Guest Post: Some Things You Should Know About China

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Wed, 11/09/2011 - 14:06 | 1861614 Imminent Crucible
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Sorry, kito. Chanos has already won that bet, and Rogers has lost.

But keep singing that happy song to yourself, if it makes you feel better while your money drains away.

Wed, 11/09/2011 - 14:20 | 1861751 moskov
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Chanos won?

 

Has Chanos been sitting in his cave for over years about selling his doom stroies? And he didn't foresee US has been downgraded at the first time in its history.

Wed, 11/09/2011 - 14:36 | 1861881 qussl3
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Pretty sure Chanos made mint on his shorts.

That said, Chanos winning =/= China losing.

Why are we so binary?

China will grow for years yet, the real problems will come when this generation retires.

If you think the baby boomer retirements are screwing the US, the one child policy fallout will dwarf that.

Still years to go tho.

Wed, 11/09/2011 - 14:30 | 1861839 floor
floor's picture

American? You better wake up, or maybe you should read the article again and again untill you grasp it.

Wed, 11/09/2011 - 14:47 | 1861991 Let them eat iPads
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I'm betting against the fraudulent, totalitarian shithole.

Wed, 11/09/2011 - 21:00 | 1863955 Belteshazzar
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China lacks food security. when TSHTF they arent going to be able to eat those ipods and PCs

Thu, 11/10/2011 - 04:42 | 1864970 Septicus Maximus
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China will be lucky to be able to feed itself in five years time.  When investment from abroad dries up, China will revert to its old form: an ossified, unweildy, excitable basket case wracked by poverty and seething malcontent.  Good luck profiting from that. 

Wed, 11/09/2011 - 13:48 | 1861438 chinaguy
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This is one the the best articles about China I've seen on this site - read it 2X.

One thing I will stress, that Smith does not, is there is not a SINGLE piece of data that comes out of China that is true.....also, if you just blow into Shanghai & have a couple of business meetings and sign a contract and fly out again - your project will fail. Period.  - BTW I have nearly 30 years on the ground in China.

Wed, 11/09/2011 - 13:55 | 1861500 moskov
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Then why you bother doing business in China?

 

Wed, 11/09/2011 - 14:04 | 1861576 chinaguy
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because I made millions of dollars there and I like the food and the people.

At least in China you always know who's on the otherside of the table from you. In the West you can't tell who's trying to screw you & who's not. In China, it's safe to assume everyone is trying to screw you. 

Wed, 11/09/2011 - 18:16 | 1863338 moneymutt
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a friend of mine that had spent a lot of time in China said you could have a family business that had been doing business with another family for three generations and both families would still try to screw eachother at any moment of opportunity, no trust, ever.

But he also thinks China is a hive menatility and is working better for worker bees than financial sector captured US.

Wed, 11/09/2011 - 13:50 | 1861452 moskov
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why does everyone with money have a bug-out plan, two passports and a house in Vancouver, New York or Los Angeles?

 

First of all, all these wealthy Chinese only wants another passport because they are fearful about their wealth may be nationalised one day or they only want their children to be educated better and rebuild their business in China, BUT, these are the same Chinese also like Jewish Americans and they know China(Israel) is the ultimate creator of their wealth and most of their business are and will still be operated in China simply because they Chinese only trust the Chinese while they are dealing with serious business with. When more and more Chinese becoming the World citizens, eventually Beijing will become the capital of monopoly power that drags all the overseas capital owned by the Chinese and inflence the politics from the rest of the world.  Just like how Anglo-Americans did while they spreading their seeds across Europe, North America and Australia.

 

 

Wed, 11/09/2011 - 13:57 | 1861516 chinaguy
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"Chinese only trust the Chinese"

Wrong, if you ain't family. One Chinese only trusts another Chinese as far as he can throw him.

But yes, all of the wealthy Chinese I know (many) see the shit is going to hit the fan and want an exit strategy.

If that legislation "buy a $500K house in American & get a green card" ever gets passed, hundreds of thousands of Chinese will buy property here.

Wed, 11/09/2011 - 14:15 | 1861664 moskov
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Yes. only if these green-carded Chinese can maintain their steady income in the US like the 1% and they won't be considering a bug-out plan as if US in the next 2 years would have hitted the fan (Otherwise it's pretty pathetic that US will introduce such desperate legislation "buy a $500K house in American & get a green card, they would have to pay lots of income tax, healthcare insurance....) . Because most of the capital portfolio is based on their business, factory based in China. And what you are assuming these so-called Chinese who can't speak proper English have a long-termed vision about what they are investing on and not the corrupted government officials who commited some kind of fraud or crime then fleed to the US for some kind of political protection. On the other hand, more and more Chinese overseas students have fleed back to China for setting up their business and technology firms. So Yeah, China has plenty of population to run about a efficient economy. Because the industral base is there, and it won't fleed somewhere else soon.

Wed, 11/09/2011 - 14:27 | 1861776 qussl3
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Try not to be married to your opinion.

Yes, the US has screwed the pooch, but in its current state there is little chance of fragmentation and large scale civil unrest. Disobedience - yes, but revolutionary unrest - no.

China on the other hand has to deal with seperatist sentiments from a multitude of sources, together with historical adversaries along its borders whom which it depends on for energy. Not to mention another pesky neighbour down south whose water China intends to reappropriate.

China does not currently have the ability to secure the resources required to maintain social stability through military force, it must do so through economic means.

In that pursuit it currently depends on convertability of both the dollar and eur, hence its desperation to supplant the dollar reserve and acquire gold.

It's play for gold is interesting as it is an open admission that its trading partners are unlikely to transition to a yuan reserve on a reasonable timeframe.

Given such constraints, should the US pursue economic war against China by exporting inflation to them, there is little the Chinese can respond with UNLESS they dramtically rebalance the labor capital contract.

China is in a strong position, but the US stronger still - provided it acts in its interests and removes corporate influence over policy (hah).

Wed, 11/09/2011 - 15:05 | 1862151 moskov
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Yes, the US has screwed the pooch, but in its current state there is little chance of fragmentation and large scale civil unrest. Disobedience - yes, but revolutionary unrest - no.

I don't believe that. There's no hard evidence for any empires in the past few decades will be immune from the revolutionary unrest if the shit does hit the fan. class warfare checked, race warfare checked, border warfare checked, wealth gap checked, military aggression checked, Hyperinflation checked, Fail Welfare system checked, Shrink of Liberty aka TSA checked.... You only need a warmonger like Hitler from the top to push the button at last. Unless American people have been so brainshed and overweight and they could not fight for justice anymore. 

China on the other hand has to deal with seperatist sentiments from a multitude of sources, together with historical adversaries along its borders whom which it depends on for energy. Not to mention another pesky neighbour down south whose water China intends to reappropriate.

I think I would be more concerned about Homeland Terrorism, Fast and Furious, False Flags more as the lunatics in Washington literally breeding a thousand of offshore conspirists for a totally destruction of US constitution and freedom and turning US into a China-style state with censoring info, big brother grid and even birth control......And you have Mexicans surpassed the white population in the United States for unbelivable corruption and drug wars beyond China's level.

China does not currently have the ability to secure the resources required to maintain social stability through military force, it must do so through economic means.

In that pursuit it currently depends on convertability of both the dollar and eur, hence its desperation to supplant the dollar reserve and acquire gold.

It's play for gold is interesting as it is an open admission that its trading partners are unlikely to transition to a yuan reserve on a reasonable timeframe.

Given such constraints, should the US pursue economic war against China by exporting inflation to them, there is little the Chinese can respond with UNLESS they dramtically rebalance the labor capital contract.

It's simple. USSR thought in the same way just like what you did above. China has no ultimate interest in bregging themselves 24/7 like the US or USSR did. It's the walk the walk does matter.

 

Wed, 11/09/2011 - 13:50 | 1861453 Syrin
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I'm willing to be that some of that anger in China stems from havin g400 million more men than women.   That's some serious blue balls.

Wed, 11/09/2011 - 15:26 | 1862367 Pituary Retard
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That's the ultimate sausage party.

Wed, 11/09/2011 - 19:11 | 1863562 smiler03
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It's also complete rubbish according to the CIA factbook: 

at birth: 1.133 male(s)/female under 15 years: 1.17 male(s)/female 15-64 years: 1.06 male(s)/female 65 years and over: 0.93 male(s)/female total population: 1.06 male(s)/female (2011 est.)

Thu, 11/10/2011 - 14:41 | 1866896 Arthur Borges
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Syrin, there is a gender gap but you're saying that the national population is 900 mln males to 400 mln females, likz 9:4 ???

 

Wed, 11/09/2011 - 13:51 | 1861463 j.tennquist
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I've been to China on business on a couple of ocassions.   Outside the port cities and the handful of inland megaplex cities, China is extremely rural.  Just ten miles out of most cities and you are in farmland.  And I don't mean some rural road with an old sign; I'm talking dirt road with no name, farms with no electricity, often no running water.   Chinese officials don't want you to see this side of China because the people who live in rural China (which is most of China) are extremely poor.  

Ironically, the disparity of wealth is so immense as to be almost unbelievable, and this is in communist China.  Something's got to give - when the poor outnumber the rich by 1,000,000 to 1, it's uber-scary.

Thu, 11/10/2011 - 15:04 | 1867006 Arthur Borges
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Folks everywhere like to look their best for visitors. They know they're a developing country and don't want to make their country look bad in front of foreigners, so sure, local elected village officials get uncomfortable about anybody taking photos that will make the whole country look bad.

Yep, the wealth gap is a biggie. Central Government is working on the new national health insurance scheme and cheaper education, plus other issues like minimum wage, which is at the discretion of provincial governments only but there's a long haul ahead.

Not sure what the poor:rich ratio is in the West, but yes, as just stated, China is not exemplary here.

 

Wed, 11/09/2011 - 13:52 | 1861476 El Viejo
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The have-nots always want what the haves have and sometimes the have-nots are not so patient. Those $13 a day workers may get that $200,000 apartment if it is still standing.

Wed, 11/09/2011 - 13:53 | 1861483 daxtonbrown
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I worked for a year in Hong Kong in 1990, just enough time to learn that nothing is as it seems. Apparently nothing has changed.

Wed, 11/09/2011 - 13:54 | 1861497 dalkrin
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Relevent and gripping book I read that offers some insight into a Chinese mentality:  Factory Girls

Thousands of rural people scrambling into the city, in this case Dongguan.  Living in cramped dorms, all but indentured to the company.

What a splash of cold water to make me appreciate American labor laws and customs.

I prefer to study the older dynasties, before the economy took front and center. 

In short, I am happy to invest some small cash in the China story, but I would be wary of even visiting.

Wed, 11/09/2011 - 14:00 | 1861545 chinaguy
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Nah, go for a visit, violent crime again foreigners is rare & the food is excellent.

Wed, 11/09/2011 - 14:07 | 1861619 qussl3
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Much of the west went through their own periods of "company men" and the company store.

Perhaps China will get to where the west is, or not.

 

Mon, 11/14/2011 - 15:16 | 1876380 BigJim
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You think if it weren't for "American labor laws and customs" you'd be working in Chinese conditions? Or maybe if they introduced the same labor laws and customs they'd all magically have Western-quality workplaces?

Get a grip. They're in the condition they are now because they're poor, and if they had to meet "American labor laws and customs" they'd wind up even poorer.

Wed, 11/09/2011 - 14:06 | 1861584 Debtless
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Extensive research has found only 1 in 1000 chinese women to be considered very good looking. But the rare ones who are, are absolutely ravishing beyond compare.  

- Yellow Fever Institute 2008

Wed, 11/09/2011 - 14:22 | 1861774 topcallingtroll
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There is no fever like yellow fever!

Asian chics rock! They still believe in serving their men.

However vietnamese chics tan olive green. I think it is a cool color though.

Wed, 11/09/2011 - 15:07 | 1862189 Fukushima Sam
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Best pussy I ever had was Vietnamese. Tight, cute, and tasted like fresh fruit.

Mon, 11/14/2011 - 15:21 | 1876406 BigJim
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Fresh Durian fruit?

Wed, 11/09/2011 - 14:06 | 1861597 williambanzai7
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There is something known as the "gift culture." Gift giving has always been part of the culture. However, this quaint cultural more has now mutated into a huge chunk of the underground economy.

I am told by a very reliable source that more than half of the Chinese luxury goods market, most of which takes place via purchases outside of China, constitutes "gifts" primarily for business associates, political honchos, mistresses, karaoke hostesses and the like. It is not unheard of to buy things like luxury automobiles etc as gifts.

There is also a huge loan sharking business since the Chinese banks don't want to finance this kind of consumer activity.

I could go on but you get the idea. It is all driven by the flood of funny money.

Wed, 11/09/2011 - 14:06 | 1861602 AR
AR's picture

Very GOOD, and worthwhile commentary.  Here are a few other potential books on China for those willing to spend a few hours reading.  also, most of these books are recently published (within the last 2-5 years):

Managing the Dragon by Jack Perkowski.  Fun reading, interesting, and gives an insiders viewpoint of starting a company in China, and obstacles (cultural and otherwise).

The PARTY by Richard McGregor.  This book discusses Politics, and the structure of China's political system.

Etiquette Guide to China by Boye DeMente.  Good book that discusses the importance of "face" which CHS refers to above.

Understanding CHINA by John Bryan Starr.  Another decent read that covers a multiple of topics from politics, economy, and some historical perspective.

Finally, all of these books are cursory reads, though good for someone wanting a broad perspective and overview. Charles is indeed very correct when he states that there are two doors in doing business in China.  One above the table top, the other deep, deep under the table.  For example, "Red Envelopes" are very much a common place custom all throughout China.  And, the majority of analysts who write and cover China, truly know very little how business is conducted, and/or how decisions are made.  Good luck everyone.

Wed, 11/09/2011 - 14:10 | 1861647 Shizzmoney
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AWESOME read.

All the reassurances you've been reading about China's "soft landing" and its "they know what they're doing" central government are probably false

Agreed.  See: Louisiana after Hurricane Katrina.

I root for the proletariat Chinese to start civil disobedience towards their govt every single day.  Even if it would cost me my job (99% of our shit made in China, obv), the lulz of all these corporations' faces on what to do next, even though they sold their souls for slave labor despite not factoring in the externalities, would be GLORIOUS.

Wed, 11/09/2011 - 14:13 | 1861674 Mark123
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China = gambling, corruption and ostentatious consumerism.

 

In other words, as the Western world degenerates we begin to appreciate the marvelous Chinese model.

Wed, 11/09/2011 - 14:22 | 1861748 oddjob
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Charles Hugh Smith quoting Bain&Co, the company run by Israelis. Yikes.

Wed, 11/09/2011 - 14:35 | 1861874 Steroid
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The author should discuss this with the "International Man". 

Wed, 11/09/2011 - 14:37 | 1861891 Grand Supercycle
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DOW chart reveals very overextended price action and another Wile E Coyote scenario...

http://stockmarket618.files.wordpress.com/2011/11/2011-11-09_dow_4_zb.png

Wed, 11/09/2011 - 14:37 | 1861895 reader2010
reader2010's picture

Very few understand China is a disease to the world.

Thu, 11/10/2011 - 10:27 | 1865733 TSA gropee
TSA gropee's picture

So is thinking like yours.

Wed, 11/09/2011 - 14:40 | 1861910 Stud Duck
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My working relationship with Chinese buyers has been enlighting to say the least.

Don't trust them for a minute, they are more concerned about screwing you than looseing face.

They are no better than our decitful politicians and bankers, but at least they do have real money for US commodties.

Thye pay cash they buy the product, they want credit, they walk! NO EXCEPTIONS!

My comment to them is" your momma may have carried you for 9 months, we are not going to carry you for a day" usually gets the message across.

Thu, 11/10/2011 - 15:59 | 1867296 Arthur Borges
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If you don't invest in social capital, i.e. in building personal relationships, you are sure to be treated like a disposable commodity.

If you don't know how to "stroke ego", i.e. go just a little bit out of your way to make the next fellow look good in front of other people, you are worthy of little better than contempt and ridicule.

Funny how it pays to be nice to others in societies far afield from China too.

Wed, 11/09/2011 - 14:43 | 1861945 Kreditanstalt
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I'm a twenty-year guy myself: 20 years married to a local in Taiwan.  I loved it! 

Writer forgot to mention that these ways of doing things there also provide more FREEDOM than one can find in Western nations.  Freedom to sell on the sidewalk without harrassment because the cops are ineffective.  Freedom to drive without license plates because you're in the countryside an the cops are few, far between and ineffective.  Freedom from government regulation because you can get your deal done with a simple handshake and turnover of the necessary money/gifts/largesse.

Or would you rather have our surveillance state here, our grasping yet effective tax net, a zillion arcane regulations obstacling every project and micro-managing interference in your private affairs and even in what you do in your house, property and garden?

Would you rather have a large, overbearing, nanny-state government with hands in every pocket and eyes in every deal?

In fact, because of the lack of this, things are in some ways more straightforward (dare I say transparent?!)  in China!

 

Wed, 11/09/2011 - 15:43 | 1862496 sdavis
sdavis's picture

Taiwan and China are not the same. 

Thu, 11/10/2011 - 10:26 | 1865727 TSA gropee
TSA gropee's picture

12 trips to China, 2 to Taiwan, I'd have to agree.

Wed, 11/09/2011 - 14:46 | 1861972 bill1102inf
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Farmers are poor because they can not afford an Ipad???? LMAO

Wed, 11/09/2011 - 14:53 | 1862046 The trend is yo...
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The only thing China really does well is know how to control their citizens.  Any outcries from individuals and they do not hesitate to shoot them, any attempt to organize agianst the ruling class and they will be wiped out. This is what they do well.  The rest not so much.  The landing will be "hard" becuase they don't know how to handle the mess they are in.   A real estate bubble, fraud in chinese small caps, trillions in US debt with the US consumer ready to file for bankruptcy etc etc.......

Wed, 11/09/2011 - 14:59 | 1862098 SilverRhino
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Really good article.

Wed, 11/09/2011 - 15:13 | 1862241 kaiten
kaiten's picture

You dont need to write such a long article about the difference between US and the rest, it can be summed up in just one sentence: US is a market place, euroasian countries are societies. No one cares in market place about your origin, caste, religion etc, the most important is to be profitable. The problem is that when the economy stops growing, there´s not too much what holds people together (in market place) and then the country disintegrates. US leaders know this very well, that´s why they are so much obsessed with growth. Without growth there´s no market place, i.e. USA.

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