Claims about China

Pay close attention to the 500+ stocks in China that are still frozen. Earlier it was reported virtually all these firms borrowed money with pledged stock near the peak of the market in May and June.  If these reports are true, it is likely that given the length of time these stocks have remained frozen, that these firms would be in technical bankruptcy.  That would be a major blow and cause all kinds of panic so clearly something will be worked out to soften the blow here.  These 500 firms might be the epicenter.

That is from Christopher Balding, the piece makes other points of interest as well.

Comments

Hi Coven, you are posting about China almost daily recently. Why are you caring so much about China? ( BTW, I am Chinese and I like your blog.)

*Cowen*

I can't speak for Tyler, but I can suggest why China is so interesting. It's the world's second largest economy, but even if it was third after Germany or Japan, it would still be a more important topic of discussion. That's because the German and Japanese economies operate in a very similar way to the American economy. China's economy is not merely large -- it also operates under a system that has very important differences, and not all of these differences are easy to understand.

Sometimes, this is called "Communism with Chinese characteristics", but the Chinese system departed from historical Communism long ago. It most certainly has "Chinese characteristics", but what are these characteristics? In some ways, the current system seems to resemble Imperial China more than the China of Mao.

Without question, China is more interesting than any other system at this time. It should not be surprising that China would be a frequent topic of discussion.

I respectfully disagree. China is largely (only?) interesting because of its size and power. Other than size and power etc., how is China different than say Vietnam? Singapore is more interesting.

"but even if it was third after Germany or Japan, it would still be a more important topic of discussion."

"China is largely (only?) interesting because of its size and power"

'That’s because the German and Japanese economies operate in a very similar way to the American economy.'

Well, apart from being manufacturing economies without massive import deficits (a deficit representing 3% of the American economy, according to Dean Baker). And being economies that seem to feel that a weaker currency is a sign of strength - it allows manufacturing companies to be more successful in export markets, while forcing those same companies to remain as efficient and innovative as possible. Toyota and VW are the world's first and second largest car manufacturers - how long do you think that GM will even remain in the top 5?

And both are economies that seem to be able to make money in China, as compared to the U.S.'s magnificent ability to fork over something like a billion dollars a day to the Chinese.

The product mix of the German economy is such that 22% of value added is attributable to manufacturing, about the same as it is in Hungary, Indonesia, and the Philippines. The comparable figure for Japan is 19%, about the same as it is in Mexico. That for most affluent countries is about 13% and that for Britain is 10%. The significance of that regarding patterns of ownership, labor relations, modes of capital allocation, & c. is precisely what?

While we're at it, the per capita product of the United States exceeds that of Germany by 18% and that of Japan by 44%, all that manufacturing and money-making in China notwithstanding. Britain's exceeds that of Japan as well, their otiose refusal to produce consumer electronics notwithstanding.

"it allows manufacturing companies to be more successful in export markets"

Please, no, don't give us your manufactured goods at a discount.

A weaker currency subsidizes exports at the expense of domestic consumer living standards, allowing weaker and less innovative companies to survive.

The biggest European companies haven't changed much in 40 years. Many of the biggest US companies didn't exist 40 years ago.

Corporatism, socialism, and protectionism erode prosperity. The power of free markets and creative destruction explains why virtually every other country in the world is considerably poorer than the United States.

Germans feeling that a weaker currency is a sign of strength? You might want to review the assumptions for your analysis.

My guess is that Tyler feels that he can benefit his readers by informing them of things that are his particular object of expertise and that they may not be aware of. For prudential purposes.

'by informing them of things that are his particular object of expertise and that they may not be aware of'

Well, as a disloyal reader, it seems appropriate to ask why you think Prof. Cowen, general director and chairman of the Mercatus Center, has any particular expertise when it comes to China or trade. It might be more accurate to say that Prof. Cowen has a particular expertise in following what others write, reposting links and commentary. A skill not to be mocked - why, he curates with the best of them.

'Blogs are curated. So are holiday gift guides. So are cliques, play lists, and restaurant menus. “Curated,” a word that barely existed forty years ago, has somehow come to qualify everything in our lives. When I tried that glib parlor game of typing a word into Google to see how it would autocomplete the search phrase, the first suggestion for “curated” was “content.” In other words, almost nothing escapes curation, or at least the possibility of being curated. How did our world become a venue for curation? And how did curating, a highly specialized line of museum work involving the care, accessioning, and exhibition of artworks, come to mean, as cultural policy scholar Amanda Coles puts it, “just picking stuff?”' http://www.newrepublic.com/article/122589/when-did-we-all-become-curators

Well, as a disloyal reader, it seems appropriate to ask why you think Prof. Cowen, general director and chairman of the Mercatus Center, has any particular expertise when it comes to China or trade.
--
Your particular talent, diligently applied, would be for whining about your former employer.

It might be because the Chinese stock market is imploding and the economy is lurching to a stop and sending economic shockwaves around the world. Just a guess though.

this is probably a bad joke about how Chinese people supposedly don't care about the stock market.

it was my first thought, but who knows.

He wants chinese food to be as cheap as chalupas.

How relevant is China to the US economy ? Our largest trading partners ( US exports) are Canada and Mexico

And Canada (like Australia and Brazil, and other commodity exporters) surely won't be feeling any pain from a dramatic slowdown in China, right?

China is politically important. If the Chinese economy tanks, the government might feel its support among the people eroding and might start acting up even more than it is already in the geopolitical realm.

Is this some rather sloppy and ineffectual internet campaign? Please avert your eyes from our exquisitely engineered trainwreck!

The pertinent question is whether the government in China chooses to save the investor class (by radical monetary stimulus to inflate financial assets) or save the economy (by a combination of less radical monetary stimulus and robust fiscal stimulus). My guess is that the political class doesn't yet know what they must do to survive (politically and maybe actually), so we will be in for a period of uncertainty. Markets don't particularly like uncertainty. These are interesting times.

(by radical monetary stimulus to inflate financial assets)

Equities have perfectly unremarkable p/e ratios. Housing has experienced some rapid appreciation in the last couple of years. Don't know if you've noticed this, but north of 3/5th of the population lives in owner-occupied housing.

rayward's confusion is more fundamental. (1) One arm of government issues debt to raise cash because it spent too much and/or didn't collect enough in taxes, (2) Another arm of government prints money and goes around and buys up some of this debt.

All for the investor class, obviously.

Combine this left-wing muddleheadedness with Austrian inflationistas, and you have a politically potent, if ignorant, alliance. Sad.

China status down.

Balding status up.

In other news. Trump up. Jeb down. SPY is confused.

Any idea of which companies are in the "technical bankruptcy" list? Construction, chemicals, transport?

Pay no attention to the stock market.

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