OUTSIDE THE BOX
IN 1295, Marco Polo returned to Venice after 24 years of travels and told of his adventures in China. That was the beginning of the West’s knowledge of China, the Middle Kingdom.
The only problem is that Marco Polo probably never went to China and all that he said about the Chinese were fabrications and lies. He claimed he was the governor of Yang-Chou (now Yangzhou) for three years under the Mongol Emperor Kublai Khan. Yet, in The Travels of Marco Polo, a 13th-century travelogue written down by Rustichello da Pisa from stories told by Marco Polo, the traveler never mentioned the Great Wall, the fact that the Chinese drank tea (not brought to Europe until 400 years later), Chinese calligraphy, or ceramic movable type and mechanized printing.
It seems like tea and the Great Wall might have stood out as something to remember to tell the folks back home.
The stories that Polo told were probably secondhand tales gained from talking to merchants and traders who traveled the Silk Road through Central Asia. Ultimately, Polo’s tales were probably nothing more than an example of the Chinese proverb, outside noisy; inside empty.
However, the bits and pieces of his story were fascinating to the European readers although they never received anything near an accurate picture of China. It’s now 2011 but the world still does not have a true picture of China, just short glimpses that are false.
China is a dictatorship similar to North Korea, Venezuela and Cuba. By definition, a dictatorship is a form of government that has the power to govern without consent of those being governed. A dictatorship serves one purpose and lives for one goal: to remain in power as long as possible. Threats of violence, strict enforcement of loyalty to the leadership, and economic control are the normal methods.
With its more than 1 billion population, China uses economic control as its primary method.
But China is not an efficient dictatorship as it is a dictatorship by committee. Hu Jintao is the general secretary of the Communist Party of China and president. However, the farther China moves from the individual dictatorship of Mao Zedong, the leader becomes more of the public face of the Politburo Standing Committee rather than the “boss.”
The global economic meltdown that started in 2007 threatens Chinese leadership in a way not seen before. The so-called democratic uprisings over the years have been appeased by increasing national and personal wealth, even more so since 2007. But the bubble is drastically bursting.
The central government knows that it cannot stop a rebellion of literally hundreds of millions of people and that rebellion is its greatest fear. And nothing can get the people to the streets faster than an economic downturn. Witness Greece, Italy, and to a lesser extent, the US.
China’s economy is in the beginning stages of a meltdown.
In 2009, the first full year of the Chinese stimulus plan, they dumped $1.1 trillion into a then $4.3-trillion economy. Talk about pump priming. The Chinese created growth—along with a property bubble, a stock-market bubble, and an inflation bubble.
Car sales have decreased nearly 5 percent since last year, and property values are beginning to plummet in key markets, with prices down 30 percent this October in Shanghai alone.
In the spring of 2010, the Chinese state electrical grid reported 64.5 million apartments showed no electricity usage for the previous six months. Those units represent housing for 200 million people. The Beijing government funded the building of another 30 million to 50 million more apartment units. That is a real-estate bubble.
The National Bureau of Statistics in Beijing said growth was 9 percent in the third quarter 2011. Yet electricity usage was up only 3 percent. A manufacturing-based economy does not work that way.
Larry Lang is chair professor of finance at the Chinese University of Hong Kong and well-known Chinese television personality. He believes the economy actually shrank by 10 percent so far in 2011. He says every province in China is Greece because of massive debt that is not included in official reports.
To control inflation, which Lang believes is running at 16 percent, the government is tightening on spending, causing the bubbles to burst. That tightening is having an effect. The Shanghai Composite Index is down 20 percent from its 2011 high. It was up 80 percent in 2009.
Finally, survey after survey shows that the rich and super-rich Chinese are making plans to leave, buying houses abroad and many already moving their families.
When China falls, the global debt circle will be complete. No wonder the Philippines is the investment “Dark Horse” of Asia.
E-mail to firstname.lastname@example.org and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by CitisecOnline.com Inc.
Every Province in China is Greece (http://www.mining.com/2011/11/16/every-province-in-china-is-greece-larry-lang/)
Chinese TV host says regime almost bankrupt (http://www.theepochtimes.com/n2/china-news/chinese-tv-host-says-regime-nearly-bankrupt-141214-print.html)
Forget Greece. Worry About China (http://www.mining.com/2011/09/21/forget-greece-worry-about-china/)
China's Economic Miracle Going Down the Tubes (http://community.nasdaq.com/News/2011-11/chinas-economic-miracle-going-down-the-tubes-10-stocks-to-watch.aspx?storyid=103992)
Tuesday, 22 November 2011