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Guest Post: Some Things You Should Know About China

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Submitted by Charles Hugh Smith from Of Two Minds

Some Things You Should Know About China

If all you know about China comes from PBoC and Central Government reports and analysts' financial statements, then you know very little about China or how it actually works.

I know it's tough to think about anything but the fast-melting ice cream cone that is Europe, but there are some things you should know about China. 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. Here's why: very little in China is as it seems on the surface, or as it's presented to the Big Noses (Westerners). There are three reasons for this.

Before I explain, let me stipulate that I am not passing judgment on what's "good" or "bad" about China, or any other nation. Each country functions in its own peculiar way, and there are always productive and counterproductive elements to each nation's way of doing things. But it is important not to gloss over reality and accept illusion as truth.

1. Old cultures are far more opaque than young cultures. All sorts of traditions and foibles get embedded into the culture as time progresses, and these features manifest themselves in the economy, finance and the machinery of governance.

What this means is that it takes a lot of time to truly understand the inner workings of old cultures and their economies. Sure, you can get a report from the central bank, or buy a villa there, and make some superficial acquaintances. All these things will foster your hubris that you "really know" how the country works.

You don't, and you won't, until you've married into a family there, lived there for years, if not decades, and actually done business there, on the ground, with your own capital and contacts. If all you know about China comes from PBoC and Central Government reports and analysts' financial statements, then you know very little about China or how it actually works.

Quite frankly, you'd be better off going to the zoo with the proverbial dartboard and having the chimpanzees toss some darts at it; those prognostications will be equally valid, and you'll be outside in the fresh air (unless you're actually in China) instead of some glitzy dining room gorging yourself on yet another wasteful banquet.

The same is true of Italy, France, Greece, and many other old countries. The attitudes, governance and actual mechanics of the economy are not transparent in any of these old cultures. Take the television tax in France. If you don't know about it, and how it's evaded and grudgingly paid, then what do you know about how things actually work in France?

I once received an email from British reader who was outraged by my comments on black-market labor in France. He had a house in Brittany, and he knew the people, and there was no black market labor there. It took me a while to stop laughing, for this is the typical "visitor who thinks he's a real resident" syndrome which you find everywhere.

We all want to be insiders, of course, and we all want to be accepted by the locals. And so we construct a thin veneer of working knowledge and delude ourselves that we've "gone native" by defending our adopted land vigorously, lauding its ancient culture, and so on.

The new arrival falls in love, and their romance lasts from a few months to a few years. Eventually the way things actually work becomes evident, and start grinding away at the love affair. After a long time, the outsider-resident become cynical, or even bitter; what a bloody unholy mess this place is, beneath the phony surface sold to tourists. The 20-year resident listens with a wry smile to the newcomer gush over the ancient ways and glorious food, etc., but keeps his mouth shut. Why spoil romance? Reality will do so soon enough.

This is how you can live in, say, Japan, for twenty years, and be accepted--as a gaijin. Until you die or leave. In other words, you will never be accepted in the way you might hope. You will be accepted as part of the landscape, but you will never become Japanese. Being accepted is the sort of thing we expect as Americans, because America is a young country and being here and liking American sports, or reviling certain teams even if you are disinterested in the sport, is enough: hey, you're an American now.

Which brings us to point 2:

2. Immigrant nations require a certain level of functional transparency; if they lack this requisite level of transparency in how things actually work, then they quickly become two-tier societies and economies filled with the resentment of second-class citizens.

This is why old cultures have so much trouble with immigration, and why America is one of the more transparent places to live and work in the world. In the dynamic parts of the American landscape and economy, say Silicon Valley and similar hotbeds, then we've got places to go, things to do, people to see and wealth to create, and we don't have time or interest in explaining arcane cultural rules to a huge spectrum of people with a non-native grasp of English. So we keep things fairly transparent. Having a lot of tangled cultural anacronysms that have to be hidden lest "people get the wrong idea" (i.e. discover the truth) just gums things up and wastes time and money.

So we don't have much of that. Nobody cares where you're from, or what caste you are, or anything like that. As long as you do your work without being a real pain in the rear-end, are pleasant to your neighbors and workmates, keep your pitbull chained, etc., then you are good to go. Many if not most of the people you interact with also know English as a second language, and since that's burden enough for all of us, we dispense with all the insider stuff. America is on most levels a WYSIWYG culture: what you see is what you get.

Places like China and Japan are on the opposite end of the spectrum: they are not immigrant cultures. Very few nations have a culture that is adapted not to tradition and an opaque mindset but to getting on with immigrants from everywhere. This is one reason people want to come to America; they lose their baggage here and can be themselves, because nobody cares, we're busy with other things, and it doesn't take 15 years to figure out how things actually work here. If it did, the whole thing would grind to a halt and that would be really annoying.

In other words: I've got another meeting, so let's cut to the chase and get this done, OK? Talk to legal, talk to accounting, get it signed and do what you agreed to do. If you can't or don't, you're out and we're not interested in complicated nuances and back-door sub rosa stuff. Those are time-sinks and we're in a hurry here.

3. China, and other Asian cultures, are built around "face". This requires a public facade, to maintain face and cloak the private, back-door reality. In general, Asian people do not like criticizing their country, as this is experienced as a loss of face.

I cover this in my longish essay from 2005, China: An Interim Report: Its Economy, Ecology and Future.

Here's how "face" works. If you marry a "local" in China, Japan, Thailand, etc., then they will eventually, obliquely and with reluctance, tell you some of the unsavory details of how life actually works. Maybe. If they do, they will not like it if you repeat these "we lose face" realities to other Big Noses. You will have to do so in private, in a hushed voice.

As a result, there are always two doors in Asia: the front door, carefully arranged to present a face-enhancing image to the outside world, and the back door, where everything important actually takes place.

A typical front door in China is the banquet with the glad-handing mayor. The back door is for his mistress, the cash "commissions" from various deals and the cover-up of the face-damaging deaths in the local factory. Bad business, that; we lost face. Go take care of it with cash, threats, promises or whatever is required to bury it and restore face.

This is how you get top-ranked American officials who travel the world constantly, flitting from meeting to meeting, "getting down to business in heart-to-heart talks" (cynical guffaw), staying a night or two in a fancy resort or hotel, and then being whisked away to another country. (That's the burden of Empire; you have to fly a lot. On the plus side, you soon accumulate a list of amusing cocktail-party stories of quaint locals, strange foods and night-time visits to embassies in quasi-dangerous places.) If you live in D.C., you know lots of people like this. If you can brag about your multiple visits to Afghanistan, you might even be one.

But this sort of tourist-slash-water-carrier-for-the-Empire doesn't really know anything about the countries he or she lands in for "power lunches." They don't know the lingo, the geography, the history, the culture or what passes through the back door.

This is also how we get superficial opinions passed off as analysis. There is an amazing amount of claptrap written about China in the Western media, seemingly most of it by people who have never been there or visitors who have no contacts others than PR flacks, denizens of Shanghai bars or official handlers.

Take, for example, the constantly repeated idea that "China can easily keep its workforce busy on big infrastructure projects." That is repeated as if it was an undeniable truth.

Have any of the people repeating this as fact ever actually watched a building project under construction in China? Things are pretty efficient there, despite all those photos you've seen of thousands of peasants planting trees in the desert, etc. The number of people required to toss up a highrise is remarkably small. Given the workforce of hundreds of millions, even a thousand-kilometer rail line doesn't take that many workers.

Then there's the reality that all the low-hanging fruit of useful infrastructure has already been built. Now it's the really marginal stuff, classic malinvestment.

Then there's the reality that nothing gets maintained in China. A lot of new stuff gets built but nothing that's already built gets maintained. So all sorts of things start falling apart and stop working. The basic idea is that when it starts looking bad then we'll tear it down and build something new. That is a mindset built on limitless resources and money, neither of which is actually limitless.

The other opinion presented as fact is that China is transitioning from a "capital investment" economy to a consumer economy. The fact is that only 35% of the official economy is consumer-driven. But the other fact is that everybody who can afford anything in China already has it.

When I was there in 2000, there was already a glut of TVs. Our friend's amah already owns a car, and she isn't paid much even by Chinese standards. It sits in a garage, rarely taken out, because she doesn't really need a car; it's simply a status symbol. Everyone with enough money to do so has already bought a car.

As for real estate: Our friends' friends already owned three rental flats each five years ago. No-nothing Westerners mindlessly talk about the 700 million peasants who need housing, but this just reveals their bottomless ignorance. Chinese families were offered their own flats for a dirt-cheap price decades ago by the central government. Most families have owned their own flat (not the land, that's 100% government-owned) for years before the bubble.

The 700 million low-wage people in China might like a $200,000 flat, but they can't afford one. They're living on $13 a month in rural villages, or making a few hundred dollars a month in a factory or other low-wage position. Claiming that there is an endless demand for costly housing in China is like saying the demand for more McMansions is endless in the U.S. because 20 million poor people south of the border want a luxury home.

The reality is that everyone who could afford a flat in China already owns one, or two or three. Those who don't own one cannot buy one, not this year or next year or in ten years. Their income is 1/40th the cost of the flat, and the price of the flat dropping in half doesn't meaningfully change the equation.

Chinese consumers with money have already bought everything they could possibly want, and purchased Coach bags for their boss's wife (you can forget the promotion if you don't pony up a legitimate Coach bag for the Missus, or perhaps Number One mistress; be sure to include the receipt and official Coach bag to show it's legit).

Those without this kind of income have seen their purchasing power decimated by high inflation in essentials like food. To save face, the government issues statistics that "prove" inflation is dropping. This is as reliable as the bogus unemployment number in the U.S., you know, the one that keeps dropping because the government stops counting millions of people in the workforce, not because the number of people with real jobs is rising.

The only sources who actually know what's going on in China are in local government. Another fantasy Westerners lap up is that the central government actually knows what's going on, and even more laughable, knows how to "fix" everything. If you don't even know what's happening, how can you fix the problem?

Westerners also don't understand "corruption." They think in terms of bribes that could be suppressed by some new rules. That is beyond laughable, for corruption isn't bribes, it's the warp and woof of how things work in China. They don't understand that pirated goods are crushed by bulldozers for a show of face; nothing changes behind the facade presented for show.

There is a lot of anger and resentment in China, especially among young people. This will not go away because some new railway is built, or a new mall opens.

Occasionally a glimpse of the back door makes it into the mainstream media. Here are some recent examples worth reading:

Swimming Naked in China With the Chinese government tightening credit, the massive leakage from the formal banking sector into the ‘shadow system’ ultimately risks sinking the country’s financial system.

Why We Should All Be Very Skeptical on China

And most importantly: Top of Chinese wealthy's wish list? To leave China

"Among the 20,000 Chinese with at least 100 million yuan ($15 million) in individual investment assets, 27 percent have already emigrated and 47 percent are considering it, according to a report by China Merchants Bank and U.S. consultants Bain & Co. published in April."

The Western resident of Beijing (married to a Chinese woman, with two children) who posted this on his blog added, "Everyone with money has a escape plan."

Here's a simple question for China bulls and all those writing about how infrastructure projects, an omniscient central government and rampant consumerism are going to keep China's growth engine humming for years to come: if the future's so bright, then why does everyone with money have a bug-out plan, two passports and a house in Vancouver, New York or Los Angeles?

If you can't answer that, then you need better sources.

 


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Wed, 11/09/2011 - 13:33 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

4. China made goods suck.

Enlightening read...

Wed, 11/09/2011 - 13:42 | Link to Comment i root for that...
i root for that fat jersey governor's picture

don't forget China is ruled by communists not capitalists - never underestimate the power of the dictatorship. The country could have crashed 5 or maybe 10 years ago if it has the similar struture as the west. But those folks who are sitting on top are willing to do whatever it takes to maintain power and postpone the crash "forever". So this is really an old topic, yawn...

Wed, 11/09/2011 - 13:52 | Link to Comment trav7777
trav7777's picture

nothin I didn't know already and haven't been saying for 5 years.  People accept me everywhere I go because of my sunny personality

Wed, 11/09/2011 - 14:44 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

How could it be otherwise with you trav?  Only in America...

Wed, 11/09/2011 - 14:06 | Link to Comment Shvanztanz
Shvanztanz's picture

I can think of a list of Arab autocrats who had the exact same will to do whatever it took to maintain power at any cost, until about the last year.

People are docile when they are fed. It's when that hunger and loss of livelihood kicks that all bets are off...

Wed, 11/09/2011 - 14:12 | Link to Comment qussl3
qussl3's picture

The arab autocrats kept their populations fed by selling sticky shit where they happened to have the geological fortune to have been sitting on.

China produces crap the world needs and wants, there may be huge problems in the allocation of the spoils of that production but the people are productive there unlike the arabs.

Wed, 11/09/2011 - 13:42 | Link to Comment eureka
eureka's picture

THERE IS SOMETHING YOU SHOULD KNOW ABOUT US Empire.

US Empire is satanic. It is going down. Extricate yourself from it or go down with it.

2012. God-Time. God-On. Truth-Time.

Wed, 11/09/2011 - 14:08 | Link to Comment Shvanztanz
Shvanztanz's picture

Any chance you are mistaking the disease (shortsightedness/fear/greed/unforeseeable natural disasters) with the body (free-market/representative government)?

Wed, 11/09/2011 - 14:38 | Link to Comment eureka
eureka's picture

The body/mind often creates its own diseases. 

Until the body/mind awakens, repents and takes responsibility according to commands and advice of Christ, it creates disease by co-operating with disease agenda - that is to say agenda of dominance, materialism, exploitation, i.e. the agenda defining US Empire.

When Christ said "give the emperor what is his, and God what belongs to Him" - He did not mean one should submit to or serve empire, but rather that one should serve God and look toward eternal life by following His commands - and turn away from and leave emperors and their minion serfs, slaves and henchmen to play with petty dust, delusional material identity and pathetic pissing contests.

Love, forgivenes and sharing, giving all to God, is the path of peace and salvation. The body will die from disease or age, but following Christ, it won't be caused by self-induced disease, but the mortality of matter, designed, whether by God or evolution, to die.

The only true, lasting body therefore, is the spirit, and it too must meet certain demands to prevail and last: it must be whole, and is so by adhering to God.

If then, a significant mass of US citizens awake and practice the radical love commands of Jesus Christ, yes, then there can be a renaissance of the US. 

We each by our choices of action determine the outcome.

Prepare. 2012.

Wed, 11/09/2011 - 15:01 | Link to Comment snakehead
snakehead's picture

Oh, yeah.  More Jeebus will fix it, and the unbelievers will deserve whatever they get.  Idiot.

Thu, 11/10/2011 - 14:05 | Link to Comment Arthur Borges
Arthur Borges's picture

Yeah, I thought it was kinda fun when Pope Benny went and abolished Limbo, essentially because God told him that room booking demand had been exceeding accommodation capacity for some time up until then.

Apparently, Jesus still knows best but he's been getting older and slower at omniscience like the rest of us.

Wed, 11/09/2011 - 15:38 | Link to Comment Stax Edwards
Stax Edwards's picture

Eureka, you seem to have gotten lost somewhere you should not be.

Go back!

Wed, 11/09/2011 - 14:10 | Link to Comment Imminent Crucible
Imminent Crucible's picture

The truth about China hurts, doesn't it, Wai Chu? Might as well get used to it, in China as in Europe and the West; the nation-state is on its last legs, and the more rigid and un-free it is, the faster and harder it will fall.

Wed, 11/09/2011 - 14:26 | Link to Comment fiftybagger
fiftybagger's picture

Newsflash:  All empires are satanic and end the same.

See Isaiah

Wed, 11/09/2011 - 14:41 | Link to Comment eureka
eureka's picture

That is self evident. W must focus on the current one. Ours. And dismantle it or sink with it.

Wed, 11/09/2011 - 13:46 | Link to Comment love
love's picture

everything is built to a cost the west tells china what it wants to pay china builds it to meet this cost its that simple china also makes iphones you get what you pay for.  the quality of a product is remembered long after the price is forgotten.

Wed, 11/09/2011 - 14:50 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

"you get what you pay for.  the quality of a product is remembered long after the price is forgotten."

 

Yes, that is certainly true in the bearing business.  We only sell some Chinese product because there IS a "Precio Nada Mas" segment of our customer base.

Wed, 11/09/2011 - 13:49 | Link to Comment qussl3
qussl3's picture

Actually the Chinese can produce quality that rivals the swiss and germans.

Its just that nobody will pay for them.

The contract manufacturers deliver the quality paid for.

Take a look at Chinese movements, better than some swiss ones and some even the swiss cant match.

Audiophillia is another area of interest.

Just because the companies that sell crap to the rest of us choose to make it in China doesnt mean the Chinese cant do quality.

Wed, 11/09/2011 - 13:53 | Link to Comment trav7777
trav7777's picture

what chinese movements...you mean japanese

Wed, 11/09/2011 - 13:58 | Link to Comment qussl3
qussl3's picture

Look up seagull and qingdao watch.

Also the swiss watch chinese movement fiasco.

Some movements even the swiss have trouble manufacturing like the double tourbillion, where many are chinese made.

Made in Switzerland is worth crap after they amended the requirements to 50%(?) of the VALUE of the item.

 

Wed, 11/09/2011 - 22:31 | Link to Comment fnord88
fnord88's picture

They do make some nice audiophile gear. Amps and D/A converters especially.

Wed, 11/09/2011 - 17:53 | Link to Comment Diogenes
Diogenes's picture

I have a friend who is in the tube audio business. He buys tubes and parts from China. When he first spoke to them, they emphasized their low prices. When he told them he wanted the best quality possible, regardless of price, they were thrilled to bits - and produced some excellent quality components at very reasonable prices.

Wed, 11/09/2011 - 13:56 | Link to Comment legal eagle
legal eagle's picture

Then all goods suck, because from hence do they come -- either in final form or component parts. Ever look under the hood of an American or German made product? I visited a factory in Guangho that made French and Italian purses, they left one strap off and shipped to Italy and France for final "assembly" -- sewing on final strap, so could be sold to US consumers as French and Italian for thousand plus each. Do you really think Gucci, Channel, Lois Vitton are made anywhere but China? You can buy same bags, off same production lines, for $30, and they will sew the strap on for you! Lmao

Thu, 11/10/2011 - 14:11 | Link to Comment Arthur Borges
Arthur Borges's picture

Um, sorry to nitpick but it's Louis Vuitton.

Mon, 11/14/2011 - 14:48 | Link to Comment BigJim
BigJim's picture

No, he really DID buy a Lois Vuitton bag for his wife while in China... at unbelievable prices!

Wed, 11/09/2011 - 14:00 | Link to Comment EnglishMajor
EnglishMajor's picture

At least they have Wal-Mart going for them...which is nice.

Wed, 11/09/2011 - 16:19 | Link to Comment eurogold
eurogold's picture

That's because dumb american....no consumers worldwide only want the best deal / cheapest price.

The Chinese are fully capable of producing high tech /high quality goods. Think about that the next time you log on with your lap-top or i phone.

Wed, 11/09/2011 - 21:33 | Link to Comment Buck Johnson
Buck Johnson's picture

Because they know that this charade won't last forever and when it stops, you will have hundreds and hundreds of millions of people/peasants attacking the rich and/or people with means that they feel brought the country to this condition (if you don't believe me just look at what happened to the chinese business class and the rich in the past when the populace got crazy).  In fact Vancouver is essentially Honk Kong east, so many Chinese are immigrating (if they have the money and some not) to Vancouver and the pacific northwest that it's looking more like parts of Asia. 

Also I don't agree with the writers judgement that the US (you can tell from the tone in his writing) as a young country/culture is better than the older ones because of our transparency and "what you see is what you get".  If he hasn't been living in a cave or have lived to long over in China, he would know that transparency has erroded over the course of years in this country.  Transparency in the govt., business, judicial etc., all of it has become more and more opaque.  And this is done in essence to "save face" American style.  If something is done that might put govt. officials or police in jail, what happens they try to obfuscate or hide the evidence or issue.  We have our own "backdoor" issues that people in other countries don't know until they are here.  Everything from racial hatred, to social mores.  All the writer is doing is comparing other places that treat him different with a place that he grew up in that he knew all the mores and his way around it and they treated him like an American. 

If he was Chinese he may look at bribery or whatever as business as usual and not a corruption, just their version of "backdoor" to save face.  In those countries at least they are honest about why they are doing it.  In America we can't be and try to deny it happens when it's being done right in front of them.

Wed, 11/09/2011 - 13:36 | Link to Comment Segestan
Segestan's picture

I'm shocked.. Shocked I tell ya.. Not about China.. but that a truthful view on China was written. Wow .. and the Liberals actually let this view through.

Wed, 11/09/2011 - 13:55 | Link to Comment Uncle Keith
Uncle Keith's picture

Heh... Liberals... That's rich.

You "Amoral/Selfish" types just kill me. George H.W. Bush elevated China to Most Favored Trading Nation Status - not a "Liberal".

 

Next, you're gonna tell me you're some kind of "conservative", right? That's equally laughable. You project - quite conspicuously - from a sense of powerlessness.

 

 

Thu, 11/10/2011 - 03:45 | Link to Comment buyingsterling
buyingsterling's picture

Both Bushes, Clinton, Obama - all globalists (and Johnson, Nixon, Carter, Reagan). That matters more than party labels, and it's why nothing really changes.

Wed, 11/09/2011 - 14:20 | Link to Comment Shvanztanz
Shvanztanz's picture

I am with you Segestan. If only there were more people to follow the China truth model, things would become a lot less expensive. Consider the trillions, yes, trillions lost to the GWOT.

Trillions in expenditures, debt and inflation thanks to all the Oil that we DIDN'T get from Iraq when we tricked the natives into sabotaging their own infrastructure. Think what that did to Oil Supply and Demand. If you can't, I'll tell you, gas was about $1.50 a gallon in 2001. Now it's more than double. Weapons of Mass Destruction or Weapons of Mass Production?

 

Thu, 11/10/2011 - 14:21 | Link to Comment Arthur Borges
Arthur Borges's picture

I was at Reuters in 1995 and 1996. At the time, everybody around me was oxpecting an end to sanctions but worried how barrel prices would sink once Iraqi oil was unfettered and back out on the world market.

Since the 2003 invasion, gasoline rapidly became rapidly in very short supply: I suspect it was all earmarked for export at sub-rockbottom prices.

If a given oil exporter goes offline, I further suspect it is no suspect: you resort to the price support mechanisms you can get.

Wed, 11/09/2011 - 13:41 | Link to Comment Ancona
Ancona's picture

I do so enjoy reading CHS essays.

Wed, 11/09/2011 - 13:51 | Link to Comment eureka
eureka's picture

CHS is NWO - US Empire & globalization propaganda tool.

US TRANSPARENCY - LMFAO.

US ranks 30 in trustworthy nations - i.e. 30 steps below the least corrupt nations in the world - of which the top most trustworthy and least corrupt  are European countries.

Suck your selfrighteousness US'ian national socialists, while your Federation crumbles.

Wed, 11/09/2011 - 14:14 | Link to Comment topcallingtroll
topcallingtroll's picture

I knew u might get something at least partially right if you just typed long enough....you know.....monkeys, typewriters, and shakespeare.

I hadnt seen many USA haters in a while. Welcome back.

Truth that northern european countries have lower corruption indexes. Too bad you are geographically connected to southern europe.

Wed, 11/09/2011 - 14:52 | Link to Comment eureka
eureka's picture

Here's a lesson in logic:

1  US, as per its constitution, is one thing - US Empire an entirely different construct

2  Some people are able to associate and dissociate along principles rather than ethnicity

I am Anglo - not Mediterranean - whom I love - as much as constitutional US'ians.

As for typing monkeys - some say identification/characterization is a function of recognition: IT TAKES ONE TO KNOW ONE.

Wed, 11/09/2011 - 18:00 | Link to Comment Diogenes
Diogenes's picture

According to one Italian, American bureaucracy is child's play to a European. You want a permit or license, you answer a few questions out of English for Beginners (what is your name, what is your address) and boom, you got it. No bribes, no "knowing somebody", no nothing. Just a few bucks and fill out a form.

Thu, 11/10/2011 - 04:13 | Link to Comment buyingsterling
buyingsterling's picture

The monkeys never type any Shakespeare. To get a 100 character sentence would take 1000 times as many keystrokes as there are atoms in the universe, in as many universes as there are atoms in the universe (approx. 10 to the 150th power). Complex things like sentences never happen by chance ((SARC ON) except for a few things that are _vast orders of magnitude_ more complex than sentences, such as living cells. Apparently they pop up with some regularity, as our existence proves. Chemical evolution, etc.) SARC OFF.

If every cubic milimeter of water 'mixed' once every second in a way which could conceivably result in the formation of a living cell, and if there were a water bearing world circling every star in the universe for all of its 13.7 billion years, the number of opportunities for the production of a single living cell would be less then 10 to the 50th power. There are another 100+ zeroes to go, each reducing the likelihood by a factor of ten, before chance can account for a single short sentence. If we are natural creatures, the odds are good that we are alone in the universe.

Wed, 11/09/2011 - 13:48 | Link to Comment kato
kato's picture
  • Yes. Still, the myriad Party Boss' wives are in the Sands Macau at 10AM playing Baccarat with $100 chips, and losing; the Triad Mafioso in white shirts or neck ties are in small rooms in the Lisboa swapping stacks of $1000 rectangular chips with each other and chuckling at their fortune/misfortune, casting a wary eye as you pass by. NO, all is well in China, the great loan machine that gets a cut funneled back to the 'right' people is still taking place, despite the occasional corruption head that rolls. Back to the rice patties for all when it end. But no end in sight.
Wed, 11/09/2011 - 13:45 | Link to Comment pauhana
pauhana's picture

"The new arrival falls in love, and their romance lasts from a few months to a few years. Eventually the way things actually work becomes evident, and start grinding away at the love affair. After a long time, the outsider-resident become cynical, or even bitter; what a bloody unholy mess this place is, beneath the phony surface sold to tourists. The 20-year resident listens with a wry smile to the newcomer gush over the ancient ways and glorious food, etc., but keeps his mouth shut. Why spoil romance? Reality will do so soon enough."

Sounds like my experience in Hawaii.  You need to be there a while before you realize how totally disfunctional the place is.  The beauty masks the rot beneath.

Wed, 11/09/2011 - 13:50 | Link to Comment chinaguy
chinaguy's picture

LOL - "aloha" really means "fuck you haole" - esp. on the Big Island

Wed, 11/09/2011 - 13:52 | Link to Comment Hephasteus
Hephasteus's picture

Hawaii's the most beautiful nuclear crap storage dump on the planet.

Wed, 11/09/2011 - 14:04 | Link to Comment ItsNotYouItsMe
ItsNotYouItsMe's picture

State controlled media is a handy, kind of a Swiss Army tool.  You can do anything with headlines and news even if there's no base in truth.

I have friends in China that speak of much here.  Truth is, there's almost no regulation there and taking care of your local powers that be is all you need to win in business.

I think the best trick China has really mastered though is, make it cheap, make it fast, get it to market and make them buy it over and over since it will break soon!

The 1 in 50 failure rate is now 1 in 25 so they sell twice as much and show just that much more growth.  Growth slows, increase the failure rate to 1 in 15, then 1 in 5 ... growth in exports through accelerated replacement!

While they do that, we follow the "Change Store" model .... volume baby!

For a quick laugh, see examples of these below (can't avoid the initial commercials of course these days, just mute 'til the clip starts :) ... enjoy killing some time!

China Stragegy

US Strategy

 

Wed, 11/09/2011 - 13:47 | Link to Comment Septicus Maximus
Septicus Maximus's picture

George Washington didn't write this.  I don't believe a werd of it. 

Wed, 11/09/2011 - 13:49 | Link to Comment GCT
GCT's picture

The man speaks the truth about Face.  Having lived in the Far East for over 12 years, you will never be accepted as an equal and if you intend to do business there you had better learn about face as it is the most important thing to asian males.  More important then their wives and mistresses. 

Japan is actually the worst of the bunch, followed by the South Koreans, then the Chinese.  We can all talk about corruption here in the good ole USA but corruption in the western sense is a daily happening there.

Thu, 11/10/2011 - 14:33 | Link to Comment Arthur Borges
Arthur Borges's picture

To put it simply for the Western mindset: Face-saving = Ego-stroking & management.

You do what it takes to go out of your way to make everybody look good in public.

If you get confrontational, you may (or may not) secure a tactical victory, but the ultimate price down line will make you sorry you didn't just shut up or, even more intelligently, find a middleman to negotiate a mutally acceptable solution to your particular issue of the moment.

Wed, 11/09/2011 - 13:48 | Link to Comment kito
kito's picture

....china will not have a hard landing. wake up!!! 1.3 BILLION PEOPLE AND THEY HAVE BARELY BEGUN TO GROW!!!! they are the future and the world knows this. growing pains yes, but not more. my money is with the rogers camp, not the chanos camp.....

Wed, 11/09/2011 - 13:59 | Link to Comment qussl3
qussl3's picture

Demographics says they go splat in about 20 years or so.

In the meantime the debt capacity is nowhere near as saturated as in the west.

The credit bubble will be blown there too, the question is whether the inflation of the oriental credit balloon can offset the deflation of the western one.

Wed, 11/09/2011 - 14:06 | Link to Comment Imminent Crucible
Imminent Crucible's picture

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 | Link to Comment moskov
moskov's picture

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 | Link to Comment qussl3
qussl3's picture

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 | Link to Comment 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 | Link to Comment Let them eat iPads
Let them eat iPads's picture

I'm betting against the fraudulent, totalitarian shithole.

Wed, 11/09/2011 - 21:00 | Link to Comment Belteshazzar
Belteshazzar's picture

China lacks food security. when TSHTF they arent going to be able to eat those ipods and PCs

Thu, 11/10/2011 - 04:42 | Link to Comment Septicus Maximus
Septicus Maximus's picture

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 | Link to Comment chinaguy
chinaguy's picture

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 | Link to Comment moskov
moskov's picture

Then why you bother doing business in China?

 

Wed, 11/09/2011 - 14:04 | Link to Comment chinaguy
chinaguy's picture

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 | Link to Comment moneymutt
moneymutt's picture

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 | Link to Comment moskov
moskov's picture

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 | Link to Comment chinaguy
chinaguy's picture

"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 | Link to Comment moskov
moskov's picture

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 | Link to Comment qussl3
qussl3's picture

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 | Link to Comment moskov
moskov's picture

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 | Link to Comment Syrin
Syrin's picture

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 | Link to Comment Pituary Retard
Pituary Retard's picture

That's the ultimate sausage party.

Wed, 11/09/2011 - 19:11 | Link to Comment smiler03
smiler03's picture

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 | Link to Comment Arthur Borges
Arthur Borges's picture

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 | Link to Comment j.tennquist
j.tennquist's picture

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 | Link to Comment Arthur Borges
Arthur Borges's picture

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 | Link to Comment El Viejo
El Viejo's picture

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 | Link to Comment daxtonbrown
daxtonbrown's picture

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 | Link to Comment dalkrin
dalkrin's picture

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 | Link to Comment chinaguy
chinaguy's picture

Nah, go for a visit, violent crime again foreigners is rare & the food is excellent.

Wed, 11/09/2011 - 14:07 | Link to Comment qussl3
qussl3's picture

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 | Link to Comment BigJim
BigJim's picture

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 | Link to Comment Debtless
Debtless's picture

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 | Link to Comment topcallingtroll
topcallingtroll's picture

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 | Link to Comment Fukushima Sam
Fukushima Sam's picture

Best pussy I ever had was Vietnamese. Tight, cute, and tasted like fresh fruit.

Mon, 11/14/2011 - 15:21 | Link to Comment BigJim
BigJim's picture

Fresh Durian fruit?

Wed, 11/09/2011 - 14:06 | Link to Comment williambanzai7
williambanzai7's picture

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 | Link to Comment 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 | Link to Comment Shizzmoney
Shizzmoney's picture

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 | Link to Comment Mark123
Mark123's picture

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 | Link to Comment oddjob
oddjob's picture

Charles Hugh Smith quoting Bain&Co, the company run by Israelis. Yikes.

Wed, 11/09/2011 - 14:35 | Link to Comment Steroid
Steroid's picture

The author should discuss this with the "International Man". 

Wed, 11/09/2011 - 14:37 | Link to Comment Grand Supercycle
Grand Supercycle's picture

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 | Link to Comment reader2010
reader2010's picture

Very few understand China is a disease to the world.

Thu, 11/10/2011 - 10:27 | Link to Comment TSA gropee
TSA gropee's picture

So is thinking like yours.

Wed, 11/09/2011 - 14:40 | Link to Comment Stud Duck
Stud Duck's picture

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 | Link to Comment Arthur Borges
Arthur Borges's picture

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 | Link to Comment Kreditanstalt
Kreditanstalt's picture

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 | Link to Comment sdavis
sdavis's picture

Taiwan and China are not the same. 

Thu, 11/10/2011 - 10:26 | Link to Comment TSA gropee
TSA gropee's picture

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

Wed, 11/09/2011 - 14:46 | Link to Comment bill1102inf
bill1102inf's picture

Farmers are poor because they can not afford an Ipad???? LMAO

Wed, 11/09/2011 - 14:53 | Link to Comment The trend is yo...
The trend is your friend's picture

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 | Link to Comment SilverRhino
SilverRhino's picture

Really good article.

Wed, 11/09/2011 - 15:13 | Link to Comment 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.

Mon, 11/14/2011 - 15:26 | Link to Comment BigJim
BigJim's picture

You've got that backwards. Without markets there's no growth.

Wed, 11/09/2011 - 15:33 | Link to Comment prains
prains's picture

bullet catchers___________every major modern conflict has been decided by either the quantity of bullet catchers or the quality(ie. high motivation to catch). When push comes to shove, the chinese i fear have both in spades.

Wed, 11/09/2011 - 16:10 | Link to Comment Stax Edwards
Stax Edwards's picture

Good Read CHS, some cannot get their mind around what lying theiving cheats these Chinese businessmen are.  They're as bad as bankers here in the west.

Wed, 11/09/2011 - 17:15 | Link to Comment malek
malek's picture

And for comparison how many wealthier Americans have a bug-out plan? I think the number is also quite high...

Wed, 11/09/2011 - 17:52 | Link to Comment brazilianbubble
brazilianbubble's picture

I agree with the author... funny thing is when "china bulls" start defending their point of views by focusing on the potential 1.3B consumers... your analogy of McMansions for the poor is spot on! You get Dragonomics defending the China bull case (http://www.brazilianbubble.com/2011/11/dragonomics-is-bullish-on-china.html) and Barclays issuing a full report yesterday talking about a 20% correction in chinese real estate (http://www.brazilianbubble.com/2011/11/barclays-report-bubble-deflation....)...  how many soft landings were there in history? But let's hope it is a soft landing, otherwise the whole world will be screwed!

Thu, 11/10/2011 - 07:23 | Link to Comment Arthur Borges
Arthur Borges's picture

BB, a prominent Shanghai real estate developer just went and slashed apartment prices by 25% only to find his offices stormed by purchasers demanding a 25% refund -- man, you don't want to mess with Chinese women who want their money back.

Wed, 11/09/2011 - 23:32 | Link to Comment fiatbubble
fiatbubble's picture

China has endured for thousands of years, and will likely be here for thousands more.

Thu, 11/10/2011 - 01:50 | Link to Comment jonjon831983
jonjon831983's picture

While true... the question is, which China.  China did not exist in its current form thousands of years ago and most definitely, the forms of government have changed as well.

 

You probably could say the same about Egypt.  It has endured for thousands of years as well.

Thu, 11/10/2011 - 03:36 | Link to Comment fiatbubble
fiatbubble's picture

Capitalism is on the rise in China, while Fascism is erupting here in the U.S.

Look at the raping of our Constitutional freedom through the Patriot Act and most recently, TSA groping. Trust me, China will be the light of the world in the years ahead.

 

...for those reasons, I'm long Mandarin.

Thu, 11/10/2011 - 01:43 | Link to Comment jonjon831983
jonjon831983's picture

Very good read

Thanks

 

My friend told me that a lot of the rich families in HK were originally more rich back in the Mainland pre-cultural revolution.  However, these families were smart enough to diversify their realestate holdings and wealth outside of the Mainland. When the Cultural Revolution hit, they were able to flee to HK.

 

Another thing you mentioned is Maintenance.  Concur, I've heard it is quite bad.

 

As a kid we always joked about china quality blah blah blah... yea.  The hope of course is that they really do up the quality.  Also though, quality for exports I think are partly determined by the company buying them - if they demand really low prices they are gonna get really cheap stuff.

Thu, 11/10/2011 - 03:39 | Link to Comment fiatbubble
fiatbubble's picture

Quite true Jon, the quality of the product is solely determined by the company's motives, which is 9.99 times out of 10, profiteering.

Thu, 11/10/2011 - 07:32 | Link to Comment Arthur Borges
Arthur Borges's picture

Well, I'm 63, Jonjon and we used to joke about Japanese quality. Quality control/assurance is everybody's problem. In the early 1990s, 33% of the manhours at Mercedes-Benz went into ironing out all the production line bugs and getting a vehicle up to standard.

One thing seems certain: a space program demands quality at least as high as aircraft manufacture where a breakdown isn't something you can fix by just pulling over to the side of the road and waiting for a mechanic in a tow truck. China has just pulled off an automated docking. All the industries feeding into the space program must be up to scratch. Moreover, the Long March rockets have a solid record of reliability, although perhaps largely because they're not overengineered like their Western competitors.

Your final comment is apt: "Cheap stuff for the cheapies," as we say in Brooklyn.

Thu, 11/10/2011 - 04:04 | Link to Comment boogey_bank
boogey_bank's picture

Ok, ok, I buy Charles Hug Smith argument,

everyone is leaving China, everyone is leaving Greece, Italy,

now let's move on, why don't talk about DESTINATIONS?

It seems to me that we're like usa president in the event of a terrorist event, locked in airforceone flying around with no destination till there is gas in the tank...

Thu, 11/10/2011 - 07:17 | Link to Comment Arthur Borges
Arthur Borges's picture

Asia is opaque to Americans because it has a culture. Culture is all the ritual, tradition, art, music, etiquette, social norms and everything else that generates and protects warm, positive emotions. China has anything between 3,000 and 8,000 years of that, depending on your kickoff point of choice. As an outsider, this is a stack of overlapping, interconnected universes that look "opaque" until you unwrap them one by one, piece by piece. In Western terms, you might say they're geniuses at the fine art of ego-stroking: the best way to get ego out of the way -- nay to coopt it -- is to stroke it generously. But for that, here, your ego needs to educate itself to become a true transmitter/receiver of the process, unfettered by pre-programmed opinions manufactured and instilled in/by the Western media.

On the other hand, the USA has values like "Money Talks" (um, it SHOUTS actually) and "Let's not get personal about this..." which relegates emotion to the waste basket. What is left passes here for "a minimum of functional transparency."

Mr. Hughes leaves out provincial government and the omission is grotesque. Provincial governments wield enormous power, even the power to ignore Beijing, which is why much legislation is frustratingly vague. The vagueness gives provincial government necessary leeway in applying national laws so that the relationship to Beijing does not shift into confrontational mode (as has happened in the past), which is ultimately in nobody's interest. In fact, the relationship is quite like that of Washington to state governments!

As for immigration-friendliness, well I gotta tell ya, this is a country with 56 official languages which has been multiethnic for a very long time: they're very used to accommodating ethnic groups with specific customs and traditions. If you want to start screaming about how beastly Beijing has been with its 5 mln Tibetans (out of 1,300 mln citizens), I refer you to Ladakh, the Indian State where living standards are way lower and infrastructural investment qualifies as quaint at best -- the population is almost entirely Tibetan and their level of political activism is so low that you would hear a mosquito taking a bite into you in its presence.

Thu, 11/10/2011 - 10:40 | Link to Comment TSA gropee
TSA gropee's picture

I first went to China in 92', Tianjin exactly and since then have done numerous trips for various lengths of time, six times this year alone. I find there is a dramatic difference (culturally speaking) between then and of late. The rudeness (by western standards), lack of empathy and cutthroat business dealings are much more pronounced now than back then.

My theory for at least part of that is that the Chinese one-child only policy since 81' has been a major contributor. We are now seeing a generation of people who grew up as Asian only children entering business and the halls of power. Anyone who has seen a Chinese family with an only child and the apparent lack of rules and boundaries knows what I'm referring to. So we now have a generation of adults that are used to getting what they want when they want it and I see it all the time there. Some of my observations are: Chinese are always in a hurry, rules only apply to others, hyper-aggressive driving is the only way to get from point A to point B and on and on. 

The lack of empathy can best be exampled by the security cam video of the 2 year old being run over and her still moving body passed by several people. http://www.dailymail.co.uk/news/article-2050438/Yue-Yue-brain-dead-run-twice-ignored-18-people.html Warning, the video is quite disturbing.

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