Changing China Set to Shake World Economy, Again

[F430murci]

Pub is correct about manipulation. Everything about China's economy from the currency to the reporting of GDP is manipulated. Although wife's primary market as a global investment banker is Russia, she does have clients in HK and China. Lets just say China is a mess right now and money going in to China is very calculated at the present and typically only that necessary to protect largest interests or investments. One can only build so many ghost towns to prop GDP before defaults impact reserves and capital requirements.

[FDog]

As an offshoot. If China goes belly up then Australia goes bankrupt. Oh well.

I'm off to China for a look next month, looking forward to it.

[LawrenceChee]

As an offshoot. If China goes belly up then Australia goes bankrupt. Oh well.

I'm off to China for a look next month, looking forward to it.

Which part are you heading ? Trust you will enjoy it ...

[F430murci]

As an offshoot. If China goes belly up then Australia goes bankrupt. Oh well.

I'm off to China for a look next month, looking forward to it.

China perhaps realizes and is counting on US. Most of our QE money has landed on foreign balance sheets to shore up reserves. Euro potentially presents a larger concern in my opinion, but US QE money is quietly shoring reserves. US get criticized by foreigners for printing money yet that money is landing on foreign balance sheets to keep foreign banks viable.

[NeverSure]

The following companies today announced deals they believe is strategic to their interests and growth as domestic consumption tanks in the matured markets of the west.

Microsoft has announced a deal with BesTv biggest iptv company in the world to create a new venture that will allow Microsoft to tap into the gaming business @ the new created shanghai free trade zone. This will make Microsoft ahead of Nintendo and Sony for the lucrative online gaming business

Cargill has also announced a deal to expand into their biggest oversea venture in china for poultry feed.

CCP has also announced that they are taking tender bids for Internet services for the new shanghai free trade zone. This will provide for the foreigners living and working there access to Facebook, Google , Twitter and NY times.

As I said on the forum, they are making the right strides in the correct direction. Shanghai, HK, Tianjin continue to be the zones for these economic reforms experiments and the moderates applaud it.

See, it is the same old Chinese business model which will continue to prove that China isn't an innovator. It's innovation that produces patents, world sales, and makes the real money for the innovators. Once again China is sucking hind tit.

This is the model which will cause the collapse of China. China is a copier, not an innovator, and earns the pittance doing things for the innovators.

Microsoft will now make a lot of money off the Chinese. This is good news for the US or for China?

Cargill will now bring its skills and technology to China and make big money for - Cargill.

China will now provide an even bigger market for US owned Facebook, Google, Twitter, and the NY Times. More money flowing from China to the US.

This is terrible news for China, but news that is no different from 20 years ago, or 20 years into the future.

Can't you see why, with only 1/4 the population of China, the US has twice the GDP? Economically and technologically, China is the US's beotch.

[Publicus]

The measurement of true press freedom is that points and opinions will not always be the same.

Reuters, Bloomberg and NY times are all reputable periodicals that may get it wrong at times and remembering articles are written with a writer viewpoint and his / her opinions and research.

I am not an economist but on the ground where I am involved in hotel projects, the REVPAR measurements of hotels in china is astounding and surpasses every other market they have invested in.

Every major hotel chain has now dedicated resources specific to the growth of their china markets and appointed some of their brightest folks in these projects.

Having worked with the regional financial professionals in Marriott, Hilton, Hyatt, IHG ...their optimism and calculations is rarely wrong. After all focusing on the property business is their speciality. And the buildings here are landmarks and rally beautifully designed.

And looking at the compiled tourist dollar spending just released where the Chinese is now the heaviest tourist spenders in the world ...they spent $102 billion worldwide with $8.8 billion in USA alone with only 1.5 million Chinese visiting ...that's some serious spending and a boost for the retail and hotels in USA.

Many service sectors need this spending and their travels have revived many hotel business in weak or matured market segments.

The Greek government is moving in with CTS to highlight special sights for the Greek itinerary ...if they are successful in getting the certificate to sell, these Chinese tourists would have rescued an economy that is mired in debts and sorely lacking in tourist spendings.

On the ground ...I cannot see the doom and gloom some are predicting. The Chinese race has always saved for a rainy day and spend within their means for the majority.

If you have a shanghai girlfriend before or now ...hehehe I can understand if anyone is saying it's an outflow of FDI

No one said the CCP-PRC economy has ceased to grow or that everything has come to a standstill.

The economy this year will grow somewhere in the range of 6.5% to 6.7%. That's a serious comedown from the 11% of several years ago, but it's not a complete halting of state business and commerce.

So, yes, your post refers to economic and financial activity that is in fact occurring. And Murci's post points out that too much of the activity is to protect existing investments and financial interests, that a lot of the activity is defensive based on a high level of discomfort, concern, unease.

A lot of respected global banks and investment houses see the CCP's economy falling off to 6.0% growth by the end of next year. Some other reputable analysts see growth as low as 4% round 2015.

Beijing's headache is that the CCP-PRC is the bus in the movie Speed (Keanu Reeves, Sandra Bullock). Remember that if the bus went below 50 mph a bomb was rigged to explode. That's the CCP-PRC dilemma. While most countries would kill for a 6% growth rate, the CCP-PRC can't go below a certain level of growth or state firms will go bust, unemployment will explode, the several bubbles will burst, real estate and housing properties will go broke, the banks will go belly up - to include the shadow banking gangs that are outside the system - and the corrupt local government development vehicles set up by local CCP officials using the shadow banking system will crash.

At least the characters in the Speed movie knew the killer number was 50 - 50 mph. The trouble for the CCP-PRC and the world is that no one knows what the killer small growth number is for the CCP-PRC. Which means the whole thing could explode in flames anytime and without warning.

The whole thing's a freakin crap shoot.

[Publicus]

The CCP way of handling non-performing loans is to say they aren't NPLs until they're called in.

So 90% of 'em never get called in.

Never mind the borrower doesn't or can't pay.

You're the government owned bank - they're all government owned banks - so just don't call in any outstanding loans owed by the guys at the desks next to you. And they don't call in your loan you can't pay.

No or few NPLs, no or few problems. Right?!

[F430murci]

The CCP way of handling non-performing loans is to say they aren't NPLs until they're called in.

So 90% of 'em never get called in.

Never mind the borrower doesn't or can't pay.

You're the government owned bank - they're all government owned banks - so just don't call in any outstanding loans owed by the guys at the desks next to you. And they don't call in your loan you can't pay.

No or few NPLs, no or few problems. Right?!

It has become a problem. Can you imagines how many billions of bad loans are out there for all these ghost cities with empty high end high rise condos and empty shopping malls. Entire cities of this.

[LawrenceChee]

I look at the bad loans and today's financial announcements for Citibank and JPmorgan and hope there is no repeat in china banks

It has a devastating effect on the world economy and the normal folks suffer

BOA just paid out 986million to Freddie Mac for selling it the bad loads that led to the subprime crisis and Citibank just paid out about 350 million. JPmorgan has also agreed last night to pay out fines.

I look at their balance sheets and wonder where the money is popping out from.

USA is also 17 days away from an agreement to extend the lending limit or will cripple government services

this is bad news for the world economy ...the same would happen when the banks collapse in china ...the effects will be felt by all

Good time to hoard some gold like the Thais and Chinese and keep it in your safes

[Publicus]

I look at the bad loans and today's financial announcements for Citibank and JPmorgan and hope there is no repeat in china banks

It has a devastating effect on the world economy and the normal folks suffer

BOA just paid out 986million to Freddie Mac for selling it the bad loads that led to the subprime crisis and Citibank just paid out about 350 million. JPmorgan has also agreed last night to pay out fines.

I look at their balance sheets and wonder where the money is popping out from.

USA is also 17 days away from an agreement to extend the lending limit or will cripple government services

this is bad news for the world economy ...the same would happen when the banks collapse in china ...the effects will be felt by allGood time to hoard some gold like the Thais and Chinese and keep it in your safes.

The Thais and the Mainland PRChinese aren't the only people buying gold these days, or at all. Both are recent converts to the value of gold and its importance in helping to withstand macroeconomic and financial fluctuations. Both peoples are used to having land as their security anchor. Then in the money economy, creating a heap of personal savings became important.

Gold is a new aspect of personal financial security to Thais and to the Chinese especially. While I was in the CCP-PRC people kept asking me why gold is considered important, how is it that gold was the mineral that came to be so important - what is it about gold that makes it of such great, indeed, ultimate, value and importance?

The Chinese haven't ever understood or comprehended gold. They still don't. They buy it because they see others value it greatly, that is has great practical utility, and that it provides a strong measure of personal security. The why of it continues to remain beyond them.

[boomerangutang]

The CCP way of handling non-performing loans is to say they aren't NPLs until they're called in.

So 90% of 'em never get called in.

Never mind the borrower doesn't or can't pay.

You're the government owned bank - they're all government owned banks - so just don't call in any outstanding loans owed by the guys at the desks next to you. And they don't call in your loan you can't pay.

No or few NPLs, no or few problems. Right?!

Reminds me of when I was dabbling as a real estate agent in northernmost Thailand a few years ago. Every so often, me and my Thai partner would go look at a property for sale. Some but not all, the Chinese owned properties here decrepit. They were well situated and only needed a modicum of upkeep to look good, but the upkeep was zero. This was a pattern with at least 20 properties I knew about. The Chinese-Thai owners usually resided in Bangkok, and it seemed to me that they viewed their potentially valuable properties in the provinces as expendable. They weren't going to let go, but neither were they going to spend a small amount on upkeep. So, they held on, and the properties degrade, month by month. Weeds growing inside houses, as well as insect colonies. Gnarly weeds growing everywhere outside. Owners very hard to contact (if a potential buyer expressed interest). Over-valued (the owners were fixated with the value of the property in perfect condition, not in its real, run-down condition). Oh well, I'm removed from that biz now. Relief.

[F430murci]

I look at the bad loans and today's financial announcements for Citibank and JPmorgan and hope there is no repeat in china banks

It has a devastating effect on the world economy and the normal folks suffer

BOA just paid out 986million to Freddie Mac for selling it the bad loads that led to the subprime crisis and Citibank just paid out about 350 million. JPmorgan has also agreed last night to pay out fines.

I look at their balance sheets and wonder where the money is popping out from.

USA is also 17 days away from an agreement to extend the lending limit or will cripple government services

this is bad news for the world economy ...the same would happen when the banks collapse in china ...the effects will be felt by all

Good time to hoard some gold like the Thais and Chinese and keep it in your safes

This shows ignorance in the details. BofA purchased Countrywide for $4 billion in 2008 and the $1.4 trillion in troubled loans were underwritten, bundled, securitized and sold as CMO bonds by Countrywide between 2000 and 2008. The M&A caused BofA to assume liability for what Countrywide bundled and sold as CMOs.

You apparently have no concept of CMO and the oddity of Fannie, Freddie and Ginnie guaranteeing CMO bonds, most of which were sold to China.

You are also clueless as the total amount. 986 million is child's play. In one settlement, BofA settled with Fannie for 10 billion 10 months ago. 3.5 billion was for losses and repurchased about 6.5 billion of the CMOs guaranteed by the now government operated entities. BofA still had profit in the quarter that settlement was paid.

FMae, GMae and FMac guaranteed bonds at request of Bush administration to make them marketable to China. A lot of politics at play in these settlements.

US banks are super healthy NOW. BofA was able to reserve 100 billion in 2010/11 to deal with Country Wide portfolio it purchased and CMOs. They survived, settled, paid bsck TARP and are super healthy now.

Haha, hoard your gold. It will be below a $ 1,000 soon and the floor is perhaps around $ 800.

China banks don't have ability to take down US due to currency and bank structure and

China's impact on Euro and Asia will be most apparent when China growth is below 6 %. Forecasts range from a low of 5 % first half of 2014 to a upper end low of 6.7 % for 1st quarter of 2014.

[LawrenceChee]

I look at the bad loans and today's financial announcements for Citibank and JPmorgan and hope there is no repeat in china banks

It has a devastating effect on the world economy and the normal folks suffer

BOA just paid out 986million to Freddie Mac for selling it the bad loads that led to the subprime crisis and Citibank just paid out about 350 million. JPmorgan has also agreed last night to pay out fines.

I look at their balance sheets and wonder where the money is popping out from.

USA is also 17 days away from an agreement to extend the lending limit or will cripple government services

this is bad news for the world economy ...the same would happen when the banks collapse in china ...the effects will be felt by allGood time to hoard some gold like the Thais and Chinese and keep it in your safes.

The Thais and the Mainland PRChinese aren't the only people buying gold these days, or at all. Both are recent converts to the value of gold and its importance in helping to withstand macroeconomic and financial fluctuations. Both peoples are used to having land as their security anchor. Then in the money economy, creating a heap of personal savings became important.

Gold is a new aspect of personal financial security to Thais and to the Chinese especially. While I was in the CCP-PRC people kept asking me why gold is considered important, how is it that gold was the mineral that came to be so important - what is it about gold that makes it of such great, indeed, ultimate, value and importance?

The Chinese haven't ever understood or comprehended gold. They still don't. They buy it because they see others value it greatly, that is has great practical utility, and that it provides a strong measure of personal security. The why of it continues to remain beyond them.

Not sure which Chinese U were talking too ...maybe the Tibetans ?

Chinese have been hoarding gold for the longest time...at least my family has been doing it for the last 6 generations.

[LawrenceChee]

Probably won't make a difference if you bought gold while it was at its 600+ mark or those u inherit from your nanna when it was below $200 ...

But if one bought at the sucker price of $1800 I can see why u may be panicking :-)

[Publicus]

I look at the bad loans and today's financial announcements for Citibank and JPmorgan and hope there is no repeat in china banks

It has a devastating effect on the world economy and the normal folks suffer

BOA just paid out 986million to Freddie Mac for selling it the bad loads that led to the subprime crisis and Citibank just paid out about 350 million. JPmorgan has also agreed last night to pay out fines.

I look at their balance sheets and wonder where the money is popping out from.

USA is also 17 days away from an agreement to extend the lending limit or will cripple government services

this is bad news for the world economy ...the same would happen when the banks collapse in china ...the effects will be felt by all

Good time to hoard some gold like the Thais and Chinese and keep it in your safes

This shows ignorance in the details. BofA purchased Countrywide for $4 billion in 2008 and the $1.4 trillion in troubled loans were underwritten, bundled, securitized and sold as CMO bonds by Countrywide between 2000 and 2008. The M&A caused BofA to assume liability for what Countrywide bundled and sold as CMOs.

You apparently have no concept of CMO and the oddity of Fannie, Freddie and Ginnie guaranteeing CMO bonds, most of which were sold to China.

You are also clueless as the total amount. 986 million is child's play. In one settlement, BofA settled with Fannie for 10 billion 10 months ago. 3.5 billion was for losses and repurchased about 6.5 billion of the CMOs guaranteed by the now government operated entities. BofA still had profit in the quarter that settlement was paid.

FMae, GMae and FMac guaranteed bonds at request of Bush administration to make them marketable to China. A lot of politics at play in these settlements.

US banks are super healthy NOW. BofA was able to reserve 100 billion in 2010/11 to deal with Country Wide portfolio it purchased and CMOs. They survived, settled, paid bsck TARP and are super healthy now.

Haha, hoard your gold. It will be below a $ 1,000 soon and the floor is perhaps around $ 800.

China banks don't have ability to take down US due to currency and bank structure and

China's impact on Euro and Asia will be most apparent when China growth is below 6 %. Forecasts range from a low of 5 % first half of 2014 to a upper end low of 6.7 % for 1st quarter of 2014.

Indeed.

The key here is the setting of a red line below which economic growth cannot fall, or hongxian.

Former Prime Minister Wen Jaibao had set the red line below which he would not allow growth to fall at 8.5%. Lo and behold, Wen then had to reset hongxian at 8%.

Now, Wen's successor, Li Kejiang, who took over early this year, has had to reduce hongxian to 7.5%. And, lo and behold once again, Li has another new hongxian staring him in the face of 7.0%.

The CCP State Council (government ministers) set hongxian because they know that, once growth slows below a certain level, unemployment and social unrest will occur. The whole of the economic and financial system would begin to crumble. CCP rule would become seriously jeopardized.

It's just that even the CCP and its State Council don't know what the accurate and true level of hongxian is. Is it 7.0%? Izzit 6.7%? Izzit 5%. 4%? They don't know. No one knows. Yet everyone knows hongxian is real.

As Seton Hall University Prof Zheng Wang puts it:

How many remember the Hollywood film, Speed, starring Keanu Reeves and Sandra Bullock? In the movie, Reeves’ character must keep the Los Angeles bus he is driving above 50 miles per hour to prevent the bomb a disgruntled former bomb squad sergeant has planted from going off and killing everyone on board.

The Chinese economy is currently like that bus in that it must stay above a certain speed. To fall below a set national growth rate will set off the bomb that is attached to the Chinese economy.

Maintaining such a high speed is to prove especially difficult for China, though, given that it is now the world’s number two economy. Beijing is therefore playing a very dangerous game indeed.

In China, growth rates have never been solely an economic issue. The growth rate is closely related to employment, employment with social stability, and social stability with political stability. Given the social and political implications of the unemployment rate, and the fact that China is endowed with a massive population, it should not be surprising that the Chinese government considers maintaining robust employment as its number one priority.

So an economic slowdown in China today may generate social problems, such as unemployment, inflation, and social unrest. Only if China can maintain its high growth rate can it continue to meet the masses’ expectations for employment and living standards.

To do this, Premier Li Kejiang wants to structurally reform the Chinese economy so that it is not completely reliant on government stimulus to maintain its speed. His first several months in power have already seen unusual fluctuations in growth, so we do not know yet whether he can be China’s Jack Traven (Keanu Reeves’ character in Speed) and remove the time bomb beneath China’s economic bus.

So far no one is betting on "Liconomics" as the premier's bomb squad economic and financial schemes have come to be called.

Everyone instead needs to stand well clear of them.

[F430murci]

Pub: the sad part is that US is doing so much to prop of China economy. Do you think if Americans purchased bad investments from China, China would step in and make good on them. That is what US did with CMOs and all of us tax payers paid all of those Chinese bond holders that purchased risky investments for high rates of return.

Lawrence:

Haha, not sure I would be bragging a out my expertise in investments if I purchased gold at $ 300 Orleans and did not sell it at $ 1,800 when everyone knew it was on its way back down.

[LawrenceChee]

Pub: the sad part is that US is doing so much to prop of China economy. Do you think if Americans purchased bad investments from China, China would step in and make good on them. That is what US did with CMOs and all of us tax payers paid all of those Chinese bond holders that purchased risky investments for high rates of return.

Lawrence:

Haha, not sure I would be bragging a out my expertise in investments if I purchased gold at $ 300 Orleans and did not sell it at $ 1,800 when everyone knew it was on its way back down.

There is no bragging needed as you are not Asian ...we hold it for the value it brings and not just for investments.

There is a pleasure of holding those bars in your hands and why sell them when you dont need ?

And it's culture we give to to the next generation ...

[Publicus]

Pub: the sad part is that US is doing so much to prop of China economy. Do you think if Americans purchased bad investments from China, China would step in and make good on them. That is what US did with CMOs and all of us tax payers paid all of those Chinese bond holders that purchased risky investments for high rates of return.

Lawrence:

Haha, not sure I would be bragging a out my expertise in investments if I purchased gold at $ 300 Orleans and did not sell it at $ 1,800 when everyone knew it was on its way back down.

I hear you very clearly. So you know my short answer is no.

That said, China and the US are heavily intertwined, so the Chinese were happy to make the bucks on the massive purchases of CMOs. Concomitantly, our government and Wall Street together were more than pleased to unload the CMOs on somebody, and the somebody we went to first were the Chinese. The Chinese anyway were the first to raise their hands to volunteer to buy.

The Chinese are so intertwined with us that, around the time in late 2008 the TARP program was being tossed about, Beijing rejected the urging of Putin and the Russians to call in T-Bills and other instruments. The Russians are not heavily dependent on the US economy but the Chinese are. So when Putin urged Beijing to screw the US, Beijing had to reject Putin's malicious purposes and designs against the US at an extremely sensitive moment.

Putin is actively malevolent. The Chinese in contrast want and need to do business with us. A collapsed United States is extremely bad news for the PRChinese and for the CCP, whereas a collapsed China is an event and development the United States can (and will) sustain.

Pub: the sad part is that US is doing so much to prop of China economy. Do you think if Americans purchased bad investments from China, China would step in and make good on them. That is what US did with CMOs and all of us tax payers paid all of those Chinese bond holders that purchased risky investments for high rates of return.

Lawrence:

Haha, not sure I would be bragging a out my expertise in investments if I purchased gold at $ 300 Orleans and did not sell it at $ 1,800 when everyone knew it was on its way back down.

There is no bragging needed as you are not Asian ...we hold it for the value it brings and not just for investments.

There is a pleasure of holding those bars in your hands and why sell them when you dont need ?

And it's culture we give to to the next generation ...

Sounds covetous, to say the least.

And do you think you are the only people who pass on wealth from generation to generation? It's less possible in the US due to the inheritance tax which is designed to prevent conglomerations of a hierarchy of wealthy families. The CCP hasn't any such rule or morality. The Chinese through the generations have always believed the elite rules and is therefore entitled to the special privilege of hoarding the wealth of the society.

You can't say to me convincingly you dismiss the value of investments either.

You like to talk a good game but can't ever seem to find the playing field.

Edited September 26, 2013 by Publicus

[LawrenceChee]

I don't believe the inheritance tax was set up for that noble purpose. It was just done to raise more money for the government.

There is a cultural gap between the east and the west with regards to money and how it's passed down to the next generations.

While I applaud some of the moves made by the richest folks namely Bill and Warren for giving much of their money to their respective foundations in helping the poor, this is not the same in most parts of Asia and China is not alone in this.

So it really has nothing to do with morality. It's just culture to pass it down to the next. I believe the west have different ways of supporting their kids like paying for a wedding, supporting the new house or down payment ...every parent has probably done that on one way or another to pass the wealth along and give the next generation a headstart

I have seen many of my western counterparts receive jewels and gemstones on their birthdays and weddings much as the Asians give gold.

Not sure of this inheritance tax but does it applies to gems and stones ?

[Publicus]

I don't believe the inheritance tax was set up for that noble purpose. It was just done to raise more money for the government.

There is a cultural gap between the east and the west with regards to money and how it's passed down to the next generations.

While I applaud some of the moves made by the richest folks namely Bill and Warren for giving much of their money to their respective foundations in helping the poor, this is not the same in most parts of Asia and China is not alone in this.

So it really has nothing to do with morality. It's just culture to pass it down to the next. I believe the west have different ways of supporting their kids like paying for a wedding, supporting the new house or down payment ...every parent has probably done that on one way or another to pass the wealth along and give the next generation a headstart

I have seen many of my western counterparts receive jewels and gemstones on their birthdays and weddings much as the Asians give gold.

Not sure of this inheritance tax but does it applies to gems and stones ?

Yeah, that's where you don't get it. Maybe can't get it.

For thousands of years in China the absolute belief has been that the elites rule, which necessarily means the elites are entitled to hoard the wealth of the country. The hoarding in China includes passing the power and wealth down through the generations. This is incestuous culturally, socially and in economics.

Egalitarianism is the rule in the United States. Immigrants to the United States left the generationally hierarchical structures of European society, culture, economics, to make a new life of the opportunities presented by the New World. Democracy was established in the United States which, necessarily, included the establishing and developing of a democratic culture. Asians, including many Chinese, have migrated to the United States because of this.

So the inheritance tax in the United States is predicated on the fact that inheritances are unequal and related to socio-economic class. Inheritances per se thus compound inequality of opportunity and, even worse, do so through the generations. Because democratic culture and society includes the belief of equal opportunity, the inheritance tax applies to both the most wealthy and to the moderately affluent.

Yet, the inheritance tax provides a very small amount of revenue to state and federal government, respectively, so your argument of government greed doesn't hold water. The people of the US are very attentive to taxes and to taxation - you do remember "No taxation without representation!"? While we support the inheritance tax, it is limited enough to have general public support. We have a direct say in whether there will be an inheritance tax and what the rate of taxation will be.

In China the elites take care of themselves and would never establish an inheritance tax or anything like it. The focus of the Chinese elites is twofold: to protect their power and wealth and to extend it, not to limit either or both. The only way the people of China can impact this is by armed revolt. Armed revolt in China has always been a part of the cycle of life through the generations as there is no peaceful outlet by which the Chinese people may express themselves, such as regular and orderly elections. The Mandate of Heaven has in fact been the Curse from Hell.

Oh yes, gems and stones are excluded from inheritance taxation - gems and stones are not considered a part of the value of an estate or of an inheritance. Gems and stones are a matter of individual wealth and value so are subject to taxes - on capital gains.

Edited September 27, 2013 by Publicus

[LawrenceChee]

The shanghai free trade zone opened today.

It allows companies to set up in 4 days to get their licenses instead of a month or more. Yuan convertibility and banks can do offshore trade and fund transfers

A very good pilot program for foreign companies in the world 2nd biggest economy.

As mention in my previous posts months back, this allows china to take another step and experiment in the restructure of its economy

[Publicus]

The shanghai free trade zone opened today.

It allows companies to set up in 4 days to get their licenses instead of a month or more. Yuan convertibility and banks can do offshore trade and fund transfers

A very good pilot program for foreign companies in the world 2nd biggest economy.

As mention in my previous posts months back, this allows china to take another step and experiment in the restructure of its economy

Shanghai's New Free-Trade Zone: Reform Breakthrough or Hype?

Indeed, for those who favor a more rapid economic and financial opening for China, the hope is the more liberal policies to be allowed in the zone, if deemed successful, could soon be extended nationally.

The fear is that if instead they are viewed as destabilizing, foot-dragging could ensue. “If the Shanghai FTZ fails, China’s overall reforms will fail,” warned Chen Bo, an economist at the Shanghai University of Finance & Economics, Xinhua reported Sept. 18.

http://www.businessweek.com/articles/2013-09-20/shanghais-new-ftz-trade-reform-breakthrough-or-hype

The Shanghai Free Trade Zone is a risky business - it is not a sure thing.

The CCP is taking a gamble on the Shanghai Free Trade Zone. Its impact, if successful, would challenge the CCP in unprecedented ways to completely change and reform the economy of the CCP-PRC. This would be a pretty radical idea and reality for any government and for the people of any country.

Because of the risky nature of the experiment, the Zone is being established in only one district of the city, the Pudong District, not in the whole of Shanghai.

One of the greatest risks is that liberalization of the market in the CCP-PRC will bring the artificially supported RMB much more closely in line with its real market value. This prospect has long terrified CCP officials who have artificially supported the yuan for many years. If the RMB is brought more in line with its real market value, what will happen to the balance of trade, the value of foreign exchange reserves, efforts to boost domestic consumer demand and production, and a long list of other items facing uncertainty?

This week, the Chinese government will open the country's first 'free trade zone' in Shanghai. It will be an area of deregulation where foreign companies will be able to sell products and services without import duties or taxes. Marketplace's China Bureau Chief Rob Schmitz says the move has those in the foreign buisness community optimistic -- but they know it won't make business in the region a cake walk.

There is a lot of skepticism because nobody knows the specifics of how exactly this is going to make selling your products easier in China, he says.

Schmitz says China may utilize this free trade zone to give global financial markets a go at determining the value of its currency -- something U.S. lawmakers have been pushing China to do for years to allow American products to better compete with Chinese products. But Schmitz says, don't hold your breath.

China has always been very, very cautious about loosening control on its currency for fear that it would have a broad, negative impact on its economy.

Already Beijing is reneging on its promise to easy internet censorship in the Zone. It has revoked its promises made as recently as last week to allow foreign firms to access Facebook, Google, the NYT. (Bloomberg News remains censored by the CCP because of its accurate reporting of the CCP-PRC economy and financial system.) CNN, the BBC, HBO and other programming carried by global cable satellite systems remain prohibited throughout the CCP-PRC so that the PRC sheeple cannot accurately access any information about the world outside of the CCP-PRC.

With Beijing already reneging on its promises to ease censorship only slightly, what can we expect concerning the rest of the promises Beijing is making about the Zone? The reality is that Beijing is still promising to issue rules and regulations governing economic and financial activities in the zone.

Little is known about the new free-trade zone that is being planned in Shanghai. But that hasn't stopped Chinese investors from speculating wildly on who might benefit.

Since a vague announcement on Aug. 23 that China's top governing body had approved the 29-square kilometer zone in Shanghai, shares in Shanghai International Port Co. have risen by more than 130%. Tianjin Port Holding Co. 600717.SH 0.00%is up 30% over the same period on speculation that other coastal cities will get similar areas. Shanghai Pudong Development Bank 600000.SH +0.69%has risen 30% since last Thursday on expectations that financial controls will be loosened in the zone.

The reality is likely to disappoint. China already has export-processing zones, where materials and parts can be imported tariff-free and assembled into exports. It's unclear what more the government will do to expedite trade.

The official announcement, just three paragraphs long, stresses that the financial and services sectors will be further opened up. Analysts and local media reports say there could be steps to loosen controls on foreign-exchange transactions, as part of efforts to make Shanghai an international financial center.

China has long promised to open up its capital account, but progress has been extremely slow, held back by concerns that it could unleash destabilizing outflows.

The Shanghai free-trade zone could be an opportunity for a breakthrough, but it is difficult to see how looser capital controls can be ring-fenced within a specific geographic area. If businesses can transfer money into and out of the zone to take advantage of the looser rules, the floodgates would effectively be opened.

So any freeing of money flows may be minimal. For instance, companies may be able to tap foreign funds only for operations physically in the zone. Or banks in the zone could face quotas on how much they can lend to businesses elsewhere in China. The impact of such moves would be small.

That investors are getting ahead of themselves is nothing new in Shanghai, where trading on the local exchange is erratic and frequently based more on rumors than fundamentals. Besides capital controls and casino-like volatility, systemic problems like weak rule of law and poor corporate governance also tarnish the city's appeal.

Free-trade zone or not, Shanghai is still a long way from becoming an international financial center

.

[boomerangutang]

This news about Shanghai reminds me of a bit of Canton's (now Guangzhou's) history from per-HK days. In a nutshell: China was being pressured by outsiders (English Portuguese, French, Dutch, Americans, others) to open trade. After years of wrangling, it reluctantly opened one part of one port. Surprise! immediately a few well-placed Chinese big shots (11 if my memory of history isn't too cloudy) positioned themselves to control all trade in and out of the port. Naturally, tensions built, and bullets fired, ....but it was a start of China opening to the outside world. A few wars later, and Hong Kong developed its stride.

This Shanghai 'Free Trade' thing is already showing signs of faltering, even at its instigation. One thing that may happen, is bunches of young folks, who want uncensored internet access, might gravitate there. What will authorities do? ...build a wall around that finite commercial section and limit access? They've had a lot of practice at building walls. And they know all about using strong-arm tactics to try to control how people act and think.

[Publicus]

This news about Shanghai reminds me of a bit of Canton's (now Guangzhou's) history from per-HK days. In a nutshell: China was being pressured by outsiders (English Portuguese, French, Dutch, Americans, others) to open trade. After years of wrangling, it reluctantly opened one part of one port. Surprise! immediately a few well-placed Chinese big shots (11 if my memory of history isn't too cloudy) positioned themselves to control all trade in and out of the port. Naturally, tensions built, and bullets fired, ....but it was a start of China opening to the outside world. A few wars later, and Hong Kong developed its stride.

This Shanghai 'Free Trade' thing is already showing signs of faltering, even at its instigation. One thing that may happen, is bunches of young folks, who want uncensored internet access, might gravitate there. What will authorities do? ...build a wall around that finite commercial section and limit access? They've had a lot of practice at building walls. And they know all about using strong-arm tactics to try to control how people act and think.

Your point is well taken but, as I point out, the CCP has reneged on its promises to allow even a tiny uncensoring of the Great Internet Firewall of China in this limited Shanghai FTZ.

Talk that occurred as recently as last week that foreign firms in the Shanghai FTZ would be allowed limited exception to CCP censorship to access Facebook, Google, the NYT has stopped. Beijing has made clear that no such exceptions will be allowed.

The Great Internet Firewall of China will remain in place. The internet will continue to be censored, access for foreign websites prohibited.

Freedom in the CCP-PRC will continue to be prohibited, Shanghai FTZ included.

The Shanghai FTZ is as bogus as is anything else the CCP does or promises.

[NeverSure]

-snip-

A collapsed United States is extremely bad news for the PRChinese and for the CCP, whereas a collapsed China is an event and development the United States can (and will) sustain.

Not true! I need that cheap crap from Walmart!

[LawrenceChee]

-snip-

A collapsed United States is extremely bad news for the PRChinese and for the CCP, whereas a collapsed China is an event and development the United States can (and will) sustain.

Not true! I need that cheap crap from Walmart!

Hahahaha it would be interesting to see the faces if people have to pay the actual price of the manufactured goods ...I guess some like it to have it all :-)

[Publicus]

-snip-

A collapsed United States is extremely bad news for the PRChinese and for the CCP, whereas a collapsed China is an event and development the United States can (and will) sustain.

Not true! I need that cheap crap from Walmart!

Hey, in 1996 I bought two items of luggage at a Walmart in suburban Atlanta and I still have 'em in working order today after all these years travelling between the USA and Korea, Thailand, the CCP-PRC, Thailand again, Hong Kong.

Holiday Luggage brand of Montreal, Canada, made in China.

A couple of wheels broke off several years ago but, being big and strong, I wave an airport redcap with a cart over to haul 'em for me.

So now you've got me thinking......

.........What can I do to help the Shanghai FTZ to succeed?

[Publicus]

-snip-

A collapsed United States is extremely bad news for the PRChinese and for the CCP, whereas a collapsed China is an event and development the United States can (and will) sustain.

Not true! I need that cheap crap from Walmart!

Hahahaha it would be interesting to see the faces if people have to pay the actual price of the manufactured goods ...I guess some like it to have it all :-)

Well, I dunno.

Have you ever watched the Chinese construct a building?

Being a Sidewalk Superintendent (certified), I once spent a couple of hours a day for several days watching during a week when I had little else to do in the People's Republic (Spring Festival and all of that).

It's a pretty painful thing to watch the men and women - yes women - hauling all those bricks on their backs and steel rods in their hands.

They pour the concrete from a small mixer into two small barrels which are nothing more than large buckets. A guy puts each barrel on the open elevator. Up they go. A guy pulls 'em off and pours each bucket while another guy smooths the concrete.

Slow and tedious.

Repeated endlessly.

To make a column there's another bucket that gets hoisted up rails to pour the concrete inside the wooden supports. One support at a time. There are only a few workers for each building 'cause pay there is low and lotsa buildings are going up everywhere all the time - ever so slowly.

It takes forever, pair of buckets by pair of buckets.

Then half the buildings stay empty indefinitely.

[LawrenceChee]

For a moment I was almost smoked into thinking you were describing a work site in Chiang Mai where they are building yet the next condo or Moobaan for an unknown clientele

Happens lots in countries with a huge workforce ...it's called job creation since not every one can be an inspector.

I wonder if this is the same I saw at a hotel worksite in the big apple ...lots of talking and big ideas floated around of what if they were the boss but hardly any work done...although I must admit there are those who are born with he gift of the gab :-)

[boomerangutang]

-snip-

A collapsed United States is extremely bad news for the PRChinese and for the CCP, whereas a collapsed China is an event and development the United States can (and will) sustain.

Not true! I need that cheap crap from Walmart!

Hahahaha it would be interesting to see the faces if people have to pay the actual price of the manufactured goods ...I guess some like it to have it all :-)

Well, I dunno.

Have you ever watched the Chinese construct a building?

Being a Sidewalk Superintendent (certified), I once spent a couple of hours a day for several days watching during a week when I had little else to do in the People's Republic (Spring Festival and all of that).

It's a pretty painful thing to watch the men and women - yes women - hauling all those bricks on their backs and steel rods in their hands.

They pour the concrete from a small mixer into two small barrels which are nothing more than large buckets. A guy puts each barrel on the open elevator. Up they go. A guy pulls 'em off and pours each bucket while another guy smooths the concrete.

Slow and tedious.

Repeated endlessly.

To make a column there's another bucket that gets hoisted up rails to pour the concrete inside the wooden supports. One support at a time. There are only a few workers for each building 'cause pay there is low and lotsa buildings are going up everywhere all the time - ever so slowly.

It takes forever, pair of buckets by pair of buckets.

Then half the buildings stay empty indefinitely.

How different is our species from, let's say, ants or termites, in regard to building (or war)?