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On October 23 2012 22:52 Otolia wrote: Very well written from a political point of view. But China isn't just a political unity anymore. Its citizens might want to achieve democracy (more precisely the semi-democracy our western countries have) but in their ideas that's becoming irrelevant.
China doesn't want to be a democracy, they just want to stand at the top of the world and look down on the rest of the world (just like Korea), nationalistic feelings will grow in China simultaneously to the building of democracy because they need a democracy to be accepted by the western world.
What will happen after that ? Who knows ? Hopefully by the time China is a the top, Europa will have decentralized and distributed its power enough in a political entity so that we don't have to suffer from its economical position. On the other hand, I only predict hard times for Africa. They might be happy now with China investing there but it will be no better than colonization in a few decades. Bolded part is absolute bullshit.
EDIT: The rest of the post doesn't seem very coherent, please elaborate.
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On October 26 2012 03:33 RavenLoud wrote:Show nested quote +On October 23 2012 22:52 Otolia wrote: Very well written from a political point of view. But China isn't just a political unity anymore. Its citizens might want to achieve democracy (more precisely the semi-democracy our western countries have) but in their ideas that's becoming irrelevant.
China doesn't want to be a democracy, they just want to stand at the top of the world and look down on the rest of the world (just like Korea), nationalistic feelings will grow in China simultaneously to the building of democracy because they need a democracy to be accepted by the western world.
What will happen after that ? Who knows ? Hopefully by the time China is a the top, Europa will have decentralized and distributed its power enough in a political entity so that we don't have to suffer from its economical position. On the other hand, I only predict hard times for Africa. They might be happy now with China investing there but it will be no better than colonization in a few decades. Bolded part is absolute bullshit. EDIT: The rest of the post doesn't seem very coherent, please elaborate. China doesn't want to look down on the rest of the world, China just wants to make money off the rest of the world. Doesn't make people hate them any less but it's a pretty big difference
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On October 26 2012 11:12 Shady Sands wrote:Show nested quote +On October 26 2012 03:33 RavenLoud wrote:On October 23 2012 22:52 Otolia wrote: Very well written from a political point of view. But China isn't just a political unity anymore. Its citizens might want to achieve democracy (more precisely the semi-democracy our western countries have) but in their ideas that's becoming irrelevant.
China doesn't want to be a democracy, they just want to stand at the top of the world and look down on the rest of the world (just like Korea), nationalistic feelings will grow in China simultaneously to the building of democracy because they need a democracy to be accepted by the western world.
What will happen after that ? Who knows ? Hopefully by the time China is a the top, Europa will have decentralized and distributed its power enough in a political entity so that we don't have to suffer from its economical position. On the other hand, I only predict hard times for Africa. They might be happy now with China investing there but it will be no better than colonization in a few decades. Bolded part is absolute bullshit. EDIT: The rest of the post doesn't seem very coherent, please elaborate. China doesn't want to look down on the rest of the world, China just wants to make money off the rest of the world. Doesn't make people hate them any less but it's a pretty big difference Yeah that's what I thought.
Otolia seems to think that China would repay the favor of the Opium Wars to Europe, which is pure fantasy.
Always funny to see Europeans lecture others on neo-colonianism too.
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On October 26 2012 11:41 RavenLoud wrote:Show nested quote +On October 26 2012 11:12 Shady Sands wrote:On October 26 2012 03:33 RavenLoud wrote:On October 23 2012 22:52 Otolia wrote: Very well written from a political point of view. But China isn't just a political unity anymore. Its citizens might want to achieve democracy (more precisely the semi-democracy our western countries have) but in their ideas that's becoming irrelevant.
China doesn't want to be a democracy, they just want to stand at the top of the world and look down on the rest of the world (just like Korea), nationalistic feelings will grow in China simultaneously to the building of democracy because they need a democracy to be accepted by the western world.
What will happen after that ? Who knows ? Hopefully by the time China is a the top, Europa will have decentralized and distributed its power enough in a political entity so that we don't have to suffer from its economical position. On the other hand, I only predict hard times for Africa. They might be happy now with China investing there but it will be no better than colonization in a few decades. Bolded part is absolute bullshit. EDIT: The rest of the post doesn't seem very coherent, please elaborate. China doesn't want to look down on the rest of the world, China just wants to make money off the rest of the world. Doesn't make people hate them any less but it's a pretty big difference Yeah that's what I thought. Otolia seems to think that China would repay the favor of the Opium Wars to Europe, which is pure fantasy. Always funny to see Europeans lecture others on neo-colonianism too. lol, if China wanted to repay the favor of the Opium Wars, all it would have to do is decriminalize marijuana and refrain from prosecuting anyone smuggling it into the EU/USA
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On October 26 2012 12:17 Shady Sands wrote:Show nested quote +On October 26 2012 11:41 RavenLoud wrote:On October 26 2012 11:12 Shady Sands wrote:On October 26 2012 03:33 RavenLoud wrote:On October 23 2012 22:52 Otolia wrote: Very well written from a political point of view. But China isn't just a political unity anymore. Its citizens might want to achieve democracy (more precisely the semi-democracy our western countries have) but in their ideas that's becoming irrelevant.
China doesn't want to be a democracy, they just want to stand at the top of the world and look down on the rest of the world (just like Korea), nationalistic feelings will grow in China simultaneously to the building of democracy because they need a democracy to be accepted by the western world.
What will happen after that ? Who knows ? Hopefully by the time China is a the top, Europa will have decentralized and distributed its power enough in a political entity so that we don't have to suffer from its economical position. On the other hand, I only predict hard times for Africa. They might be happy now with China investing there but it will be no better than colonization in a few decades. Bolded part is absolute bullshit. EDIT: The rest of the post doesn't seem very coherent, please elaborate. China doesn't want to look down on the rest of the world, China just wants to make money off the rest of the world. Doesn't make people hate them any less but it's a pretty big difference Yeah that's what I thought. Otolia seems to think that China would repay the favor of the Opium Wars to Europe, which is pure fantasy. Always funny to see Europeans lecture others on neo-colonianism too. lol, if China wanted to repay the favor of the Opium Wars, all it would have to do is decriminalize marijuana and refrain from prosecuting anyone smuggling it into the EU/USA ...that's actually brillant. Use Afghanistan to produce marijuana and export to the West.
Make billions.
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http://www.nytimes.com/2012/10/26/business/global/family-of-wen-jiabao-holds-a-hidden-fortune-in-china.html?pagewanted=all&_r=2&&
Late one evening early this year, the prime minister’s only son, Wen Yunsong, was in the cigar lounge at Xiu, an upscale bar and lounge at the Park Hyatt in Beijing. He was having cocktails as Beijing’s nouveau riche gathered around, clutching designer bags and wearing expensive business suits, according to two guests who were present.
...
A Times review of Winston Wen’s investments, and interviews with people who have known him for years, show that his deal-making has been extensive and lucrative, even by the standards of his princeling peers.
State-run giants like China Mobile have formed start-ups with him. In recent years, Winston Wen has been in talks with Hollywood studios about a financing deal.
Concerned that China does not have an elite boarding school for Chinese students, he recently hired the headmasters of Choate and Hotchkiss in Connecticut to oversee the creation of a $150 million private school now being built in the Beijing suburbs.
Winston Wen and his wife, moreover, have stakes in the technology industry and an electric company, as well as an indirect stake in Union Mobile Pay, the government-backed online payment platform — all while living in the prime minister’s residence, in central Beijing, according to corporate records and people familiar with the family’s investments.
...
Winston Wen was educated in Beijing and then earned an engineering degree from the Beijing Institute of Technology. He went abroad and earned a master’s degree in engineering materials from the University of Windsor, in Canada, and an M.B.A. from the Kellogg School of Business at Northwestern University in Evanston, Ill., just outside Chicago.
When he returned to China in 2000, he helped set up three successful technology companies in five years, according to people familiar with those deals. Two of them were sold to Hong Kong businessmen, one to the family of Li Ka-shing, one of the wealthiest men in Asia.
Winston Wen’s earliest venture, an Internet data services provider called Unihub Global, was founded in 2000 with $2 million in start-up capital, according to Hong Kong and Beijing corporate filings. Financing came from a tight-knit group of relatives and his mother’s former colleagues from government and the diamond trade, as well as an associate of Cheng Yu-tung, patriarch of Hong Kong’s second-wealthiest family. The firm’s earliest customers were state-owned brokerage houses and Ping An, in which the Wen family has held a large financial stake.
He made an even bolder move in 2005, by pushing into private equity when he formed New Horizon Capital with a group of Chinese-born classmates from Northwestern. The firm quickly raised $100 million from investors, including SBI Holdings, a division of the Japanese group SoftBank, and Temasek, the Singapore government investment fund.
Under Mr. Wen, New Horizon established itself as a leading private equity firm, investing in biotech, solar, wind and construction equipment makers. Since it began operations, the firm has returned about $430 million to investors, a fourfold profit, according to SBI Holdings.
“Their first fund was dynamite,” said Kathleen Ng, editor of Asia Private Equity Review, an industry publication in Hong Kong. “And that allowed them to raise a lot more money.”
Today, New Horizon has more than $2.5 billion under management.
Some of Winston Wen’s deal-making, though, has attracted unwanted attention for the prime minister.
In 2010, when New Horizon acquired a 9 percent stake in a company called Sihuan Pharmaceuticals just two months before its public offering, the Hong Kong Stock Exchange said the late-stage investment violated its rules and forced the firm to return the stake. Still, New Horizon made a $46.5 million profit on the sale.
Soon after, New Horizon announced that Winston Wen had handed over day-to-day operations and taken up a position at the China Satellite Communications Corporation, a state-owned company that has ties to the Chinese space program. He has since been named chairman.
China's push for reform is basically going to set these fortunes free--in the sense that the money and influence of China's ruling class will no longer be "black" or "gray" (eastern european or Soviet-style--tied to a Leninist party) but rather "white" (Anglo-American style--tied to directorships, shareholdings, trust funds, endowments.)
And when that shift is made, China will become a democracy.
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The one thing I find sad about China is that they want to become America so badly that they just want to copy the American model, without even considering whether the model fits or whether the model is even desirable.
China won't become a leading nation by copying the socio-economic structure of someone else.
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On October 26 2012 12:35 Shady Sands wrote: The one thing I find sad about China is that they want to become America so badly that they just want to copy the American model, without even considering whether the model fits or whether the model is even desirable.
China won't become a leading nation by copying the socio-economic structure of someone else. I wonder about this as well. Another main problem from what I can imagine, is the lack of third party organizations independent from the CCP that can correctly identify mistakes in policies and take measures against them.
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On October 26 2012 13:05 RavenLoud wrote:Show nested quote +On October 26 2012 12:35 Shady Sands wrote: The one thing I find sad about China is that they want to become America so badly that they just want to copy the American model, without even considering whether the model fits or whether the model is even desirable.
China won't become a leading nation by copying the socio-economic structure of someone else. I wonder about this as well. Another main problem from what I can imagine, is the lack of third party organizations independent from the CCP that can correctly identify mistakes in policies and take measures against them.
FYI take a look at this chart
http://www.nytimes.com/interactive/2012/10/25/business/the-wen-family-empire.html
This is why
a) Hong Kong will never, ever become independent--look at how the movers and shakers of HK (and Taiwan) are becoming commpletely intertwined with the mainland elites (and by extension, the Party)
b) This should give you a good idea as to why Chinese reformists want reform--because it offers a chance to legitimize all these stakes and directorships
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http://www.reuters.com/article/2013/02/28/us-china-economy-urbanisation-idUSBRE91R1H720130228
This is where the dumb money will come from, in terms of bailing out Chinese banks that are trapped in these 'evergreen' loans (e.g. loans where the principal is repaid with a new loan to the same source, in effect lengthening duration and tying up inordinate amounts of capital into keeping essentially insolvent entities afloat--all of which jacks up the implied cost of capital for non-politically connected firms)
Central and local governments, as well as bank loans, will fund the costs, the sources said. But, sweeping reforms to create a fully-functioning municipal bond market, boost corporate and high-yield bond issuance and actively steer foreign capital into the sector, are crucial to raising the sums of money China will need, they added.
FYI, I love having a girl I can talk this sort of stuff with... a pity I let her go once, she's now in Hong Kong, and I'll never be able to afford her, ever
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http://www.reuters.com/article/2013/03/18/us-china-economy-reform-idUSBRE92H10P20130318
(Reuters) - China is poised to launch its most serious economic reform drive since the 1990s after a series of top appointments at the weekend put the architects of Zhu Rongji's clash with state owned enterprises in charge of key economic agencies. Vice Premier Ma Kai, Finance Minister Lou Jiwei and central bank governor Zhou Xiaochuan were all Zhu lieutenants at the State Commission for Restructuring the Economy, which drew up the blueprint to sever the army's ties with business and make millions jobless as state-owned enterprises (SOEs) were reformed.
Yep, China is about to privatize everything that moves, and a lot of things that don't. Lou Jiwei, in particular, is a very unorthodox/heterodox Chinese bureaucrat-businessman (Chinese term: 官商). He was noted for being an aggressive 'young turk' back in the late 90s in his financial modeling/proposals to shake up SOEs. Ma Kai's a bit more conservative, but has a lot of deep political pull with SOEs through his tenure at the NDRC--my guess is Ma and Lou will play good-cop/bad-cop in dealing with SOEs, with Ma's velvet glove concealing Lou's iron fist.
Zhou Xiaochuan is staying in place because his job isn't done yet, and he's probably the only guy who knows how to finish it. It's a little like leaving a coder in place because sending in a new guy would require him to reinvent an insanely complex wheel.
(Sidenote: Lou is one of the few Chinese bureaucrats who is a fan of metal--death metal in particular. An apocryphal story has him trading a thousand-dollar bottle of Rothschild wine he got as a gift for a pair of front-row tickets to a Mastodon concert.)
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Shady, I love reading these posts of yours, and this blog post in particular. The blog post itself was inspiring, and your follow up posts are also wonderful reads.
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Honestly I think this entire generation of Chinese leaders is going to get screwed. Either they're going to have to rebalance so quickly that the Chinese economy collapses, or they're going to have to let the bubble burst. As for those SOEs, I think privatizing them will do nothing. Most of them are adding no new wealth to the economy anyways, they are just turning a profit since they can borrow at negative real rates thanks to the CCP fixing household savings rates at close to nothing.
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On March 20 2013 03:22 iamho wrote: Honestly I think this entire generation of Chinese leaders is going to get screwed. Either they're going to have to rebalance so quickly that the Chinese economy collapses, or they're going to have to let the bubble burst. As for those SOEs, I think privatizing them will do nothing. Most of them are adding no new wealth to the economy anyways, they are just turning a profit since they can borrow at negative real rates thanks to the CCP fixing household savings rates at close to nothing.
The PSC is willing to let the bubble burst. That's why Bo had to go--the justification floating at elite levels was that Bo, being ambitious, might take cheap shots at Xi while he did open heart surgery on the Chinese economy.
Also, contrary to your assertions, privatizing the SOEs will partially fix the capital misallocation problem, because the theory is banks will be more reluctant to lend to freshly private companies without an implicitly government-backed balance sheet. Now, whether proves true in practice or not will depend on how deeply Li Keqiang decides to sever the institutional guanxi that bind SOEs and the big banks together on top of privatization. That's going to be the real acid test, and what the new administration is likely to spend most of its political capital doing.
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http://www.businessweek.com/articles/2013-10-11/chinas-third-plenum-get-ready-for-disappointment
China is about to hold its Third Plenum (三中全会). In the post-Mao cadence of Chinese politics, the Third Plenum has usually been the forum by which key personnel issues have been worked out, and the government can get to economic policy. What sets this forum apart from prior iterations is that China is about re-engineer its economy on a scale hitherto unimagined (or even unimaginable); however, expectations for this meeting are low due to the strength of special interest groups within the Communist Party.
+ Show Spoiler +In the runup to China’s Third Plenum, the excitement among reform advocates is palpable. Likely to open in early November, the key Communist Party meeting is expected to launch sweeping changes to the Chinese economy, say economists, officials, and local media. There is a precedent after all: At the best-known Third Plenum in 1978, paramount leader Deng Xiaoping announced gaige kaifang, or “reform and opening up,” ending the autarchic period of the Cultural Revolution and earlier decades, and throwing open China’s economy to market forces.
“Thirty-five years after the Communist Party of China (CPC) lifted the country out of 10 years of chaos and started economic reform and opening up, analysts say that the Third Plenary Session of the 18th Central Committee of CPC has the potential to be a landmark event,” said the official Xinhua News Agency on Oct. 9. “It can chart out a comprehensive plan to propel the world’s second-largest economy on a more sustainable growth path.”
But what if the plenum doesn’t deliver? Given the lofty hopes, that is a real possibility. And it’s a prospect that some are starting to consider. “High expectations about reforms to rebalance growth are likely to be disappointed by the outcome of the November plenum,” write economists Louis Kuijs (formerly based in Beijing with the World Bank) and Tiffany Qiu at the Royal Bank of Scotland in Hong Kong, in an Oct. 9 note.
STORY: World Bank Cuts East Asia Growth on China Slowing So what is likely to come out of the party meeting? There will probably be few specifics about what shape individual policies may take. But there will be no dearth of broad statements by top leaders, including Party Secretary Xi Jinping and Premier Li Keqiang, laying out long-term goals for the country. Of course, that will include the now familiar refrain that China must transform its economy to one driven much more by consumption and services and less by investment. We will also hear that China intends to upgrade its industries to produce higher-value, technology-oriented products, while stepping away from its labor-intensive, energy-wasting, and polluting role as factory to the world—so serving less and less as a maker of shoes, toys, textiles, and cheap electronics.
Yet among the many reform hopes bruited about in recent months, some have a much better shot at getting a push forward at the plenum. “Surveying key reform areas, we expect reasonably concrete principles and directions on how to move forward in November, and measures in the coming two years, in areas where there is not much resistance and thus a mandate for reform, such as financial and monetary reform, pricing and taxation of raw resources and more government spending on health, education and social security,” write Kuijs and Qiu.
Others areas, however—many of which are widely seen as key to China achieving its move to a more sustainable development—have much less chance of really making progress. Prime example: dealing with the outsize role that powerful state enterprises play in the Chinese economy. “We expect little clarity on objectives in November, and not many measures in the coming 2 years, in areas where the political economy is an obstacle and that have not been emphasized by senior leaders, such as leveling the playing field between SOEs” and private enterprise, write the Royal Bank of Scotland economists.
VIDEO: What Will Drive Economic Growth in China? “The benefits preferential policies bring to state-owned companies every year are huge,” points out Sheng Hong, director of the Beijing-based market reform-oriented Unirule Institute of Economics. “Taking them away is very difficult.”
Then there is another category: reforms cited by the Chinese leadership and economists as very important but that are also deeply complicated to carry out, not to mention controversial. Official statements emanating from the Third Plenum will likely talk in general about the desirability of pushing household registration and land ownership reforms—both key to giving rural Chinese and migrant workers more consumption power—and may announce limited pilot programs in both, but don’t expect nationwide policy breakthroughs.
That’s because everyone from urban residents who don’t want to share limited educational and health-care resources to local governments hooked on land revenues are powerful opponents to change. “If an official wants to develop his city, then the land surrounding it can be forcibly taken from farmers at a very low price, and the farmers cleared off,” says Unirule’s Sheng. “We call it land finance. Every local government relies on it.”
STORY: A Slowing China Needs Reform While slower progress on reforms won’t likely lead to economic collapse—despite what some China bears believe—foot-dragging nevertheless could create serious problems down the road. “China’s overall reform process could become skewed,” write Kuijs and Qiu. “If China maintains decent progress with necessary, politically easy ‘welfare state’ types of reforms, but cannot make progress with the politically difficult but essential growth and productivity-enhancing rebalancing reforms, the country could end up with a rebalanced but slower growing economy.”
Meanwhile, if China’s leaders don’t adopt reforms to make a more market-oriented economic and financial system, including by ending the serious favoritism shown to state-owned companies and allowing banks to make more commercially based lending decisions, risks could rise further. “If the reforms to adjust the economic structure and the domestic financial system cannot be implemented but the government presses ahead with capital account opening, the risks of financial instability would rise while misallocation of capital may actually also increase,” the RBS economists write.
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Interesting I feel you should start on qing dynasty instead though. Also some difference in opinion for the history part but a good write up nethertheless
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Physician
United States4146 Posts
1st thank you for the blog and follow ups, it is the sort of thing that keeps me coming back to teamliquid! 2nd I would like to add an observation and ask what your take is on the issue and how will China try to solve it.
I realize that, like your blind men, I am just touching the legs of the elephant but even from my vantage point of partial ignorance I can feel a fracture in one or two of its legs (can't help it, I guess my trade betrays me) and I despite my humble wisdom, I know that in the Serengeti, an elephant that breaks a leg, does not fare well. As for this broken leg, when it comes to China, I am referring to its impending demographic disaster.
So many years of one child policy has created a problem that may not have a solution, at least not in time to correct the dramatic changes it will bring about and with a low fertility rate, of < 1.5 (overall; it is lower in the 4 megacities, higher of course in rural areas, but over all its less than 1.5 and as low as 1 in places were it matters more), which is below the level that is considered incompatible with cultural survival - how and has China started to address these problems? Even if they managed to correct it today, instantly, many analysts in such matters suspect it is too late to prevent to prevent what will unfold. Europe has the same problems but it compensates it with immigration, China on the other hand as a youth drain.
http://www.stratfor.com/analysis/china-unprecedented-demographic-problem-takes-shape http://www.zerohedge.com/node/477976 http://www.economist.com/node/21553056 http://www.oecdobserver.org/news/archivestory.php/aid/40/China,_a_demographic_time_bomb.html
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This was a fantastic Blog. Thanks for the great read Shady
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Physician
United States4146 Posts
I see that in their Third Plenum they finally decided to ease off the one child policy. Personally I do not think they did enough to try and patch the demographic problems China will have to face in the next 20 years. https://oia.stanford.edu/node/16087
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