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Sol Sanders | Follow the money No. 102 America’s love affair with China

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Latest from Uncle Sol.  A version of this column is scheduled for publication in The Washington Times, January 23. 2012.  -- Chris
 

Follow the money No. 102 |  America’s love affair with China

By Sol Sanders <solsanders@cox.net>

Old friend columnist Joseph Alsop once told me of arriving in China with a clanking sword he had hassled across the Pacific, given him by his cousin, FDR, along with an instant “Inside-the-Beltway” Navy commission. Pres. Roosevelt sent him immediately after Pearl Harbor to Chungking as “political adviser” to Claire Lee Chenault and his volunteer Flying Tigers. Assiduously building his brief, Joe got horrendous detail from the Chinese Nationalist refugee capital’s best informed correspondent about the outrageous corruption of Generalissimo Chiang Kai Shek’s Kuomintang. When Joe asked our mutual friend why he wasn’t writing it for his newspaper, the Old China Hand smiled, knowingly, saying: “Nobody tells on China.”

America’s romance and intimacy – and conflicts -- with China are as old as The Republic. Yale’s original endowment reputedly came from a cargo of Indian opium shipped to China. Coolies helped build the transcontinental railroads, then got expelled or denied citizenship. Long before “multiculturalism”, U.S. boonies had their Chinese restaurants. For those old enough to remember, local Chinese handwash laundries were a landmark in every neighborhood.

But exotic legend often obscured mundane reality. Most, if not the majority of American China academics, were for decades apologists for Mao’s atrocities, vilifying their few vocal critical colleagues. Alas! some, without confession much less apology, still hold high places in American Asian NGOs. Even now temerity permits tomes about Mao’s “secret” famines. [A Hong Kong friend “Only three and a half million here were trying desperate to get food packets to Mainland relatives.”]

Now history repeats as stories begin to proliferate about the coming Chinese economic crisis. A minority of us have watched, stupefied, over the years as writer after economist without caveat spelled out glories of the Chinese “model”.

Hold up! You mean there hasn’t been incredible Chinese economic development? Yes, of course, there has. And no one who has lived with the Chinese entrepreneurial spirit wherever it flowered among Overseas Chinese or in Taiwan – or recalls pre-World War II’s coastal cities’ prosperity even under Japanese assault -- were surprised when it took off after Maximum Leader Deng Hsiaoping opened floodgates to foreign capital and technology.

But those Shanghai office towers across the river in Pudong were already standing empty a decade ago – not that you would know from any contemporary reporting. Former Prime Minister Rhu Rongji publicly pleaded with provincial bureaucrats to stop fabricating figures because it made it impossible for him to know what was going on. Only a year ago provincial GDP figures didn’t jibe with the national totals. But, never mind, our academics – and most of the financial media – kept right on, grinding out incredible gobbledygook about economics “with Chinese characteristics”, how its GDP make it No. 2 [despite subsistence living standards for the majority of its people], and how Chinese growth would save the world, etc., etc.

Now even The Financial Times, among the loudest indiscriminate propagandists for China straight-line projections, has taken a deep breath, predicting coming problems, perhaps even disaster. Ut oh! The Chinese boom has depended on export markets now drying up in the U.S. and the EU. It has relied on unlimited infrastructure expansion but government “stimulus” is leading to inflation. Virtually zero rural investment and protectionist trading are driving up food prices where most Chinese live. Banks’ newly created debt dumps are being used to lend to Party-favorites so there just might be a credit problem. The government is shifting to subsidized housing [but still beyond the reach of wage-earners] to deflate a real estate bubble, the only place “hot money” could go with government “planned” investment.

Oh yes, and it’s now “clear” Chinese growth isn’t going to “save” the world economy. In fact, some commodity-dependent economies are going to be in little trouble. Hello!

But there is always room for new wishful thinking: Beijing will use its depreciating dollar hoard [already backing local currency] to expand the “money stock” measured by meaningless M2 and M3Western econometrics. Or it will try to buy Western equities, scaring the wits out of security-minded politicians, or get at technologies [such as shale fracking] to reduce its growing imported energy. And, of course, Chinese planners will somehow manage a “soft landing”.

After almost every disaster – natural or man-made – there is the inevitable cry, “But why didn’t we see this coming; it was so obvious.”

 

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Sun, 01/22/2012 - 21:52 | 2087338 arg
arg's picture

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Sun, 01/22/2012 - 23:05 | 2087489 Imminent Crucible
Imminent Crucible's picture

arg=idiot

As if ZH had any fat readers, let alone commenters. Duh.

Sun, 01/22/2012 - 22:03 | 2087387 ihedgemyhedges
ihedgemyhedges's picture

TD, can't you just delete this crap????????????????

Sun, 01/22/2012 - 20:51 | 2087265 zorba THE GREEK
zorba THE GREEK's picture

Even with all the problems in China today, IMHO China has a better chance to survive the coming 

sh#tstorm than U.S., Japan, or E.U. because they encourage Capitalism more, even though they

are communist. 

Mon, 01/23/2012 - 05:32 | 2088041 Tompooz
Tompooz's picture

Zorba, the Romans knew already that in times of crisis you need a dictator, until the crisis has been overcome.

The Fed-planned economy in the US needs pretend-democracy as a cloak. This gives all sorts of complications , time-lags and unsustainable structural deficits.

 

Mon, 01/23/2012 - 06:31 | 2088058 falak pema
falak pema's picture

...the Romans knew already that in times of crisis you need a dictator, until the crisis has been overcome....

Read the sequel to understand what happens to nations that take short cuts.

From 300 AD, Imperial Rome became anarchy and hell, and the Emperor had to take his capital to Constantinople. Then it collapsed and Italy was so scarred by Rome's cruel despotism during Caesarian dictatorship, that Italy never united as nation until 1860s; always a playground for other nation's imperial plays, as they aped old imperial Rome, during that period from 476 AD to 1860; aka nearly 1400 years.

So in Rome's own history, Demagogues win for three hundred years and lose for 1400 afterwards, the ruins run deeper and longer than the glory won from dictatoship. 

That's the big lesson. And Italy today is still suffering from its historical legacy as the EUro burns and they as nation stay impotent, like that other old european nation, which invented democracy : Zorba's country.

The biggest ruin that results from dictatorship and rule of Oligarchs is that it destroys the mind set, the value system of a nation, of a people; its most precious legacy over time; eternal Parthenon that looks on silently towards past glory, as its halcyon days are so hard to get back once its lost.

Ruins of mind set, alas, are eternal, history written in the people's blood, now blinded to progress.

"Life, liberty, pursuit of ..." Libérté, égalité, fraternité..."; both are value systems that merit being defended. There is no ONE route to nation state and people's welfare, as that is about MEANS in a culturally diverse world, but there is only one true END to nation state construct : people's freedom. That's the true bottom line.

Sun, 01/22/2012 - 20:12 | 2087221 tony bonn
tony bonn's picture

the same mendacious press which covered up stalin's crimes covered up the china failures, and the same president who was an agent in the murder of john kennedy was the one who  white washed tianamen square....the slave labor camps in china are the ones serving western interests - the plutocrats of the rockefeller-mic-yale-cia cabal....

Sun, 01/22/2012 - 18:02 | 2087049 847328_3527
847328_3527's picture

China reports second bird flu death in a month

 

http://www.msnbc.msn.com/id/46091755/ns/health-cold_and_flu/#.TxyG74H59n5

Mon, 01/23/2012 - 03:19 | 2087955 New World Chaos
New World Chaos's picture

I'm quite keen on this speech but my browser freezes whenever I click the link (goddamned Illuminati...)  Other parts of your blog work OK.  Could you post text here (if you have it)?

Thanks

Sun, 01/22/2012 - 17:56 | 2087041 billsbest
Sun, 01/22/2012 - 17:32 | 2087013 snblitz
snblitz's picture

I have been to mainland China a few times. I have seen the empty buildings first hand. When I was last there about 5 years ago about 90% of the highrise buildings I walked by in downtown Bejing where empty. I am not certain why one would need to build more with such a low occupancy rate.

I wondered at times if the buildings were actually completed on the inside.

Mon, 01/23/2012 - 07:58 | 2088110 onebir
onebir's picture

I've seen a lot of empty buildings too, in and around Changsha. There were never any lights in the whole front block of my friends development. I asked her why, she said people bought the older blocks to live in, but by the time the front block was completed, people were just buying them for investment (often in shell state). That would have been about 6 or seven years ago I think.

So I'd guess that most apartments sold post 2005 in Changsha (and other second-tier cities) were sold for investment. Given that the property boom seems to have originated in first-tier cities, this was probably true a few years earlier in Shanghai, Beijing etc. Given the share of construction in GDP, that's a lot (even after leaving out commercial buildings and infrastructure).

 

 

 

Sun, 01/22/2012 - 21:26 | 2087311 Xtreeeme
Xtreeeme's picture

dude seriously... 90%?? you couldn't come up with a better made-up number?

Sun, 01/22/2012 - 19:04 | 2087132 laomei
laomei's picture

Yea, I live here... and you have no idea what you are talking about

Mon, 01/23/2012 - 07:45 | 2088095 Raskolnikoff
Raskolnikoff's picture

I lived in guangdong province, lot's and lot's of 30 story plus empty buildings there...well, at most ten percent full anyway. Guangdong, unlike the political capital Beijing gave one a deep cloud of smog everyday. one knew there was a sun, but one never saw it...it was like living in Plato's cave, only shadows. never been to Beijing, however i have also lived in the capital of Shunde, a section of Foshan, one of the bigger parts of Guangdong, the sky's were sometimes surprisingly blue...the government is planning a big transfer of factories from Guangdong to the Western provinces and pollution is gradually disappearing now, at least in the government headquartered area's like Daliang in Sunde, but still, many empty buildings with even more construction cranes still dotting the skyline. Why is production moving west and Guangdong is losing so many jobs and yet still many more high rises going up....doesn't make sense. But, now it appears that countries further south like Vietnam are eating China's lunch when it comes to attracting 'hot money. Meanwhile the avg Chinese worker hasn't a prayer to even think to afford to live in these new buildings. What usually happens is the big Chinese families pool their money to buy rooms in these high rises, but the still wind up owing on a loan for a 99 year lease. Many folk are neck deep in RE losses on a lease that will not last their grandchildren's lives. Corruption is the name of the game for the Chinese people.

Sun, 01/22/2012 - 17:24 | 2086997 steve from virginia
steve from virginia's picture

 

On a roll: Sol Sanders ('who dat?' as they say in New Orleans, 'was he with Johnny Otis?') then Joe Alsop, Claire Chenault, Chiang Kai Shek which is just one of the murderers' row of cold war Nazis. You left out Robert Welch Jr and  the original dragon ladies, the Three Witches Anna Chenault, Madame Chiang and Tr?n L? Xuân more familiarly as Madame Nhu.  Imagine going to a party with those three chicks? Very Hollywood, very ... Southern California aerospace and nuclear industries. You had to watch yr drink and keep yr back to the wall at all times ...

Who killed Jack Kennedy, girls? The fall guy is E. Howard Hunt but there are too many questions.

Everyone buys the 'China Growth' story? I don't think so.

http://www.economic-undertow.com/2009/06/10/hyperinflation-in-china/

 

Sun, 01/22/2012 - 17:08 | 2086971 Georgesblog
Georgesblog's picture

I don't know that "love" is the proper term. There is no crying in baseball, and no love in Corporatism. The same mentality that dooms millions of people to starvation, also sends combat troops around the world. The Wars of Corporate Conquest, continue. Don't mistake sympathetic ideological tenets for love. A dog doesn't smile because he likes you.

 

http://georgesblogforum.wordpress.com/?s=The+Daily+Climb

Sun, 01/22/2012 - 16:40 | 2086931 jonjon831983
jonjon831983's picture

Would the following make sense?

 

Chinese gov't to citizens: BUY GOLD/SILVER/anything physical.   We're going down!  You're gonna need it! Get it while our money is hot!!!

Sun, 01/22/2012 - 16:28 | 2086909 jm
jm's picture

Zhu Rongji.  Getting the facts right lends to the credibility of your opinions and vice versa.

Sun, 01/22/2012 - 15:34 | 2086814 Judge Arrow
Judge Arrow's picture

The giant sucking sound comes from everyone opening the doors at once to get out fast - everyone in $$ real estate in Californication has Chinese clients knocking, not to invest, to live. Now if the 1% in China breeds with the 1% in the USA - what do you get? I don't know but after an hour you'll be wanting it up the ass again.

Sun, 01/22/2012 - 15:13 | 2086760 JW n FL
JW n FL's picture

 

 

we keep driving the prices of PM's down all day long.. so that china can buy cheap all night long..

we won’t let our companies dig for and provide rare earth metals... so china can control the market and pricing.. 2,000% increase in pricing.

china's vertical construction was funded by America companies.. who until 3 years ago could control the properties and companies they built.. don’t worry they still control everything of value in china through chinese esquires.

America makes china wealthy in a million different ways, every day.. and people sit back and relax and talk about Austrian Economics or Porn or what the fuck ever to fill the day.. all the while America is Gutted... A conservative number.. for manufacturing jobs.. sent to china.. since Bush signed into effect the World Trade Organization Docs.. a decade ago.. is 6 million.. when EVERYONE knows it is WAYYYYY more than that..

America is lowering its standards.. and raising the rest of the Worlds standards.. so that we can be on a even playing field..

and why?

so we can all hold hands together? in the same shot hole? owned by the same fucking scumbags?

fuck that.

 

 

 

http://www.youtube.com/watch?v=A4GppnVl4kQ

http://www.youtube.com/watch?v=cItxu-jcWD4&feature=relmfu Coffman NDAA Amendment on Rare Earths

 

 

Last week, the federal government reported that the U.S. trade deficit grew by 33 percent in 2010 to nearly half a trillion dollars. Most of the gap resulted from an imbalance in trade with China, which shipped $365 billion in goods to America but only bought $92 billion in U.S. goods. The resulting U.S. deficit of $273 billion in bilateral trade with Beijing reflects a persistent feature of the Sino-American relationship since China joined the World Trade Organization in 2001. Over the last ten years, China has mounted the biggest challenge to the U.S. manufacturing sector ever seen, threatening producers of steel, chemicals, glass, paper, drugs and any number of other items with prices they cannot match. Not coincidentally, the United States has lost an average of 50,000 manufacturing jobs every month during the same period.

 

http://www.forbes.com/sites/beltway/2011/02/14/intelligence-community-fears-u-s-manufacturing-decline/

 

 

Sun, 01/22/2012 - 17:20 | 2086993 Stuck on Zero
Stuck on Zero's picture

I beg to differ on one little point.  The 1% in America is stealing from the 99% to give to the 1% in China who make the 99% do all the work.

Mon, 01/23/2012 - 07:20 | 2088088 falak pema
falak pema's picture

Leverage, as invented by Archimedes, was not supposed to work that way; it was supposed to bring progress as it did it terms of mechanical technology. Even Archimedes could not anticipate the perversity of the human mind; when he jumped out of his bath tub singing Eureka! 

Newton said the same thing : "I invented the calculus but I didn't know it would be used for speculation by human nature as that by defintion is unpredictable". If he were alive today he would probably add :  These shills even went one step more : they used my demonstration of incremental gain under the integral curve to evaluate incremental gains through tangential trend plays using game theory, the differential at each point in time. Worse, my definition of the differential's differential, these crazy bums used in their beta plays! Now math is their WMD for their Quant constructs of bubblenomics.

Sun, 01/22/2012 - 16:30 | 2086915 Kayman
Kayman's picture

Trade deficit $6 Trillion over the past 10 years. Half of it with China alone.

When the day comes to hang the Traitors, they better pray the rope is Made in China.

Sun, 01/22/2012 - 21:00 | 2087271 Eally Ucked
Eally Ucked's picture

But at the same time America built big financial sector which supposed to extract all those profits back into US. Hasn't worked that way, has it?

Mon, 01/23/2012 - 07:28 | 2088092 falak pema
falak pema's picture

It has for the 1% who are all on Caymans, and only americans in name. They be world citizens, to whom now nation states are aggregates of sheeple to be controlled by NDAA and Guantanamolese(#TM).

Sun, 01/22/2012 - 15:48 | 2086846 Freddie
Freddie's picture

POS like Diane Feinstein and her hubby are making hundreds of millions off China.  Evil lib Democrat scum.

Sun, 01/22/2012 - 15:27 | 2086801 ozziindaus
ozziindaus's picture

Totally agree and I would like to add that the endgame is for the US to purposefully build up a China that is a formidable opponent to the US's military. 

Sun, 01/22/2012 - 15:04 | 2086757 847328_3527
847328_3527's picture

Inequaltiy there is stark. How many of the 1.3 billion can afford those $1 million condo/apartments in Beijing? Shanghai? Chengdu?

PBS TV showed the massive shanty towns of peasants on the outskirts of these modern cities. There must be 1,000 extremely poor peasants there for every one wealthy apartment dweller.

Every Bubble eventually finds a pin. Every instability eventually corrects.

Sun, 01/22/2012 - 19:01 | 2087128 laomei
laomei's picture

You really have no idea how cheap it is to live here and be rather happy at the same time.  The inlaws live in a small village, have a tiny pension of a few thousand RMB a month and they can't even spend half of it.   They recently pooled together with relatives to buy the rights to a local mountain... they are growing pigs, chickens, farming it, etc.  Great investment so far... we helped them stock it up and the returns are amazing.  Dad fishes, mom collects wild veggies.  They don't live complicated lives in any real way, but despite being 63, they look about 40 or so still.

 

So, those "shanty towns".  yea, they are not shanty towns at all if you know what you are looking at.  It's called pingfang and the people there live fairly ok for what they have.  A whole bunch of them are only there to holdout for development compensation which can run into the millions of dollars for each of those "shanties".

 

For the rest of the country, rural income is advancing faster than urban income is now.  This is by design.  The main cities have the 300m, but China is still very much a simple rural country, and the countryside is doing quite well in recent years.  Those poor destitute workers in the cities are almost never local residents, they came here from the countryside to do one thing.  Earn money, save everything they can and go back home with enough to be top dog in the village.  People here, apart from the largest cities are still of a very simple mindset, they don't need your consumer trash to be happy, and a ton of them will outright shun it.  If it's not 100% necessary, 100% useful, they won't piss away their money on it.. after all, they want to have money to send to the the kids and invest in ventures.

 

The difference between China and say... the US, is that in China, people save the crap out of what they earn.  That overpriced condo was paid for in cash.  That car was paid for in cash.  Everyone here focuses on the total amount after loan payments and interest and THAT is the bottom line as far as they are concerned.  Don't spend money you do not have.  Don't get locked into payment contracts you do not need and if you can do something on your own you do it.  City life.. different, but that's city life for ya.

Mon, 01/23/2012 - 06:52 | 2088073 ebear
ebear's picture

If life in the countryside is so ducky, then why all the migrant workers?

Sun, 01/22/2012 - 19:45 | 2087181 Kayman
Kayman's picture

laomei

Better to get your countrymen used to buying crap, for the U.S. consumer is unemployed and has no assets to borrow against.

Sun, 01/22/2012 - 16:05 | 2086868 delacroix
delacroix's picture

.

Sun, 01/22/2012 - 17:22 | 2086998 Stuck on Zero
Stuck on Zero's picture

Could you be more specific?

Sun, 01/22/2012 - 14:52 | 2086731 GeneMarchbanks
GeneMarchbanks's picture

BDIY telling you something?

Neo-merc policies, housing bubble, dollar-peg, bla-bla... same inside-the-box thoughts as always. You're just panicky cause you now have to import Chinese wages which --you guessed it-- nobody (in the US) saw coming.

What does it take for you monkeys to realize that China is in the business of devaluation of everything?

Sun, 01/22/2012 - 15:20 | 2086791 ozziindaus
ozziindaus's picture

China could not have done it without the complicit involvement of the US congress and financial sectors. It is no accident that the major dollar devaluation came in part with the economic boom of "low cost" nations like China and India (see Gold/Dow ratio from 2000 onwards). You rightfully said it. To offset the depreciating value of the dollar through endless war and non-conservative fiscal spending, the US had to import cheaper goods and, consequently, deflation. The winners were the MIC (military spending), corporations (outsourcing), banks (interest rates) and of course, Wall street (ponzi EM boom). 

So I would not credit China for being shrewd or business savvy. They are victims as much as us.  

Sun, 01/22/2012 - 16:10 | 2086877 Bam_Man
Bam_Man's picture

It is no accident that the major dollar devaluation came in part with the economic boom of "low cost" nations like China

Yes, but it actually goes back much further than most people realize.

Nixon "opened" to China in February, 1971.

Nixon closed the gold window in August, 1971.

Does anyone actually believe those two events are unrelated?

Sun, 01/22/2012 - 15:42 | 2086826 GeneMarchbanks
GeneMarchbanks's picture

'So I would not credit China for being shrewd or business savvy. They are victims as much as us.'

That's where I disagree. The corporate model operates better in China than the US as is now glaringly clear. Wall St have no allegiance other than profit. I'm not sure how MIC spending is tied in to this but I speculate that it would have happened regardless.

Sun, 01/22/2012 - 17:01 | 2086962 ozziindaus
ozziindaus's picture

Frivolous spending on the governments behalf does have it's limits. We're hitting that critical mass now so imagine threatening war with Iran at $15/gallon or a $5 McDollar menu. 

Sun, 01/22/2012 - 14:34 | 2086692 apberusdisvet
apberusdisvet's picture

When, not if, the Chinese economy implodes, the NWO folks will have no remaining obstacle for their world conquest agenda, and there is nothing that the present and future slaves can do to change this fact.

I wish it were not so, but I don't see any other plausible outcome.

Sun, 01/22/2012 - 14:28 | 2086686 Jack Sheet
Jack Sheet's picture

See what coming?

Sun, 01/22/2012 - 14:13 | 2086660 falak pema
falak pema's picture

Pudong would be Shanghai pudding I guess. I know a whole team of French business men out there who cry only one thing : if only we were more numerous out here! We'ed all have business coming out of our ears. We have so much to sell, if we could beef up local presence and sales acumen. To say the least the frogs are not good travellers. MAybe this crisis will change that.

Sun, 01/22/2012 - 13:16 | 2086566 ozziindaus
ozziindaus's picture


America’s love affair with China? No, Wallstreet's love affair and how they colluded with the Chimerican government to rig the currency values, keep import tariffs low, raise payroll taxes locally, provide tax breaks to outsources, use tax payers money to build development facilities offshore, close development facilities onshore and sucker everyone and their dog into speculating on the never ending China growth. 

If the Financial Times is starting to report a cool down, then it's evidence enough that Wallstreet has already exited. 

Sun, 01/22/2012 - 13:00 | 2086538 williambanzai7
williambanzai7's picture

So far as I know, those Pudong office towers, which I remember viewing from M on the Bund on numerous occasions, are now full.

Which only serves to show that there is always more to things than meet the eye.

Sun, 01/22/2012 - 21:31 | 2087318 philipat
philipat's picture

 Americans don't understand China and its ability to implement policy very quickly. Perhaps because Congress can't implement anything except new spending?

Sun, 01/22/2012 - 18:11 | 2087060 i-dog
i-dog's picture

"M on the Bund" ... ahhhh, Michelle ... one of the finest chefs and restaurateurs I've ever had the pleasure of knowing! I used to get her to cook for home dinner parties before she became so successful. Thanks for sparking the memories, WB!

Sun, 01/22/2012 - 16:02 | 2086865 Dugald
Dugald's picture

Truth and Fact are such rare things these days they should be priced higher than PM's

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