China’s Economy Blowing More Bubbles; Russian Brains and Capital Flee

“I think Chinese property is the Titanic about to crash into the iceberg right in front of it,” Pan Shiyi, billionaire chairman of commercial developer SOHO China, said at a forum, China Business News reported. __ NZHerald

Swimming in Bubbles

China’s economy may appear robust from outside, but according to Zhang Laiming, vice-minister of the Development Research Center of the State Council (DRC), and Li Jianwei, Research Department of Social Development, the DRC:

There are problems that cause decreasing investment intention in the real economy, such as the weakening domestic demand, declining overseas demand, rising production cost, high tax, and a low income from investment.

The real estate bubble has consumed a great deal of resources, which push up finance and production costs and weaken household consumption and enterprise competitiveness.

Many business people would rather speculate than do real business but, since real business is the foundation of the economy, the country needs a management mechanism to stop the economic bubble for sustainable, healthy economic development. __Research Report
No. 28, 2014

Bubbles within bubbles now on the way:

… the National Development and Reform Commission [is] planning to allow some local governments to issue bonds directly.[!]

The bond-issuing programme will be slow to roll out. Initially, only 10 local governments will be allowed in on the experiment and the amounts will be restricted… it does not augur well for the property market, at least in the short term. Housing inventory is at a 14-month high; liquidity has dried up, especially for smaller developers. Home-price rises in major cities have slowed or even reversed. Coupled with the frantic pace with which many developers have issued a record amount of debt since last year, many analysts have warned of a bubble bursting.

… The commission – the mainland’s top economic planning agency – which announced the bond initiative, has vowed to stay focused on reforms despite some signs that the central government’s enthusiasm for bringing about painful change may be ebbing as the mainland economy stumbles. Lenders, for example, have been instructed to speed up issuing mortgage approvals as a measure to slow down property market reverses…

_South China Morning Post

If you thought the massive local government debt was out of control before, just wait until corrupt local kingpins have the power to issue their own debt, without having to resort to the shadow banking system.

According to a report on Bloomberg yesterday: “China’s biggest banks are poised to report the highest proportion of bad debts since 2009 after late payments on loans surged to a five-year high.” But that’s not half the trouble: China’s shadow banking system is estimated to account for 70 to 100 per cent of the country’s GDP. It is an impenetrable fog of dodgy deals and toxic debt, the complexity of which nobody can fully grasp.

On top of this, Morgan Stanley argues that China’s corporate debt is equal to the whole country’s national income, and China’s consumers are in more debt than ever. In fact, when you add it up, since 2008 China’s public and private debt has ballooned from 135 per cent of GDP to more than 200 per cent today…

… __On China’s fiendishly complex financial system, impenetrable shadow banks and horribly indebted local governments, companies and
consumers

More on China’s ghost economy:

Hangzhou government will hide the cooling trend in the real estate market. Any price decline more than 15% below the list price will not be entered into the online registry. Developers are not forbidden from cutting prices and no sales will be stopped, though at least one developer expressed concern that advance sales permits may not be issued if the price cuts are deemed too large. _ICS quoted in ZeroHedge

Tiananmen Square: An Exiled Dissident’s View of China

Meanwhile inside Potemkin Putin’s Russia, capital flight and brain drain continue —
and threaten to worsen as a result of Putin’s grand Ukrainian adventure.

“For any country, international contacts are a lifeblood of stimulation, fresh ideas, and opportunities,” he said. “So many will try to leave simply to avoid such isolation and the harm it does to creativity and opportunity.”

Andrei Kortunov, General Director of the Russian International Affairs Council (RIAC), predicts that in the near future the outflow of talented and creative people might be the case because of the political situation in the country and economic challenges.

“Historically, brain drain is accompanied by capital outflow from a country,” he said. And in this situation there will be two major factors that fuel this trend. If Russia’s economy has stagnated, with Europe and the U.S. gradually getting out of the economic crisis, it will increase ‘brain drain’. Political factors will also play a role: An ideological rejection of Western values will frighten liberal, more educated and creative people.” _
http://www.russia-direct.org/content/ukrainian-crisis-could-lead-another-russian-brain-drain

If the Ukrainian crisis ends up isolating Russia in the world, it may lead some of Russia’s best and brightest to pursue opportunities abroad. Can Russia deal with this challenge? __ http://www.russia-direct.org/content/reversing-russian-brain-drain

Putin might be celebrated as the one who brought back Crimea, but he also alienated Russia from the West. Russian elites and the middle class do not vacation in Abkhazia or Crimea, but in Turkey, Spain and Italy. They do not send their children to universities in China or North Korea, but in the US and Europe. They prefer to drive German cars and are crazy about Italian fashion. _Source

As Putin increases Russian isolation from the more modern world, Russia stands to lose ever more of its best science graduates and professionals, the life’s blood of Russia’s future.

More: Russian Media — How propaganda gets done

The Russian central bank last month said $63.7 billion left Russia in the first quarter, equal to all capital lost in 2013. The World Bank estimates this year’s total could reach $150 billion. U.S. automakers GM and Ford, which were doing well in Russia’s underserved auto market, decided this year to slow down or stop some production lines “because of political risk,” Cohen said. Companies leave because of corruption, but the worsening economy is another factor. “The economy is projected to slow down or go into recession. “Consumer income is dropping; consumer credit is dropping. So people will be buying less, including American cars,” he said.

… Russian officials may be thinking they can operate without being part of the global economy, but “it feels like going back, after 30 years, to where we were in the Soviet Union,” she said. “People always hope for the best. I don’t hope for the best anymore. It’s not like tomorrow the curtain will fall, but the sooner we leave the better. _Tech Startups Abandon Moscow (h/t NBF)

Brain drain, capital flight, growing problems with alcoholism, diseases of tobacco abuse,
infectious diseases, violent crime, a hostile environment for business, and horrific rates of suicide — all combine with low birthrates, high death rates, high abortion rates, and a drain of young fertile Russian women seeking better lives overseas. Ethnic Russians inside Siberia are either fleeing or dying off. Russia’s poor demographic future seems on a greased slide to oblivion.

It is important to look at China and Russia together, since their outlooks will interact
strongly for many years into the future. Both countries are still trying to emerge from
serious problems dating back to their communist pasts, with no guarantee that either will be able to avoid serious schisms in the not-so-distant future. And western mainstream press coverage of both countries views the two dictatorships through rose-tinted glasses, leaving most westerners largely in the dark on what is happening inside two of the countries with the most influence over the future of the globe.

Not that the US or Europe are doing so hot themselves. The US struggles under the worst US president in history with record numbers of able workers unable to find jobs, while Europe is trying to survive suicidal energy and immigration policies.

There is not a country in the world that can afford to cripple itself by adopting green energy and climate policies — and yet that is exactly what incompetent leaders in the US and Europe are attempting to force onto their citizens. This intentional hobbling of entire economies by ideologically bound leaders and bureaucratic systems allows despotic nations such as China and Russia to limp ahead with global programs of international disruption and the propagation of tyranny, such as we see with Russia/China friends such as Syria, Iran, North Korea, Venezuela, and any number of other criminal regimes and state terrorism promoters.

More: Obama’s Energy Plan is a Gift to Russia and China :

Putin desperately needs higher oil prices, to fund his adventures overseas and his promises of higher pay and benefits made to Russians and Crimeans alike. Russia’s growth has slowed, the government has promised to spend $48 billion building up Crimea, and foreign capital is leaving the country. With 70 percent of Russia’s exports and17 percent of the economy dependent on oil, an aggressive U.S. energy policy could have been a powerful weapon.

Instead of declaring a full-out program to boost domestic energy, we will now spend our great energy bounty to drive carbon emissions lower. Americans are being told this is an urgent need – with President Obama speciously linking carbon emissions with weather disasters and respiratory ailments. This program will be another unpopular, divisive quest by Mr. Obama to secure his legacy; instead it may become an anvil around the country’s neck.

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6 Responses to China’s Economy Blowing More Bubbles; Russian Brains and Capital Flee

  1. bob sykes says:

    It’s not just Russians, white people everywhere have below replacement level reproductive rates, as do the Han Chinese, the Koreans and the Japanese. Japan’s population is actually falling Demographic failure is a disease of culturally and economically advanced high-IQ populations everywhere.

    The world’s population is expected to peak around 2030 and then decline and age thereafter. A smaller population would be desirable, but the age structure is wrong. The elderly population the world is about to get will be unproductive and dependent, uncreative, reactionary and intolerant.

    You are an optimist, but population/IQ decline plus economic failure plus the rise of tyrannical governments and Islam does not bode well for the world. Large-scale warfare (now nuclear) and economic collapse are back on the table.

    • alfin2101 says:

      Yes. Richard Lynn’s “Dysgenics” gives a good overview of why high-IQ and high-conscientiousness populations are failing to breed. Lionel Tiger’s “The Decline of Males” looks more closely at the sexual implications of the developing failure to thrive of advanced societies.

      It’s best to be neither completely optimistic nor completely pessimistic. The phrase “hope for the best, prepare for the worst,” is another way of saying “be ready for anything.”

      There are many prepper and survival blogs and websites around, but they only urge people to be ready for doom. I suggest it is better to be ready for doom and boom, in succession, in any order.

  2. swampie says:

    I can tell you a reason for the birth decline among the responsible folk right now: It will cost daughter and her husband $200 per week for daycare for their newborn infant. The three-year-old (potty trained) child is an additional $150 per week. The seven and ten-year-old kids are $125 each. Just the costs for daycare for the four children are $2,400 per month per month when school is out. When school is in session, before and after school care is @ $150 each for the two oldest children. That doesn’t include things like clothing, food, toys, or other expenses that children incur. A young married couple with student loans, vehicle payments, insurance, and house payment or rent finds it almost impossible to meet such obligations. Children for working adults are a financial liability and, sadly, parenthood is best committed by the young, healthy, and energetic who are also usually broke.

    An unwed mother drawing benefits, subsidized housing, and subsidized insurance, on the other hand, is rewarded financially for additional children. She will even be put through school at taxpayer expense.

  3. alfin2101 says:

    Very true.

    But we need to understand why young adults are so pressed for cash in the first place. Why mothers have to work, and why daycare is so much in demand — and thus so expensive.

    If a mother is married, why can’t she stay home with the child at least for the first few years? Think of all the different pressures — economic, social, governmental (taxes, regulations, etc.) — that force mothers into the workplace so that daycare becomes suddenly so important and exorbitant.

    Single mothers are another thing entirely, along with the social changes that have made single motherhood so common these days — largely caused by government policies and media/educational systems gone wrong.

    The rot is deep and wide, and the fallout of misery will be correspondingly widespread. Communicating networks of resilient and dangerous communities (R&D communities) can mitigate the problem only for a relative few. But those few are meant to form the nucleus of leadership and innovation for what comes after.

  4. swampie says:

    Well, I know the market forces that are pressuring daughter and her husband. His income has dropped since 2008 and “man” jobs are vanishing. Now she’s the main wage earner, but doesn’t earn enough by herself to provide insurance, vehicles, house payment, food, etc. SIL, being the lesser wage earner, stayed home for a year when their now-3-year-old daughter was born, and they’re still paying off the bills from that. SIL went back to college to get a different degree in something that was allegedly in demand; he’s had ONE interview in his new field of choice and that was for a job paying below Seattle’s minimum wage, and there are hundreds of other applicants. And there are student loan payments, too. He started school under the GI bill but quickly found that the GI bill payments were as capricious and dysfunctional as VA care.

    They’d like to sell their (now too small) house and move closer to us so that they wouldn’t have any day care costs at all, but the house is` worth $50,000 less than when they got the mortgage on it. Then there would be the commuting costs because they’d each have over a one hour each way commute. The kids live with us during school breaks and summer vacation, so the child care costs are lower than what they could be.

    • alfin2101 says:

      Yes, a very common story. Either son-in-law needs to learn welding, or he needs to declare himself “gay” or “trans” to get hired. In Obama-world, males of European extraction are being starved out of the workplace unless they have special in-demand skills, or are part of an “oppressed minority” somehow.

      That is why resilient and dangerous communities are so important, as “shadow” or “underground” economic centres of prosperity for the future, as Idiocracy sets in. The mainstream/skankstream (government-academia-media-neutered commercial interests) is shutting out and putting out of business those who are seen as traditional enemies of the progressive future.

      Alternatives have to be built and grown outside of the corrupt mainstream.

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