China today is dip$hit investing.
While you state that investors are blaming poor performance of Chinese stocks is due to Geopolitical risk are wrong, you wonât invest due to Geopolitical risks? All seems very circular as well as assume poor performance is due to geopolitical risks. I think most believe it is due to internal issues. But does it matter when all seem to agree that it is not worth the risk but have to debate that the reasoning is wrong?
That all happened while things were not as bad in China.
We have not even had that discussion yet.
âThe release of foreign direct investment figures, showing that inbound investment into China is now the lowest in 30 years (at $33 billion)âŚâ
That was for 2023. This year is continuing the trend.
DB2
What is going on inside and outside China are linked. Why do you think Xi does what he does? To wreck everybodyâs business just because he is the big bad Xi? He is doing that in reaction to the geopolitics. The US is trying to contain China. Xi is preparing the inside for the confrontation that will take place outside.
Criticisms against investing in China have been numerous even before Xi came to the scene or before China growth slowdown. That is not new. The geopolitics has changed over the past several years and that has had additional repercussions on foreign investments.
As for the domestic economy, it is undeniable that the chinese growth is slowing but the chinese economy will still be significant moving forward. The path from here to there will be difficult but it has to get there, and in my opinion it will get there.
tj
I do not think you know what is happening with the Chinese economy.
Growth last quarter was 7% as reported.
The Chinese are turning inward because of a lack of water to expand as the economy had been for decades. The growth last quarter was some capacity to meet internal needs. There was a lot of stimulus to make that growth happen.
Xi has outlawed Winnie the Poo because Chinese people were having some fun saying he looked like Winnie the Poo. That is not benign. He would imprison a human being over Winnie the Poo.
Xiâs command economy is ultra-problematic.
Your investment in PDD is high risk. The resources can be denied at any time for exporting.
China has a lot of extreme problems that are surfacing. Most city and provincial governments have been funding themselves primarily from income on long term (100 year usually from the ones I looked at) leases on land to real estate developers who are now mostly experiencing death by speculative bubble explosion. All of a sudden teachers and police and health facilities and transit maintenance and⌠are facing big paycuts.
Ouch.
And Xi is trying to get ahead of the âgameâ by reestablishing Maoist levels of terror to suppress the unhappiness.
I sure as hell am staying as far away as I can.
d fb
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For decades, Chinaâs economic policy has been âbuild stuffâ. Which is great for the economy but as discussed before, real estate developers have more stuff than can possibly be sold. A lot of this development was financed by local government bonds. Local governments also benefited selling land to developers. Thatâs all done and wonât come back for a while, if ever. There is lots of household debt tied up in real estate too. I donât know how this will shake out, low and slow or a big reckoning. But good times are not ahead.
On the national level, China has built tons of railways and airports to the point they donât need much more. Building stuff might not bail them out here, either. Foreign investment is now negative.
The economy has now slid into deflation. Deflation kills jobs and China already has an alarmingly high youth unemployment rate.
And if China were to straighten all this out in the next few years, they still have a demographic bomb to face and there is nothing they can do about it.
Iâm fine not investing in China, me.
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Would that be the ultimate realization of the promise of âsupply side economicsâ: build stuff and people with the means to buy will magically appear, in infinite quantity? How is massive overproduction working for them? Lotâs of âjobsâ being created?
/snark
Steve
Prison guards, âcorrectorsâ of the non-believers, and so on.
Not investable.
Especially for the forced labor camps. Are those inmates appropriately grateful for their âjobsâ?
/sarcasm
Steve
Reading through this thread, especially up near the top, I a reminded of the casual racism that infected the world in the mid 20th century.
Germany led the world in chemicals and physics and other science fields, and that led (subtly and indirectly) to the conviction that they could be the Master Race.
The bright lights in the US were not so worried about the Japanese Air Force because, you know, they saw the Charlie Chan movies portraying Asians as short people who squinted and needed big round glasses to see anything. How could they possibly be pilots?
Now I am not accusing anyone of racism, but perhaps of short-sightedness when it comes to âChinese inventivenessâ. (For one thing there is a whole catalog of things they got to first: gunpowder, paper, umbrellas, wheelbarrows, mechanical clock, silk production, even movable type (yes, before Gutenberg).
But just as I would not expect a lot of technological breakthroughs to come from sub-Saharan Africa (because they donât have the supporting infrastructure on which to build), the Chinese are just getting to the point where they do have that infrastructure. And theyâve been doing some pretty impressive things with it, even if theyâre derivative to this point.
They have bullet trains, chip foundries, internet giants, social media, passenger aircraft (which will likely challenge Airbus and Boeing in another decade), EVs at low price points, and they are turning hundreds of thousands of scientists and technologists in their universities, many of whom are sure to have some original thoughts along the way.
It may be that the âcultureâ will repress some of their scientific exuberance, but (as the old saying goes) âYou canât keep a good man down.â I expect great things from them.
I also expect bad things from them, and we are seeing some of it now: population bomb, overleveraging and over dependence in a single sector, command economy, and so on. Then again, itâs not as though our vaunted capitalist system hasnât gone through some bad times: I offer 2008 and 1929 as prime examples, not to mention the internet bubble or the rampant corruption of the railroad magnates of the 19th century.
All of that said, I donât - and wonât - invest in China. I donât know enough about the companies, and I fear I never will given the state of the media there. (And here! But I digress.) I also have less confidence that I will wake up one morning to find an entire sector nationalized, rationalized, palletized, or terrorized into submission at the whim of a despot.
But in fairness, I thought the same thing here between 2016 and 2020, so I try to keep a fair balance in mind about these things. Anyway, there are better pickings in the more traditional places: US and European markets. Well, maybe not âbetterâ, but at least âmore understandable.â
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I think by âcultureâ, two things are meant: 1. China has a âMarxist-Leninist systemâ currently, 2. chinese traditional culture and history. The first is taken by the academic intelligentsia, and the second by most of the general public. Recently the academics have backed off from definition #2, and concentrate fully on 1 which suits current US rhetoric against China. The academics helped construct it. You can also say with the current regime of political correctness, definition #1 is favored over #2 but that should not be in my opinion. We should see things for what they are. Yet we need to find the right conclusion if we want to talk about culture as defined by #2.
With definition #1, the argument goes that such a system has inherent instabilities that will eventually make it crumble almost by itself. For good measure, pressures and containment are exerted to make this inevitable point occur sooner than later as the US did with the Soviet Union. It becomes then a kind of cold war replayed but now the US did see what happened to the URSS ((evidence!) so they think they were right all along (even though at some times like during the Vietnam war it had its doubts), and it wants to play the same scenario with China. To be fair the US does acknowledge a big difference that we are very much intertwined economically with China while we had almost zero interaction economically with the URSS.
Different but essentially the same.
On innovation again, the Soviet Union had the best mathematicians. Yurin Manin a soviet physicist had proposed a quantum system to make computation. The concept of a quantum computer is widely assigned to Feynman in the West but Manin had the idea earlier. We like to say that the Soviet got the nuclear bomb by infiltrating the Mahatthan project but the truth is that the US and the URSS poached many German scientists to make it.
But China is not N*zi Germany nor Japan nor the Soviet Union. China has its own internal logic that has ticked for millennia. The apparatus it uses to govern its people changes but there is an internal logic that has maintained itself for very long between its people and its government. That is what the western intelligentsia let alone the strident media donât get.
You have a good point that China has advanced infrastructure and science and technologies that the Soviet never had, and there is a critical mass above which innovations will flourish.
sure you wonât invest in China. That is a personal choice.
tj
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It is not racism because I donât think anyone has suggested that the Chinese in America are not innovative. It is more culturalism, specifically whether the top heavy communist culture of Xi is conducive to independent thought that challenges the status quo. And this is not an all-or-nothing issue, as no one is arguing that China has had no innovation at any time in its history. It is a relative question of whether China innovates at the same frequency and magnitude as America specifically and as Western democracies in general.
Xi himself considered it a problem in 2016 and apparently still in 2019 since the speech was prominently republished:
âThough our economy has vaulted to second place in the world, it is big and not strong, and its bloatedness and frailty are quite prominent,â Xi said.
âThis is mainly reflected in the lack of strength in innovation ability, which is the âAchilles heelâ of this lug of an economy of ours.â https://www.reuters.com/article/us-china-politics-xi/lack-of-innovation-is-achilles-heel-for-chinas-economy-xi-says-idUSKCN1SM08G/
2019 was not that long ago, particularly with the pandemic interruption. Is the lack of innovation observed by Chinaâs leaders suddenly no longer a problem? Has there even been enough time to assess the issue? Does rising innovation jive with a rapidly slowing economy?
There still seems to be some concern in the Chinese government about innovation in China in 2024:
âThe direction of promoting tech innovation is right, but my worry is how to achieve it â what path and what institutional mechanisms should we rely on to drive technological innovation and boost productivity?â said one Chinese policy adviser who spoke to Reuters on condition of anonymity. https://www.reuters.com/world/china/chinas-xi-summons-new-productive-forces-old-questions-linger-economy-2024-03-05/
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China is at the other end of demand-side economics. The country needs to shift to supply-side economics to recapitalize.
Instead Central Europe is shifting first to match the US shift to demand-side economics. Effectively locking China out of position for any economic purpose.
China was used as an environmental dumping grounds. Now smokestack factory standards for better air and water are different. Energy supplies are shifting to renewables. The technologies have advanced.
West has no use for China. The limited water resources in China force the countryâs production to turn inward. China is at the apex of its military might and that will dwindle from here.
Xi is unnecessary as a man. He is not much of a human being. He is inflicting a lot of cruelty.