China

[Viking]

9 minutes ago, Spekulatius said:

@Viking as I said before, this was an unforced error by China, which tried to intimidate and failed. I also came to the conclusion that Xi Jinping is tremendously overrated - he is a really poor leader for China.

 

Now it seems that China is stuck with him for likely for a long time, the downside of an autocratic regime.

 

@Spekulatius I think you might be right. I am 1/2 way through the video you posted on Xi (thanks for doing that). A real eye opener. It sure makes one appreciative of liberal democracies of the West (with all their faults).  

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From an investing perspective, China is in my too hard pile... especially given Xi's hard pivot to nationalism/communism/autocracy and the rising tensions with the West. Not to say there are not great investments there... just not a fit for me.  

Edited August 2, 2022 by Viking

[Spekulatius]

10 minutes ago, Viking said:

 

@Sweet no, of course in am not blaming the US. I am just trying to understand what is going on (from the very different perspective of each player). And how things are likely to play out in the future. And hopefully make some $ along the way

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Bottom line, Taiwan is a big, big deal for China. US is crossing a line... i am not sure why. Perhaps US is not happy with China's positioning with Russia and Ukraine war. What do you do if you want to get China's full attention? Visit Taiwan. The next move is now China's. What will they do? Escalate or not?    

The visit was planned for quite some time, initially planned in April and delayed because Pelosi got COVID-19. So, the Chinese knew about this for many many month (probably February). They didn't need to make it a big deal, they choose to.

Edited August 2, 2022 by Spekulatius

[formthirteen]

As a not-yet-retired five-star armchair general with combat experience from Desert Storm and later wars, my prediction is that Nancy just pulled the rug out from under Xi and China. Nobody (I) will be able to trust or respect a leader that is upset over visitors to a neighboring country. Oh wait, VIX still at 23.93. Forget what I said.

 

 

 

Edited August 2, 2022 by formthirteen

[Parsad]

On 7/30/2022 at 9:44 AM, Gregmal said:

Regardless of what’s going on, haven’t folks realized by now it’s a bad idea in general to make bets against basically everything blowing up? Essentially wagering that the powers that be will just stand by and let it happen? You’re already seeing it in the US….now folks wanna blame and be hostile that the bear trade is losing steam but bottom line is you should know better and when there’s intervention, like there always is, you don’t get to moan and groan about how you got screwed. 
 

Even more generally speaking, WTF is it with the bear people? Like there’s a million and one ways you can make easy money being long a whole variety of things. Yet for some reason these folks have this need to stand on a pedestal, screaming for attention, hoping to call a measly 10-25% down move? Which is not only challenging, but also difficult to time. So these experts and fund managers and doomsdayers aren’t even really trying to make money it seems, but simply get attention and walk around for a short while as “the guy who called it”….isn’t that kind of pathetic? 

 

And your upside is limited while the downside is unlimited!  It's just stupid.  Cheers!

[ICUMD]

China has been at 'Battle' with USA for 20-30 years on many fronts: economically, technologically and now with governance.

 

USA has just wisened up to this challenge. Pelosi's visit is a political test of boundaries and reaction.  Just like Russia is testing NATO resolve in the Ukraine.  

 

Give an authoritarian Muppet leader an inch and they will take Manhattan.  

[sleepydragon]

1 hour ago, formthirteen said:

As a not-yet-retired five-star armchair general with combat experience from Desert Storm and later wars, my prediction is that Nancy just pulled the rug out from under Xi and China. Nobody (I) will be able to trust or respect a leader that is upset over visitors to a neighboring country. Oh wait, VIX still at 23.93. Forget what I said.

 

 

 

to be fair, if Xi can have birthday party with Putin why can’t Pelosi have a tour with Taiwan? What’s the big deal. I feel China is acting up intentionally, to support someone own agenda of remaining in power — or some are certain fractions in China who want to escalate- maybe the defense companies

 

[Spekulatius]

Here is a translation of the controversial intelligence law from 2017 that was referenced in the recent DW feature posted above.

https://www.chinalawtranslate.com/en/national-intelligence-law-of-the-p-r-c-2017/
 

Key provisions see, to be 7 and 11. Those clearly state is that every Chinese citizen or organization has to cooperate with the national intelligence agency, be it in China or abroad.

 

Someone tell if I took crazy pills and TikTok or any other Chinese company would not sent information on US citizens to China if the Chinese intelligence service asks them to.

 

 

[zippy1]

10 hours ago, Spekulatius said:

Here is a translation of the controversial intelligence law from 2017 that was referenced in the recent DW feature posted above.

https://www.chinalawtranslate.com/en/national-intelligence-law-of-the-p-r-c-2017/
 

Key provisions see, to be 7 and 11. Those clearly state is that every Chinese citizen or organization has to cooperate with the national intelligence agency, be it in China or abroad.

 

Someone tell if I took crazy pills and TikTok or any other Chinese company would not sent information on US citizens to China if the Chinese intelligence service asks them to.

 

 

No, you are exactly right.  It was there and it caused quite a lot concerns when the law passed a few years back. 

China is a "rule-by-law" society and not a "rule-of-law" society.  The laws are written for government to "govern" the people.  You can see this philosophy clearly based on what was put in the law.  

[changegonnacome]

On 8/2/2022 at 4:04 PM, Spekulatius said:

They didn't need to make it a big deal, they choose to.

 

Yep my read too - China has lots of problems going on right now...........an external enemy to direct attention to is a useful distraction.......I think the level of noise made around Pelosi visit should be seen not as a show of strength by the Chinese but rather a sign of internal domestic weaknesses bedeviling the Xi administration.

[meiroy]

8 hours ago, changegonnacome said:

 

Yep my read too - China has lots of problems going on right now...........an external enemy to direct attention to is a useful distraction.......I think the level of noise made around Pelosi visit should be seen not as a show of strength by the Chinese but rather a sign of internal domestic weaknesses bedeviling the Xi administration.

 

The "noise" as you call it always exists, it's always in the background, it fills local Chinese news. In that sense, nothing really changed. As far as China is concerned, Taiwan is 100% Chinese. You could flip it and say that they feel stronger, and that's why there's more external noise.

 

I would definitely agree that deteriorating economic situation leads to a higher probability of war.  With the global macro trajectory of the past decade this become more and more likely, going hand in hand with sovereign defaults.  This doesn't apply only to China.

[changegonnacome]

4 hours ago, meiroy said:

The "noise" as you call it always exists

 

For sure it does, completely agree the Americans, the Japanese……the CCP feeds Chinese society the constant hum of xenophobic diatribes through state media - but sometimes its useful for a regime to turn the volume up or down depending on their needs…..the Pelosi trip, in a different set of domestic circumstances, would have been dialed up to a 7……..this time they choose to dial the volume all the way up to 11……that tells you something very interesting about China domestically in 2022

[sleepydragon]

The problem is not China, the problem is Xi. His other title is “the big accelerator”— accelerate China to doom.

[Sweet]

Xi and the CCP control China, therefore it is a China problem.  Like the Nazis made Germany a global problem in WW2.

[tnp20]

Spek, I have great respect for you having followed you here and BAK board.

 

I am invested in China. My views are more nuanced about it.

 

Xi needs China's economy to continue to grow and develop - both in terms of technology prowess, global integration and depth and increasing wealth of the populace. It is from here that he derives ultimate support from within the party. Fail economically and move China backwards and he is OUT, perhaps after a long delay and painful fight but he is OUT.

 

Xi is certainly in the Mao mold. Authoritarian/autocratic, non-transparent, Nationalistic, and not particularly bright. It is interesting that he chooses Mao over Deng Xio Ping as his role model. Mao was a disaster for China. Deng was the savior for Chinese economy. I have a lot of Chinese friends, some even nationalistic. For the most part, they have negative view of China primarily because of authotarianism, corruption and lack of basic freedoms. Some felt a whilst back that as china develops economically, it will become more like the west and open up and be more democratic and transparent. Well that idea is gone now, it wont happen under Xi !  Xi wants to develop a chinese version of Capitalism  where certain favored sectors benefit and perceived bad sectors get punished. Its all very ad-hoc and not rules based. It was supposed to be that China becamse more rules based over time as they develop their legal system but foreign investors have been scared off by the arbitary and ad-hoc and heavy handed top down approach. Some investors will never come back (until Xi is gone I supposed and they take a different direction) whilst other investors like myself are watching things carefully and only investing in sectors that are deemed safer and favored. Ofcourse with Xi, nothing is safe and he could make a rule tomorrow and the stock crashes but I doubt he wants to destroy national champions that are doing good for the economy and lines up with their goals....so I think investing in China is ok, but selectively, but one also has to watch the evolving direction and perhaps watch Xi's further moves ...further moves towards more centralized economy and random punishment for various sectors/companies  would be very negative indeed. I dont feel we are there or heading there yet. Their heavy handed nature for the tech sector was mostly bad implementation not total "kill" the industry.

Edited August 8, 2022 by tnp20

[ICUMD]

9 minutes ago, tnp20 said:

Spek, I have great respect for you having followed you here and BAK board.

 

I am invested in China. My views are more nuanced about it.

 

Xi needs China's economy to continue to grow and develop - both in terms of technology prowess, global integration and depth and increasing wealth of the populace. It is from here that he derives ultimate support from within the party. Fail economically and move China backwards and he is OUT, perhaps after a long delay and painful fight but he is OUT.

 

Xi is certainly in the Mao mold. Authoritarian/autocratic, non-transparent, Nationalistic, and not particularly bright. It is interesting that he chooses Mao over Deng Xio Ping as his role model. Mao was a disaster for China. Deng was the savior for Chinese economy. I have a lot of Chinese friends, some even nationalistic. For the most part, they have negative view of China primarily because of authotarianism, corruption and lack of basic freedoms. Some felt a whilst back that as china develops economically, it will become more like the west and open up and be more democratic and transparent. Well that idea is gone now, it wont happen under Xi !  Xi wants to develop a chinese version of Capitalism  where certain favored sectors benefit and perceived bad sectors get punished. Its all very ad-hoc and not rules based. It was supposed to be that China becamse more rules based over time as they develop their legal system but foreign investors have been scared off by the arbitary and ad-hoc and heavy handed top down approach. Some investors will never come back (until Xi is gone I supposed and they take a different direction) whilst other investors like myself are watching things carefully and only investing in sectors that are deemed safer and favored. Ofcourse with Xi, nothing is safe and he could make a rule tomorrow and the stock crashes but I doubt he wants to destroy national champions that are doing good for the economy and lines up with their goals....so I think investing in China is ok, but selectively, but one also has to watch the evolving direction and perhaps watch Xi's further moves ...further moves towards more centralized economy and random punishment for various sectors/companies  would be very negative indeed. I dont feel we are there or heading there yet. Their heavy handed nature for the tech sector was mostly bad implementation not total "kill" the industry.

I like this balanced viewpoint on China.

 

Ultimately, I don't think Autocratic societies will thrive in today's digital age over the longer run since people ultimately value freedom and stability.  Seeing your friends in other countries enjoying a comfortable life while you work 996, will become a more difficult sell to your people as prosperity grows.

 

 

 

 

[Spekulatius]

@tnp20 fair comments. I don't think Xi is out to kill the tech sector, but he was certainly out to get back at individuals (like Jack Ma). The whole crackdown then spread affected the whole sector, whether that was intended or not (See DiDi, education sector and Alibaba / Tencents) My views on China were way more positive in the past and maybe they are too myopic now.

 

I think some bets in Chinese stocks can work out well , but I would rather try my luck with non-tech stocks (China Postal bank being one example) that are less likely to be in the CCP's crosshairs than with Alibaba and others.

 

I just think there are easier ways to make money investing than trying to make money with Chinese stocks that have huge (imo) tail risk.

[Sweet]

Can you trust China?

 

Do you believe your capital is protected and would be free from interference by the Chinese government?

 

Can you trust the financials of companies, that they are telling the truth and not lying or masking problems at the heart of businesses?

 

Is there a regulator that is independent, and will do the right thing even if the government don’t like it?

 

For me the answer to all of the above is no.  Therefore I have to stay away from any company based or have the vast majority of their business in China.  
 

I think there is an unappreciated chance that your holdings would go to zero.

[crs223]

I believe China should be punished for killing 1M Americans with COVID and another 100k/year from fentanyl.

 

Even if China is blowing this out of proportion to hide internal problems: what did we gain from the photo op?

 

China now launching missiles over Taiwan.

 

 

Edited August 8, 2022 by crs223

[meiroy]

The crackdown on the tech sector was at least partially justified.

 

The short version is that some of these companies managed to grow extremely fast in scale and scope due to lack of regulation in a developing country. It got to the point where it could cause systemic risk or stifle the economy.

 

The RE sector is far worse. Any adjustment will hurt. Regardless who's in charge.

 

 

 

 

 

 

[hillfronter83]

Top China Strategist Sees Stocks in Limbo as GDP Growth Slows to 2%

 

Hong is one of the top China analysts. Fired from his job because of his bearish view of Chinese market and banned from all social media. He is quite active on twitter since started "vacationing". Worth a follow IMO.

[ICUMD]

3 hours ago, hillfronter83 said:

Top China Strategist Sees Stocks in Limbo as GDP Growth Slows to 2%

 

Hong is one of the top China analysts. Fired from his job because of his bearish view of Chinese market and banned from all social media. He is quite active on twitter since started "vacationing". Worth a follow IMO.

I'm no China analyst, but if one thing is apparent, it's that China wishes to dominate politically, economically and militarily. 

 

I think their key companies like BABA Tencent etc need to do well for them to achieve this goal. 

 

They are a means to and end. 

Regardless of what challenges they face, I doubt they will be stagnating for the next decade. 

 

Applying western capital rules to an Autocratic government may be the mistake.

[elliott]

On 8/10/2022 at 3:07 PM, hillfronter83 said:

Top China Strategist Sees Stocks in Limbo as GDP Growth Slows to 2%

 

Hong is one of the top China analysts. Fired from his job because of his bearish view of Chinese market and banned from all social media. He is quite active on twitter since started "vacationing". Worth a follow IMO.

I have not read the article, but according to professor Pettis, GDP slowing considerably would not be a bad sign but exactly the opposite, a very positive development for China.

Edited August 11, 2022 by elliott
rephrasing

[Cigarbutt]

On 8/11/2022 at 4:49 PM, elliott said:

I have not read the article, but according to professor Pettis, GDP slowing considerably would not be a bad sign but exactly the opposite, a very positive development for China.

Opinion: This is not exactly what Mr. Pettis suggests..

What a slowing GDP growth may mean:

-yes maybe a 'successful' centrally-driven transformation to a more 'productive' phase

but also

-the possible realization of slower (perhaps much slower) growth ahead and the amortization of bezzle.

-----

In China (much more now than in other developing and developed countries), GDP numbers are an input and not an output outcome.

This has given rise to an amazing catch-up phase but diminishing returns have started to trickle down.

For the last few years (especially since GFC), debt levels have grown faster (and accelerating despite central efforts to curb debt growth and to boost 'productive' growth) than GDP and productivity measures are going down. China is still in the catch-up phase but is already surpassing all developed countries (except Japan):

Demography is destiny (not quite) and China interestingly has caught up and more in that respect and this will be interesting to watch.

Baby bust: China’s looming demographic disaster | The Spectator

Diminishing productivity linked to higher debt levels and an aging population is the story of our times though. And China will be leading the way in a command-and-control fashion.

[maplevalue]

https://www.economist.com/business/2022/08/05/meet-chinas-new-tycoons

 

- Some businesses suffering, but others thriving in Xi Jinping China

- Record 58bn in IPOs in mainland China this year (19bn in America, 5bn in HK)

- By 2020 privately controlled companies were half market capitalization of China’s 100 biggest firms, versus one tenth a decade earlier

- Five years ago mood began to shift: first crackdown on conglomerates, then shadow banks shut down, then tech giants hit with regulator probes

- Next generation of entrepreneurs, Mr Xi recently urged them to “dare to start a business”

- Unwavering support for startups, as long as focused in priority areas: cloud computing, green energy, high-end manufacturing

[Parsad]

Sheesh!  Build'em to house people and then tear them down to keep real estate prices/demand up. 

 

China Finance 101!  Cheers!

 

https://finance.yahoo.com/news/china-tears-down-tower-blocks-122948254.html