This country is an enigma to me, I hear conflicting and convincing arguments as to its economic strength and weakness, that it is on the precipice of collapse or overtaking the United States. I tend to believe that they are weaker than they are strong, but this is based in bias rather than sound evidence.
The party leadership appears to be tightening their control over the party and the very wealthy. To me this feels like they are preparing for upheaval by eliminating their likely competitors before a catalytic event.
It's one of the first tenets in The Art of War, which applies fairly directly to business:
> Appear weak when you are strong, and strong when you are weak.
China is very strong, maybe not supremely organized but they are still growing and have been for many years. Especially a country that actively manipulates its currency to reflect its apparent strength or lack of... its anything but unintentional.
They are doing a superb job of giving the impression they have little control over money leaving the country. I'd love to read history books 50 years in the future when they are the undisputed and final ruler of planet earth.
> They are doing a superb job of giving the impression they have little control over money leaving the country.
Well, the US tries to promote the ability of Americans to engage in foreign investment, because foreign investment is a great way to suck money out of a country. If I buy a countries companies, then all the profit from that country goes to me. It's actually in China's interest to have "money leaving the country". And it is more in China's interest to have no one fight back.
It depends on where the money is going, and if it is ever coming back. I happen to believe a lot of it is people who covertly working with the government in order to establish significant presence in countries throughout the world, similar to what the US has done, only more economically efficiently. Pure speculation of course, but if they can pull it off...
Yes, but foreign investment in China's case depletes foreign reserves. China is also printing money to maintain the current exchange rate, and this is leading to inflation. Their economy is going to result in recession, or they might go to war instead.
Inflation isn't a big concern for China, keeping the manufacturing and technological advancement machine running and public satisfaction high is what matters. And keeping the American public uninformed, but their politicians have that well under control.
China is way too smart to go to war, they can assume leadership without having to engage in significant conflict as long as they make sure they share the wealth with the proper people.
They actually deserve world leadership, I think they've earned it.
Does it have to be one thing or the other? Like the United States, China is a large and complex country. Pollution is horrible, there is a serious shortage of professional skills, and a looming demographic issue. However, at the same time, growth is strong and the country is still very much a developing economy, which means that there is a lot of low-hanging fruit that can be modernized for economic gains.
I don't think it needs to be an issue of China either taking over the world or collapsing. In all likelihood, China will continue to develop along its current track, with China becoming the largest economy sometime in the next 20 years, and presumably the largest military power sometime thereafter.
It feels like the real issue is in the US. The United States needs to come to terms with the fact that, for the next generation, it will have a geopolitical and strategic rival of roughly equal strength and influence, and needs to start building a coherent industrial policy to match that reality.
Pollution is probably a price that a country needs to pay in its early stages of modernization.
Militarily, China is checked by Vietnam, South Korea, Japan....and drum roll...INDIA. No large country like India wants a military monster next door, so India will have to get strong. Plus the counties in the South China sea have beef with China. https://en.wikipedia.org/wiki/South_China_Sea#Territorial_cl...
You make it sound like all these countries are eternal enemies, unlikely to ever cooperate when the future could actually look quite different.
Because I don't think it's an accident that the BRISC New Development Bank is located in China, it's also no accident that Putin has been very vocal about removing the US$ as the world reserve currency and establishing a "bipolar world order" to replace current de-facto US hegemony.
You make it sound like all these countries are eternal enemies, unlikely to ever cooperate when the future could actually look quite different.
When your large neighbor in that area, increases military spending every year why do think that is? To fight Belgium? They are ETERNAL neighbors and have eternal (well in our timescale) interests. See what Russia did in Ukraine? The same could happen to Mongolia, happened to Tibet and is happening in the South Sea where China is essentially planting their flag.
> When your large neighbor in that area, increases military spending every year why do think that is?
I wonder how often Canada or Mexico asked themselves that very same question?
> They are ETERNAL neighbors and have eternal (well in our timescale) interests.
These can still end up aligning, case in point: Not too long ago nobody would have thought it possible for the British and their former colonial settlers to exist in peace. These days they don't only just exist in peace, they are pretty much partners in crime.
The same applies to Europe: Nations that formerly despised each other for decades and centuries are now working for their common interests.
I don't see why similar couldn't be possible in Asia/Eastern Europe/Africa.
> See what Russia did in Ukraine?
Protect their interests from an, very obviously, staged "Western coup"? I really hate how that whole Ukraine situation is reduced to this narrative of "Look what Russia did to Ukraine!" like that whole situation just started with the "green men" appearing. The green men had been a reaction, not the action which started events.
> invading sovereign country and annexing part of it IS NOT protecting their interests.
Unless that sovereign country happens to be Iraq and you skip that whole "annexation" part in favor of just leveling the whole place.
Why is the US allowed to "protect their interests" on the other side of the world, but if Russia does the same, in a place that's literally their backyard, it's suddenly a crime?
Eastern Ukraine was of immense military relevance to Russia, it's where parts of their rockets used to be built, parts of their military hardware [0]. Crimea has been the home to the Black Sea Fleet for centuries, it's the most important port for the Russian marine.
Those are all facts people rather ignore in favor of this naive "Russia just goes around annexing countries for no reason whatsoever" narrative.
> Also “obviously staged western coup” IS NOT obvious.
I guess "Fuck the EU Nuland" handing out cookies was just some emotional gesture with no relevance, same with all those other US/EU officials showing up on Euromaidan and pumping up the crowd. Just like pumping billions of $ in the country and sponsoring "Yats our man" trough NATO/NED and even the DoT [1], feel free to look up the other organizations on that list, there's a certain "theme" to them.
It's also not like this has never happened before, it actually has [2] but this time the result did stick, that's why Russia was pressured into acting.
where I defended US actions in Iraq? I did not. All this whataboutism distracts from main point - Russia invaded Ukraine, sovereign country, and that's a fact, regardless of how you turn that event for your convenience.
I understand benefits for Russia to annex Crimea and so on, but still it's a crime and legitimacy of this action is not questionable.
You can replace Iraq with any other sovereign country the US meddled in to "protect their national interests", there's a long list of those from which you can choose.
I don't consider it "whataboutism" to point out double standards. If it's legit for the US to meddle in other sovereign countries, to protect their "national interests" on the other end of the world, then the same behavior should be legit for everybody else because I do not subscribe to the concept of "American exceptionalism".
> I understand benefits for Russia to annex Crimea and so on, but still it's a crime and legitimacy of this action is not questionable.
I guess then it's a good thing nothing was annexed but people rather voted for independence, just like the people of Ukraine voted in "free and open elections" and everything went according to the Ukrainian constitution.
A narrative can be such a handy device, good thing it ain't reserved for exceptionalists, just like using unmarked PMC's for tasks where official soldiers would lead to international legal troubles with the ICC, which the US doesn't even acknowledge (so much about international "crimes" and "legitimacy of actions").
Let's leave it at that, it's obvious we won't be agreeing on much and at this point, the discussion has become rather OT, have a nice evening.
> When your large neighbor in that area, increases military spending every year why do think that is?
Clam down, there're many ways for China to expand it's influence other than war. Plus, India and China both have nuclear weapons, meaning death trigger for everyone on earth, you don't want to touch that.
Tibet on the other hand is a very long, complex and different story (and South China Sea is whole another different one), I don't think they belongs to the same topic.
I can pretty much tell you that, in China, nobody think of India or Vietnam etc as enemy. Instead, they're the MARKET we can sell our product to. Which, guess what, that's what everybody do now, rather than thinking about war all days.
>>India and China both have nuclear weapons, meaning death trigger for everyone on earth, you don't want to touch that.
Yet they--and USA, Russia, France, UK etc--also have millions of soldiers and spend gazillions a year on conventional military stuff. Usually try to outdo each other.
>>Tibet on the other hand is a very long, complex and different story
Complex it is, but it's now 100% part of China, regardless of whatever.
>>in China, nobody think of India or Vietnam etc as enemy
If your neighbor had gun, you properly want it too. Specially when he don't like your dog and you don't like hes garden. But it's not meaning you two will actually going to kill each other, the gun here is just a counter weight.
The current relation model between nations made nobody fully trust each others. So nobody wants to drop their military, unless everybody do it at same time (Which is impossible).
It's sad that we still had to maintain that amount of military power and feed them with tax payer's money. If we use those money else where, we properly typing on mars now.
But it's the world we live in now, there is no other choose but get use to it.
One day in the future, we may reach a higher level of globe society that could maintain itself without any military force. And, that's why everybody should keep pushing the society go forward.
But until we reached that point, everybody will continue upgrading their military, and rely on it to ensure their own safety.
I wonder how much of that bi-polar reporting is due to Chinese government manipulation, which it does a lot of; and how much of it is due to the feeling that China is the enemy, so it's either weak (contempt) or strong (fear).
Funnily, I could say the same about the US seen from outside.
On the one hand, rising poverty and inequality, third-world healthcare with people dying because they fell $50 short of their insulin crowdfunding, industry disappearing, cities practically abandoned like Detroit, and a madman president posting unbelievable tweets and advocating absurd policy, make it seem that it's in on the precipice of collapse.
On the other hand, you still have the top universities in the world, the best innovative countries, and the most exciting projects with a potential to bring noticeable progress for humanity (Tesla, etc.) making the US seem like a leader that won't be overtaken.
So when I was a kid I noticed that countries that name "People's" or "Democratic" in their full names tended to be brutal dictatorships (eg GDR (East Germany), PRC (China)). Those that had both were brutal dictatorships on steroids (ie DPRK aka North Korea).
I found this interesting because it was an early lesson in how people will coopt words to hide the true nature of things, something that happens all the time. For example, if the US government enacts a new piece of legislation and it has the name "patriot" or "freedom" in it, you can bet your last dollar it's going to take away your rights.
Another version of this is the now conflated term of "free trade". Free trade in its purest form is freedom of goods and services to cross borders without quotas, tariffs or other artificial barriers to entry. We largely have that now yet countries like the US want to impose a legislative agenda on the rest of the world through large multilateral treaties like the TPP and TIPP all under the guise of "free trade".
Now either economists and politicians have forgotten what free trade actually means or they're wailfully ignoring it for their own idealogical agendas. I find this [1] a good account of the conflation of "free trade" and the "free movement of capital". Back in high school economics I learned about the foreign debt trap where instead of trade outflows from your trading partner, the money came back as capital to buy assets and the means of production. Have such basic principles really fallen out of favour in the blind devotion to the free movement of capital?
So the developed world clamored for China to join the WTO, probably sensing a giant opportunity to sell goods to a new market of a billion Chinese.
Thing is, despite claims to play fair, China has basically cheated at every step along the way. For example:
- Not opening their markets to foreign companies;
- Blatant IP infringement;
- Theft of military and scientific knowledge;
- Pegging their currency to the US dollar rather than letting it float so they could accumulate giant hard currency reserves; and (more recently)
- Restricting capital outflows.
I'm really surprised (even concerned) that the West (in particular) doesn't demand the same access to China that China gets to the rest of the world.
And we could go further into China's many other transgressions: no freedom of the press, the annexation of Tibet, Tiannemen Square, human rights violations, labour camps, material support to North Korea and so on.
> For example, if the US government enacts a new piece of legislation and it has the name "patriot" or "freedom" in it, you can bet your last dollar it's going to take away your rights.
First thing that comes to my mind for "freedom" is the Freedom of Information Act, which fails that test?
I don't know of that many so I really have no idea if this is true. FOIA and Patriot Act were the only ones that jumped to my mind, and the Internet Freedom Act which was just mentioned by someone else is another one I'm aware of right now. Would be awesome if you or someone else could list 5-10 more.
The FOIA doesn’t encode a “shall release upon production” edict, it instead is a limited “shall respond upon request for permission to release”. The former creates an atmosphere where information is automatically released when created. That is freedom. The latter creates bureaucratic and legalistic discretion, an impediment to freedom. The latter is still needed for gray areas, but there is no bright line test that unequivocally states if you don’t cross the bright line, then automatically publish with no registration for access, much less petitioning.
Indeed, there never wasn't. The Civil War was just one phase in a conflict that predates the founding of the country and certainly didn't end with Reconstruction.
There are many variations of democracy - what the communist nations refer to, or referred to, as a democracy is a "People Democracy" in the Marxist-Leninist sense or the "Democratic Dictatorship" in the Maoist sense
Workers or peasant councils would be directly elected, they would in-turn elect a local congress from those members, who then then elect a municipal congress, etc. up to the national congress.
They're not democracies in the Western liberal multi-party democracy sense - but as they retain a facade of self-determination they're still classed democracies much as there are other variations - such as Russia and Hungary being illiberal democracies.
>>I'm really surprised (even concerned) that the West (in particular) doesn't demand the same access to China that China gets to the rest of the world.
We get access to two things that matter:
1) Near-unlimited below-market skilled (and unskilled) laborers at below-market wages with few (though accelerating) human rights laws.
2) An ability to scale factories, technologies, industries, and business processes at a breakneck pace the US bureaucratic system holds up. As Steve Jobs said: "The iPhone is never going to be made in America." He said it not because of the cost - that was secondary - he said it because scaling rapidly and the turnaround time was not possible domestically.
$3b would be chump-change in the worldwide black economy. I'm guessing that this extra-legal money is quite happily parked in legal low-tax economies earning interest. So.. if we're taking the moral high ground, isn't there room for some whataboutism or tu coque here?
I'm guessing that this extra-legal money is quite happily parked in legal low-tax economies earning interest.
I'm certain that even if they're losing 2% they are quite happy to have it out of China. This is not a Chinese farmer taking his money out of China, most likely you're talking about corrupt politicians that make $20 million with the stroke of a pen.
This is just signal to the remaining 1-2 trillion Underground banking sector to get out of it. If China goes after all of it at once it will crash it economy or at least stall it. These Busts and other signals have been coming out of the Chinese government in the last few weeks after the twice a decade party conference.
So is this one mechanism of how Chinese nations get their money out to afford million dollar properties in Australia?
> Australia's money laundering watchdog investigated more than $3 billion in suspicious transfers by Chinese investors last year, including $1 billion in property transactions. [1]
Considering they can only take out 50k USD per year [2]
I'm sure many can agree it's disgraceful that the Australian government is turning a blind eye to an incredible amount of money laundering... which some may argue is contributing to the incredibly high housing prices in Melbourne and Sydney. There are no median house prices left in Sydney under half a million dollars. [3].
A friend witnessed a Chinese national at an auction try to pay their deposit with a suitcase of cash. The real estate agent had to explain (through a translator) that they can't accept that amount of cash in a suitcase. Sorry can't give a reference here, but other HN'ers who have witnessed the auction frenzy in Australia may attest that this scenario is plausible.
Note, I'm not implying the Chinese are the direct contributor to the current situation, I am simply suggesting there is contributory related forces at play...
Australian Financial Review - "Of China's $47.3 billion (investments in Australia in 2016), $31.9 billion will go into real estate mostly in residential development assets." [4]
I feel like you may have a bit of an axe to grind about local real estate prices. Yes, they are money laundering in the sense that they are avoiding regulations from their home country. But they aren't trying to avoid Australian regulations right? These investors generally have legal businesses in China, as much as that is possible in a state like that.
"I'm sure many can agree it's disgraceful" is a particularly choice piece of rhetoric that I am still trying to unpack. Also I like how you over attributed your comment as an appeal to authority.
There is a whole ball of string that you find when you start pulling the thread of your argument. That ball of string can be called globalization. Many people around the world are just coming to terms with the trade offs involved in the the way we have structured the world today. You can see some of this in the nationalism of Trump and Brexit. It is a complicated problem with complicated answers. I just want people to watch out for situations like this and not think that "whoah, this is clearly disgracefully wrong".
> I feel like you may have a bit of an axe to grind about local real estate prices
Absolutely. Due primarily to record low interest rates, negative gearing and capital gains tax reductions.
> "I'm sure many can agree it's disgraceful" is a particularly choice piece of rhetoric that I am still trying to unpack
Thanks for pulling me up on that, I acknowledge the comment does not contribute to a healthy discussion.
> You can see some of this in the nationalism of Trump and Brexit.
Your spot on. As the gap widens people will be looking for others to blame for their misfortune. This is what we need to avoid at all costs. Nationalism has no place in society. I hope I did not come across as blaming a specific nationality. The blame goes directly onto government policy. Let's ensure Australia doesn't regress into the rhetoric we are seeing in other places.
> I just want people to watch out for situations like this and not think that "whoah, this is clearly disgracefully wrong".
Let me be very specific, what i'm implying is disgraceful is real estate agents and government regulatory bodies ignoring the "The Anti-Money Laundering and Counter-Terrorism Financing Act 2006" [1].
"AUSTRAC has identified that laundering illicit funds through real estate is an established money laundering method in Australia," said a spokesperson. "Criminals are drawn to real estate investment in Australia because it is possible to purchase in cash, it offers reliable returns and it is possible to disguise ownership." [2]
Example - "A senior Chinese policeman has been jailed for 17 years for embezzling money to buy two Australian homes for his two daughters." [3]
Completely agree. As someone who lives in a developing country, it always seems funny to me how there is frequently a distorted view in developed countries of how globalization should work, where they get all the upsides but none of the competition.
Everybody loves the idea of selling in a global market, but few realize that with globalization there are more opportunities, but also that they will have to work harder, study more and be more creative to compete for businesses, jobs and assets, with billions of people who previously had little to no opportunities, but who are willing to put in a lot of effort to compete for a share of the global marketplace. The trickiest part is that with technology and education, globalization is inevitable in the long term, no matter what politicians do or think.
From my view, sometimes it looks hypocritical when people from developed countries criticize the local 1% and the rigged system and unfair privilege that keep rich people rich, but then demand and expect that they get those same advantages on a country wide level, without realizing that they are simply defending the global 1% because it benefits/affects them directly.
Within a developed and healthy economy, corruption is ideally minimised and caught by regulation.
Poorer developing countries are more prone to corruption and fraud, because there are not as many pooled resources to stop it.
The grandparent post is pretty clearly taking umbrage with those people attempting to circumvent the few systems in place. A motivation for doing that, is because a shifting their resources to a stable and developed economy legitimises their assets.
Those assets are often the result of raping their own country. People literally die, as money is stolen and taken from them.
This has nothing to do with accepting competition as a result of globalisation. It is however correlated with it, as open borders and trade makes it possible.
In a lot of ways, it mimics 19th century imperialism, where small countries were raped for their assets by foreign powers. The key difference being that, in these cases, the abuse and exploitation comes from within
Global globalization may be inevitable, but I don't really see why individual countries must accept it entirely. Why can't you pick and choose which parts to engage in, knowingly accepting the positive or negative consequences that come with that? I see very little reason why large advanced countries like the US can't decide to restrict some free trade and take the 10% or whatever hit to GDP, in exchange for greater control and less uncertainty. This may be a naive belief, but specifically why?
What I would see as problematic is that picking and choosing parts of globalization would probably involve limiting the development of technology, commerce, and in some cases limiting free speech. And depending on the restrictions put in place to limit it, it could end up becoming sort of a global discrimination program which leads up to social conflict or even a war. There is also a conflicting part in your statement, where if for example the US took a 10% hit in GDP, it would in real terms mean that unemployment would double or triple, education, health and the base of society in general would take a huge hit, besides loosing global military and economic leadership, probably leading to huge political instability which lead to less control and more uncertainty (which could give space for a dictatorship, an internal war or a slew of other social problems). Economic growth is sort of like a drug, because once you have a society hooked up and dependent on it, if you take it away cold turkey, everything else that society has built will come crashing.
Well, if just one simple action such as one country even partially opting out of globalization could lead to a world war, then I'd prefer to cancel the whole undertaking asap. Countries and civilizations have existed largely independently for centuries, if we've build ourselves a house of cards that can come down that easily, getting self sufficient and extracting yourself seems like pretty simple common sense.
> A friend witnessed a Chinese national at an auction try to pay their deposit with a suitcase of cash. The real estate agent had to explain (through a translator) that they can't accept that amount of cash in a suitcase.
In Vancouver there's a well oiled mechanism of bringing duffle bags of cash into casinos for cleansing, in plain sight and with the knowledge of law enforcement. There was a small scandal recently where police got involved for some reason, but nothing will come of it. Truth is stranger than fiction.
>In Vancouver there's a well oiled mechanism of bringing duffle bags of cash into casinos for cleansing, in plain sight and with the knowledge of law enforcement. There was a small scandal recently where police got involved for some reason, but nothing will come of it.
That's a very interesting fact, do you have a source so I can read more about it?
I'm not here to win internet points, believe whatever you want. It is a fact that money is being laundered.
I'm starting to think that the internet is starting to have significant effects on culture, in that people will no longer believe things that they see in physical reality if they can't find it reported on the internet.
>I'm not here to win internet points, believe whatever you want. It is a fact that money is being laundered.
If you can't document it, it's not a fact.
>I'm starting to think that the internet is starting to have significant effects on culture, in that people will no longer believe things that they see in physical reality if they can't find it reported on the internet.
If the claims you make are as pervasively known as you claim, it would be simple to provide a source.
I'm starting to think that the internet is starting to have significant effects on our culture, in that people think it's your opponent's job to discredit whatever claim you throw out into the ether rather than your job to prove it is accurate.
The Chinese art of selectively enforcing their laws to the detriment of those that won't play ball with the government really makes it hard to believe Xi's press-tornado of successful anti-corruption measures.
The government has been actively extorting international companies into "joint" ventures. These ventures essentially require "treats" (as an insider told me) every several months. These treats would be manufacturing processes, engineering drawings of proprietary IP, or technical training for their engineering staff. Boards of Directors can't ignore the scale of the Chinese market, but it comes at the cost of essentially giving away your business prospects within the country inside of 15 year window.
China's current long-term strategy seems to be:
1) Spend an egregious amount to woo top talent [1], [2]
2) Learn from them over the next 5-10 year period [2]
3) Transcend the need for foreigners in China
It's a pretty terrifying environment and many Chinese investors are desperate to get their money into foreign investments [3]. Instead of laundering illegally earned money, they are laundering legally earned money that they can't get out of China. At least that is the hearsay that I've heard from several different sources (VC events, friends of friends etc).
Anti corruption is a classic measure to shift weath from one set of former insiders to the new set of insiders. One time pushes are almost meaningless without the creation of new long term institutions.
For companies the pressure for managers to create the illusion of progress causes a lot of structural problems. I find companies that stay out of China are better long term prospects and tend to have far better upper management.
PS: The other option is to sell one or two generations back so copycats start at a significant disadvantage internationally.
As the saying goes "thou doth protest too much, methinks." China will SAY anything - you might recall China promising to float its currency in the Bush years when this was a sticking point in trade - a float that happened in name only and so the request to actually float currency remains in US trade negotiations with China.
It may well be that foreign companies are merely encouraged to participate in mutually beneficial exchanges of know-how.
I have no information either way on the subject, but generally, no, it not exactly a novelty that a government announces a grand intention, and mostly even sticks to the letter, but drifts significantly from the spirit when applying the intentions under the constraints of everyday political life. Not because of any specific malice, but because governments are huge beasts the sit on top of a huge intricate web of opaque incentives.
Interesting thought: A market for flawed tech/designs.
Consider a product that, part-way through development a fatal flaw was discovered. Perhaps, a company can insure itself with a deal whereby if such a flaw is found, the tech design will be bought out at a reasonable price.
The insurer then makes use of the design by ... setting up a company based in China manufacturing that product. Over time, China steals poor designs and cripples its reputation..
I have no idea about China or Chinese economy but your whole comment consists of serious-looking references accompanied by "behind the doors" gossips. All your comment makes me doubt regular Economist/NY doom-saying about Chinese economy. Do you have trustable independent references for the below claims?
* Selectively enforcing their laws to the detriment
* Extorting international companies into "joint" ventures
* "Treats" (as an insider told me) every several months.
* Hearsay that I've heard from several different sources
> Selectively enforcing their laws to the detriment
Excerpt relating the Weiquan movement[0]:
"Recently, some judges have started to believe that to be a
judge you just have to strictly apply the law in a case. In fact, this kind of concept is erroneous [...] all the legal formulations have a clear political background and direction [...] We must stamp out the kind of narrow viewpoint that thinks that you can also do court work by having judicial independence."
* Extorting international companies into "joint" ventures
Look at some of these articles on starting a China JV[1]. Man are the caveats. So many ways to shoot yourself in the foot. Then look at a list of sectors WFOE (Wholly Foreign Owned Enterprises) are allowed in. Then check what licenses are required to operate, and whether this precludes entities with majority foreign control, any amount of foreign investment (e.g. Internet Cultural Media License 网络文化证）, etc. Then look at the costs of acquiring such a license. Remember that your Chinese competitors will likely just ignore that until they're large enough to be fined for it. Remember that they'll get a slap on the wrist as long as they play ball, and you'll get deported.
* "Treats" (as an insider told me) every several months.
Look at how China ate up high-speed rail in a couple of years. All 国产 now.
I do not. I tried to be as up-front as possible about the sources of the information that I'm referencing because it is
a) Not verifiable
b) Not on the record
I am myself very confused by the comments I've been hearing whilst working here because they are at odds with the typical rhetoric that I've heard from both the Western and Chinese press.
I won't go into details of why you're wrong, but let's just say random posters with unknowable credentials shouldn't comment on geopolitical or economic affairs of a foreign country.
>"The government has been actively extorting international companies into "joint" ventures. These ventures essentially require "treats" (as an insider told me) every several months. These treats would be manufacturing processes, engineering drawings of proprietary IP, or technical training for their engineering staff."
That sounds like something that a patriot would do. They want the knowledge for the country so they play to get it.
>"Boards of Directors can't ignore the scale of the Chinese market, but it comes at the cost of essentially giving away your business prospects [..]"
So, they want the markets but don't want to pay the price. Nobody is forcing them to go to China.
>"many Chinese investors are desperate to get their money into foreign investments"
Sure, they did well and now they want out, human nature. Unfortunately, capital controls is what China economy needs if they want to keep growing. Without capital controls the growth of the last 20 years would not be possible.
Even without special insight, I'm sure that Xi and his mates want more control not less, and that there is a lot of corruption and unfairness in the country, but you shouldn't put, in the same bag, that with the policies that are the reason of the economic success of China.
"The state should serve the people, not the other way around."
That depends on your political views, but in my book, sure. The only measure of economic success for a country should be the improvement of the lives of their citizens.
China's current economic strategy have lifted more than 500 millions of people from poverty. A change of that magnitude have never happened before in history.
Do you know how they talk about poverty in the world improving in the last years?. Normally it's not mentioned but it's basically China.
About the capital controls, from the NYT article:
"The government sets a $50,000 limit on the money Chinese citizens can move out of the country in a year, [..]"
It seems to me that the people that feel constrained by this are not the majority of the people in China.
> It seems to me that the people that feel constrained by this are not the majority of the people in China.
They would be insofar as most people aren't performing the action of "investing" their money at all, but are rather handing it off to money managers (e.g. mutual funds) to invest. Those money-managers are then limited by the the capital controls—not at the $50k level, but still at a level low enough that it prevents prevent globally-efficient investment to best grow private citizens' wealth.
is run by the Communist Party. "It's good to be rich", indeed, but apparently "enjoy the good life in China" is the unspoken addendum.
The people who got rich in China did so in context of a national strategic plan, devised and put in place by the Communist Party. It seems disengenuous to adopt a Randian position after the fact.
This same plan was supported by "partners" in the West. It is equally disengenuous ("tricky") for Western companies to complain about "treats". Those "treats" were, undoubtably, part of the agreement between the Communist Party and Western elites.
China emerged from the bottom of the economic pyramid with this strategy. It wasn't immoral of them to insist that its people wouldn't be exploited in perpetuity, was it?
China is doing what any country should do.
It is not extortion, there is no blackmail here. Foreigners want to be part of the Chinese market? let's make a deal.
Nobody forces you to accept this. I say this as a European that actually worked some years in China. I was extremely privileged as engineer and manager as I was making China wealthier.
That is not different than Britain hiring the best engineers of the Netherlands(where industrial revolution started) and giving them a good life if they improved the country, until they did not need them anymore of course.
The USA did the same thing later with Britain, pirating their industrial machinery, even as it was punished with death.
Nor any different from the USA accepting Einstein,
von Braun, Sergey Brin, or Elon Musk and giving them the opportunities they lacked in their original places.
But in China it is not so much about "secrets" but culture, West culture has evolved from 500 years of extreme changes thanks to Gutenberg press.
If you read "The prince" Machiavelli says extreme changes are happening today(in 16th century). Napoleon reads it and say:those changes are nothing compared with those happening today(in 19th century).
When you live in China you realize all those accumulated changes were not done at all, as culture was very well controlled so the masses could not access to it. So a revolution happened but inner change of the culture takes time.
You say China improving is terrifying. What is terrifying for me that is the extreme differences in poverty in the world. People in poor countries like China are hungry to get out of poverty while people in the west feel entitled to wealth even when the only thing they have done is being born privileged.
I travel to Africa frequently as a reminder of all how rich we are and giving value to things we ignore as we take for granted.
Leaving history aside (do we really want to apply 16th century economics rules today? No) your statement that any country would do the same thing is untrue in many ways. There are IP laws that protect a comoany's right to keep its secrets and extract value out of them for a number of years. That's a bit too long in some cases but this is what makes modern economy possible. A company invests tons of money in R&D and then gets it back through patents they can protect.
For a government to extort companies to give up their IP is to steal, no mincing words.
Especially if the companies and people given access to the information extracted are close to the government, it's just another tool for them to control the economic environment with politics.
To claim this is some Robin Hood scheme that will bring equality in the world is to say stealing from rich countries is ok and we should do it more, companies be damned. It's essentially an extreme firm of communism and as someone who lived in that system for a while and is has first hand experience of how frustrating corrupted governments are to doing business, I can point at virtually all attempts to make it work and we can all see how they failed.
Chins wants to be competitive at someone else's R&D expense.
Edit: China improving is terrifying would you like to have that political system in your country? If yes most of would would rather have freedom of speech which btw allows us to have this conversation without fearing a knock on the door and prison for life.
>"do we really want to apply 16th century economics rules today? No"
Well, it's not 16th century economics, it's economics if you are a already developed country or a country in process of development. Those are different animals with different needs.
Of course, now that USA or Europe is already developed is time to apply different rules.
The economist Ha-Joon_Chang have a full book about those double standards called, appropriately in my opinion, "Kicking Away the Ladder: Development Strategy in Historical Perspective"
If you don’t like the Chinese playbook, don’t play in China. Your company does not have a right to the Chinese market on your terms - only on their terms. If you disagree, I’ve got a generic HCV drug market you (and Gilead) are going to love.
True there’s no right to a market. At the end of the day they can impose any rules they like and it’s up to companies to accept them or not.
But don’t make China look like a sad puppy who needs help. It’s a ferocious tiger (good for them) whose economic and military prominence would scare me and everyone who likes free speech and non authoritarian rule.
Negotiating IP rights that are different than the legal default as a condition of entry into a closed market is not theft. That’s just sound business and it’s perfectly legal in every sense of the word.
It's curious how when certain countries or topics come up, you invariably get the same comments. China, Russia or even elon musk, there must be a standard template somewhere...
> The Chinese art of selectively enforcing their laws to the detriment of those that won't play ball with the government really makes it hard to believe Xi's press-tornado of successful anti-corruption measures.
It's not a "chinese" art. It's every government's art. All governments selectively enforce laws.
> The government has been actively extorting international companies into "joint" ventures.
That's called business, not extortion. Otherwise, everyone is extorting everyone. You do realize that all governments "extort" companies in return for access to their home markets right?
> These ventures essentially require "treats" (as an insider told me) every several months.
"Insider" told you. Right. Because you are a very important person. That the chinese government force foreign governments to form joint ventures and to share knowledge is a well known as it has been reported widely for decades.
> China's current long-term strategy seems to be:
That's the strategy of every country - especially every major nation. No major nation is keen of being dependent on a foreign nation.
China is absolutely doing the right thing in cracking the power of the private banking system. Having a powerful private banking system is the recipe for disaster, since the predatory (rentier) nature of banking suffocates the development of industry and even the long term survival of a consumer base. It is funny that this was very well understood by economists an politicians as far back as the 19th century but it has been largely ignored throughout the 20th and 21st century. Now we see the US and the EU largely controlled by banking interests, with very little if any taxes applied to financial gains and little support for industrial development. It is not a surprise that practically the entire industrial complex has moved to China, with the exception of highly subsidized industries such as weapons production.
I was under the impression that the move of industry to China was due to cheap labor, not due to different banking regulations.
Is it possible to get a loan in the US and use it to build a factory in China? How about vice versa? Because if so, then I don't see how banking regulations would change where a factory would be built.
With few exceptions, you cannot get a loan in the US to do anything productive. Most of the loans given to business nowadays are to buy back stocks, private equity (M&A), or to speculate on real estate.
Yes and no. The US banking system uses a pretty complicated maze to spread risks. Banks help you organize a bond sale/auction, then "investors" buy your bonds (usually it goes for lower than nominal price .. but sometimes not http://www.livemint.com/Money/sM11Y0RuGHmvUiGFVgNecL/Corpora... ), and then other banks and institutions buy your bond (invest in it).
I’m sorry do you have a citation? I was able to get a line of credit and an installment loan from a bank for my small business. We didn’t do stocks, private equity or real estate.
This is FUD. Billions of dollars are loaned to businesses (for purposes besides those you list) every year. See for example the SBA annual report (available online for free on sba.gov).
SBA loans are guaranteed by the government. They are zero risk loans for bankers, in other words, it is just another way to subsidize the banking industry.
> sorry your post is juvenile garbage. banks do not suppress industry or consumers, they finance it.
It's a complicated problem. Sometimes they do their job with so much passion that "industry and consumers" seem to depend on them, i.e. on the banks, instead of vice-versa. See the 2007-2008 crisis and the cries of "the world will die if we let the banks fail".
This is pretty fine high level grade bullshit. (Or Poe's law strikes again!)
The not-too-representationally selected/elected leaders of China want to keep the power of pegging their currency, which is very essential in a centrally planned economy, at the cost of personal freedoms. (And the yearly 50 000 USD limit is more than enough for poor people to send all of their savings away to a fraudster though, so it's not absolutely the right thing.)
A powerful private banking system is very different from a shadow bank that uses identity theft/fraud to store and gambling to exchange currencies. A healthy banking system helps allocate credit (which is risk), but since the barriers to entry to the finance sector is high (cost of regulatory compliance, IT security risks), margins are low (products are fungible, a mortgage is a mortgage, a savings/checking account is a savings/checking account, it doesn't matter which bank you chose, so you'll use the cheapest) and network effects are also high, we don't really see a healthy banking sector. (Thus risks are largely concentrated in too big to fail banks, and that's why the new big bank requirements include systemic exposure stress test regulations: https://en.wikipedia.org/wiki/Basel_III - of course, it's easy to argue that this just moves bubbles somewhere else.)
As to the other claims ("Now we see the US and the EU largely controlled by banking interests" - no, we don't, we see populism/nationalism/chauvinism, we see good old regulatory capture [the FCC Chairman is an ex-Verizon lawyer currently playing dumb for a lot of money, or just out of spite, the EPA lead is a proud climate change denier, the current UK leaders are typical isolationists, and so on], "very little if any taxes applied to financial gains" - cca average of 15% is not very little https://en.wikipedia.org/wiki/Capital_gains_tax and "the entire industrial complex has moved to China" - no, only the labor and raw materials intensive things [which is of course an enormous slice of the pie], but nowadays the problem is with lack of effective retraining in the advanced economies.)
This is just a bunch of BS to try to explain away the fact that the US economy is geared towards advancing the interests of banks and other financial institutions. It is amazing that you think that a 15% tax rate is a lot when even under the proposed tax breaks all other comercial activities will pay more than that in taxes. As a result, the US in fact subsidizes an activity which is not the primary producer of ANYTHING other than interests and fees, that is, a drag in the economy.
Later you claim that is just fine to support big banks because said banks exist to "spread risks". But of course the biggest risk for a country is in the existence of banks that are too big to fail, since they need to be saved by the government. Therefore, banks in fact perform ZERO risk reduction. They CLAIM to take risks away from the system, but when a crisis occur the whole tab of bad betts will be paid by the citizens of a particular country, not by bankers.
As for control of the US and EU, just look at who is responsible for economic policy in these places and tell me if they're not from the same half dozen banks that are already deemed to be too big to fail! What a coincidence...
What do you think is the best way for society to provide capital to people who need it? I'm genuinely curious. Peer-to-peer lending is interesting, but I'm not sure it's competitive with banks. State owned banking-enterprise would probably be more expensive for consumers, and if not, a tax for everyone who isn't loaning money.
too-big-to fail banks were bailed out also by people who are not loaning money, so it’s kinda same. just profits are private, damages are paid by public. in this regard private banks are worse. the main issue with government bank I see is that it will be very tempting for politicians to use public bank as a tool to buy votes for people by promising low interest rates or something not viable in long term, and doing damage to economy for short term political gain.
I don't get the revulsion towards bailouts. It isn't as if the money is handed freely without it being expected back. How are taxpayers hurt in the process? In fact, "the government and taxpayers made a $23 billion profit from the AIG bailout." [1]
>> In fact, "the government and taxpayers made a $23 billion profit from the AIG bailout."
The results do not justify the process. Would small business owners be offered the same loans that were unjustifiable based on assets:liabilities? I can answer that for you right now as someone who has cash in the bank to cover a six figure loan but can't get one due to a 690ish credit score: No, they won't.
That we made a profit on (some of the) bailouts doesn't matter. The same process would never be offered to 99.999% of the other citizens of this country.
You could argue about exposure and banks that failed would have had larger impact on ordinary people than the 99.999%. But I generally agree with your comment.
If you wanted to bail out the home speculators individually, the analogous approach would be to buy their houses at below the prices the speculators had paid, essentially a short sale.
Remember TARP bought the assets for close to their realized value, so the loss was already priced in.
Well in the UK at least the taxpayers were hurt by nearly a decade of austerity measures, selling off of national assets and a gutting of the welfare state.
All as a result of yet another financial crisis caused by irresponsible and greedy financial institutions.
The government of China bails out industries all the time. However, they do it with money they print up on an as needed basis that doesn't incur debt to the government or require future payments for this debt by the taxpayer. This means that bailouts have no effects on the taxpayer in China while they burden the American taxpayer for years to come.
This isn’t completely true. The government makes the banks lend money to the SOEs with the implicit backing of the people. Much of china’s private sector debt is actually public sector debt in that way. When the loans go bad, they have to recapitalize the banks, which is when the printing presses are used.
You can call bullshit without being rude, true, but you can also be rude. For example, "This is not at all true." is less rude than "This is pretty fine high level grade bullshit."
I think you have misunderstood the overwhelming consensus of economists on the nature of finance and banking. A excellent work to better understand the history of economic thought from before Adam Smith through to mid-twentieth century is Mark Blaug's Economic Theory in Retrospect.[1]
Discussions about systemic risk, for example, have not lead to normative conclusions about nationalizing banking. An analogy might be that finance is like electricity. The very real risks of electrocution or fires don't discount its fundamental role in modern civilization.
China is absolutely able to engage in megaprojects financed by the state and the PLA, however funding for the industrial centers on the Pearl River Delta which are so important to China's economic success is largely private.
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[ 3.0 ms ] story [ 209 ms ] threadThe party leadership appears to be tightening their control over the party and the very wealthy. To me this feels like they are preparing for upheaval by eliminating their likely competitors before a catalytic event.
> Appear weak when you are strong, and strong when you are weak.
China is very strong, maybe not supremely organized but they are still growing and have been for many years. Especially a country that actively manipulates its currency to reflect its apparent strength or lack of... its anything but unintentional.
Smart communism >>> capitalism.
Well, the US tries to promote the ability of Americans to engage in foreign investment, because foreign investment is a great way to suck money out of a country. If I buy a countries companies, then all the profit from that country goes to me. It's actually in China's interest to have "money leaving the country". And it is more in China's interest to have no one fight back.
Capitalism and freedom has a giant Achilles heel.
China is way too smart to go to war, they can assume leadership without having to engage in significant conflict as long as they make sure they share the wealth with the proper people.
They actually deserve world leadership, I think they've earned it.
I don't think it needs to be an issue of China either taking over the world or collapsing. In all likelihood, China will continue to develop along its current track, with China becoming the largest economy sometime in the next 20 years, and presumably the largest military power sometime thereafter.
It feels like the real issue is in the US. The United States needs to come to terms with the fact that, for the next generation, it will have a geopolitical and strategic rival of roughly equal strength and influence, and needs to start building a coherent industrial policy to match that reality.
Militarily, China is checked by Vietnam, South Korea, Japan....and drum roll...INDIA. No large country like India wants a military monster next door, so India will have to get strong. Plus the counties in the South China sea have beef with China. https://en.wikipedia.org/wiki/South_China_Sea#Territorial_cl...
On the other hand, India might have to deal with Pakistan and South Korea with North Korea. Russia is also not a fan of China, Siberia once was Chinese and it's virtually free of people. https://www.nytimes.com/roomfordebate/2014/07/03/where-do-bo...
Because I don't think it's an accident that the BRISC New Development Bank is located in China, it's also no accident that Putin has been very vocal about removing the US$ as the world reserve currency and establishing a "bipolar world order" to replace current de-facto US hegemony.
When your large neighbor in that area, increases military spending every year why do think that is? To fight Belgium? They are ETERNAL neighbors and have eternal (well in our timescale) interests. See what Russia did in Ukraine? The same could happen to Mongolia, happened to Tibet and is happening in the South Sea where China is essentially planting their flag.
Trade with them, but ...
I wonder how often Canada or Mexico asked themselves that very same question?
> They are ETERNAL neighbors and have eternal (well in our timescale) interests.
These can still end up aligning, case in point: Not too long ago nobody would have thought it possible for the British and their former colonial settlers to exist in peace. These days they don't only just exist in peace, they are pretty much partners in crime.
The same applies to Europe: Nations that formerly despised each other for decades and centuries are now working for their common interests. I don't see why similar couldn't be possible in Asia/Eastern Europe/Africa.
> See what Russia did in Ukraine?
Protect their interests from an, very obviously, staged "Western coup"? I really hate how that whole Ukraine situation is reduced to this narrative of "Look what Russia did to Ukraine!" like that whole situation just started with the "green men" appearing. The green men had been a reaction, not the action which started events.
Unless that sovereign country happens to be Iraq and you skip that whole "annexation" part in favor of just leveling the whole place. Why is the US allowed to "protect their interests" on the other side of the world, but if Russia does the same, in a place that's literally their backyard, it's suddenly a crime?
Eastern Ukraine was of immense military relevance to Russia, it's where parts of their rockets used to be built, parts of their military hardware [0]. Crimea has been the home to the Black Sea Fleet for centuries, it's the most important port for the Russian marine.
Those are all facts people rather ignore in favor of this naive "Russia just goes around annexing countries for no reason whatsoever" narrative.
> Also “obviously staged western coup” IS NOT obvious.
I guess "Fuck the EU Nuland" handing out cookies was just some emotional gesture with no relevance, same with all those other US/EU officials showing up on Euromaidan and pumping up the crowd. Just like pumping billions of $ in the country and sponsoring "Yats our man" trough NATO/NED and even the DoT [1], feel free to look up the other organizations on that list, there's a certain "theme" to them.
It's also not like this has never happened before, it actually has [2] but this time the result did stick, that's why Russia was pressured into acting.
[0] https://www.rferl.org/a/russia-ukraine-military-equipment/25...
[1] http://openukraine.org/en/about/partners
[2] https://www.theguardian.com/world/2004/nov/26/ukraine.usa
I understand benefits for Russia to annex Crimea and so on, but still it's a crime and legitimacy of this action is not questionable.
I don't consider it "whataboutism" to point out double standards. If it's legit for the US to meddle in other sovereign countries, to protect their "national interests" on the other end of the world, then the same behavior should be legit for everybody else because I do not subscribe to the concept of "American exceptionalism".
> I understand benefits for Russia to annex Crimea and so on, but still it's a crime and legitimacy of this action is not questionable.
I guess then it's a good thing nothing was annexed but people rather voted for independence, just like the people of Ukraine voted in "free and open elections" and everything went according to the Ukrainian constitution. A narrative can be such a handy device, good thing it ain't reserved for exceptionalists, just like using unmarked PMC's for tasks where official soldiers would lead to international legal troubles with the ICC, which the US doesn't even acknowledge (so much about international "crimes" and "legitimacy of actions").
Let's leave it at that, it's obvious we won't be agreeing on much and at this point, the discussion has become rather OT, have a nice evening.
Clam down, there're many ways for China to expand it's influence other than war. Plus, India and China both have nuclear weapons, meaning death trigger for everyone on earth, you don't want to touch that.
Tibet on the other hand is a very long, complex and different story (and South China Sea is whole another different one), I don't think they belongs to the same topic.
I can pretty much tell you that, in China, nobody think of India or Vietnam etc as enemy. Instead, they're the MARKET we can sell our product to. Which, guess what, that's what everybody do now, rather than thinking about war all days.
So, why not trading and be good at it?
Yet they--and USA, Russia, France, UK etc--also have millions of soldiers and spend gazillions a year on conventional military stuff. Usually try to outdo each other.
>>Tibet on the other hand is a very long, complex and different story
Complex it is, but it's now 100% part of China, regardless of whatever.
>>in China, nobody think of India or Vietnam etc as enemy
Yet, they all have militaries and somewhere on the shelves they plans to attack /defend from each other. They are friends until they aren't. https://www.nytimes.com/2014/07/13/opinion/sunday/vietnams-o... https://en.wikipedia.org/wiki/China%E2%80%93India_relations#...
If your neighbor had gun, you properly want it too. Specially when he don't like your dog and you don't like hes garden. But it's not meaning you two will actually going to kill each other, the gun here is just a counter weight.
The current relation model between nations made nobody fully trust each others. So nobody wants to drop their military, unless everybody do it at same time (Which is impossible).
It's sad that we still had to maintain that amount of military power and feed them with tax payer's money. If we use those money else where, we properly typing on mars now.
But it's the world we live in now, there is no other choose but get use to it.
One day in the future, we may reach a higher level of globe society that could maintain itself without any military force. And, that's why everybody should keep pushing the society go forward.
But until we reached that point, everybody will continue upgrading their military, and rely on it to ensure their own safety.
On the one hand, rising poverty and inequality, third-world healthcare with people dying because they fell $50 short of their insulin crowdfunding, industry disappearing, cities practically abandoned like Detroit, and a madman president posting unbelievable tweets and advocating absurd policy, make it seem that it's in on the precipice of collapse.
On the other hand, you still have the top universities in the world, the best innovative countries, and the most exciting projects with a potential to bring noticeable progress for humanity (Tesla, etc.) making the US seem like a leader that won't be overtaken.
Who knows.
I found this interesting because it was an early lesson in how people will coopt words to hide the true nature of things, something that happens all the time. For example, if the US government enacts a new piece of legislation and it has the name "patriot" or "freedom" in it, you can bet your last dollar it's going to take away your rights.
Another version of this is the now conflated term of "free trade". Free trade in its purest form is freedom of goods and services to cross borders without quotas, tariffs or other artificial barriers to entry. We largely have that now yet countries like the US want to impose a legislative agenda on the rest of the world through large multilateral treaties like the TPP and TIPP all under the guise of "free trade".
Now either economists and politicians have forgotten what free trade actually means or they're wailfully ignoring it for their own idealogical agendas. I find this [1] a good account of the conflation of "free trade" and the "free movement of capital". Back in high school economics I learned about the foreign debt trap where instead of trade outflows from your trading partner, the money came back as capital to buy assets and the means of production. Have such basic principles really fallen out of favour in the blind devotion to the free movement of capital?
So the developed world clamored for China to join the WTO, probably sensing a giant opportunity to sell goods to a new market of a billion Chinese.
Thing is, despite claims to play fair, China has basically cheated at every step along the way. For example:
- Not opening their markets to foreign companies;
- Blatant IP infringement;
- Theft of military and scientific knowledge;
- Pegging their currency to the US dollar rather than letting it float so they could accumulate giant hard currency reserves; and (more recently)
- Restricting capital outflows.
I'm really surprised (even concerned) that the West (in particular) doesn't demand the same access to China that China gets to the rest of the world.
And we could go further into China's many other transgressions: no freedom of the press, the annexation of Tibet, Tiannemen Square, human rights violations, labour camps, material support to North Korea and so on.
[1] http://economixcomix.com/home/tpp/
First thing that comes to my mind for "freedom" is the Freedom of Information Act, which fails that test?
https://en.m.wikipedia.org/wiki/Patriot_Act
Regardless, i believe the intent was to convey a principle, not specify the words they use.
That's because the right people are getting their palms greased
Workers or peasant councils would be directly elected, they would in-turn elect a local congress from those members, who then then elect a municipal congress, etc. up to the national congress.
They're not democracies in the Western liberal multi-party democracy sense - but as they retain a facade of self-determination they're still classed democracies much as there are other variations - such as Russia and Hungary being illiberal democracies.
We get access to two things that matter:
1) Near-unlimited below-market skilled (and unskilled) laborers at below-market wages with few (though accelerating) human rights laws.
2) An ability to scale factories, technologies, industries, and business processes at a breakneck pace the US bureaucratic system holds up. As Steve Jobs said: "The iPhone is never going to be made in America." He said it not because of the cost - that was secondary - he said it because scaling rapidly and the turnaround time was not possible domestically.
I'm certain that even if they're losing 2% they are quite happy to have it out of China. This is not a Chinese farmer taking his money out of China, most likely you're talking about corrupt politicians that make $20 million with the stroke of a pen.
> Australia's money laundering watchdog investigated more than $3 billion in suspicious transfers by Chinese investors last year, including $1 billion in property transactions. [1]
Considering they can only take out 50k USD per year [2]
I'm sure many can agree it's disgraceful that the Australian government is turning a blind eye to an incredible amount of money laundering... which some may argue is contributing to the incredibly high housing prices in Melbourne and Sydney. There are no median house prices left in Sydney under half a million dollars. [3].
A friend witnessed a Chinese national at an auction try to pay their deposit with a suitcase of cash. The real estate agent had to explain (through a translator) that they can't accept that amount of cash in a suitcase. Sorry can't give a reference here, but other HN'ers who have witnessed the auction frenzy in Australia may attest that this scenario is plausible.
Note, I'm not implying the Chinese are the direct contributor to the current situation, I am simply suggesting there is contributory related forces at play...
Australian Financial Review - "Of China's $47.3 billion (investments in Australia in 2016), $31.9 billion will go into real estate mostly in residential development assets." [4]
[1] http://www.news.com.au/finance/economy/australian-economy/ch...
[2] http://www.cityweekend.com.cn/china/article/how-to-get-your-...
[3] https://www.domain.com.au/news/there-are-now-no-suburbs-left...
[4] http://www.afr.com/real-estate/chinese-investment-in-real-es...
"I'm sure many can agree it's disgraceful" is a particularly choice piece of rhetoric that I am still trying to unpack. Also I like how you over attributed your comment as an appeal to authority.
There is a whole ball of string that you find when you start pulling the thread of your argument. That ball of string can be called globalization. Many people around the world are just coming to terms with the trade offs involved in the the way we have structured the world today. You can see some of this in the nationalism of Trump and Brexit. It is a complicated problem with complicated answers. I just want people to watch out for situations like this and not think that "whoah, this is clearly disgracefully wrong".
Absolutely. Due primarily to record low interest rates, negative gearing and capital gains tax reductions.
> "I'm sure many can agree it's disgraceful" is a particularly choice piece of rhetoric that I am still trying to unpack
Thanks for pulling me up on that, I acknowledge the comment does not contribute to a healthy discussion.
> You can see some of this in the nationalism of Trump and Brexit.
Your spot on. As the gap widens people will be looking for others to blame for their misfortune. This is what we need to avoid at all costs. Nationalism has no place in society. I hope I did not come across as blaming a specific nationality. The blame goes directly onto government policy. Let's ensure Australia doesn't regress into the rhetoric we are seeing in other places.
> I just want people to watch out for situations like this and not think that "whoah, this is clearly disgracefully wrong".
Let me be very specific, what i'm implying is disgraceful is real estate agents and government regulatory bodies ignoring the "The Anti-Money Laundering and Counter-Terrorism Financing Act 2006" [1].
"AUSTRAC has identified that laundering illicit funds through real estate is an established money laundering method in Australia," said a spokesperson. "Criminals are drawn to real estate investment in Australia because it is possible to purchase in cash, it offers reliable returns and it is possible to disguise ownership." [2]
Example - "A senior Chinese policeman has been jailed for 17 years for embezzling money to buy two Australian homes for his two daughters." [3]
[1] http://www.austrac.gov.au/businesses/legislation/amlctf-act
[2] http://www.smh.com.au/business/the-neverending-money-launder...
[3] http://www.smh.com.au/world/chinese-police-chief-wang-jun-re...
Everybody loves the idea of selling in a global market, but few realize that with globalization there are more opportunities, but also that they will have to work harder, study more and be more creative to compete for businesses, jobs and assets, with billions of people who previously had little to no opportunities, but who are willing to put in a lot of effort to compete for a share of the global marketplace. The trickiest part is that with technology and education, globalization is inevitable in the long term, no matter what politicians do or think.
From my view, sometimes it looks hypocritical when people from developed countries criticize the local 1% and the rigged system and unfair privilege that keep rich people rich, but then demand and expect that they get those same advantages on a country wide level, without realizing that they are simply defending the global 1% because it benefits/affects them directly.
Within a developed and healthy economy, corruption is ideally minimised and caught by regulation.
Poorer developing countries are more prone to corruption and fraud, because there are not as many pooled resources to stop it.
The grandparent post is pretty clearly taking umbrage with those people attempting to circumvent the few systems in place. A motivation for doing that, is because a shifting their resources to a stable and developed economy legitimises their assets.
Those assets are often the result of raping their own country. People literally die, as money is stolen and taken from them.
This has nothing to do with accepting competition as a result of globalisation. It is however correlated with it, as open borders and trade makes it possible.
In a lot of ways, it mimics 19th century imperialism, where small countries were raped for their assets by foreign powers. The key difference being that, in these cases, the abuse and exploitation comes from within
In Vancouver there's a well oiled mechanism of bringing duffle bags of cash into casinos for cleansing, in plain sight and with the knowledge of law enforcement. There was a small scandal recently where police got involved for some reason, but nothing will come of it. Truth is stranger than fiction.
That's a very interesting fact, do you have a source so I can read more about it?
I'm starting to think that the internet is starting to have significant effects on culture, in that people will no longer believe things that they see in physical reality if they can't find it reported on the internet.
If you can't document it, it's not a fact.
>I'm starting to think that the internet is starting to have significant effects on culture, in that people will no longer believe things that they see in physical reality if they can't find it reported on the internet.
If the claims you make are as pervasively known as you claim, it would be simple to provide a source.
I'm starting to think that the internet is starting to have significant effects on our culture, in that people think it's your opponent's job to discredit whatever claim you throw out into the ether rather than your job to prove it is accurate.
The government has been actively extorting international companies into "joint" ventures. These ventures essentially require "treats" (as an insider told me) every several months. These treats would be manufacturing processes, engineering drawings of proprietary IP, or technical training for their engineering staff. Boards of Directors can't ignore the scale of the Chinese market, but it comes at the cost of essentially giving away your business prospects within the country inside of 15 year window.
China's current long-term strategy seems to be:
1) Spend an egregious amount to woo top talent [1], [2]
2) Learn from them over the next 5-10 year period [2]
3) Transcend the need for foreigners in China
It's a pretty terrifying environment and many Chinese investors are desperate to get their money into foreign investments [3]. Instead of laundering illegally earned money, they are laundering legally earned money that they can't get out of China. At least that is the hearsay that I've heard from several different sources (VC events, friends of friends etc).
[1]: https://www.nytimes.com/2017/01/04/world/asia/china-soccer-x...
[2] Qi Lu, Baidu's COO YC interview: https://www.youtube.com/watch?v=WSydk0XzxEE&t=351s
[3]: https://www.bloomberg.com/news/articles/2017-01-03/china-dri...
For companies the pressure for managers to create the illusion of progress causes a lot of structural problems. I find companies that stay out of China are better long term prospects and tend to have far better upper management.
PS: The other option is to sell one or two generations back so copycats start at a significant disadvantage internationally.
[1] https://www.bloomberg.com/news/articles/2017-11-10/china-say...
While they do their best to ban BTC and other cryptocurrency that will allow for the free exchange of their currency for others.
I have no information either way on the subject, but generally, no, it not exactly a novelty that a government announces a grand intention, and mostly even sticks to the letter, but drifts significantly from the spirit when applying the intentions under the constraints of everyday political life. Not because of any specific malice, but because governments are huge beasts the sit on top of a huge intricate web of opaque incentives.
Consider a product that, part-way through development a fatal flaw was discovered. Perhaps, a company can insure itself with a deal whereby if such a flaw is found, the tech design will be bought out at a reasonable price.
The insurer then makes use of the design by ... setting up a company based in China manufacturing that product. Over time, China steals poor designs and cripples its reputation..
* Selectively enforcing their laws to the detriment
* Extorting international companies into "joint" ventures
* "Treats" (as an insider told me) every several months.
* Hearsay that I've heard from several different sources
Excerpt relating the Weiquan movement[0]:
"Recently, some judges have started to believe that to be a judge you just have to strictly apply the law in a case. In fact, this kind of concept is erroneous [...] all the legal formulations have a clear political background and direction [...] We must stamp out the kind of narrow viewpoint that thinks that you can also do court work by having judicial independence."
* Extorting international companies into "joint" ventures
Look at some of these articles on starting a China JV[1]. Man are the caveats. So many ways to shoot yourself in the foot. Then look at a list of sectors WFOE (Wholly Foreign Owned Enterprises) are allowed in. Then check what licenses are required to operate, and whether this precludes entities with majority foreign control, any amount of foreign investment (e.g. Internet Cultural Media License 网络文化证）, etc. Then look at the costs of acquiring such a license. Remember that your Chinese competitors will likely just ignore that until they're large enough to be fined for it. Remember that they'll get a slap on the wrist as long as they play ball, and you'll get deported.
* "Treats" (as an insider told me) every several months.
Look at how China ate up high-speed rail in a couple of years. All 国产 now.
[0] Huang Jiayou, "Considerations on some issues related to the education in socialist rule of law viewpoints," China Laws (http://www.lawbase.com.cn ), 13 June 2006. [1] https://www.chinalawblog.com/tag/jv/
a) Not verifiable
b) Not on the record
I am myself very confused by the comments I've been hearing whilst working here because they are at odds with the typical rhetoric that I've heard from both the Western and Chinese press.
That sounds like something that a patriot would do. They want the knowledge for the country so they play to get it.
>"Boards of Directors can't ignore the scale of the Chinese market, but it comes at the cost of essentially giving away your business prospects [..]"
So, they want the markets but don't want to pay the price. Nobody is forcing them to go to China.
>"many Chinese investors are desperate to get their money into foreign investments"
Sure, they did well and now they want out, human nature. Unfortunately, capital controls is what China economy needs if they want to keep growing. Without capital controls the growth of the last 20 years would not be possible.
Even without special insight, I'm sure that Xi and his mates want more control not less, and that there is a lot of corruption and unfairness in the country, but you shouldn't put, in the same bag, that with the policies that are the reason of the economic success of China.
Since when did benefits to "China" surpass benefits to individuals living in China? The state should serve the people, not the other way around.
That depends on your political views, but in my book, sure. The only measure of economic success for a country should be the improvement of the lives of their citizens.
China's current economic strategy have lifted more than 500 millions of people from poverty. A change of that magnitude have never happened before in history.
Do you know how they talk about poverty in the world improving in the last years?. Normally it's not mentioned but it's basically China.
About the capital controls, from the NYT article: "The government sets a $50,000 limit on the money Chinese citizens can move out of the country in a year, [..]"
It seems to me that the people that feel constrained by this are not the majority of the people in China.
They would be insofar as most people aren't performing the action of "investing" their money at all, but are rather handing it off to money managers (e.g. mutual funds) to invest. Those money-managers are then limited by the the capital controls—not at the $50k level, but still at a level low enough that it prevents prevent globally-efficient investment to best grow private citizens' wealth.
is run by the Communist Party. "It's good to be rich", indeed, but apparently "enjoy the good life in China" is the unspoken addendum.
The people who got rich in China did so in context of a national strategic plan, devised and put in place by the Communist Party. It seems disengenuous to adopt a Randian position after the fact.
This same plan was supported by "partners" in the West. It is equally disengenuous ("tricky") for Western companies to complain about "treats". Those "treats" were, undoubtably, part of the agreement between the Communist Party and Western elites.
Nobody forces you to accept this. I say this as a European that actually worked some years in China. I was extremely privileged as engineer and manager as I was making China wealthier.
That is not different than Britain hiring the best engineers of the Netherlands(where industrial revolution started) and giving them a good life if they improved the country, until they did not need them anymore of course.
The USA did the same thing later with Britain, pirating their industrial machinery, even as it was punished with death.
Nor any different from the USA accepting Einstein, von Braun, Sergey Brin, or Elon Musk and giving them the opportunities they lacked in their original places.
But in China it is not so much about "secrets" but culture, West culture has evolved from 500 years of extreme changes thanks to Gutenberg press.
If you read "The prince" Machiavelli says extreme changes are happening today(in 16th century). Napoleon reads it and say:those changes are nothing compared with those happening today(in 19th century).
When you live in China you realize all those accumulated changes were not done at all, as culture was very well controlled so the masses could not access to it. So a revolution happened but inner change of the culture takes time.
You say China improving is terrifying. What is terrifying for me that is the extreme differences in poverty in the world. People in poor countries like China are hungry to get out of poverty while people in the west feel entitled to wealth even when the only thing they have done is being born privileged.
I travel to Africa frequently as a reminder of all how rich we are and giving value to things we ignore as we take for granted.
For a government to extort companies to give up their IP is to steal, no mincing words.
Especially if the companies and people given access to the information extracted are close to the government, it's just another tool for them to control the economic environment with politics.
To claim this is some Robin Hood scheme that will bring equality in the world is to say stealing from rich countries is ok and we should do it more, companies be damned. It's essentially an extreme firm of communism and as someone who lived in that system for a while and is has first hand experience of how frustrating corrupted governments are to doing business, I can point at virtually all attempts to make it work and we can all see how they failed.
Chins wants to be competitive at someone else's R&D expense.
Edit: China improving is terrifying would you like to have that political system in your country? If yes most of would would rather have freedom of speech which btw allows us to have this conversation without fearing a knock on the door and prison for life.
Well, it's not 16th century economics, it's economics if you are a already developed country or a country in process of development. Those are different animals with different needs.
Of course, now that USA or Europe is already developed is time to apply different rules.
The economist Ha-Joon_Chang have a full book about those double standards called, appropriately in my opinion, "Kicking Away the Ladder: Development Strategy in Historical Perspective"
(https://en.wikipedia.org/wiki/Ha-Joon_Chang)
You talk about "stealing", so making a moral judgement. For me, the moral thing is to answer: what is the way that more people have a good life?
That isn't stealing. That is negotiating. You act like companies have a right to the chinese market.
> Chins wants to be competitive at someone else's R&D expense.
And our companies want access to the chinese market at china's expense.
> To claim this is some Robin Hood scheme that will bring equality in the world is to say stealing from rich countries is ok
The chinese aren't claiming to be robin hood.
If you don’t like the Chinese playbook, don’t play in China. Your company does not have a right to the Chinese market on your terms - only on their terms. If you disagree, I’ve got a generic HCV drug market you (and Gilead) are going to love.
But don’t make China look like a sad puppy who needs help. It’s a ferocious tiger (good for them) whose economic and military prominence would scare me and everyone who likes free speech and non authoritarian rule.
> The Chinese art of selectively enforcing their laws to the detriment of those that won't play ball with the government really makes it hard to believe Xi's press-tornado of successful anti-corruption measures.
It's not a "chinese" art. It's every government's art. All governments selectively enforce laws.
> The government has been actively extorting international companies into "joint" ventures.
That's called business, not extortion. Otherwise, everyone is extorting everyone. You do realize that all governments "extort" companies in return for access to their home markets right?
> These ventures essentially require "treats" (as an insider told me) every several months.
"Insider" told you. Right. Because you are a very important person. That the chinese government force foreign governments to form joint ventures and to share knowledge is a well known as it has been reported widely for decades.
> China's current long-term strategy seems to be:
That's the strategy of every country - especially every major nation. No major nation is keen of being dependent on a foreign nation.
Is it possible to get a loan in the US and use it to build a factory in China? How about vice versa? Because if so, then I don't see how banking regulations would change where a factory would be built.
The reason manufacturing has moved to China is simply because it's cheaper to make stuff there.
It means that the profit on/from that specific form of economic activity is due to market inefficiencies, not due to the actual added value.
So, if more money chases the same stock of housing, rents and housing prices go up, yet no value was added to the houses.
Similarly, if opening a bank is impossibly hard, banks can be assholes, they can raise monthly fees and so on.
It's a complicated problem. Sometimes they do their job with so much passion that "industry and consumers" seem to depend on them, i.e. on the banks, instead of vice-versa. See the 2007-2008 crisis and the cries of "the world will die if we let the banks fail".
The not-too-representationally selected/elected leaders of China want to keep the power of pegging their currency, which is very essential in a centrally planned economy, at the cost of personal freedoms. (And the yearly 50 000 USD limit is more than enough for poor people to send all of their savings away to a fraudster though, so it's not absolutely the right thing.)
A powerful private banking system is very different from a shadow bank that uses identity theft/fraud to store and gambling to exchange currencies. A healthy banking system helps allocate credit (which is risk), but since the barriers to entry to the finance sector is high (cost of regulatory compliance, IT security risks), margins are low (products are fungible, a mortgage is a mortgage, a savings/checking account is a savings/checking account, it doesn't matter which bank you chose, so you'll use the cheapest) and network effects are also high, we don't really see a healthy banking sector. (Thus risks are largely concentrated in too big to fail banks, and that's why the new big bank requirements include systemic exposure stress test regulations: https://en.wikipedia.org/wiki/Basel_III - of course, it's easy to argue that this just moves bubbles somewhere else.)
As to the other claims ("Now we see the US and the EU largely controlled by banking interests" - no, we don't, we see populism/nationalism/chauvinism, we see good old regulatory capture [the FCC Chairman is an ex-Verizon lawyer currently playing dumb for a lot of money, or just out of spite, the EPA lead is a proud climate change denier, the current UK leaders are typical isolationists, and so on], "very little if any taxes applied to financial gains" - cca average of 15% is not very little https://en.wikipedia.org/wiki/Capital_gains_tax and "the entire industrial complex has moved to China" - no, only the labor and raw materials intensive things [which is of course an enormous slice of the pie], but nowadays the problem is with lack of effective retraining in the advanced economies.)
Later you claim that is just fine to support big banks because said banks exist to "spread risks". But of course the biggest risk for a country is in the existence of banks that are too big to fail, since they need to be saved by the government. Therefore, banks in fact perform ZERO risk reduction. They CLAIM to take risks away from the system, but when a crisis occur the whole tab of bad betts will be paid by the citizens of a particular country, not by bankers.
As for control of the US and EU, just look at who is responsible for economic policy in these places and tell me if they're not from the same half dozen banks that are already deemed to be too big to fail! What a coincidence...
[1]: https://www.thebalance.com/aig-bailout-cost-timeline-bonuses...
The results do not justify the process. Would small business owners be offered the same loans that were unjustifiable based on assets:liabilities? I can answer that for you right now as someone who has cash in the bank to cover a six figure loan but can't get one due to a 690ish credit score: No, they won't.
That we made a profit on (some of the) bailouts doesn't matter. The same process would never be offered to 99.999% of the other citizens of this country.
Remember TARP bought the assets for close to their realized value, so the loss was already priced in.
But I think that those responsible for the financial crisis should have been charged and done prison time.
All as a result of yet another financial crisis caused by irresponsible and greedy financial institutions.
Tax rates went up. (At least, where I am. Don't know about the US)
> the government and taxpayers made a $23 billion profit
How much of this did taxpayers actually get (in terms of, for example, decreased tax rates, or anything else that directly benefits the taxpayer)?
You can disagree without being so rude.
Discussions about systemic risk, for example, have not lead to normative conclusions about nationalizing banking. An analogy might be that finance is like electricity. The very real risks of electrocution or fires don't discount its fundamental role in modern civilization.
China is absolutely able to engage in megaprojects financed by the state and the PLA, however funding for the industrial centers on the Pearl River Delta which are so important to China's economic success is largely private.
[1] https://www.alibris.com/Economic-theory-in-retrospect-Mark-B...