China's "Planned Capitalism" Kills Wealth | Sandy Ikeda
A story of slow strangulation.
More after the page break.
China is slowing down (again) a lot faster than anyone expected
What do you mean "anyone?" Readers of maddogslair.com have long realized that China is "slowing" and fast, and what appeared to be growth in the past was mostly a Ponzi scheme of kited debt, and valueless construction of ghost cities, roads to nowhere, and other rubbish.
Welcome to the party Business Insider . . . YOU'RE LATE!
Friedman is a smart cookie, if he thinks China is entering an existentially difficult phase, he is likely correct.
China Takes Drastic Measures To Save The Regime
China is in a rough patch, from the huge debt overhang, to the inane property values, to the fact that China has 60-70 million housing units which have been bought for speculative investment, and are unused, to the first time in human history, brand new never used ghost cities, to the wealth inequalities, to the PLA. Perhaps it will be able to suss out the problems, and find some intricate Rube Goldberg plan to resolve them, but I am not betting on it.
This is a very good analysis of China's internal problems. Friedman did not point out that using the PLA to address issues as it did in 1989 is likely no longer possible. Nor did he discuss the fact that there are a near infinite number of ethnic groups in China who hate the Han, and who are about as stable as warm Nitroglycerine.
China is a confusion of problems, competing interest, and lightly papered over chaos. It is just waiting for an economic crisis to touch off something the CCP can't control.
Caught On Tape: "Enormous Crowds" Of Unemployed Chinese Miners Take To The Streets, Clash With Riot Police
"'While so far most Chinese worker strikes had been largely peaceful, two weeks ago we said it was only a matter of time before these turned violent after Reuters reported that "China aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution.'
All this changed overnight when as AFP reports, thousands of miners in China's coal-rich (or poor depending on one's perspective) north have gone on strike over months of unpaid wages and fears that government calls to restructure their state-owned employer will lead to mass layoffs."
These are not people laid off, they are only owed back wages, and threatened with layoffs. Just wait till the layoffs begin.
"Citing the video shown below, AFP reported that thousands of protesters were marching through the streets of Shuangyashan city in Heilongjiang province, venting their frustration at Longmay Mining Holding Group, the biggest coal firm in northeast China. Pictures showed enormous crowds filling the streets.
And here is why we said this is the biggest threat facing China:
"I'm on my knees, my family can't eat," an elderly woman pleaded with a man who appeared to be a government official. "Tell me, how can we live?" she shouted, before collapsing and being rushed away by fellow protesters.
In the video footage from Heilongjiang, dozens of police cars, lights flashing, lined the streets, and protesters complained of violence by authorities as tensions mounted. 'Traffic in the centre of Shuangyashan city was halted," a witness told AFP, adding "some people were hurt.'"
The crowds are truly impressive. But this is just a local problem, right? Wrong!
"AFP adds what we have been warning about for months: "the situation in Heilongjiang exemplifies the dilemma faced by Chinese authorities, who say they want to reform the world's second-largest economy and at the same time seek to avoid unrest."
China's state-owned enterprises (SOEs) are plagued by overcapacity and many are unviable, but the government has been loathe to kill off such "zombie" companies, fearing unemployment could lead to instability.
Instability such as the one described above, and shown in the video below.
* * *
This is just the beginning: China plans to lay off about 1.8 million workers in the steel and coal industries, a human resources and social security ministry official said last month, and millions more across all state-owned "zombie firms."
Earlier this month Premier Li Keqiang again pledged to encourage "structural adjustments" in his opening speech to the annual session of China's Communist-controlled parliament. Judging by the predicted confirmation violence, the only adjustments China has in place is a massive police force trained to break up precisely such protests, something we further showed back in May 2014 when we demonstrated how 'Chinese riot police train for a "working class insurrection.'"
What's with China and zombies? There are zombie cities, zombie companies, zombie firms, zombie everything. The problem will not stop at these state owned firms, there are many other businesses which are being forced to close. China faces much unrest, and it is not clear how this will be handled. The people of China will not likely suffer tanks rolling through their streets, and citizens murdered just to keep order. On the other hand, the CCP knows little else. This could be an epic high noon showdown, if the CCP cannot find a way to defuse this situation. No matter what, it does not appear that the heady days of the early 2000s will return for China, not in the immediate future anyway.
While I am hoping for a positive outcome, with the CCP agreeing to relinquish some power, assist these destitute families, and a turn to a more reasonable growth model in China, I am not holding my breath.
China Howls but Dalai Lama Draws Crowd at Human Rights Talk
. . . no, not the Dalai Lama, silly, China!
China today has some residual power driven by its status as the worlds largest manufacture of plastic trinkets, and iPhones. But not much as it is beginning the collapse of its myriad Ponzi Bubbles.
IMF issues warning on global growth as China exports plunge - FT.com
The IMF is correct to worry about China, but wrong to think that a little consumerism can right the economic ship of China. China is a massive debt Ponzi, construction Ponzi, Ghost cities Ponzi, infrastructure Ponzi, bank Ponzi, to name but the larger few.
China cuts growth forecast - FT.com
This is mostly blather, and bluster. It is impossible to trust these numbers, and from what I have seen, the backing internals do not support GDP growth of 6.5% and may not support GDP growth of even 3%. Nor do I see any of this changing over the next many years. I have no crystal ball, but the world has achieved peak Socialism in Japan, Europe, China, Russia, and much of Eastern Europe. The results of this are demographic decline, an aging population, business stagnation, and economic stagnation. The feckless, dithering politicians who cannot take the steps necessary to shift from the dying Socialist/progressive economic model to a new functional economic model, will not be savior in this scenario. I suspect this ends with the following cue card,"And a hard landing was had by all!" Huzzah! Huzzah! Huzzah!
The Dalai Lama only needs to wait out the rapidly weakening China to win this one. What that win will look like is anyones guess, but let's hope, and pray for something less "interesting" than a full on revolution in China. Perhaps China could learn from the late 20th Century Russian revolution, and make it relatively uneventful? Yeah, I think that's mostly wishful thinking too, but I am sticking to that wish, since it would mean fewer casualties.
Perhaps the CCP survives these rough seas, Perhaps not. Regardless, nothing will be the same for the CCP and its leaders. Once the China Colossus feet are revealed as made of clay, it will never be viewed the same. And once it cracks, and the little mouse inside wanders out, it will return to its appropriate place in world events.
Death and Despair in China's Rustbelt
I have been pointing to the problems in the Chinese economy for quite a while. Watching it disintegrate, nearly instantaneously, is disturbing. The US underwent a very slow disintegration of our rust belt over many decades. China seems to be undergoing the same problem much more quickly, and the nation is far less wealthy, and capable of handling the decline.
China has many problems, but it will have to find a solution to this one and quick. If it does not, it could find itself in dire straits. China may have foreign currency today to address this situation, but it seems preoccupied with currency manipulation, this will not achieve the desired effect.
While many seem to believe an economically destabilized China could destabilize the world, I disagree. It could push the world, or the Asian region into a recession, and I believe it is doing this. I is also creating real problems with commodity suppliers. The fallout from this problems will be serious, and recessionary, but only temporary. The problem in China itself is much more serious, and the way out is unclear.
One great change is that China is much more integrated today then back in 1989. Any serious crackdown, or aggressive military action to suppress groups within China is likely to be met with wide spread protest, which could quickly slide into revolt. The last thing the CCP needs is for a large and widespread group of the people to openly revolt.
I expect this to create a significant flight to security towards the US dollar, US equities, and US government, and corporate debt.
Now would be a good time to pray for the Chinese, they are likely to need it.