China

[tnp20]

 

BofA does not think its not a balance sheet recession ...its a growth recession. Their case is compelling.

 

Different disease requires different (policy) prescription.

 

china5.pdf

[tnp20]

1 hour ago, Parsad said:

All these Chinese hedge funds are going to have to liquidate their portfolios where possible as they shutter!  Cheers!

 

My bess guess is the impact of this is less than $100B...and if its hedged... it may be a muted impact as longs and shorts are closed.

 

There have been lot of market structure changes in the last few years - nearly all have been positive with a view that they are setting this up for the stock market to be the new (safer) vehicle where Chinese money goes ....instead of housing. As with housing, the runway for stock could be both long and epic (bubble culmination). Realistically, china's long term GDP growth potential is closer to 4% with shorter burst rates of up to 5-6% but with low deposit and bond rates and housing not a good option, stock market seems like a good alternative. 3-4% sustained is still a pretty good rate for the market to do well.

 

 

 

Edited August 11, 2023 by tnp20

[Haryana]

On 7/11/2023 at 7:42 AM, Luca said:

US capital definitely behind the slandering of China, pushing the media both domestic but also in europe to publish more and more "china danger" articles. 

 

https://youtu.be/DjjND_ky6t4

 

Apparently most Western media houses have always been weapons of colonialism and expansionism to world domination.

 

[Luke]

2 hours ago, Haryana said:

Apparently most Western media houses have always been weapons of colonialism and expansionism to world domination.

 

Worth to think about: 

 

https://link.springer.com/chapter/10.1057/9781137028303_3

 

Ha-Joon Chang enlists economic history to mount a provocative critique of the “Washington Consensus” — the standard set of policy recommendations that aim to promote economic development in poor countries. According to the consensus, developing countries should adopt a set of “good policies” and “good institutions” to improve their economic performance. The good policies include stable macroeconomic policies, a liberal trade and investment regime, and privatization and deregulation. The good institutions include democratic government, protection of property rights (including intellectual property), an independent central bank, and transparent corporate governance institutions and financial establishments. These policies have been embraced by the World Bank, the International Monetary Fund, and many mainstream economists, hence the term Washington Consensus.

 

Chang highlights the paradox that many of today’s high income countries did not pursue such policies when they were climbing the economic ladder of success in the nineteenth century. Rather, these countries implemented high tariffs and sectoral industrial policies, lagged in the introduction of democratic reforms, stole industrial technologies from one another, did not have independent central banks, and so forth. Therefore, in Chang’s view, developed countries are hypocritical when they seek to deny developing countries access to these same policy tools and when they urge them to adopt democratic reforms and protect intellectual property.

 

Chang, who is Assistant Director of Development Studies at the University of Cambridge (UK), divides his slim book into four chapters. Each chapter focuses on the policies pursued a century ago by the leading rich countries of today (Britain, United States, Germany, Japan, and other European countries) and compares those policies to the ones that developing countries are urged to adopt the Washington Consensus. Chapter One introduces the book and asks “How Did the Rich Countries Really Become Rich?” Chapter Two looks at trade and industrial policies designed to allow developing countries to “catch up” with industrial countries. Chapter Three focuses on institutions and good governance. Chapter Four concludes with lessons from the past.

 

https://en.wikipedia.org/wiki/Ha-Joon_Chang

Edited August 12, 2023 by Luca

[Luke]

It's also so strange to hear the US government talk about the strength of their system, freedom and democracy while their OWN universities conducted studies (I shared research from princeton university) that showed that the opinion of the majority does not influence the direction of where the US will develop. There is a serious amount of people not voting in the US:

 

 

Maybe because it doesn't matter what they vote for, their opinions don't matter?

 

Is china so bad because you cant vote but meanwhile you can vote in the US but it doesnt matter one bit? 

 

I wonder what chinese secret service knows about the US, hard to see the full picture. 

 

Is china better? Hard to say, certainly both countries have their fingers dirty and are fighting for ressources. 

Edited August 12, 2023 by Luca

[Luke]

From an Investors Standpoint the US has rights that are far superior, regulation far more lenient etc. Their businesses are super dominant globally, many still side with the US. So understandable people exiting China. 

[Luke]

I recently listened to another podcast looking at why china specifically has been able to catch up with their development compared to other underdeveloped nations, I found an additional interesting commentary, I will link some things I found remarkable:

 

1. 19th century china perceived themselves superior to the west and ignored the industrial revolution, didnt copy the growth happening in england. 

2. Outside spectators often wonder how a communist government was able to make this radical economic move towards industrialization, the important key is that government and capitalism always went hand in hand which makes chinas uprising less surprising. 

3. Germany in the 19th century was in a similar situation as china was before it started their industrialization, almost no factories, underdeveloped and mainly agricultural economy. Distance to britain got bigger and bigger and what did they do: 

 

Stealing technology, textile machines, railroads, steal production etc. Prussian state sent industrial spies to england to get access to these machines, in around 1870 germans catched up with the british economy. From then they developed their own economic research. 

4. China is doing the same as germany did now, combination of legal and illegal industrial copying/stealing by means of: 

 

a) Western companies that want to export to china are forced to enter agreements with local chinese companies-->technology transfer. (nobody forces western countries to do that, they could simply not invest into china but if they dont they are losing the scale advantage to competition that does have the chinese market)

b) the government in peking coordinates and finances ownership of foreign companies to gain technology knowledge-->invested between 2014-2017 in 175 german companies, majority were car suppliers, alternative engines, energy systems, biomedicine, medical devices. 

c) the government in peking does not punish industrial espionage in foreign countries, they use every trick, observing phone calls, reading mails, infiltrating computers etc. 

 

BUT these tricks are not new, Japan, Taiwan and also southkorea only developed because they used foreign know how. This stealing ends when they reach the technological status of the already developed countries. This is happening now in china-->

 

2017 they were placed on position 5 in administrating patents with the EU, behind the US, Germany, Japan and France. 

 

In order to develop their country and catch up, the local economy HAS to deliver and export to the world market because local demand ist too little that industrial companies would be worth it. China targeted on exports which lead to huge trade surpluses. 

 

Normally the chinese yuan would have gotten huge currency upgrades because chinese goods where in such high demand but that would have lead to price increases in these goods so the chinese government artificially pushed the yuan down and bought USD and invested these into US treasury bills. 

 

The opposite side of this export surplus was that chinese goods became to cheap and they financed american consumption. They cant sell their USD and treasury bills without losses due to the size. Instead of doing the old strategy china now bets on buying factories in foreign countries and building infrastructure->silk road. 

 

Goal of the silk road is of course  to increase trade with wealthy country with buying power. 

 

Banning semiconductor devices in china is actually leading to more chinese independence because previously they were disfavoured due to the edge nvidia and co still have, local companies will have bigger RnD budgets and more customers->better development. 

 

 

 

 

Edited August 12, 2023 by Luca

[Luke]

So who is the bad guy here? Consumers are not the losers in this situation, the additional competition will lead to better prices. Its investors, business owners that would lose, coincidentally these persons of interest have huge influence on politics and the media and thats where the growing hate against china is coming from. 

 

 

 

 

[Luke]

https://displaydaily.com/boe-records-remarkable-27-flagship-smartphone-panel-market-share-in-q123-driven-by-foldable-oled-sales-and-major-partnerships/

 

https://www.boe.com/en/innovativeTechnologies/BOEInnovation

 

 

 

Changing landscape of smartphone panel makers. Samsung dropped from 21.3 to 15%

 

Huge jumps for its Chinese competitor HKC and of course BOE. 3 out of top 4 are from mainland

 

In OLED, Chinese firms hit 120m & >40% in H1

 

[crs223]

2 hours ago, Luca said:

Banning semiconductor devices in china is actually leading to more chinese independence

 

If the US wants to hurt China, it should repeal the chip ban.

[Luke]

29 minutes ago, crs223 said:

 

If the US wants to hurt China, it should repeal the chip ban.

Yep, i think that is true for the long term. Short term it will hurt.

[zippy1]

Hard to imagine failing to come up with the cash for only US$22.5m
https://asia.nikkei.com/Business/Markets/Property/China-Country-Garden-to-suspend-onshore-bond-trading-from-Monday
 

[james22]

China Is Screwed: Pipe People

 

https://www.battleswarmblog.com/?p=55184

[cubsfan]

1 hour ago, james22 said:

China Is Screwed: Pipe People

 

https://www.battleswarmblog.com/?p=55184

Whoa- that’s a hell of a read!

[zippy1]

"China reports big data miss in July, stops releasing youth unemployment numbers"

"Contrary to prior reports, the latest release did not break down unemployment by age. The age 16 to 24 category has seen unemployment far above the overall jobless rate, reaching a record high of 21.3% in June.
A spokesperson for the National Bureau of Statistics said the bureau is suspending the youth unemployment number release due to economic and social changes, and is reassessing its methodology."
https://www.cnbc.com/2023/08/15/china-economy-july-industrial-output-fixed-asset-retail-data.html

[Luke]

10 hours ago, james22 said:

China Is Screwed: Pipe People

 

https://www.battleswarmblog.com/?p=55184

Absolute contrarian indicator, should make people really excited about value in China

[Ulti]

Good interview /analysis with the bp and leading candidate for Taiwan election in January 

[UK]

3 hours ago, zippy1 said:

"...stops releasing youth unemployment numbers"

 

Funny, but yet another wrong step. Fact or propaganda:)?

[UK]

2 hours ago, Luca said:

Absolute contrarian indicator, should make people really excited about value in China

 

Luca, I definitely agree with you on contrarian situation here and big excitement on a micro level/valuations, especially on Prosus/Tencent. But it seems to me that all political/geopolitical/macro situation just continues to go to the wrong direction. And in order to succeed just beeing contrarian is not enought. But I hope things still could change and you will also be right in the end.

 

Edited August 15, 2023 by UK

[zippy1]

14 minutes ago, UK said:

 

Funny, but yet another wrong step. Fact or propaganda:)?

Historically, I think the youth unemployement rate tends to peak in July due to students graduating in May and June. Below link has the historical data.  Maybe this is a case of "if there is no good things to say, don't say anything?"
Maybe this year's July number is worse than what can be explained by the seasonal changes like what happened in the prior years; hence, the reluctance in releasing the number.
https://www.macromicro.me/collections/22/cn-gdp-relative/21469/cn-the-urban-surveyed-unemployment-rate

Edited August 15, 2023 by zippy1

[UK]

43 minutes ago, zippy1 said:

Maybe this is a case of "if there is no good things to say, don't say anything?"

 

Also: 

 

https://www.bloomberg.com/news/articles/2023-08-08/xi-speak-and-closed-doors-obscure-china-s-18-trillion-economy

 

Taking the pulse of China’s $18 trillion economy is getting tougher for foreign visitors who previously could count on holding informative meetings with key policy makers. While “old friends” such as Bill Gates and Henry Kissinger have gained access to the highest rungs of power in widely publicized visits this year, it’s been a different story for bankers, economists and businesspeople returning after three years of closed borders. Accounts from more than a dozen people, some who asked not to be identified to speak freely, describe dinner invitations that were seen as potential ethics breaches and politely declined, silence around taboo topics such as deflation and bland party speak replacing the honest exchange of ideas. Once-familiar officials, they said, are now fearful of breaching newly broadened anti-espionage laws as President Xi Jinping grows more wary of the US and its allies. Cliff Kupchan, chairman of political risk consultancy Eurasia Group, said he was still able to meet with long-time contacts on his first trip since the pandemic in over three years, but they were more reticent about expressing their views or had shifted toward the official line. “The number of Xi Jinping quotes I got was far more than any previous trip,” he said.

 

The deepening opacity — coming as China’s economic rebound falters — threatens to further undermine the already wavering confidence of foreign businesses and investors, rattled in part by a crackdown on consulting companies earlier this year. One gauge of foreign direct investment has slumped to the lowest level in 25 years and overseas funds aren’t buying into the stock market’s recent rally.

 

Edited August 15, 2023 by UK

[Luke]

37 minutes ago, UK said:

 

Luca, I definitely agree with you on contrarian situation here and big excitement on a micro level/valuations, especially on Prosus/Tencent. But it seems to me that all political/geopolitical/macro situation just continues going to the wrong direction. And in order to succeed just beeing contrarian is not enought. But I hope things still could change and you will also be right in the end.

Yeah, it's a rough spot for china right now, but isn't the best time to buy into big strong super well managed companies when the macro looks bad and everybody hates it? Buying in 2008 was hard because everything looked ugly but the reality is that with a long term view, buying big strong companies at a discount was smart. China is a huge country, leading in science and technology, more than 4000 years of recorded history, the government is not filled with idiots (respectable degrees, MBA etc), i seriously don't think they will run things down. There will and always was less freedom of business than in the US, less freedom in what individuals do. So much hate flying against China, from investors especially. Many guys in my circle sold things at big losses in October 2022 and swore "never again". The geopolitical situation is hot because china is so damn well competent in many fields, they have many players that are getting even more superior to western peers and EU and US...the track record for the CCP the last 20 years was massive and with some ups and downs they will recoordinate the economy to achieve the wealth and respect they want to achieve. 

 

 

[Luke]

So i am seeing the negative headlines to continue while over the coming years their economy stabilizes and growth continues. The investments will continue, the huge part of the still poor population in china will get lifted out of poverty with competent financial moves by the CCP (that can regulate like no other state), and china will look better and stronger 10 years down the road. There will be more people taking part in their digital economy, benefitting the smart management of Tencent that knows china inside out. Geopolitics will change too over time, the leaders of today are all 70 years+, if one is willing to own these ownership mindset largecaps like tencent for the next 15 years, even better via prosus due to buybacks and discount. I think the probability is a lot higher we will make a lot of money here than not. 

[Luke]

People need drama to be entertained, just look at some of these photos and headlines. Clickbait, onesided, trying to make you spend time watching it because the life of most Chinese citizens is normal and boring! They completely miss the full picture. I can make videos like this about every country in europe, we could have made some nice horror show clips about the protests in france! 

 

[Luke]

 

Unemployment rates in EU member states, talking about Sweden, Italy etc. is boring, doesnt make as good of an article than the mysterious autocratic foreign country named china!