Daily Adams

China

The Party Ladles It Out 

The desperate suzerains of the Red Ponzi are incorrigible. There appears to be no insult to economic rationality that they will not attempt in order to perpetuate their power, privileges and rule.So now comes the most preposterous gambit yet. Namely, a veritable tsunami of state handouts to foster, yes, capitalist entrepreneurs!That’s right. As described by Bloomberg, Premier Li Keqiang  gave the word, and, presto, nearly $340 billion poured into an instantly confected army of purported venture capital funds run by local government officialdom all over the land.

Via The World Economy Wreckers Of Beijing @ David Stockman’s Contra Corner.

Another State-Capitalist Error 

It’s about to become clear just how much pain the recent devaluation of the yuan caused to Chinese companies. As earnings season accelerates in Hong Kong, Shanghai and Shenzhen, investors can brace themselves for larger losses from foreign exchange and rising interest expenses. That’s just the beginning.

Via Brace for Yuan Horror Show @ Bloomberg Gadfly.

Party-minded

Chinese state-owned acquirers often seem motivated by non-commercial impulses, which complicates matters. By carrying out directives to “go out and buy” businesses that fit with Beijing’s industrial policy, state-owned companies and even a few of their private counterparts win kudos in the Communist party hierarchy. That helps them tap into official largesse, such as approval […]

Via The biases in Chinese SOEs @ Marginal REVOLUTION.

Bender

Rhetorically, at least, President Xi Jinping acknowledges the exact dilemma that spooks the rest of the world. If China falls back on excessive stimulus, he was quoted recently as saying in the Communist Party’s flagship journal, Qiushi, it will “create new contradictions and problems.”

Yet he seems to ignore his own advice. Two years ago, in a much-heralded effort to address the problem of bad debt in the banking system, financial authorities introduced a program to swap the bank borrowing of local government-controlled entities—much of it linked to the slumping real-estate sector—for municipal bonds. The arrangement should have reduced the overall volume of bank loans. Instead, banks simply filled the slack with new lending. In effect, the government had created a whole new stream of credit.

Via China’s Party Isn’t Over—That’s the Problem @ WSJ.

Chinese Kleptocracy

OK, Politico did not use the exact term, but Charles Davidson and Jeffrey Gedmin make a pretty bold statement in today’s edition. China is a kleptocracy and this encourages instability in the country and in the global economy.

We have argued this pretty much since the founding of this website. A broad system of crony capitalism like the one in China creates distortions in the economy, prices are obfuscated, the connected become wealthy, dishonesty is compounded, until the facade eventually crumbles when the lies become apparent. To some degree that is what we are seeing now with the Chinese downturn.

Via Politico calls out China as the world’s Ultimate Crony Capitalist State @ Against Crony Capitalism.

Considering China Perceptively

American fears over China’s future economic power need to be tempered with some evidence. The same goes for hopes that low-value-added manufacturing that has left the United States will some day return. Gerald P. O’Driscoll, Jr. comments.

Official Chinese Growth Numbers a Lie 

The Party is founded on lies – 

For starters, Citi thinks China’s true real GDP growth rate is more like 4%, or even lower, not the 7% or so that the Chinese government reports. Their “global recession” call suggests that growth will dip to just about 2.5% by the middle of 2016. China’s growth hasn’t been lower than that since 1976, when Chairman Mao was still alive.

Via Business Insider.