Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Is China an Economic Miracle, or Massive Government Sponsored Fraud?

Politics / China Economy Oct 11, 2012 - 12:20 PM GMT

By: Graham_Summers

Politics

Best Financial Markets Analysis ArticleHistory has shown us countless times that centrally-­‐planned, command style economies do not produce long-­term economic growth. We’ve seen this will the Soviet Union, the UK, the US-­since the Tech Crash, and today in China.

I realize that many would argue China has adopted free market policies with its “free market zones.” However, even this terminology reveals China is nowhere near a free, dynamic market (a free market is simply a free market, not a “zone.”).


Instead, China should be viewed through the lens of rampant corruption, fraud, and insider dealing that has seen a select handful get rich (usually those with close ties to the ruling party) via paper wealth (real estate and stock prices).

First and foremost, no Chinese economic data is even close to accurate. The reason for this, is that unlike the US in which GDP is measured using final sales, China simply counts any and all economic production as economic growth.

So, let’s say that China built a city. Regardless of whether any of the buildings are ever purchased or leased, China will count the entire city in its GDP growth. As one can imagine, this has highly incentivized China’s government to build “bridges to nowhere” or economic projects that are never actually used.

As a result the country is replete with ghost towns…

China’s ghost towns and phantom malls

“In Chenggong, there are more than 100,000 new apartments with no occupants,” according to the World Bank’s Holly Krambeck.

Designed as an overspill point for nearby Kunming, a city of nearly six-­‐and-­‐a-­‐ half million, Chenggong began to take shape in 2003.

High-­‐rise apartment blocks have mushroomed but today it is still largely deserted after failed attempts by the authorities to attract new residents.

Matteo Damiani, an Italian journalist who worked for seven years in Kunming, has visited Chenggong several times, photographing empty tower blocks that loom over gigantic plazas, peopled only by enormous works of art.

He found a small community of students, workers and security guards but nobody else.

“The suburbs and even the city centre are empty,” he says. “You can find a big stadium, shopping malls and hundreds of buildings finished but abandoned.”

There is even an area for luxury villas that is totally abandoned, he adds. It is said to be one of the biggest ghost cities in Asia. http://www.bbc.co.uk/news/magazine-­‐19049254

…as well as widespread economic fraud and counterfeiting:

Fraud, Culture and the Law: Can China Change?

Counterfeit goods and scams are used to defraud millions of Chinese daily.

This week alone, the country’s state media have reported the arrests of two men for fraud: one a high-­‐profile real estate financier suspected of manipulating bids, the other a sales manager at milk producer Mengniu who reportedly tampered with production dates on milk and yogurt labels.

Those cases follow the announcement earlier this month by police that they had seized more than $182 million in counterfeit pharmaceuticals, including drugs used to treat diabetes and high blood pressure, as part of a nationwide crackdown on fake food and drugs. Drug counterfeiters “are coming up with new schemes, becoming craftier and better able to deceive” police warned in a statement accompanying the news.

The persistence and extent of fraud in China, despite a near constant string of crackdowns and arrests, raises fundamental questions about cultural forces in Chinese society that limit the reach of law…

…The production of counterfeit cigarettes, for example, has been estimated to reach 400 billion cigarettes, although cigarette manufacturing and distribution is supposed to be exclusively state-­‐ owned and controlled. One manufacturer reportedly went so far as build a counterfeit cigarette factory in Fujian designed to look like a military compound, including laborers dressed in second-­‐hand military uniforms who conducted false military drills to complement the masquerade. In Sichuan, meanwhile, police are said to have raided a black-­‐ market cigarette factory that had been disguised as the “Number 1 Block” of a provincial prison.

http://blogs.wsj.com/chinarealtime/2012/08/24/fraud-­‐culture-­‐and-­‐the-­‐ law-­‐can-­‐china-­‐change/

Some more striking evidence of fraud, corruption, and counterfeiting in China:

1) In 2010, 30 animals died in the Chinese zoo of Shenyang due to malnutrition.

2) China built the world’s largest mall in 2005. Of the over 2,300 spaces 
available for lease only 47 were rented.

3) China alone accounted for 73 % of $1.69 billion in counterfeit goods seized in 
the EU in 2011.

4) Chinese officials have seized over 50 TONS of counterfeit pharmaceuticals.

5) Raids have seized more than 350,000 counterfeit golf products.

These sorts of issues don’t come out of a free market with a stable regulatory bodies, sound accounting principles, and a legitimate legal structure: they come out of control style economy that are based on fraud and corruption. Indeed, as noted in previous articles:

1) In 2010 alone, 146,000 cases of corruption were launched in China (that’s 400 PER DAY).

2) How much these officials stole is unknown. But… of the 14 cases that were actually reported in the Chinese media, the average amount stolen was 18 MILLION RMB (for perspective, the average college graduate in China earns 2,500 RMB per year).

3) Between 1991–2011, it’s estimated that between 16,000–18,000 Chinese officials fled China taking 800 BILLION RMB (roughly $125 BILLION) with them. Bear in mind China’s entire GDP was just 2.1 trillion RMB in 1991.

So I fully believe that China is heading for a full-scale economic collapse a la the Soviet Union, not just a hard landing.

Indeed, if you need evidence of just how desperate the Chinese Government has become to maintain control, you should consider that it has launched $1 trillion in stimulus projects:

China’s More Than $1 Trillion Stimulus Will Disappoint, Barclays Says

From the central government and the PBoC to regional governments, spending plans worth approximately more than 11 trillion RMB ($1.74 trillion) have been announced, according to Barclays and Nomura. Analysts at the Japanese bank expect Chinese GDP to hit 7.7% in the third quarter and then rebound strongly to 8.8% in the fourth.

There are reasons to be skeptical of these growth expectations, as China is going through both structural and cyclical changes that will limit the impact, and the breadth, of the coming stimulus, Barclays’ team argues. “This time is different,” they wrote, noting that both in the Asian crisis and in the 2008-­‐9 financial crisis, China suffered massive job losses and deflation.

http://www.forbes.com/sites/afontevecchia/2012/09/17/chinas-­‐more-­‐ than-­‐1-­‐trillion-­‐stimulus-­‐will-­‐disappoint-­‐barclays-­‐says/

To put this number into perspective, China’s entire economy is only $7.3 trillion. So China just unveiled stimulus measures equal to 23% of its entire GDP. This is more than TWICE the size of the 2008 stimulus plan.

Imagine if the US announced a QE program equal to over $3 trillion. That’s the equivalent scale of the recent stimulus programs announced in China. And the Chinese stock market barely reacted to this.

Again, China is beyond a hard landing at this point. Combine this with growing food inflation and it’s possible China may in fact break into several smaller countries in the coming years.

Those investors looking for actionable investment ideas could also consider our Private Wealth Advisory newsletter: a bi-weekly detailed investment advisory service that distills the most important geopolitical, economic, and financial developments in the markets into concise investment strategies for individual investors.

To learn more about Private Wealth Advisory and how it can help you navigate the markets successfully…

Click Here Now!!!

Graham Summers

Chief Market Strategist

Good Investing!

http://gainspainscapital.com

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2012 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Graham Summers Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules