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Migration and degrowth fail to impress | Advantage China

Experiencing the clutching straws of withdrawal (Antagonistic media biting its own words)

If I do separate the grain from the chaff apart from the headlines, you could probably make it “naysayers clutching a t straws” , “western FDI withdrawal leaves a bad taste in the mouth”  a matter of a year of monetary policy easing in time instead of a recession for life. and some more such college things that show up as analysis on China

Most are just reporting expereinced analysts now, of course, but among the new “thinkers” are some who point to the extradition of capital by corruption as the root cause for the coming hard landing too. Of course china has likely already survived the hard landing but those clutching at strawas are probably being heard very seriously indeed as some monetary problems point to a longer period of slow growth a nd though European Capital makes tless than 10% of Hongkong banking assets and much lesser mainland assets, there is still a thought that goes into implementing any stringent reform while we could hand hold the big guy back to growth. The very fact that China still has options gets neighbours like India and now even South Korea in awe of the towering giant as it looks ripe to pluck all trade from North Korea in the new regime

The extent of the Flight of Capital from China

While western FDI implementation is very small in 2011, China remains a darling FDI destination even for the West despite the rearing head of indigenous innovation and monetarily the new FDI coming to China has an even better ratio of developing inland China with Yuan trade and ASEAN and Central Asia growth

The big hole in China’s FDI fabric however is the lack of domestic investment and with 3 out of 5 china’s wealthy trying to take it with them, it is difficult for the government to implement something to block the same. It is still hard to see hoever, with options like Macao and Singapore available, if China will really lose for that one reason in terms of a soft or hard landing. The best data on the problem is thus:

Back in June Forbes magazine wrote that 60 percent of China’s high-net-worth individuals are either considering emigration or have already left the mainland for safer havens elsewhere. Global Financial Integrity estimates that the sums of money that have already left the country are huge, exceeding $2 trillion dollars through 2008. Such a financial exodus has naturally been criticized by the Chinese government. Writing in the communist newspaper Global Times, Zhong Dajun protested, “We have been working hard to develop the economy in the past 30 years, but now these elite members of society are fleeing with the majority of the wealth.”(Bob Adelman, NewAmerican.com via Prisonplanet)

India and Japan are not even treated as par competition as Consumer consumption esp in Luxury has brought about unique advantages to China with Volkswagen even opting to set up plant in the Central Asia bordering Uighur / Han province of Xinjiang. Audi and BMW have also planned setting up local plants to avoid paying import taxes. the Audi plant for the A3 hatch back is apart from its Mexico investment for the US market and will directly accrue to Asia exports from China in Foshan in the existing JV with FAW. The existing plant in Changchun will also be expanded as labor costs do not impact it in North China

Continuing Growth in China

BMW’s China partner has even planned a hybrid.  It sells 250,000 units annually in China with Brilliance China Auto, the 5 series hybrid shown in the May edition of the Shanghai Auto Show. Their Shenyang facility will be ready this year at a cost of more than a billion Euro in Tiexi . The existing Dadong unit and the Tiexi unit will each produce 100,000 vehicles including the X1 SUV

McDonalds is adding 700 outlets in the next 700 days to reach 2000 outlets by 2013, the new including more than 50% to Franchisees in line with the global model. Colonel Sanders already has 3200 stores in China. (huff)

In the latest curbs on Westernism, China TV regulator SARFT has shut down realty shows predominantly focused around dating and talent including Super Girl (American Idol) from Hunan Sat TV timed with Hu Jintao’s essays in  CPC mouthpiece on Western Culture’s ill effects, enabling the flight of personal fortunes from the nation.

From TV and movie censorship to indigenous innovation, State efforts go largely unappreciated and vocally challenged by the multitudes too, leaving the chink in the armor subject to constant barrage but unless the State adheres to a sensitive “Ears to the Ground” approach of education and reform incl that of its own governance policies it is unlikely to adhere to social stability ” , indigenous innovation” or other societal goals for its polity.

Property price collapse actually translates into a -0 to -0.5% change in housing price index every month and is well manageable in the 60 odd cities where prices are falling, bracketed by builders stayin gin and choosing to put projects on hold without really reducing asking prices. A managed lowering of prices in property owuld be welcomed by the lartger economy but that too is unlikely to happen in less than 2-3 years. If demand picks up again before that despite people buying their third house etc. ( now a thing of the past)

Probably with a million Dollar millionaires growing to 1.21 million this year (BCG-CCB survey) china can well absorb the migration of a few thousand to USA every year.

 

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One comment on “Migration and degrowth fail to impress | Advantage China

  1. Pingback: China wins again! China export surge underlines turnaround | The Banking and Strategy Initiative

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