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Lots of super interesting things going on in China today as they attempt to deleverage and pivot their economy away from a real estate/infrastructure investment model to one driven more by personal consumption. For years Michael Pettis has been one of my sources in trying to understand China. The 30 minute interview below lays out Michael’s thesis. Bottom line he is thinking GDP growth in China will be coming way down to something closer to 3% moving forward and that this could be too optimistic. 
 

 

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yeah, I think Xi is in big trouble. He has to deal with

1) real estate slow motion crash (likely takes of several percent off from GDP growth)

2) zero COVID policy failing with  no end game in sight (also impeding GDP growth and causing civil unrest)

3) failed foreign policy (getting aligned with Putin who seems to be losing a war or at best gets into stalemate) and US hardening stance on Taiwan

4) Fallout from tech crackdown( impeding innovation and causing wealth destruction for the elite)

 

I think there is a bigger risk that Xi get's canned somehow than people think.

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@Spekulatius I am sympathetic to your view about Xi's vulnerability, but the more I read on it the more I am convinced he is not very vulnerable (many China experts believe his next 5 years a done deal). Xi has essentially purged most of his opposition via anti-corruption campaigns. Plus we are at the beginning of China opening up and he will be able to say "yes it was hard, but I saved millions of lives at the expense of a few percentage points of GDP growth". 

 

Good article below (paywall)

 

Rumours that Xi Jinping is losing his grip on power are greatly exaggerated

https://www.ft.com/content/5e14bfb2-f0a9-4259-9d4c-a1b0ff607560

 

 

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3 minutes ago, maplevalue said:

@Spekulatius I am sympathetic to your view about Xi's vulnerability, but the more I read on it the more I am convinced he is not very vulnerable (many China experts believe his next 5 years a done deal). Xi has essentially purged most of his opposition via anti-corruption campaigns. Plus we are at the beginning of China opening up and he will be able to say "yes it was hard, but I saved millions of lives at the expense of a few percentage points of GDP growth". 

 

Good article below (paywall)

 

Rumours that Xi Jinping is losing his grip on power are greatly exaggerated

https://www.ft.com/content/5e14bfb2-f0a9-4259-9d4c-a1b0ff607560

 

 

Yes, he possibly has a strong grip on power. Traditionally, China was run by a party committee (post Mao) but that seems to have changed. That said, it is very difficult to access the vulnerability of a regime from the outside and possibly even from the inside.

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8 hours ago, Viking said:

Lots of super interesting things going on in China today as they attempt to deleverage and pivot their economy away from a real estate/infrastructure investment model to one driven more by personal consumption. ...

 

 

Sounds bullish for BABA. Incidentally BABA has stealthily marched up ~50% from its lows.

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1 hour ago, backtothebeach said:

 

Sounds bullish for BABA. Incidentally BABA has stealthily marched up ~50% from its lows.

It’s hard to get a real picture of some of this because the truth gets censured all over the world to fit the political agendas, however the general rule of thumb is that whatever MSM in NA is shouting, something closer to the opposite is true. Remember how following Russia in February, China was next? China was a pariah and uninvestable? Whoops!

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China has its human rights problem, but American have people mass shooting kids while having a gun convention next week near by. They don’t think they have a problem, and nor do many American think we have a problem.

 

But China has changed a big way from the past. Of course younger people are still fooled by propaganda etc, but they are largely intelligent and rational. And Chinese people work damn hard and they are mostly damn smart. Most people in CCP leadership is very smart too, so I don’t completely buy the idea that Xi has unlimited power. The trend of the last 30 years is just too powerful and people will not want to come back. They want a good western like life.

 

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The Americans...go read the BABA thread or the Russia Ukraine thread, are under the illusion that China is all evil and uninvestable. Meanwhile CCP is taking unprecedented measures to boost financial markets, provide not only stability, but also transparency never seen before. Of course, nothing is perfect and there is warranted skepticism. But never IMO have I seen the Chinese markets and ADRs greenlighted by CCP like we've seen recently. Meanwhile you have the US agencies attacking and aggressively pouring cold water on any positive foreign development, continuously moving the goalposts on what they want from Chinese listed companies, and oh yea, labeling anyone they dont like "oligarchs" and using that as an excuse to steal their assets. Quite the dislocation between narrative and reality. Since the greenlight a few months ago, Chinese stocks have done quite well. 

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I bought a lot of baba, between 85ish to 120, average cost of $106. Still holding.

 

this is a truely “blood on the street” moment for Chinese ADRs — massive layoffs, Covid lock downs, even suicides of tech startup CEO.  all the founding CEOs (PDD, JD, Baba) are pushed out. 

 

But Baba has about $20ish cash per share and $20ish investment in Ants.(seems Ants is still hiring now and people are posting interview experience on Zhihu. this is interesting, could be IPO is not far). Business ROI is north of 15%.   
 

 

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16 hours ago, Gregmal said:

The Americans...go read the BABA thread or the Russia Ukraine thread, are under the illusion that China is all evil and uninvestable. Meanwhile CCP is taking unprecedented measures to boost financial markets, provide not only stability, but also transparency never seen before. Of course, nothing is perfect and there is warranted skepticism. But never IMO have I seen the Chinese markets and ADRs greenlighted by CCP like we've seen recently. Meanwhile you have the US agencies attacking and aggressively pouring cold water on any positive foreign development, continuously moving the goalposts on what they want from Chinese listed companies, and oh yea, labeling anyone they dont like "oligarchs" and using that as an excuse to steal their assets. Quite the dislocation between narrative and reality. Since the greenlight a few months ago, Chinese stocks have done quite well. 

In the meantime I keep buying baba shares at a marvellous price.

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