Why China's Stimulus Plan Will Change the World

Brazil's President Lula told his country in September, "People ask me about the [financial] crisis, and I answer, go ask Bush. It is his crisis, not mine."

Fifty days later, British Treasury Secretary Stephen Timms told a conference of G-20 nations gathered in Sao Paulo, Brazil: "We are in extraordinary times, the global economy is facing shocks which are wholly without precedent and we need a new approach. … It is a global crisis. It therefore requires an international response."

In other words, what goes around, comes around. Global schadenfreude toward a stupid and greedy United States and its subprime mortgage meltdown has rapidly become global concern about how to rescue the world from an all-encompassing financial disaster. Here's just a smattering of companies large and small that recently announced lowered outlooks for the year: Under Armour (NYSE: UA  ) , News Corp. (NYSE: NWS  ) , Starbucks (Nasdaq: SBUX  ) , Vodafone (NYSE: VOD  ) , Electronic Arts (Nasdaq: ERTS  ) , ADP (NYSE: ADP  ) , and Hormel (NYSE: HRL  ) . (Yes, in these tough times, even the outlook for Spam is grim.)

And if that were not enough, the International Monetary Fund (IMF) recently lowered its outlook for the entire global economy.

One country's plan to step up
Against that backdrop, China announced a 4-trillion-yuan ($586 billion) stimulus package for its domestic economy this past Sunday. It plans to fund extensive infrastructure construction, aid poor farmers, and cut export taxes.

While China's plan has clear beneficiaries, and should help keep more laborers in their jobs and prop up domestic consumer spending, the most important (and underreported) aspect of the plan is how it will fundamentally change the economic relationship between the U.S. and China.

Here's how it was
One of the big debates over the past half-decade was whether China had reached a point in its economic development at which its internal economic gravity would allow it to "decouple" from the global economy. If so, it could continue along its fantastic growth trajectory, even as growth in the U.S. or Europe ceased or reversed.

That may sound like gobbledygook, but it's important. The U.S. has a $20 billion monthly trade deficit with China. It's funded by China's willingness to hold U.S. treasuries in its Central Bank (essentially, we're borrowing the money). China manages the arrangement by pegging its currency (the yuan) to the dollar at an artificially low rate, and by not worrying so much about certain niceties like environmental regulation and labor protection.

It's a mutually beneficial arrangement -- a weak yuan supports Chinese exporters, helping the country industrialize and quickly integrate rural migrants into its urban workforce, with the salutary effect of keeping inflation and potential political unrest low. For its part, the U.S. has gotten dirt cheap financing, by virtue of China parking more than a trillion dollars in U.S. government securities. That has supported the dollar and allowed the Federal Reserve to fuel consumer spending by keeping interest rates low.

China's stimulus package heralds the unwinding of this relationship.

Here's how it will be
This is why the decoupling argument matters. Many analysts have pointed to the thousands of factories that have shut down in China in these past few months as evidence that a slowdown in American spending will cause a depression in China -- potentially even leading to regime change. But in fact, our trade imbalance with China is artificially preserved by the aforementioned currency peg, and by the decision of China's state-run banks to make uneconomic loans to businesses it deemed worth propping up.

China has paid heavily for this relationship. Rather than invest its surplus cash in its own country, the Chinese poured money back into the U.S. to further spur our debt-fueled consumption. (Put less artfully, some poor Chinese guy in Shaanxi province was essentially helping you pay your mortgage.)

The announced stimulus package reverses that. Hundreds of billions of dollars that would have gone to propping up the greenback are now being reinvested in China, helping it to transition from its reliance on exports to a self-sustaining economy. So while China isn't yet decoupled from its export markets, this new spending plan will help it along that path.

What you need to do to survive
China's huge currency reserves are about to be put to use, and while there will be some real and perhaps severe bumps along the way, the China that comes out on the other side will be a heck of a lot stronger, more independent, and more decoupled than the one we've seen up to now.

Chinese premier Wen Jiabao called his country's stimulus the "biggest contribution to the world." We don't know whether that's true, but we do know that China's ability to reach deep into its huge coffers to finance further growth gives it a significant advantage over the rest of the world's struggling economies. This is why we continue to believe in the Chinese miracle, and why we think more American investors should be taking advantage of this current temporary downturn to diversify their portfolios into previously expensive Chinese stocks.

We've recommended some Chinese companies at our Motley Fool Global Gains service that can help you do just that. A few of them are now poised to profit mightily from China's domestic bailout plan. You can read all about them by clicking here to join Global Gains free for 30 days.

Starbucks is a Motley Fool Inside Value recommendation. Vodafone is a former Inside Value selection. Starbucks and Electronic Arts are Stock Advisor picks. Under Armour is both a Rule Breakers and a Motley Fool Hidden Gems selection.

Bill is the advisor of Motley Fool Global Gains. Tim is a Global Gains senior analyst. Bill does not own shares of any company mentioned. Tim own shares of Starbucks. The Fool owns shares of Starbucks and Under Armour. Since the fantasy football playoffs are approaching, the Fool's disclosure policy not-so-humbly requests that Braylon Edwards stop dropping the dang ball. Seriously, a fourth-grader could have caught some of those passes, dude.


Read/Post Comments (96) | Recommend This Article (166)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 12, 2008, at 4:56 PM, GoNuke wrote:

    We can't believe Chinese financial reports so how do we invest with any degree of confidence. China is going to continue to grow but its financial markets are far too murky for small investors.

  • Report this Comment On November 12, 2008, at 4:57 PM, DrBurr47 wrote:

    Exactly....what will be the effect on the US economy in the short and long term?

  • Report this Comment On November 12, 2008, at 5:16 PM, ironyworks wrote:

    Pssst:

    Be way more respectful...

    Cause they own us now....IW

  • Report this Comment On November 12, 2008, at 5:26 PM, ka1950 wrote:

    So now hundreds of the factories designed to produce cheap non-essential exports to US will go back to work and produce cheap toasters, useless junk tools, fall-apart silk shirts, and good Lenovo computers and sell it to themselves? And pigs can fly.....

  • Report this Comment On November 12, 2008, at 5:57 PM, FOOLBEFREE wrote:

    Great article, very insightful.

    I do agree China will decouple, grow at about 5% in 2009 and 2010.

    China will trade with the Middle East, India and Brazil. It is NOT 100% dependent on the US or Europe. The emerging markets economy will grow faster than that of the US and Europe.

    I believe it is a great opportunity to buy some more Chinese stocks, and some more US infrastructure companies that do business in China.

  • Report this Comment On November 12, 2008, at 6:50 PM, dymty wrote:

    There's the difference between a fundamentally communist society and a capitalist one. Their government sees fit to give money to the consumers to spend on goods to support manufacturing so employees, well, stay employed and have money to spend and support the cycle. They also throw money at infrastructure which employs millions. Don't forget that taxes come from wages, again completing the cycle.

    On the other hand, the US decides to throw money at the corporations that caused all this mess. It's like giving gasoline to a pyromaniac to put out a fire. I don't understand: we're a consumer economy, and the money is being sent to the corporations? I think this also draws comparisons with trickle-up and trickle-down theories. To me, the advantage that China will enjoy is that its workforce will remain more fully employed, while the US's un- and under-employment will continue to rise.

  • Report this Comment On November 12, 2008, at 8:29 PM, abhinaik wrote:

    In the past years countries like China, India, Europe had invested in US treasuries. This was even happening when the financial crisis hit the US. The Euro, and Yen was dumped and USD was accumulated in the central banks. This was the reason for dollar appreciation in the US. As we see that there is no end in sight for this crisis, there is fear that worst may happen. Central banks of these countries may dump US treasuries and move to a more tradional way of accumulating old or invest in domestic market, to make it self sustaining. We have seen the sign of it as part of China's bailout package. If this spreads across other developing, developed countries, the future of US economy looks very grim.

    This is the time to invest in China and mpre than that in India. India's economy is the only economy amongst BRIC countries that has very less dependence on US economy. It is very close to a self sustained one.

    With rising unemployment, closing businesses, credit crunch, weakest consumer spending - the tide has been reversed, the building of the next biggest economy has started. Only time will tell whether its Brazil, China or India.

  • Report this Comment On November 12, 2008, at 9:48 PM, altrue1090 wrote:

    But what will happen to U.S. interest rates, inflation and the value of dollars if China instead invests in itself instead of us? Should we be buying gold?

  • Report this Comment On November 12, 2008, at 10:04 PM, Unbelieverstill wrote:

    More advice from the guys who all but bankrupted me through value investing. My new mantra is agile investing. Short holding time and pocket gains.

  • Report this Comment On November 12, 2008, at 10:36 PM, mashuribc wrote:

    More Keynesian economics: Spend your way out of a depression. It will hurt China in the long run just like it has (and is) hurting us. The dollar is on the brink of losing its status as THE standard and the U.S. government is near insolvency. Spending more is NOT the answer!

  • Report this Comment On November 12, 2008, at 10:52 PM, nonzerosum wrote:

    Yes, it is Keynesian economics and it is exactly the same prescription that Nouriel Roubini has for the USA. The Chinese will be wise enough to spend this on infrastructure, i.e. assets that will create value over time. The USA did that once, e.g. interstate freeway construction, and it paid off handsomely. The hard thing is to reduce govt spending once the economy is chugging again...

    tj

  • Report this Comment On November 12, 2008, at 11:42 PM, deduart wrote:

    Once the corporate puppets, Bush, Cheney, Paulson et all are gone there will be a shift in the US Governments bail out philosophy. A main component of the new economic philosophy will be infrastructure build and repair and other important component will be renewal energy including nuclear power.. One would think this change in direction would take some time to make and implement but, President Obama using his executive powers can enact a rapid transition from support of financial America to jobs creation in the form of infrastructure build and repair, renewal energy expenditure and even support of key manufacturing industries such as automotive which by itself creates the employment of about 5 related workers in other industries to support the auto business.As China has begun its transition so will the US under President Obama. Remember that FDR faced a very similar economic scenario but by turning to infrastructure build and repair and a monetary understanding and control of basic currency support put this country back on track. Admittedly his program will have taken longer than will President Obama's to begin to turn the economic corner but in the 30's the engines of economic momentum were not as prepared as they are today to swing the pendulum from negative to positive.

    Expect a turn around in about the third or fourth quarter of 2010 to begin brought about by President Obama's initiatives.

  • Report this Comment On November 13, 2008, at 12:28 AM, TWSTD4JR wrote:

    Let us delve into the realm of common sense, which quite frankly has been lacking in huge extremes since 2000 in the USA. I'm not a financial wizard or pro, merely a commoner born American. Yet I cannot help study history to further educate myself in these troubled financial times. Has anyone set forth precedent regarding the sale of America? Not since the apparent sale of America to Japan in the 80's has there been such an uproar. Silently American holdings have been sold to China, without as much as a whimper from Congress or for that matter vain America. Silently America has been sliced apart like the beef President Bush so likes to devour as a Texan. Silently America has bet on the wrong horse and sat idly by because it was put on auto-pilot since 9/11. No more! Respectfully, America has realized it can no longer trod on stuffing itself like a gluttonous child. Instead of financial woes tallied up like dead insects, why not a wake up moment of sanity that simply states, "Hey, I don't need that extra what-ever.""I can do without." Remember Japan? Study the history and then be patriotic with your dollars.

  • Report this Comment On November 13, 2008, at 9:19 AM, hikerdude7088 wrote:

    What happened to the free market??

    George may think because he has his little followers believing him, that huge countries around the world would believe him also.

    As I see it; barter is the only real free market.

  • Report this Comment On November 13, 2008, at 11:29 AM, none0such wrote:

    One person's "decoupling" is another's "Great Leap Forward", ho hum

  • Report this Comment On November 13, 2008, at 9:01 PM, yuggoth3 wrote:

    Dont't forget the facts:

    China's success stood on two legs:

    - low wages

    - currency manipulated downwards.

    The former is disappearing (that's why investors look at Vietnam, Pakistan, Africa). So the stream of money going into China will come donw.

    The yuan is and will be rising (the US exerts pressure at that, as it did with Japan formerly at the Plaza "contract"). So the stream of money going to China will come down.

    And about the Chinese economy:

    - Their BNP is FAR below that of the US.

    - It is VERY uneffective. (To get a $ out of it, you must put in MANY more $$ as in other countries. This is because of the boom time , during which ANY startup could succeed - they were exposed to hardly any competition.

    - Do not confound foreigtn money streaming into China (driving stock prices) and economic development in China.

    - They have little honesty in business. It is Chinese tradition to outwit business "partners" by dirty tricks, especially foreign ones (see patent piratry). This is looked upon as a virtue in China, and highly admired. There is even a handbook of tricks (dirty ones as well) from a historic author, kind of a samurai, which is famous and is followed even today. "Red" Chinese stocks prices are strictly manipulated; even if they are listed as ADRs. If a China man wants to invest his money, he won't buy stocks but goes to a business man nearby whom he knows personally and gives him his money. (See what "Taiwan Tim", a SU business man married to a Taiwan woman and living in Taiwan, reports at Business Wire/ Highbeam Research.)

    - What are your chances in a Chinese court room - what do you suppose?

  • Report this Comment On November 14, 2008, at 5:46 AM, Voltaire wrote:

    Hyperbole. Yes, we should pay attention to China but I think you overemphasize the importance of their moves and you don't emphasize enough the lack of transparency in their market dealings. We will see. It wouldn't hurt us to wean ourselves off China a bit.

    j

  • Report this Comment On November 14, 2008, at 12:55 PM, nerd1944 wrote:

    This article could have been very good but when you lay the whole mess at Bush's feet you are either showing your bias against the current administration or your ignorace of the situation.....

  • Report this Comment On November 14, 2008, at 12:58 PM, trebla62 wrote:

    HEY GRESCENTRE, what is a Terrist?

  • Report this Comment On November 14, 2008, at 1:06 PM, jrm14673 wrote:

    Let's remember our history as it hapened not at the liberals recorded it. None of FDR's pblic works programs worked to revitalize the economy, because his tax policies worked against a recovery. World War II was what brought our economy back. I give FDR credit for being an excellent war president, but we need to remember he ran for his third term because he felt his two terms had been a failure. He didn't want that as his legacy.

  • Report this Comment On November 14, 2008, at 1:07 PM, jjbristol wrote:

    Agreed. Where Ronald Reagan was labeled the "Teflon" because the media tried to blame him for everything but had trouble making the blame stick; Bush is "Fly Paper", where everything, including even my stressed out front lawn, seems to be Bush's fault. But we know the lastest turmoil started by government meddling back in 1998 (under Clinton). The gov't began the mortgage frenzy by pressuring banks into giving loans to more and more unqualified borrowers. This was the beginningof the bubble that just burst. Obama-nomics (or FDR-nomics) is upon us now; more taxation and government spending is not the prescription for our (or any) economy. China is a much artficially manupulated economy and cannot be trusted for anything. The growth it has experienced has been at the grand beneficence of the Chinese powers in charge. They giveth and they can easily taketh away. This also happens to be the Obama mentality.

  • Report this Comment On November 14, 2008, at 1:31 PM, bbeerme wrote:

    Hey, jjbristol, you just stole some of my thunder . . . !

    It has been a global economy since before any of us were born. I seem to remember hearing about this little triangle consisting of molasses, rum, and slaves when I was a kid. Decoupling has not, and will not occur; maybe degrees of it, but nothing more. The entrepreneur will see to that.

    I do agree that in two or so years the economy will begin to improve, but not for any of the reasons stated above. And not because of China. It's going to take two, or maybe three years for the defaults on the mortgages to stop . . . since banks stopped writing these high risk loans around the beginning of 2007.

    Our current economic mess is Clinton's true legacy. A piece of legislation passed by our Congress during the Clinton administration called The Community Reinvestment Act (or something like that) forced banks to issue the high risk loans. The banks didn't want to make them, but Janet Reno guaranteed Fannie and Freddie would buy the loans and threatened a law suit to any bank who would not comply. There are other factors involved, but this single piece of legislation is the catalyst that made our economy shoot up, then crash.

    Our economy will begin to recover after these loans are "washed" from the system. For better or worse, the recovery will be long and slow. At least if president elect BO follows through on his campaign promises. Until then, buy bear market Exchange Traded Funds if you want to safely make any money. Since oil is currently in the fifties, that is the only thing I am currently long. The first cold snap, refinery problem, or international mishap will make the price shoot up.

  • Report this Comment On November 14, 2008, at 2:21 PM, warren955955 wrote:

    I think its hilarious that some are blaming Clinton for our huge mess. NO one forced the banks to loan money on unsecured mortgages in spite of what is said here. They did so out of the vision that they could make "lots" of money by packaging these loans and selling them in bundles to investors. China has huge sums of money to "use" for what they determine the appropriate action to the crisis at hand. If the so called conservatives would have put some money aside instead of spending all they could get and then borrowing more, we would be in the same position. Our current government had run up more debt in the name of patriotism than anyone in prior history as we all know. It just goes to show that great leadership does not come from just anyone

  • Report this Comment On November 14, 2008, at 2:34 PM, perspectivetruth wrote:

    I couldn't agree more with requests that Braylon Edwards stop dropping the dang ball. With all the junk happening around, its good to keep a sense of humor considering most of us have very little control over any of it.

  • Report this Comment On November 14, 2008, at 2:45 PM, gary365 wrote:

    Two years ago, I spent 2 weeks in China (Jia Mu Si - Way up near the Russian border) at the request of the Communist Party and on behalf of myself and a group of other potential investors in a pharmaceutical company which was not making enough money to maintain employment. The Party wanted American businessmen to buy the firm and make it profitable. I got royal treatment and was impressed with the quality systems and operating potential of the firm; and the price was a give away.

    However, I could not recommend the venture to the other investors because I was not convinced that the rule of law would allow us to actually own what we were to buy. Also, the potential revaluation of the yuan could have sunk our venture.

    In a communist dictatorship, no matter how far they have come toward some freedom in markets, you do not dare to invest because your invesrtment can be wiped out in an instant by the government.

    The current U.S. bailout folly is moving America in the direcvtion of China; no longer a somewhat free socitey, but a socialist regime.

    Gary

  • Report this Comment On November 14, 2008, at 2:48 PM, RBancroft wrote:

    After a half-Century one would think that there would be general agreement on the question of whether FDR's policies brought the U.S. economy out of the depression or actually lengthened the depression. Do scholars agree? What does Ben Bernanke think?

  • Report this Comment On November 14, 2008, at 2:57 PM, gary365 wrote:

    Dear R Bancroft

    There will not be agreement about FDR because the forces moving us away from free market capitalism will always hail FDR as the messiah (sound familiar) while the free market capitalists ( like myself) will blast him for dragging us away from freedom.

    Just read Wickard v. Filburn sometime if you want a laugh and a shock at the same time!

    Gary

  • Report this Comment On November 14, 2008, at 3:12 PM, foolishbroker68 wrote:

    Every country in the world is facing difficulty and there is no safe haven where you are going to totally avoid economic cycles. The Chinese partly have a problem because they allowed too many inefficient companies to continue for too long. One of my companies operated a plant in China as a JV partner with the Chinese government and it was never able to make money because of government requirements on employment.

    The Indian economy is in trouble right now because they had a large portion of their economy built on outsourcing and other services to US enterprise.

    Brazil is in trouble along with several Middle East countries because of oil falling. Why is it falling? Because the US who is the largest consumer in the world is decreasing demand. For every .01% that US demand decreases Chinese demand must increase by 5% just to maintain balance.

    Over 40% of China's economy is still exports to the US leaving a huge gap in their economy if we are not buying their goods and that is why they bought our debt. But we have seen this before with Japan and it did not turn out so well for them. Eventually they will have to let their currency strengthen and then someone else will come along as the low cost producer.

    I remember back in 99 and 00 when South Korea was growing like gang busters and no one thought they could be stopped. The US went into a recession and it triggered a pullback in their economy that almost bankrupted them. The most ridiculous thing you will hear an analyst say us, "It's different this time." It's never different and the world economy will always seek equilibrium with the largest economy(s) creating the fulcrum. Maybe in time the Chinese economy can become bigger than the US but it will have to be during during a world expansionary phase not a global contraction.

  • Report this Comment On November 14, 2008, at 3:20 PM, fatheras wrote:

    Don't blame Clinton for the mess. We had a surplus before Bush got into office. Yes 'Clinton brought about Fannie and Freddie but as time went on , It was brought to the attention of Green Span, Levin, and Rubin, republicans, by Mrs Born ( gov't official in the adminstration ) Several times,,, that we're heading into trouble. Finally She was censored or she would be kicked out of her position. She was right. Anyone that thinks Obama is wrong about moving ahead with infrastructure and fuel independance should get a check up from the neck up. Is there a better idea?

    I personally would never invest in China. We americans have lots of stuff right here to invest in. My fear with the G-20 ( just came out of DC and there are lots of black suits and ties going on ) is that , the USA will relinquish It's super leadership around the world. Some one has to be in charge like it or not. We can not be equal partners in the world. Let's do whatever, as americans , to keep ahead of the pack and never let it go. If we become equals, there will be wars.

  • Report this Comment On November 14, 2008, at 3:25 PM, advantedges wrote:

    Without insulting anyone, it appears that this forum demonstrates the need for adult education --- I am shocked when I see the spelling, as well as poorly developed arguments here. Between "terrist," "pblic works" and (my favorite) "ignorace!" we have identified a need for schools! No wonder stocks such as APOL and DV are being recommended! Perhaps the chinese stock EDU could be considered. They are taking this issue seriously, by training Chinese citizens in english! Maybe they should open schools in other countries!

    Since this is supposed to be an exchange of information on stocks, do any of you have an opinion on specific stocks or ETF selections?

    I see CEO, PTR and perhaps FXI (the index) going higher in the near term. Take profits whenever you have a nice gain -- that is the nature of this market!

    Ideas?

  • Report this Comment On November 14, 2008, at 3:34 PM, macsiccar wrote:

    JFK. "ask not what your country can do for you, ask what you can do for your country". as relevant today as it was then.

  • Report this Comment On November 14, 2008, at 3:42 PM, infomaniacal wrote:

    Fatheras,

    Clinton was fortunate to be president during the DotCom bubble. It is utter BS that the Democrats give him credit for ANYTHING.

    History will show him to be a president who thought with his little general.

    By the way, even Bill Clinton acknowledged the Republicans were trying to get the reigns around FM and SM...

    Are the Republicans any better, no But when people continue to spout off like you do about partisan talking points and not balanced facts, then this great experiment called democracy slips away.

    "Like it or not, someone has to be in charge." What the hell are you talking about? The US has ceased to be the dominant player. Game over. It is a numbers game, and we don't pump out the babies as much as China does, or India for that matter.

    The US has to emerge as one voice of several superpowers, with far better emphasis on diplomacy and coordination among those nations. Nobody is in charge anymore, and that is not necessarily bad.

    Bill

  • Report this Comment On November 14, 2008, at 4:05 PM, ecoshift wrote:

    Okay, the global economy is interconnected -- coupled -- as it were.

    And the global economy is taking a dive.

    Now, would you rather be going into this "recession" with 1.5 trillion in cash, or with 1.5 trillion in debt?

    It's pointless to argue that national economies are functionally independent. They are not. Just look around you.

    Yet despite this interconnectedness some are in stronger financial positions than others. They will be the ones that can load up on cheap assets, or stimulate their own economies as this recession moves forward. This will result in a significant change in geo-political power balances -- not decoupling.

    If/when the dollar falls and China decides to let it go, China will be our new market.

  • Report this Comment On November 14, 2008, at 4:07 PM, Sillyboy2 wrote:

    I just spent 5 weeks in China. Your article is completely correct.

    Chinese infrastructure has surpassed this country's quite some time ago. Chinese know the value of a "saved" Yuan. Yet they live very well, especially in the cities. They don't just "talk green" they act on it. 90% of scooters (and there are millions-replacing the bycycles from years ago) run on electric. No noise, no pollution. Yes, a lot of their factories need cleaning up ( so do some of ours), but they are working on it. NOT finding loopholes to get away with not doing it. Buses run on CNG. Or hybrid.

    Some of the comments on this site need to get their facts right.

    Things may have been that way, they are NOT anymore. China has gotten "their act together". We just seem to talk about it to a greater extend. China has achieved in 10 years, what we have done in 75 or 100 years. And they DO NOT desecrate their flag by putting it on blue jeans, caps etc. They are a proud people - and rightly so. Communist Government or not. And I did not go with a tour group, but on my own. And was never harrassed, watched, or told not go here or there. Contrary to what our news would like us to believe. And Yes...I own Chinese stocks !

  • Report this Comment On November 14, 2008, at 4:15 PM, mnspeedracer wrote:

    I believe the problem the US has, Europe has, and the rest of the world have, is that too many folks have made millions and billions in cash, but have not contributed to the economy in any meaningful way. As long as large profits are more important than sound business and, yes, ethics, we will continue to jog from one bubble to the next.

    The US, on average both citizens and government, live far beyond their means. The greedy, product-less financial system has obviously financed this to its own ruin. The system is collapsing, but there are many with huge bank accounts because of the unethical business practices that paved the road to this collapse.

    How can we as a country tolerate that the most incredibly well compensated folks do nothing but destabilize the stock marked by profiting from moving billions in and out of stocks, or making millions from unsound lending. This does not help our economy in any way. Folks are loosing their retirement savings while a small handful end up siting on piles of cash as high as Mount Everest.

    We need more ethics, higher interest rates (that do not seduce folks into overspending, esp. on homes), and we need to outlaw Hedge funds, short selling, and perhaps other 'instrumnets'.

    I say this all as an investor myself. We must realize, even as investors, that the idea of the stock market was not to make folks rich through short term investments. The idea was to help companies generate cash for growth and then share their success with the investors. Making millions should take lots of time in most cases. _Extremely_profitable_ speculation (excluding VC investments) is one of the roots of the problem we are facing.

    Just because we can, should not mean we should, and what we get away in the short run, will eventually catch up, as it is now and will for a while.

    So there, I said the unsayable.

    I guess this is pretty much off topic, but not totally.

  • Report this Comment On November 14, 2008, at 4:15 PM, mashuribc wrote:

    nonzerosum wrote:

    "Yes, it is Keynesian economics and it is exactly the same prescription that Nouriel Roubini has for the USA. The Chinese will be wise enough to spend this on infrastructure, i.e. assets that will create value over time. The USA did that once, e.g. interstate freeway construction, and it paid off handsomely. The hard thing is to reduce govt spending once the economy is chugging again..."

    No, the U.S.'s squandering of it's citizens' savings into misaligned capital lengthened our recession. The best thing our government can do for us (but not them -- keep that in mind) is to turn off the money spigot, let a much needed deflation happen and just plain get out of the way of the market's self-correction.

  • Report this Comment On November 14, 2008, at 4:55 PM, timkop wrote:

    At some point yes, China will be able to decouple from the global economy and sustain internal econmic growth. Realistically they are not there yet, when they get to that point, watch out for a tide of US Treasuries flowing back to the open market,. This will cause our economy more suffering due to higher borrowing costs. In order to avoid a future meltdown financial crisis, lets cut the crap and get our fiscal policy in order. We do not need to bail out our failing industries, we need to focus and develope new programs for energy indepence and financial independence.

  • Report this Comment On November 14, 2008, at 5:17 PM, bbeerme wrote:

    advantedges . . .

    I wasn't aware "this is supposed to be an exchange of information on stocks", I thought it was an area to comment on the article above. But I love your comment on spelling!

    -

    So, you want specifc stock picks? Here's my current strategy . . . First thing to remember in this economic climate is that cash is king. Personally, I sold off all my "long term holdings" a few months ago. In essence, even though I took a big hit on the sale, I've got more money (about 25%) in my pocket now than if I had kept the equities.

    -

    Second thing (to consider) is not to invest in stocks directly. Use an ETF. That way it is like a shock absorber. And all you really have to do is figure out which sectors are trending which direction. To counteract the shock absorber effect, I like to use the ETF's that move at twice the rate (or twice the inverse) of an index.

    -

    The third thing to accept at this point is that the market will still loose another 30% before a bottom is near.

    -

    The only position I am currently long is oil and gas (DIG). My only "short" position is (QID). But you could use any index as a base; for example other "short" positions to consider would be (DXD)(SDS) or (TWM). I'm hoping for another really big up day here in the next week or so, at that time I'll short the semiconductor sector by buying (SSG). If you look into these ETF's, you'll notice I like Pro Shares, but there are many others.

    -

    Keep it simple, cash is king, just pick the direction (trend) of the sectors, and you'll make money. I'll probably start to go bullish next summer, depending on if the president elect BO stinks up the markets or not. I'm also waiting for the financials to drop a bit more, then I'll pick up the financial index fund (UYG) (it moves at twice the rate of a financial index)). Something under five bucks a share should be good. Maybe a limit order at $2.50 just incase it bangs down there real fast then pops back up, otherwise, I'll settle for something around $3.50 or $4.00.

    -

    In two or three years you can go back to buy and hold, but not in this market.

    -

    Now go out and make some money!

  • Report this Comment On November 14, 2008, at 5:19 PM, Khedive wrote:

    It is very possible that one could make plenty of money investing in Red China. I think otherwise. Get on the Net and take a look at Chinese paper currency, stocks, and bonds from the 1910s-1930s. Very attractive, very collectible, and in some cases, actually valuable as such. Most however, sell for next to nothing and represent a significant loss from their original value.

    Red China is different from the old Empire, the "Warlords" and the pre-WWII Republic of China, yet it shares negative features with with those former regimes. It represents an additional challenge to the investor, who has to consider not only issues about market or corporate management, but state intervention in such. The current government on the mainland faces massive political, sociological, economic, and military challenges. How will it deal with these? Maybe fine, or maybe in a way that will make you current paper another "collectible" with zero value otherwise.

    - John

  • Report this Comment On November 14, 2008, at 5:27 PM, infinitytsa wrote:

    All you socialist who think China is so great, just head on over there and find out just how much freedom you really have.

    Without the U.S. buying China's stuff, they would still be a third world nation.

  • Report this Comment On November 14, 2008, at 5:31 PM, masayako wrote:

    Every Fools article is a sales pitch. WTF.

  • Report this Comment On November 14, 2008, at 5:41 PM, pitapie wrote:

    Give me a break. Based on this pedestrian look at China we are supposed to toss a bunch of dough into their volatile stock market. wow. are you on the payroll?

    Look at all of the companies who are laying off thousands of workers in China. FoxCon is cutting 25,000 jobs--they make the boxes we buy from Apple, HP et al. What happens to China when their workers decide they need some rights?

    China's biggest customer is sick and won't be coming to the store for a while. What makes you think they can spend their way out of the mess. Free market tells us where to allocate resources. Govt spending doesn't have the same long term benefit.

    If you have some real intel, bring it on, but not a guess from 35,000 feet.

  • Report this Comment On November 14, 2008, at 6:05 PM, attucks wrote:

    Interesting to see this article explain a possible future for China. Is it the China 'miracle' or the China 'facade' you believe in? Check comment by yuggoth3, he sees through the facade.

    The 1.3-4 billion Chinese produce slightly more than 80, or so, million Germans. They do it exploiting, not Marx's exploitation, their own people and at a huge environmental cost. Hundreds of millions of Chinese can not even afford to watch 75 US cent pirated DVDs.

    Rule of Law? Law code is applied to foreign firms and individuals when advantageous. Otherwise, Law of the Jungle is the norm.

    Infrastructure? Well, it looks good but how long will it last? No one talks about overpass collapses in Beijing due to shoddy materials as this information is suppressed by media controls. Chinese face demands no critique of anything. Maintaining the facade is the highest priority.

    GDP? The Effective Economic Population (EEP) of China is about 300 million. Most Chinese have only marginally participated in the 'miracle' of China. The 'Haves' see the rural folk and poor city residents as unwashed, ignorant fodder to be used to further the aims and goals of the Mao Dynasty. When the Beijing leadership talks about 'social stability' they are hinting at cracks in the facade that threaten those in power.

    Words for the ROW are substituted for action. China deals with problems with words: Problem becomes known to the West, deny, deny, admit a little, investigate, deny, blame the West for trampling on China in the past, find some scapegoats, deny, deny, announce the minor, but overblown in the Western media, problem has been overcome by hundreds, if not thousands, of officials and experts, who fought the battle and defeated the problem, and lastly, a media blackout to effect a reverse Goebbels play.

    Best part is the talking heads on Western TV news eat this up and the Chinese facade, sorry, miracle, continues.

    Keep your money in your pockets boys! Watch the belly dancer but don't buy the snake oil.

  • Report this Comment On November 14, 2008, at 6:15 PM, ducky664 wrote:

    I don't believe I've ever seen anything useful on Motley Fool, and this China decoupling theory is no different.

    If you decide to invest in anything global/Chinese right now, best of luck to you. What is likely to happen to the Chinese stock market is a repeat of Nasdaq 2000. Look at the charts for the similiarities. It has about another year of falling off a cliff before it is safe.

    foolishbroker68 above nailed it:

    foolishbroker68 wrote:

    Every country in the world is facing difficulty and there is no safe haven where you are going to totally avoid economic cycles. The Chinese partly have a problem because they allowed too many inefficient companies to continue for too long. One of my companies operated a plant in China as a JV partner with the Chinese government and it was never able to make money because of government requirements on employment.

    The Indian economy is in trouble right now because they had a large portion of their economy built on outsourcing and other services to US enterprise.

    Brazil is in trouble along with several Middle East countries because of oil falling. Why is it falling? Because the US who is the largest consumer in the world is decreasing demand. For every .01% that US demand decreases Chinese demand must increase by 5% just to maintain balance.

    Over 40% of China's economy is still exports to the US leaving a huge gap in their economy if we are not buying their goods and that is why they bought our debt. But we have seen this before with Japan and it did not turn out so well for them. Eventually they will have to let their currency strengthen and then someone else will come along as the low cost producer.

    I remember back in 99 and 00 when South Korea was growing like gang busters and no one thought they could be stopped. The US went into a recession and it triggered a pullback in their economy that almost bankrupted them. The most ridiculous thing you will hear an analyst say us, "It's different this time." It's never different and the world economy will always seek equilibrium with the largest economy(s) creating the fulcrum. Maybe in time the Chinese economy can become bigger than the US but it will have to be during during a world expansionary phase not a global contraction.

  • Report this Comment On November 14, 2008, at 6:39 PM, Obamanism wrote:

    Why would a Chinese stimulus package work any better than the failed bailout in the US. China banks sit on 40% non-perfoming loans that they shift from bank to bank to keep them out of their current accounts. China is starting to implode and it's implosion will make the Japaneses implosion look tame by comparison. The Japanese played the same three card monty with their banks and it caused a twelve year deflationary recession (depression). Compared to the Japanese and their cultural of discipline, the Chinese are a heard of cats. The only way the current regime will remain in power is to slaughter their own peasants when they begin to revolt. Not a very stable environment for investing.

    Cheers

  • Report this Comment On November 14, 2008, at 6:42 PM, lobsterbob wrote:

    The end is near the end is near.... I didn't think it would ever arrive but here it is. Now comes the new beginning. Accountability will reign and disclosures will run deep. It will be difficult for many to stay above water due to major contractions. What we are seeing is just a sneek peek. As hedge funds sell off their positions to cover margins and currency fluctuations that blindsided them all. unwinding of the carry trade is deeper than we know. Once the baby boomers get fed up with all the trillions being lost in equities and they bail out who will buy their positions? Just like who will buy these overpriced homes? Fire sale Fire sale. Cash is king while everything is going into foreclosure. Look for the Dow to hit six thousand after unemployment soars even higher and this holiday season ends up a bust for merchandisers. Nowhere to hide. Day of reckoning is upon us all. A spiritual awakening is right around the corner. Back to basics and on with the inward journey rather than the material journey.

  • Report this Comment On November 14, 2008, at 6:46 PM, patib wrote:

    I wonder how many of the commenters to this article have ever been to China. I have. Several times. My company has outsourced a LOT of jobs to China - many more after there was some realization that outsourcing to India wasn't so cheap - too much negative customer satisfaction Now, after a few years, China isn't so cheap anymore. Perhaps we'll see the day when China reverse outsources jobs to the US? Not likely - our education system will have to scale up to meet the new worldwide standards to compete.

  • Report this Comment On November 14, 2008, at 7:10 PM, Markenglandd wrote:

    Yeah, But: With increased advertising the cost to produce is theoretically to decrease

  • Report this Comment On November 14, 2008, at 7:20 PM, Rolin4ward wrote:

    I'm not claiming to be a financial wizard. However,doesn't it make sense that Busch has had almost 8 years to "make good " internationally and financially and hasn't? And every President didn't create the "problems" he inherits when he gets into office. That's the nature of the job. So why am I hearing a bunch of excuses when many presidents before him have done so much better? Die hard Republicans and their greedy politics are doing just that; dying hard.

    Has anyone forgotten that China is still a Communist country that doesn't respect human rights, has no respect for environment, or even the safety of food to the point of poisoning their own kids with melamine along with the rest of the world, etc. etc. It's time to do business with people that have ethics or is that a bad word around here? Investing makes strange bedfellows? It's one thing to trade internationally, it's another thing to trade with an unethical country and then get in debt to it. Now, everybody, let's invest in China and help them along? Hmm.

    I recently saw an advertisement for a newly advanced electron microscope that has enabled scientists to make new recent discoveries. A couple of months later, on the same site, the German manufacturer mentioned it had been solicited by several Chinese manufacturers and it had absolutely no intention of doing business with the Chinese. This German company claimed to have a long tradition in optics and intended to keep it that way. Smart, ethical, good security, and quality control. Who are YOU going to buy the electron microscope from Eh?

    And I agree 100% with yuggoth3 about any legal support. Ever notice how in Japan, very few American companies are successful and if their ideas are stolen, they are delayed, delayed, delayed to the point of not having any real legal recourse? Just wait until we do “business” with China.

    I am dismayed.

  • Report this Comment On November 14, 2008, at 7:42 PM, chas4bass wrote:

    First: Rolin4ward should learn to spell our president's name. Obviously, way too much a Democrat....

    Second: A lot of trash piled on Bush's doorstep. A lot of "intelligent" Americans blame it all on the Oval Office rather than on those who make and fund the laws AND policies - the Congress (who, OBTW, are largely Democrats).

    Lastly: Nothing against Obama or Obamanomics, but this isn't the 30's and Americans are much more educated now than then. Don't think we're going to sit around and watch our soon-to-be-rising taxes go to public give-aways. Personally, I think the color of his skin brought out the vote and got him elected - but it isn't going to make his policies successful. Keep in mind that Ms Pelosi and her merry band of POLITICIANS has to fund them.........but she's a horse of another color (pun intended)!!

  • Report this Comment On November 14, 2008, at 7:52 PM, jossyboyseer wrote:

    well....if it could be capsulized....our demise is GREED..making a fast buck is o.k. but manipulized at the expense of others in greedy form...enron and aig sited as prime examples..anyone here ever hear the sound bites of some enron wolves grabbing california by the throat.......nasty i'll tell ya !! there are many great american philanthropists giving oh so much aid to their fellow man,but joe main street doesn't think that way...it's screw you...live beyond your means and not think of the consequences.

    we all need to be reeducated about credit...the lenders have been totally neglegent in who they lend to..spurred on by packaging their loans and selling them to some sucker and collecting a fee.

    more loans more fees in my pocket......glad the chickens have come home to roost.....when the dust settles we're gonna be alot wiser.TOO BAD IT HAD TO COME TO THIS.good luck president Obama.

  • Report this Comment On November 14, 2008, at 8:42 PM, coomotexas wrote:

    Think about it:

    Lovely Chinese girl sings national anthem at Beijing Olympic games

    Young girl has buckteeth

    Chinese (government) replace girl with “better looking” young girl who lip-syncs song.

    Take your money-give to Chinese powers (government)-expect return.

    Uh, wake up America and smell the chi!

  • Report this Comment On November 14, 2008, at 9:31 PM, bobmurcie wrote:

    America will surrender to china, if we keep buying their junk .

    and their contaminated food products and toys .

  • Report this Comment On November 14, 2008, at 9:47 PM, Freddierio wrote:

    Lobster Bob is spot on except . . . the end isn't near. Once we have total Peace, then they're be a final transition. That's my vision and its everyone's option. LB's "inner ownership" bring total tranquility. Its all an illusion and if people really believe that this is how its suppose to be with bad architectural design, (power lines! how unsightly) rating driven national media, corruption (we can show the Mexicans, Russians and everyone else how its really done!) lack of equality, there mistaken. Besides, the really power are the unseen power brokers that use Kissinger and Soros in courier capacities. Our country's true freedom is to live outside the American Corporation here in America. Yes, and still be patriotic, but truly free. Everyone stands as a World Citizen atop the center of the world. . . except inside a corporation. And if some think that we need leaders, they must think we're a "heard of cats" instead of reasoning, spiritual entities. A true leader is satified to just point the way . . . (H. Miller). Hope Obama has legs because everyone is watching and when they stop watching . . . they chase!

    Freddie Rio

  • Report this Comment On November 14, 2008, at 10:43 PM, donteverbotherme wrote:

    美国是愚笨的。 您什么都不知道关于中国。 我们将吃您的午餐。 请现在送您的金钱。 和杀害一样。

  • Report this Comment On November 14, 2008, at 11:36 PM, goodthaigirl wrote:

    So now hundreds of the factories designed to produce cheap non-essential exports to US will go back to work and produce cheap toasters, useless junk tools, fall-apart silk shirts, and good Lenovo computers and sell it to themselves? And pigs can fly.....

    hahahahahaha

    The FOOL is only interested in selling stock recommendations bullocks for permabulls!

  • Report this Comment On November 15, 2008, at 1:13 AM, ashishchugh wrote:

    FOOL rightly said its time American Investors took advantage of the insanity prevailing in the global financial markets to take exposure in economies with good growth potential – apart from China, India is another one – infact India is a bigger potential compared to China on account of the following – a) Even though China & India are compared with the same yardstick, where China is today in terms of Infrastructure, India will take atleast 10 years to reach- this means a great opportunity in India’s infrastructure. b) Indian corporates are better regulated, c) banks have very little Non-Performing Assets (compared to China), d) the level of corporate governance is much better and e) Indian entrepreneurs are very talented and command a lot of respect Internationally f) India receives very little of the global Asset Allocations of various funds, imagine what can happen if alocations go up by even a few percentage points. INDIA could be the next BIG OPPORTUNITY & seeds are currently being sown for the mother of all bull runs which India can potentially witness in the next few years.

  • Report this Comment On November 15, 2008, at 1:22 AM, jerrold76minyard wrote:

    China, are playing the right cards. This will be the next economic super power. All of those treasury notes that China bought from the United States(DEBT). When things get really bad, and the world slips into a depression. You can bet your last worthless currency note, That China will sell these worthless US Treasury notes(dollars) into the precious market and make a killing. What affect will this have on the US economy. Let me tell you, the dollar will not exist. Nor will the free enterprise wheeling economy of the United States. No social services, no State, County, or municiple grants. We'll be in a depressions, and we will live without for a long time. This is a great time to start buying gold and silver related assets. J Minyard

  • Report this Comment On November 15, 2008, at 1:23 AM, HarryCarysGhost wrote:

    If you want to make a quick buck short china.

    But if you want to preserve your way of life please BUY AMERICAN.

  • Report this Comment On November 15, 2008, at 1:30 AM, Bklooste wrote:

    I Dont know why everyone thinks the RMB is undervalued , personally i think its overvalued. I have been living in China for 4 years in the last 8 .

    eg

    Apartments cost US100,000 or in places like Shanghai US$500,000 ( not talking about Penthouses or good locations were talking average new places) and lots of things dont fit and break.

    Coffee prob US $4-6

    Compared to Thailand , Philippines , Indonesia things are really expensive.

    etc etc

    Factory workers earn about US$145 /month ( or ) and really dont save much due to cost of living despite trying VERY hard. Skilled jobs like Computer programmers , Economists etc get about 3-4 times this per month. Unskilled wages will stay low here as the real unemployment rate is like 35%. China due to its huge population does not value labout much especially unskilled or semi skilled and this will remain, however capital prices are high.

    Another thing to remember is even when the Chinese economy will be bigger than the$US (prob 20 years from now) the GDP/Capita will be about 1/7 and hence the average person could be described as "in Poverty" by US standards with equivalent purchasing power. Thats 20 years from now...the way people are talking about the RMB people think its now.

  • Report this Comment On November 15, 2008, at 1:38 AM, Bklooste wrote:

    I agree in the above comment India is a better bet than China the people who became Rich in China did so in the 90's after 2000 its much harder.

    Chinese shares you can buy are terrible they come from privatized bloated government companies ( and remember the government owns 2/3 of the shares ) and you have the dodgy A/B/H share concept . T

    he real growth in China comes from the Small to Medium companies these will destroy the big ones in the long term but to be part of the action is hard. Its worth watching Small to Medium cap shares as the dodgy management lies are improving and brokers are beginning to rate them.

    Lastly remember that fundamentals matter little in the Chinese markets its a form of gambling so psychology rules and having a P/E of 5 or 50 or even if its technically insolvent ( like most of the banks were) is not that important.

  • Report this Comment On November 15, 2008, at 2:27 AM, iambothered wrote:

    having read the Bible (my financial advisor), i think (not being a financial wizard according to mortal 'wisdom') that those who have pegged greed as the cause of this crisis (it is not just financial -- it is moral/ethical primarily) are getting very close to the truth. it will not be solved without painful changes in all our souls (love of money being the root of evil?) -- those who talk last days may note that Paul says we will be lovers of self at that time. we are not totally gone -- look at all the selfless giving of time/money/effort during Katrina/Rita/flooding and around the world. the global economy is de facto -- all being children of the same creator and therefore brothers and sisters -- but having faith in the arm of man will get us in the end no better off than we are now. the USA being a democracy, we had better dig in and start all together saving it if we want it saved (along with our financial futures), and not rely on any of the proven unreliable entities in charge (look at all the governments that have taken out corporate money and kicked our businesses out with no recompense, over and over; look at all the politicians that have done the same with our votes; look at all the CEOS that have done the same with our businesses driven into bankruptcy for the past several decades, taking with them our jobs/homes/economy while padding their Swiss bank accounts; look at examples closer to home -- our kids are getting away with cheating in school and telling us there is nothing wrong with it, our school districts are commiting i.d. theft to comply with laws to educate immigrants (DallasISD in Texas); we use coupons to get our groceries for next to nothing -- let some other fool pay double because we are smart enough to get ours cheap. Let the big corporations drive the small farmers out of business. Who will be left to protect me -- and you?

    we can't be in this just for ourselves, or we will not be able to save ourselves or anyone else.

  • Report this Comment On November 15, 2008, at 2:56 AM, niru53 wrote:

    donteverbotherme wrote:

    "The United States is stupid. You do not know anything about China. We will eat your lunch. Please send your money now. And the killing of the same."

    This from someone who either hasn't the guts/courtesy to say so in the common language of the posts, or doesn't know how to use an online translater? If these are the standards in China, I think not. And I am NOT American.

    As a shopper, I no longer buy any foodstuffs from China - (or from the US either for that matter, as I know their rules for export are different from those for domestic consumption). Local production from certified organic suppliers in the UK or elsewhere. Then New Zealand and Australia are my preferences. But an exception for French cheeses and wine!

  • Report this Comment On November 15, 2008, at 3:40 AM, cv1157 wrote:

    Ashishchuch wrote "INDIA could be the next BIG OPPORTUNITY & seeds are currently being sown for the mother of all bull runs which India can potentially witness in the next few years."

    I just wanted to add that this would be a great place for a bull run ...they don't kill cattle there! And they are a democracy too folks!

  • Report this Comment On November 15, 2008, at 4:02 AM, ashishchugh wrote:

    CV1157 - you righly said - we don't kill cattle here. Infact, cow is regarded as Mother - "Gau Mata" as it is called in Hindi. Gau is Cow & Mata is Mother. To add to the above - Indian Corporate sector tll date has been able to withstand the global economic turmoil - though the markets are down 60-70% and some individual stocks between 80-90% primarily due to mindless selling by Foreign Investors who are facing redemption pressures in their country. Indian businesses are available at mouthwatering valuations - growth businesses available at between 2-3 years Cash Profits. With elections out of the way early next year, the uncertaity on the political front may also go away paving way for a strong bounce. Five years down the line when you look back, you may regret the golden opportunity missed if you don't act now.

  • Report this Comment On November 15, 2008, at 4:27 AM, lupeixu wrote:

    Gary365: you are wrong. The Chinese constitution protects ownership rights of foreigners and locals and there is no case of an unlawful expropriation and ther will not be since the Chinese do not dare to upset foreign investors. THere are hundred thousands of successful JVs here that have allready earned their original investment and more. I know many (solid) deals with IRRs above 100%.

    Yuaggoth3: sorry, but you are completely wrong and it's clear you have never been here. I ahve been living here for 8 years. Of course I do not like pollution and dictatorships but this cheap China bashing is not okay

    Somebody who implies somehow that Samurai are from CHina seems not to know all the facts...I thought they are from Japan ;)

    Dont't forget the facts:

    "China's success stood on two legs:

    - low wages"

    So what, they are a developping country and still have enough people as cheap labor force

    "- currency manipulated downwards."

    This is not true. As one of the other guys said: China is not cheap anymore and a coffe at Starbucks is 4US$. BTW the low currency allowed you the consumer to buy cheap goods. Don't always think that what the government says is good for you.

    There are theories that the RMB would devalue in open capital markets since the Chinese government is printing money like hell.

    Their success stands on more legs. Hardworking people (if I see the lazyness in Europe and the States I could laugh). They are pragmatic and friendly. They are well educated and every Chinese can write (what about the West?). They are open to foreigners and foreign ideas, they are quick learners and have good scientists. They are for example leading worldwide in sectors of agri business.

    "The former is disappearing (that's why investors look at Vietnam, Pakistan, Africa). So the stream of money going into China will come donw. "

    Maybe but they are also buying machines now and these are brand new and efficient, a bit like Germany after WWII

    "The yuan is and will be rising (the US exerts pressure at that, as it did with Japan formerly at the Plaza "contract"). So the stream of money going to China will come down."

    Not clear as mentioned. If the Yuan will continue raising there will be even more companies investing since you then expect that you can reconvert your profits at better exchange rates.

    "And about the Chinese economy:

    - Their BNP is FAR below that of the US."

    Yes, till around 2040, so what?

    "- It is VERY uneffective. (To get a $ out of it, you must put in MANY more $$ as in other countries. This is because of the boom time , during which ANY startup could succeed - they were exposed to hardly any competition."

    This is the reason why many companies here make outrageous profits. You can be happy that Chinese are still buying Buick sind the Shanghai operation may be the only profitable one.

    "- Do not confound foreigtn money streaming into China (driving stock prices) and economic development in China."

    The stock prices are at a historic low and the CHinese have a lot of savings to invest.

    "- They have little honesty in business. It is Chinese tradition to outwit business "partners" by dirty tricks, especially foreign ones (see patent piratry). This is looked upon as a virtue in China, and highly admired. There is even a handbook of tricks (dirty ones as well) from a historic author, kind of a samurai, which is famous and is followed even today."

    It is not a book of dirty tricks but a book from Sun Zi about war strategies. There are many loyal businessmen here. I know since I do project finance here since 11 years and have not lost a penny in around 50 projects.

    " "Red" Chinese stocks prices are strictly manipulated; even if they are listed as ADRs.""

    They are in fact manipulated but what the government tries is to keep prices up so savers don't lose their money. This time they did not intervene and you see what happened. You are complaining about this while the uncontrolled investment bank sector costs us all a hell lot of money

    " If a China man wants to invest his money, he won't buy stocks but goes to a business man nearby whom he knows personally and gives him his money."

    'A China man' sounds as bad as nigger. Most of my CHinese friends buy themselves. Even they do: what is the point?

    "(See what "Taiwan Tim", a SU business man married to a Taiwan woman and living in Taiwan, reports at Business Wire/ Highbeam Research.)"

    Will look this up

    "- What are your chances in a Chinese court room - what do you suppose?"

    Here you have a point but it's getting better. There are cases one in recent years. So start the China bashing or I start the USA bashing, hahaha. I am German so I am neutral. Please do better research and next time and come here, it's a cool place with good people.

  • Report this Comment On November 15, 2008, at 5:08 AM, leicestercityfc wrote:

    US commenters talk about corrupt Chinese markets, lack of transparency, poor ethics in business. Have these people been living under a rock? The same scenario is all around America, just packaged nicer with obviously much less affront to human rights. Paulson practically just said, Forgive us for we know not what we have done! He is talking about the vast majority of us suckered in by the select few behind the creation of debt. The select few pulling the strings know exactly what they have done, and it has worked out quite nicely for them with more people in debt than ever before. It is now China's turn to add another $500bn of indebtedness to their own folks' tab in the name of "help". BS.

    Clearly many people are dreaming of joining another of those elite clubs and becoming one of those mythological characters who make millions investing wisely in a time of crisis. Unless your name is Warren Buffet, give it up already and concentrate on keeping a job and saving more. Investing now is like advising your kids to give up school to become a basketball star. Same difference.

    Yes, I am 50% down and wont be selling any time soon, but even if I had sold when my gut told me, back in December 2007, I still wouldn't gamble a red cent of my cash on stocks in any Chinese or US or Indian company. I might set up my own business, but certainly not invest in any member of a headless stock market.

  • Report this Comment On November 15, 2008, at 7:51 AM, coomotexas wrote:

    Think about it:

    Lovely Chinese girl sings national anthem at Beijing Olympic games

    Young girl has buckteeth

    Chinese (government) replace girl with “better looking” young girl who lip-syncs song.

    Take your money-give to Chinese powers (government)-expect return.

    Uh, wake up America and smell the chi!

  • Report this Comment On November 15, 2008, at 9:20 AM, wistle2000 wrote:

    This is less than $.5 per person. This will not stimulate a country the size of China. The latest US bailout package is over $700 mil and equal to over $2 per person.

  • Report this Comment On November 15, 2008, at 9:36 AM, GlobalPatriot wrote:

    Most people don't understand the dynamic whereby our trade imbalance ends up back in our treasury. That is such a slippery slope, as changes in Chinese economic philosophy can have devastating effects on our financial markets. But no one cared as long as it was fueling our growth. Now it's time to pay the price.

  • Report this Comment On November 15, 2008, at 9:53 AM, armistice wrote:

    I trust the chinese more then the Americans

    it can't get any worse then the lying dogs on wall street & Washington.

  • Report this Comment On November 15, 2008, at 11:01 AM, KCHO1348 wrote:

    Here is a comment :

    ".... I investigated offshore entities for the better part of five years for the world's largest Credit Insurance firm in the world.

    Here's the deal with offshore companies registration.

    To open an account through the British Virgin Islands (BVI) financial services Commission, one only needs to wire 500 bucks a year to the registrar to keep a "good standing" and $1,500 to $3,000 to a lawyer called a "Registered Agent".

    Under BVI law, the company reporting requirements are limited to the name of the company, year of incorporation, company number, and registered agent. Under law, the company's directors, shareholders, employees, financial statements, what they do, and where they do it are completely secret.

    An entity may register and do business anywhere in the world, except where the company is registered. It is estimated by the Suisse that most of the 70 trillion in Credit Default Swaps originated from companies in the Caribbean.

    A company called "ABC Offshore Ltd" can place bets on financial vehicles defaulting and get "insurance on the failure", and the only thing the desk manager knows is that when the insured party defaults, the payment gets transferred to a numbered account, which is also secret. All of these CDS agreements are PRIVATE, and they are all priced in dollars. This is why the dollar is king right now. There is less demand for hard assets and commodities, because they are not as liquid.

    The reason the dollar gained 25% in three months is because other currencies are failing, and banks are off loading their hard assets at fire sale value to get short term dollars to pay off these "default bets".

    They are selling quick cause they couldn't see what was coming. The short sellers (buyers of CDS "insurance") are secret individuals. You could be a desk manager at Lehman and have an offshore entity placing bets on your "own" company".

    The architects of subprime are based in the Caribbean, but you will never identify them. They sold banks the MBS/CDO (note: MBS is Mortgage Backed Security, CDO is Collateralized Debt Objection, CDO is a combination of whole bunch of ABS. ABS is Assets Backed Security, such as mortgages, credit card debts, home equity loans) adjust in two years, because they invented the products.

    Transparent investors saw the potential risk, but were attracted by high monthly yield spreads. CDS allows for 100 or more bets to be put on the full value of the default policy, far exceeding what the banks have in cash in case of such a default. The amount estimated this month is 12 trillion, which represents more money than Americans have in checking and savings (7 Trillion).

    Its unfortunate that these banks also took the 7 trillion of your money and used it as collateral to take out loans in excess of 70 trillion so they could generate 73 trillion in loans....."

    This is the magic, trillions after tens of trillions of US dollar generated from thin air by hedge funds, derivatives, loans, securities, ABS, MBS, CMBS, CMO, CDO, CBO, CLO, and other subset of what are generally characterized as structured products ....worldwide.

    Here is the bubble? a size of more than 10 times the total sum of all savings accounts and all checking accounts combined in America?

  • Report this Comment On November 15, 2008, at 11:11 AM, KCHO1348 wrote:

    Here is an article from USA Today:

    Although no precise estimates are possible, as much as $1.6 trillion in North American wealth is likely held in offshore accounts, according to a 2005 report by the Tax Justice Network, an international group opposed to tax avoidance.....................

    A network of brokers, accountants, attorneys and other providers is increasingly promoting offshore trusts and accounts as a way to avoid lawsuits, creditors and, in some cases, federal and local taxes in the USA. Riding the rapid expansion of the Internet, some parts of the mini-industry are making tax-avoidance techniques — once mainly offered to high-net-worth individuals in private conferences — available online to average Americans......................

    In addition to Swiss and Liechtenstein, here are some places (not all of them) in Caribbean:..................................

    Belize. Caribbean nation has eight banks, one insurance company, 23 trust companies and 38,741 registered offshore corporations............................

    British Virgin Islands. A territory of the United Kingdom, it has more than 500,000 registered offshore corporations.

    ..................................

    Cayman Islands. United Kingdom territory is home to more than 500 banks and trust companies, 7,100 mutual and hedge funds.

    ....................................

    Isle of Man. A crown dependency of the United Kingdom, the Irish Sea island is home to 171 offshore service providers.

    .........................

    Panama. Central American nation has 34 offshore banks and about 350,000 offshore companies.

    ...........................................

    St. Kitts and Nevis. A federation of two Caribbean islands that has one offshore bank, 50 trust and company service providers and 15,000 offshore corporations

    .......................................

    And so on and so forth...

    .............................

    According to a GAO report, since 2002, the number of American entities reporting a Cayman Island bank account has jumped from 2,677 to nearly 8,000. Suspiciously, investigators traced more than 9,000 American entities that had registered in the Caymans to a single office building.

    .........................................

    Is that building one of the largest buildings in the world to have 9,000 American entities? ................................

    With 69,000 total population of Cayman Islands?................................

    Average seven Cayman Island residence work for one American company in one building alone?........................................

    How many more buildings in Cayman Island?.......................

    May be one Cayman Islands residence own one American company? ........................

    May be 10 companies?...........................

    How many more locations/places/countries in Caribbean as tax heavens for USA? .....................

    How about Swiss? and leichenstein?.....................

    The working stiffs pay and apy and work and work and pay, modern day slave? .............................

    I am using Cayman Island as an example: Cayman Island is 100.4 square miles, estimated of population in 2008 is up to 69,000. How can they have 500 American Banks? More than 7,100 mutual fund companies? Hundreds of thousands people open their credit cards in Cayman Island? Tens of thousands companies registered in Cayman Island.....................

    Accenture, the old name is Anderson Consulting, used to be part of one of the biggest accounting firm called Anderson Accounting, and one of most respected computer consulting company is a Bermuda company......................... And so on and so forth..............

    Indeed, we need to do reality check. Where are these companies? Who are these people? May be your neighbor do not know Liechtenstein, perhaps they know Swiss? Caribbean? May be they took a company paid vacation to Cayman Islands? Bermuda? Virgin Islands? Just questions....

  • Report this Comment On November 15, 2008, at 12:06 PM, 55usernames wrote:

    Obamanism asked why China's bail out would work any better than the US.

    Three reasons why it will work better.

    1. Because they can do it on cash have no need to borrow or create currency out of thin air. They are sitting on >$2trillion of US currency, T-Notes, T-bills and 30 year bonds. This is cash on hand or US I.O.U.s either way they can do it with our money not theirs. In effect you and I have already either paid for it by shopping at Wal-Mart or will be paying for it when all the debt is due. Chinese have a huge amount of personal savings as well.

    So when they say they are going to spend $5-$6 billion on their country they will only be spending about 25% of there total of in US$ holdings. And, why not since everyday the $ becomes worth-less and less they may as well spend it before it is worthless.

    My example excludes the hoard they have in other world currencies and debt instruments.

    2. The Chinese will be spending their money on actual things within China improving their infrastructure and lifting up their people. They have no need to throw good money after bad to try and subsidize the virtual profits of failed enterprises.

    3. The Chinese economy is has slowed from better than 10% in 2007 to about 9% this year. Our economy is not in the same position as China’s.

    As in the 1870’s when wealth and influence began to transfer from Austria and France to America so now it begins to move from America to China. I hate to admit it but that’s the way I see it.

  • Report this Comment On November 15, 2008, at 12:46 PM, mikealondon wrote:

    Mr Mann, Hanson:

    I think you're missing some monetary issues, which weakens your argument. First, the trade deficit causes US dollars to pile up in China's central banks. How does this happen? Chinese companies sell products in the US, in return for US Dollars. They take these dollars home to China but can't spend them there, They keep some in reserve, and go to the Chinese central bank to convert most to Yuan, which they can spend in China to pay workers, etc. The infrastructure "bailout" by the Chinese government will be transacted in Yuan, not US Dollars. The net effect of their bailout to the large reserve of US Dollars is nearly zero.

    Ive seen the insinuation before: the brave and hard working Chinese are slaving away making products while the awful American's consume, and only do so because the wonderful "investment" the Chinese are doing to prop up the deficits. I believe just the opposite is more true: The Chinese government's peg of 8 now 7 yuan to the dollar allows China to export. If the Yuan were valued fairly, then there might be a deficit, but nothing on the order of 20 billion a month (in good times, for them).

    The Chinese government didn't "industrialize". For the most part, foreign companies paid to build factories there in exchange for lax environmental protection, and horrific working conditions. Neither can last in the long run. And if you've ever done business in China, you'll know the hidden costs of institutionalized corruption are quite significant.

    Make no mistake about it. China is not a democracy. It is a brutal and repressive dictatorship. Supporting China, as it exists today, is not a good thing in the long run for anyone. Not for the Chinese people. Not for the American people.

    China has not done anything "good" for the world or for itself. It maintains its dictatorship, slave labor, horrific environmental misuse, and the only reason wealth has been trasnferred there, is due to the artificial pegging of the Yuan to the dollar.

    If our congress had a spine, or a brain between them, the USA would not have allowed China to enter the WTO unless they removed the peg of the Yuan to the dollar. But they didn't, and look where we are now!

    For all of this countries blathering about "democracy", and "freedom", for example just look at the posturing toward the Middle East, constantly telling the world how we're "freeing" the Iraqi people for democracy, I find it Ironic that the USA could allow a brutal, backward dictatorship like China to enter the WTO, and gain such large illegal advantages in trade.

    Have we forgotten about the illegal subsidies that the Chinese government uses to force a particular industry onto the world? Isn't this blatant disregard for the very WTO agreements?

    Regards,

    ML

  • Report this Comment On November 15, 2008, at 3:58 PM, phubaiguy wrote:

    Why would a Chinese stimulus package work any better than the failed bailout in the US

    _______

    Because the Asians are actually getting something for their money. Raw materials mined and sold, demand for labor rising rather than falling, and when the money is spent they will have something to show for it as compared to our own stroke of brilliance here, different signs on banks. Asian mentality is different than ours in the areas of what's 'good for all' and what's 'good for me'. Can you guess which is which?

    One thing I read which to me was amazingly ironic is you can't trust the government and businesses over there. That statement truly made coming here well worth it! Watergate, Enron, Martha Stewart (prosecuted), many GGP insiders (not prosecuted), the mortgage meltdown, and Gulf of Tonkin incident. We are indeed most fortunate here.

    Once I arrived in Tokyo at around 3 in the morning. 20 degrees will always seem cold but it's feels even colder when 5 hours ago it was 115. The road crew were working that night but there was no one by the fire and I remembered it years later when I watched an American road crew win the Guinness for the highest number leaning on a shovel.

    I bought some Chinese and American stock this week Yucheng and Boeing. At Boeing the engineers (Avg $85,000), and the tech writers (Avg $65,000) will probably strike, now that the other strike with the machinists (Avg $$$$$?) has been settled. At Yucheng in China they are working hard.

    I've worked at companies like Boeing before who could survive almost anything by simply passing their costs on. They will fail when they can no longer get away with it. Boeing still can so far. Why should the Boeing worker care? His children might want to work there.

    Over at POT I see the unions want a piece of the success side now without risking a thing on the fail side...hmm...

    sorry Buffet but you want me to invest here now to help build your much safer money up...while you still have a ton of it in China.!

    Nope, South America, Australia, China, Canada, plus the US. Especially now with the dollar up,re the first two.

  • Report this Comment On November 15, 2008, at 4:07 PM, PicoKid wrote:

    As China finds wealth and prestige in it's blossoming capitalistic practice we can take solice knowing that when we were great we played a huge role in enabling them.

    At some point we will fight over our differences as brothers always do. But the stronger brother will always have his way.

    With hundreds of millions of Chinese still making just a few bucks a day, the production capacity of China (and of course the key to it's world power), is a once in a lifetime opportunity for the Chinese who struggle, and for investing Americans.

    China's growth is free from the hugely expensive American style entitlement programs.

    America has devolved into something fatefully stupid. It moved away from and virtually forgot, the premise of it's own greatness.

    It has placed one it's own feet on it's own neck as a demonstration of 'fairness', 'compassion', and 'tolerance' under mistaken moral motive, while thinking it could still compete in the world.

    Under our accepted contortions, China will soon become the economic power of the 21st century. We might bet whether our foot on our neck will cause one or the other to break first.

  • Report this Comment On November 15, 2008, at 6:42 PM, johnloiu wrote:

    Hey there,

    Alll this debate about free markets. There is no such thing and there probably never will be. As long as there is corruption, hypocrisy, nepotism etc., it cannot exist. (read human nature/power corrupts). Would all you free market fans like to live in the 1800s, when there was a small middle class, child labor and no weekends and few holidays and any attempt to form organized labor could get you killed by your employer?. The days when the robber barons ruled? They completely manipulated the stock market with investment pools. I am a capitalist, but I do not believe in laissez-fare capitalism. It is an economic theory from the classroom, not a realistic possibility. The legacy of FDR will always be debated. I think on the whole, he did some good and some bad. IMHO, I honestly believe that the Post-War boom was an economic anomaly in Ameican history that created a strong middle-class, which in turn gave the masses political capital. The Republicans have been trying to erase everything that benefits the common man that FDR created. Their followers vote for these men and tow the line in the hopes of profiting from the ideology. They do not realize that they are voting against their own best interests unless they are multimillionaires. Unfortunately, Democrats do not have all the answers either. Let's hope that the current administration can improve the situation and stop the co-opting of our country's future for the generations to follow. As for making good investments, maybe it is just a 'Random Walk'. Oh! Have a Nice Weekend!

  • Report this Comment On November 15, 2008, at 9:14 PM, BeachExec wrote:

    This is an interesting article but I don't understand the argument that "Hundreds of billions of dollars that would have gone to propping up the greenback are now being reinvested in China, helping it to transition from its reliance on exports to a self-sustaining economy."

    Is it not true that for every dollar of trade imbalance we have with China, there is a dollar of "something American" that the Chinese must buy, whether it be Treasury bonds, U.S. real estate, stocks or bonds of U.S. companies, etc? The notion that they can simply take these dollars and re-invest them instead in China works how exactly?

    Is it a premise of this article that China's stimulus package is going to reduce the trade imbalance with America somehow?

  • Report this Comment On November 15, 2008, at 9:57 PM, DupedByFools wrote:

    NIRU53 quoted donteverbotherme:

    "The United States is stupid. You do not know anything about China. We will eat your lunch. Please send your money now. And the killing of the same."

    and said:

    'This from someone who either hasn't the guts/courtesy to say so in the common language of the posts, or doesn't know how to use an online translater?...'

    BUT, donteverbotherme DID likely use an online translater...

    Those purported Chinese lines are merely VERBATIM translation -probably with an on-line translater - of the English lines as translated by Niru53. The grammar of those lines is laughable in Chinese. Part of them simply doesn't make sense in Chinese ("We will eat your lunch" means nothing in Chinese. Translation 101 - if you translate an idiom verbatim, it probably would be laughable. (Examples: "eat your lunch", "cost me an arm and a leg", good candidates for making bilingal jokes when you translate it verbatim...) Likewise, a Chinese reader would scratch his/her head with the line of "the killing of the same" in that context.)

    No. I'm not bilingual. Instead, I'm multi-lingual - and, naturally, that would mean I'm not American. Hahaha.

    For those of you who want to get something out of this thread, scroll back and read what lupeixu wrote. At least that would be close to a decent, accurate picture of China from an informed foreigner looking outside in.

  • Report this Comment On November 16, 2008, at 6:24 AM, esch001 wrote:

    "Hundreds of billions of dollars that would have gone to propping up the greenback are now being reinvested in China, helping it to transition from its reliance on exports to a self-sustaining economy."

    In order to reinvest Dollars in China they must find somebody accepting their Threasury bonds as payment. This should lead eventually to lower price i.e. higher interest rate for Threasury bonds, and to a stronger Yuan.

  • Report this Comment On November 16, 2008, at 5:19 PM, jamesgambrell wrote:

    Greenspan Caved.

    Bernake Capitulated.

    Atlas Shrugged

  • Report this Comment On November 16, 2008, at 9:07 PM, mhmarsh wrote:

    deduart:

    I hope you are not gravely disillusioned!

  • Report this Comment On November 17, 2008, at 3:17 AM, anneinchina04 wrote:

    I've lived in China for more than 6 years so I feel slightly qualified to respond to some of the things I've read. But first, I'd like to say that I resent Bill Mann's and Tim Hanson's comment that America is stupid and greedy. A generalized statement like that is an insult to the majority of the people that are not stupid and greedy.

    To yuggoth3, investment is not going down. It continues to escalate from investments in the Middle East, Brazil, and many other countries. I have watched the stock prices and development go hand in hand. And as for competition, there are 6,000 mobile phone and accessory factories in the city where I live. As for doing business, there are some honest people, but in the majority of the cases, somehow you will be cheated. Every country has dishonest people, but given the huge population here, I'm astounded by the number of dishonest people, from the very highest levels of government, right down to the man on the street. Chinese New Year is coming up and when you go out, you have to doubly guard your purse, wallet, cell phones, everything. Corruption is rampant. Last year, the French Carrefour had a sale on cooking oil, which they buy by the gallon. There was a stampede at the door and people were hurt and a couple died. The government held Carrefour responsible for the Chinese acting like a bunch of animals.

    As for chances in a Chinese courtroom, forget it. Last year, even though I had a valid contract, the new owner of my apartment wanted me out. So he turned off the electric. When I didn't move out right away, he broke in and changed the lock. I ended up homeless for almost 6 months. And the management of the complex helped him all the way. Even after I found a new apartment, for 3 months, he wouldn't let me have my things, yet he kept threatening he was going to throw everything out. NO ONE would help me. I had to take him to court and I got screwed, not only in the money I lost, but I had to pay my own attorney's fees and 2/3 of the court costs. Nothing happened to him. So I went to the appeals court, and got the same result. I had a Chinese woman tell me, "If they don't care about their own people, why should they care about you???" If you really want to know about China, read the book. "Wild Swans" by Jung Chang, a fascinating and terrifying look into the "real" China. And I know for a fact, I'm being watched and followed. Yeah, from all appearances they've changed, but underneath the facade, it's still business as usual.

    As for "sillyboy2" you really are silly. They need transportation to move the 1.3 billion people, so their trains and buses are very good, and many people have electric bikes now, including me. But their air, road and highway infrastructure is light years behind the states. Only now can so many people afford a car, but the roads lag far behind. Most buses do not run on CNG or are hybrid. Many spew disgusting clouds of air pollution. The air, water and land pollution is stifling. Most people open an ice cream, candy bar or whatever and just throw the wrappings on the ground. Travel throughout China shows how bad the littering problem is where people just throw their trash out the window of their apartment. Their "Hainan" is supposed to be China's Hawaii.. not even close. China has not "got their act together." The 900 million people still living in the countryside are poor, uneducated and lack any kind of skills. If you own Chinese stocks, they are only the "B" shares which are not any of the top companies in China. All the really good shares are "A" shares which foreigners are not allowed to buy, only qualified investment funds. And if you own shares now, you lost a lot of money. I got out in March. Chinese people do buy their own stocks. I watched the run-up in prices and the current downslide. One man went to the police and demanded that they reimburse his losses.

    As for "infinitytsa" you're right. They censor radio, TV, books, newspapers, Internet and every other form of communication. When you go online, you get a box you have to check that you "are leaving a secure page and what you do can be seen by a third party." They watch everything you do online. The book I recommended above was bought in Hong Kong because you can't buy it here. The government doesn't want the people to know the truth about the past because they will become disillusioned by the "ONE AND ONLY" Communist party. And there are MANY books you can't buy here, only in HKG.

    To "attucks", you're right. The facade is everything. When SARS broke out in 2003 and WHO was coming to Beijing to investigate, the hospitals were emptied and patients were either put in a hotel, or driven around in vehicles. It wasn't until the problem got really bad and a lot of people died, that they admitted the problem. "Law of the Jungle" is correct. Most people have no moral compass or conscience. You should see the way they drive. It's the "Wild East"...few out of more than one million drivers in this city obey the traffic laws. I've seen cars speed right past the police and nothing happens. Anybody, even average people, look down on the lowliest of each other. There's a lot of unrest but the communists try to keep the lid on. Right now there are a lot of factories that are closing and leaving the workers with 2-3 months of unpaid wages.

    To "Rolin4ward" you're right about human rights, the environment and food safety. CASH IS KING. 53,000 babies were poisoned by melamine in this milk scandal. The courts refused to hear cases brought by the parents of the children that died. And now there's melamine in eggs due to the chicken feed. They poisoned pets in the U.S. and people in Panama have died because of the cough syrup a company sent out. Some guy read a chemistry book and set up a factory. When he could get some cheaper ingredient, he substituted that even though it was deadly.

    To "Bklooste" housing prices here are outrageous, well beyond the budget of most people. I was in construction for 18 years in the U.S. and prices are higher here than there, even before the mortgage crisis. And when they buy new, they merely buy an empty shell. They have to do and pay for all the interior work. Many things in the city are very expensive. Factory workers and many others are given housing (usually 8 to a room) and food. So the money they make is to save or to spend. Most send money home to their families in the countryside. 3000 yuan or US$438 per month is considered middle-class. And they don't get cheated the way foreigners do. I was standing next to a Chinese girl who was quoted a lower price for the same thing. The guy thought I couldn't speak Chinese. Many will cheat you, not by a little but by 300%, 400%, 500% or more. You can't compare Chinese and U.S. standards. What's poor there, is not here. And I believe their economy will be bigger than the U.S. in less than 20 years, maybe 10. The government is finding ways to continue growing the economy by encouraging domestic consumption, and that's a lot of consumers.

    To, "lupeixu" from your defensive stance, it sounds like you may be German-Chinese so you have a better chance of being protected. But you should know how few human rights people here have, and I'll bet you've never had to test the system. Many Chinese flat out had their homes taken away from them for the Olympics. Your government doesn't care about foreigners, unless they're huge multi-nationals. They won't cause a scene then because of their membership in the WTO...the world's watching. There are probably many instances of expropriation that you don't even know about....secrecy is their method of operation. They even forced Wal-Mart to accept labor unions. They can swoop in at any time and close a business down, and the business doesn't stand a chance. Yuggoth3 is right about cheap China. My computer, printer, heater, Whirlpool washing machine (made in Shanghai) and so many other products have broken down, some of them repeatedly. And it's not easy to get them fixed. Right now my Canon printer is broken for about the 10th time. If you want quality at the factory, the buyer has to pay more. And if the quality still isn't good, he has to pay even more. Your comment about "every Chinese is well educated and can write" is laughable. How can they write if they can't even read?? And I've seen it. Some people in the city may be educated, but not in the countryside. And from what I understand, many doctors only have a bachelor's degree. Many people are not the least bit friendly, in fact, they're downright rude. And they spit every where, don't cover their mouth when they sneeze or cough, and urinate or deficate in public. I've also seen that. You're making sweeping generalizations about the population in general. There are many profitable foreign companies here (GM, Carrefour, Honda, B&Q, Wal-Mart, etc.). So what? The Chinese are getting a great deal in return...better management and production practices, products they never had, cars they want, on and on. I don't think the writer was talking about "The Art of War" when he talked about a book of "dirty tricks". That book is about management strategies. I'm sure there's some book out there about using "dirty tricks". Investors aren't just looking at other countries, they're leaving because things have gotten too expensive here. As for stocks, the government makes policies to manipulate the market up or down. They also have a 10% daily limit on trading. And they often will take a stock off the market for a while. I've had it done to me more than once. While the market is soaring, mine is just sitting for 2 months. "So start the China bashing or I start the USA bashing, hahaha". I don't know what you're talking about with your terrible English. Looks like you're not as educated as you think. It may be a cool place if you're Chinese, but for foreigners, unless you're very rich or hold a high level position in a multi-national firm, it's a whole different ball game, and not so cool when you're constantly cheated, have your purse stolen, your passport stolen, homeless for 6 months, lied to all the time, etc., etc.

    Guess I've had my say. I hope I didn't bore anyone.

  • Report this Comment On November 17, 2008, at 9:37 AM, Windsurfing1 wrote:

    Well, not sure. China is still governed by a regime that does not respect human rights and private property. I would be careful.

  • Report this Comment On November 17, 2008, at 11:57 AM, PhilCane wrote:

    As a parent, I have spent a lot of money on toys. I remeber looking at the backs of my son's various V-Techs, Leap Frogs, Fisher-Prices, etc. The vast majority of them were made in China. Think what you will about the Chinese, but remember, there are over three-hundred and thirty million members of China's middle class alone. It is the potential up and comers of any nation that seem to have historically provided the impetus for economic growth and the creation of wealth. With our shrinking industrial sector, we make less and less of what the world needs, and though we would like to think otherwise, there are other fish in the industrial sea. Saudi Arabia's King Feisal helped create the largest exchange of wealth in the history if the world in a few short years; China may take a little longer, but their moves will doubtless have a much greater impact on our lives.

  • Report this Comment On November 17, 2008, at 12:12 PM, SanJoseBob62 wrote:

    For those blaming Clinton for the current mess, please remember that everything he signed in 1998 passed through Gingrich's House and Lott's Senate. You people make it sound like the Republicans were in full revolt over the Fannie Mae legislation. The idea of an ownership society is a good one, and what political party wouldn't want to take credit for expanding it? Both sides got greedy and got carried away, or at least were influenced by the FNM/ FMC lobbyists. If you want an example of de-regulation that bit us in the butt, let's take a look at the Republican Revolution's 1994 scrapping of Corporate Average Fuel Economy (CAFE) standards. Nothing learned from '73, nothing learned from '79, and NOW how far are foreign manufacturers ahead of us in hybrids and alternative fuel vehicles?

  • Report this Comment On November 17, 2008, at 3:16 PM, ET114 wrote:

    why don't financial writers use the correct term... sub-prime mortgages were the instigator... but, the real collapse came from the investment bank ponzie scheme... that's what derivitaves and hedge funds are... a huge ponzie scheme... all the posts about the about spreading the bailout $$$ are interesting, but if the feds had merely "paid-off" the defaulted and foreclosed mortgages; it keeps the $$$ in circulation... but that won't work for H.Paulson who should be in jail.

    Yup, China owns the USA... they've got the cash; we've got the debt ($10,000,000,000), and we continue to print conterfeit money... just wait till the new administration controls the 401k, IRA, etc. pot of money (~$13,000,000,000)... it's great collateral, just like the SSA fund

  • Report this Comment On November 18, 2008, at 12:24 AM, perfectday wrote:

    anneinchina04 - So, why are you staying?

  • Report this Comment On November 18, 2008, at 12:37 PM, gggordy wrote:

    I see this entire affair with China in a different light. I own a small technology business that sells at least 50% of our production in China. If China starts to unload dollars the dollar will drop relative to the Yuan. Our products will become much more competitive in China than is now the case. They prefer our tech products over their own and our sales will increase substantially. I'm sure that other businesses like mine will also benefit. In addition, Chinese products will become less competitive in the U.S. and that will help our balance of payments. But they cannot just dump the dollar because it will drop a lot. The dollars that they hold are not really debt. They cannot just come to us and say give it back at its current value. They hold our currency and if they dump the currency or bonds that they hold what they are getting will not what we gave them.

  • Report this Comment On November 19, 2008, at 12:54 PM, katrinas1952 wrote:

    ET114 is right ... why isn't anyone else talking about Henry Paulson, who according to the NY Times, 'led the Big 5 Investment Banks charge on the SEC' in an April, 2004 meeting in which they pressured - again! (he had been promoting this idea for years) - the Commission to exempt them from the regulations which restricted the percentage of debt-to-capital ratios. They complied (who were these idiots, anyway?) and the resulting trillions of dollars loan without any capital support (the leverage ratio skyrocketed upwards of 43 -1 !!!!) created the tsumani of "false" credit available to consumers. The release of billions and lack of accountablity made it possible for not only Paulson's Goldman Sacks, but Bear Sterns, Merrill Lynch, Lehman Brothers and Morgan Stanley to invest in mortgage-backed securities. Without this flood of unsupported credit, this debacle would never have happened. To lay this at Clinton's feet is pure partisan folly. It contributed, but Freddie and Fannie constitute about 15% of the overall problems. The de-regulation of the financial institutions created the free-for-all for greedy guts, with corporate executive payscales and bonuses reaching into the billions. THEN - Paulson is made Secretary of the Treasury!?! AND, given "unpresidented authority" over the $700 Billion US Tax Dollars he is now in charge of dispersing. Help for struggling homeowners? Support of US manufacturing? Auctioning off those 'bad debts' ? no no no ---- In what has been called "A classic bait and switch" there are more guarantees for MORE bank debt and unlimited bank deposits in 'certain accounts', of course! First things first -- those bonuses MUST be paid up .. and there must be more money for his friends in high places. According to Bloomberg News, there are 2 Trillion dollars --- TWO TRILLION DOLLARS of OUR TAXES that has been "loaned" to financial institutions without congressional oversight - and Paulson wont tell to whom the money went to, or why.

    This isn't even a part of the $700 Billion -- it is just 'extra' help.

    Banks that don't have bad debt are standing in line for the 'free money' - and the problems created by Paulson in the first place just keep getting bigger and bigger. The fox has been put in charge of the hen house, so don't ask why there is carnage in there! SHOOT THE FOX!

  • Report this Comment On November 21, 2008, at 2:39 AM, anneinchina04 wrote:

    To perfectday: I have several reasons for staying. I'll tell you one. What is a 60 year old going to do for money??? I make almost $50/hour here. That's about $150/hour in the states. And that's working only 24 hours a week. If you can find me a job making that kind of money back home, I'd love to move back. But until things get a whole lot better there, I just have to put up with the way things are here.

  • Report this Comment On November 21, 2008, at 2:39 AM, anneinchina04 wrote:

    To perfectday: I have several reasons for staying. I'll tell you one. What is a 60 year old going to do for money??? I make almost $50/hour here. That's about $150/hour in the states. And that's working only 24 hours a week. If you can find me a job making that kind of money back home, I'd love to move back. But until things get a whole lot better there, I just have to put up with the way things are here.

  • Report this Comment On November 21, 2008, at 11:45 PM, Belisarius42 wrote:

    Sure, there might be money to be made here, but not by me(American). If China can manage its many challenges some of these companies should rise in yuan. Even if they do, (I'm not betting either way) China's move is likely to push up dollar interest rates, which could actually keep a lot of the safe haven money in dollars, since interest rates will be dropping elsewhere. This could cause the dollar to rise further when everyone is predicting its demise. If I lived in China the currency risk is gone and I might be able to assess the other risks well enough to invest .

  • Report this Comment On December 23, 2008, at 12:16 PM, dazelike61 wrote:

    The notion that a $586 billion stimulus will allow China to decouple, if I understand what that means, is rather insignificant when compared to the impact the U.S. consumerism has on long term growth over there. In addition, $586 bil. won't make a dent in China's infrastructure needs if what we read is true. If we have a deficit of $20 bil monthly, do the math. In a bit over 1 year the U.S. consumer has steamrolled that stimulus. I don't get it. Besides, we'll get a good piece of the $586 bil. so buy CAT.

  • Report this Comment On February 25, 2009, at 4:25 PM, PascalsDog wrote:

    Did you know that half of China's exports come from American companies!? There will never be a decoupling.

    Cuba, North Korea, these are the great "decoupled" nations. It's one world people. Globalization is (obviously) done and established.

    http://pascalsdog.blogspot.com

    Your lovely,

    Pascal

Add your comment.

DocumentId: 774711, ~/Articles/ArticleHandler.aspx, 4/17/2014 2:55:11 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement