China

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Submitted by FlyerInHi on October 12, 2018 - 5:12pm

Just watched an interesting lecture by Kai Fu Lee on Chinese innovation and Artificiial Intelligence.
Very interesting talk about the future.

https://youtu.be/bh0TXtB0NxU

Submitted by moneymaker on October 13, 2018 - 5:36am.

Very interesting. Makes me hope we can form a cooperative relationship with China rather than an adversarial one. Like the part about correlating phone battery status to likelihood of default on loan.

Submitted by The-Shoveler on October 13, 2018 - 7:39am.

LOL Make sure all your parameters meet the AI's approval parameters.

I do think it will not be too long before all these trade issues etc.. will get resolved between US and China and both will benefit greatly.

Submitted by ocrenter on October 13, 2018 - 10:09pm.

moneymaker wrote:
Very interesting. Makes me hope we can form a cooperative relationship with China rather than an adversarial one. Like the part about correlating phone battery status to likelihood of default on loan.

How would you propose a cooperative relationship with the world’s biggest Nazi regime?

Submitted by Myriad on October 13, 2018 - 11:19pm.

It would be nice to have a cooperative relationship with China. Unfortunately, that's not happening right now.
There's lots wrong with what both countries do internationally. China's OBOR policy is really just a back door way to subjugate Asia. You could argue that the US has done some of the same things in the past, but the US has vastly more internal policy discord. China is able to align it's financial, military, diplomatic, commercial, and other sectors and wield it as a single foreign policy tool.

The media in Hong Kong has been talking about Cold War for months. Finally the WSJ picks up the theme also.
https://www.wsj.com/articles/u-s-edges-t...

Also, watch the policy speech by VP Pence at the Hudson Institute. The US is doing much more than a trade war with China.
https://www.youtube.com/watch?v=mYAHPPXm...

There's an interesting discussion of naval policy with direct relation of Mahan vs Mackinder
https://youtu.be/tGaSmvSv8jI?t=2203

Heartland Theory
https://en.wikipedia.org/wiki/The_Geogra...

Submitted by Myriad on October 13, 2018 - 11:18pm.

ocrenter wrote:
How would you propose a cooperative relationship with the world’s biggest Nazi regime?

It's incorrect to equate China with the Nazi's. They don't want to get rid of other types of people, just subjugate them. The government really are just completely scared of Muslims and terrorism, but only second to internal protests.
What China is really trying to do is create a sphere of influence and a tribute system for countries to pay them. As opposed to Nazi's trying to take over Europe.

Submitted by Myriad on October 13, 2018 - 11:18pm.

.

Submitted by ocrenter on October 14, 2018 - 9:04am.

Myriad wrote:
ocrenter wrote:
How would you propose a cooperative relationship with the world’s biggest Nazi regime?

It's incorrect to equate China with the Nazi's. They don't want to get rid of other types of people, just subjugate them. The government really are just completely scared of Muslims and terrorism, but only second to internal protests.
What China is really trying to do is create a sphere of influence and a tribute system for countries to pay them. As opposed to Nazi's trying to take over Europe.

Key aspect of nazism is the concept of racial hierarchy and the presence of a master race. Another important idea is socialism reshaped by extreme nationalism.

China ascribes to Han Chinese as the master race on top of all racial hierarchy. This is ingrained in the teaching of all Chinese children in school. They are doing everything they can to reach that goal in progressive steps. As for getting rid of people, they want to get rid of other cultures. Chinese have known the power of assimilation is far more effective in the long term than ethnic cleansing. Why do you think so many people think they are pure “Han Chinese” around the world? The plan is to annex Taiwan, the only sinospheric area outside of Chinese control. Once China can control the entire linguistic and cultural sphere (btw, no other country in the world have total control of a linguist and cultural sphere in the world, the ability to control speech and thought would be unprecedented), then onwards to all of the East Asian countries, which China sees as easy target for full assimilation. They also figure SE Asia would be easy prey given these brown countries are already dominated economically by Han Chinese. With full and total control of East and SE Asia, full domination of the world order would be a given.

Submitted by FlyerInHi on October 14, 2018 - 11:13am.

Myriad wrote:

There's lots wrong with what both countries do internationally. China's OBOR policy is really just a back door way to subjugate Asia. You could argue that the US has done some of the same things in the past, but the US has vastly more internal policy discord. China is able to align it's financial, military, diplomatic, commercial, and other sectors and wield it as a single foreign policy tool.

Does that mean we are admitting that government economic planning works?
Kai Fu Lee said in his talk that, in the past 5 years, China’s risk aversion culture is gone thanks to government program.

Why is planning working for China but didn’t work for the Soviet Union? Or didn’t work so well in France?

I see a lot of worry about China, but... in the USA, our bedrock popular belief is that government planning always fails catastrophically. So should we not relax and just let China fail?

Actually I have an answer to that.... China learned best practices from us and they implemented them masterfully. We make the mistake of thinging of capitalism (private ownership) vs socialism (state ownership). But China has learned to use capital (money, money creation and management) to achieve development goals. It was the Ford Foundation that, at first, bought Chinese students to learn from us. They returned to China after Mao died and developed the policies that led to today’s prosperity.

http://www.chinadevelopmentbrief.cn/arti...

The Ford Foundation began its work related to China in the United States in the 1960s and 1970s by funding the establishment of centers of Chinese Studies at major American universities, including Harvard, Berkeley and the University of Michigan. Because of this early investment, at the time of the normalization of China-US relations the Ford Foundation was in a strong position to begin supporting work directly in the PRC. In 1988 we opened an office in China in partnership with CASS.

Submitted by FlyerInHi on October 14, 2018 - 11:48am.

Myriad wrote:
ocrenter wrote:
How would you propose a cooperative relationship with the world’s biggest Nazi regime?

It's incorrect to equate China with the Nazi's. They don't want to get rid of other types of people, just subjugate them. The government really are just completely scared of Muslims and terrorism, but only second to internal protests.
What China is really trying to do is create a sphere of influence and a tribute system for countries to pay them. As opposed to Nazi's trying to take over Europe.

That sounds out of the past, and not possible in a post colonial world. Zbigniew Brzezinski wrote about that. That’s why wars such as Vietnam, Afghanistan, Iraq fail. We failed in those countries and China is moving in with development and commerce.

I see China as focused on commerce and money and nothing breeds admiration like brand new shopping malls, tall buildings and urban high tech such as metros and trains. China is developing soft power very fast and people in Africa, SE Asia and even Latin America are aspiring to be like China.

The US is actually trying to create a tribute regime whereby the rest of the world pays us tribute for IP. But the humanist reason for IP is to spur innovation. IP is not to stop copying of an original idea through a royalty regime, but to provide some protection so more innovation can happen. But if innovation is hampered, or ideas are not put to use to improve lives, then the concept of IP falls apart.

I don’t think we can just blame China. After all, China is providing development and improving living standards. If we don’t want the world to follow China, we need to up our game and woo the world with US led development.

Did you read the Washington Post story about the effect of withdrawal from TPP on Vietnam? Meanwhile the Hanoi metro, built by China, is in final test phase and set to open by lunar new year. Bravo to USA and China!

Submitted by Myriad on October 14, 2018 - 12:45pm.

FlyerInHi wrote:
That sounds out of the past, and not possible in a post colonial world. Zbigniew Brzezinski wrote about that. That’s why wars such as Vietnam, Afghanistan, Iraq fail. We failed in those countries and China is moving in with development and commerce.

I don’t think we can just blame China. After all, China is providing development and improving living standards. If we don’t want the world to follow China, we need to up our game and woo the world with US led development.

Did you read the Washington Post story about the effect of withdrawal from TPP on Vietnam? Meanwhile the Hanoi metro, built by China, is in final test phase and set to open by lunar new year. Bravo to USA and China!

Oh, the US does plenty of stupid stuff too. The US does things in it's own interest too - just different. Usually it's for a few investors to get more rich as opposed to creating spheres of influence. What China is doing recently will force Asia into a pro-China sphere vs a pro-Western sphere.

And all the projects China is building - it's really to buy favor with the leaders of those countries, not to help the local citizens. If they really wanted to help the local economy, they would hire local workers and not load them up with debt that the countries won't be able to repay without losing their sovereignty.

Here's an article comparing the Japan built HCMC metro vs the China built Hanoi metro. Time will tell I guess.
https://www.scmp.com/week-asia/business/...

Every time I hear of unrealistic and expensive rail projects (Chinese's ones, CA HSR, etc), I always think of the Simpson's monorail episode.
https://www.youtube.com/watch?v=ZDOI0cq6GZM

Submitted by FlyerInHi on October 15, 2018 - 1:24am.

Myriad, I agree that the quality perception of China quality s lacking. But that is psychological more than real. After all, a physical good is just an object regardless where it's made.

In terms of soft power, I would say that 80% of the world used to be on our side. It's getting closer to 50% between USA and China, especially among the population just coming out of poverty. Chinese businessmen are very good. Small Chinese businessmen open shops in the developing world and provide credit to local people.

In 20 years we will be able to tell what policies worked best. I think the development projects will pay for China -- it's a way for them to export high value goods and services. I look forward to traveling in Asia enjoying the infrastructure being built.

Macro wise, the Western liberal order in under threat with nationalism and possibly the implosion of Europe. I believe, in an interconnected world, capitalism and commerce are now trumping military and political forces. But we will see in 20 years. It's not that long to wait.

The latest trade numbers are in. The trade deficit with China is widening as is the total trade deficit. Will Trump be able to bring manufacturing back to USA?
https://lasvegassun.com/news/2018/oct/12...

And meanwhile BMW is investing more in China because ownership rules have been relaxed. I hope our companies don't lose out in the biggest market. And I hope China doesn't overtake us in our own backyard, Latin America. Australia and New Zealand are now firmly in the China economic sphere even though they are on our side politically.
https://www.bbc.com/news/business-45819620

Submitted by ocrenter on October 16, 2018 - 6:45am.

Chinese real estate bubble bursting as we speak.

Builders offering condos at 50% reduction in inland provinces (Jiangxi)

In Xiamen, builder discount of 40% led to violent protests on the street by current owners. (Bought at $720k, now valued at $430k).

In Shanghai, builder discount by 20%.

Most builders living off credit, with credit drying up, there goes the fire sales. Things will be a lot worse then our prior bubble burst. Chinese real estate valuation is 5 times the size of their GDP. The Japanese bubble burst in the early 90’s had a valuation to GDP ratio of 2:1. The US 2008 bubble burst had a valuation to GDP ratio of 1.7:1. Not only that but building quality universally is atrocious, that’s going to make recovery efforts that much more difficult.

This coming right off the heel of bursting of the P2P lending bubble.

And suddenly our real estate market grinds to a halt. The Chinese led bubble burst has begun.

Submitted by Rich Toscano on October 16, 2018 - 7:50am.

Hi ocr - Where did you find that data on real estate to GDP ratio? That was a really interesting stat so I went looking for more info, and found this from PIMCO:

"We estimate China’s property market to be worth around US$22 trillion, approximately 1.8 times the size of its GDP in 2017."

https://blog.pimco.com/en/2018/06/chinas...

Submitted by ocrenter on October 16, 2018 - 8:41am.

Rich Toscano wrote:
Hi ocr - Where did you find that data on real estate to GDP ratio? That was a really interesting stat so I went looking for more info, and found this from PIMCO:

"We estimate China’s property market to be worth around US$22 trillion, approximately 1.8 times the size of its GDP in 2017."

https://blog.pimco.com/en/2018/06/chinas-property-market-bubble-or-balloon

https://www.google.com/amp/s/amp.busines...

Business Insider had the ratio at 3.7:1 at end of 2016.

http://m.ltn.com.tw/news/focus/paper/123...

The ratio of 5:1 comes from Taiwanese news outlet this week, sorry, not in English. I just checked the numbers, they are using $62 trillion as the current Chinese property valuation instead of the $22 trillion cited in the PIMCO article. Plus they “rounded up” from 4.4 to 5.

Valuation in an opaque market like China is always difficult, but 4.4:1 ratio seems legit given ratio was 3.7:1 in 2016. $700k plus for an average sized condo in Xiamen (GDP per capita is $14k) seems to be in line with the higher ratio estimate.

Submitted by FlyerInHi on October 16, 2018 - 9:46am.

ocrenter wrote:

sorry, not in English.

You’re so lucky to read Chinese because you know first hand what’s going on over there. I wish I knew Chinese. I took classes but it’s hard to learn.

As far as RE devaluation, it will be interesting to see. My friend is saying that relatives in China report that people who work for state enterprises are having passports held by HR to make it hard to travel abroad. It’s also harder to transfer money out.

My friend sold a house in a second tier city and transfering the money to USA. There are currency controls but you can spend as much as you want on credit cards so she remodeled her house here in Cali on her Chinese CC.

Assets owners are now complaining that values are not increasing so many want to sell and invest abroad where they can get higher rents.

China is in dire need to move another tranche of the population into the middle class and into home ownership. That’s part of their policy of continuing economic growth so lower RE might be just that opportunity. Will local governments seize failing projects and dole out the condos to state workers? Let’s see how they manage it.

Is the China crash finally coming after 30 years of predictions? And what would a crash mean? 2% GDP growth for a while or an actual recession?

Submitted by The-Shoveler on October 16, 2018 - 10:09am.

In general Dictators are tolerated as long as they produce results (perceived as good by the population they serve).

What the Chinese Gov fears most is instability.

Submitted by FlyerInHi on October 16, 2018 - 10:25am.

The-Shoveler wrote:
In general Dictators are tolerated as long as they produce results (perceived as good by the population they serve).

What the Chinese Gov fears most is instability.

That’s why I believe the state will give “free” condos to the newly educated class (children of peasants) to move them into the middle class. Free housing is a lever that China has used many times before for different classes of people. We will see.

Submitted by ucodegen on October 16, 2018 - 11:54am.

ocrenter wrote:

https://www.google.com/amp/s/amp.busines...

Business Insider had the ratio at 3.7:1 at end of 2016.

http://m.ltn.com.tw/news/focus/paper/123...

Direct link on Business Insider article:
https://www.businessinsider.com/chinas-p...

The link you had posted seemed to get lost in the 'ether'-net/Web.

Interesting quote from article:

Analysts at HSBC have been crunching the figures, and they believe that during the first eight months of 2016, property prices in urban areas rose by 18.13% year-on-year. Back at the end of February 2010, the national average price per square metre of property within China was RMB5,508 for urban areas and RMB473 for rural areas. Today these figures have risen to RMB9,570 for urban areas and RMB822 for rural areas.

RMB 822/sq ft = $119/sq ft.
RMB 9570/sq ft = $1,385/sq ft.

This on median chinese wages of approx $14k/yr, per capita GDP below $10k/person/year.
Beijing average annual salary about $16,117.66/yr(111,390yuan), Henan province is about $6,569.15/yr(45,403yuan) - ref statistica.com
NOTE: St Louis fed give different numbers, but still not very good to support their housing costs. https://www.stlouisfed.org/on-the-econom...

Submitted by Rich Toscano on October 16, 2018 - 12:49pm.

Wow... those are some crazy stats, especially the price/sq ft vs. median wage...

Submitted by Myriad on October 16, 2018 - 1:36pm.

ucodegen wrote:

Interesting quote from article:

Back at the end of February 2010, the national average price per square metre of property within China was RMB5,508 for urban areas and RMB473 for rural areas. Today these figures have risen to RMB9,570 for urban areas and RMB822 for rural areas.

RMB 822/sq ft = $119/sq ft.
RMB 9570/sq ft = $1,385/sq ft.

That's in sq meters. have to divide by 10.7639
So $11.05/sq ft and $128.67

https://www.mansionglobal.com/articles/h...
City Median Home Price Median Annual Household Income Median Multiple
Hong Kong $5,422,000 $300,000 18.1
Sydney, Australia $1,077,000 $88,000 12.2
Vancouver, Cananda $830,100 $70,500 11.8

Submitted by ltsdd on October 16, 2018 - 7:05pm.

Wait, did I read that correctly? HK's annual hh income is $300K?

Submitted by Myriad on October 16, 2018 - 8:35pm.

I think it's all in local currency, otherwise it doesn't make sense

Submitted by ucodegen on October 16, 2018 - 9:02pm.

Myriad wrote:

That's in sq meters. have to divide by 10.7639
So $11.05/sq ft and $128.67

Sorry, my mistake. But also consider that I was not taking Hong Kong as highest income city in China, but Beijing. Hong Kong is an outlier. It has a median income that has more than 2x a chance of supporting the prices - for whatever good that can be considering that Hong Kong is priced a bit extreme (recent correction - not a 2x chance, they are both in a bad condition).
Similar ratios for Beijing:
Beijing $580,598(4.02mil RMB)$16,117.66/yr(111,390yuan) 36.1

I have seen other numbers for price to income ration that look worse (44:1).
https://www.numbeo.com/property-investme...

other link:

http://www.chinabankingnews.com/2018/01/...

NOTE: on " Myriad's" post - it looks like it might be local currency.
See: https://www.numbeo.com/property-investme...

Beijing, New York comparison:
https://www.numbeo.com/property-investme...

Though this shows the price to income ratio as being worse.

Note to Rich: Is it possible to add the codes for tables to the allowed HTML tags? ie; 'table', '/table', 'tr', '/tr', 'td' - just make sure to have the filter program spit out closing '/tr' and '/table' if a poster has not closed it at the end of the post - as it should be doing with '/b', '/i' etc.

Submitted by ocrenter on October 17, 2018 - 8:00am.

FlyerInHi wrote:

You’re so lucky to read Chinese because you know first hand what’s going on over there. I wish I knew Chinese. I took classes but it’s hard to learn.

we are lucky there exists a free and democratic and independent country WITHIN the Greater Sinosphere that is OUTSIDE of control by China.

I did a news search this morning in Chinese with the key words "Chinese real estate." Nothing from within China. Bunch of stuff from Taiwan, some articles in simplified Chinese, but they turned out to be based in N.America, receiving their source info likely from the same Taiwanese sources.

Taiwan gets annexed as you have always wished, and this type of information ceases to exist.

Submitted by FlyerInHi on October 17, 2018 - 12:36pm.

ocrenter wrote:

Taiwan gets annexed as you have always wished, and this type of information ceases to exist.

I don’t want China to annex Taiwan. Taiwan now has de-facto independence but there are a lot of legal issues. I don’t think it’s for us, Americans, to get too deeply involved.

I think we need to accept the rise of China. But we should contain China by providing a moral and business alternative to Chinese authoritarianism, otherwise the countries who do business with China will follow their model. China is all business and development while US foreign policy is still Cold War thinking. Moral preaching is not enough... there needs to be wealth and development.

The peaceful reunification of Germany is a good model. Angela Merkel is East German and East German politician are well integrated in running the country.

Submitted by ocrenter on October 17, 2018 - 1:36pm.

FlyerInHi wrote:

I don’t want China to annex Taiwan. Taiwan now has de-facto independence but there are a lot of legal issues. I don’t think it’s for us, Americans, to get too deeply involved.

I think we need to accept the rise of China. But we should contain China by providing a moral and business alternative to Chinese authoritarianism, otherwise the countries who do business with China will follow their model. China is all business and development while US foreign policy is still Cold War thinking. Moral preaching is not enough... there needs to be wealth and development.

The peaceful reunification of Germany is a good model. Angela Merkel is East German and East German politician are well integrated in running the country.

Not really a comparable model at all. More comparable model would be Austria and Germany prior to WWII, and the West allowed Hitler to annex Austria based on Hitler’s desire to unify all Germanic people.

Submitted by Myriad on October 17, 2018 - 2:50pm.

FlyerInHi wrote:
I don’t want China to annex Taiwan. Taiwan now has de-facto independence but there are a lot of legal issues. I don’t think it’s for us, Americans, to get too deeply involved.

I disagree that the US should not be involved. The strategic interest of the US is that any reunification should be the choice of the people in Taiwan. Not because the country is politically and economically strangled and forced to.

FlyerInHi wrote:
I think we need to accept the rise of China. But we should contain China by providing a moral and business alternative to Chinese authoritarianism, otherwise the countries who do business with China will follow their model. China is all business and development while US foreign policy is still Cold War thinking. Moral preaching is not enough... there needs to be wealth and development.

That dosen't seem correct - in fact, it's the reverse. The US has promoted economic development in the majority of countries, especially in Asia. They allowed China to open up for investment and growth and allowed entry to WTO.
China has followed a 18/19th century mercantilism system which primary purpose is economic benefit to the home country. China's investment in other countries is very little about business and development and more about changing the economic system of global trade back to regional mercantilism system.
Let this be clear, China is the aggressor here. While the US has been occupied in the SW Asia and ME, China has taken strategic moves to remove the current global geopolitical and economic order.
Why should the US not take a Cold War path after the open trade model has failed. On almost every strategic interest, China is challenging the US.
North Korea, Taiwan, South China Sea, Senkaku Islands, A2AD weapon systems, cyberattacks, economic espionage, trade imbalance, China 2025 (technology dev, tech handover, state backed investments and loans), Belt & Road, AIIB, etc. There's a reason why every major country in Asia is expanding their military and it's not because of the US. Japan had 500 air defense scrambles against PLAAF in 2017. THere will 300 submarines in the Pacific by 2030.

FlyerInHi wrote:
The peaceful reuniication of Germany is a good model. Angela Merkel is East German and East German politician are well integrated in running the country.

Except that the a large portion of the population doesn't want to be part of China, especially the younger population who don't have any affinity or history with China. For that matter, neither does Hong Kong, but China has an economic stranglehold on the city.

Submitted by FlyerInHi on October 17, 2018 - 4:03pm.

Myriad, just watch one of Kishore Mabubahni’s talk on Youtube. He makes a convincing argument that the West’s position is declining and business as usual won’t work.

And what do you make of Kai Fu Lee optimism about China? He was born in Taiwan, educated and thrived in USA. He could have retired in a McMansion, but he’s putting his money in China. He said that because of CFIUS, he’s not even looking at investing in USA.

And Richard Hass of the Council on Foreign Relations said our moral high ground is gone. We are now like any ordinary country.

But if what we are doing now is working, then no need to worry about the above.

Submitted by The-Shoveler on October 18, 2018 - 7:14am.
Submitted by FlyerInHi on October 18, 2018 - 12:51pm.

The-Shoveler wrote:
A different view point

https://www.scmp.com/news/article/210844...

Thanks for the link. I love SCMP. Interesting but very conventional perspective that has predicted a China crash for the last 30 years. I bet the author didn’t buy condos in HK in 1997 and throughout the 2000s. Many Hong Kongers who sold and moved West regret it now because they are relatively poorer than those who stayed and rode the property and job markets.

I used to think this way also but I have changed. China needs to catch up to the West in a couple decades. “Surplus” production is good for humanity because scarcity is transformed into plenty of cheap but essential commodities that improve lives.

Money, debts and financial management are just means of exchange and allocation of resources. Who’s to say China can’t develop new ways of allocating wealth. If housing crashes, who’s to say that the state can’t seize the properties and house the newly urbanized workers as a form of compensation. Those workers who no longer have crushing housing expenses could spend their salaries on consumption. As long as people have confidence in the system, they can continue to produce as before.

After 1979, China began giving free houses to military officers, party cadres, etc... those people are now rich because they owned centre city properties that they sold as China’s cities developed.

I know that these hypotheticals are pie in the sky. But wouldn’t you agree that the whole China experience since 1979 has been pie in the sky? (Just search the Economist or Financial Times articles and see how many times the big China crash has been predicted).

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