Qualche giorno fa mi è capitato di leggere la News Letter di J.Mauldin che non leggevo da quando ho smesso di tradare circa un anno e mezzo fa.
Mi aveva attirato il titolo Cina,Cina ,Cina di un altra News Letter,questa volta di S.Blumenthal ( socio di J.Mauldin ) che richiamava ( cosa consueta per i lettori ) la qualità del suo socio Mauldin.
E' stata una lettura interessante anche se è un repubblicano .
Ovviamente non ha nulla a che fare col becerume trumpiano.
Parlando della Cina, Mauldin sostiene che il piano di Xi è molto molto sbagliato.
E' però una testa pensante e già il fatto che parli di un piano di Xi si pone un miglio avanti a tutti i suoi colleghi che si illudono di avere a che fare con un comunista vecchio stampo che fa del collettivismo e della dittatura del Partito Comunista l'asse portante del suo pensiero.
E cosi saltano fuori queste perle ....che ho stralciato.
Si incomincia con un po di storia.
"Modern China’s founding father, Mao Zedong, led the government from 1949 until his death in 1976. He was ideologically Communist and acted accordingly. There was nothing resembling capitalism in China during those years. And like the Soviet Union, it didn’t work very well. China under Mao was an unmitigated disaster. Tens of millions of people literally starved as government officials lied about farm production in order to please Mao. Massive misallocation of capital kept the country poor. Reeducation camps for anyone thought of as an intellectual scarred a generation.
A once-thriving economy became an impoverished mess. Mao’s successors recognized this and started “restructuring” long before Moscow did under Gorbachev. This may be why China avoided a similar disorderly breakup. And understand, many of the subsequent and current leaders of China grew up and were influenced by those events under Mao.
So throughout the 1980s and 1990s, Chinese authorities, under the encouragement of Deng Xiaoping, allowed some capitalist-like innovation and entrepreneurship, but always within limits. It led ultimately to China’s 2001 admission to the World Trade Organization, now widely seen as the launch of globalization.
Louis Gave argues (and I think rightly) that in global historical perspective, China entering the WTO may have been more important than 9/11. The country’s growth in the early 2000s was unlike anything in economic history. As many as 250 million people moved from subsistence farming to working in cities with far better lifestyles in a few decades. That’s a bigger migration by a factor of 10 than anything else of which I’m aware.
But as the old song went, “How ya gonna keep ‘em down on the farm after they’ve seen Paree?” Show people even a little prosperity and they don’t want to go back.
This became a problem for China when the Great Recession struck in 2008. Those millions of newly-happy peasants became a threat to social order, something Beijing couldn’t abide.
The solution was simple, though. With exports dried up, the government turned inward by launching massive infrastructure and housing projects around the country. These produced some valuable facilities but their real point was to produce jobs. And it was mostly debt-financed.
All this happened before Xi Jinping became president in 2013. He was on the Politburo at the time, though, and so involved in the decisions. Did he agree? We can’t know. He had grown up under Mao and spent his career advancing through the Party’s ranks. Everything we know says he is a dedicated communist. But he reached the top by being a pragmatic, get-things-done administrator.
In any case, it fell to Xi to deal with the aftermath of these choices. The infrastructure campaign and related policies produced a giant economic boom in themselves, further enhanced by the rest of the world’s simultaneous recovery. China and Xi took advantage of the economic boom and their trade balance simply soared.
China developed something new: a class of wealthy business founders, corporate executives, and professionals seemingly independent of the Communist Party. Their rise is now looking less like the goal and more like a temporary side effect.
The phrase—’To get rich is glorious’—is the simplified version of what Deng Xiaoping told his country a generation ago: ‘Rang yi bu fen ren xian fu qi lai,’ he declared. ‘Let some people get rich first.’ It unshackled China’s economy, and created the tycoons and super-growth we see today.
Which brings us to Evergrande.
Imploding Superblocks
Evergrande, the troubled property developer now emblematic of China’s problems, didn’t appear out of nowhere. It grew by providing a) something people needed which was b) consistent with the government’s goals.
Sometimes the best economic insight comes from outside economics. This is from an interesting 2019 article on Chinese “superblock” architecture—those giant, tombstone-like apartment towers that dominate city skylines there.
Chinese officials in the 1990s were under pressure to expand the housing supply, and fast. The most expedient way of accomplishing this was to parcel out enormous plots of land to private developers, who quickly filled them with 30-story residential towers. The city planning authorities, meanwhile, obligingly built eight-lane highways between the blocks to service inevitable car traffic.
One reason for this… is the symbolic importance of cars and highways. Chinese officials obsessed with projecting a “modern, world-class” facade would of course seek to emulate the American city model, no matter how badly that model has been discredited. For ordinary Chinese people, too, car ownership was a crucial indicator of socioeconomic status.
But an even more important reason behind the continued insistence on superblock planning is the reliance of Chinese city governments on land lease revenue. Since the tax-sharing reform of 1994, cities have been obliged to fork over an enormous percentage of their tax revenue to the central government. In order to generate enough revenue to cover social services and other costs, cities have come to rely heavily on China’s land-lease mechanism that allows the city to rent parcels of land to private developers for a period of 70 years.
Superblock planning therefore was irresistible to Chinese officials, who could quickly expand the housing supply and generate a massive amount of tax revenue in the process. Although it’s changing, it’s still the case that Chinese cities generate an astonishing percentage of their revenue from land leases—more than half by most estimates.
The key point here: Evergrande-like development in China wasn’t just capitalism doing its thing. It was capitalism facilitated by government officials for their own purposes. Beijing wanted social order and local officials wanted revenue. The housing projects helped deliver both. Capitalism with Chinese characteristics?
Not surprisingly, this led to excess. You may have seen the viral video of 15 empty towers being imploded in Kunming this summer. They had sat empty since the developer ran out of money in 2013. Many more such “ghost cities” exist, often financed by pre-sales before construction even started.
Here in the US we think of homeownership as a sign of financial maturity and stability. In China it is even more so. Some estimates show 80–90% of household wealth is in real estate. That wealth is now in serious danger. The Kunming implosions suggest portions of it will literally go up in smoke.
Evergrande’s problems, like those of other developers, began when the government cracked down on the same leverage and speculation it encouraged for years. That’s how central planning works. The plan can change.
The China experts I follow don’t expect this will spark a financial crisis. As Louis Gave said in a recent report I shared with Over My Shoulder members, Evergrande is collapsing not in spite of the government’s wishes but because the government decided to let it fail. Protecting big companies is inconsistent with Xi’s new “Common Prosperity” initiative, so it will stop. Here’s Louis.
Common prosperity is a way for the Chinese government to highlight the differences between policymaking in China and in the West, not just to China’s citizens but also to citizens of the developing world in general. The not-so-subtle message is that while policymakers in the West allow big tech monopolies to fleece small and medium-sized companies, China protects its mom and pop corner stores, restaurants and other small businesses from the predatory behavior of tech platforms.
While private education companies in the West are free to gorge themselves on the insecurities of parents, in China that behavior will no longer be accepted. While in the West, gains are privatized but losses are socialized, China aims to privatize the losses (as with Evergrande) and socialize more of the gains (as with the pressure on tech platforms to raise wages, hire more young graduates, and make big donations from their profits to charitable causes).
This isn’t entirely bad. Making businesses bear the cost of their mistakes is refreshingly capitalist. We should do more of that here. In the Chinese case, these mistakes were also the government’s. But because the government rules, it will decide who to protect. Chinese homebuyers who never got their homes will probably get bailouts. Property developer executives, shareholders, lenders, and suppliers probably won’t.
In fact, what is happening on the ground is that all of the cash from Evergrande and other equally distressed companies is being used to finish the projects for the homebuyers at the expense of the bondholders and of course the equity holders. The rule of law is the rule of Xi, and he is pragmatic. He deems the well-being and happiness of homebuyers more important than a few upset bondholders."
Viva HK