Wedding Favors
|
|
The China Bubble
   
|
Great Beginnings
This article is available for free reprint provided that the author's bionote is left intact and the article is published complete and unaltered. If you are using this article on a website .....
This article is available for free reprint provided that the author's bionote is left intact and the article is published complete and unaltered. If you are using this article on a website .....
The China Bubble By William Cate
Bubbles are good speculations. They are terrible long-term
investments. If you sold your DotCom shares by March 2000, you
did well. If you still own those shares, you are reading this
article from the Poor House. If you cash out of the PRC before
the Bubble bursts, you can watch the PRC economic failure from a
safe haven. If you ride it to the end, you could find yourself
little better off than many people in North Korea today.
Bubbles develop because there is a gulf between investor
expectation and reality. As more investor lemmings jump into the
investment, the gulf grows. Business decisions are made on
perception. In time, the perception gulf is recognized and the
bubble bursts. Currently, the American Media is questioning the
perception gulf in U.S. Real Estate. In due course, the American
Real Estate Bubble will burst. Eventually, economic reality will
overtake the Chinese Economic illusion. You don't want to be
invested or living in the PRC when this happens.
The People's Republic of China (PRC) phenomenal economic growth
of the past decade came as a byproduct of an unlikely marriage
between Capitalism and Maoist Communism. China's economy is
based upon an "Export to the West" strategy. However, both the
European Union and the United States are objecting to the
tactics used to create a massive favorable PRC trade balance.
This trade-based conflict of interest can only get worse over
the next few years. As it grows worse, the PRC favorable trade
balance will contract. In turn, this contraction will slowly
reverse the PRC's economic growth curve.
Wedding Capitalism to Communism is dangerous. The expectation of
Communism is that the wealth created by Capitalism will be
equally distributed to the masses. The expectation of Capitalism
Family Baby Showers
The addition of baby number 2, 3, or 10 is an occasion to celebrate for any family.
Just think how exciting it must be for your littlest one who is .....
is those who make the money will keep the money. The BeijingThe addition of baby number 2, 3, or 10 is an occasion to celebrate for any family.
Just think how exciting it must be for your littlest one who is .....
Government cannot distribute sufficient wealth to the
countryside. The Government risks rebellion. Distributing the
Capitalist wealth evenly in any country offers little financial
benefit to the majority of citizens in that country. This share
the wealth axiom applies equally to the United States as it does
to the UK or PRC. So, the peasants will eventually conclude that
Beijing has failed in keeping the promise of Communism. The
peasants won't have two cars in every garage and a chicken in
every pot. The reason is there aren't enough cars or chickens to
meet the peasants' expectations.
China's development of hydroelectric energy has already reduced
some major rivers to a dribble. The resulting reservoirs flood
millions of hectares of peasant farmland. Beijing's
environmental policies are based upon development at any cost.
Eventually, the bill for those costs will become due. It can't
be paid.
Political stability exists as long as the standard of living in
any country remains at least constant. The risk in a sharply
raising standard of living for those directly benefiting from
PRC Capitalism is that when their living standards fall, social
unrest is certain to follow. I suspect PRC living standards will
start to fall in the next few years.
Taiwan is a flash point. A decision by Taipei to declare
independence would put the PRC into the untenable position of
losing face or going to war. A loss of face would probable lead
to the breakup of the PRC. For instance, there are 250 million
PRC citizens who follow the teachings of Mohammed. Most want
independence from the PRC. The PRC invaded Tibet and the
Tibetans have consistently sought their independence. A war
would quickly involve the United States, Japan and the European
Union. Either response to Taiwan Independence ensures that the
Chinese Economic Bubble would burst.
North Korea is a loose canon that threatens the region. The PRC
is at far more risk of a North Korean nuclear attack than is
generally acknowledged in the West. After all, when you are
crazy and your friends turn away from you as your people starve,
it's easy to blame your former friends for your woes.
Because of the PRC's export dependence, you should view the
longevity of the PRC Bubble in the context of the strength of
Western Economies. When the American Real Estate Bubble bursts,
as the U.S. Media predicts, a Worldwide Recession will follow.
Given that the Real Estate Market is based upon perceived value
and the American Media are destroying the perception, the odds
are the West should brace for a Recession in the next couple of
years. A Western Recession will drastically reduce the PRC
exports. It could be the needle that pricks the PRC Bubble.
If you are a PRC Capitalist or Taiwanese investor, there are
some steps you should consider taking to protect yourself. 1.
Take your PRC Company public in the West. You will convert your
fixed PRC assets into liquid shares that can be converted into a
free trading currency. 2. Move a percentage of your assets
offshore. Doing so gives your family insurance should you find
it necessary to flee the PRC or Taiwan. 3. Obtain a second
passport.
This Bubble Bursting Defense is common sense. A trickle of PRC
middle class families has adopted it. A larger number of
Taiwanese family use it. You should be part of this trickle
before it becomes a flood and the economic dam cracks and the
bubble bursts.
It's your future and the fate of your family. Plan carefully or
be swept aside by macroeconomics.
About the author:
He has been the Managing Director of Beowulf Investments
[http://home.earthlink.net/~beowulfinvestments/] since 1981 and
is the Executive Director of the Global Village Investment Club
[http://home.earthlink.net/~beowulfinvestments/globalvillageinves
tmentclubwelcome/]