Tag Archives: Chinese

Chinese Economy Circling the Drain

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“What I’m trying to remind everyone is you don’t make anything investing in a totalitarian [Communist Chinese] government over a long period of time. ~ Kyle Bass, founder and chief investment officer of Hayman Capital Management

In recent months, a plethora of downbeat economic data and news have come out of Communist China.

Trouble is growing particularly in China’s real estate sector and financial markets. Massive property developers like Evergrande and Country Garden Holdings have teetered on the brink of default. Beijing has in recent months tried to stabilize the property and banking sectors and shore up support for the country’s stock market and renminbi.

Amid the constant flow of negative economic data emanating from China, government officials announced this summer that they would no longer publish certain economic statistic, such as youth employment, which is has soared in recent years.

“In the long run, you’ve got the Chinese economy circling the drain and you have the real estate market falling apart,” said Kyle Bass, founder and chief investment officer of Hayman Capital Management. “Every single private developer is in some stage of bankruptcy today. And you’ve got about $190 billion worth of offshore bonds, dollar bonds, in some sense of default.”

Further, “I just think you don’t want to invest,” he said. “I think you want to invest in markets where there’s a rule of law, and where you have real leadership, and you actually have ways to earn returns that are positive for your portfolio.”

References:

  1. https://markets.businessinsider.com/news/stocks/china-economy-investors-markets-capital-bass-workers-real-estae-property-2023-9

Cathie Wood Dislikes Investing in Chinese Stocks

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“Pouring billions of dollars into China now is a tragic mistake.” George Soros

Cathie Wood, the CEO of Ark Invest, has slashed her company’s investment exposure to China in 2021. Her actions came as Beijing’ tightened its authoritarian grip on domestic businesses and the economy. These actions has rattled global investors, wiping trillion of dollars off the value of Chinese stocks and triggering fears about the future of innovation in China, especially with China experiencing serious economic slowdown and real estate turmoil.

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Wood revealed that her Ark Innovation ETF has significantly reduced its exposure to China. Sweeping regulatory changes have made the investment environment riskier in,China, according to a Financial Times report.  Additionally, the Chinese government has been accused by the U.S. and the international community of committing genocide specifically against the Muslim Uyghurs and other minorities which has resulted in several countries boycotting the 2022 Beijing Winter Olympics because of these allegations.

Almost every week late last year, China announced a regulatory crackdown aimed at reasserting its absolute control of its economy. The crackdowns included a banned on the ride-share company Didi from app stores a day after it listed on the New York Stock Exchange.

With Chinese authorities apparently focusing on social issues and social engineering at the expense of capital markets, Wood said, “We own very, very few stocks there [in China] because they’re unpredictable. They are grappling with what most governments are grappling with: the gap between rich and poor.”

Furthermore, Chinese authorities have been cracking down on cheap credit in an effort to cool the country’s real estate market that has been driven by speculation. These actions has caused China’s Evergrande Group, the world’s most indebted property developer, and other large property developers to default on bond payments. Wood is concerned that 75% of consumer savings in China is held in real estate, and real estate values have fallen in recent months. Her analysis: That the Chinese government is willing to risk the decline in real estate values and wipe out real estate investors in order to address the wealth gap.

Angel investor and entrepreneur Jason Calacanis commented: “I think the mad king is circling his wagons because he feels threatened. I’m talking about [Chinese President] Xi Jinping.”

President Xi Jinping’s has talked about “common prosperity” as a policy goal in China, and called on high-income Chinese enterprises to “return more [of their profits] to society”. These policies have been particularly focused on cracking down on the power of big private companies, such as e-commerce giant Alibaba and ride-hailing app Didi. Beijing’s policies have prompted investors to sell Chinese assets in 2021.

Moreover, Chinese companies in the technology, education and gaming sectors have faced an onslaught of draconian new rules relating to data privacy and workers’ rights in recent months. Chinese authorities have told the companies to “break from the solitary focus of pursuing profit or attracting players and fans.” Within the past several months, China barred online gamers under the age of 18 from playing on weekdays and limited their play to just three hours on weekends.

Cathie Wood is also circumspect about China’s demographics. China has been confronting the lowest fertility rates it has experienced in seven decades as well as a material gender imbalance. This is a growing concern to the Communist authoritarian government.

“I think President Xi is very unsettled that China’s three-child policy is not working. And that’s very forecastable,” Wood said.

Multinational U.S. companies have come under increased pressure both within China and internationally as they aim to comply with Xinjiang-related trade sanctions while simultaneously overlooking Chinese government’s crimes against humanity while continuing to operate in China. These companies issued marketing statements condemning the murder of George Floyd in the U.S. while turning a blind eye and remaining mute regarding genocide and mass murder in China.

Billionaire investor George Soros said BlackRock’s and other U.S. businesses who are investing billions of dollars into China now is a “mistake” and will likely lose money for the asset manager’s clients, according to an opinion piece in the Wall Street Journal.

“Pouring billions of dollars into China now is a tragic mistake,” Soros wrote in the op-ed. “It is likely to lose money for BlackRock’s clients and, more important, will damage the national security interests of the U.S. and other democracies.”

References:

  1. https://www.forbes.com/sites/kerryadolan/2021/12/03/investor-cathie-wood-on-bitcoin-why-she-sold-stocks-in-china-and-what-her-firm-is-buying-now
  2. https://www.cnn.com/2021/09/09/investing/cathie-wood-ark-china/index.html
  3. https://www.afr.com/markets/equity-markets/how-jack-ma-treatment-prompted-cathie-wood-to-quit-china-20211020-p591ia
  4. https://www.reuters.com/business/finance/soros-says-blackrocks-china-investments-likely-lose-money-wsj-2021-09-07/
  5. https://www.cnbc.com/2022/01/11/intel-deletes-reference-to-xinjiang-after-backlash-in-china.html

Huawei’s Threat to Communications Networks

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Updated: Saturday, 2/15/2020

“Most people are starting to realize that there are only two different types of companies in the world: those that have been breached and know it and those that have been breached and don’t know it. Therefore, prevention is not sufficient and you’re going to have to invest in detection because you’re going to want to know what system has been breached as fast as humanly possible so that you can contain and remediate.” Ted Schlein, a venture capitalist with Kleiner Perkins Caufield & Byers.

To begin the discussion, it is important to understand that communications, such as telecommunications and internet data networks, are vital to national security and are critical infrastructure for every sovereign nation. Since critical electrical grids, 5G technology, autonomous vehicles and even hospitals rely on the communication networks.

U.S. Intelligence Sharing

U.S. Defense Secretary Mark Esper warned allies that letting the Chinese firm Huawei build their next-generation, or 5G, network risks their security cooperation and information sharing arrangements with U.S. intelligence and national security agencies. The U.S. SECDEF remarked that, “reliance on Chinese 5G vendors, for example, could render our partners’ critical systems vulnerable to disruption, manipulation and espionage,” in a speech at the high-level Munich Security Conference in early 2020. “It could also jeopardize our communication and intelligence sharing capabilities, and by extension, our alliances.”

“National security is a serious matter and I do not think it is improper to discuss such details in a public forum.” Narendra Modi

One recent morning on Yahoo Finance, an on-air guest was dismissive about Huawei 5G technology and the U.S. Administration’s allegations that the Chinese technology giant has built backdoors to communication networks that they installed across the globe. Additionally the on-air guest stated that the Trump Administration needs to provide evidence of Huawei’s complicity to spy for China.

What the guest commentator omitted from his less than transparent comments was that unlike U.S. technology and telecommunications companies, Huawei has functioned as a tool for surveillance and espionage for the Communist Chinese government. In addition, they have been significantly subsidized for more than a decade by the Chinese authoritarian government. Thus, this is the reason that they can substantially underbid their Western competitors on 5G network projects across the globe.

Furthermore, despite Huawei’s adamant denials, they have built backdoors into the communications systems that include Huawei technology, equipment and software, or in networks that have been installed by them or their affiliates. Essentially, a backdoor is a method of bypassing a network’s security protocols to access communications or computer network.

Vodafone in Italy

U.S. Intelligence agencies have repeatedly warned allies regarding the potential threat posed by Huawei’s technology if installed in 5G networks. Back in April 2019, Yahoo Finance reposted a Bloomberg article that Vodafone Group, Europe’s biggest phone company, discovered hidden backdoors in the software installed by Huawei that could have given Huawei or the Chinese government unauthorized access into the Vodafone’s voice and data network. Although the backdoor was discovered and reportedly removed by Huawei, subsequent investigations by Vodafone discovered the the backdoor remained.

“We’re talking about the fate of our economy and the questionable resiliency of our Nation’s critical infrastructure. Why are experts so polite, patient, and forgiving when talking about cybercrime, cyber security, and National Security? The drama of each script kiddie botnet attack and Nation State pilfering of our IP has been turned into a soap opera through press releases, sound bites and enforced absurdity of mainstream media. It’s time for a cybersecurity zeitgeist in the West where cyber hygiene is a meme that is aggressively distributed by those who have mastered it and encouraged to be imitated by those who have experienced it.” James Scott.

Deterring Chinese cyber-espionage

We must not allow ourselves either to be misled by Chinese repeated denials or to rely solely on U.S. entertainment media’s reporting by omission regarding the cyber security risks posed to U.S. and its allies’ communications networks once Huawei’s equipment is installed. Effectively, Huawei is a Chinese Communist state-controlled enterprise. And, it operates at the behest of the Chinese Communist Party in surveilling their own citizens, and assisting with spying and espionage against foreign nations.

Bottomline, Huawei, and its affiliates, represent a national security threat to the United States, our allies, and our privacy. If they’re permitted to install their technology, equipment and software in critical communications infrastructure, backdoors and unencumbered access would exist. Their technology does pose a real threat to the economy, the critical communications networks and the critical infrastructure that relies on the communications backbone.

References:

  1. https://www.defensenews.com/congress/2020/02/15/esper-huawei-5g-could-risk-us-information-and-security-ties/?utm_source=facebook.com&utm_medium=social&utm_campaign=Socialflow+DFN
  2. https://www.c4isrnet.com/battlefield-tech/it-networks/5g/2020/02/12/white-house-claims-huawei-equipment-has-backdoor-for-spying/
  3. https://www.state.gov/huawei-and-its-siblings-the-chinese-tech-giants-national-security-and-foreign-policy-implications/
  4. https://www.forbes.com/sites/haroldfurchtgottroth/2017/05/08/chinese-government-helps-huawei-with-5g/#67ea148b6bae
  5. https://www.rickscott.senate.gov/sen-rick-scott-attorney-general-barr-keep-huawei-out-us-markets
  6. https://securityfirstcorp.com/cyber-security-quotes/

Coronavirus is less deadly than SARS — but that also explains why it’s so contagious – MarketWatch

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Two months into the epidemic, the coronavirus has not proven to be as deadly as the SARS virus. That, however, may also help explain why it’s spreading so quickly. It has an incubation period of up to two weeks, which enables the virus to spread through person-to-person contact.

The coronavirus, a highly contagious, pneumonia-causing illness that infects the respiratory tract, is now responsible for 213 deaths in China as of late Thursday and 9,692 infections worldwide, according to Chinese officials and official figures from the World Health Organization.

SARS, or severe acute respiratory syndrome, infected 8,096 people worldwide with approximately 774 official SARS-related deaths; most of those infections occured during a nine-month period from 2002 to 2003. Even with 43 new fatalities reported over 24 hours, the fatality rate remains steady.

SARS had a fatality rate of 9.6% compared to the fatality rate of 2.2% for the coronavirus.

SARS had a fatality rate of 9.6% compared to the fatality rate of 2% for the coronavirus. However, that death toll could rise as the weeks progress, and drug companies scramble to come up with a vaccine for the virus. Whether the fatality rate remains steady has yet to be determined.

— Read on www.marketwatch.com/story/coronavirus-is-less-deadly-than-sars-but-that-may-explain-why-its-so-contagious-2020-01-30

Buy the dip in stocks and then sell the rip higher – Bank of America

That’s the strategy that strategists at Bank of America Securities appears to be espousing for investors, amid swings in U.S. stock benchmarks that have become increasingly gut-wrenching in the aftermath of a coronavirus outbreak in China that appears to be giving bullish investors at least a momentary pause after a record-setting rally.

For the week, the S&P 500 index and Dow are on track for a more than 1% loss, and the Nasdaq is on pace for a 1.2% drop, after Chinese authorities on Thursday said that more than 7,700 people have been infected with the Asian influenza, with at least 170 dead. Moreover, the Centers for Disease Control and Prevention confirmed the first case of person-to-person spread of coronavirus in Illinois. There are now six confirmed cases of coronavirus in the U.S., two of which are in Illinois

China’s Seven Deadly Trade Sins

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China has not been partners in good faith in trade and economic negotiations. They’re an authoritative Communist Dictatorship that enslaves it citizens for the empowerment of the Party

The U.S. and the Western multinational enterprises have enabled and fueled China’s extraordinary quarter century economic and global geopolitical growth. While the U.S. goal is Free Trade, Individual Freedom and Democratic Capitalism. U.S. companies are getting fed up with the force technology transfer by companies doing business in China and the Chinese firms exporting and selling those products in the U.S. market.

China’s Seven Deadly Sins

1. Stop stealing Western intellectual property,

2. Stop forcing technology transfers,

3. Stop hacking U.S. computers,

4. Stop dumping into U.S. and Western markets and putting our companies out of business,

5. Stop state-owned enterprises from heavy subsidies,

6. Stop the importation of fentanyl, and

7. Stop the currency manipulation

They’ve reneged on the Hong Kong autonomy agreement, they reneged on the agreement signed in the Oval Office with President Obama regarding the militarization of the South China Sea. In 2015, China’s President Xi stood with President Obama in the Rose Garden at the White House and promised (lied) that “there is no intention to militarize” a collection of disputed reefs in the South China Sea known as the Spratlys.

President Obama stated on his way to the 2016 G20 Summit in Hangzhou China. That “If you sign a treaty that calls for international arbitration around maritime issues, the fact that you’re bigger than the Philippines or Vietnam or other countries … is not a reason for you to go around and flex your muscles,” Obama added, according to Reuters. “You’ve got to abide by international law.”

Military analysts have criticized President Barack Obama’s administration for having been too timid in countering China aggression and militarization in the South China Sea. Critics, for instance, have faulted the previous administration for not conducting more frequent freedom of navigation patrols. “China’s militarization of the South China Sea has been a gradual process,

Source: https://www.nytimes.com/2018/09/20/world/asia/south-china-sea-navy.html

Chinese Cheating on Trade

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There should be no doubt in the minds of Americans that China has not been living up to the obligations and continues to ignore the rules of the World Trade Organizations (WTO) on bilateral trade with the U.S. and global trade with Western trading partners. For decades, the Chinese Communist centrally managed capitalist economy has been subsidizing inefficient domestic industries, dumping cheaply produced goods such as steel and iron on global markets, and erecting barriers to protect their domestic markets from foreign goods and services.

And, the U.S. and Western governments and global corporations, for decades, have taken the three monkeys approach to confronting China of “see no evil, hear no evil and speak no evil” to addressing the unfair trading practices. The inept response from governments and large corporations are because of the desire to access the lucrative and rapidly growing Chinese domestic market. Over the decades, this approached has proved an ineffective strategy and has only encouraged additional bad behavior and strong arming by the Chinese.

Despite Chinese Communist Party leaders’ continued denials of the bad behavior, there is no doubt that China is coercing the transfer of U.S. and Western technology, and stealing Western Intellectual Property (IP). Again, over the past several decades, Chinese rapid rise to becoming the world’s second largest economy by GDP and their rapid technological advancements as a global leader in artificial intelligence can be directly contributed to their successful pilfering of IP and forcing technology transfers.

Additionally, for decades, multiple U.S. administrations have avoided directly confronting the Chinese regarding their unfair trading practices and outright theft IP and forced technology transfers. The current U.S. – China trade reality is a result of policies of appeasement by administrations of both parties.

The Chinese have deliberately practiced bilateral and multilateral trade in a manner that have created an un-level and unfair trade environment built on theft, coercion, subsidies of domestic enterprises and dumping excesses below market priced goods on global markets that effectively decimates competition.