Deflation leaves China on the brink of financial crisis

[Thai at Heart]

I'm not a complete noob in financial matters, but after all those years I still don't understand why a low inflation is so bad.

Low inflation=No money in the market to drive up prices!! (very simplified)

Not exactly. Deflation or very low inflation mean that people would rather hold on to their money than spend it. In addition, if people have mortgages or other loans, deflation means that they actually become more expensive to service especially since when there is deflation or low inflation, the rate of unemployment is higher.

There is a tipping point that once deflation sets in, it is extremely difficult to stop.

The Japanese just finally managed it,but they have had to print gazillions of yen. It is like a cliff and once u fall off it is very difficult to stop.

[daveAustin]

I must admit, I don't give a monkey's what happens in China -- it's had it good for far too long (albeit QUICKLY as opposed to generations of hard work and innovation) plying cheap crap on the world -- I'm just interested in when the heat is taken out of the fake UK housing bubble.

[NeverSure]

I must admit, I don't give a monkey's what happens in China -- it's had it good for far too long (albeit QUICKLY as opposed to generations of hard work and innovation) plying cheap crap on the world -- I'm just interested in when the heat is taken out of the fake UK housing bubble.

When the heat is taken out of housing bubbles everyone suffers. This is happening in China. The borrowers not only lose equities, they often find themselves upside down owing more than the property is worth. If coupled with a recession and high joblessness, many are stuck. They can't make their payments and they can't sell and pay off the loan. Individuals and lenders get clobbered.

I don't give a rat's what happens to China, but I hope our friends in Europe find a soft landing.

[Bakeman]

Watched on the news this evening that China has dropped and the USA has regained the lead as the largest economy.

Yes, I know the USA didn't really gain and that China actually dropped but if you are not in the lead then you are not first.

[SiSePuede419]

A friend of mine has a Chinese wife.

Apparently, her parents made "a lot" of money in (residential) real estate.

She's always looking at houses, even though they're not in the market to buy one.

I'm afraid the Chinese will soon find out "the hard way":

You can't make money in RRE. It's a bubble.

[NeverSure]

Watched on the news this evening that China has dropped and the USA has regained the lead as the largest economy.

Yes, I know the USA didn't really gain and that China actually dropped but if you are not in the lead then you are not first.

Actually the US economy is growing rapidly. Faster than it has in a long time.

What these figures don't show is profits. Cash flow. The US has innovation and patents and technology and many companies are making record profits. China has no such thing.

China has a population about 4x what the US does, so the $$ on the economy per capita leave China in the dust.

The US had its bubbles and crash and has recovered nicely and is going full steam ahead. China doesn't have the engine to do that because the government owns the means of production and is about 50 years behind in technology. There's no individual incentive to innovate.

China is communist and is responsible to house and feed its people. No communist country that I can think of has ever prospered long term.

[HeijoshinCool]

I'm not a complete noob in financial matters, but after all those years I still don't understand why a low inflation is so bad.

If prices are viewed as going down, domestic consumption dries up as people stop buying stuff as it will be cheaper in the future. As domestic consumption dries up, growth stagnates. Without growth in the economy and with lower domestic consumption, businesses cannot expand and sales decrease forcing businesses to lower prices so fuelling deflation. It becomes a cycle that is difficult to escape from.

.

Other than (supposedly) the Universe, name me one thing that doesn't eventually stop growing.

Hey, come to think of it, don't all the brainiacs say that even the universe will eventually collapse into itself?

Uh-oh.

[SiSePuede419]

"China is communist..."

You're confusing politics and economics.

Politically, China is "Communist" in name only. No true communist government has ever existed.

True communism would mean everyone is equal. The closest thing to this ideal in today's world, is where several employees leave their company and start their own company, with equal shares and reach a consensus on all business decisions.

Economically, China is probably the most Capitalistic country on the planet, with very little socialistic "safety net". Although, this particular blog ranks them as #3 in the world:

http://blog.peerform.com/the-five-most-capitalistic-countries-in-the-world/

Edited January 12, 2015 by SiSePuede419

[SiSePuede419]

"Other than (supposedly) the Universe, name me one thing that doesn't eventually stop growing."

Cancer?

[boomerangutang]

Well, I should quickly go and buy an apartment in Beijing for 4.67 million dollars ::: source

Heck, let's look at the bright side of the impending Chinese implosion: Tibetans may be able to take back their country, and Chinese men won't have as much money, to keep buying endangered animal parts - in the mistaken assumption ingesting (things like; powdered tiger penis bone) will stiffen their flagging totem pole.

[45slap]

And we can thank Obama and the Democrats for pulling us out of the recession that the GOP helped put us in. Presently, the Republicans are trying to lighten the regulations put on Wall Street. They never stop.

[boomerangutang]

"Other than (supposedly) the Universe, name me one thing that doesn't eventually stop growing."

Cancer?

My hots for Lady Gaga.

[45slap]

Now that the U.S. Has regained its position as the number one, I have dusted off the Aerosmith vinyl to listen to Back in the Saddle Again.

[lovetotravel]

The yank financial experts are already announcing the end of China and Russia. They must still believe that the gold is still in fort knox.5555555

Same message is coming from many news sources, not just the US. But good try.

http://www.bbc.com/news/business-26225205

[MrWorldwide]

Anyone who thinks that a major downturn in China wont impact everyone in the Asia-Pacific region (including the US) may be in for a shock if this sort of doomsaying comes to pass. The world's largest exporter, second largest importer and fastest growing consumer market - not sure why so many here seem gleeful at the prospect of a collapse in an economy of that size and the flow-on impacts in Japan, South Korea, Singapore, Indonesia and Thailand. The last thing any of us need here in Pattaya is for factories in Chonburi to start laying people off and the Asian tourists who are still coming here to cancel their flights, but the impact would be felt all over Thailand.

http://en.wikipedia.org/wiki/Economy_of_China

http://en.wikipedia.org/wiki/List_of_the_largest_trading_partners_of_China

http://en.wikipedia.org/wiki/List_of_the_largest_trading_partners_of_the_United_States

http://en.wikipedia.org/wiki/Economy_of_Thailand#Foreign_trade

Throw in some of the dark clouds looming over Indonesia's economy and it does look bleak for 2015/16. Think happy thoughts.

Edited January 12, 2015 by MrWorldwide

[Prbkk]

Perhaps a bit of schadenfreude going around in respect of this prospect but there is nothing good for the rest of the world in the event of a Chinese collapse: on the contrary, it could well result in another version of 2009, but worse..

[Robert24]

@publicus: thanks for sharing the BNP summary paper which I've read. With regards to the property market, the article mentions there is a yoy decline of property prices of 10% although it doesn't indicate which province in China it is referring to. But let's assume the national average is a decline of 10%. This in my opinion would be healthy decline from elevated property market price levels but I would not refer to this as a bubble that has burst last March. As you know prices of property have gone up exponentially and it's only healthy to see a correction of it. By the way the government has been trying to cool the property market for a while introducing aggressive measures. Now with regards to terminology: A bubble is usually the last 9-12 months of a bull market where prices of an asset increases massively without any fundamentals supporting it. It usually ends with the bubble bursting and a sharp decline in prices over a very short time period, usually referred to as a crash. For example the US credit bubble in 2008 or the dot com bubble that burst in March 2000. Now this has not happened in China last March in my opinion and I don't see any data suggesting it.

About inflation or deflation: the BNP reports an inflation as per September last year of 1.5% - so whilst inflation has come down significantly, this is still far away from a deflationary economy. Now clearly there are strong deflationary forces which led to the reduction in inflation but again to be fair, 1.5% inflation is far healthier than 5-10%.

Whilst I agree the credit growth in China is unsustainable, I would recommend to avoid over-exaggerating conclusions about China. I remember when in 2005-2008 I worked in Hong Kong and many predicted that China is going to collapse and that the double digit growth figures we have seen back then will just lead to a crash imminently. Well it hasn't happened and China is still growing faster than most other economies.

[Robert24]

@Publicus: where you get this from that Chinese have "thrown in the towel on the government"? Where you get this from that "increasing number of.people who have significantly reduced the amount of money they spend"?

I do not see any evidence of this. GDP.growth last year was 7.5%, this year probably around 7%, overall consumption is growing, maybe not as much as the government would like, but it's growing.

The government is well aware of the housing bubble and has been cooling the market now for 1.5-2 yrs. You say the bubble burat last March? Did you see a crash? I didn't. It's more a soft landing or taking some pressure out of the market.

Lol, first off you have to acknowledge that any numbers coming out of China are suspect and that their GDP has largely been inflated by useless construction projects that are now going into default. China's property bubble is actually much worse than the US's in 2008, but the financial institutions in China are government owned so they have much more discretion or leeway in restructurting the bad loans to keep the banks afloat. Unfortunately, it is the private investors and the property developers in China taking the beatings. The banks are essentially the government. They can print money, use federal reserves or adjust balance sheets as they like.

China's biggest problem is the vast income disparity is getting larger by the day. They are far from being a consumption economy which is needed to decrease the income disparity gap and place the average Chinese in the position of actually being able to buy real estate or purchase larger ticket items. Rural poverty in China is shockingly bad and many in large cities live in the shadows of empty high rises in poor living conditions and shantees.

agree with you about GDP numbers from China but to be honest I don't really believe GDP numbers from other countries neither. So in your opinion, how fast is China growing? I think there are some alternative ways to get a sense of the pace of the economic growth in China, i.e. electricity consumption, exports from other countries into China especially those that are heavy exports to China, ie South Korea and Taiwan. But it would be interesting if you could give me a pointer about economic growth.

Now with regards to rural poverty and income disparity. Agree with your observation but have you been to China 15-20 years ago? China is way, way better now than it was in the 90s. Poverty is much much smaller. There is a vast majority of Chinese that can afford things they could never do. They have a significant middle class and poverty is reducing fast, young people migrate from rural economies to the cities, get good job in factories, etc, can send money home etc etc. Have a look at sectors in the economy, such as food consumption, travel, cars etc. Why do you think so many Chinese can afford a car nowadays?

So I'm not saying there are no problem and I agree they are far away from a consumption led economy, but the government has realised it and are working hard to change it. But do not give the impression that the country hasn't changed massively to the better.

[SiSePuede419]

The first domino falleth:

http://for.tn/1xR1sby

Timber!!!!

[SiSePuede419]

"They must still believe that the gold is still in fort knox."

I don't know what planet you're from, but here on Planet Earth, no country has used rocks for money since the Middle Ages...

[Publicus]

"China is communist..."

You're confusing politics and economics.

Politically, China is "Communist" in name only. No true communist government has ever existed.

True communism would mean everyone is equal. The closest thing to this ideal in today's world, is where several employees leave their company and start their own company, with equal shares and reach a consensus on all business decisions.

Economically, China is probably the most Capitalistic country on the planet, with very little socialistic "safety net". Although, this particular blog ranks them as #3 in the world:

http://blog.peerform.com/the-five-most-capitalistic-countries-in-the-world/

I see you didn't take Political Science 101 and it is for sure you didn't take any polysci courses beyond that, not to mention Economics 101 etc.

Politically, China is "Communist" in name only. No true communist government has ever existed

Beyond this astounding and world-stopping news bulletin, the world has had the totalitarian communism of the USSR, Cuba, the CCP et al. Totalitarian refers to the system of government, communism refers to a nebulous notion of economics. Totalitarian communism since 1917 has presented itself variously as some dubious at best notion of Marxism warped and mangled by the statism of Lenin and Leninism, then Maoism, as well as of others.

Economically, China is probably the most Capitalistic country on the planet, with very little socialistic "safety net"

The United States has a far greater and more extensive social safety net than the CCP have for their PRC and only recently has the far right of the US accused a president of actively and actually being socialist.....and Muslim, and gay, and anti-American, and Kenyan and so forth.

Socialism anyway is not about a social safety net. Socialism is government ownership of the means of production, transportation, communication, which makes the CCP-PRChina the socialist state that it is. So now in China we have "market socialism with Chinese characteristics," the principal Chinese characteristic of the past 5000 years being dictatorship. Fit all of that in to your screwy scheme along with the rest of your sophomore's post.

[thailiketoo]

"They must still believe that the gold is still in fort knox."

I don't know what planet you're from, but here on Planet Earth, no country has used rocks for money since the Middle Ages...

Give a call to any trillionaire (did I spell that correctly) and they might tell you where the gold is.

[Publicus]

@publicus: thanks for sharing the BNP summary paper which I've read. With regards to the property market, the article mentions there is a yoy decline of property prices of 10% although it doesn't indicate which province in China it is referring to. But let's assume the national average is a decline of 10%. This in my opinion would be healthy decline from elevated property market price levels but I would not refer to this as a bubble that has burst last March. As you know prices of property have gone up exponentially and it's only healthy to see a correction of it. By the way the government has been trying to cool the property market for a while introducing aggressive measures. Now with regards to terminology: A bubble is usually the last 9-12 months of a bull market where prices of an asset increases massively without any fundamentals supporting it. It usually ends with the bubble bursting and a sharp decline in prices over a very short time period, usually referred to as a crash. For example the US credit bubble in 2008 or the dot com bubble that burst in March 2000. Now this has not happened in China last March in my opinion and I don't see any data suggesting it.

About inflation or deflation: the BNP reports an inflation as per September last year of 1.5% - so whilst inflation has come down significantly, this is still far away from a deflationary economy. Now clearly there are strong deflationary forces which led to the reduction in inflation but again to be fair, 1.5% inflation is far healthier than 5-10%.

Whilst I agree the credit growth in China is unsustainable, I would recommend to avoid over-exaggerating conclusions about China. I remember when in 2005-2008 I worked in Hong Kong and many predicted that China is going to collapse and that the double digit growth figures we have seen back then will just lead to a crash imminently. Well it hasn't happened and China is still growing faster than most other economies.

That's a stunning statement you make, that you dunno if BNP Paribas' reference to a 10% fall in housing prices applies to one single province or to all of the PRChina. PNB does not identify any province. PNB does of course refer to all of the PRChina rather than to one single province. What else on earth could BNP be talking about if not all of the PRChina!

Let's try to clear the short-circuited mind in the above post with some actual and accurate data:

The IMF finds the ratio of residential investment to GDP has reached 9.5%. In Shanghai the median of residential property prices is RMB 53,775 psm (USD 1: RMB 6). The median price of residential property in New York City is $550. Indeed, the PRChinese joke that for the ordinary Chinese to buy a house he had to have started saving during the Tang Dynasty (900 A.D) (an actual calculation).

China's laborforce contracted by 3.5 million in 2012 and by 2.3 million in 2013 as the society's demographic negatives began to take hold, with that trend projected to continue into the next decade as the PRC continues to grow older rather hold steady or grow younger..

Since 2010 the flow of fresh rural migrants to the existing populated cities declined by 50%, to 6.3 million. Nomura Securities says existing cities will begin experiencing net population outflows beginning next year due primarily to continued decreases in manufacturing. Meanwhile, the dozen existing huge ghost cities remain empty and dark, a half dozen others remain partly constructed and abandoned.

Beijing's official state banking system has loaned out $16 Trillion since 2009 which is the size of the entire US banking system, while the CCP's GDP is no better than equal to US GDP. The state banking system had no cash for most of 2014, which also indicates the actual extent of non performing loans.

The shadow banking system, which is off the books and thus not included in GDP, stopped all lending in February last year....PNB and others calculate shadow banking is equal to 40% of current GDP.

One could go on........

Briefly stated, the CCP's PRChina has jagged edges sticking out all over the place. The jagged edges keep getting wider and longer....very soon there will be no center mass remaining.

Edited January 12, 2015 by Publicus

[spidermike007]

With China and Russia cooperating closely, what affect will China's economic problems have on Russia?

What affect will it have on S.E.Asia, particularly Thailand?

A lot.

Both Russia and Thailand have seen China as an economic powerhouse and have aligned themselves with China's future.

Look how Thai leadership is getting into bed with China, almost appearing to shun the West due to criticism and sanctions. It's been agreeing on currency swaps, signing rail deals, concentrating on tourism and exports... If China goes down now, Thailand is in a mess.

Putin has known the West won't play ball with him including imposing sanctions and has increasingly turned to China. Putin and China have believed that together they can be a world unto themselves but both are failing in front of our eyes.

I have no clue why so many have believed that China is a rising star when in fact it is a communist dictatorship with a hidden banking system (Shadow banking) and debt up the ying yang. Pundits say that China's real debt is about 250% of GDP while the UK's is 100% and the US has about 90%.

The EU and the US actually invent and produce things. China either makes cheap copies or manufactures for the West where Western companies make the big bucks and the Chinese pick up the scraps with cheap labor. Think of what Nike shoes sell for in the West after having been made in China for peanuts.

I will feel vindicated after the Chinese collapse after soooo many people have predicted that it will rise above the West. It can't rise above capitalism which spurs innovation for profit by individuals while its leaders try to fake it.

You may be right as to Thailand. Thailand also gets in trouble when Yuan appreciates and

Chinese exports are no longer cheap. Thailand is trying to participate in global markets and needs a better hedge due to its exposure and reliance on global markets.

Russian on the other hand is fully capable of going isolationist again and simply maintain ties with China and perhaps India for oil exports. Both systems can go to or remain closed currencies.

Russia doesn't have the climate or the right type of land to feed its people. It's a net importer of food. This is much what the sanctions have been about.

China has the climate but a population that's far too large. It is a net importer of food.

Neither isolationism nor a quasi partnership would provide food for the people. They both need to be part of global trade.

And, they need not only the relationships but the money to do so.

Perhaps King Vlad does not have a mature enough emotional development to understand this? Perhaps his venomous hatred of the west is blinding him to the economic realities of these partnerships? Or is it simple, blind arrogance? He certainly seems like an intelligent man. He orchestrated a multi billion dollar personal fortune from scratch by privatizing Russia's state enterprises, for a large commission. That's smart. Or, maybe he just miscalculated on his Crimean misadventures, and found his back against the wall? Maybe his days as director of the KGB do not allow him to either trust other nations, nor back down? He is definitely a puzzle.

[Publicus]

Both Russia and Thailand have seen China as an economic powerhouse and have aligned themselves with China's future.

Look how Thai leadership is getting into bed with China, almost appearing to shun the West due to criticism and sanctions. It's been agreeing on currency swaps, signing rail deals, concentrating on tourism and exports... If China goes down now, Thailand is in a mess.

Putin has known the West won't play ball with him including imposing sanctions and has increasingly turned to China. Putin and China have believed that together they can be a world unto themselves but both are failing in front of our eyes.

I have no clue why so many have believed that China is a rising star when in fact it is a communist dictatorship with a hidden banking system (Shadow banking) and debt up the ying yang. Pundits say that China's real debt is about 250% of GDP while the UK's is 100% and the US has about 90%.

The EU and the US actually invent and produce things. China either makes cheap copies or manufactures for the West where Western companies make the big bucks and the Chinese pick up the scraps with cheap labor. Think of what Nike shoes sell for in the West after having been made in China for peanuts.

I will feel vindicated after the Chinese collapse after soooo many people have predicted that it will rise above the West. It can't rise above capitalism which spurs innovation for profit by individuals while its leaders try to fake it.

You may be right as to Thailand. Thailand also gets in trouble when Yuan appreciates and

Chinese exports are no longer cheap. Thailand is trying to participate in global markets and needs a better hedge due to its exposure and reliance on global markets.

Russian on the other hand is fully capable of going isolationist again and simply maintain ties with China and perhaps India for oil exports. Both systems can go to or remain closed currencies.

Russia doesn't have the climate or the right type of land to feed its people. It's a net importer of food. This is much what the sanctions have been about.

China has the climate but a population that's far too large. It is a net importer of food.

Neither isolationism nor a quasi partnership would provide food for the people. They both need to be part of global trade.

And, they need not only the relationships but the money to do so.

Perhaps King Vlad does not have a mature enough emotional development to understand this? Perhaps his venomous hatred of the west is blinding him to the economic realities of these partnerships? Or is it simple, blind arrogance? He certainly seems like an intelligent man. He orchestrated a multi billion dollar personal fortune from scratch by privatizing Russia's state enterprises, for a large commission. That's smart. Or, maybe he just miscalculated on his Crimean misadventures, and found his back against the wall? Maybe his days as director of the KGB do not allow him to either trust other nations, nor back down? He is definitely a puzzle.

The ostensible chess master's main complication comes from the fact he never played chess against anyone he couldn't put in jail.

Xi Jinping's problem is that he still plays Chinese checkers.

[Robert24]

@publicus: thanks for your answer. With regards to property price decline in BNPs report of 10% is because I have my doubts about the accuracy of that data. I assume you frequently travel to China as well and see that the economies in the different provinces are very different, saying you could have an increase of property prices in Beijing of 5%, Fujan might be flat and simultanously you may see a decline in Sichuan by 10%. So to just say it's gone down by 10% doesn't give you much insight into the property market.

Now with regards to the demographics of China. I agree in the long run they may run into a problem, say in 20-30 years time from now when it really starts to hurt the ratio between the working population and retirees will peak. But certainly not now. There is no shortage of labour available, there are plenty of migrants available that can move into areas where they work in manufactoring. Actually I think other countries like Japan or most European countries have a much more near term problem with demographics than China.

One other thing you keep referring to 'PR Chinese', or 'CCP's GDP vs US GDP', I think these terms are not helpful. It's fine if you just refer to Chinese or Chinese GDP, people tend not to use those terms. I obviously know what you mean.

Now about Shadow banking: In general I don't think shadow banking is such a bad thing and if you look what happened in established economies, you also see that regulations and new capital requirements have led to banks getting rid of huge amounts of assets from their balance sheets which ended up with asset managers, hedge funds and other institutions that are less regulated. This in itself hasn't made the financial system more stable, but it did make banks more stable and probably has taken some leverage out of the system. In China you refer to 40% debt of GDP in the shadow banking sector which may or may not be a problem. People keep referring to it as an issue, I'm not sure if it is. Would you feel more comfortable if this debt would move to the regulated banks? Not sure about it.

Hope this gives a little bit different perspective on China. I think your views are overly negative on China and you underestimate their capability to address issues and pro-actively steer their economy towards a more consumption led economy rather than mainly investment led.

[lovetotravel]

The first domino falleth:

http://for.tn/1xR1sby

Timber!!!!

As the article states, this is a very small loan. But as it also says, it's the first time this has happened for an active developer.

This is another interesting article to read:

http://fortune.com/2014/10/24/chinese-house-price-slump-continues/

[Publicus]

Perhaps a bit of schadenfreude going around in respect of this prospect but there is nothing good for the rest of the world in the event of a Chinese collapse: on the contrary, it could well result in another version of 2009, but worse..

If there might be any schadenfreude at this thread it would only be the rough equivalent to the feeling people get when they see the Death Star explode.

On schadenfreude....

When a word such as this is borrowed into another language its meaning is often more restrictive than in the original. I think the instances in English strongly suggest that the sufferer somehow deserves the misfortune. In German, one could feel Schadenfreude when a fat man slips on an icey sidewalk, though it would be considered very illbred to show it, but I think in English, one only feels schadenfreude if the man had just been extremely rude to a shop clerk. Janko

The PRChina crashing affects the PRChina primarily and the East Asia region somewhat. The PRC capital markets exist within the PRC only and the RMB isn't even a regional currency, much less the global reserve currency of the medium of global trade, investment, forex.

Since 2012 Japan has been steadily pulling out its considerable FDI from the PRC. Australia which has seen its mineral commodities exports to the PRC decline will soon have other emerging markets elsewhere. Nor would it be ill bred to smile when a certain country ruled by brasshats slips on a banana peel tossed off by a CCP.

[Robert24]

@Publicus: re your statement that an Economic crash would mainly impact China itself and East Asia, I think you completely underestimate 1) how interconnected the Global economy has become and 2) how important China has become as a Global growth engine. If there will be an economic contraction in China, believe me you will have an ugly Global recession. If the economic contraction in China comes in form of a financial collapse, it will get even more uglier everywhere. Most Global companies not only produce significant amounts of goods in China but also sell a lot of goods in China, and the growing amount of spending power of Chinese consumers is hugely important to the Global economy. Have a look at the Global car makers, food producers, producers of electronic goods, etc etc., for many of them China is either their no 1 market globally or amongst the top 3.

[thailiketoo]

@Publicus: re your statement that an Economic crash would mainly impact China itself and East Asia, I think you completely underestimate 1) how interconnected the Global economy has become and 2) how important China has become as a Global growth engine. If there will be an economic contraction in China, believe me you will have an ugly Global recession. If the economic contraction in China comes in form of a financial collapse, it will get even more uglier everywhere. Most Global companies not only produce significant amounts of goods in China but also sell a lot of goods in China, and the growing amount of spending power of Chinese consumers is hugely important to the Global economy. Have a look at the Global car makers, food producers, producers of electronic goods, etc etc., for many of them China is either their no 1 market globally or amongst the top 3.

This is not in keeping with grandfathers opinion of all things Asian, "China's system can't work long term because they are copiers rather than innovators. They have been working at cheap rates for their Masters which are the Western countries."