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Low taxes and less regulation..... that is how you run a communist nation.

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  • #61
    Sure, why not? All of the former Soviet Bloc is in the same situation, as is Vietnam.

    Just because Marx got it wrong (it wasn't the only thing he got wrong), doesn't mean the world comes to an end.
    Trust me?
    I'm an economist!

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    • #62
      Originally posted by editec View Post
      Too few investment opportunities? Why is that? With all the manufacturing done in China, one would think there are plenty of companies to invest in.

      Is this some overhang from China's Communist past? Does the state still own these industries or something?
      It's not really that, it's this...

      1. The vast majorities of the companies in China are either privately funded (aka not on stock exchanges) or are listed in foreign stock markets. For example, my relatives in FuJian are factory owners, but they are funded completely by themself (they make kitchen utensils like forks and spoon) My uncle's company here in Taiwan, which he inherited from my grandfather (But managed to make it much much bigger) makes industrial papers and is also completely owned by him and his immediate family. If they need additional funds for investments and stuff they would go to banks, or look from friends, so there's no real publicly accessed ways to invest in them, if you throw your money to the bank, the best you could hope for is that the interest rate is high enough to cancel out the inflation rate. obviously not exactly as much of an "investment" as mere safekeeping.

      2. In such situations, if you hold big money your left with either buying the limited selections from China's own stock markets, or start your own company (usually through relatives), or invest in local companies that you know (personal connections and such) obviously the options are drastically cut down. Since in this sort of personal investments the risks are very high, it's almost always done because you known the guy your investing in personally, and probably familiar with the stuff he's going into. so you begin to see why the options are being cut down.

      3. For areas that we see the biggest phantom property boom, the typical symptom we see is that those areas are based on resource explorations and not industrial developments, which is why for big capital holders there the problems become even more obvious, there's no real companies to invest in locally even if they want to , consider inner Mongolia for a minute, it's land locked, not as densly populated as areas elsewhere, and not very close to any big markets, and relatively behind in terms of general infrastructure. Thus it's a very bad place to start the typical type of companies in China (aka export based manufacturers). The ridiculas cost it would take to transport stuff out of inner Mongolia to elsewhere in the world is probably enough to offset whatever other advantage it could have.

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      • #63
        Originally posted by DOR View Post
        The lack of good investment opportunities in China is a development market issue, not a post-communist one. At their income levels, the housing and stock markets are just too expensive for the lower billion.

        = = =

        Household debt service-to-disposable income ratios, which is a much more useful measure than debt:equity, were 11.09% in Q-2 2011. To put it in perspective, the average in the 1980s was 11.40%, in the 1990s 11.56% and in the 2000s 13.26%.
        I'm still trying to figure out how an economy like China's, one that seem to have become a manufacturing giant, doesn't have investment opportunities.

        There wss certainly no shortage of investment opportunities in the USA when we were the WORLD's leading exporter.

        What is going on in China?

        Who OWNS the manufacturing companies that are making most of the chacha that China sends us?

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        • #64
          Originally posted by editec View Post
          I'm still trying to figure out how an economy like China's, one that seem to have become a manufacturing giant, doesn't have investment opportunities.

          There wss certainly no shortage of investment opportunities in the USA when we were the WORLD's leading exporter.

          What is going on in China?

          Who OWNS the manufacturing companies that are making most of the chacha that China sends us?
          Private owners.

          Using my family busniess as an example, we make industrial papers, the company is owned 100% by my Uncle and his Wife / Children. not a single share is owned by anyone else. The company was started by my Grandparents shortly after they fled to Taiwan, it basically started as a family factory, where most of their labor were their kids (and themself) and some long time friends. At that time it was just really a paper cutting workshop, so they only needed very basic machines and their means of transporting goods often involved my 10 year old dad riding a big tricycle (not the toy kind, the kind that had big space at the back to carry goods). sounds crazy today right? but they were the wealthiest folks in their neighborhood at that time because of that, for example they were the first to own a TV.

          By the time my Uncle started to take over, he managed to expand the busniess by many fold over several decade, first he and my grandfolks managed to upgrade it to a real factory, almost completely through borrowing money from friends (I think their starting capital for their first real factory was 300K NT, which is just 10 K USD). by the time I was born he was starting to really go into big factory territory, today he has one really big plant in Taiwan and more in China. He's one of the biggest non-listed paper maker in Taiwan.

          (their website A?~??q )

          The Vast majority of Chinese corperations are not super high capital based busniesses, the actual capital base for them is very low, because the starting investment isn't high, many started off as mere family factories which obviously require close to no capital at all just like my family's paper busniess. It is very difficult for outsiders to invest in these companies for obvious reasons. they're not public which means they aren't really restricted by the same audit standards, which means you better really really trust the dude your investing in if you want to borrow them money, this is why investment of such types almost always happen because they're relatives or long time friends. aka you have bounds that go beyond law.

          The really really big busniesses in China are often foreign or state owned, the foreign onces are obviously listed usually on foreign stock exchanges (which most Chinese can't really invest in).
          Last edited by RollingWave; 12 Oct 11,, 03:20.

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          • #65
            Originally posted by RollingWave View Post
            It's not really that, it's this...

            1. The vast majorities of the companies in China are either privately funded (aka not on stock exchanges) or are listed in foreign stock markets. For example, my relatives in FuJian are factory owners, but they are funded completely by themself (they make kitchen utensils like forks and spoon) My uncle's company here in Taiwan, which he inherited from my grandfather (But managed to make it much much bigger) makes industrial papers and is also completely owned by him and his immediate family. If they need additional funds for investments and stuff they would go to banks, or look from friends, so there's no real publicly accessed ways to invest in them, if you throw your money to the bank, the best you could hope for is that the interest rate is high enough to cancel out the inflation rate. obviously not exactly as much of an "investment" as mere safekeeping.

            2. In such situations, if you hold big money your left with either buying the limited selections from China's own stock markets, or start your own company (usually through relatives), or invest in local companies that you know (personal connections and such) obviously the options are drastically cut down. Since in this sort of personal investments the risks are very high, it's almost always done because you known the guy your investing in personally, and probably familiar with the stuff he's going into. so you begin to see why the options are being cut down.

            3. For areas that we see the biggest phantom property boom, the typical symptom we see is that those areas are based on resource explorations and not industrial developments, which is why for big capital holders there the problems become even more obvious, there's no real companies to invest in locally even if they want to , consider inner Mongolia for a minute, it's land locked, not as densly populated as areas elsewhere, and not very close to any big markets, and relatively behind in terms of general infrastructure. Thus it's a very bad place to start the typical type of companies in China (aka export based manufacturers). The ridiculas cost it would take to transport stuff out of inner Mongolia to elsewhere in the world is probably enough to offset whatever other advantage it could have.
            Thanks RW.

            That cetainly helps me understand it.

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