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  • #61
    cyppok

    You expect people to take time to education you when you write crap like that? Do you have any data to back your claims up? If not, that it is all "faith based"
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

    Comment


    • #62
      Originally posted by xinhui View Post
      cyppok

      You expect people to take time to education you when you write crap like that? Do you have any data to back your claims up? If not, that it is all "faith based"
      Most data is not honest by any standard. We are having a theoretical discussion on the realities of capital being destroyed or not. I argued that it was in fact being destroyed.

      This is not faith based time in the next ten years or so will settle the issue. If China invents something completely new or old to deal with the age old problem of capital escaping to where it is productive and leaving where it is not.

      China's Solar Boondoggles, RealClearWorld - The Compass Blog
      August 03, 2012
      China's Solar Boondoggles

      Posted by Greg Scoblete at 7:02 AM

      Bill Powell says that after pinning its hopes on solar, Chinese firms are finding it to be a "capital destruction" machine:

      These are epic, historic collapses in market valuation, made all the more stunning by the assumption, so prevalent just four years ago, that "clean" energy's time had come. How ironic it is that Barack Obama's insistence that the United States invest government money into the creation of so called "green jobs" -- which led to the debacle of Solyndra and other wasted investments -- was predicated on the fact that if the U.S. didn't do so, the industry of the future would be Made in China. A credulous political press, egged on by the environmental lobby, swallowed the reasoning wholesale.
      Powell argues that solar's ability to reach "grid parity" - where it is price competitive with other fuel sources - has been dealt a big blow by the collapse in U.S. natural gas prices, but may yet still happen in China, where gas is still expensive. That is, until they start fracking.
      Why China is losing the solar wars - Fortune Tech
      So now we sit, four years later, and China's solar energy industry has become nothing less than a capital destruction machine, with some of its most prominent companies now desperately flailing for lifelines. On July 12, the municipal government in Xinyu, a town in Jiangxi province, 415 miles southwest of Shanghai, where LDK has its headquarters, said it would cover the $118 million debt it owes a Chinese bank, the Huarong International Trust Co. In May, LDK said in an SEC filing that if it couldn't improve its access to funds it might be unable to remain a "going concern."

      Suntech, which accounted for 10% of the solar module and panel market globally last year, has its own troubles. Earlier this week it alleged that it may have been had been defrauded of 556 million euros by GSF Capital, the general partner in an Italian solar firm called Global Solar Fund S.C.A, of which Suntech owns 80%. After the credit crunch of 2008, when traditional sources of financing dried up, GSF turned to the China Development Bank, a state owned institution run by the State Council in Beijing, the country's central policy-making body. In order to provide a loan to GSF, the CDB needed a Chinese guarantor. Suntech, in May of 2010, agreed to put forward 554 million euros as a loan guarantee. In order to protect itself, it then asked GSF Capital to post collateral for the funds, which it said it did, in the form of 560 million euros worth of German bonds. GSF claimed to have placed the funds in a "reputable custodian bank," as David King, Suntech's chief financial officer put it this week.

      Fast forward to the present: Suntech, laboring under a huge debt burden, with large payments coming due next year, was looking to "monetize" its investment in GSF; that is, it wanted to cash out in order to pay down some of its debt next year. But Suntech discovered -- allegedly -- that the German bonds supposedly put forth as collateral by GSF capital didn't exist. Suntech's stock slumped to less than $1 on the NYSE earlier this week, a humiliating moment for a company that was supposed to inherit the earth. A market cap that was once north of $14 billion has now been slashed to a mere $188 million. Suntech is now suing GSF Capital.
      So why did these alleged world-beaters instead become the capital destruction machine they've turned into, and what does the future hold for them? The solar industry has been, as Michael Parker, a senior analyst at Sanford Bernstein put it earlier this year, "a $25 billion mechanism to extract subsidies from Western European and North American governments." That is, given that solar has been uncompetitive relative to coal, hydro and natural gas, it relied on government subsidies—granted in the name of environmental protection—to exist. The global financial crisis, and the deep recessions that have ensued, blew that world apart. First—as we have seen in Suntech's case— for a time it made access to capital nearly impossible in a capital-intensive industry. Worse, it meant countries like Germany and Spain, out of necessity, had to slash subsides as pressures on their national budgets increased. Later, the U.S. placed tariffs on some China made solar products, and Europe filed its own anti-dumping complaint, adding to the downward pressure on the Chinese industry.

      In the short run all that hurt, to be sure; but it wasn't necessarily a deathblow. Because over the past few years, Chinese companies and their global counterparts made enormous progress in reducing the installed cost of solar energy. The Holy Grail in the industry is to meet what's known as "grid parity," the point at which solar could go mano a mano with coal or gas or hydro-driven power plants, without subsidy. Grid parity, Sanford Bernstein estimates, would transform solar from a rent seeking $25 billion industry to a serious competitor in the $5 trillion global power generation market. Companies like Suntech, despite its deteriorating finances, have been drawing closer and closer to that magical place.
      Granted 25 billion industry is not that big a number in the grand scheme of things. But a start non the less. I know you think it means nothing and that current values fostered on future profits in present value don't matter but I kinda disagree.

      Ghost towns of China: Satellite images show cities lying completely deserted | Mail Online
      Old article but nice pictures to give you the idea.
      Originally from Sochi, Russia.

      Comment


      • #63
        cyppok,

        "Communism" . . . are you thinking of North Korea, or China?


        “Only lasts until all surplus capital is destroyed” . . . really? Any evidence of this (and please, don’t point to the collapse of the USSR or subsequent changes in East Europe) ?


        “If due to loans given to insolvent businesses equipment costs are so high . . .” Who said equipment costs were any higher in China than on the world market? Lower, I believe, since huge amounts of it are made locally.


        If you want to have a theoretical argument, please pick a country that fits your preconceived notions. This one doesn’t.
        Trust me?
        I'm an economist!

        Comment


        • #64
          Your post is full of crap. yeah, here are some satellite pictures, it's a ghost town, and there are more than 1! China is in trouble!

          Comment


          • #65
            China has at minimum 3 trillion dollars in reserves and is in no way even close to bankrupt.[1]

            They are not "soviet style communists" and cannot be studied as such. Some people do but they don't work in business or finance :-)

            China has a very strong global manufacturing industry and is heavily invested in the developing and 3rd world, further much of that investment is from their private companies (i.e. capialist businessmen) not state owned central corporations.

            [1] List of countries by foreign-exchange reserves - Wikipedia, the free encyclopedia

            Comment


            • #66
              Originally posted by dmm View Post
              China has at minimum 3 trillion dollars in reserves and is in no way even close to bankrupt.[1]

              They are not "soviet style communists" and cannot be studied as such. Some people do but they don't work in business or finance :-)

              China has a very strong global manufacturing industry and is heavily invested in the developing and 3rd world, further much of that investment is from their private companies (i.e. capialist businessmen) not state owned central corporations.

              [1] List of countries by foreign-exchange reserves - Wikipedia, the free encyclopedia

              dmm,

              While I agree with you that China is far from bankrupt, the now $3.5 trillion it holds in foreign reserves are not the government’s money.

              Think about it: when you deposit your own money into your own bank account, is it “your” money, or “the bank’s” ?
              Trust me?
              I'm an economist!

              Comment


              • #67
                Originally posted by DOR View Post
                dmm,

                While I agree with you that China is far from bankrupt, the now $3.5 trillion it holds in foreign reserves are not the government’s money.

                Think about it: when you deposit your own money into your own bank account, is it “your” money, or “the bank’s” ?
                China Has Become One Big "Stuffed Channel" | ZeroHedge

                the New York Times published "China Besieged by Glut of Unsold Goods" in which, as the title implies, it is revealed that China is now nothing more than one big "stuffed channel."
                I am not going to write much because you apparently think that me providing links and an argument can be swept aside by simply going through a mantra of "it cannot be so".

                One thing I will say is China became exposed to the business cycle precisely because it went to a partial controlled economy and allowed malinvestment to fester through state control and private incentive. The only way to resolve it is to let price/demand align OR drive every private actor into insolvency by credit expansion.

                Foreign currency reserves are nice if you actually spend them on future productivity or some benefit which brings higher yields of prosperity or returns in some area. Sitting on a balance sheet they simply finance others globally while diminishing their purchasing power presently. Very similar to me having a bunch of numbers on my calculator while others use the real purchasing power behind them presently... The ignored aspect is the transfer in this added purchasing power from companies to the government which then funnels it through the banking system that fosters investment that may not have been if the actual recipients of that added purchasing power used it. It really is like a giant VAT tax that is redistributed into the banking system to foster further investment, HOWEVER banking is predicated on furthering past performance so the added capital keeps flowing into diminishing return investments over and over until it is negative in return which gets recognized in the present and future.
                Originally from Sochi, Russia.

                Comment


                • #68
                  Originally posted by DOR View Post
                  dmm,

                  While I agree with you that China is far from bankrupt, the now $3.5 trillion it holds in foreign reserves are not the government’s money.

                  Think about it: when you deposit your own money into your own bank account, is it “your” money, or “the bank’s” ?
                  Those figures are for central banks. It's very much the government's money. Central banks are different from the retail banks you're used to. An example of a central bank would be the US Federal Reserve.

                  In answer to your second question, legally it's still mine.

                  Comment


                  • #69
                    cyypok

                    I agree with _some_ of this. Clearly things aren't going to go up for ever and ever. There are bumps ahead. However, I do not believe a _severe_ crash is coming.

                    In my opinion, a lot of times when people analyse situations they use their own method of thinking and not the method used by the thing being studied. (The old cliche about "to catch an enemy, you have to think like the enemy - otherwise they continually surprise you")

                    Reading through the links you provided and some of the articles they link to, in one article [1] he writes that the US stock markets are a cash sink for inflationary pressures, in that the rich put their spare money into the "stock market casino" (his words). He then goes on to say that because China doesn't trust its stock market, they will instead suffer high inflation.

                    This is indeed true in the USA.

                    IMO he isn't thinking like a Chinese: the Chinese rich use their spare money to buy artworks (which increase in value), to buy high end western goods (gold-plated automobiles, which have a value in gold) and investements in western companies. So, China still has an inflationary sink for the rich. It's just a different inflationary sink, which is not available to, or disliked by, western investors.

                    [1] (Why Chinese Inflation Risk Is Over Three Times Greater Than In America | ZeroHedge)

                    Comment


                    • #70
                      Originally posted by dmm View Post
                      Those figures are for central banks. It's very much the government's money. Central banks are different from the retail banks you're used to. An example of a central bank would be the US Federal Reserve.

                      In answer to your second question, legally it's still mine.
                      one question we have to ask; if the Chinese government is "indeed" facing a legitimacy question for not delivering the goods, how far can they mobilizing their economy to get the jobs back again by digging holes. While I don't have the actual figure, but they'd have a fairly deeper pocket to allows them to dig holes, far deeper then most of the nations out there.

                      They have yet to exercise their deep pocket (During 2008, their stimulus package was amount to 560 billion and then some). so far, they only put forward a 150 billion infrastructure package.
                      “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

                      Comment


                      • #71
                        Originally posted by xinhui View Post

                        They have yet to exercise their deep pocket (During 2008, their stimulus package was amount to 560 billion and then some). so far, they only put forward a 150 billion infrastructure package.
                        The pockets are not that deep. Over 1/3rd of their forex is US government debt which is not currency. With $586 billion spent and another $1.7-3.8 trillion out the window on non-stimulus under/non performing investment vehicles inside of the PRC at the local level itself that fueled the real estate boom... Those pockets have an awful lot of IOU's and very little cash.

                        Comment


                        • #72
                          Originally posted by zraver View Post
                          The pockets are not that deep. Over 1/3rd of their forex is US government debt which is not currency. With $586 billion spent and another $1.7-3.8 trillion out the window on non-stimulus under/non performing investment vehicles inside of the PRC at the local level itself that fueled the real estate boom... Those pockets have an awful lot of IOU's and very little cash.
                          I see you’re still confusing foreign exchange reserves with government revenues.

                          “Reliable Chinese statistics” is an oxymoron, but unless we use them we can’t talk about the economy. So, I’ll show some that the Asian Development Bank received from the National Statistics Bureau and deemed worthy of inclusion in their database:

                          2010 data
                          External debt to GDP: 9.3%
                          Of that, 36.6% long term, 63.4% short term (e.g., trade financing)
                          Debt service ratio: 28.9%

                          2011 data
                          Government deficit (single year): 1.1% of GDP
                          Government deficit (15 yr avg): 1.4% of GDP
                          Trust me?
                          I'm an economist!

                          Comment


                          • #73
                            Before they would issue more bonds, the Chinese government, as the past, can lower the reserve requirement for commercial lenders, they have done that twice already in the past few months. The point is that they have ammos if they want to use them
                            “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

                            Comment


                            • #74
                              Some people on the media claim the products “made in China” will uncompetitive as Chinese workers salary and income increase rapidly. Such comments are laughable and ridiculer.
                              , if said low salary and lost cost are the Chinese success secret, why the Latin countires ,south-east Asian countries like Philippines, Vietnam, Thailand, Myanmar and African countries, their labor cost and worker salary are lower than Chinese worker! Why they can not be successful?
                              Because Chinese workers are more quality and efficiency than those countries. They can produce more high-value products,like airconditioning,icebox,electronic products, mobile phones,computer, microwave ovens, senior automotive, induction cooker, water heater,home appliances, Luxury yacht . . . . .

                              China want to become the second Japan in Asia, every developed country become rich were not by low labor cost. They need high-quality workers made high value-added products to got more profit!
                              Like Japan,USA,German,Sweden,British...........
                              With decline very fast in the working-age population in China, the low-value and low skilled sectors are move out from China,like toys,clothes,textiles,bowl,shoes,bike,paper industry......
                              Last edited by udake; 21 Nov 12,, 15:53.

                              Comment


                              • #75
                                Originally posted by udake View Post
                                Some people on the media claim the products “made in China” will uncompetitive as Chinese workers salary and income increase rapidly. Such comments are laughable and ridiculer.
                                , if said low salary and lost cost are the Chinese success secret, why the Latin countires ,south-east Asian countries like Philippines, Vietnam, Thailand, Myanmar and African countries, their labor cost and worker salary are lower than Chinese worker! Why they can not be successful?
                                We are getting plenty of products made in the above countries now due to shifting of wages, working conditions, trade agreements etc.

                                Because Chinese workers are more quality and efficiency than those countries. They can produce more high-value products,like airconditioning,icebox,electronic products, mobile phones,computer, microwave ovens, senior automotive, induction cooker, water heater,home appliances, Luxury yacht . . . . .
                                Plenty of high quality products from many of those other countries. My Nikon camera is made in Thailand, as are some of the hard drives. A number of automotive parts sold here in the US are made in Mexico. It will take a while to move the sheer amount of production that is now in China to smaller countries, and many of the countries you mentioned are not yet ready to support such shifts, but others are, and the shifts are happening.

                                Also beginning: a shift of industrial production back to the United States from China and other countries as rising wages in developing nations and increasing worker productivity here at home due to automation and more efficient production processes narrow the difference in production costs, even as increasing fuel costs increase transportation costs.

                                Thus, manufacturing in China is beginning to be squeezed both by movement of manufacturers to other developing nations and return of some manufacturing back to developed countries.

                                China want to become the second Japan in Asia, every developed country become rich were not by low labor cost. They need high-quality workers made high value-added products to got more profit!
                                Like Japan,USA,German,Sweden,British...........
                                With decline very fast in the working-age population in China, the low-value and low skilled sectors are move out from China,like toys,clothes,textiles,bowl,shoes,bike,paper industry......
                                That is certainly the case, and it's a very challenging shift.
                                Last edited by citanon; 21 Nov 12,, 20:23.

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