China Best Bet, USA Stuffed

[bluekelah]

Well, do they stimulate, like all the previous attempts (good, more infrastructure and empty buildings) OR do they restructure and try and get economy back on track (harder but what's needed).

Some commentary:



A takeout is deflation could well be exported (buy Bunnings?).

IMHO with shortterm desposit/savings rates of above 5% its a hard call to be vested in stocks, especially dividend yield types like wesfarmers where price is peaking and yields are sub 4%.

I think China recently did a stimulus which doesnt seem to be working as it used to. perhaps this year their property sector will really crash, Given top dog Country Garden has just started missing bond payments and slightly smaller major players like Evergrande finally going bankrupt.

From the ground it seems their youth unemployment is getting pretty bad now.

If 2006-2007 is anything to go by we probably still have another half to 1 year to go before the 5%+ rates tank the USA and global markets. I would keep some gunpowder handy in short term instruments for 2024 buying oppourtunity

 

[Dona Ferentes]

I was thinking about their infrastructure. Is it possible that it will make business a little easier with the drop in rates. If so, they may buy more iron ore. But news is unreliable, will they, won't they?

The infrastructure boost; same old, same old. Will it work again? All mandated by the central power

Buy WES? How does that tie in considering they're importers of Chinese products? Or are you thinking about WES's mining?

Chinese will try to export their way out = Dump stuff. And falling currency helps. WES import and keep the margin.

But would i know.?

 

[eskys]

Well, I certainly hadn't thought about that, Dona. I don't know either.

Thank you for your replies, by the way....I'm logging out. Have a great evening, Dona, bluekelah.

 

[divs4ever]

The infrastructure boost; same old, same old. Will it work again? All mandated by the central power

Chinese will try to export their way out = Dump stuff. And falling currency helps. WES import and keep the margin.

But would i know.?

i wonder if China will follow the strategy used by Japan and Germany post WW2 where they switched from cheap mass produced exports to making superior quality , firstly for local consumption and later for export

not a guaranteed exit plan but if you believe the global economy is heading for a down-turn ..

 

[wayneL]

As to the original proposition, I'm still not quite sure who is more stuffed, given recent developments.

Equally, there doesn't seem to be an obvious heir to 'Murica's economic hegemony. It seemed to be Chy'na, but not so sure.

Perhaps India is the dark horse?

 

[finicky]

 

[divs4ever]

As to the original proposition, I'm still not quite sure who is more stuffed, given recent developments.

Equally, there doesn't seem to be an obvious heir to 'Murica's economic hegemony. It seemed to be Chy'na, but not so sure.

Perhaps India is the dark horse?

i am putting my cash ( as best i can ) on India , it may not be the winner in the short sprint , but should be good for a place ( top three) in the mid-term

China , US , EU and Japan , all have their challenges , India is still not a mature economy , and needs plenty of infrastructure to reduce bottle-necks , and a big enough population to absorb most excess manufactured goods

IMO China needed to slow down and consolidate , short term difficult but mid-term maybe not so bad

 

[Dona Ferentes]

there isn't a graphite as a commodity thread, most of the China threads veer off in FMGesque splays, so here's today's concern.

.... a familiar theme of market dominance with predictable argy bargy to follow.

China curbs graphite exports in latest critical minerals squeeze

China announced on Friday that it will require export permits for certain graphite products to protect national security, its latest move to curb shipments of minerals that are critical to the energy transition.

www.reuters.com

 

[Dona Ferentes]

war by other means

Foxconn under the gaze of the State

Foxconn faces tax audit, land use probe - Chinese state media​

Reuters
Published Oct 22, 2023 13:45

BEIJING (Reuters) - Foxconn Technology Group, Apple Inc (NASDAQ:AAPL)'s largest supplier of iPhones, has been subjected to tax audits at some of its key subsidiaries, suspected of violating laws and regulations, Chinese state media reported on Sunday.
China's natural resources department also conducted on-site investigations on the land use of enterprises of Foxconn in Henan, Hubei provinces and other places, according to the exclusive report in the nationalist tabloid, the Global Times. It did not elaborate on the investigations or the timing of them...

 

[Dona Ferentes]

we get a visit from the premier, the top dog goes elsewhere.

​

China's Cosco Shipping is building a $3.5 billion port in Peru

In a bid to expand its clout overseas, China is building a port in South America that could further dent its relations with the US. According to a report in The Wall Street Journal, Beijing is developing a deep-water port in Peru's Chancay which is likely to be inaugurated by Chinese President Xi Jinping later this year.

China's Cosco Shipping is building the $3.5 billion port in the resource-rich region that may bolster trade between Asia and South America and open new markets for Chinese electric vehicles and other exports

It will also be the first port on South America's Pacific coast that will be able to receive mega ships because of its nearly 60 feet of depth, the WSJ report said.

The port, however, has posed a challenge for the US that seeks to stop China's rise in Latin America. The US is worried that China's control over the port will allow Beijing to further strengthen its grip over South America's resources, the WSJ reported.

 

[basilio]

Came across this exceptionally thought provoking analysis of the effects of Chinas subsidies to EV, renewable energy, AI.

If Governments subsidise businesses who should share the benefit ?

China’s subsidies create, not destroy, value

Nearly 250 years after the publication of Adam Smith’s ‘The Wealth of Nations’ and the West has lost the economic plot

A common narrative bandied about by the Western business press is that China’s subsidized industries destroy value because they are not profitable – from residential property to high-speed rail to electric vehicles to solar panels (the subject of the most recent The Economist meltdown).

...... What China has done in industry after industry is to flatten the supply curve by subsidizing hordes of producers. This spurs innovation, increases output and crushes margins. Value is not being destroyed; it’s accruing to consumers as lower prices, higher quality and/or more innovative products and services.

If you are looking for returns in the financial statements of China’s subsidized companies, you are doing it wrong. If China’s subsidized industries are generating massive profits, policymakers should be investigated for corruption.

A recent CSIS report estimated that China spent $231 billion on EV subsidies. While that is certainly a gross overestimation (the think tank’s assumption for EV sales tax exemption is much too high), we’ll go with it. That comes out at $578 per car when spread over all ~400 million cars (both EV and ICE) on China’s roads.

The result has been a Cambrian explosion of market entrants flooding China’s market with over 250 EV models. Unbridled competition, blistering innovation and price wars have blinged out China’s EVs with performance/features and lowered prices on all cars (both EV and ICE) by $10,000 to $40,000. Assuming average savings of $20,000 per car, Chinese consumers will pocket ~$500 billion of additional consumer surplus in 2024.

What multiple should we put on that? 10x? 15x? 20x? Yes, China’s EV industry is barely scraping a profit. So what? For a measly $231 billion in subsidies, China has created $5 to $10 trillion in value for its consumers. The combined market cap of the world’s 20 largest car companies is less than $2 trillion.

Graphic: Asia Times

What we have been looking at – illustrated in the supply/demand curves above – are just primary market effects. The more significant outcomes of industrial policy are externalities. And it is all about the externalities.

To name just a few, switching to EVs weens China from oil imports, lowers particulates and CO2 emissions, provides jobs for swarms of new STEM graduates and creates ultra-competitive companies to compete in international markets.

Externalities from the stunning collapse of solar panel prices may be even more transformative. Previously uneconomic engineering solutions may become possible from mass desalinization to synthetic fertilizer, plastics and jet fuel to indoor urban agriculture. China could significantly lower the cost of energy for the Global South with massive geopolitical implications.

The city of Hefei in backwater Anhui province has achieved spectacular growth in recent years through shrewd investments in high-tech industries (e.g. EVs, LCD, quantum computing, AI, robotics, memory chips). In theory, the Hefei model – where local governments operate venture capital funds – can be more efficient than Silicon Valley’s version.

While returns for traditional venture capital investments are dictated by company profits, the Hefei model is more flexible. Returns can be collected through multiple channels from taxing employment to upgrading workforces to increasing consumer surplus. The internal hurdle rate can be set lower if positive externalities are part of the incentive structure.

While Hefei has been hosting symposiums for processions of municipalities hoping some of the city’s magic rubs off, the model isn’t truly unique. It is just what the China model looks like when pushed against the technological frontier.

While quantum computing, AI and robotics may be sexy, the formula is not much different from the macro China model. That is, a model that understands all facets of value creation – from consumers to producers to externalities – not a model fixated on and distorted by profits.

China's subsidies create, not destroy, value - Asia Times

Cash rules everything around me C.R.E.A.M., get the money Dollar dollar bill, y'all – Wu-Tang Clan A common narrative bandied about by the Western

asiatimes.com

​

​