Chinese Economics Thread


AssassinsMace

Brigadier
Unlikely to be viable. All bids to national providers, can be subject to freedom of information requests, if they are not published as standard. Even if such information is not normally made public, the US will know if China is trolling them by purposefully making lowball bids to US ally nations that are likely to get the US grants, so can easily get those nations to publically disclose the lowball price China was offering.

It will be hard to charge actual market prices when everyone can point to specific lowball bids you have made, and so it’s quite possible that by trolling in this way, China ends up being the one being forced to make unsustainable subsidies.
Well that's why I said conspire meaning with these countries. If these countries the US offers to subsidized not to buy Huawei, might as well help them get more money out of it. Multiply it by how many countries and that's going to be a lot of money the US will have to fork up.
 

Rettam Stacf

Junior Member
Registered Member
IMF just updated 2020 GDP growth forecast :

World -4.9%

US -8%
Euro Zone -10.2%
China +1%

UK -10%
India -4.5%
Brazil -9.1%
Mexico -10.5%

IMF slashes its forecasts for the global economy and warns of soaring debt levels
  • The
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    slashed its economic forecasts once again on Wednesday and warned that public finances will deteriorate significantly as governments attempt to combat the fallout from the
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    crisis.
  • The IMF now estimates a contraction of 4.9% in global gross domestic product in 2020, lower than the 3% fall it predicted
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    .
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Rettam Stacf

Junior Member
Registered Member
The massive zombie loans, the hugely inefficient SOEs, etc. etc...are exactly the structural problems im talking about. The CCP will never give these up because doing so means decreasing state power itself. At the same time, delaying these structural reforms means they become harder to solve in the future.
Why are SOEs so bad ? Because the "West knows Best" ? China has been "saddled" by "hugely inefficient" SOEs since before Deng Xiaoping's time. Why then China's economy has been growing at break neck speed yet to be matched by any post WW II economies ?

Below are my take on China's SOEs that most Western economists do not want to talk about.

Type 1 SOEs : China created certain SOEs for the main purpose of preserving employment. These are the genuine "inefficient" ones. Instead of laying off the people and pay them unemployment and other social hand outs like Western countries, it is the Chinese government's philosophy to offer them employment instead to preserve their dignity and Chinese's work ethics. You can see the same philosophy in China's foreign policy which rarely offers foreign aids like her Western counterparts. Instead, China helps other countries by offering investment in business and infrastructure projects with low interest loans. In doing so, Chinese treats them as equals. Back to those SOEs. Overtime, as China's per capita income improves, these type of SOEs will slowly disappear. But the priority is not on reforming them (i.e. make them profitable by laying off people), but on making people less dependent on them for employment (i.e. create other better paying job opportunities).

Type 2 SOEs : There are certain industries that will never be profitable, but are of great importance to China's economic development. A good example of those is the railroad. US's rail transport is essentially all privatized. At the other end of the spectrum, the Indian rail transport is part of the government's Ministry of Railways. How well both work is for all to see. China has chosen the middle approach via SOE and has the best result to show among the three. These SOEs are hardly "inefficient" and provide services to Chinese citizens that are the envy of the rest of the world.

Type 3 SOEs : There are certain industries that are strategic to China's survival as a nation. Example of these are the shipping, ship building, energy and energy services, defense and certain financial segments. These have to be state controlled and supported. Imagine a powerful foreign government put sanction on any company that ship goods for China and China has no strong shipping companies of her own. Like Type 2 SOEs, majority of Type 3 SOEs can hardly be called "inefficient" as Western media would want you to believe in.
 
Last edited:

j17wang

New Member
Registered Member
IMF just updated 2020 GDP growth forecast :

World -4.9%

US -8%
Euro Zone -10.2%
China +1%

UK -10%
India -4.5%
Brazil -9.1%
Mexico -10.5%

IMF slashes its forecasts for the global economy and warns of soaring debt levels
  • The
    Please, Log in or Register to view URLs content!
    slashed its economic forecasts once again on Wednesday and warned that public finances will deteriorate significantly as governments attempt to combat the fallout from the
    Please, Log in or Register to view URLs content!
    crisis.
  • The IMF now estimates a contraction of 4.9% in global gross domestic product in 2020, lower than the 3% fall it predicted
    Please, Log in or Register to view URLs content!
    .
Please, Log in or Register to view URLs content!

Please, Log in or Register to view URLs content!

US growth will probably be much lower. Just remember this is a political document which needs a great deal of consensus before it is released. Numbers are massaged here so as to not offend anyone. When they were creating this document, nobody was considering that the US was going to have a resurgence in COVID which will extend the lockdown from 2-3 months like in other countries to much longer. Also, not sure what impact the George Floyd protests will have, although it is reasonable to assume it will lead to thousands of bankruptcies in American retail.
 

ansy1968

Junior Member
Registered Member
Why are SOEs so bad ? Because the "West knows Best" ? China has been "saddled" by "hugely inefficient" SOEs since before Deng Xiaoping's time. Why then China's economy has been growing at break neck speed yet to be matched by any post WW II economies ?

Below are my take on China's SOEs that most Western economists do not want to talk about.

Type 1 SOEs : China created certain SOEs for the main purpose of preserving employment. These are the genuine "inefficient" ones. Instead of laying off the people and pay them unemployment and other social hand outs like Western countries, it is the Chinese government's philosophy to offer them employment instead to preserve their dignity and Chinese's work ethics. You can see the same philosophy in China's foreign policy which rarely offers foreign aids like her Western counterparts. Instead, China helps other countries by offering investment in business and infrastructure projects with low interest loans. In doing so, Chinese treats them as equals. Back to those SOEs. Overtime, as China's per capita income improves, these type of SOEs will slowly disappear. But the priority is not on reforming them (i.e. make them profitable by laying off people), but on making people less dependent on them for employment (i.e. create other better paying job opportunities).

Type 2 SOEs : There are certain industries that will never be profitable, but are of great importance to China's economic development. A good example of those is the railroad. US's rail transport is essentially all privatized. At the other end of the spectrum, the Indian rail transport is part of the government's Ministry of Railways. How well both work is for all to see. China has chosen the middle approach via SOE and has the best result to show among the three. These SOEs are hardly "inefficient" and provide services to Chinese citizens that are the envy of the rest of the world.

Type 3 SOEs : There are certain industries that are strategic to China's survival as a nation. Example of these are the shipping, ship building, energy and energy services, defense and certain financial segments. These have to be state controlled and supported. Imagine a powerful foreign government put sanction on any company that ship goods for China and China has no strong shipping companies of her own. Like Type 2 SOEs, majority of Type 3 SOEs can hardly be called "inefficient" as Western media would want you to believe in.
hi Rettam Stacf,

Your the best:cool::cool::cool::cool::cool::cool::cool: 7 thumps up!!!

It is also a way to maintain and preserve the skillset of the workforce . UTILITY SOE is there to provide service not for pure profit. It is the prefer target of western financial institution cause it is a sure way of easy return with big profit. A perfect example of corporate greed is the privatization of our water system in the PHIL. It is the most expensive in asia, the service is lousy and it was sold by the govt for a pittance, cause we follow the advise of IMF , WORLD BANK and US banks.

With the soaring cost of BASIC SERVICES, it affect the living standard of the people ,the economy due to competitive cost pressure and overall the country, the only one who gain are the bank and the 1%(usually oligarch).
 

ansy1968

Junior Member
Registered Member
from BEIJINGWALKER (PAKISTAN DEFENSE FORUM)

Defying Dire Predictions, China Is the Bubble That Never Pops
The country’s rapid rebound from the coronavirus means it’s poised for another year of growth while the U.S. contracts.

By Tom Orlik
June. 23 2020
[IMG]


Don’t tell President Trump, but China is winning.

The U.S. has thousands of
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. China’s reported daily case count is
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. The U.S. is braced for an historic 6% contraction in gross domestic product. China’s rapid rebound means it’s poised for another year of growth—and a speedier catch-up in the race to overtake the U.S. as the world’s biggest economy. America’s international standing has seldom been lower. From the corridors of the World Health Organization to the protest-ridden streets of Hong Kong, China’s global clout increases.

For many, China’s world-beating rebound must come as a surprise. To read the history of China analysis in the last 30 years is to be bombarded with predictions of imminent demise. Sure, the skeptics conceded, double-digit growth looked impressive. But, they said, just poke beneath the surface, and the reality was an unsustainable bubble. The authoritarian political system was too constricting for the economy to truly thrive. Banks were
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. The industrial landscape was littered with zombie companies, the urban landscape with ghost towns.

At first, it appeared Covid-19 would confirm that narrative. Reports about a virus contracted from bats and spread in a crowded wet market confirmed prejudices about a primitive and backward people.
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—the whistleblower who tried to alert China’s authorities but had been silenced—affirmed the superiority of the open U.S. system. Footage of mechanical drones barking “go home” at lockdown dodgers added fears about the rise of a surveillance superstate.

The lockdown hammered China’s economy. With factories closed, profits for state-owned enterprises slumped, falling close to 50% in the first months of the year. Home sales—a critical driver of China’s construction boom—plummeted. Tax revenue and land sales, which are the main source of revenue for local governments, followed them down. Workers faced rising unemployment and shrinking incomes. The official data showed the jobless rate rising above 6%. Cynics assumed the reality was worse.

In the grizzly bear narrative, the arch villain in China’s economy is debt. A four-trillion-yuan ($565 billion) stimulus that started as a powerful response to the 2008 great financial crisis ran too strong for too long.
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as a whole rose precipitately—climbing from 140% of GDP in 2008 all the way to 260% in 2019. Everyone from International Monetary Fund policy wonks to Wall Street money managers to China’s own communist cadres were warning of a dangerous bubble.

The biggest borrowers—state-owned enterprises, real estate developers, local governments—were the very same groups that were now facing plunging incomes as Covid-19 swept through the economy. Surely the day of reckoning was nigh.

For some in the Trump administration, it seemed like a good moment for a victory lap. China’s outbreak would “accelerate the return of jobs to North America” said Wilbur Ross, the commerce secretary. Back at the end of January, when China had the virus and the U.S. did not, that seemed tone-deaf to human suffering. A few months later, with China in recovery mode and the U.S. reporting 2.2 million cases, it’s clear that it was also off-base on where the economic costs would fall.

Beijing took action on Feb. 1, a Saturday. For more than a week, China’s financial markets had been closed, an extended break as policymakers kept the 1.4 billion population on lockdown for the Lunar New Year holiday. On Monday, they opened again. With traders scrambling to price in a plethora of bad news—from a rising case count to falling markets in the U.S. and Europe—there was only one way the markets could go: down.

In a show of strength, the People’s Bank of China, the China Banking and Insurance Regulatory Commission, and the State Administration of Foreign Exchange issued a joint statement, committing to stabilize the market and
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to small businesses stretched to the breaking point by the lockdown. More action followed. The People’s Bank of China injected 1.7 trillion yuan into the economy—a record slug of cash aimed at calming nervous markets. Interest rates were cut. Bearish short sellers faced new regulatory constraints. And cash-rich insurance funds were given a clear signal: Buy stocks now.

It worked. A drop in stocks was inevitable, but with the assurance of strong support from Beijing the market quickly regained lost ground. The yuan, a crucial gauge of investor confidence, moved back to the strong side of 7 to the dollar. China’s seven-day repo rate, the beating heart of the financial system, stayed low and stable, showing banks had no shortage of funds.

With the financial system steady, policy focused on plugging the gaps for businesses and households—preventing the lockdowns necessary to control the pandemic from triggering a downward spiral of bankruptcies and unemployment. Banks were told to go easy on borrowers. Nationwide, small enterprises and companies got a holiday on loan repayments. In Hubei, the epicenter of the outbreak, big ones were off the hook too. Fiscal policy shifted to reduce the burden on business, freeing up cash flow. An accountant at a cinema in the northern metropolis of Tianjin says breaks on taxes and social security contributions helped keep the lights on through the lockdown.
 

ansy1968

Junior Member
Registered Member
continue:::

Major corporations, from state-owned dinosaurs to gleaming new tech titans, swung into action. From long experience, state-owned companies know the crisis drill—no letting workers go, no turning off the investment taps, keep money flowing through the system. Tencent Holdings Ltd. and Alibaba Group Holding Ltd., tech giants whose payment and messaging apps are the digital arteries of China’s economy, created add-ons that enabled the government to judge who could leave the house safely. Leveraging its payments network, Alibaba provided cut-price loans to small businesses and street vendors, helping keep them afloat through the lockdown.

The outcome will be far from perfect. China is poised for the
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of the reform era. Bloomberg Economics’ forecast is for GDP to expand 2.1% in 2020, down from 6.1% in 2019 and the lowest since the start of Deng Xiaoping’s reform and opening in 1978. But a system-shaking crisis has been avoided. Markets are stable. Banks are still standing.

How did China manage once again to defy the doubters? The answer—as I argue in my new book, China: The Bubble That Never Pops—lies in the strengths of a system that are hiding in plain sight: rock-solid funding for the banks, state intervention that can be more strength than weakness, and the competitive edge that comes from enormous size.

Let’s start with the banks. Much ink has been spilled on the risks in China’s financial sector. Since November 2008, when then-Premier Wen Jiabao pressed the “go” button on the four-trillion-yuan stimulus, bank assets have more than quadrupled in size. Reviewing the history of credit bubbles, the IMF found none that had expanded so quickly, but plenty of more modest size that still imploded into crisis.

Worse, the problem of moral hazard—the assumption that a deep-pocketed government would backstop bad loans—was endemic. In 2019, cracks started to appear. Baoshang Bank Co., a city lender in Inner Mongolia, became the
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. Defaults, including by state-owned companies and local governments, rose. Even ahead of the Covid-19 crisis, it seemed like sky-high debt, recklessly allocated, might result in a day of reckoning.

Maybe tomorrow, but not today. Missing from the crisis thesis was a crucial point: Financial meltdowns don’t start because bad loans are too high; they happen because banks run out of funding. In the Asian Financial Crisis in 1997, Korea’s banks didn’t melt down because they had made too many loans to crony-capitalist chaebol. They melted down because the foreign funds they relied on to finance their operations dried up. In 2008, Lehman Brothers didn’t collapse because it had too many investments in dodgy mortgage- backed securities. It collapsed because the money markets that financed its activity decided to cut it off.

In China, the combination of a high savings rate and tight controls on moving capital out of the country means that a lack of funding is unlikely to be a problem. Its banks can count on a steady inflow of domestic savings to provide a stable, long-term basis to fund operations. While helter-skelter expansion in lending is a problem—as are a state-dominated banking system and zombie borrowers—as long as bank funding remains adequate, there’s no trigger for crisis.

Then there is the nature of business. Nowhere is the contrast between the U.S. free-market system and China’s state-centric approach as sharply drawn as in the relationship between government and corporations. In the U.S., a hands-off approach is a critical driver of economic dynamism. In China, the biggest banks, telecoms, airlines, and industrial companies are owned by the state. Even in private companies, the Communist Party exercises an influence that would be unthinkable in the U.S.

There are major costs to this approach. “We’re state-owned, so we don’t have to worry about profits,” says the manager of one massive power project on the outskirts of Beijing. Writ large, that cavalier attitude to the niceties of actually making money means a big chunk of the corporate sector is mired in low productivity. Return on assets for state companies is a fraction of the level in the private sector.

But there are also benefits. China’s direct control of state companies—and sway with the private sector—gives policymakers a powerful instrument to manage the ups and downs of the economic cycle. Rarely has that been more evident than in the response to the Covid-19 shock. State companies holding on to their employees prevented spiraling unemployment. Tech giants supported the public health response and the credit stimulus. In a crisis, government and business moving together can be a powerful force for resolution.

Behind it all are the benefits of China’s enormous size. As far back as 1776, Adam Smith—the grandfather of modern economics—recognized that the “vast multitude” of China’s population gave it a built-in advantage in the global economic race. If, Smith wrote, China could “learn for themselves the art of constructing all the different machines made use of in other countries,” they would be able to leapfrog ahead of smaller rivals. After Deng kicked open the door to the world in 1978, and even more after entry to the World Trade Organization in 2001, China had ample opportunity to “learn for themselves.” By directing the resources of the state to acquire new technologies, and then scaling them to China’s massive domestic market, industrial planners were able to give Chinese companies a competitive edge first in textiles, then metals, and now high-speed trains, solar panels, and nuclear power.

That story isn’t over. China’s GDP per capita is just a third of the level in the U.S. That means ample room for continued catch-up growth. As China focuses its attention on the technologies of the future—from electric vehicles to industrial robots and artificial intelligence—the annual pace of growth could stay close to 5% through 2025 and end the decade not much lower. With global businesses deeply invested in their China relationship, Trump’s trade war is unlikely to change the trajectory.

“There are lots of Baoshangs,” says one senior banker in Henan province, hinting that other banks could go the same way as the failed lender. Maybe. But as long as the market believes the government will underwrite their operations, they will stay in business. And as long as China continues to grow, the government’s ability to provide that backstop won’t come into question.

One day, a crisis will come along that’s too big even for Beijing to handle. When that happens, the price of allowing problems to fester in the dark will be a meltdown of monumental proportions. One day. But if a once-in-a-hundred-year pandemic doesn’t pop the bubble, the question is: What will?

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plawolf

Brigadier
Why are SOEs so bad ? Because the "West knows Best" ? China has been "saddled" by "hugely inefficient" SOEs since before Deng Xiaoping's time. Why then China's economy has been growing at break neck speed yet to be matched by any post WW II economies ?

Below are my take on China's SOEs that most Western economists do not want to talk about.

Type 1 SOEs : China created certain SOEs for the main purpose of preserving employment. These are the genuine "inefficient" ones. Instead of laying off the people and pay them unemployment and other social hand outs like Western countries, it is the Chinese government's philosophy to offer them employment instead to preserve their dignity and Chinese's work ethics. You can see the same philosophy in China's foreign policy which rarely offers foreign aids like her Western counterparts. Instead, China helps other countries by offering investment in business and infrastructure projects with low interest loans. In doing so, Chinese treats them as equals. Back to those SOEs. Overtime, as China's per capita income improves, these type of SOEs will slowly disappear. But the priority is not on reforming them (i.e. make them profitable by laying off people), but on making people less dependent on them for employment (i.e. create other better paying job opportunities).

Type 2 SOEs : There are certain industries that will never be profitable, but are of great importance to China's economic development. A good example of those is the railroad. US's rail transport is essentially all privatized. At the other end of the spectrum, the Indian rail transport is part of the government's Ministry of Railways. How well both work is for all to see. China has chosen the middle approach via SOE and has the best result to show among the three. These SOEs are hardly "inefficient" and provide services to Chinese citizens that are the envy of the rest of the world.

Type 3 SOEs : There are certain industries that are strategic to China's survival as a nation. Example of these are the shipping, ship building, energy and energy services, defense and certain financial segments. These have to be state controlled and supported. Imagine a powerful foreign government put sanction on any company that ship goods for China and China has no strong shipping companies of her own. Like Type 2 SOEs, majority of Type 3 SOEs can hardly be called "inefficient" as Western media would want you to believe in.
Exactly, and excellent points. Just to add that western economic and political hectoring can never be trusted. Half of it is western internal ideological conflict spilling into the outside world, and the other half are malicious lies of sweetened poison pills. If you are stupid enough to follow their proscriptions, you will either end up robbing yourself to profit western oligarchs, and/or you end up wrecking your own economy.

If Chinese SOEs were half as bad as western talking heads would have you believe, why was getting China to scrap and break them up such a central part of Trump’s initial trade war demands?

Western main strain capitalist economics is a lie, but American and other western societies have become so focused on ideological purity rather than reality, anyone who dares to question this new orthodox is marginalised and discredited, while quacks who’s predictions are proven wrong time and again and given prominent positions of power and influence.

The free market model just doesn’t work very effectively to technological breakthroughs and true innovation.

If we look back at America’s golden age and the height of its powers from the 80s to early 2000s, we can see that the backbone and foundation of America economic success was its scientific dominance, which in term was underpinned by vast government (Usually military but also with significant contributions by the likes of NASA) funded and directed R&D.

Apple and the iPhone is perhaps the perfect case study in both earlier American success, and present day American stagnation.

Apple was just a mediocre bit player until the iPhone revolutionised its fortunes. What is remarkable but rarely reported is that of the 10 most central and revolutionary technologies that made iPhones and other smartphones possible, every single one was created through American government (read military) funded R&D programmes.

Apple was able to take the fruits of these government programmes (at almost no cost) and combine it to make the most successful and profitable product in human history.

While private enterprise obviously played a critical role in taking existing technologies to make this revolutionary product, what is always omitted (due to western ideological battles) is the equally if not more important role government played in researching the underlying technologies that made the smartphone possible.

It is no accident that as the Cold War ended and America massively scaled back its government R&D funding, American private tech companies went into its slump of stagnation and decline.

iPhones have stagnated and fallen increasingly behind its Asian rivals in terms of introducing new technologies and features because America stopped making the big, revolutionary scientific breakthroughs, and it is Asia (Specifically China) that is now taking the lead in terms technological innovation.

When I was working in the pharmaceutical industry, a global product development director gave a perfect illustration of why private, market driven R&D is ineffective and wasteful.

When private medical companies make investment decisions on what medicines to invest their R&D budget in, they look, above all else, at profitability.

That means the diseases that affect the most number of people, and treatments that are most likely to be successful, are the ones individual private companies would choose to invest in.

The problem is that every private company is independently making the same choices based on the same parameters and data, which means invariably, most private companies end up investing to develop the same kinds of medicines for the same most common diseases. You end up with massive duplication and waste with dozens or even hundreds of functionally identical treatments for some diseases while other, potentially more dangerous and lethal diseases are passed over altogether.

The frequent patent wars between Apply and Samsung is a good example of this happening. It’s pretty common for two completely independent teams to come up with the same solution if they were set the same task with similar budgets, deadlines and parts supplier. Consequently, many private companies are also increasingly wasting their R&D budgets on diversification rather than innovation, if a rival managed to get a key piece of technology patented first. Even if they completely independently developed their version, a patent court is likely to rule that they are in breach, so the loosing company would need to invest more resources and time to literally re-invent the wheel to avoid having to pay exorbitant licensing fees to a direct rival.

It is the central role of government that is the key different between the likes of Huawei and Apple now.

As such, I would say that the most fundamentally important role that Chinese SOEs perform is not employment support, but R&D investment. Closely followed by infrastructure building and only then social stability through employment.

The main reasons western think thanks have such an almighty hard-on for breaking up and privatising Chinese SOEs are twofold.

From a strategic POV, since America cannot easily go back to Cold War era state R&D funding levels due to internal ideological differences (incidentally, a key reason why many hawks in the US are pushing for a new Cold War with China is because they also privately recognise the Fundamentally important role of state lead R&D but cannot win the internal ideological battle without a new Big Bad to scare the free market purists with), the next best thing in terms of the Great Game competition with China is to try and trick China into giving up its own edge in this area.

The second reason is because privatisation is the biggest profiteering bonanza possible for oligarchs.

Privatisation has always been the biggest transfer of wealth from the state to extremely few, well connected private individuals in human history.

Oligarchs cherry pick the most profitable parts of public institutions and pay pennies on the pound to make them theirs while leaving all the unprofitable parts for the state to continue running.

Previously SOEs might be breaking even or even making small profits because they were able to cross subsidies to provide vital services to unprofitable areas, but after privatisation, the privatised parts start making record profits for their new private owners because they no longer need to subsidies for the unprofitable vital services, while the remaining publicly funded services make record losses that the taxpayer need to pick up because all their profitable parts have been sold off. This is then used to illustrate the ‘inefficiency’ of SOEs to justify more privatisation. It’s just one giant scam and works in the west because the rich oligarchs who stand to profit the most from privatisation also owns all the media and the politicians making the decisions.

It is the most disgusting kind of legalised corruption and robbery of state coffers in history, and is most certainly not something China wants to be learning from the west.
 

ansy1968

Junior Member
Registered Member
hi Plawolf

Its a text book NEO LIBERAL policy wrap as GLOBALIZATION, it is used to enslave countless countries (PHILIPPINE, INDONESIA, LATIN AMERICA) and even used military force (former Yugoslavia and now UKRAINE). Its main target is CHINA (and possible RUSSIA) the country who benefited the most from GLOBALIZATION but is not willing to surrender its STATE POWER.

How ironic that they (internationalist) always cite CHINA as an example of globalization success, urging other countries to open up its economy and privatize its SOE (state utilities). if they failed in the experiment they will blame them cause they did'nt open it more.
 

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