Monday, October 15, 2012

Endof the China cult

4 Reasons Why You Should Stop Believing In Chinese Leadership

 by Zarathustra of Also Sprach Analyst,

Did you know that Chinese government officials are all corrupt?
Did you know that many of Chinese statistics look either weird or totally unreliable to a point that even the Vice Premier can’t help admitting it?
Premier_WenPeople outside of China have never really trusted the Chinese Communist Party as far as politics are concerned, and probably never will. However, the seemingly unstoppable growth engine of China has produced a remarkable level of complacency among investors that China is going to do well. Indeed, our contacts in Europe even suggest that investors are looking to invest in China because China seems to be in better shape than Europe, and that seemingly depressed Chinese stocks represents a buying opportunity.
Read more: the death of China cult
While recent economic data from China are mixed at best, the market consensus is unanimously biased towards believing that the second quarter is the bottom. We acknowledge that there is a chance that the government does have enough ability to stimulate growth in the short-run, it was precisely that ability which made matters worse for the long-term. And with the current economic growth model in-place, we argued that China will be a very bad place to invest in even if growth can be artificially pumped up by massive stimulus.

By World Economic Forum from Cologny, Switzerland [CC-BY-SA-2.0], via Wikimedia Commons
We do not understand the reasons behind the faith in the Chinese leadership as far as running the economy is concerned. We do have a few reasons on why you should just stop believing in the Chinese leadership when it comes to running the economy.
Comment: State capitalism is in deep trouble - always and everywhere, by its very nature. It's a system of permanent crisis interrupted by short periods of stability and spurts of growth. In classical capitalism it would be the other way round. Steady high growth interrupted by a crisis once in a while. Politicians love state capitalism because it gives them power and importance - that's why it is the dominant system - globally.

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