Posted on 06/10/2006 5:36:20 PM PDT by RWR8189
I haven't underestimated anyone. I'm only presenting my view of the Chinese government and economy, neither of which are to be taken seriously.
I have agreat confidence in the Chinese people, that, having once discovered what's been stolen from them, will begin the process of cleansing their country of the formerly-communist and kleptomaniac elements, and be so thorough about it, that it will make Rwanda and Darfur look like tea parties.
And it won't be Tiannamen Sqare either. The modern Chinese has access to all sorts of weapons that didn't exist in 1989: the media, the internet, cell phones, sattelite television and radio, with which to spread the word and co-ordinate and distribute dissent. One day they'll wake up and realize that all that money they suppossedly have in the bank isn't worth half a bucket of warm spit and go apesh*t on the commies.
As per Lenin. "If you want to make a revolution, first debase the currency". I can think of nothing that debases a currency faster than $911 billion inloans outstanding that will never be repaid.
Just you watch. China will rot from within long before the United States has to (attempt to)destroy it from without.
China's bad loans have been used in doomsday scenarios for the last 10 years. I remember clearly during the Asian Financial Crisis of 1997, the economic pundits predicted China's economy to crash in 1998. It's 2006 now.
China is not headed for the same place as Japan. Japan's main issue was real estate inflation and a saturating market. China has plenty of domestic market to go toward.
The same people who believe that China's bad loans are going to tank their economy are the people who think the United States' large debt will tank the American economy.
L
Well, those are some really really large apples and oranges, there, buddy. US debt, while I would like to see deficit reduced, is certainly manageable. It's about 30% of our GDP.
Now, Chinese *bad* debt is 40% of their GDP. You don't think that is a problem, especially for a country desperately dependent on exports (like Japan was) ? In true comparison, our savings and loan scandal was 2% of the GDP. And we have had no institutionalized corruption, either.
And keep in mind, Chinese domestic market has no buying power. Sure they got room to grow on the domestic market, but never the less, they are completely dependent on exports. Their profit margins are, if even existent, razor thin.
Should we have a recession, they will be in serious trouble.
Emerging markets are very volatile. They're not at the bottom yet, but there might be some reasonable buys out there in latter part of the year when things consolidate.
Four things to bear in mind about Indian markets:
1. The Indian population (according the UN) will surpass that of China within 30-50 years. Eventually, instead of 1-in-3 people being a Red Chinese, they will be a democratic Indian.
2. India, unlike China, is a western-style democracy which has an actual, true-to-the-term free market, unlike China's which pretends to be free and in which as many obstacles as possible are put in the way of Western business in terms of return on investment. The Chinese are more than happy to take our money, but make it difficult for us to take any back.
3. Free market + booming population + stable democracy = excellent market for US goods and services.
4. The Indian population is increasingly more educated and has far more purchasing power (in real terms) than your average Chinese peasant. The Chiense government will tell you differently, but if you believe them, you need a psychiatrist. The fluctuations in the Indian markets are understandable when you stop to consider just how much money is being pumped into them, and in the face of rising energy prices.
And just for good measure;
Chinese economic figures are suspect. Particularly when almost half the country lives outside the showpiece Coastal cities, and often in remote areas where the installation of a vending machine can be represented as a doubling or tripling of economic activity in the region.
I'm no expert, but it seems to me that India is a very good,long-term prospect. If you're one of those pump-and-dump day trader types, in it for a quick buck, then you won't like it. If you're in for the long haul (and you should be), it's a gold mine just waiting to be tapped.
What you said is all true (kudos for the list), but it makes several assumptions and does not take in to account the below:
1. Continued Indian increase in population might be a liability for India. India has only 1/3 the geographic territory of China, and only 1/2 of the arable land. Second, the bulk of population increases are coming from the poorest of poor regions (extension of poverty to the next generation), and predominantly in muslim areas (a potential source of tension in the future).
2. India's western-style democracy might perpetually lead them to socialist governments. The BJP cannot win with the current Congress-Communist coalition.
3. See #2. A democratic government never guaranteed a free market; they are separate concepts. If socialists are continually elected, India will only raise tariffs, which would mean a poor market for US goods and services.
4. Your last point lacks quantitative evidence and is solely anecdotal. Currently China's literacy is much higher than India's. This means the "average Chinese peasant" as you call them has greater access to opportunities than the average Indian (is the average Indian not a peasant too?). Sure the Chinese data is suspect, but there is no reason to believe the Indian data are any better, especially considering the linguistic chaos of India.
Last point about the quality of Chinese economic data, the Chinese economic data can be confirmed from export and import records in more reliable foreign countries. There is now greater evidence that the Chinese are UNDER-estimating their economic data, especially in private sectors along the Jiangsu-Shanghai-Zhejiang powerhouse corridor.
India has great potential, no doubt. But to deliberately say that India will definitely be economically better off than China in the foreseeable future (10-20 years) is certainly pushing it. There is a tendency to downplay every single negative India has, and exaggerate every single negative China has. It's like how a parent compares his child to others. No one wants a still nominally Communist regime to come out in the lead of a supposedly free society. But there are a lot of other factors that can limit India's economic development, as there are also for China. If there is indeed a race, it's clearly too close to call now.
With regards to your TV example, the Chinese may have four channels, but they are pretty much all government owned or operate under strict censorship. I'd doubt you'd find a sattelite dish that offers 500 channels of programming (especially FOREIGN programming), for example.
You will in India, however; don't forget Bollywood.
That doesn't have anything to do with economic growth, per se, but it does give an indication of the wider range of communication, expression, exchange of ideas and concepts in India that are, ultimately, the fertilizer with which capitalism flourishes.
As for cell phones, I'd hardly equate economic productivity or condition by simply counting cellphones. For one thing, you don't know just what people are doing with those cell phones (other than the obvious). I'm sure there are many who have absolutely no credible use for a cell phone, but buy one anyway because it's all the rage (it's why I bought one, and subsequently, got rid of it). If that's an indication of economic strength, then you might as well count any other arbitrary product or commodity. By that method, we could say that Pakistan is an economic powerhouse because it has more goats per capita than anywhere else on the planet. It doesn't automatically follow that because all those cell phones were sold that everyone one of them is a productivity tool, for business use, or that it's going to equate to any economic boom. Human natgure being what it is, I'll bet the vast majority of Chinese cell phone users are doing exaclt what the vast majority of American cell phone users do: yack incessantly about anything and everything loudly and rudely in restaurants and movie theatres.
The important thing, as always, is that India, as opposed to China, is a much more open society and that such societies ALWAYS prosper because people are free to go about their business and exchange ideas and information without having to worry about a secret policeman busting them for sedition at every turn.
Clearly we view the ends and means differently. I believe that sociopolitical compromise can be made in the name of greater economic development (the saying goes, "how do you enjoy freedom when you are an illiterate peasant?"). This is because long-term economic development has the potential to bring in greater personal freedoms in unpredictable ways. And you believe greater long-term economic development can only result without any of those compromises to overall freedom. I respectfully disagree, good discussion though.
Close, but no cigar. I believe economic development cannot happen in an atmosphere were there is no such thing as free thought or freedom of action. There is no ecomonics without innovation, without protection of property or intelectual rights, and certainly not without politcal rigths.
You are right, there will be no economic development. But I believe so long as the goal is economic development, protection for intellectual property rights will naturally become important as the margins decrease and innovation is demanded by economics. This is the same reasoning on alternative energies (once gas prices go high enough, there will be economic incentive to develop alt energies). In other words, nothing is written in concrete, and the Chinese legal system is still in infantile stages, greater protection of property rights is not an impossibility, even in Communist China. The point is, you first have to have the property to protect, for there to be collective awareness of its importance.
Well, that's how it happened in the West. if the Chinese wish to enjoy Western-style prosperity, they will have to adopt western-style legal and economic systems. Without them, there is no capitalism.
What you have now in China is more akin to National-Scoialism than it is capitalism, frankly.
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