I might be naive in asking this, but I live on the mainland (Xiamen), and in the course of a five minute walk I see a dozen S-class Mercs (plus the 7-series, A6s etc).
I’m not bedazzled by it, I’m just wondering. Of course the Chinese are going through an extremely healthy period, economically. I have a rich Chinese friend who says she was only buying the X6 because it gave her face.
Perhaps I am bedazzled, South Africa went through a patch where everybody was buying houses and cars because the banks were throwing loans around. Then went through a dip.
Fill me in. I’m a watcher, an observer. I’d like the dirt. I know some of ya’s of quite astute. I read the rags, I trawl the net, I have a couple of rich Chinese buddies. But where does does all this money come from? Owning a factory? Being connected?
Because there are still plenty of working class people. And dirt poor people.
Money is coming from the developed world. Labor is cheap in China. Companies charge countries like USA many folds than they actually spend. Funny part is, from the same money Chinese got from USA, they go back and buy out American companies and lend money to America.
[quote]On Thursday, data showed China’s manufacturing is contracting. An index compiled by HSBC fell to 48.1 in March from 49.6 in February. Figures below 50 indicate that manufacturing is shrinking.
That’s a negative sign because growth in China has played a key role in shoring up the global economy since the financial crisis of 2008.
And in another sign of cooling growth in the world’s No. 2 economy, new home prices dropped in 45 Chinese cities in February as the government implemented measures to cool property speculation.
Worries about China’s deceleration were compounded by a survey Thursday showing slower growth in Europe. An index of economic activity from financial information company Markit fell to 48.8 in March from 49.3 a month earlier. The index combines both the services and manufacturing.[/quote]
The peasants will not want to remain peasants much longer. Is the economy ready to deal with the loss of cheap labor?
Who will be the next cheap labor center? Viet Nam? India? Indonesia? Philippines?
Hurry and get in the next bubble before it pops, with good timing, your nest egg is set.
In simple terms, if something costs in US 100 $, China would ask them 70 $ for same product but would actually spend like 35 $ or less on production. I need to check how many firms in US are actually owned by China and Japan. I keep getting news but never looked for stats.
Read a good article on the land grabs (property development) in China and how the property bubble might be about to burst (too much supply). It also told a story of a farmer who sold his land. He invested his money in private loans (grey area loans?), lost nearly all of it when the business partner bunked on him. Apparently that sort of thing is common, both the loans and the bunking off.
There are a bunch of factors that are facing big head winds.
Export business grew exponentially but now has maxed out and possibly decreasing. The yuan is rising which is impacting their competitiveness.
Property has been systematically confiscated and rezoned resulting in massive wealth for developers and corrupt officials. The money to fund the deals came mostly from loose monetary policy.
Infrastructure has also been brought up to 1st world standard and more in most cities, but at this stage returns from investment are decreasing rapidly.
Lastly Chinas cheap labour force is going to start shrinking within the next few years.
Now they have to start concentrating on the software like pensions and healthcare and not hardware to get higher living standards and that is not so easy. The number of workers to dependents is reducing steadily.
All economies without fail go through economic cycles and it looks like it is chinas turn to finally take a hit. It was held off by massive credit growth in 2008 butthey cant do that again because inflation will get out of control , the price of oil is going to be a real worry now for them.
If they continue to keep credit loose the eventual bust will be worse and the poor and middle class may revolt due to inflationary pressure, if they reduce credit growth the property bubble along with many businesses could implode spectacularly. I don’t think they can get out of this vise.
As a country, China is still poor. The only reason it appears rich is that they were starting from such a rock-bottom baseline that any improvement at all was bound to be spectacular. Sure, there are a few (OK, a lot) of people who own Mercedeseses, or even just Honda Civics. But that doesn’t prove anything. Money is easily printed. And the hicks out in the boondocks are still living like peasants, same as they did for all 5000 years of China’s glorious history.
As HH says (with slightly less cynicism), it’s all smoke-and-mirrors; without any sound underpinnings or actual social progress, it can’t continue. Even in our (supposedly) advanced economies, there is a natural cycle of ups and downs (the business cycle being about a decade, and the recession cycle about a century). In China’s case, the only reason the upswing has continued for longer than usual is that China is BIG. They have a lot of resources to dig up, a lot of people to exploit, and a lot of leeway for making promises they may or may not be able to keep. They’re on the start of a roller-coaster ride, and there’s going to be a lot of screaming when they go over the top.
[quote=“Baas Babelaas”]I might be naive in asking this, but I live on the mainland (Xiamen), and in the course of a five minute walk I see a dozen S-class Mercs (plus the 7-series, A6s etc).
I’m not bedazzled by it, I’m just wondering. Of course the Chinese are going through an extremely healthy period, economically. I have a rich Chinese friend who says she was only buying the X6 because it gave her face.
Perhaps I am bedazzled, South Africa went through a patch where everybody was buying houses and cars because the banks were throwing loans around. Then went through a dip.
Fill me in. I’m a watcher, an observer. I’d like the dirt. I know some of ya’s of quite astute. I read the rags, I trawl the net, I have a couple of rich Chinese buddies. But where does does all this money come from? Owning a factory? Being connected?
Because there are still plenty of working class people. And dirt poor people.[/quote]
There are some main lines of money flow in China. One is of course the foreign investment company who has decided to move it’s manufacturing plants to China, where labour is cheap and where the government is overly accommodating. Then you have the second tier Chinese businessman who has strong connections with the local government. The government offer trillions in grants and loans to local Chinese companies to help improve the local infrastructure, and local businesses benefit hugely from this.
Then you have the third tier money maker who makes his money from local property which has shot up in value because of foreign and local investment.
To be fair China has done a terrific job of creating a large middle class so rapidly. I travel around china and India every year and India is so far behind China economically and infrastructure wise it’s not even funny. It does look like India is getting it’s act together slowly though with no help from its own government.
The problem in China is more the degraded environment (air quality is terrible in 9/10 cities I visit) and lack of human rights including migrant rights and property rights for farmers.
Right now they are in an economic transition period where the easy gains have been made and where they have binged on too much credit and polluting industry.
i think everyone is being to critical of china. for just 30 years they went from eating rice everyday, to eating rice with pork. how is there economy not past ours?
serious note tho for 30 years they have exploded i think around 600-700 million people are now in the middle and upper class. With around 20-25 million joining that group each year. They well rule us and make us pay for how we treated them in the past. we well be forced to learn mando and work in big factories in the US for china. And be shocked when we see the glorius Han speaking english.
Bas, were you born yesterday? China had been the richest country in the world for thousands of years. The better question is, how did the west become rich? The answer is simple, through thievery, and genocide. I won’t get too much into that because they should have taught you that in school. Mainland China was also able to rise from the ashes because it has an independent economic policy, whereas Taiwan, and Japan do not. The lesson here is that being a puppet state of the west will get you nowhere. If you want to be rich, then you have to be independent. You can’t be a puppet state like the UAE and expect to get hand outs from the west, because once the west puts its hand away, then what are you left with?
In a nutshell China got rich by doing what the USA did , and Japan and Taiwan and Korea. By making tons of stuff that other people buy. By selling more then she spends. Shes got 3 trillion bucks in the bank or so.
She did tricks that others couldnt or wouldnt do and now shes a rich , slighty psycho shiao chieh
I just want to say anybody hating on any successful country is just jealous. Plain and simple. America DID NOT get rich by thievery and genocide! America got it by being smart and expanding industry just like Russia and Japan and China did. Germany pulled genocide and got crushed. America sold weapons to Europe when it was going through WWII and screwing the hell out of their own economies not to mention blowing everything useful to scrap. Its knowing the resources you have and coming up with a plan to use them to gain wealth and power and that’s why America’s still at the top today.
America got rich because it was the only major industrial country not bombed to hell after WWII. We still had infrastructure and a functioning economy. And we made a lot of money using that unique position to rebuild Europe. Our post WWII leaders understood this (until recently) and did the same thing by developing other countries (see saudi arabia, UAE, japan, south korea, etc). Sure we help those countries get developed and live much better, but we also make a ton of cash on the deal too.
