China

[Luca]

 

[Luca]

8 minutes ago, Luca said:

 

The video mentioned in this clip: 

 

 

[Luca]

 

[Hektor]

https://www.nytimes.com/2024/05/13/business/china-bullet-trains-ticket-prices.html

 

China Is Raising Bullet Train Fares as Debts and Costs Balloon

 

China is taking the rare step of sharply increasing fares for riders on four major bullet train lines, in its broadest move to address rising costs and heavy debts since construction of the system began nearly two decades ago.

 

The higher prices for train tickets are part of a push to raise prices for public services. Earlier this year, water and natural gas bills started going up in some cities.

 

Increasing prices can stem losses at some giant state-owned enterprises that provide these services. And making consumers pay more helps offset the falling prices that are widespread in China’s economy as growth slows.

[Luca]

Pretty clear statement on whats happening in geopolitics:

 

 

[Gamecock-YT]

Needs those autoworker votes in swing states

[Hektor]

8 minutes ago, Gamecock-YT said:

eeds those autoworker votes in swing states

[crs223]

This is what Biden is afraid of:

 

 

[Hektor]

https://www.nytimes.com/2024/05/17/business/china-property-mortgages.html

 

China Says It Will Start Buying Apartments as Housing Slump Worsens

Signaling growing alarm, policymakers ramped up efforts to stem a continued decline in real estate values.

 

Chinese officials on Friday took their boldest step yet, unveiling a nationwide plan to buy up some of the vast housing stock languishing on the market. They also loosened rules for mortgages.

 

The flurry of activity came just hours after new economic data revealed a hard truth: No one wants to buy houses right now.

[Luca]

https://asiatimes.com/2024/04/the-myth-of-chinese-overcapacity/

 

Interesting read: 

 

Quote

While some may marvel at how Japan, South Korea, Taiwan and, of course, China exported their way to riches, it was, in reality, an arduous, grueling and brutal process that has left lasting scars. Economic development really is not supposed to happen this way.

The East Asian export model is swimming upriver, playing the video game on hard mode, running up the down escalator. What kind of development strategy requires poor countries to scrimp and save only to lend that money to rich customers to purchase one’s manufactures?

Quote

East Asia had to do battle with the Lucas paradox. East Asia won not because the export model is so effective; it won because East Asia is East Asia. The Lucas paradox is the observation that capital does not flow from rich country to poor as predicted by classical economics. In theory, as capital experiences diminishing returns in rich economies, it will flow to poorer economies which still have low-hanging fruit. In practice, however, rich countries have hoovered up capital from developing economies, leaving much of the world starved for investment. East Asia, starting with Japan, was able to develop despite the Lucas paradox. After WWII, Japan’s Ministry of International Trade and Industry (MITI) husbanded the nation’s meager resources to invest in strategic industries – steel, autos, electronics, semiconductors etc. The country bought treasuries with export revenues and slowly accumulated capital through reinvestment of retained earnings – bit by excruciating bit. This didn’t reveal the efficacy of the export-driven development model as much as it demonstrated the diligence and self-sacrifice of the Japanese people as well as the managerial expertise of MITI.

Quote

The Asian Tigers followed suit, achieving even more spectacular results and also accumulating similar costs. Ultimately, the biggest player came on the scene running a version of the model that, because of China’s size, is causing Western politicians to mash panic buttons.

Quote

Through methods fair and foul, the US had long since dismantled Japan’s export growth model and is now desperately targeting China. The acid-tongued venture capitalist Eric Li recently quipped that China’s biggest economic problem is that it can’t go out and get itself a bunch of colonies. Imperialism is the other development model that has worked spectacularly well. But like the East Asian export model, it too has left lasting scars. On balance, overworked salarymen is probably less objectionable than colonial ills. Economists twist themselves into pretzels trying to figure out the cause of the Lucas paradox. But is it all that mysterious?

Quote

US Treasury Secretary Janet Yellen’s recent trip through China kicked off a round of hand-wringing in the Anglo press over industrial overcapacity in China. Without a single Chinese electric vehicle (EV) sold in the US, Senator Sherrod Brown has already called for their ban, declaring, “Chinese electric vehicles are an existential threat to the American auto industry.” Western progressives are mired in cognitive dissonance over long-trumpeted climate commitments when the solution presented to them is low-cost, made-in-China solar panels. This entire overcapacity issue is another tiresome demonstration of Western solipsism. As Asia Times’ David Goldman likes to say, “China’s just not that into you.”

Quote

When the US imposed “voluntary” export quotas on Japan in the 1990s, it constituted 40% of the world’s car market. That has fallen to 13% in 2023. China does not export cars to the US and, given geopolitical realities, will likely tip-toe around the US by building factories in Mexico for regional markets. Around 35 million cars were sold in developed markets (North America, EU, Japan, South Korea, Australia) in 2023, unchanged since 1990.

 

The Global South cannot accumulate capital through imperialism and it should not accumulate capital through the backbreaking East Asian export model. They are in luck because China’s “overcapacity” is exactly how development should work under classical economics. Excess capital in China should flow to developing economies in the form of loans and investments along with capital goods – 5G base stations, railroad equipment, electrical systems, commercial trucks and, yes, cars. This is the entire theoretical basis of President Xi Jinping’s Belt and Road Initiative (BRI). Without “overcapacity” in China, the Global South would have access to neither capital nor capital goods. Given its current account deficit and capital account surplus, it is mathematically impossible for the West to provide development assistance to the Global South on an appreciable scale. Long-forgotten initiatives like Build Back Better World (B3W) and the Blue Dot Network die on the vine because the US does not suffer from “overcapacity.”

Quote

The Communist Party of China appears to have embraced its Industrial Party faction. The Industrial Party is an ambitious political identity that dispenses with the hoary left-right divide and believes that industry, science and technology will determine China’s future. While not necessarily an economic ideology, Industrial Party precepts have an intuitive understanding of the necessity of China’s “overcapacity” and that it is up to China to reverse the Lucas paradox. Wang Xiaodong, a vocal Industrial Party champion recognized the trends as far back as 2011, exhorting China to globalize its industrialization: We must go out to meet the world. Not only do we want our products to “go global,” we also want our industrialization to go global, and our high-quality talent to go global. We can spread industrialization to every corner of the world. Many of our scientists and technicians will travel around the world to work, bringing with them civilization, a dignified existence, and relief from poverty. This is one thing that Westerners have been unwilling or powerless to accomplish. China’s Commerce Minister Wang Wentao has dismissed Secretary Yellen’s accusations of overcapacity as groundless, insisting that China’s industries are just more competitive. Both the US and EU are likely to erect trade barriers as China appears unlikely to compromise. When all is said and done, the squabble between China and developed economies is ultimately a sideshow. The real action will be the flow of Chinese capital and goods to the Global South.

 

Regarding the EV bans its also interesting to look at Teslas subsidies and compare that to the likes of BYD. This is not because of chinas subsidies, their EV market is margin to the bone super hard competition and the west has subsidies themselves. The problem is that these companies are more efficient in every way and provide more value per dollar. GM does tens of billions of buybacks, no innovation, little investment...we cant have Chinese EVs! 

[Luca]

8 hours ago, Hektor said:

https://www.nytimes.com/2024/05/17/business/china-property-mortgages.html

 

China Says It Will Start Buying Apartments as Housing Slump Worsens

Signaling growing alarm, policymakers ramped up efforts to stem a continued decline in real estate values.

 

Chinese officials on Friday took their boldest step yet, unveiling a nationwide plan to buy up some of the vast housing stock languishing on the market. They also loosened rules for mortgages.

 

The flurry of activity came just hours after new economic data revealed a hard truth: No one wants to buy houses right now.

Interesting move, still need to read up on this.

[Luca]

On 5/14/2024 at 9:46 PM, crs223 said:

This is what Biden is afraid of:

 

 

Yeah, it's crazy. The same costs 2-3x in the West and you have to pay 200 USD extra for every coup holder or whatever...but people won't be allowed to have it because it's unacceptable to Western government to have their protected car players lose margins and get all this competition...does it matter for the worker if they work at BYD factory or Tesla factory? Primarily the very big family shareholders are protected meanwhile US investors who bought Nio shares have to suffer the competition  

Edited May 17 by Luca

[formthirteen]

10 hours ago, Luca said:

 

China Says It Will Start Buying Apartments as Housing Slump Worsens

 

Weird, I thought the agenda was common prosperity not unequal distribution of wealth or common misery.

[Luca]

31 minutes ago, formthirteen said:

 

Weird, I thought the agenda was common prosperity not unequal distribution of wealth or common misery.

How do you infer unequal distribution of wealth? Looks like they are gonna make social housing out of it but financing and further detail not revealed yet. This sounds good to me so far and sensible. 

[formthirteen]

10 hours ago, Luca said:

How do you infer unequal distribution of wealth? Looks like they are gonna make social housing out of it but financing and further detail not revealed yet. This sounds good to me so far and sensible. 

 

I would assume good money (tax payer money) is used to pay for bad investments made by companies (state/city officials?). Seems they have that in common with every country in the world. I don't think this will make their economy more effective, but it might make officials and even some citizens happy. Anyways, the Chinese should decide what they do with the money. I don't really care as long as they don't become as aggressive as the Russians. Oh wait, they (Xi and Putin) already seem to be (literally) on the same road hugging each other:

 

 

[Luca]

22 minutes ago, formthirteen said:

 

I would assume good money (tax payer money) is used to pay for bad investments made by companies (state/city officials?). Seems they have that in common with every country in the world. I don't think this will make their economy more effective, but it might make officials and even some citizens happy. Anyways, the Chinese should decide what they do with the money. I don't really care as long as they don't become as aggressive as the Russians. Oh wait, they (Xi and Putin) already seem to be (literally) on the same road hugging each other:

 

 

Well, I think they see what a mistake it was to give real estate developers that much market freedom, and future regulation will prevent this situation from occurring again. For now, something has to be done and I agree that the government can use the situation and make the best out of it. 

 

Russia has deep cultural ties with China, they share a huge border and there are countries in China with many Russian-speaking people that have close ties to Russia. It is not in China's Interest to join Washington's sanction games and hostility towards Russia so IMO they are doing just what's fine for China. 

Edited May 18 by Luca

[Hektor]

https://www.barrons.com/articles/how-chinas-retirement-crisis-is-contributing-to-weak-consumption-811dc64a

 

How China’s Retirement Crisis Is Contributing to Weak Consumption

Demographics and a feeble economy are straining both China’s pension system and the family tradition of children caring for aging parents.

[hillfronter83]

a pretty balanced view (IMO) from an expat:

 

[Hektor]

https://fortune.com/asia/2024/05/17/chinas-real-estate-workers-90-pay-cuts-skipping-social-events-survive-property-slump/

 

The slump has tossed some 500,000 people out of the property sector in the three years through 2023, according to Ke Yan Zhi Ku, a real estate research group. That’s not counting workers in related industries such as construction and marketing. They’re all facing setbacks in the middle of their careers, forced to make skill adjustments “on an epic scale,” says Alex Capri, senior fellow at the National University of Singapore. “The property meltdown is feeding a wider sense of somber reflection.”

 

The days when some real estate companies doled out Mercedes-Benzes as yearend bonuses are a distant memory, but many analysts say this isn’t rock bottom yet. The housing sector’s economic heft may shrink to about 16% of China’s GDP by 2026, according to Bloomberg Economics. That possibility threatens to put about 5 million people—equal to the population of Ireland—at risk of unemployment or reduced incomes, the analysts wrote. Even young workers in their prime are struggling to find jobs, with the youth unemployment rate reaching 15.3% after China revised its data methodology. 

[Hektor]

https://www.nytimes.com/2024/05/25/world/asia/china-surveillance-xi.html
 

Xi Jinping’s Recipe for Total Control: An Army of Eyes and Ears

Reviving a Mao-era surveillance campaign, the authorities are tracking residents, schoolchildren and businesses to forestall any potential unrest.

 

The Chinese Communist Party has long wielded perhaps the world’s most sweeping surveillance apparatus against activists and others who might possibly voice discontent. Then, during the coronavirus pandemic, the surveillance reached an unprecedented scale, tracking virtually every urban resident in the name of preventing infections.

 

Now, it is clear that Mr. Xi wants to make that expanded control permanent, and to push it even further.

 

The goal is no longer just to address specific threats, such as the virus or dissidents. It is to embed the party so deeply in daily life that no trouble, no matter how seemingly minor or apolitical, can even arise.

Mr. Xi has branded this effort the “Fengqiao experience for a new era.” The Beijing suburb in the propaganda video, Zhangjiawan, was recently recognized in state media as a national exemplar of the approach.

“Fengqiao” refers to a town where, during the Mao era, the party encouraged residents to “re-educate” purported political enemies, through so-called struggle sessions where people were publicly insulted and humiliated until they admitted crimes such as writing anti-communist poetry.

 

Mr. Xi, who invokes Fengqiao regularly in major speeches, has not called for a revival of struggle sessions, in which supposed offenders were sometimes beaten or tortured. But the idea is the same: harnessing ordinary people alongside the police to suppress any challenges to the party and uphold the party’s legitimacy.

[coffeecaninvestor]

This might have been brought up before but it really got me thinking about the quality of GDP for countries, and the complexity of international investing. I was listening to a podcast (if I remember  the episode I will send the link) and the guest was negative on China. His thesis was that the country is really great at producing GDP, but not wealth. He gave an example that they will spend billions building a bridge that will save the population making very little wages and the ROIC will be terrible versus doing that in the US where the economics are much better. I think China is in the too hard pile for me… I’m sure there will be some winners there, but on average over time I think things are just too difficult. I got close to buying Tencent mainly because a good chunk of its revenue was global, but didn’t pull the trigger. If CM only had a 50% win rate in China with Li Lu as a resource what chance do I have picking a winner there.. 

[Intelligent_Investor]

You can get rich with a much lower than 50% win rate

[Castanza]

18 minutes ago, Intelligent_Investor said:

You can get rich with a much lower than 50% win rate

 

You can also become poor with a similar rate 

[james22]

2 hours ago, coffeecaninvestor said:

. . . the complexity of international investing.

 

 

 

[coffeecaninvestor]

27 minutes ago, Intelligent_Investor said:

You can get rich with a much lower than 50% win rate

I agree but we aren't Charlie or Li Lu so our hit rate is bound to be less and/or luck will be a much larger component rather than skill/edge.