China

[UK]

https://www.economist.com/finance-and-economics/2024/07/23/why-is-xi-jinping-building-secret-commodity-stockpiles

 

https://www.economist.com/asia/2024/07/27/america-recreates-a-warfighting-command-in-japan

 

Edited July 28 by UK

[nsx5200]

https://www.economist.com/china/2024/07/18/fury-erupts-in-china-over-a-food-safety-scandal

 

“A great nation is rising. But it can’t even guarantee the basic safety of cooking oil,” wrote one of many outraged users on Weibo.

 

I think that's a great summary.  The race to be the lowest producer of consumer goods, world-swaying military force is not as easy as China make it out to be.  The population in China are merely tools for the CCCP to advance their agenda, and if not controlled properly, can turn on the CCCP party.  That's the true open-secret: people can easily be enemy for the Chinese government in the long-term.  Note that previous whistleblowers to such scandals have not been praised, but have disappeared, or at least been censured, so it's likely these type of issues will continue to pop up.

 

Like previous food scandals, its citizens are forced to devise solutions on their own.  Chinese people import milk powder not because they're so prosperous, it's because they're forced to fend for themselves.  Journalist have reported increased sale of home oil presses.

 

https://www.nutraingredients-asia.com/Article/2024/04/15/major-infant-nutrition-brands-gaining-market-shares-in-china-despite-shrinking-birth-rates#:~:text=Register here.,Trending ingredients

As of last December, the top five English label infant formulas in China in terms of market value share were Aptamil (44.5 per cent), a2 milk (20.6 per cent), Nestle (6.7 per cent), Mead Johnson (4.9 per cent), and Friso (4.2 per cent). In terms of China label products, Feihe took the lead at 21.4 per cent, followed by Yili (9.8 per cent), Aptamil at 7.7 per cent, Friso at 7.2 per cent, and Junlebao at seven per cent, data from Kantar Worldpanel showed.

[crs223]

1 hour ago, nsx5200 said:

A great nation is rising. But it can’t even guarantee the basic safety of cooking oil

 

I didn’t read the article.  But here is how I see that quote:

 

1. Chinese call their nation “great” - long term asset

 

2. Chinese call their nation “rising” - long term asset

 

3. Chinese being poisoned by the food supply - short term problem

 

I had been assuming Chinese were clamoring to escape and would describe the country as a hellhole — evidently it’s a great rising country.

 

Every growing country will have problems like this.  Take the US - richest country in the world cannot stop people from shitting on the sidewalks in Philadelphia and San Francisco (probably elsewhere too).

[Hektor]

https://www.washingtonpost.com/immigration/interactive/2024/china-migrants-us-border-san-diego-new-york/

 

Migrants from China ‘walk the line’ to U.S. border, testing Biden and Xi

Driven in part by the stifling economic and political fallout of China’s extended covid-19 lockdowns, the Chinese arrivals have become a political and national security flash point in Washington.

[nsx5200]

18 hours ago, crs223 said:

Every growing country will have problems like this.  Take the US - richest country in the world cannot stop people from shitting on the sidewalks in Philadelphia and San Francisco (probably elsewhere too).

Thanks.  That's a great long-term view of that particular issue, even though that food safety is a long-standing issue within China.  It is nevertheless a good way to view contemporary issues.

 

I read somewhere that Charlie Munger gave a speech on China something along the lines of "China, 2000 years in the past, 2000 years into the future".  Did anybody run across any of that material?  TIA.

[james22]

Five conservative states have forced their employee pension funds to divest from China over the past year, amid increased tension with the Asian country, and more are considering following suit.

 

Tension between the United States and China has been worsening for years, but Director of U.S. National Intelligence Avril Haines most recently warned lawmakers in May that China is preparing for increasingly unstable relationships with the United States.

 

Indiana, Florida, Missouri, Oklahoma, and Kansas are leading the calls to divest from the economic powerhouse, over fears that U.S. assets could be frozen if conflict breaks out between China and Taiwan, Politico reported Friday.

 

https://justthenews.com/nation/states/five-states-force-employee-pension-funds-divest-china-amid-increasing-tension

[Hektor]

Chinese are enterprising!

 

https://www.nytimes.com/2024/07/30/business/chinese-electric-vehicles-thailand.html

 

Chinese E.V. Makers Rush in and Upend a Country’s Entire Auto Market

China’s electric vehicle companies are making inroads in Thailand, a key industry hub, as Europe and the United States wield tariffs to keep them out.

 

Ma Haiyang and eight of his colleagues arrived in Thailand a year ago to establish the first overseas operation for GAC Aion, an electric vehicle maker from China. They had no office, no factory, no local employees and, basically, no clue.

 

The Aion team set up shop in a Bangkok hotel, commandeering conference rooms and holding meetings in the lobby. They had a long list of things to do: Find office space, recruit dealers and devise a business strategy. The team worked around the clock and, 74 days after arriving in Thailand, sold its first electric vehicle.

 

“The window of opportunity for Chinese new energy vehicles going overseas will be relatively short,” said Mr. Ma, general manager at Aion for Southeast Asia, using China’s preferred phrase for fully electric and gas-electric hybrid vehicles. “This is why we wanted to hurry up,” he added.

[nsx5200]

https://www.wsj.com/world/china/chinas-politburo-pledges-steps-to-boost-consumer-spending-f18e6a5b

"As the recovery has shown signs of slowing this year, China’s central bank has already jumped into the fray, delivering a string of surprise rate cuts last week that amount to the most substantial easing of monetary policy so far this year."

"The Politburo’s downbeat tone indicates that more policy support and stimulus could be in the offing."

 

As much as I dislike the CCCP, they are working on the issues, which is good for everyone inside and outside of China.

[ValueArb]

On 7/29/2024 at 8:23 AM, james22 said:

Five conservative states have forced their employee pension funds to divest from China over the past year, amid increased tension with the Asian country, and more are considering following suit.

 

Tension between the United States and China has been worsening for years, but Director of U.S. National Intelligence Avril Haines most recently warned lawmakers in May that China is preparing for increasingly unstable relationships with the United States.

 

Indiana, Florida, Missouri, Oklahoma, and Kansas are leading the calls to divest from the economic powerhouse, over fears that U.S. assets could be frozen if conflict breaks out between China and Taiwan, Politico reported Friday.

 

https://justthenews.com/nation/states/five-states-force-employee-pension-funds-divest-china-amid-increasing-tension

interesting take. I’ve always been of the opinion that it’s unlikely 74 years of Chinese bluster over Taiwan is going to turn into a hugely costly amphibious assault. Esp when it risks war with the powerful Japanese and Korean militaries, let alone US.

 

Of course I might be biased as I’ve put a quarter of my portfolio in Chinese companies.

 

https://nvariant.substack.com/p/my-current-favorite-stocks

[Hektor]

Looks like the crack down season in China is not over!

 

https://www.scmp.com/business/china-business/article/3273955/chinese-fund-manager-zhao-xuejun-whisked-away-beijing-cracks-down-securities-sector

 

Chinese fund manager Zhao Xuejun whisked away as Beijing cracks down on securities sector

The chairman of Harvest Fund Management has resigned after being placed under investigation, according to a statement from China’s fourth-largest mutual fund firm

 

 

[Spekulatius]

He is viewed as an open-minded professional with an international perspective on the mainland’s stock market. 
 

 

There is his problem. He will be back, fully re- educated.

[UK]

https://www.bloomberg.com/news/articles/2024-08-07/china-urges-officials-to-stop-playing-throwing-eggs-card-game

[Hektor]

Wonder how these are funded during difficult economic times. 

 

https://www.nytimes.com/interactive/2024/08/10/world/asia/china-border-villages.html 

 

China’s Great Wall of Villages

China has moved thousands of people to new settlements on its frontiers. It calls them “border guardians.”

 

Amazing villages near the frontiers. It will be interesting to see how these compare to other villages in interior China.

 

 

 

[WayWardCloud]

China does everything they can to be hated by every single one of their many neighbors. This is the most puzzling part of their global strategy to me. Do they really need a tiny bit more land here and there and what is the diplomatic cost of being such a dick to everyone else in the region? This isn't medieval times anymore.

 

I was equally scratching my head when they decided it was a good idea to send "wolf" diplomats to Europe to straight up insult and threaten us. They gained nothing and only deeply damaged their own image. I imagine they might have internal reasons that justify all this external non sense. Appeasing the hard liners nationalists in the party by giving them a bone to chew or something? Maybe some general needs to justify increasing the army budget?

 

Those settlements cancel the soft power and good will Belt and Road was supposed to bring and push away countries that should be natural allies such as Vietnam.

Edited August 11 by WayWardCloud

[Spekulatius]

Some of these villages are basically in wasteland with nothing around it. My guess is that China needs people to pay somehow to live there, because there is nothing to do.

[sleepydragon]

2 hours ago, WayWardCloud said:

China does everything they can to be hated by every single one of their many neighbors. This is the most puzzling part of their global strategy to me. Do they really need a tiny bit more land here and there and what is the diplomatic cost of being such a dick to everyone else in the region? This isn't medieval times anymore.

 

I was equally scratching my head when they decided it was a good idea to send "wolf" diplomats to Europe to straight up insult and threaten us. They gained nothing and only deeply damaged their own image. I imagine they might have internal reasons that justify all this external non sense. Appeasing the hard liners nationalists in the party by giving them a bone to chew or something? Maybe some general needs to justify increasing the army budget?

 

Those settlements cancel the soft power and good will Belt and Road was supposed to bring and push away countries that should be natural allies such as Vietnam.

the best ways for a dictator to maintain control is to be at constant wars with neighbors— look at North Korea and Russia, and Gengishi Khan. You get to feed and control the military and grab power and send people you don’t like to jail.

[formthirteen]

Made-in-China Goes Upscale as a New Generation of Brands Battles Slowdown

https://archive.is/GQDPi

 

Quote

Narwal’s Shao says the company is looking at the possibility of manufacturing some of its products in the US, Europe and other Asian countries, “to prepare for tariff and demand changes.” He’s not alone. Chinese businesses are investing abroad at the fastest pace in eight years, making $60 billion in foreign direct investments in the first five months of this year, an almost 16% increase over the same period in 2023.

 

Quote

Zongyuan Zoe Liu has a widely read article in Foreign Affairs this week about the drawbacks of China’s manufacturing-focused economic model.

 

The article gives an excellent explanation of how China promotes manufacturing. Basically, it’s all about bank finance — banks loan huge amounts of money very cheaply to manufacturers, who then compete fiercely, resulting in a flood of cheap, often undifferentiated products.

 

These price wars result in collapsing profit margins, as all the Chinese manufacturers glut the market with products no one wants to buy. It also results in a flood of exports, as Chinese manufacturers try to sell their excess capacity overseas. And it results in a mountain of corporate debt, forcing Chinese companies to stay on the treadmill of unprofitable production just to keep making their interest payments.

 

 

China’s Real Economic Crisis - Why Beijing Won’t Give Up on a Failing Model

https://www.foreignaffairs.com/china/chinas-real-economic-crisis

 

Quote

Simply put, in many crucial economic sectors, China is producing far more output than it, or foreign markets, can sustainably absorb. As a result, the Chinese economy runs the risk of getting caught in a doom loop of falling prices, insolvency, factory closures, and, ultimately, job losses. Shrinking profits have forced producers to further increase output and more heavily discount their wares in order to generate cash to service their debts. Moreover, as factories are forced to close and industries consolidate, the firms left standing are not necessarily the most efficient or most profitable. Rather, the survivors tend to be those with the best access to government subsidies and cheap financing.

 

   

Quote

What’s interesting is that this is very similar to how Japan promoted manufacturing from the 1950s through the 1980s. As Chalmers Johnson explains in his book “Miti and the Japanese Miracle”, a key component of Japanese industrial policy was “overloaning” to manufacturers, using a combination of public and private banks.

 

 

Quote

China’s industrial policy, in contrast, leans in to overcapacity by dispensing absolutely massive government subsidies to manufacturers. This is why China’s overcapacity problem is much worse than Japan’s in the 20th century, which is why countries around the world are getting mad and putting up tariffs.

 

Quote

According to party orthodoxy, China’s economic advantage derives from its low consumption and high savings rates, which generate capital that the state-controlled banking system can funnel into industrial enterprises. This system also reinforces political stability by embedding the party hierarchy into every economic sector. Because China’s bloated industrial base is dependent on cheap financing to survive—financing that the Chinese leadership can restrict at any time—the business elite is tightly bound, and even subservient, to the interests of the party. In the West, money influences politics, but in China it is the opposite: politics influences money.

 

Looking for the upside of tariffs on China - Both Trump and Harris expected to slap more tariffs on Chinese-made goods in policy that seeks to reset terms of globalization

https://asiatimes.com/2024/08/looking-for-the-upside-of-tariffs-on-china/

 

Quote

China’s government thus needs an additional incentive to shift its economic model. That incentive is tariffs. By stopping China from being able to use the rest of the world as the release valve for its overproduction, the US and other countries can hasten the day of reckoning when Chinese companies find themselves unable to offload their products at any price. That reckoning will force the Chinese government to figure out how to cut back on production.

At that point, the US and other countries can offer to remove tariffs if China agrees to voluntary export restriction and currency appreciation. But without the “stick” of tariffs to force China to deal with its own overcapacity, nothing is likely to change.

 

Quote

There’s another important way in which tariffs on China could help the rest of the world. One way for Chinese companies to partially avoid tariffs is to move their factories out of China to other countries, like Vietnam, Mexico, or Morocco.

 

This results in somewhat less revenue for China because the Chinese companies have to pay the labor, land, and energy costs in the country where they set up their factories. But Chinese companies still get to sell materials, parts, and components to their overseas assemblers, and they still get to keep the profits. So they get to partially avoid the impact of tariffs.

 

Quote

But if China could climb up the value chain, then so can Vietnam, Indonesia, Morocco and Egypt. Over time, the companies in these countries that do assembly for China will learn enough of the tricks of the trade that they’re able to make more and more of the harder, more valuable stuff.

 

In Europe, the chancellor of Germany is intent on continuing the policy of deindustrialization:

https://www.reuters.com/technology/germanys-scholz-not-convinced-about-tariffs-chinese-evs-wirtschaftswoche-2023-09-28/

 

Meanwhile in the US:

 

I wonder if, for example, GoPro and iRobot will survive the CCP policy of industrial growth at any cost? If not, more innovative companies will be founded that will outcompete the Chinese companies. Creative destruction…

 

I would expect TSLA to be able to compete with China through technological innovation and branding, but not pricing:

 

 

Edited August 11 by formthirteen

[crs223]

On 8/10/2024 at 8:30 PM, sleepydragon said:

constant wars … send people you don’t like to jail.

 

[formthirteen]

 

[Parsad]

https://finance.yahoo.com/news/china-rare-loan-drop-stokes-034230811.html

 

Cheers!

[UK]

https://www.reuters.com/markets/asia/chinas-home-price-slump-deepens-july-new-9-year-low-2024-08-15/

[forest81]

Hi Guys, Does Li Lu have a Chinese portfolio? The only portfolio I can find online is full of US stocks. If he doesn't, I find it rather odd as most Chinese stocks are at all time lows. I found an interview from 2021 with him where he was saying the future for Chinese stocks was very good and China was the ideal hunting ground for a value investor. Seems odd to me he is not buying as there are some amazing companies trading at amazing prices.

[Luke]

38 minutes ago, forest81 said:

Hi Guys, Does Li Lu have a Chinese portfolio? The only portfolio I can find online is full of US stocks. If he doesn't, I find it rather odd as most Chinese stocks are at all time lows. I found an interview from 2021 with him where he was saying the future for Chinese stocks was very good and China was the ideal hunting ground for a value investor. Seems odd to me he is not buying as there are some amazing companies trading at amazing prices.

He does but not publicly available. You can filter on the Hong Kong stock exchange for some larger positions. The rest is unknown but likely he owns some Tencent etc  

 

[nsx5200]

41 minutes ago, Luke said:

Link to search page:

https://di.hkex.com.hk/di/NSSrchPerson.aspx?src=MAIN&lang=EN&g_lang=en

[forest81]

Many Thanks