China

[Spekulatius]

36 minutes ago, Parsad said:

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

That’s essentially the broken window fallacy implemented as a public policy, on a large scale:

https://en.wikipedia.org/wiki/Parable_of_the_broken_window

Edited August 23, 2022 by Spekulatius

[mcliu]

Aren't these Fathom Consulting guys China perma-bears? 

[Spekulatius]

On 8/23/2022 at 3:03 PM, mcliu said:

Aren't these Fathom Consulting guys China perma-bears? 

Probably. You should take what every source states with a huge grain of salt. Xi has a tough decision to make - on the one hand, they want to make owning a home cheaper to help out young families and perhaps the demographics in the long run, on the other hand lower home prices may de-stabilize the financial system and cause unrest with existing home owners.

 

We know there is financial stress in the system, because China lowers its interest rates and seems to do some sort of quantitative easing while the US is tightening. This is interesting because China has their currency pegged to the USD so it generally means that monetary policy in China has to track the US. That means that we will likely see a devaluation of the Yuan relative to the USD.

Edited September 1, 2022 by Spekulatius

[mcliu]

China has numerous problems, but so does every country.

These China analysts keep failing because they only focus on the problems but miss the big picture.

 

If anything, it's the Western governments that are failing its constituents by failing to provide quality education and infrastructure. Luckily, we can rely on the private sector for some of the shortcomings but private sector can't do it all.

 

Education:

 

Infrastructure:

[Parsad]

Comments from China's largest developer:

 

https://www.wsj.com/articles/chinas-property-market-has-slid-into-severe-depression-real-estate-giant-says-11661863259?siteid=yhoof2

[Castanza]

The Daily Upside

 

SEMICONDUCTORS

China Claps Back After US Curbs Nvidia’s Exports

All the chips are on the table now.   China’s biggest tech firms face a murky future after the US government on Wednesday told Nvidia to halt all China-bound exports of two computing chips crucial to developing artificial intelligence. Experts say the move is a major escalation in the two nations’ battle for tech supremacy – and could severely limit China from advancing its AI capabilities.

Code of Semi-Conduct

Tensions are mounting between the world’s two most powerful nations as Beijing continues to menace Taiwan, home to much of the world’s semiconductor production. The US’ latest salvo is barring sales to China, Hong Kong, and Russia of Nvidia's high-powered A100 and H100 computer chips, which are often employed in massive data centers to power advanced AI natural language and image recognition tools.   Washington says the action was primarily designed to keep American technology from being used to advance China’s military prowess. But its impact is also expected to strafe China’s biggest tech companies:

•   China’s trio of top cloud computing companies, Tencent, Alibaba, and Baidu, all use the A100 chip for cloud computing and storage services, as well as various AI-powered data analysis tasks. Other top Chinese customers include BYD Auto, IT giant Lenovo, and cloud provider Inspur.

•   In total, China and Hong Kong sales accounted for over 25% of Nvidia’s $27 billion of revenue in fiscal year 2022, and the new rules will cost Nvidia about 10% of long-term future revenue, Truist Securities analysts wrote in a note. Most Chinese firms will now have to patch together multiple, lower-end Nvidia chips in lieu of the high-powered A100 and H100 chips.

China is not happy about any of this. “The U.S. side should immediately stop its erroneous practices, treat companies from all countries equally, including from China, and do more to contribute to world economic stability,” Chinese Commerce Ministry spokesperson Shu Jueting said Thursday in a statement. A New Player: Another rising global power, India, wants in on the lucrative chip game, too. On Thursday, its government announced $10 billion in incentives for manufacturers to establish semiconductor fabrication plants in the country. Already, Singapore-based IGSS Ventures, Israeli group ISMC, and Foxconn have signed letters of intent to develop Indian-based sites. Now, the chips will fall where they may.

[sleepydragon]

1 hour ago, Castanza said:

The Daily Upside

 

SEMICONDUCTORS

China Claps Back After US Curbs Nvidia’s Exports

All the chips are on the table now.   China’s biggest tech firms face a murky future after the US government on Wednesday told Nvidia to halt all China-bound exports of two computing chips crucial to developing artificial intelligence. Experts say the move is a major escalation in the two nations’ battle for tech supremacy – and could severely limit China from advancing its AI capabilities.

Code of Semi-Conduct

Tensions are mounting between the world’s two most powerful nations as Beijing continues to menace Taiwan, home to much of the world’s semiconductor production. The US’ latest salvo is barring sales to China, Hong Kong, and Russia of Nvidia's high-powered A100 and H100 computer chips, which are often employed in massive data centers to power advanced AI natural language and image recognition tools.   Washington says the action was primarily designed to keep American technology from being used to advance China’s military prowess. But its impact is also expected to strafe China’s biggest tech companies:

•   China’s trio of top cloud computing companies, Tencent, Alibaba, and Baidu, all use the A100 chip for cloud computing and storage services, as well as various AI-powered data analysis tasks. Other top Chinese customers include BYD Auto, IT giant Lenovo, and cloud provider Inspur.

•   In total, China and Hong Kong sales accounted for over 25% of Nvidia’s $27 billion of revenue in fiscal year 2022, and the new rules will cost Nvidia about 10% of long-term future revenue, Truist Securities analysts wrote in a note. Most Chinese firms will now have to patch together multiple, lower-end Nvidia chips in lieu of the high-powered A100 and H100 chips.

China is not happy about any of this. “The U.S. side should immediately stop its erroneous practices, treat companies from all countries equally, including from China, and do more to contribute to world economic stability,” Chinese Commerce Ministry spokesperson Shu Jueting said Thursday in a statement. A New Player: Another rising global power, India, wants in on the lucrative chip game, too. On Thursday, its government announced $10 billion in incentives for manufacturers to establish semiconductor fabrication plants in the country. Already, Singapore-based IGSS Ventures, Israeli group ISMC, and Foxconn have signed letters of intent to develop Indian-based sites. Now, the chips will fall where they may.

For baba it may not be that bad. Cloud is capx intensive and they can spend less money. Also, cloud servers with this fast chip are extremely costly, most people who need it use their own machines.

 

but it’s not good in the big picture. It’s not good for companies in US or China if both sides keep escalating trade wars. I voted for Biden because he was for globalization, now everything he’s doing is against business. I guess it’s better to vote for a idiot than a dr. Evil. Not much choice was given.

 

[Spekulatius]

1 hour ago, sleepydragon said:

For baba it may not be that bad. Cloud is capx intensive and they can spend less money. Also, cloud servers with this fast chip are extremely costly, most people who need it use their own machines.

 

but it’s not good in the big picture. It’s not good for companies in US or China if both sides keep escalating trade wars. I voted for Biden because he was for globalization, now everything he’s doing is against business. I guess it’s better to vote for a idiot than a dr. Evil. Not much choice was given.

 

AI chips are dual use tech, just like high tech laser components. The latter had export controls for a long time.

 

I think semis are very vulnerable to an escalation of Chinese- US trade war. The exposure of semi equipment companies like AMAT and LCRX is huge. Then there are those with indirect exposure like AAPL.

Edited September 2, 2022 by Spekulatius

[Castanza]

2 hours ago, Spekulatius said:

AI chips are dual use tech, just like high tech laser components. The latter had export controls for a long time.

 

I think semis are very vulnerable to an escalation of Chinese- US trade war. The exposure of semi equipment companies like AMAT and LCRX is huge. Then there are those with indirect exposure like AAPL.

 

Unless China somehow defies typical tech advancement and brings competitive chips to market I don't see how there won't be some type of conflict in the future. Whether that's 10,20, or 50 years (or never) from now who knows. But we've had the Oil wars already and silicon is the next most important thing to secure global dominance (imo). Either way, not something I spend a lot of time thinking about. Plenty of ways to make money in any environment. 

3 hours ago, sleepydragon said:

For baba it may not be that bad. Cloud is capx intensive and they can spend less money. Also, cloud servers with this fast chip are extremely costly, most people who need it use their own machines.

 

but it’s not good in the big picture. It’s not good for companies in US or China if both sides keep escalating trade wars. I voted for Biden because he was for globalization, now everything he’s doing is against business. I guess it’s better to vote for a idiot than a dr. Evil. Not much choice was given.

 

 

I think Free Trade is much different than Globalism. The later is a pipe dream imo. But also not really sure what you consider or lump into Globalism. Either way not important lol. As far as BABA and Chinese tech companies go, it could be a big deal if China can not figure out their own tech to keep them competitive. That being said Intel has the freedom/ability here but seems to be squandering it with poor business decisions haha 

[mcliu]

Insane escalate. Why antagonize 1.5 billion Chinese people.. Feeds right into Chinese propaganda that the West is trying to hold it back like during the Opium wars.

[Castanza]

15 minutes ago, mcliu said:

Feeds right into Chinese propaganda that the West is trying to hold it back like during the Opium wars.

 Are we not trying to do exactly that? 

[Viking]

China is a wolf in sheep's clothing (politically and economically). It is run by a communist government and its core values are diametrically opposed to those of Western nations. This was ignored for decades… China’s political and economic clout was small so who cared? That is no longer the case today: China is a political and economic gorilla. And for some strange reason it has also decided to shed the sheep’s clothing. The wolf is now in plain sight for all to see.
 

Western governments and companies are slowly and finally starting to  understand the reality of China. It is a formidable adversary who plays by very different rules (THERE ARE NO RULES in a communist system… think about that). Liberal democracies are at a big disadvantage (in terms of playbook).

 

Over time, political and economic relations between the West and China will continue to get worse. For 2 reasons:

1.) the West has woken from its stupor and recognizes China for the threat that it is

2.) China has decided it will kowtow to the West no more - in economic, political and military terms it has reached ‘critical mass’
So that means game on.

 

With chips, the US is not poking China in the eye. Rather, the US is simply recognizing the current reality and acting accordingly (better late than never). We now have Cold War Book 2. The West vs the authoritarian block (lead by China). 
 

Western companies operating in China better get their heads out of their ass. Nvidea is just another example of what is coming for companies who refuse to deal with reality. 

Edited September 2, 2022 by Viking

[Spekulatius]

Just listened to the odd lot's podcast about  China. It does a good job of describing the confluence of factors currently impacting the Chinese economy (real estate, zero COVID, stimulus (or lack thereoff), drought etc.)

https://www.bloomberg.com/news/articles/2022-09-05/odd-lots-podcast-tom-orlik-on-china-s-economy-covid-zero-and-real-estate?srnd=oddlots-podcast

 

[Ballinvarosig Investors]

https://www.foreignaffairs.com/china/xi-jinping-china-weakness-hubris-paranoia-threaten-future

 

Must read article on what's going on in China politically. Is Xi really the man you want to hitch your wagon to?

[maxthetrade]

On 9/2/2022 at 11:18 PM, Viking said:

China is a wolf in sheep's clothing (politically and economically). It is run by a communist government and its core values are diametrically opposed to those of Western nations. This was ignored for decades… China’s political and economic clout was small so who cared? That is no longer the case today: China is a political and economic gorilla. And for some strange reason it has also decided to shed the sheep’s clothing. The wolf is now in plain sight for all to see.
 

Western governments and companies are slowly and finally starting to  understand the reality of China. It is a formidable adversary who plays by very different rules (THERE ARE NO RULES in a communist system… think about that). Liberal democracies are at a big disadvantage (in terms of playbook).

 

Over time, political and economic relations between the West and China will continue to get worse. For 2 reasons:

1.) the West has woken from its stupor and recognizes China for the threat that it is

2.) China has decided it will kowtow to the West no more - in economic, political and military terms it has reached ‘critical mass’
So that means game on.

 

With chips, the US is not poking China in the eye. Rather, the US is simply recognizing the current reality and acting accordingly (better late than never). We now have Cold War Book 2. The West vs the authoritarian block (lead by China). 
 

Western companies operating in China better get their heads out of their ass. Nvidea is just another example of what is coming for companies who refuse to deal with reality. 

 

Couldn't agree more! I thought that China under Deng Xiaoping was on a path to more freedom, this has completely changed under Xi Jinping who clearly is a neo Maoist. On the one hand that scares me on the other hand if gives me hope that he completely screws up.

It's time for the free democracies to wake up and deal with reality.

[Spekulatius]

35 minutes ago, maxthetrade said:

 

Couldn't agree more! I thought that China under Deng Xiaoping was on a path to more freedom, this has completely changed under Xi Jinping who clearly is a neo Maoist. On the one hand that scares me on the other hand if gives me hope that he completely screws up.

It's time for the free democracies to wake up and deal with reality.

I also went from being a moderate bull on Chinese stocks to being bearish. The stuff is all out there, the well researched DW documentary, Document #9, the spy legislation. It's not a surprise that the performance of Chinese equity has been crappy in general.

Now, if you chose to invest in China, you first have to make sure you know what you are buying but also how it fits into the political framework and then there are tripwires like fraud, delisting's and pot sanctions as well as the possibility of another iron curtain rolling up once China tries the Taiwan unification. Seems like a lot of risk for what you are getting.

 

There is certainly opportunity there, but at this point investing in China feels like playing in hard mode.

[Viking]

5 hours ago, Ballinvarosig Investors said:

https://www.foreignaffairs.com/china/xi-jinping-china-weakness-hubris-paranoia-threaten-future

 

Must read article on what's going on in China politically. Is Xi really the man you want to hitch your wagon to?

Anyone who doesn’t understand how China works needs to read that article. What a messed up political system. As China’s economy continues to get bigger, just like with the former Soviet Union, allocation of scare resources gets much more difficult with a communist model. Thanks for posting. 

Edited September 9, 2022 by Viking

[sleepydragon]

I think contra to what most people think, Chinese stock is going to rally huge after Xi is confirmed.

The strict Covid policy and Taiwan issues etc we see now is a reflection of the fierce in-flighting within CCP.  After the in-fighting is completed, Xi will focus on economy. Massive stimulus is coming.
there’s also a lot rumors (some seems quite convincing) on Twitter that Xi will not be re-elected or will take a smaller role if he is. 

[aceskc]

Isnt Covid Zero a Xi mandate? Why would he back down after gaining more power?

[sleepydragon]

2 hours ago, aceskc said:

Isnt Covid Zero a Xi mandate? Why would he back down after gaining more power?

Covid zero policy enable him to exercise his power and grab more power, same as what Pelosi’s visit enabled him to move more military and promoted generals he liked. When he is confirmed to rule again, his focus will hopefully turn into economy.

 

[Spekulatius]

14 minutes ago, sleepydragon said:

Covid zero policy enable him to exercise his power and grab more power, same as what Pelosi’s visit enabled him to move more military and promoted generals he liked. When he is confirmed to rule again, his focus will hopefully turn into economy.

 

Yes, he could focus on other things after being confirmed, but why helped Zero COVID-19 helped him grab more power?

It seems more likely that he put a stance on this and now can't walk it back easily, since it makes him look wrong and weak. If so, the Zero COVID  policy likely will remain there for quite some time.

 

It's interesting that this is also related to China not having a vaccine that works. They got out of the gate early with a vaccine that has proven not to be effective, even sold it to countries like Thailand (which stopped ordering it).

 

I guess they could have made a deal with western companies like Moderna or Pfizer but then they would have to swallow the bitter pill that they couldn't do this themselves. They rather lock up millions from time to time when a new wave blasts through the country.

 

That's the thing with autocracies, stupid things can keep going on for a long time, if they come from the top. For them it makes sense to rather pay a high price than admit you are wrong. They don't have the purge mechanism of a democracy that can get rid of bad governance with elections.

Edited September 9, 2022 by Spekulatius

[crs223]

23 minutes ago, Spekulatius said:

That's the thing with autocracies, stupid things can keep going on for a long time

 

… things can be stopped quickly too

 

https://globalnews.ca/news/8164763/china-ban-sissy-men-effeminate/

[Castanza]

6 hours ago, sleepydragon said:

I think contra to what most people think, Chinese stock is going to rally huge after Xi is confirmed.

The strict Covid policy and Taiwan issues etc we see now is a reflection of the fierce in-flighting within CCP.  After the in-fighting is completed, Xi will focus on economy. Massive stimulus is coming.
there’s also a lot rumors (some seems quite convincing) on Twitter that Xi will not be re-elected or will take a smaller role if he is. 

After the infighting is done? Does it ever end? With who as the winner? Xi? He wants a more closed isolated China. His policies speak for themselves. 

[Viking]

1 hour ago, crs223 said:

 

… things can be stopped quickly too

 

https://globalnews.ca/news/8164763/china-ban-sissy-men-effeminate/

 

China continues to crack down and reveal their true colors. And not surprisingly China's 'new' values (text book definition of totalitarian) look to be almost an exact match to Apple's values as a company. I wonder how all of this also plays into a companies ESG score? How do you even score a totalitarian regime like China's on ESG? What a mess...

-----------

Macho, macho man.

 

China wants to be a country of macho men, and it’s trying to make that happen by banning “sissy” boybands and “effeminate” males from all media in the nation.

 

Broadcasters must “resolutely put an end to sissy men and other abnormal esthetics,” the National Radio and TV Administration wrote in a new set of rules released Thursday. It also used the term “niang pao,” an insult for effeminate men that means “girlie guns.”

 

The new rules call for broadcasters to enforce a “correct beauty standard” and to boycott “vulgar” internet celebrities and celebrations of wealth, while promoting “traditional Chinese culture, revolutionary culture and socialist culture.” They also ban all “idol audition shows” and recommend blacklisting anyone who has broken the law or offended public morals.

 

Additionally, the rules say that broadcasters should avoid airing anything that is “overly entertaining.”

The Chinese Communist Party’s propaganda department announced the new media masculinity rules on Thursday, in its latest effort to police morality through censorship.

 

President Xi Jinping has essentially pledged to Make China Great Again with a “national rejuvenation,” which he is trying to pull off through strict control of all business, education, culture and religion in the country.

 

The CCP has racked up a long list of censorship and human rights abuses in recent years, from the persecution of ethnic Uighurs in Xinjiang, to the complete denial of the 1989 massacre at Tiananmen Square, to new rules that ban certain karaoke songs or limit children from playing more than three hours of online video games a week.

Even Winnie the Pooh has been banned, after the character was once used to mock Xi.

Edited September 9, 2022 by Viking

[sleepydragon]

Keep in mind Xi doesn’t represent china. He’s pretty powerful now, but he has lost a lot of support from regular Chinese in recent years. He’s not that powerful as it appears now.
Just like you won’t stop investing in US stock markets when you have a bad president, you shouldn’t stop investing in good companies because of you have a political or macro view..