China’s economy is doing great!
At least, according to China.
That’s why foreign investors
Should give China their money.
Welcome to China Uncensored. I’m Chris Chappell.
Last week Chinese officials released their third quarter GDP figures—measuring
how well the Chinese economy has done in the last three months.
Earlier this year, China’s economy shrank for the first time in decades.
That was of course because of the Communist Party’s coronavirus lockdown.
But while the Chinese economy may have been down in the first quarter,
it is back with a rebound in the third.
Yes, China’s economy bounces back.
It surges ahead.
And it’s a slam dunk! I mean, it’s the envy of the world.
Sorry, I got carried away with the sports metaphors.
Anyway, China’s economy looks great. “China posted 4.9% economic growth in its third quarter
compared to the same period last year.”
If you believe the official numbers.
And there’s the catch. After the Chinese government released their third quarter numbers,
analysts began to see signs of “apparent data manipulation.”
For example, “China recorded growth of 0.8%
in fixed-asset investment for the first three quarters of the year, compared with 2019,
but the absolute figures for the same period showed a drop of several trillion yuan.”
What does that mean? Well, according to the chief executive of China Beige Book,
the Chinese government essentially made 2.5 *trillion* yuan in investment
disappear from last year’s books to make it look like investment grew this year.
But would the Chinese Communist Party really manipulate statistics
to get the results they want? I know, it’s hard to believe.
These analysts aren’t saying that the Chinese economy isn’t recovering. It obviously is,
since people can actually leave their house and go back to work and travel now. They’re
just saying it may not be recovering as fast as Chinese officials would like everyone to believe.
But these Debbie Downers don’t really matter. Because the Chinese Communist Party already
got those blockbuster headlines from foreign media about how great China’s economy is doing.
And China wants to make it clear to foreign investors:
We’re open for business. And we’re ready for your money.
And I’ll tell you how you can make lots of money in China after the break.
Welcome back. The Chinese Communist Party wants foreign investors to know,
China is open for business!
Last weekend, the Bund Summit was held in Shanghai. It’s billed as “an open,
pragmatic and internationally influential financial high-end communication
platform” that promotes “China’s financial opening-up and global economic development”.
And it was part of China’s charm offensive to woo foreign investors.
“One key message China is trying to deliver is that it is committed
to deepening its economic and financial ties with the rest of the world even
though relations between Beijing and Washington have plunged to their lowest level in decades.”
Hey, we may not like you, but we still want your money.
And in a sign of how important this Shanghai Bund Summit was,
Chinese vice president and Xi Jinping’s right-hand man Wang Qishan made an appearance.
Wang told the attendees that “Win-win cooperation is the only right choice for the world.”
Ah yes, win-win cooperation.
And in case that wasn’t clear enough of a message,
the head of China’s central bank Yi Gang said in his speech that “International
investors entering China can share the dividends of China’s growth and reform.”
Did we mention that we really, really want your money?
Now this isn’t completely new. Starting two years ago,
Chinese officials have been making it easier for foreign investors to invest money in China.
Like letting them own financial institutions in China and letting them buy Chinese bonds.
But the Bund Summit, which is only in its second year,
is a sign of how much the Chinese regime wants to turn Shanghai into a financial hub.
High-profile attendees included a former British prime minister;
two former US treasury secretaries; the former head of the European central bank;
and the former director general of the WTO.
Big investment banks like Goldman Sachs and HSBC were also there. And they seemed
pretty receptive to the ‘we want your money’ message.
“Noel Quinn, chief executive of HSBC,
said the bank’s commitment to mainland China ‘is unwavering even in today’s challenging time.’”
Meanwhile “John Waldron, president and chief operating officer at Goldman Sachs, told the forum
that the US bank was ‘encouraged by the enhanced access China [is] providing foreign firms.’”
Waldron did have some suggestions though. Like
China should make it easier for people to move money out of China.
And “Align Chinese regulation with international norms to bolster investors’ confidence.”
Ok, if you’ve watched our previous episode on why China is running out of dollars,
you know that they’re not going to make it easier for people to move money out of China.
But to be fair, they do want to regulate financial markets better.
In his speech at the Bund Summit, Wang Qishan said that the financial sector
should avoid the “wrong paths” of speculation, bubbles and Ponzi schemes.
Wang also sought to reassure investors about how safe China’s financial industry is.
He said, “Of the [financial] industry’s three key principles—security,
liquidity and effectiveness—the most important is always security.”
We want your money, but don’t worry, it’s safe with us.
Now, it’s good that China wants to avoid speculation, bubbles, and Ponzi schemes. It’s
had a lot of trouble with all three things.
But the second part of Wang’s message, about how safe investing in China is,
is actually part of the reason that China has so much speculation, bubbles, and Ponzi schemes.
People assume that when China’s stock market goes crazy, or when the real estate bubble
gets too big, the Chinese Communist Party will always step in. Because they want stability.
And they do. That’s why some people have called China the bubble that never pops.
But in some ways, the Chinese Communist Party is actually operating the biggest
Ponzi scheme of all on foreign investors.
And I’ll show you how after the break.
Welcome back. The Chinese Communist Party is operating a
vast Ponzi scheme on foreign investors.
It goes like this: The Chinese government always gives the impression that its economy is growing.
Even if that takes some fudging of the numbers.
The Chinese Communist Party lures in the first round of foreign investors
by showing them how much money they can make in the China market.
These investors then influence others to invest in China too.
A lot of them are institutions that hold average Americans’ 401(k)s and other investment money.
Which means a lot of us are invested in China, even if we don’t want to be.
The big investors also convince foreign governments to play nice with China,
so they can keep doing business there.
And meanwhile all of this money is pumping up China’s economy and the CCP.
Which then lures in more investors, and rinse and repeat.
Like in any Ponzi scheme, some of the investors will win.
But eventually, most investors will lose. We just don’t really hear about the losers.
It’s like what happened with foreign companies 20 years ago. The Chinese government told them,
“Come to China, you can sell your products here and make money!”
Some of these foreign companies won big, like Apple and McDonalds.
Some of them lost everything.
Here’s an example of how China uses investors to bring others in. Last week,
hedge fund manager Ray Dalio wrote a piece in the Financial Times called “Don’t be blind to China’s
rise in a changing world. Anti-Beijing bias has blinded too many for too long to opportunities.”
Dalio, by the way, was a keynote speaker at the Bund Summit in Shanghai.
He starts off by talking about how well China has succeeded, using official Chinese numbers.
Then he says China succeeded even though people have said China can’t succeed. These people say
“Communism doesn’t work. Authoritarianism doesn’t work. The Chinese aren’t creative.”
Look, communism doesn’t work. And authoritarianism
doesn’t create long-term stability. But I’ve never said Chinese people aren’t creative.
I would never say that. I’ve seen Chinese farmers make homemade rocket launchers.
Anyway, Dalio’s point is that we all need to check our “persistent anti-China bias.”
What kind of anti-China bias?
“[China] produces and collects vastly more data to process with artificial intelligence.
For many in the west, this has a dark side in terms of state surveillance.”
But if you take off your anti-China bias glasses, it’s not so bad after all.
Because “For many Chinese it reinforces
positive social norms while also promising vast efficiencies.”
Wow, when can we get state surveillance!?
And ok, Americans don’t like what the Chinese Communist Party is doing to the Uyghurs.
But if you take off your anti-China bias glasses,
“China’s rejoinder is that a strong hand is needed to maintain order,
what happens inside its borders is its business, and the US has its own human rights problems.”
No wonder this guy thinks that authoritarianism works.
Anyway, the point of this entire article is that Dalio invests in China and you should
too. You don’t want to miss out because of your anti-China bias.
“China’s fundamentals are strong, its assets relatively attractively priced,
and the world is underweight Chinese stocks and bonds.
This discrepancy is at least in part due to anti-Chinese bias.”
Dalio’s message aligns pretty well with the Chinese Communist
Party’s message to foreign investors: Anti-China bias is bad. Greed is good.
So as foreign investment increases in China, it’s not just the bubble that never pops.
It’s the Ponzi scheme that never collapses.
As long as the Chinese Communist Party keeps finding more investors to keep it going.
And now it’s time for me to answer a question from one of you,
who supports China Uncensored through the crowdfunding website Patreon.
Ringleader asks: hey Chris, what ever happened to the fake gold issue that hit China in June?
Oh boy, talk about a crazy Chinese scam. Back in June, Caixin magazine reported that a Chinese
jewelry company called Kingold had taken out more than 2 billion dollars worth of loans.
And those loans were backed by fake gold.
“At least some of 83 tons of gold bars used as loan collateral
turned out to be nothing but gilded copper.”
This was a huge deal. “Kingold is the largest privately owned gold processor
in central China’s Hubei province. Its shares are listed on the Nasdaq stock exchange in New York.”
Kingold’s CEO used to be in the Chinese People’s Liberation Army.
Also, Kingold had borrowed money from more than a dozen companies
and had taken insurance out on the loans, too.
After this story broke, Chinese authorities started looking into Kingold.
But as far as I can tell, they’re still investigating.
And after their stock fell dramatically,
Kingold had to delist from the Nasdaq stock exchange back in August.
Now after dropping almost 95%, Kingold shares are at 15 cents each.
Sounds like a steal. Heeey foreign investors...
Thanks for your question, Ringleader.
And if you’d like to have me respond to your question or comment on the show for
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It’s a better investment than China. Once again, I’m Chris Chappell. See you next time.