Workers walk out from a construction site at the Central Business District of Beijing, China Tuesday, Jan. 20, 2015. China's economic growth slowed to 7.4 percent last year, the weakest expansion in more than two decades. The numbers released Tuesday, are still miles ahead of growth rates in major industrialized economies, but represent a sharp decline from double digit growth in previous years. That adds to pressure on the country's communist leaders as they try to prevent a sharper slowdown in 2015 while overhauling the economy. (AP Photo / Andy Wong)Workers walk out from a construction site at the Central Business District of Beijing, China Tuesday, Jan. 20, 2015. China's economic growth slowed to 7.4 percent last year, the weakest expansion in more than two decades. The numbers released Tuesday, are still miles ahead of growth rates in major industrialized economies, but represent a sharp decline from double digit growth in previous years. That adds to pressure on the country's communist leaders as they try to prevent a sharper slowdown in 2015 while overhauling the economy. (AP Photo / Andy Wong)

Chinese entrepreneur Guo Xueming shares his experience partnering with Japanese business investors in China. This is a direct translation of his account posted to his Wechat account on March 7. — Epoch Times translation team

One day in October 2012, Matsumoto Moria, the Japanese Consul General in Shenyang, invited me to eat with him at the Japanese restaurant inside the Isetan Department Store in Shenyang. He wanted to know my take on the anti-Japanese demonstrations, including the smashing of Japanese cars, that were taking place in various parts of China.

Mr. Matsumoto advocated friendship between Japan and China. As a diplomat, he actively helped China attract Japanese investment. I met him at the groundbreaking ceremony of the Modern Architecture Industrial Park in the spring of 2010. Soon after, he came to my company to see me.

During our first visit, Mr. Matsumoto wanted to know how I was able to bring two top Japanese companies, Kashima Group and Lixil Group, to China in just a few months. These were Fortune 500 companies and top construction and building materials enterprises. Japanese companies are very conservative, and Kashima, founded in 1840, is even more conservative, ал айтты. Our company was registered in October 2009, and we signed contracts with Kashima in December 2009, with the relatively small registered capital of 100 million yuan (US$14.5 million).

“Your company was set up only a couple of months ago. How did you introduce them to China?” Mr. Matsumoto asked.

I summarized the three main points for Mr. Matsumoto.

One: The city of Shenyang has a diameter of 200 km. This construction area is equivalent to the total building area in Japan.

Two: There is a big difference in building material quality between China and Japan, especially in prefabricated construction, where China has zero and Japan tops the world. Japan’s prefabricated construction technology therefore has the advantage in China. It is able to take the market.

Three: Although our company was very small, our team members were all entrepreneurs and familiar with the market. Japanese companies that want to invest in China need a partner who understands the market.

My three points are actually just one: market, market, market.

What business cares most about is the market. Japanese companies came to China’s market. We signed contracts with Kashima, which brought Lixil. They also brought 17 affiliated companies to investigate the Chinese market.

Бирок,, during our meal at the Japanese restaurant, Mr. Matsumoto commented that with China’s anti-Japan sentiments, many Japanese companies had reservations about the prospects of investing in China. He asked for my perspective, as a Chinese entrepreneur, on the future trend of Sino-Japanese business cooperation.

I was very optimistic and told him that China’s three decades of development had benefited from the open-door policy. The future wouldn’t diverge from this policy.

Furthermore, consumers are very practical. There was no need to worry that there wouldn’t be a market for good products, I assured him. Nationalist emotional outrage and pragmatism in shopping are not the same thing.

And finally, those who boycott foreign products and smash cars on the streets don’t represent most Chinese people, I told him.

Mr. Matsumoto agreed with my analysis. He talked to me about the Japanese government being sincere about Japanese-Chinese friendship and about clearing Japanese companies’ doubts about China. He also talked about a plan to build a Japanese road in the Hunnan district of Shenyang to provide a favorable environment for Japanese businessmen there, and he invited us to invest in the road.

Shortly after my meeting with Mr. Matsumoto, a young man who had smashed a car in Xi’an was sentenced to prison. But Japanese companies remained sensitive, realistic and conservative; it did not help much to create a more optimistic attitude.

A few months later, the Kashima Group and Lixil Group decided to withdraw from the Chinese market. The plan of 17 related Japanese companies entering China also evaporated.

As their partner, we tried to find viable solutions. I asked twice to hold talks with the high-level executives of the three companies to study the issue of product adaptability in China and solve operational difficulties. But they refused to talk. They did not even listen to solution proposals. They were determined to withdraw and bear the financial and credibility losses. This was clearly not a decision based on cost. They had lost confidence in China’s market discipline. If a business is confident about the market, it will first think about solutions to problems instead of closing down without even listening to any solutions.

Kashima and Lixil left. Although we took over their technology and team and carried on, it was difficult to get expected returns from the tens of millions invested. Our team’s dozens of trips to Japan to negotiate—which we took great pride in—came to nothing. Our dream to build safe, earthquake-resistant residential housing in China based on Japanese architectural norms was difficult to achieve in the short term.

Chinese people are the biggest losers.

I do understand the Japanese firms. Investor confidence is based on predictability. If a country’s market is not determined by the key economic element of scarcity, but instead by uncertain factors, such as political, diplomatic, and nationalistic emotions, it will shake the confidence of foreign capital. Those with capital are not willing to risk it in an environment that offers no security.

The most important foundation of the market economy is the protection of private property. Customers are resources that are part of that property, and they are the only source of return on investment. Encouraging boycotts of products is in essence encouraging infringement and deprivation of property rights. If non-economic factors of resistance are regarded as legitimate and correct, and often happen in a society, it will fundamentally shake the foundation of a market economy.

While China’s anti-Japan protests were brief, companies see what they imply. Just like seeing a maggot in the corner of a room, one’s immediate conclusion is that the room itself is dirty.

In recent years, many foreign-funded enterprises have withdrawn from China. The Isedan, where Mr. Matsumoto invited me for dinner, also went bankrupt. The success rate of introducing foreign investment has substantially declined. Of course, there were many factors. By sharing my own experience, I just want to remind everyone of the harm we inflict when we direct our patriotic sentiments toward foreign companies.

I think politicians and diplomats should garner the wisdom, means, and patience to resolve disputes between countries. They should not motivate the public to smash foreign cars, or boycott foreign supermarkets or foreign fast food chains, which undermines the overall open-door policy and the basis of the market economy.

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Chinese sales staff walk along an aisle paved with gold bars at a gold exchange house in Kunming, Кытай, Dec. 11, 2012. (STR/AFP/Getty Images)Chinese sales staff walk along an aisle paved with gold bars at a gold exchange house in Kunming, Кытай, Dec. 11, 2012. (STR/AFP/Getty Images)

The world is full of golden rules. There is one for every field: ethics, communication, fashion. But there is only one that counts, the golden rule of money: “Who has the gold makes the rules.”

Кытай, it seems, wants to make the rules in the international monetary system, which is why it has been acquiring vast amounts of gold both through private and official channels.

Because of the obscure nature of the Chinese gold market and the reluctance of Chinese officials to show their hand, nobody has been able to accurately calculate how much gold the Chinese have amassed since about 2000, when they began amassing it.

Enter Koos Jansen, an analyst with Singapore bullion dealer Bullion Star. He has studied the Chinese gold market for years and recently came up with an estimate of total Chinese gold holdings: 19,500 metric tons, or 21,495 U.S. tons, at the end of January 2017.

“They have promoted gold ownership as a store of value since at least 2002, but more so when they introduced the ‘storing gold with the people’ concept in 2004,” says Jansen, a campaign encouraging private citizens to buy gold.

Private Hoard

According to Jansen’s estimates, total private holdings, including those of individuals and firms, are 15,500 metric tons. The official reserves of the People’s Bank of China (PBOC) are around 4,000 metric tons.

This would make Chinese the second biggest holders of gold after India, where citizens are estimated to hold 20,000 metric tons of gold in jewelry and other forms. Private sector holdings for the United States are unknown, but the Treasury still holds 8,134 tons in official reserves.

But where did China get all this gold when in the year 2000 it only had 4,000 tons in total?

The first piece of the puzzle is domestic mining.

“In the 1970s when China needed foreign exchange, that’s when they started their mining industry. They were supposed to start exploration and the people were incentivized to mine gold. That’s why there are so many gold mines in China.” He pegs the number at around 600.

Those 600 mines produced 490 tons of gold in 2015, making China the biggest producer ahead of Australia with 300 tons.

Importing Into a Black Hole

The next piece of the puzzle are imports. According to Jansen’s estimates, China imported about 1,300 tons of gold in 2016, mostly through Hong Kong but also directly from Switzerland and the United Kingdom.

Here, Jansen points out a peculiarity regarding Asian buying: “Asian demand is strong when the price goes down. Western demand is strong when the price goes up. In April 2013, the gold price collapsed and a lot of gold was exported from the West to China, mostly from the UK.”

When the gold gets into China, it is then sold through the Shanghai Gold Exchange (SGE), which also handles scrap supply and domestic mining.

Curiously, Jansen points out, none of this supply is going to the central bank but rather to consumers and companies.

“In the domestic market, there are laws and incentives to push supplies through the SGE. Scrap, domestic production, imports, all go through SGE at first. The withdrawals from the exchange are equal to total private gold demand.”

Private demand includes individuals who want to diversify their assets or institutional investors, like pension funds but also the gold sold to jewelry companies for later resale.

“Companies and individuals buy gold for the same reason. Get out of the Renminbi, diversify, protection, etc,” he says.

As for the central bank, Jansen says that their purchases don’t show up in official import statistics and are kept a tight secret.

“The Chinese army even has a special division, I call it the gold army. This gold army can still be active, they can pick it up directly in the UK,” he says. The central bank also uses commercial banks who buy in Switzerland or South Africa and secretly ship the gold to China.

Мисалы, the total gold holdings of the London Bullion Market Association dropped by 2,750 tons from 2011 үчүн 2015 but net exports were only 1,000 tons. Thus, those 1,750 tons are unaccounted for and most likely ended up in official Chinese reserves.

According to Jansen’s contacts at Chinese banks, official holdings are closer to 4,000 tons rather than the published figure of 1839 tons.

What does China need that gold for? “They buy official gold to internationalize the Renminbi. If there are enough reserves behind it, they can make it a credible currency.” He who has the gold makes the rules.

That’s also why China doesn’t allow even one ounce of gold and silver to leave its shores once it enters. “The West has been selling gold into a black hole,” says Jansen.

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Chinese sales staff walk along an aisle paved with gold bars at a gold exchange house in Kunming, Кытай, Dec. 11, 2012. (STR/AFP/Getty Images)Chinese sales staff walk along an aisle paved with gold bars at a gold exchange house in Kunming, Кытай, Dec. 11, 2012. (STR/AFP/Getty Images)

The world is full of golden rules. There is one for every field: ethics, communication, fashion. But there is only one that counts, the golden rule of money: “Who has the gold makes the rules.”

Кытай, it seems, wants to make the rules in the international monetary system, which is why it has been acquiring vast amounts of gold both through private and official channels.

Because of the obscure nature of the Chinese gold market and the reluctance of Chinese officials to show their hand, nobody has been able to accurately calculate how much gold the Chinese have amassed since about 2000, when they began amassing it.

Enter Koos Jansen, an analyst with Singapore bullion dealer Bullion Star. He has studied the Chinese gold market for years and recently came up with an estimate of total Chinese gold holdings: 19,500 metric tons, or 21,495 U.S. tons, at the end of January 2017.

“They have promoted gold ownership as a store of value since at least 2002, but more so when they introduced the ‘storing gold with the people’ concept in 2004,” says Jansen, a campaign encouraging private citizens to buy gold.

Private Hoard

According to Jansen’s estimates, total private holdings, including those of individuals and firms, are 15,500 metric tons. The official reserves of the People’s Bank of China (PBOC) are around 4,000 metric tons.

This would make Chinese the second biggest holders of gold after India, where citizens are estimated to hold 20,000 metric tons of gold in jewelry and other forms. Private sector holdings for the United States are unknown, but the Treasury still holds 8,134 tons in official reserves.

But where did China get all this gold when in the year 2000 it only had 4,000 tons in total?

The first piece of the puzzle is domestic mining.

“In the 1970s when China needed foreign exchange, that’s when they started their mining industry. They were supposed to start exploration and the people were incentivized to mine gold. That’s why there are so many gold mines in China.” He pegs the number at around 600.

Those 600 mines produced 490 tons of gold in 2015, making China the biggest producer ahead of Australia with 300 tons.

Importing Into a Black Hole

The next piece of the puzzle are imports. According to Jansen’s estimates, China imported about 1,300 tons of gold in 2016, mostly through Hong Kong but also directly from Switzerland and the United Kingdom.

Here, Jansen points out a peculiarity regarding Asian buying: “Asian demand is strong when the price goes down. Western demand is strong when the price goes up. In April 2013, the gold price collapsed and a lot of gold was exported from the West to China, mostly from the U.K.”

When the gold gets into China, it is then sold through the Shanghai Gold Exchange (SGE), which also handles scrap supply and domestic mining.

Curiously, Jansen points out, none of this supply is going to the central bank but rather to consumers and companies.

“In the domestic market, there are laws and incentives to push supplies through the SGE. Scrap, domestic production, imports, all go through SGE at first. The withdrawals from the exchange are equal to total private gold demand.”

Private demand includes individuals who want to diversify their assets or institutional investors, like pension funds but also the gold sold to jewelry companies for later resale.

“Companies and individuals buy gold for the same reason. Get out of the Renminbi, diversify, protection, etc.,” he says.

As for the central bank, Jansen says that their purchases don’t show up in official import statistics and are kept a tight secret.

“The Chinese army even has a special division, I call it the gold army. This gold army can still be active, they can pick it up directly in the U.K.,” he says. The central bank also uses commercial banks who buy in Switzerland or South Africa and secretly ship the gold to China.

Мисалы, the total gold holdings of the London Bullion Market Association dropped by 2,750 tons from 2011 үчүн 2015 but net exports were only 1,000 tons. Thus, those 1,750 tons are unaccounted for and most likely ended up in official Chinese reserves.

According to Jansen’s contacts at Chinese banks, official holdings are closer to 4,000 tons rather than the published figure of 1839 tons.

What does China need that gold for? “They buy official gold to internationalize the renminbi. If there are enough reserves behind it, they can make it a credible currency.” He who has the gold makes the rules.

That’s also why China doesn’t allow even one ounce of gold and silver to leave its shores once it enters. As Jansen put it: “The West has been selling gold into a black hole.”

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Gordon Chang was a bit early when he wrote the book “The Coming Collapse of China” in 2001.

He predicted the collapse of the Chinese economy and the downfall of the communist party within ten years and his prediction is four years overdue.

Бирок,, the core arguments he made in the book are more valid than ever as Chang continues to provide us with an uncensored behind-the-scenes view of the Chinese political economy.

Epoch Times spoke to Chang about a superficially stable China in 2017 and what is causing the real friction under the surface.

доору Times: China managed to stabilize its economy in 2016, will the regime be able to continue in 2017?

Gordon Chang: China looks strong but it’s actually weak. It has passed the point of no return.

They put in an enormous amount of debt, and they did stabilize the economy. The manufacturing sector is a beneficiary; we are starting to see some inflation. But the cost of this is enormous. It’s the old tactics of using debt to generate growth. It shows desperation more than anything.

There are some things that China should do regarding reform in 2017, but they won’t get it done because of the political imperative. This year we have a half a decade event, the party congress in the fall of this year, where they will either announce a new leader or Xi Jinping remains in control. That is a critical one.

I think they will be successful holding the line through the party congress. After that, they are going to fail.

So they are going to try and hold the line. Xi Jinping has relentlessly taken the economics portfolio from Li Keqiang. He gets the credit, but he also gets the blame. He is not going to want to see a major disruptive event between now and the party congress. It should be obvious, but a lot of people take this into account.

I think they will be successful holding the line through the party congress. After that, they are going to fail. They are going to prevent adjustments for as long as they have the ability to do so. Their ability to create jobs, holding the GDP growth close to 7, all of this stuff they are going to try and do.

Even if it was growing at the official rate, China is creating debt 5x faster than incremental GDP. Beijing can grow the economy with ghost cities and high-speed railways to nowhere but that’s not free, it’s not sustainable.

After the party congress, China is going to go into free fall.

The only thing that can change the Chinese economy is fundamental economic reform. But they are moving in a regressive manner, Beijing is stimulating again. It’s taking China away from a consumption economy, toward the state, away from private companies.

China is not going to have another 2008, it’s going to be a Chinese 1929.

The Chinese dream wants a strong state, and it’s not compatible with market reform. Even if Xi were up for liberalize and change, it would be too little too late. Stimulus is going to increase the underlying imbalances. That’s going to make it more difficult to adjust.

доору Times: What is happening beneath the superficial stability?

Mr. Chang: Look at what happened last year, capital outflows were probably higher than 2015. And 2015 was unprecedented, somewhere between $900 billion and a $1 trillion dollars.

The Chinese people see what other people have seen and it doesn’t make sense anymore. They see the economy is not growing. People are concerned about the political direction of the country, and people see the end is not that far away, so they move their money out.

People are also leaving. Young Chinese used to come to America to get an education; then they went back. Now Chinese kids get an education, they try to work for an investment bank, and they try to stay. Things are not as good at home as Beijing maintains.

To stop the capital outflows and maintain stability, they put in draconian capital controls starting in October, November 2016.

They put some real limitations on outbound investment for corporates and multinationals. They can do this, but how much longer? They are disincentivizing people to put money into China because they don’t know they can take it out again. In spite of the controls, they had record outflows. Capital outflows in the second half, when the controls started, were higher than in the first half.

They are going to continue to smooth things out after the Congress, but they won’t have the ability to continue the game. The whole thing is about confidence, and there is a failure of confidence in China.

доору Times: They are also using their foreign exchange reserves to manage the decline of the currency. The International Monetary Fund (IMF) for example says the $3 trillion they have is enough to run the economy.

Gordon Chang: They can just give you any number, and you don’t know whether it’s the right one, just like GDP. You cannot go to the State Administration of Foreign Exchange (SAFE) and look through their books. They can report anything, and you don’t’ know. They have a high incentive to fake that number.

We also know they have a synthetic short position because they are selling derivatives through the state banks. If you look at the estimates of foreign exchange reserves each month, they always outperform the surveys. China always outperforms, it doesn’t take a genius to figure out that the FX number can’t be right. Misreporting their FX reserve declines minimizes the problems, so people keep believing in the currency.

They can report anything, and you don’t’ know. They have a high incentive to fake that number.

So I think they don’t have the $3 trillion. They have done the trick Brazil pulled in 2014 of selling derivatives instead of actual dollars. According to my sources, there’s $500 billion dollars still to be accounted for.

Then there are illiquid investments in the Chinese foreign exchange reserves, around $1 trillion. According to my estimates, you are then down to $1.5 trillion in usable money to defend the currency. The FX reserves aren’t as big and as liquid as Beijing wants them to be.

доору Times: So they will have to devalue sooner or later.

Gordon Chang: I don’t think they are going to devalue before the 19th party congress later this year.

Then they are going to devalue, but not as far north of eight [current rate is 6.9 per dollar] as it needs to be. The insufficient devaluation will shake confidence; people think it’s not enough, it has to be more. Eventually, someone is going to figure out that their reserve numbers are wrong. But the one thing they need to defend their currency is foreign currency.

Xi Jinping says the Chinese dream is a strong China. So he is responsible for everything and depreciation never benefits the Chinese consumers. They continue to make stupid decisions. It’s the political system; the political imperative is too strong. It would be too embarrassing to do wholesale reform. He wants to appear strong. They have always tried to prevent natural economic adjustments—by doing that they have made the underlying imbalances bigger.

So in the end, China is not going to have another 2008, it’s going to be a Chinese 1929.

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Editor’s note: The following column is about Cao Dewang (or Cho Tak Wong), a well-known entrepreneur in the glass industry and a top philanthropist in China. About two months ago, Cao revealed an investment plan in the United States totaling about $1 миллиард, which is expected to create thousands of jobs. A recent interview with Cao, where he explained why he made the decision, led to intense discussion in China about the country’s economy and the obstacles to doing business in China. The following column by finance columnist Dao Feng was among the most popular on the topic.

A year ago, Chinese real estate tycoon Li Ka-shing massively sold his real estate holdings in mainland China and “escaped” to the UK. Back then, an article titled, “Don’t Let Li Ka-shing Run,” widely circulated online. But maybe because of Li’s Hong Kong citizenship and not being a mainlander, state media refrained from taking his retreat very seriously. Бирок,, a year later, Cao Dewang, chairman of Fuyao Glass Industry Group, the second largest manufacturer of auto glass in the world, is leaving for the United States to build factories and plans to invest $1 миллиард. This time Chinese media has responded in an uproar.

Why is Cao, the king of glass and China’s number one benefactor, going to the United States? The reason is the high cost of doing business in China. According to Cao, except that wages are lower in China, land, taxation, energy, logistics, and other costs are much higher in China than in the United States.

As a key figure of China’s manufacturing industry, Cao’s economic evaluation, though it makes China lose face, demonstrates the thinking of a true entrepreneur. Capital naturally chases the highest return, and if this is true, Cao is voting against China’s poor real economy with his feet. Now the Chinese media is demanding that Cao stay put. But even if Cao Dewang stays, will Zong Qinghou, Dong Mingzhu and other entrepreneurs do so?

We need to seriously consider how to really keep these Chinese manufacturers and support the development of the real economy in action.

Fixing China’s Real Economy

To create the “slow bull” market, the China Securities Regulatory Commission (CSRC) has recently cracked down hard on “monster stocks,” a term referring to those with unreasonably spiking or plummeting prices, even at the cost of serious financial market losses. Apparently, Liu Shiyu, Chairman of CSRC, understands politics very well. In response to the call from the top to transform the economy from virtual to real, CSRC has been determined to deleverage, squeeze the bubble, and guard against risk. It seems they now realize that the revival of China’s real economy cannot be further delayed.

During the recent Central Economic Conference, high-level officials set the tone, with the main focus being reducing bubbles. According to this rationale, the stock market will experience short-term adjustment and pains, but this is said to serve as the basis of the 2017 slow and steady bull market. Also predicted, Бирок,, is a long-term capital scarcity.

Why doesn’t China’s real economy make money? Because of insufficient demand. Why is the demand insufficient? Because people have no money to spend. Why don’t people have money? Their money was taken away by real estate speculation and various financial scams. Moreover, many years of government stimulus spending created asset bubbles, have made the rich become richer and the poor become poorer. The growth of M2 mostly benefits high-income groups, but their need to consume will not grow as much due to diminishing marginal utility.

Since the recession hit the real economy beginning in 2014, a flood of hot money inflated bubble after bubble. In early 2014, the bond market rallied, followed by the stock market in the second half of that year, the real estate market in 2015, then the commodity market in 2016. In addition, use of the Internet has led to an acceleration and bubble in the virtual economy during recent years. Many companies raised billions of yuan just by telling a good story via powerpoint presentations.

If we want to go back to the real economy, we need to come up with courage and action, otherwise the whole business community will run away.

Cao Dewang’s story also exposes a major sore spot in China’s economic recovery plan: high taxation. China has the world’s most government investment projects. It therefore has to impose the highest taxes in order to maintain itself. Moreover, when local governments’ land sales revenue comes to an end, tax pressure will become even higher. Right now, tax cuts sound like just fairy tales!

For a long time, China’s per capita income growth has been lower than the country’s GDP. GDP growth has been lower than tax growth. Burdens increasing for enterprises is an indisputable fact, and in the long run, capital escape is inevitable.

The solution lies in smaller government, including the reduction of project approval processes, large-scale dismissal of the civil service staff, reduction of all kinds of ineffective investment, and substantial tax reductions. The outcome would be that the growth of people’s income will surpass that of GDP, and the growth of taxes will be less than GDP.

This is an abridged translation of a Chinese article posted on the author’s personal blog at Sina. Dao Feng is a well-known Internet blogger and stock analyst. Writing pseudonymously, Dao Feng produces a high volume of articles analyzing China’s stock market and economic issues, and is one of China’s most influential financial bloggers, registering millions of readers monthly.

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A water container delivery worker drives on a street in Beijing on Dec. 9, 2016.  Economist Ma Guangyuan says that China needs to develop genuine property rights to enhance economic growth. (Nicolas Asfouri/AFP/Getty Images)A water container delivery worker drives on a street in Beijing on Dec. 9, 2016.  Economist Ma Guangyuan says that China needs to develop genuine property rights to enhance economic growth. (Nicolas Asfouri/AFP/Getty Images)

During a sea battle in 1571, a Turkish general hid 150,000 gold coins in the cabin of his warship. He was defeated, and his entire wealth ended up at the bottom of the sea. Why did he bring along all this gold when going off to war? There was no property protection in Turkey back then. People’s belongings could be stolen or confiscated at any time.

Scottish economist Adam Smith, in his now classic book An Inquiry into the Nature and Cause of the Wealth of Nations, first published in 1776, made a comment that still holds true today: “In a rude state of society… The individuals, who hoard whatever money they can save, and who conceal their hoard, do so from a distrust of the justice of government, from a fear that if it was known that they had a hoard, and where that hoard was to be found, they would quickly be plundered.”

This now brings me to China’s present economic situation and the need to address private property protection that was recently laid out by senior Chinese officials in a published document.

How important are property rights?

The right to own property is the cornerstone of a healthy economy, the foundation of trust, the premise for innovation, and the key and prerequisite for understanding economic growth since the time of the Industrial Revolution.

U.S. financial expert William Bernstein, in his best-selling book The Birth of Plenty, How the Prosperity of the Modern World was Created, attributes this rapid economic growth to four factors: property rights, scientific rationalism, capital markets, and efficient communication and transportation systems. He argues that a country can only prosper when all four factors are in place. Moreover, he ranks property rights at the top. In his view, the protection of private property is the very premise and foundation of an economy.

Being able to own wealth motivates people in their pursuit of success and happiness. Whether a country has laws that allow citizens to acquire wealth, and provides legal protection for this wealth, is not only of great importance to the wellbeing of the individual, but also vital to the development of society as a whole.

In his 1981 book Structure and Change in Economic History, renowned economist Douglass C. North states that by comparing economic effects of different social systems over a long period of time, he discovered that countries that guaranteed property rights and provided a predictable solution to economic disputes, create an optimal environment for economic development. The rise and fall of Western powers, and the ups and downs of modern countries, have proven this point: countries that protect private property rights can overcome various traps in the process of development. Britain and the Netherlands surpassed France and Spain in the 17th century mainly because of their effective recognition of property rights and their robust political and legal systems.

In China, where state ownership predominates, the development of a property rights protection system has not been easy. The conception of a free market economy, private property rights, and the introduction of property laws, are steps that require the hard work and lofty ideas of many individuals.

The provision of laws in China means that property rights are not, in reality, being properly protected. We can see that in actuality there are still many deficiencies in the protection of property rights, especially in the protection of private entrepreneurs. During the past years, some entrepreneurs under investigation, even when proven innocent, found it difficult to continue running their businesses, and in some cases their assets were even seized. With irregular business practices being the norm in China, entrepreneurs live in a constant fear of punishment. This environment has become a big factor in Chinese entrepreneurs’ lack of trust in long-term economic prospects.

The recently published document specifically mentions these prominent issues: The use of state power against private property rights, and frequent illegal sealing, seizure, and freezing of private property. It also stresses the need to protect the various forms of economic entities as well as citizens’ property rights according to law and to enhance people’s sense of confidence regarding the security of property and wealth.

As China is determined to become an innovative economy, the importance of property rights protections is more urgent than ever. Negative expectations in regards to property rights have an unprecedented impact on China’s future. The key to whether China can become a country of innovation is tied to the respect of property rights and the rule of law. It is the premise and key of China’s successful economic transformation.

In a country where private property right are violated every day, entrepreneurs will not feel the impetus for innovation. Why do Chinese entrepreneurs transfer large amounts of assets overseas? And why do Chinese companies show so little motivation to innovate? The answer lies in the lack of property rights. This is the problem.

This is an abridged translation of Ma Guangyuan’s Chinese article, posted to his public WeChat account on Nov. 30, 2016. Ma Guangyuan is a well-known independent economist in China. Ma appears as a financial commentator on China Central Television, and his columns have been published in Financial Times Chinese, Southern Weekly, and elsewhere.

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Deng Xiaoping’s ‘cat theory,’ parodied by the political cartoonist Rebel Pepper. (Rebel Pepper)Deng Xiaoping’s ‘cat theory,’ parodied by the political cartoonist Rebel Pepper. (Rebel Pepper)

Editor’s note: China’s rapid economic growth over the past three decades began with a privatization process pushed forward by former Chinese Communist Party leader Deng Xiaoping. Following the decade of extreme political oppression during the Cultural Revolution, Deng presented his famous “Cat Theory” to propagate his introduction of a capitalist market economy. The theory states: “It doesn’t matter if a cat is black or white; as long as it catches mice, it’s a good cat.” In essence, the “black cat” and “white cat” stands for “planned economy” and “market economy,” and Deng was saying that whichever one gets the job done will be adopted. Бирок,, more than 30 years after Deng’s proclamation, with China’s economy in the doldrums, massive government corruption, and extreme social inequality, many now question China’s economic model. The following blog article is an example.

In Deng Xiaoping’s home, there is a painting called “Two Cats” by renowned painter Chen Liantao. An inscription in Chinese calligraphy says: “It doesn’t matter if a cat is black or white; as long as it catches mice, it’s a good cat.”

In 1985, Deng was voted “Man of the Year” by Time magazine. The white cat, black cat theory was also featured in Time magazine. That year, Deng’s “Cat Theory” spread from China to the world. Since the Third Plenary Session of the 11th Communist Party’s National Congress, the “Cat Theory” has become the theoretical mark of China’s transition to economic development.

Cats Catch Mice

Cats are born to catch mice. Human beings have human nature, without which people are not humans. But humans also have a selfish side, a tendency to look after their own self-interest. Almost everyone wants to get rich, from the emperor to the common people.

Enterprises share the same nature in terms of market competition. The impulse to “catch mice” is completely different in private enterprises and in state-owned enterprises. Private enterprises are driven by a strong impulse of self-interest, similar to the nature of a wild cat. State-owned enterprises are different, because “catching mice” is not directly related to “eating mice.” Therefore their nature has changed. Мисалы, Chu Shijian created the Red Pagoda cigarette kingdom that paid tens of billions of yuan in taxes each year. But in the end, Chu was sentenced to decades of imprisonment just for stealing a “small fish.” The Chinese communist regime made the cat look at the fish, but didn’t allow the cat to eat.

Allowing All Cats to Catch Mice

Why can some cats catch mice, but others cannot? In a given social environment, it depends on whether they are allowed to do so, or which ones are allowed to do so. All cats have the nature to catch mice. But if some cats are locked up in a cage, they cannot catch mice. From this perspective, the statement “regardless of white cat or black cat, the cat who catches mice is a good cat” is a false proposition.

The same is true for a profitable industry. Take the financial industry for example, it is easier for state-owned capital to enter the field, but very difficult for private enterprises to enter. Is it that private enterprises do not know how to manage their finances? Of course not. In order to protect “state cats,” some “wild cats” are not allowed to catch “mice.” In an unequal market environment, it is not possible to know which cat is a good cat.

Cats catching mice is not the secret of success. The secret of success is that we can all catch mice. Why are you the only one allowed to catch mice?

Not All Rich Cats Were Good Cats

White cat or black cat, those who became rich first were not necessarily good cats. Letting some people get rich first was a strategy of the “Cat Theory.” This strategy enabled some people in China to become world-class tycoons. It also made China grow into the world’s second largest economic power. Бирок,, not allowing white cats to catch mice made black cats become very large. After black cats became rich, they did not have the intention to let white cats join them in catching mice.

In the three decades after China’s reform, the vast majority of rich Chinese entrepreneurs and tycoons have benefited to a certain extend from this inherent injustice in the system. The reason you caught mice was not because you were more capable than Jack Ma, but because you were allowed to do so by your master.

Dysfunctional Distribution System

For a long time, a dangerous economic policy tendency has prevailed: the introduction of “demand side” or “supply side” policies. These ended up furthering the interests of a few people by letting them reap profits. In fact, many times polices were made to benefit the entire population, but they often ended up benefitting only a small number of people. This is the reality.

The “demand side” and “supply side” reforms developed by western economies are unable to unlock China’s economic gridlock. The real issue of the Chinese economy is that its mechanism of “distribution” is degenerating. It cannot regulate the fair distribution of social benefits. The “distribution side” of the machine has rusted and shut down. In fact, it is accelerating the process of the wealthy getting richer, and the poor getting poorer.

In the past, we used to refer to dysfunctions in the distribution system as a problem of income distribution. In fact, this is a one-sided view. In today’s Chinese society, the ways to become wealthy are diversified, with income being only one of the channels and no longer the main channel. Regardless of how rich the wealthy are, who became rich through labor income? Very few.

Having the majority of people become rich cannot be limited to labor income. Income from labor is limited. One needs knowledge, capital, human relationships, and opportunities. Мисалы, if a small shopkeeper wants to open up a shop or expand his business, he needs liquidity. Getting the capital is critical for him. Without capital and relying only on savings from his income, he may not be able to achieve his dream of opening a shop.

Financing opportunities are related to the distribution of capital, access to knowledge and education. Opportunities to accumulate wealth are related to social equality and fairness. How a society distributes resources equally among all members of society is not only an issue of income distribution, but also an issue of fair competition. Without fair competition, opportunities are controlled or monopolized by a few people and society will accelerate the polarization of wealth.

Why are black cats fatter than white cats? It is not because there is a difference in their genes, or that black cats are smarter, more capable, or work harder. The problem resides with the owner.

Fan Di is an independent economist and part-time professor of Peking University and Sun Yat-sen University. He obtained a Ph.D. at the University of California, Berkeley, supervised by Li Yining of Peking University and Nobel Prize winner George Arthur Akerlof. Fan has been a senior executive and consultant at major banks, financial firms, and large companies. This is an abridged translation of an article posted on Sept. 9, 2016 on his public WeChat account.

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An elderly Chinese farmer stands outside her home on farmland backdropped by a new housing development outside Beijing on Nov. 21, 2014. (Kevin Frayer/Getty Images)An elderly Chinese farmer stands outside her home on farmland backdropped by a new housing development outside Beijing on Nov. 21, 2014. (Kevin Frayer/Getty Images)

The size of China’s government is enormous. By 2007 China’s fiscal revenues had reached 5.1 trillion yuan ($770 миллиард), which accounted for 21 percent of GDP and was equivalent to 370 million urban residents’ annual disposable income — or the annual net income of 1.23 billion farmers.

Imperial China’s Fiscal Revenue

How does China’s fiscal revenue under Communist Party rule compare with the era under imperial rule? In 1766, during the mid-Qianlong era, the government’s fiscal revenue was 49.37 million taels of silver.

The Dutch East India Company conducted detailed investigations around 1760 on income and consumption of people in Beijing and Guangzhou. According to historical archives, the annual income of an ordinary Beijing citizen was about 24 taels. Therefore, 49.37 million taels of silver was equivalent to 2.05 million ordinary Beijing citizens’ annual income. The income of just 2.05 million Beijing citizens was sufficient to support the entire Qianlong government. Obviously, it was a small government.

Of course, some people might say that we cannot compare any country’s government revenues and spending with a period of the past, because those were traditional agricultural economies, and government revenues were therefore low. Modern economies, Бирок,, are complex and depend on various kinds of government assistance. This reasoning makes a certain amount of sense. So, let’s use a different example.

United States’ Fiscal Revenue

Let’s use the United States, a modern country, as comparison with today’s China. АКШ. financial securities markets, intellectual property sector, and private enterprises are the most developed in the world. In addition, it also plays the role as world police. Therefore, its government spending would not be lower than any other country’s.

In 2007 the U.S. federal government’s fiscal revenue was $2.4 trillion, or 18 percent of GDP, and was equivalent to 85 million average American citizens’ annual disposable income. That is to say, in order to support the U.S. government’s spending, it took 85 million Americans’ disposable income. This is far lower than the 370 million Chinese urban residents required to support the Chinese government in 2007.

China has 540 million urban residents, жана 800 million farmers. Their total disposable income last year was 10.7 trillion yuan ($1.62 trillion). The Chinese government’s fiscal revenue was 50 percent of Chinese citizens’ total disposable income.

By contrast, total disposable income in the United States was $8.4 trillion. The $2.4 trillion government fiscal revenue was equal to one quarter of U.S. citizens’ disposable income.

Thus, the Chinese government is much larger than the U.S. government in terms of fiscal budget.

Private Wealth Structure Comparison

Chinese citizens do own wealth, including real estate, corporate equity, financial securities, bank deposits, and so on. But these citizens are mainly urban residents. Chinese farmers do not own land, nor do they have much savings. They have little wealth.

According to a National Development and Reform Commission (NDRC) estimate, by the end of 2005, the total asset value of Chinese urban residents was 20.6 trillion yuan ($3.11 trillion). If adding 15 percent to adjust for inflation, it would have been 27.6 trillion yuan ($4.17 trillion) by the end of 2015, less than one third of the 88 trillion yuan worth of state-owned assets and state-owned land.

The total of China’s private and state-owned assets was 115.6 trillion yuan ($17.5 trillion), equivalent to 4.7 times of GDP. In contrast, the U.S. government basically does not own income producing assets. It only holds a small amount of land. By the end of 2007, total private assets in the United States were $73 trillion, 5.4 times of GDP and slightly higher than China’s ratio of total assets versus GDP.

Although the ratio of total assets and GDP of the two countries is roughly the same, wealth distribution between the people and the government is completely different. In China, more than 76 percent of assets are owned by the state, with people owning less than a quarter. In the United States, assets are basically in the hands of the people.

Of China’s 115.6 trillion yuan of wealth in 2007, only 27.6 trillion ($4.17 trillion) belonged to people, the remaining 88 trillion yuan ($13.3 trillion) was owned by the state. If in 2008, China’s asset value and GDP increased by 10 percent, then private citizens earned 2.76 trillion yuan, and the government earned 8.8 trillion yuan. The government’s share of asset appreciation from economic growth was three times greater. This is the reason why asset appreciation has so little effect in driving China’s domestic demand or raising internal consumption.

Where Did the Government’s Money Go?

I mentioned above that the government’s fiscal revenue was 5.1 trillion yuan ($770 миллиард) last year, and state-owned assets and appreciation of land was at least 9 trillion yuan ($1.36 trillion). State-owned enterprises had profits of 1.6 trillion yuan ($240 миллиард). The government had a total income 15.7 trillion yuan ($2.37 trillion). How was the money spent?

According to former Finance Minister Xie Xuren, боюнча 2007, the Chinese government’s direct spending on people such as healthcare, social security and employment benefits totaled about 600 billion yuan ($90.6 миллиард). This was equivalent to 15 percent of total expenditures and 2.4 percent of annual GDP. Divided by 1.3 billion people, the per capita of social expenditures was 461 yuan ($69), which is equal to 3 percent of urban residents’ per capita disposable income.

In the United States, government spending on the same three categories in 2015 was about $1.5 trillion, or 61 percent of total federal spending, жана 11.5 percent of GDP. The per capita spending was $5,000 when divided by the 300 million U.S. population, and it was equivalent to 18 percent of Americans’ per capita disposable income.

It is not that the Chinese government does not spend money, but that it lacks real oversight of the budget process. The Chinese government tends to waste money on high-profile infrastructure projects and government office buildings, and invests in industries with high resource consumption, high pollution and low job-creation. In addition, this all provides a breeding ground for corruption.

Because in China there is too much asset wealth and income in the hands of the government, it is difficult for the masses of people to earn more and consume more, and for service industries to develop around people’s livelihoods. Thus, where would demand and investment for tertiary industries come from?

Chen Zhiwu is a professor of finance at Yale University. This is an abridged translation of his Chinese-language article posted on the website Aisixiang, and widely republished on the Chinese-language internet.

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Октябрь 9, 2016

Customers and real estate agents look at several building models at a real estate exhibition in Jiashan, Zhejiang Province on Oct. 19, 2012. (AFP / AFP / Getty Images)Customers and real estate agents look at several building models at a real estate exhibition in Jiashan, Zhejiang Province on Oct. 19, 2012. (AFP / AFP / Getty Images)

China’s real estate market is akin to a Ponzi scheme with the government acting as the dealer, referee, and big player. The market is entirely propped up by loans.

From a market point of view, Chinese real estate has no investment value. To consider it an investment product, one needs to first examine the existence of a bubble based on three indicators: the ratio between real estate investment and GDP, the price to income ratio, and the rental ratio.

The real estate investment to GDP ratio is mainly used to evaluate the anticipated future price and whether real estate investment is overheating. China’s real estate investment and GDP ratio has been high: 14.8 percent in 2013 жана 14.18 percent in 2015.

Since 1960, real estate bubbles have all burst in countries where real estate investment and GDP ratios were higher than 6 percent . When the Japanese real estate market collapsed, real estate investment accounted for only 9 percent of GDP. At the start of the U.S. subprime mortgage crisis, the ratio reached a local peak of 6.2 percent.

Other data, for instance the affordability of housing, as well as rental income from housing, shows that real estate holds hardly any interest as an asset class in China, and is little better than a gamble.

Then why does the Chinese government allow the use of large amounts of loans to support real estate?

Real Estate Dependence Sickness

China’s economy is suffering from real estate dependence sickness, primarily because local governments are financially dependent on land.

China’s local governments all make money on land sales as all land in China is state-owned. Between 2003 жана 2015, their land dependence ratio (the ratio of land transfer fees to general budgeted revenues) averaged nearly 50 percent .

Мисалы, Suzhou city, a second-tier city, had an average land dependence ratio of 82.6 percent during the first eight months of 2016, up from 40.58 percent in 2015. In Hangzhou, Hefei, Nanjing and other cities, land dependence ratios were also above 50 percent. Therefore, local governments must act as big players in the housing market and keep supplying land to the market.

In addition, the real estate industry has an important position in China’s economy. As early as 2009, Yu Bin, the Macroeconomic Research Department Chair at China’s State Council, publicly stated that the real estate industry accounted for 6.6 percent of GDP and one quarter of investment, with up to 60 directly related industries, and had become the direct lifeline of China’s economy. Once there are huge real estate market fluctuations, dozens of industries relying on real estate will suffer incalculable losses and may even cause the collapse of China’s real economy.

Now, with the depressed real economy, what would the Chinese regime do if real estate collapsed? Therefore, the central bank must be the dealer and keep issuing money and distribute dice to the local governments, real estate developers, and buyers, for them to gamble.

Political Survival

From a market economy point of view, China’s real estate boom will die. In fact, the world has experienced real estate bubbles about a hundred times. In the last 20 years, we watched the collapse in Japan, the world’s second largest GDP, and the United States, the world’s largest GDP. While the bubble in Japan slowly deflated, the United States suffered an instant collapse.

Past experience tells us that China’s real estate bubble will burst sooner or later. The only question is how it will collapse.

For the Chinese government the consequences of a real estate collapse are very serious. The first domino to fall will be a local debt crisis, followed by a financial crisis. So, in the government’s view, real estate is the industry that must be saved by all means. In 2015, the majority of the 11 trillion yuan new loans issued went to the real estate market. This trend continues in 2016 and might surpass 2015. Therefore, it can be expected that as long as the central bank continues to issue loans, home prices will keep rising.

In the United States, the Ponzi scheme went bankrupt because players, banks, and the government (the referee) are all parties with different interests. In China the government is the referee, the central bank the dealer, and local governments the players.

Real estate in China has become the central bank’s currency pool. Supplying the real estate market with credit has become the Chinese government’s way of maintaining economic stability. The worst consequence of this approach is inflation. Бирок,, inflation only diminishes social wealth. It does not create external military threats or internal conflicts that are difficult to suppress, and it will not directly lead to the collapse of the regime. Zimbabwe’s hyperinflation was many times worse than China’s but did not lead to the downfall of the regime.

In addition, the Chinese government has long ago put in place a set of market controls, such as purchase limits, sales limits, and price limits. It uses them in whichever way it wants to. Since the government is the referee, dealer, and big player, the bubble can become much bigger than the ones in Japan and the United States. And the government has a lot more room to maneuver.

He Qinglian is a prominent Chinese author and economist. Currently based in the United States, she authored “China’s Pitfalls,” which concerns corruption in China’s economic reform of the 1990s, and “The Fog of Censorship: Media Control in China,” which addresses the manipulation and restriction of the press. She regularly writes on contemporary Chinese social and economic issues.

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A group of potential real estate buyers look at an estate plan by a local developer at a property exhibition in Shanghai on March 19, 2006. (Mark Ralston/AFP/Getty Images)A group of potential real estate buyers look at an estate plan by a local developer at a property exhibition in Shanghai on March 19, 2006. (Mark Ralston/AFP/Getty Images)

Editor’s note: For a number of years, both Chinese Western economists have commented on China’s out-of-control real estate bubble. According to all indications, the bubble should have burst a long time ago. But it hasn’t—for reasons all of its own. This article by Cai Shenkun uncovers some of the dynamics of China’s distorted real estate market.

The number one dinner table conversation in Beijing these days is the red-hot real estate market. There seems to be no limit for Beijing’s property market; it boasts the most expensive real estate projects, the largest number of buyers, and the most frenzied investor activity.

At the end of 2014, a friend of mine bought an apartment at the West Fourth Ring Road for under 50,000 yuan per square meter (about $740 per square foot). Now it is valued at over 100,000 yuan per square meter. Another friend bought a property in Hebei GuAn last year for 7,000 yuan per square meter, and it is now worth over 20,000 yuan per square meter. Yet another friend brought a property in Tianjin Wuqing earlier this year for 10,000 yuan per square meter. буга чейин, it too is worth over 20,000 yuan per square meter.

It is not purely an economic issue, but also about the survival of the regime.

In Shenzhen and Shanghai home prices are also skyrocketing. Skeptics who forecast the decline in first tier cities are now quiet and have joined the bandwagon of house buyers.

With the downturn of China’s economy, it has become more and more difficult to make money. People find that buying and selling real estate is the only way to get rich, and get rich fast.

As of Sept. 5, 304 properties priced over 100,000 yuan per square meter have been sold this year, nearly five times as many as the 63 sold around the same time in 2015. Furthermore, a record number of 3,849 homes priced over 10 million yuan have been sold.

The community of Golden Huachen, located in a remote mountain area, just won a “grand slam” award. According to data released by developers, 156 four-bedroom apartments with an average price of eight million yuan were sold out 40 minutes after the sale started at 9:30 am. An average of four units were sold per minute, with buyers waiting in line since 6:00 am. The developer grossed 1.3 billion yuan in one day.

The Bubble

People don’t seem to be concerned that China has a big real estate bubble. The observation of one company leader is very characteristic. He said that, based on per capita income, not many people can afford buying homes in Beijing, Shanghai or Shenzhen. The bursting of the real estate bubble is long overdue, ал айтты, but the reason the bubble is getting bigger and bigger and indestructible is because of support from the banks. Should the real estate bubble burst, banks would collapse, followed by the government. So the government makes every effort to prevent the bubble from bursting. It is not purely an economic issue, but also about the survival of the regime.

Home loans make up the majority of most banks’ credit. At the end of this year’s first quarter, 18 listed Chinese banks held a total of 14.12 trillion yuan ($2.1 trillion) in home mortgages. This does not include the huge development loans given to developers. In 2016 many banks launched a home equity loan program, most of them are in the amount of 3 million yuan ($450,000) or more. Some banks even do not have an upper limit. Banks are thus giving tremendous support to the hot real estate market.

Many people have disagreed with the statement that real estate has kidnapped the Chinese economy. Now it seems that real estate has not only kidnapped the Chinese economy, but also the banks, the Party, and every family and individual who has purchased real estate through loans.

Based on the law of the market, housing prices don’t only go up, they also come down. Political factors outside the market also affect real estate prices. The “Chinese Model” that people talk about refers in fact to China’s peculiar real estate wealth accumulation pattern. When a country of 1.3 billion people copies the example of Hong Kong, tying land to revenue, how could real estate prices not go up?

Many people have disagreed with the statement that real estate has kidnapped the Chinese economy. Now it seems that real estate has not only kidnapped the Chinese economy, but also the banks, the Party, and every family and individual who has purchased real estate through loans. From the start, the Chinese real estate market was not about providing homes for better living conditions. This is not a normal real estate market. It is all about politics.

Corruption

Many factors are pushing up China’s real estate prices. In addition to currency issuance, land finance, and government intervention, there is also corruption. Almost every fallen corrupt official owns multiple houses.

In today’s real estate market, ordinary people cannot afford to buy a home, yet corrupt officials own large numbers of properties. It fosters a deep sense of powerlessness and frustration among the people. In fact, housing has become a hard currency. Corrupt officials’ ownership of multiple housing units tells people that abuse of power is indeed very serious in China.

At the end of 1979, China’s RMB currency supply (M2) was 155.5 billion yuan. In 2006, M2 reached a record of 30 trillion yuan ($4.5 trillion), and in 2016 it has soared to 141 trillion yuan, an increase of nearly 1,000 times over 1979. Because China’s real economy has little to recommend it, this massive capital can only circulate in the property market, thus continuously boosting house prices. In this emotionally charged environment, people seem to have lost their rationality and sense for numbers. No matter how much new property comes on the market, it will sell out — for now.

This is an abridged translation of Cai Shenkun’s Chinese article, posted on the author’s personal blog. Cai Shenkun is a well-known Chinese economist and blogger. He writes columns for a number of prominent business websites and was named a Top Ten Influential Blog Writer on Phoenix Television’s website for three consecutive years.

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A general view of buildings in the abandoned Qingquan Steel plant which closed in 2014 and became one of several so-called 'zombie factories' in Tangshan on Jan. 26, 2016. (Kevin Frayer/Getty Images)A general view of buildings in the abandoned Qingquan Steel plant which closed in 2014 and became one of several so-called 'zombie factories' in Tangshan on Jan. 26, 2016. (Kevin Frayer/Getty Images)

This is the final of a four part series. Parts бир, two, жана three were published previously.

Since Marx created his communist theory, China’s has become the first capitalist economic system under communist party rule. Кытайдын Коммунисттик партиясы (CCP) started its reign by eliminating capitalism—transforming private ownership into state ownership—but was unable to create a successful socialist economic system. It finally had to switch back to a capitalist system to extend its rule.

During the reform to private ownership, CCP officials at all levels, and their families, became entrepreneurs, large property owners, and huge financial asset owners. Their process of wealth accumulation has been one of darkness and crime. They thus needed the red regime to protect their property and lives, and they also needed government monopolies to continue amassing more wealth. Therefore, these people are the strong supporters of China’s current system, rather than facilitators of democratization.

Unlawful Misappropriation

How did the CCP’s red elite go from owning nothing to becoming super wealthy in a short period of 20 үчүн 30 years? This is the communist-capitalists’ secret and the guide to understanding the communist capitalist system and the future political direction of the CCP interest groups. Basically, they achieved it through unlawful misappropriation of public assets, maintaining monopolies of important industries, and by manipulating policies to gain benefits and maintain their authoritarian rule.

Cheng Xiaonong (NTD)

Unlawful misappropriation of public assets refers to the CCP elite directly taking over small and medium-sized state-owned enterprises (SOE) and obtaining free shares in large SOEs during the privatization process.

Maintaining monopoly industries refers to large SOE’s in the financial, energy, electricity, transportation, telecommunications, and other industries in which the red elite or their second generation offspring occupy key positions. Some of these enterprises are among the world’s top 500 enterprises. They provide large amounts of tax revenues to support the regime and allowed the red elite to quickly become rich through acquiring shares, kickbacks, pay and bonuses.

By influencing and manipulating policy-making, the red elite and their relatives were the first to get involved in many industries and projects and hence easily gained tremendous benefits.

Maintaining authoritarian rule refers to the red elite’s extreme hostility to democratization and to their hope to eternally keep the red regime in power, so as to permanently have their privileges and huge amounts of illicit wealth be protected by the CCP regime.

Red Capitalists

When a large number of China’s enterprises and wealth lie in the hands of red capitalists, the only reliable system of protection for them is neither market economy nor the rule of law, but “the proletarian class dictatorship,” which means their permanent dictatorship over all other members of society.

They clearly know that the traditional socialist economic system is not workable; they have access to wealth that is more readily available than wealth earned by entrepreneurs in democratic counties; they also have an excellent political position without competition, and they are able to prevent political democratization that might lead to political and economic liquidation. This is the essence of the “China model.”

An elderly Chinese farmer stands outside her home on farmland backdropped by a new housing development in Hebei on Nov. 21, 2014. (Kevin Frayer/Getty Images)

Obviously, under the CCP’s regime, this red capitalism will not spontaneously transform into a capitalist democratic system. For a long time, Western scholars have held the belief that, after economic liberalization, the red elite will naturally embrace democracy and freedom. China’s transformation has proven this idea to not only be naive, but also wrong.

Бирок,, the red elite is also very clear about the fact that the China model faces constant threats from the bottom of society. Therefore, they have been transferring personal assets to Western countries while arranging for their family members to immigrate to Western countries should the need arise. This indicates that the future of the “China model” is actually very fragile.

Revisiting Marx

In early 1989, the Friedrich Ebert Foundation, a German NGO, arranged for several visiting scholars to visit the Karl Marx House in Trier. Someone wrote in Chinese: “Mr. Marx, you really harmed us.”

Now it seems this statement was only half right, as Marxism was also harmed by the China model. If Marx were able to comment on today’s communist capitalism, he might be irritated and pleased at the same time. Irritated, because communists have married their enemy in order to survive; and pleased that a few communists are still around, no matter what kind of anti-Marxist theories they employed. So Marx might feel that he hasn’t become totally irrelevant.

But Marx would still be disconcerted by a huge contradiction. According to his theoretical framework “the economic base determines the superstructure,” and “advanced productive forces inevitably change a backward superstructure.” However, the China model would force Marx to completely overthrow his core concepts and thus the entire Marxist ideology, because under the present communist capitalist system, the superstructure of the “proletarian dictatorship” relies, in fact, on the economic base of capitalism.

A broken desk is seen at the top of an enclosed conveyer belt at an abandoned chemical factory on the outskirts of Beijing on April 4, 2016. (Greg Baker/AFP/Getty Images)

So, the big question remains on what the fate of this residual superstructure of the old socialist economic base will be. Is it to be totally eliminated on the scrap pile of history, or does it indeed contain an “advanced” nature that will inevitably breed a new communist revolution to eradicate communist capitalism?

Alternatively, in order to learn from the China model, Marx might need to update his theory from, “the economic base determines the superstructure” to, “the superstructure determines the economic base.” This would not only be a tough lesson for Marx to face, but also poses an unavoidable ideological crisis for the CCP.

Marx is still revered by the CCP because he provides ideological legitimacy to the privileged red bourgeoisie as well as to the continuation of the “dictatorship of the proletariat” model. The paradox is that the China model itself is anti-Marxist.

The CCP’s trick of survival is to hold the banner of Marxism while building and consolidating a capitalist economic system that is the opposite of Marxism. The China model thus is opposed to both Marxism and democracy.

Dr. Cheng Xiaonong is a scholar of China’s politics and economy based in New Jersey. He is a graduate of Renmin University, where he obtained his Masters degree in economics, and Princeton University, where he obtained his doctorate in sociology. In China, Cheng was a policy researcher and aide to the former Party leader Zhao Ziyang, when Zhao was premier. Cheng has been a visiting scholar at the University of Gottingen and Princeton, and he served as chief editor of the journal Modern China Studies. His commentary and columns regularly appear in overseas Chinese media.

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A couple walks on a street at an abandoned industrial area of Houjie town in Donggyuan on Jan. 27, 2016. (Lam Yik Fei/Getty Images)A couple walks on a street at an abandoned industrial area of Houjie town in Donggyuan on Jan. 27, 2016. (Lam Yik Fei/Getty Images)

The privatization process of China’s state-owned enterprises (SOE) has been a process of building a capitalist economic system. Different methods of privatization lead to different forms of capitalism. At the end of 1997, Zhu Rongji launched SOE reforms. This policy was called “Seizing the Big and Letting Go of the Small.”

“Seizing the Big” meant maintaining control over SOEs that owned large-scale assets and those related to national interests in finance, energy, electricity, telecommunications, transportation, etc. After restructuring, these enterprises were allowed to list on stock exchanges, and they could sell part of their shares to Chinese citizens and foreign investment. Бирок,, the state still owned the majority shares — meaning that the government continues to “seize” these companies.

“Letting Go of the Small” meant allowing privatization of small SOEs and those with serious losses, so as to rid the government of the burden. The consideration for privatization of small and medium-sized SOEs was who would buy them and in what way. In those days, the average monthly salaries of SOE directors and managers were only a few hundred yuan. Even the red elite and their relatives did not have significant financial assets.

The approach the Chinese Communist Party (CCP) came up with was to order SOE managers to get bank loans, and use the SOEs as collateral for “buying” state property. It then allowed the managers to re-register the SOEs in their names or in the name of a family member. Then, as business owners, they would use business funds to repay the private loans.

Another approach used was for SOE managers to force employees to purchase a part of the business. Employees had to use their family savings to buy into the company in order to keep their jobs. But employees were not allowed to get involved with the transfer of business assets. They were forced to supply funds so that the managers could get ownership of the business.

At the same time, the authorities allowed families of those in power to acquire shares in large listed enterprises through their personal networks. They received free shares and made huge profits when stock prices went up.

Two Privatization Phases

China’s privatization began in the second half of 1997 and was basically completed in 2009. In 1996 China had 110,000 SOEs, and at the end of 2008 there were 9,700 left, including partially privatized large SOEs with the government owning the majority of shares. Privatization was divided into two phases.

The first phase, from 1997 үчүн 2001, was the privatization of small and medium-sized SOEs. Most of these enterprises were privatized by SOE directors and managers.

I analyzed 130 cases of privatization from 29 provinces and summed up several typical tricks and the darkness of the process as part of the research for my dissertation. Their approach was usually to deliberately understate the net assets of the enterprise. Managers then bought the business, using business funds or loans from banks or private borrowers and registered the company in their own name or a relative’s name. Finally, with the new business owner’s identity, they would pay back the borrowed funds with income from the enterprise. They basically paid little to nothing for these SOEs.

A general view of buildings in the abandoned Qingquan Steel plant which closed in 2014 and became one of several so-called ‘zombie factories’ in Tanghsan on Jan. 26, 2016. (Kevin Frayer/Getty Images)

The second phase, from 2002 үчүн 2009, was partial privatization of medium and large-sized SOEs. The approach included listing SOEs after restructuring, managerial ownership transfer, demutualization of workers, foreign joint ventures, and joint ventures with private enterprises. Because these enterprises owned large-scale assets, management could not afford to take on ownership all by themselves. They usually used business funds to buy shares and distributed shares to management cadres, as well as to officials and families who helped approve the listing, forming a common interest group. These SOE cadres and government officials became owners, general managers or board members of medium and large-sized listed companies without any cost to themselves, and they became wealthy.

According to data from two nationwide sample surveys, about 50-60 percent of China’s privatized or semi-privatized enterprises are owned by enterprise management teams. Approximately 25 percent of the buyers were investors from outside of the enterprises; less than 2 percent of shares are held by foreign investment; and less than 10 percent of enterprises are co-owned by management and workers. The management does not allow employee shareholders to be involved in asset managements and transfers.

This type of privatization is equivalent to workers paying management to own the enterprises. This “SOE reform” could be called public robbery and distribution of assets among corporate management, local government officials and the children of officials. In any case, the authorities can not legitimately justify this predatory behavior. Open disclosure would lead to public outrage. Therefore, the government does not allow domestic media to discuss privatization, and Chinese scholars are not allowed to research the privatization process.

Workers’ Social Benefits Dropped

From 1998 үчүн 2003, when the red elite misappropriated SMEs on a large scale through privatization, the authorities deliberately closed the Administrative Bureau of State-Owned Property for six years during the crucial climax of privatization, to provide convenience to the red elite. Although in 2003 the bureau was restored, it rarely investigated state-owned asset misappropriation.

Between 1997 жана 2005, large-scale labor conflicts took place across China sparked by misappropriation of public assets related to privatization. The government basically stood with management because officials also benefited from privatization. During China’s privatization, the original welfare system based on SOE collapsed. Many companies gave workers very little money and drove them away. At the time, the CCP used propaganda that laying off SOE workers was a necessary sacrifice of the reform. The government did not want to build a unified unemployment benefits system for those workers and tossed the problem to the management teams. If the head of the company did not want to pay, the government did not intervene. Thus the CCP shamelessly shirked its responsibility to provide social welfare to the workers.

Demolition workers take a rest after cleaning up an abandoned building at the Shougang Capital Iron and Steel Plant in Beijing on May 28, 2015. (Greg Baker/AFP/Getty Images)

By contrast, during Russia’s privatization process, the social welfare system still functioned, and some unemployed workers were able to receive a minimal amount of social welfare. The Russian government never implemented the forced layoff policy and used tax incentives to encourage companies to retain workers. Employees owned about 40 percent of the privatized enterprises.

Compared to the privatization of Central European countries and Russia, the privatization in China was the most unjust and the most ruthless. Clearly, the economic restructuring under an autocracy can disregard social justice without fear of electoral pressure. To the elite, this model is naturally more desirable, but the sentiment among the general public is probably the opposite.

Some western scholars are of the opinion that the authoritarian communist regimes were good for economic restructuring and economic development, because they were able to overcome resistance from the people, and China was often cited as their best example. Бирок,, the privatization process in China demonstrates that a totalitarian government tends to ignore social justice, deprives people of their rights and interests, and make arrangements in favor of the ruling elite.

Dr. Cheng Xiaonong is a scholar of China’s politics and economy based in New Jersey. He is a graduate of Renmin University, where he obtained his Masters degree in economics, and Princeton University, where he obtained his doctorate in sociology. In China, Cheng was a policy researcher and aide to the former Party leader Zhao Ziyang, when Zhao was premier. Cheng has been a visiting scholar at the University of Gottingen and Princeton, and he served as chief editor of the journal Modern China Studies. His commentary and columns regularly appear in overseas Chinese media.

To read parts 1 жана 2 in this series.

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A general view of Qian'an steelworks of Shougang Corporation in Tangshan on Jan. 20, 2016. (Xiaolu Chu/Getty Images)A general view of Qian'an steelworks of Shougang Corporation in Tangshan on Jan. 20, 2016. (Xiaolu Chu/Getty Images)

The annual Fortune 500 list was published on July 20. The number of Chinese companies has increased from 106 боюнча 2015 үчүн 110 this year, more than 20 percent of the total list and close to the number of U.S. компаниялар. Thirteen Chinese enterprises, including Vanke, made it on the list for the first time.

Fortune 500 is regarded as a mirror of the global economy. Over the years, despite the global economic landscape having undergone tremendous changes, emphasis on Fortune 500 has not changed much. Fortune 500 companies account for approximately 40 percent of global production, 50 percent of international trade, 60 percent of international technology trade, жана 90 percent of international direct investment. It indeed represents the economic strength of a country and is a country’s most important “business card.”

Бирок,, when we examine industry distribution, profitability, international influence, and brand competitiveness, these 110 Chinese companies perfectly mirror the distorted state of China’s overall economy.

Industry Distribution

Most of the Chinese Fortune 500 companies operate in the petroleum, finance, electric power, iron and steel, automobile, coal, and non-ferrous metals sectors. Over many years, this industry distribution has not changed substantially, and these industries either have a monopoly status, or suffer excess capacity or huge losses.

Currently, China is making great efforts to reduce production and eliminate zombie companies — unproductive state-owned enterprises that are kept alive through loans. In other words, these Fortune 500 companies undoubtedly represent the Chinese economy’s shortcomings rather than its competitiveness.

A pedestrian walks past the People’s Bank of China in Beijing on Aug. 22, 2007. (Teh Eng Koon/AFP/Getty Images)

Banks Top List

This year, Apple reported a profit of $53.4 миллиард, surpassing the Commercial Bank of China as the world’s most profitable company. The 2nd to the 5th most profitable Fortune 500 companies are China’s big four banks. There are 10 Chinese banks on the list this year. With over $180 billion in profits, they account for 55 percent of all Chinese companies on the list in terms of profit.

Whether we are looking at China’s more than 3,000 companies listed on the stock exchange or the ones on the Fortune 500 list, banks are earning much more than the real economy. From the Fortune 500 list we can see that the real economy works for the banking industry.

A worker rides bicycle at an oil refinery of China’s Sinopec in Wuhan, a city in China’s Hubei Province on May 10, 2011. (STR/AFP/Getty Images)

Few Service and Technology Companies

Over the years, the number of U.S., Japanese, and even Korean companies on the Fortune 500 list have been declining. In 2016, only 54 Japanese companies are on the list, less than half the number of Chinese companies.

Бирок,, in terms of industry distribution, companies from these countries spread across retail, electronics, internet, state-of-the-art manufacturing, medical, and other fields that represent the world’s future economic development. Chinese companies, on the other hand, are mostly involved in oil, power, telecommunications, steel, and other monopoly or quasi-monopoly enterprises, although e-Commerce giant Jingdong, home appliance giant Midea, and food giant Wanzhou International are also on the list.

Visitors view architects’ models of apartment blocks during the 2007 Xian Autumn Real Estate Trade Fair in Xian of Shaanxi Province on Oct. 26, 2007. (China Photos/Getty Images)

Many Real Estate Companies

Lastly, China has the most real estate companies on the Fortune 500 list, including the three real estate giants, Vanke, Wanda, and Hengda. In the past, Greenland Holding Group was also on the list.

According to incomplete statistics, more than 13 companies associated with real estate are also on the list, including China Resources, China CITIC Bank, COFCO Group, PowerChina, China Minmetals, China State Construction Engineering, Aviation Industry Corp of China, Hainan Airlines, CK Hutchison, and Tianjin Goods & Materials Group. This means that among the 110 Chinese companies, at least 17 are related to the real estate sector. It reflects the Chinese economy’s dependence on real estate.

Challenges Ahead

Presumably, the more Fortune 500 companies a country boasts, the higher its overall economic power. But when taking industry distribution and profitability into consideration, the gap between the U.S. and China is not as small as it appears from the Fortune 500 list. It’s a huge embarrassment for Chinese to have companies on the list that are monopoly industries, industries plagued by overcapacity or financial losses, and real estate businesses. Ошол эле учурда, there are few Chinese science and technology companies. It indicates that China still has a long and challenging road ahead before realizing economic transformation based on innovation and competitiveness.

The significance of any list will change with China included. To get on the Fortune 500 list has become a goal for Chinese enterprises, and local governments also pursue it for the sake of their performance records. It goes right along with China’s pursuit of gross domestic product size and the speed and scale of overall development in the past 30 years.

But clearly, making it onto the Fortune 500 list is not everything. For one thing, it does not represent advanced productivity. The 500 enterprises are in fact the 500 largest enterprises. As China relies on the state, it is not a big deal to have large enterprises. Some people think that through corporate mergers and acquisitions, China can take the top 200 places on the Fortune 500 list if it wants to.

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A man rides a bicycle at an abandoned industrial area of Houjie town in Dongguan on Jan. 27, 2016. (Lam Yik Fei/Getty Images)A man rides a bicycle at an abandoned industrial area of Houjie town in Dongguan on Jan. 27, 2016. (Lam Yik Fei/Getty Images)

After 35 years of rapid economic growth, China’s economy has significantly decelerated in the past couple of years. What used to be double-digit growth has dropped to between 6 үчүн 7 percent, a nearly 50 percent reduction. Many people point to China’s weak internal consumption. Бирок,, the real problem is the rigid wealth distribution system.

Ailing Consumption

калкты, consumption, and exports have long been the troika of China’s economic growth. Бирок,, despite the fact that consumption has somewhat increased in the past couple of years, investment and exports have accounted for larger shares during the past twenty plus years before 2011, while consumption was relatively weak. Especially in the 10 years after 2000, consumption as a share of GDP, continued to decline from 46 percent in 2000 үчүн 34 percent in 2010.

Chinese construction workers at work in Central Beijing on Jan. 20, 2015. (Kevin Frayer/Getty Images)

China is the world’s second largest economy after the United States. Бирок,, it has over a billion more people than the United States, and all Chinese are thought of as newly rich. But actually, that’s not the case. According to a World Bank survey, боюнча 2012 the per capita consumption in the United States was $30,903, while in China it was only $1,221. The world’s per capita consumption, excluding China, is about $5,400. That makes China’s per capita consumption less than a quarter of the world’s consumption and only 4 percent that of the United States.

The massive building boom that has transformed China’s major cities gives one the false impression that everyone in China is wealthy and that Chinese are rich enough to buy up the United States several times over. But if you go to the countryside, you will see farmers who are not even able to buy a can of soda.

With a population of 1.4 миллиард, China’s consumption still depends on government investment. This shows that there are serious, inherent problems in the economic structure. Мисалы, the average square meter home price in Beijing costs 50,000 yuan ($7,500 ). Who can afford this kind of real estate? Less than 1 percent of China’s total population can. In other words, Beijing’s real estate prices are of no consequence or benefit to 99 percent of the Chinese people, even if the price were to rise to a million yuan per square meter.

China’s mainstream population is not rich, although there are quite a lot of new-rich who have made a fortune over the past two decades. In fact, China has the most wealthy people in Asia. But compared with China’s total population, they are a very tiny percentage, and they cannot be expected to raise China’s internal consumption by very much.

Wealth Distribution

For more than 90 percent of Chinese people, low consumption is a problem related to lack of income, lack of wealth, land, and capital. In order for the Chinese economy to improve, we must resolve the polarization of wealth and design a system that supports prosperity for the majority of citizens.

For a long time now, a detrimental policy has persisted in China’s economic planning. Namely, the focus has been to benefit the interests of a small number of people. Therefore, the real issue facing the Chinese economy is its outdated and rigid wealth distribution system that is incapable of fairly adjusting the distribution of the county’s resources. Since only a few people can benefit, it accelerates social inequality, with the rich becoming richer and the poor becoming poorer.

A scavenger picks up useful construction waste from a garbage dump in Hefei, Anhui Province on Dec. 9, 2012. (STR/AFP/Getty Images)

China’s social distribution system is defunct not just in regard to income, but also regarding bank credit and opportunities. To obtain some degree of financial wealth, it is not enough to tell people to work hard. One also needs knowledge, capital, political and business relationships, and other opportunities. Мисалы, a small trader needs liquidity to open a shop or expand his business. Whether he can get capital is crucial to him. Lacking capital, he may not achieve his lifetime dream of opening up a shop merely through working hard.

Availability of bank loans are part of the system of social capital distribution. Access to knowledge is about equal education for all. Opportunities to accumulate wealth is about equality and justice. How a society distributes these resources to all its members is not just a question of income distribution, but an issue of fair competition.

If China’s wealth distribution system does not change, the majority of the Chinese people will remain shut off from opportunities and resources and be unable to accumulate any meaningful wealth. Therefore, the prospects for China’s economic development lie in the reform of wealth distribution.

Fan Di is an independent economist and part-time professor of Peking University and Sun Yat-sen University. He obtained a Ph.D. at the University of California, Berkeley, supervised by Li Yining of Peking University and Nobel Prize winner George Arthur Akerlof. Fan has been a senior executive and consultant at major banks, financial firms, and large companies. This is an abridged translation of an article posted on July 12, 2016 to his public WeChat account.

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A man reads a newspaper report that China's central bank announced it will devalue China's tightly controlled currency on Aug. 11, 2015 following a slump in trade, triggering the yuan's biggest one-day decline in a decade. (AP Photo / Andy Wong)A man reads a newspaper report that China's central bank announced it will devalue China's tightly controlled currency on Aug. 11, 2015 following a slump in trade, triggering the yuan's biggest one-day decline in a decade. (AP Photo / Andy Wong)

The more debt the merrier, the saying goes, at least until the party stops and the hangover starts. This is true for the debt situation inside China, as well as for international lending to China.

According to the Bank for International Settlements (BIS), total cross-border bank lending to China decreased $63 млрд $698 billion at the end of the first quarter of 2016. Over the year, this measure is down 27 percent.

“Since hitting its all-time high at the end of September 2014, cross-border bank credit to China has contracted by a cumulative $367 миллиард (–33 percent), with interbank and inter-office activity leading the decline,” the BIS writes in a recent report.

The total stock of outstanding cross-border bank credit was $27.5 trillion at the end of March 2016.

This is important because that money is not coming back. Once the loan or debt is paid off, it vanishes and can’t be used to fuel other financial or economic transactions. It is part of the reason why many economies in the world are teetering on the edge of a recession with only bank lending to Western governments balancing out the emerging market credit decline.

The reduction in bank lending is part of the capital that is flowing out of China by the hundreds of billions, $676 billion in 2015 alone.

International Institute of Finance (IIF)

International Institute of Finance (IIF)

Banks in Hong Kong decreased their China exposure by 4.5 percentage points from 32.8 percent of assets at the end of 2014 үчүн 27.3 percent at the end of 2015, according to rating agency Fitch, the first decrease in a decade.

International banks are wary of a slowing Chinese economy and a rise in corporate defaults.

According to rating agency Standard and Poor’s (S&P), China’s credit quality is “deteriorating more quickly than at any time since 2009,” it states in a recent report. S&P downgraded three companies for every company upgraded in the first half of 2016.

Chinese corporates will “come under increasing strain as economic growth slows, industrial overcapacity crimps profitability and cash flow, and an elevated appetite for expansion weakens leverage.”

Claims of international banks of different countries in U.S. dollar trillion (left) and U.S. dollar billion (туура) (Bank for International Settlements (BIS))

Claims of international banks of different countries in U.S. dollar trillion (left) and U.S. dollar billion (туура) (Bank for International Settlements (BIS))

And international banks don’t want to wait for that to happen. Neither do they want to wait for a sharp devaluation of the Chinese currency.

“A sharp depreciation of the yuan, which would be the consequence if the [foreign currency] reserves would have to be used to safeguard systematically important entities that do have foreign currency debt. This would be the consequence of a failure to act, a recession and, in the worst case, a financial crisis. Again, something that’s survivable; not the end of the world, but very costly and politically destabilizing, said Citigroup chief economist Willem Buiter.

Hugh Hendry, principal at the hedge fund Eclectica is more pessimistic:

“Tomorrow we wake up and China has devalued 20 percent, the world is over. The world is over. The euro breaks up. Everything hits a wall. There’s no euro in that scenario. АКШ. экономика, I mean everything hits a wall,” he told RealVisionTV earlier this year.

Артынан Valentín боюнча Twitter: @vxschmid

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