Rant time....or maybe my just repeating myself


Splash of cold water time.

Reality check.

For me and you.

Especially for me.

China has debt, folks.  A fucking lot of it.  More than America has. 

And so what.

However…

As long as China’s people cannot freely exchange their currency, then all of their savings/cash/money is nothing but a big ass bank just sitting there waiting to be drawn upon from Big Brother at a moment’s notice, if need be.

So sorry folks.  Until that time comes the Chinese will simply have to take all their begotten gains and put them in real estate.  In China.  Sure some folks with the foresight to move their money abroad will somehow someway continue to trickle out to LA or NYC or Seattle to buy an overpriced condo the Chinese themselves consider dirt cheap, but so what?

But for the love of God, how much higher can the price of real estate in China go?  Just think about it for a moment?  If you are a Chinese citizen and your 700 sq foot apartment has turned you into a millionaire wouldn’t you look across the Pacific to Sydney or Melbourne or Phoenix or Vegas or even God Forbid Detroit and take out a calculator? 

And that is where the Chinese government comes in.   “No way Jose” that money is leaving China.  IF China allowed it’s People to have decision making authority on how their own money is actually spent, then China would be a pauper nation already.  To be honest, in China, the Chinese are content to see their investment grow.  Too bad they can’t spend it.  Unless it’s on yet another condo of course.

Nevermind that the Chinese can buy a Ferrari in China, just like one can in Italy.  Or a Porsche just like one can in Germany.   (For double the price of course.)   The point of being able to freely transfer one’s hard earned(begotten?) savings out of China is about freedom.  Freedom to use it as one sees fit without having to look over one’s shoulder.

Simply the right to put their money where and how they see fit.  It is only the aim of a few to actually hide their money.

The West could sure welcome that hard cash.  Capitalists are greedy, baby.  We never have enough. 
And for the Love of God how high can it go?   When I began my last stint in Shenzhen an apartment was around $300,000 for  maybe 1000 sq feet.  (100 sq meters)  Now it’s over $800,000!  

Gentle reminder to all: 

The Chinese today have never experienced nor lived through real economic pain.  For them, every day is October 28, 1929.  Groundhog Day.  Over and over and over.    Yeah, folks have lost money in the stock market.  Sure.  And a few have even been cheated.  Yep.  But China controls the markets. 

The downside just isn’t that severe.

But how does China prevent a collapse in real estate?

I think we miss the point when we ask that question.   With China’s real estate, it is not so simply as supply and demand.  Strange as it may seem, the Chinese have plenty of housing.  And a lot of that housing stands empty. 

And if Chinese only make so much a month, thus unavailable to really afford housing, how is it so high?

The price of housing in China is high because those with money have no choice but to park their money in real estate.    With the advent of further tightening of capital controls, it is a perfect storm for higher real estate pricing to continue.   So the price of housing thus really isn’t bad on economics. 

(Unless you a single Chinese Guy.)   China has basically said if you want to invest, it has to be in housing, and pretty much nothing else. 

The sad thing is the Chinese could also use this coin to start a business.   Create a new jobs.   Instead, many see buying real estate as a simple way of laundering their money.

Aren’t there those who need housing but just can’t afford it?

And what of single China Guy?

As long as many  Chinese Men have pressure to buy a house in order to properly marry, demand will stay high.  After all, tens of millions of Chinese Men are fighting for a limited resource.  China Girl that is.  Which is another, probably smaller reason prices therefore won’t drop.   So it is not just a simple lack of choices, but cultural expectations that keeps pricing from falling through the floor.
The Great Chinese Housing Bubble we hear so much about may simply never pop in my lifetime.   

Unless the Chinese change their mind and start selling.    Or something else happens.

Still China is at an inflection point.  The game is up creating jobs off the back of a new Iphone.   China simply can’t meet the expectations of its increasingly sophisticated and worldly population by offering them yet another assembly line job for yet another foreign product.  China needs to stretch itself a bit.  And it knows that.  It knows that very well.  Doesn’t need a blog writer to remind them.  

That is, China needs to learn to create its own jobs for its own people from its own designs and creations.  Relying upon The West for that is a most dangerous game.  Sooner or Later someone is gonna get smart and do something like put a tax on Chinese exports, with the deliberate notion of strengthening some other country a bit more friendly to America, or Canada, or Australia, or Europe or wherever. 

All with the very stated and real goal of reminding China it is a buyers’ market out there.

You see China can be replaced.

Maybe with Vietnam.  You know, China’s “best friend”.

Hmm…

America has all sorts of leverage at its disposal. It simply lacks a President interested in Asia.   
The scary thing is while China is well versed playing one company off of another, America has the ability to play one nation off of another.   That is the home team privilege of having such a large economy that everyone wants to sell to.   Yet America is a fervent, come Hell or High Water believer in Capitalism. 

“Let the damn market decide”, what is sold where and at what price.

Unfortunately over time, I don’t think I’m the only one to realize the Asians themselves don’t play the game this way.  And why should they?

Korea has a GDP around 1/13th the size of Americas.

Japan?  About 1/4th the size. 

My point is these are nations so small and fragile and constantly at risk one can blame them for NOT playing the game as laissez faire as America does.  After all, Somebody has to be the sucker.
To American Capitalists, however, “strategic vision” has nothing to do with it.   It is not nation versus nation, but rather Industrial Titan vs Titan.

Alas, Democracies aren’t built for closing the hatch and trapping somebody on the other side to save a sinking ship.  Democracies simply aren’t that cold and calculating.

And that is the difference between China and the rest of us.  It has no  hesitation leveraging its buying power to do just that.   The Government is China and vice versa.  Airbus and Boeing lose every time China plays one off another.   And now the Chinese are on the verge of building their own plane.  

And once that is complete, it nearly is, everyone knows what is going to happen to Boeing and Airbus.  Those behemoths with assembly lines in China(thank you for your “willingness” to share your technology Comrade!), will within a decade start to see their sales to China decrease and perhaps within two decades be shut out altogether.    Talk about selling your own rope from which you will be hung….

And that is long after China begins to offer their own airplane to their brotherly sisters in Africa, for a cheaper price of course.   And Latin America. You don’t think the African nations can’t wait to give America and Europe the finger before embracing China’s cheaper, generic airplanes? 

At this pace within 30( 20?) years China will have fully usurped Europe as America’s near equal.   If only China can avoid collapsing in on itself.   Or starting a war it can’t win with somebody.  

This continuing rise of China isn’t so much scaring folks as it is making fodder for newspapers and cable TV.    But who really knows how high China can climb before slipping off the mountain and tumbling into a dark crevice?  (And will anyone be there to pull China out?  Will they want to?) All this news of how China is becoming strong that one sees on Quora is only so much water cooler talk.   Written by the Chinese wumao and fenqing

Suddenly talk of the inevitable eclipse not only of America but of the West comes into vogue.   It is a struggle really.  The Redditors, nearly all laowai, talk gleefully of China’s collapse while Quora writers, nearly all Chinese college students high on being able to communicate with a foreigner so directly without need of a visa, speak of its rise.   Of course they come to Quora because you know, they simply can’t have this kind of free for all on Zhihu.

But we do know this much to be true; 

When the China Crash comes, and it WILL come(just don’t know what century….or what decade..)  It will without question be something we’ve never seen before.   That sinking of the Titanic will be more like a lifeboat going down.  And if China has to bite its lip and ask Western Banker Man for assistance, terms will not be pretty. 

The loss of wealth will be crazy.

In 1929 America’s population was 120 million people.  Today China’s is about 12 times that.  Give or take.  The Heavenly Kingdom crashing down will have lots of noise.  And it won’t crash quietly like a tree in the middle of deep Siberia.  Uh-0h.   Everyone around it may come crashing down, too.  All those Korean factories in China….not gonna take a hit?  Really? Taiwan? Japan?  Anybody with a factory in The Heavenly Kingdom is gonna feel the pain too. 

Whose gonna feed North Korea? 

And suddenly decades old talk of “containing China” becomes outdated.   The Chinese will have easily contained themselves.

How will the Chinese react when they see their life savings go up in the rubble of a real estate crash.    China’s confidence won’t be shaken by an American ass kicking on some distant ocean, but right in front of one’s very eyes, in every city and province.    This will sap the will and confidence and vitality of every Chinese National.  

And they won’t be able to blame any laowai.  But trust me, it won’t be for lack of trying.

Now is just not the time to talk sense to China. Nor to the Chinese Nation. Not now.  How can it be?  Have you ever seen a bodybuilder that can’t benchpress?  It’s not their job to be strong.  It’s their job to look strong.   With body building, it’s all about the cosmetics.  The glamour.  Many less stronger looking people who are not body builders can bench more, but you’d never know it, well because its human nature to judge capabilities from appearance. 

And this is the trap the Chinese have fallen into.

How can China not think it is superior to America or Australia or the West when the Chinese travel abroad?  If you were Chinese wouldn’t you expect to see 200 story buildings in every Western city you visited?   And if you didn’t see any would you not by extrapolation believe your country, your culture to be superior?  Of course you would.

I’ve said a few times now America is becoming nothing if not a country of warehouse workers.   This once, not so bad country of America, that built the Empire State Building, the Golden Gate Bridge and Hoover Dam when the Chinese Communists were still hiding in the caves of Yanan.    A country whose first aircraft carrier is older than the Chinese Communist Party. 

Slowly, but steadily, Corporate America is sending one class upon another of jobs over to China.(yeah, I know, other places, too)     Who will be left?  What cannot possibly be outsourced?   Warehouse jobs??  All those imports from China….now that is a job the Corporate Chieftains have yet to figure out how “to rationalize”.

But even those are not safe.  Within a decade everything will be truly automated.   Only the “Maytag Repairman”(sorry, unfair American cultural reference to my readers in Bahrain, please go to youtube) will be left at the front gate.

The Chinese People are not only from birth soaking up the daily drumbeat of how great they are from the Media, the glamorous unprecedented filling up of their nations infrastructure with glitzy trophy after glitzy trophy, but everything they’ve been taught since grade school is only confirmed upon visiting another country!

“What don’t these backward ass laowai have buildings as tall as ours”?

“Where are the fucking new subways?  Where are the subways?”

“I can’t believe this city of 5 million people only has 3 buildings (3!) taller than twenty stories.   I thought America was better than this(Or Australia, which is our fucking colony anyway)”

And now what?

Trump the Magnificent has taken America out of a global agreement.  As a country with 30% of the world’s carbon emissions and twice that of America’s, China will not be filling a leadership vacuum anytime soon.   Anyone who thinks otherwise is guilty of kneejerk intellectualism. Yet that is not the point.  The point is that in the mind of the Chinese, America exiting to begin with is symbolic of what the Chinese think anyway;  that America is a declining power, afraid of being surpassed, and probably exited in order to somehow “pollute its way to remain on top” of China.

America has had the World’s largest economy since before 1900.  Those days are obviously numbered.  As they should be.   India and China, minus War, Famine or Invasion, can only grow and prosper.  These two countries owe their prosperity to Free Trade and the willingness of America in particular to hollow out it’s middle class for a buck.  But to the Chinese, it is only a return to the natural order of things, of which they have a point.   Well before America was even an afterthought to the Europeans, China’s share of Global GDP was roughly equivalent to that of America’s today.   The only flaw in this argument is that America did not exist during the Song, or the Tang.  Or the Ming.    
Somehow the Chinese people will have to figure out that unlike in the past, the New China will have to share any future glory it obtains with other nations.  If only because the China Media has emphasized a return to Chinese Glory as it was before the rise of The Beautiful Country. The Chinese must realize that they simply will not be able to obtain the same glory of dynasties past. 

Will China share? 

And now we’ve come full circle.  Because at the end of the day, how can the Chinese want to share anything, believing upon landing back in China, that they truly are superior to the West?   Because for the Chinese appearances are everything. 

To have the Chinese Media espouse the endless upward trajectory of its culture and economic prowess and soon to be hegemony is one thing, but to have the People “buy into” that message is quite another challenge.  And you know what? The Chinese government has succeeded handsomely in doing just that.  This is the greatest accomplishment of China’s government since Liberation.

There is nothing to brag about when it comes to China’s government officials, from the village level on up.  But the National Leaders are first rate.  Much attention has been taken to cull the herd.   When has China last had an incompetent President?  Hua Guofeng?  Maybe…but even he knew he was over his head.   Mao?  Yeah, to an extent.

The irony is to find a truly horrific and incompetent Chinese Leader, we’d have to go back.  Way back.  Nobody can compare with Jiang Jieshi.  By far the least competent Chinese Leader in the last century. Not even close.  Deng, Zhou, Liu, Zhu Rongji….top rate leaders all.  Fantastic!  They have picked China up from the carnage following 1976, and finely sorted things out.  Were they lucky?  

You damn right!  If Deng had died a few years earlier Jiang Zemin would’ve been over his head.   But he didn’t so he wasn’t.   They’ve handsomely succeeded, with the liberal help of Western Capitalism’s willingness to build factories and create jobs in China, at taking a tremendous economic burden of the World’s Plate.  

However….

When a pretty Chinese lady of 25 is still denied a visa to visit America because the visa officer thinks quite frankly, either she is a whore just trying to set up shop in America, or she is a risk to stay in America and not return to China(because you know, America rocks and really is that superior to anything China can offer) how does that lady not feel anything but contempt for us?

I was travelling once with my family from Paris to London, via the Chunnel.  We saw in the next line over(and thank God for that!) a Chinese family being stymied for one reason or another by British customs.   They obviously thought the worst.   The plainly visible contempt on the Chinese mother’s face for this customs official, if not for the country she was about to visit and spend lots of money in was plain to see.

“I am Chinese you pale faced Vitamin D deficient can’t find a job anywhere else loser.  My country’s economy is 5 times larger than yours.  I am Chinese and China is great!  And we will become greater.  One day before my children are married you will be my bitch.  Your country will take my phone call before Uncle Sam’s.  Indeed, you will put that wrinkly Old Man on hold while crowing for more trade with me.  You’ve already thrown Hong Kong to the wolves.  It is an insult to think my family would want to call your country home!   I don’t want to even go to your 3rd rate raggedy ass country anymore!”

Behind every Chinese smile is a firm conviction of two things:  Deng Xiaoping was a greater leader than Mao and two, that Chinese are superior in every shape and fashion to anyone else.   The sad thing is I’ve stopped giggling.

Yet China is on a modern steel rollercoaster supported by rotten wooden beams.   It’s a hell of a great ride until it all comes crashing down.

My question is Can China Handle the Crash?  Can the Chinese People handle the realization their country simply isn’t as great as they’ve thought and been lead to believe?  As they’ve seen with their own eyes upon going abroad?  (after all, if a country does not have 200 story buildings, is it not decrepit and weak?)

I don’t believe China can.  The Chinese simply lack the psychological tools or bandwidth to accept any competing  narrative that differs with what they’ve been fed since birth.  To accept an alternative interpretation of where China is headed would be irrational to most Chinese.  China can only be great, and on its own terms. 

To accept anything different would be preposterous.    Because for China, denial never turns into acceptance.  Only into conspiracy.  And that is the scary part.   





Comments

  1. A lot of ideas packed in here. I'm just to going to throw in a half chewed idea if I may. I've spent a lot of time over the last couple of years getting up to speed with renewable tech. Of course, initially I was most excited by Tesla and what is going on in the U.S. Big things are coming. German and Japanese auto makers (not to speak of the other big U.S. makers) have had a rude shock to find out that their industry is changing faster than they realized, and that they have to play catch up or end up like Nokia or Kodak. Some are going to make it. Some wont. Now however, I've increasingly been impressed by India and China. China in particular. Some smart cookies saw this disruption coming for a long time now, and saw it as an opportunity to break into new markets. China is now the worlds number one producer and buyer of electric vehicles. And it is turning now to foreign markets. If you are running a transport system in an Australian (or European, or U.S.) city, and want some new electric buses, are you going to get on the horn to Japan? No. You are going to call BYD or another Chinese company (or maybe Korean). The Chinese are investing in renewable energy, and renewable transport, not just to clean up the locally bad air, or to help deal with global warming. They know that it is the major growth industry of the century, and that it will create a huge number of jobs. I can't speak much when it comes to a big picture analysis of the country and its challenges coming up (including psychological ones etc.). However I certainly find myself impressed by how far ahead industry and policy leaders are when compared with those in other so-called "advanced" countries.

    Meanwhile, in my Australian city, the local mining based economy has shat itself, and businesses are going down left and right. Restaurants are having a really hard time. But not in my area. Why? Because they are predominantly owned and run by Chinese. We went to a Sizchuan place last night on a Wednesday. It was packed out with exchange students, etc. God knows what state this city would be in if it wasn't for the Chinese. If a crash does come, we are in deep, deep trouble.

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  2. Hi again Urashima Joe. I've a long put off(very long put off) post on how Australia became like Vancouver. The Chinese are bringing their money overseas, and that is good for EVERYONE.

    Two things about that though if I may:

    1. If China was to have truly convertible currency, or hell, even remotely convertible currency, China would collapse overnight with the former, and die a slow death with the latter.

    My point is look how prosperous Australia could become if the Chinese were simply allowed to bring out more $$$. Don't think its possible? Believe China is prudent?

    I give you India. The economy of which is around 5x smaller. Yet how much can Indian's annually take out of the country? Last I checked it was aroun $200k. Not 50k, but 200k....

    2. Last point...let's make no secret of the fact the more sway China has over your economy(anybody's economy), the more of China's bitch you will be.

    True, I packed alot into the above post. Over 3000 words. But what will Australia do in the next 10 years or so when they realize never mind the cultural affinity to the West. Australia Democracy dictates it do what is best for its People, ie give China more leeway and freedom within your country's society.

    That may be The Question in Australia for the next generation to solve.

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