

No income tax or property tax in China?  I have more questions.

Do ya think maybe that all of those brand new city and towns that the ChinComs are building are for very rich non ChinComs? to move there at a later date?  (is that to many (too)? question marks?  How about now?

Oh God now I am really confused. 

 

Fri, 01/21/2011 - 13:38 | Link to Comment chinaguy
chinaguy's picture

Come 2015 - 2020 the "one child per family" generation comes on line - their two parents and four grandparents have ALREADY bought the kids a house.....the new OCPF generation doesn't need to buy one and demand falls through the floor for expensive residential...ain't no two ways about it

Fri, 01/21/2011 - 13:14 | Link to Comment buzzsaw99
buzzsaw99's picture

Screw stability, I hope the Chinese leadership is overthrown.

Fri, 01/21/2011 - 13:27 | Link to Comment topcallingtroll
topcallingtroll's picture

Amen brother. I got so mad during tianamen that i wanted to go.down there and kick some peoples army ass. Fortunately i am too much of a coward.

Fri, 01/21/2011 - 13:39 | Link to Comment Rodent Freikorps
Rodent Freikorps's picture

YAF Remembers Tank Man & Tiananmen Square Massacre June 4 1989.wmv

http://www.youtube.com/watch?v=Hp-FpWkudPE

 

Fri, 01/21/2011 - 13:31 | Link to Comment Atomizer
Atomizer's picture

ZH Title Revision: China's Runaway Rickshaw

Fri, 01/21/2011 - 13:31 | Link to Comment alter ego
alter ego's picture

China knows the play they are right now.

Even though the establishment is putting pressure on them to de-peg the Yuan from the US Dollar, they are not going to do it.

I believe that they prefer to star a War in Asia to get the resources they need before they obey the order from the powers-that-be.

This is not going to end pretty.

China is running out of time to beef up their military strength to confront US and other countries.

What we are witnessing right now is economic warfare and I think we are running out of time until we see a real one.

 

Fri, 01/21/2011 - 13:33 | Link to Comment TWORIVER
TWORIVER's picture

Seems that PM's are being used for their original purpose as a store of value. For some they need to transfer taht value into food at these high prices. makes sense as to why PM's flat vs rallying food.

Fri, 01/21/2011 - 13:35 | Link to Comment chinaguy
chinaguy's picture

SSEC + 38.29 (1.43%)...not a massive decline

Fri, 01/21/2011 - 13:44 | Link to Comment SmittyinLA
SmittyinLA's picture

It boggles my mind with China's $600B a year trade surplus with the US how many shit securities they buy and how little Nebraska farmland they buy.

 

20 years from now when their hundreds of millions of state factory employees attempt to retire on their FNM  & US treasury securities I suppose they be asking the same questions.

Fri, 01/21/2011 - 13:52 | Link to Comment High Plains Drifter
High Plains Drifter's picture

They know they can buy all of the US farm land they can stand but they also know it would be a problem to keep it, if the shtf.

Fri, 01/21/2011 - 13:44 | Link to Comment SmittyinLA
SmittyinLA's picture

It boggles my mind with China's $600B a year trade surplus with the US how many shit securities they buy and how little Nebraska farmland they buy.

 

20 years from now when their hundreds of millions of state factory employees attempt to retire on their FNM  & US treasury securities I suppose they be asking the same questions.

Fri, 01/21/2011 - 14:27 | Link to Comment DisparityFlux
DisparityFlux's picture

It maybe that the Japanese own Nebraska farmland.  In the early eighties, during their economic boom, they were buying cattle ranches and real estate all over America.

Fri, 01/21/2011 - 13:48 | Link to Comment KTV Escort
KTV Escort's picture

I'm a regular traveler to China since 2007, and clearly the "build out of empty malls and towns" mantra is overstated, but all in all this is a good article. I've been lucky to spend time with several families (in Shanghai, Guangzhou, Zuhai) and they indeed manage by multiple earners living, happily, under one roof. Chinese hospitality is second to none.

www.chinapositive.blogspot.com

Fri, 01/21/2011 - 14:21 | Link to Comment DisparityFlux
DisparityFlux's picture

In America, we are emptying our built out malls of retailers and consumers, and households manage by having multiple government entitlement beneficiaries under one roof.  American hostility is second to none.

Fri, 01/21/2011 - 14:36 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Nice Blog -

 

I can't wait to buy China stocks cheap after the slowdown ... Long term, great future.

Fri, 01/21/2011 - 13:49 | Link to Comment High Plains Drifter
High Plains Drifter's picture

No property taxes and no income taxes?  Mandarin class, here I come.

Fri, 01/21/2011 - 14:01 | Link to Comment TruthInSunshine
TruthInSunshine's picture

The one question which should be quite troubling is why would trillions in manufacturing  plants and facilities, a good portion of whose output goes for export, be built in China by multinationals if the rug was going to be pulled out from under China?

The only answer that seems credible that I could ever come up with is that it's always been the plan to use those facilities to fulfill Chinese domestic consumption.

But who knows what dangerous games are being played.

Fri, 01/21/2011 - 15:00 | Link to Comment trav7777
trav7777's picture

executives see only this quarter's bonus.

Time and time again, we see them make decisions which lead to corporate BKs and in the aftermath, people ask questions like you just did.

stop assuming that they have some master brilliance or that they have any foresight whatsoever.  Look at them as if they care only about maximizing their immediate return and the analysis becomes a lot simpler

Fri, 01/21/2011 - 14:57 | Link to Comment Encroaching Darkness
Encroaching Darkness's picture

Let's see - minimal arable land, requiring food imports: check.

Top-down economic "planning", generating waste, fraud and corruption: check.

Demographic fault-line approaching A, elders will outnumber youth: check.

Demographic fault-line approaching B, many more males than females: check.

Vast ecological damage, toxicological diseases, pollution effects: check.

"Educated" elites controlling everything, understanding little: check.

China is so screwed - I just wish we weren't, for other reasons, as well.

Fri, 01/21/2011 - 16:43 | Link to Comment topshelfstuff
topshelfstuff's picture

"""""Though the first link states that the average urban wage in China is about $3,000 a year, my sources in China report that a college-educated worker makes about $6,000 a year--about one-eighth the average U.S. income of $49,777. A mid-level manager might make $12,000 a year--an excellent salary in China."""""

 

Quoting a worker's average pay in USD equivelent, w/o including what the PPP, Purchasing Power Parity, is for that country is of little meaning. Isn't China the country that also has an Average Savings Rate of about 50%, a Standard of Living that's been Rising for Decades, increasingly so in the past 10 years. Just today I was reading about their Inflation Rate last year, but it wasn't mentioned that the average pay increased 11%, more than double the inflation.....they had to actualy halt the purchasing of new autos....need to get the roads built up to handle the capacity increases. China = Rising Middle Class, in that and many other ways the polar opposite of here

Fri, 01/21/2011 - 17:59 | Link to Comment ATTILA THE WIMP
ATTILA THE WIMP's picture

You China bashers have been smoking too much of that Austrian monetarist pot. In my lifetime I've seen the Chinese go from eating each other to being inches away from the world's greatest and strongest economy. When will you monetarist gold bugs wake up and admit that real wealth comes from making things that are useful? Note that I'm buying up PM too but only because the USA is run by London NWO crooks.

And as for those of you who think we can whip China (or Russia) in a war keep in mind that either of those two can take 10,000 KIA per day and laugh it off.   

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