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Author Topic: China  (Read 163867 times)
ccp
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« Reply #600 on: March 12, 2016, 09:45:03 AM »

Yes we spend hundreds of billions and probably trillions in R & D and they  just "march" in and steal the blueprints for comparatively nothing. 

So Gilder says 'big deal'?

He lost me on that one going back 16 yrs or thereabouts.
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G M
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« Reply #601 on: March 12, 2016, 09:47:22 AM »

Yes we spend hundreds of billions and probably trillions in R & D and they  just "march" in and steal the blueprints for comparatively nothing. 

So Gilder says 'big deal'?

He lost me on that one going back 16 yrs or thereabouts.

It is a big deal, and not enough is being done.
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DougMacG
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« Reply #602 on: March 12, 2016, 03:45:59 PM »

They steal intellectual property on a massive basis via hacking.

That's right.   We need enforcement,  not a trade war.
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ccp
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« Reply #603 on: March 13, 2016, 06:16:11 AM »

My question is 'why'?  Why is China increasing military power in the South China Sea?  No one is threatening them.  The sea lanes are open.  What do they hope to achieve?  It could only mean some sort of expansion.  ? Is this against Japan.  Taiwan?   Indonesia?  What?  It would be like us building up atolls with military offensive capability in the Caribbean.

http://www.breitbart.com/national-security/2016/03/11/intelligence-chief-china-will-have-substantial-military-power-in-south-china-sea-by-2017/
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G M
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« Reply #604 on: March 13, 2016, 07:43:21 AM »

My question is 'why'?  Why is China increasing military power in the South China Sea?  No one is threatening them.  The sea lanes are open.  What do they hope to achieve?  It could only mean some sort of expansion.  ? Is this against Japan.  Taiwan?   Indonesia?  What?  It would be like us building up atolls with military offensive capability in the Caribbean.

http://www.breitbart.com/national-security/2016/03/11/intelligence-chief-china-will-have-substantial-military-power-in-south-china-sea-by-2017/

China is the "Middle Kingdom", as in between heaven and earth. They see themselves as ascending to first a regional superpower and eventually a global superpower. They see it as a position wrongfully deprived of them in the past by imperialist powers that they will now claim.
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Crafty_Dog
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« Reply #605 on: March 15, 2016, 08:02:17 PM »

Someone around here has been predicting this for quite some time  evil

by Anne Stevenson-Yang and
Kevin Dougherty
March 14, 2016 12:17 p.m. ET
12 COMMENTS

After initial declines in the Chinese market to start the year, the past few weeks have seen signs of what some would call a rebound. Lending in China rose by 67% in January, iron-ore prices initially rallied by 64% and housing sales in the top four markets surged. The yuan gained back half of the nearly 7% it had lost against the dollar since November, sending hedge funds that had shorted on the currency running for cover. And yet there remains no sign of life in the underlying Chinese economy.

More than $800 billion in credit that had been pushed into the economy in January failed to boost production or increase sales. Producer prices remained negative, dropping 5.1% in January-February, while the manufacturing PMI fell to 48 in February from 48.4 in January, indicating worsening contraction. That’s because the rally was the result of a coordinated government effort to restore confidence in the China Dream of limitless growth at home and glory abroad. The market, apparently, isn’t so easily convinced.

From hiding capital outflows to propping up real-estate values, manipulating futures markets and squeezing short-sellers of the yuan, Chinese authorities have been trying to bring back the old, quasisuperstitious belief in Beijing’s omnipotence. But the political desperation behind these efforts betrays a different story: that an impending currency crisis is a signal of the dream’s undoing.

That’s why in China getting money out of the country is now the major preoccupation of both families and corporations. Risk-averse individuals are trading out of the wealth-management products they used to buy for 10% yields and moving their money to safety in the U.S., Australia, Canada and Europe. Chinese companies are making extravagant bids for overseas assets such as General Electric ’s appliance division, the equipment maker Terex Corp. , the near-dead Norwegian web browser Opera, the Swiss pesticides group Syngenta, technology distributor Ingram Micro and even the Chicago Stock Exchange.

In the first six weeks of 2016, Chinese firms committed to spending $82 billion on such acquisitions. Last year saw nearly $1 trillion in capital outflows, including a decline of $512.66 billion in the foreign reserves. Although no one is sure how much of China’s reserves are liquid and available, it’s safe to say that, at this rate, China can’t afford capital flight for more than another year.

One way to stem the crisis would be through depreciation. That would be sound policy for the people of China, but it’s a dreaded last resort for a leadership that wants, more than jobs for its people, to bolster buying power and save political face overseas. Yet history shows that holding the line on the currency is a losing strategy. Tightened liquidity causes more pain to the economy and simply delays the inevitable.

National leaders, when faced with a disorderly adjustment, will inevitably resist markets, promise major structural changes (which are then slow to materialize), inject liquidity into financial markets and insist that everything is under control. But these measures rarely work and in fact have never worked when imbalances are as severe as they are in China today.

In other countries, currency crises usually followed a sudden and irreversible loss of confidence. The Asian Tigers were booming and then fell apart rapidly. Same in Russia. China faces the added difficulty of having little institutional memory and few tools to manage the economy in a time of capital scarcity. And there is no sign that capital-outflow pressure will ease.

And so a painful adjustment will be unavoidable: Property values will decline by an estimated 50% from the current reported average of $142 per square foot in tier-two cities, roughly equivalent to the national average in the U.S., where incomes are much higher. (Current price-to-income ratios in China are generally over 20, while the U.S. averages about three.) Excess industrial capacity will shut down. People will lose their jobs.

But Beijing still has a choice: Either let the yuan take some of the pressure of adjustment, or let all of it fall on the domestic market. Placed in such stark terms, a currency adjustment seems inevitable.

A likely depreciation of at least 15% against the U.S. dollar would take the renminbi back to where it was on the eve of the global financial crisis, before speculative capital inflows flooded into China and drove up the currency’s value. This would be a “reset event” globally. All forecasts for inflation/deflation, interest rates, currency crosses, growth and commodity prices would have to be ripped up and recalculated. It would likely lead to an emerging-markets crash. As a percentage of global gross domestic product, China today is nearly twice the size of Asia (excluding Japan) in 1997.

Commodities, emerging-market equities and multinationals with exposure to China have already started to realize significant losses. Soon major corrections will reach other assets boosted by the Chinese economy, such as property values in Hong Kong and Singapore. When this unfolds, U.S. government bonds may be the world’s only safe haven. The end of the China story is at hand.

Ms. Stevenson-Yang is co-founder of J Capital Research Ltd. Mr. Dougherty is chief investment officer of KDGF Asset Management.
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Crafty_Dog
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« Reply #606 on: May 27, 2016, 12:15:01 AM »

http://www.ft.com/cms/s/2/e99ff7a8-0bd8-11e6-9456-444ab5211a2f.html#axzz49pX8DbnI
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DougMacG
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« Reply #607 on: May 27, 2016, 07:19:05 AM »



(subscriber content.)   Another look:
http://www.latimes.com/world/asia/la-fg-pakistan-china-snap-story.html
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Crafty_Dog
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« Reply #608 on: May 27, 2016, 04:27:26 PM »

Good follow up.
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Crafty_Dog
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« Reply #609 on: July 25, 2016, 04:34:39 PM »

 Dawn for the Dead Companies of China
Analysis
July 25, 2016 | 09:00 GMT Print
Text Size
China is grappling with how to handle unprofitable industries, many of them state-owned, that keep employment numbers up but threaten the nation's macroeconomic stability. (Kevin Frayer/Getty Images)
Summary

China is battling a ghastly economic problem. For months, the country's so-called zombie corporations — failing, mostly state-controlled companies — have been teetering on the brink of bankruptcy, caught among high and rising levels of debt, ballooning debt-servicing costs and slim or nonexistent profits. In response, China's State Council released a statement July 18 describing a possible pilot program to enable indebted corporations to convert some of their outstanding debts to equities held by Chinese banks. On its own, a corporate debt-to-equity swap would do little to reform these companies into productive and profitable businesses, a key requirement if China is to "rebalance" to a more sustainable growth model. Even so, it would help lower the businesses' debt burden in the short term. For Beijing, bound as it is by the need to maintain employment and, in turn, social stability, that may be enough to stave off a crisis for the time being.
Analysis

Zombie corporations have been a serious problem for Chinese economic authorities since at least 2011. But when China's real estate sector entered a prolonged slowdown in 2014, the companies became an even greater risk. A large majority of them are state-controlled (or closely affiliated) enterprises engaged in property-related sectors, including residential and commercial development, infrastructure construction, steelmaking, and iron ore and coal production. Over the past two years, steady declines in real estate activity — which by some measures accounts for over a quarter of China's total economic output — have dragged down income and profits across the thousands of businesses in those sectors. As a result, foundering businesses turned to bank loans and shadow financing to cover the costs of maintaining their workforces, sending corporate debt levels soaring. In all but a few cases, the political imperative to prevent unemployment crises that could fuel broader social unrest — a powerful motivator for China's central and local governments alike — overpowered authorities' desire to reform the economy by letting failing companies fail.
A Staggering Problem

Now corporate debt is the greatest structural threat to Chinese macroeconomic stability. China's ratio of corporate debt to gross domestic product reached 165 percent by December 2015, up from 101.7 percent in 2008, the year before Beijing launched its emergency stimulus drive. By comparison, household and government debt equaled 40 and 22 percent of GDP, respectively, at the end of 2015 (though the government debt figure does not include debt held by local government financing vehicles, private companies responsible for raising money for local government investment since 2008-09). Corporate debt was by far the largest component of China's 247 percent total debt-to-GDP ratio, according to Moody's Investors Service.

Perhaps more concerning is the fact that state-owned enterprises (SOEs) account for 55 percent of total outstanding corporate debt, according to the International Monetary Fund, though they produce only 22 percent of China's total economic output. This imbalance helps explain the state's disproportionate representation among China's zombie corporations. On one hand, SOEs enjoy easy access to bank credit long denied to their private-sector counterparts. On the other, they face enormous pressure from their overseers in local, provincial and central governments to maintain stable output and employment. Combined, these factors give SOEs powerful incentive to keep borrowing and producing regardless of the wider economic costs. While China's private sector has steadily improved its efficiency, productivity and profits, the state sector has, by and large, lagged. In the coal and steel industries, dominated by hundreds of local and provincial state-controlled businesses, the contrast is especially pronounced. In many cases, these companies are too small, and their ties to local officials and banks too tight, for Beijing to control.
A Temporary Solution

The debt-to-equity swap proposal reveals Beijing's efforts to reconcile its growing desire for industrial reform and consolidation with local political and economic conditions. China's central government remains committed to reforming and restructuring Chinese industry, and, in particular, the state sector. At the same time, however, it understands that it can go forward with the measures only as long as the workers affected are taken care of, at least well enough to prevent unrest. Given China's weak economy and slowing industrial profits, that objective will entail finding new ways to temporarily offset borrowing and other costs for deeply indebted enterprises.

To be sure, a debt-to-equity swap program could itself be a means to achieve industrial reform and restructuring. Combined with serious corporate governance reforms and forced consolidations of truly moribund enterprises, the swap could help put struggling but fundamentally sound businesses on surer financial footing going forward. Chinese authorities will certainly try to play up this aspect of the program. Nonetheless, the primary purpose and effect of the swap in the short run will be to reduce borrowing costs for corporations, much as the debt-to-bond swap program for local governments has served mainly to offset localities' borrowing costs. Without corporate governance reforms and industrial restructuring — changes that will depend on deeper adjustments to China's political incentive structure — the swap program would not go far in making Chinese SOEs the pillars of productivity that Beijing envisions.

Like the local government bond program before it, the new swap program will probably come into being slowly. In light of the State Council's announcement, some form of pilot program could well be in place by the end of 2016. But in all likelihood, it will be at least six months and probably longer before a program on a scale sufficient to address China's overall corporate debt exists. In the meantime, China's leaders will struggle to manage the country's corporate bankruptcy risks. If the housing sector falters again in the second half of the year, this will prove an even greater challenge.
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Crafty_Dog
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« Reply #610 on: September 19, 2016, 11:26:40 PM »

The WSJ catches up with my table pounding here  grin

China’s Growing Credit Risk
The bubble grows as Beijing keeps pushing growth before reform.
Sept. 19, 2016 7:30 p.m. ET


Respectable financial analysts once derided the tiny coterie of “China bears” for warning that the country could face a financial crisis. But over the last year the risk of a bad loan reckoning has become conventional wisdom. While Beijing possesses the resources to shore up the banking system, its continuing efforts to stimulate growth with more lending are complicating China’s economic and political predicament.

The latest alarm comes from the Bank for International Settlements, the clearing house of central banks in Basel. Its latest quarterly review shows that China’s credit-to-GDP gap, which measures credit growth above a country’s long-run trend, is now 30.1%. Anything above 10% is usually considered a red flag.

The idea behind the ratio is that there is no specific debt level that causes problems in all economies, but a sudden borrowing spree is a good predictor of a crisis. It suggests a mania in which loans create the illusion of high returns, which justifies more borrowing. The U.S. credit-to-GDP gap breached the 10% level in 2007 right before the housing bubble burst. As Goldman Sachs warned earlier this year, “Every major country with a rapid increase in debt has experienced either a financial crisis or a prolonged slowdown in GDP growth.”

The speed of China’s borrowing was staggering as Beijing opened the credit taps to stop the effects of the global financial crisis from reaching China. Total debt in the economy zoomed to more than 250% at the end of last year from less than 150% at the end of 2007.

This is especially worrying because the ratio continues to climb despite Beijing’s decision last year to rein in wasteful investment and undertake supply-side reforms. The government promised to stop state banks from evergreening, the practice of making new loans so troubled borrowers can repay old ones. Such zombie companies were supposed to go bankrupt. Instead China has seen few defaults.

Beijing has a good political reason for its caution. Carrying out reform promises would slow growth, and every time that happens social unrest soars. The protests this year in the town of Wukan seem to reprise the violence seen there in 2011, the last time the economy went south.

In the past few months Beijing has encouraged the three policy banks to finance new investments by state-owned enterprises. Banks have also fueled a mortgage boom that has boosted property prices. While the central bank hasn’t cut rates or reserve requirements, it has used open-market operations to give banks more liquidity.

Government statistics show that the banks’ nonperforming-loan ratio is approaching 2%, an 11-year high. But even officials acknowledge that the real number is much higher. Banking analyst Charlene Chu has predicted that it could reach 22%. That would require Beijing to recapitalize the banking system as it did in the early 2000s.

Fixing the financial system could be much messier this time, due to the advent of shadow banking. The state banks have created a complex web of “wealth management products” that attract investors with higher returns than ordinary deposits. According to Ms. Chu, WMPs grew by $1.1 trillion last year, accounting for nearly 40% of total credit growth.

These short-term liabilities fund long-term assets, a mismatch that has exacerbated crises elsewhere. And many of the buyers are other institutions, reminiscent of the U.S. mortgage-backed securities in 2008. Savers don’t understand the risks, and banks have been forced to repay their principal when the WMPs fail. A run on these investments could cause serious unrest and erode middle-class trust in the government.

Beijing faces a daunting challenge of engineering a market-driven deleveraging of an economy that has become dependent on monetary and fiscal stimulus. Managing the inevitable political fallout could be as dangerous as the economic risks.
 
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Crafty_Dog
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« Reply #611 on: October 22, 2016, 08:47:55 AM »

http://www.breakpoint.org/bpcommentaries/entry/13/30008

I have repeatedly made this point here for many years.
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