Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
US Treasury Bonds Pause Near Resistance Before The Next Rally - 18th Oct 19
The Biggest Housing Boom in US History Has Just Begun - 18th Oct 19
British Pound Brexit Chaos GBP Trend Forecast - 18th Oct 19
Stocks Don’t Care About Trump Impeachment - 17th Oct 19
Currencies Show A Shift to Safety And Maturity – What Does It Mean? - 17th Oct 19
Stock Market Future Projected Cycles - 17th Oct 19
Weekly SPX & Gold Price Cycle Report - 17th Oct 19
What Makes United Markets Capital Different From Other Online Brokers? - 17th Oct 19
Stock Market Dow Long-term Trend Analysis - 16th Oct 19
This Is Not a Money Printing Press - 16th Oct 19
Online Casino Operator LeoVegas is Optimistic about the Future - 16th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - Video - 16th Oct 19
$100 Silver Has Come And Gone - 16th Oct 19
Stock Market Roll Over Risk to New highs in S&P 500 - 16th Oct 19
10 Best Trading Schools and Courses for Students - 16th Oct 19
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

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