China

[The_Polymath]

A “systemic credit event” according to BofA.

Xi is desperately trying to hide the extent of the damage from the collapse of the property market (like he did with Covid), but that is only going to make things worse when it comes to their economic progress (which can be tracked from the outside), as he is just building the proverbial dam higher and higher.

Chinese property woes trigger ‘dramatic shift’ into US stocks

[knoath]

@dr_t_non-fan

@Indy

What do other people think?

Did you know that in China there are fifty six cities with over a million people?

I have 49 more to visit.

[joejam]

@knoath

I have 49 more to visit.

I have 56

[knoath]

Well, given that China’s population is shrinking, maybe it’ll be less than 56 of them that you’ll need to visit when you finally get around to it.

[Indy]

@The_Polymath

Xi is desperately trying to hide the extent of the damage from the collapse of the property market (like he did with Covid), but that is only going to make things worse when it comes to their economic progress (which can be tracked from the outside), as he is just building the proverbial dam higher and higher.

This may all be true, but I don’t see that it is supported by your link. The article says that money managers are shifting money out of Chinese stocks. It implies that Xi isn’t doing enough – " But the actions have fallen short of the “bazooka” many investors think is required."

It’s interesting that

“A third of fund managers named Chinese commercial real estate as the most likely source of a ‘systemic credit event’ in the September instalment of Bank of America’s monthly poll, with the proportion more than doubling since last month to eclipse concerns over US commercial property.”
So apparently, when they asked about the most likely systemic credit event in August, the most common response was US commercial property.

[The_Polymath]

This is what I have been referring to in this thread.

Their governance is dysfunctional because they don’t trust their people unless they have known them for decades. Ideology and corruption creates huge economic inefficiencies as you have too much censorship and need to control.

I like to refer to this issue as Heisenberg’s uncertainty principle applied to political ideology: the more you try to control a complex economic system, the larger the economic inefficiencies that arise. The old USSR was a good example of this as well.

Chinese Military (PLA) has huge corruption problems

While many analysts view Xi’s anti-corruption campaigns as politically motivated, one US official said graft was endemic in the PLA, inhibiting the president’s ambitions of turning it into a force capable of tasks such as subduing Taiwan. “It [corruption] has had a profound effect on what they’re able to do, and how they do it,” the official said.

Xi is only really interested in loyalty because the only thing he truly fears is being purged himself by insiders.

loyalists to the top leadership positions and excluded rival factions — such apparent purges would become more regular, said NUS’s Wu.

Officials would compete to show their loyalty and try to expose rivals’ weaknesses, he said. In a paper on tensions between Xi’s top officials, Guoguang Wu, senior research scholar at the Center on China’s Economy and Institutions, Stanford University, said that these disputes accounted for many of China’s contradictory policies, such as trying to attract external investors while conducting national security raids on foreign consultants.

“When the supreme leader controls everything, ironically, the CCP regime becomes less stable politically and more inconsistent in terms of governance,” Wu wrote in The China Leadership Monitor magazine this month.

Then there were two: disappearance of second Chinese minister sparks speculation - Then there were two: disappearance of second Chinese minister sparks speculation | Financial Times via @FT

[knoath]

@The_Polymath

I like to refer to this issue as Heisenberg’s uncertainty principle applied to political ideology: the more you try to control a complex economic system, the larger the economic inefficiencies that arise.

I agree with what you say but perhaps it could more accurately be referred to as the observer effect.

Uncertainty principle

Historically, the uncertainty principle has been confused[8][9] with a related effect in physics, called the observer effect, which notes that measurements of certain systems cannot be made without affecting the system,

[The_Polymath]

Not sure observer effect applies as you are not simply observing an event, you are in fact applying force (momentum) to the system as well, in order to achieve a desired outcome (expectation).

In any event, I recognise its not a perfect analogy but the trend in China seems fairly clear. Xi is increasingly trying to centralise power, and the circle of influence around him is shrinking. This is having increasingly negative effects on governance at all levels.

This reminds me a lot of how the old Politburo of the USSR functioned. The members became disconnected from the country, and you ended up with poor economic outcomes because people ended up telling them what they wanted to hear (as they were afraid to be purged for not showing enough loyalty), as opposed to the actual economic reality.

[EimonGnome]

Pure speculation follows. I got no links.

It’s so curious how China can blend capitalism and communist authoritarian. They seem at odds. But real estate is pretty cool.it’s a blend of capital and regulatory approval. The key might be “controlled corruption”

As long as the bribes are flowing to the politicians and the real estate capitalists and banks are happy, it’s smooth sailing for Xi. If that goes south, hard to say what the political and social ramifications could be. So it might be a bigger crisis than meets the eye.

[The_Polymath]

I have a friend who regularly visits China for extended family reasons, and the situation regarding bribes is really off the scale.

Basically, public officials will ignore you and not do their job unless you pay them off.

A system like that is just never going to work long-term.

[Snikelfritz]

To be fair a lot of developing countries are like that, I’m looking at you India…

[The_Polymath]

Evergrande chair put under ‘mandatory measures’ on suspicion of crimes - Evergrande chair put under ‘mandatory measures’ on suspicion of crimes | Financial Times via @FT

[Actuary321]

Evergrande on Thursday said its chair, Hui Ka Yan, had been placed under “mandatory measures” on suspicion of involvement in “illegal crimes”, a sign of escalating government pressure on the Chinese developer almost two years after its default shook global markets.

I see, “illegal crimes” as opposed to the legal ones?