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.
The Party looks for enemies –
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.
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 […]
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.
The One-Party State keeps score –
With a concept straight out of a cyberpunk dystopia, China has gamified obedience to the State.China has created a social tool named Sesame Credit which gives people a score for how good a citizen they are.
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.
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.
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.
That didn’t last long –
“Some economists and investors have long questioned the accuracy of China’s official growth data. When Li was party secretary of Liaoning province in 2007, he said that figures for gross domestic product were “man-made” and therefore unreliable, according to a diplomatic cable published by WikiLeaks in 2010.”
The vanity of state capitalism –
“Few dispute that China is in trouble. Credit has been stretched to the limit and beyond. The jump in debt from 120pc to 260pc of GDP in seven years is unprecedented in any major economy in modern times. For sheer intensity of credit excess, it is twice the level of Japan’s Nikkei bubble in the…