Finished Review Of China's Great Wall of Debt.

Buy American - Remake America

And:

Is a Coup Really Looming in Turkey? 

Kadri Gursel, Al-Monitor
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Just finished reading "China's Great Wall of Debt." and will finish my semblance of a review of the remaining chapters.

To paraphrase, China remains an enigma wrapped in a Fortune Cookie because they profess to have open and free markets but, in the final analysis, the state and various local governments have the ultimate power.  However, when they seek reforms they seldom happen either because they are mere words with no intent to follow through, political corruption, their system is not readily conducive to change and/or resistance overcomes the effort to change.

China has made amazing strides but a lot of their progress is due to intellectual theft and the West's tolerance. Their school system is based on rote and not competitive with Western Education and they are not deemed creative thinkers.

 If one digs deeper China face many potential threats in the short and long term.

First, China has an aging population and demographic problems which could result in what is termed the "middle income gap." As more people move into the city and earn higher incomes they also could run out of needed labor to sustain their growth. Consequently, Chinese labor is slowly but steadily pricing itself out of its former competitive status.

The author tells the story of a Chinese entrepreneur who manufactured cloth fiber in China but moved his plant to North Carolina because technology allowed him to offset higher labor costs with less employment and he gained transportation cost advantages along with being closer to the source of cotton and consumer markets etc.

Second, the Chinese banking system is full of bad loans. Therefore,  if Chinese depositors ever fear the government will fail to respond or it's effort to handle this matter they could quickly withdraw deposits bringing the entire system to it's knees. So far, the State Government has been successful in keeping the balloons afloat through the use of printing money which, eventually, could lead to the third problem.

Third, at some point, the nation could be hit by inflation resulting in erosion of buying power and their currency losing its value.

Fourth, the Chinese government has been capable of making transitions in production but generally, when they undertake doing so, it results in overproduction and the excess is dumped on world markets depressing prices. This creates a boomerang effect and enemies.

Fifth, China subsidizes most every production segment of their economy and this gives them competitive edges but it also comes at a price of increasing the debt burden.

Sixth, the author's book was printed before the Coronavirus but it is becoming evident China will pay a steep price in it's commercial and trading relationships,   America, alone, is in the process of rethinking our own vulnerability and dependence on a country that is no longer viewed in a benign light. 

The author believes China is aware of its many problems but is trying to build a new economy without changing the underlying institutions. They are attempting to grow through the problem by applying old growth models to new industries. The jury remains out in what seems to be a desperate effort. Their strategy also comes at the expense of other nations and that is not sustainable

Stay tuned.
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