Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Silver Outlook Is 'Excellent' - 23rd July 19
Why The Coming Silver Rally Might Be The Greatest - 23rd July 19
We Are in for Decades of Ultra-Loose Monetary Policy - 23rd July 19
Gold & Gold GDX Stocks Ripping. What’s Next? - 23rd July 19
Stock Market Breadth Warning Signs for the Stock Market’s Rally? - 23rd July 19
U.S. Recession Watch: The Six-Cycle Forecast - 23rd July 19
US Dollar Index tightly wound between: US Bond Yields down on safety flows - 23rd July 19
Stocks Bull or Bear? The Market’s Message - 23rd July 19
This Dividend Aristocrat Is Leading the 5G Revolution - 22nd July 19
What the World Doesn’t Need Now is Lower Interest Rates - 22nd July 19
My Biggest 'Fear' For Silver - 22nd July 19
Reasons to Buy Pre-Owned Luxury Car from a Certified Dealer - 22nd July 19
Stock Market Increasing Technical Weakness - 22nd July 19
What Could The Next Gold Rally Look Like? - 22nd July 19
Stock Markets Setting Up For A Volatility Explosion – Are You Ready? - 22nd July 19
Anatomy of an Impulse Move in Gold and Silver Precious Metals - 22nd July 19
What you Really need to Know about the Stock Market - 22nd July 19
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

China Spending 11.6 Million Annual Incomes Per Day Propping Up Stocks

Stock-Markets / Chinese Stock Market Aug 07, 2015 - 06:51 PM GMT

By: Graham_Summers

Stock-Markets

For years now China has been heralded as an economic miracle that will drive the global economy towards growth and eventually eclipse the US as THE superpower in the world.

This theme was driven by the view that somehow China had obtained the magic balance between free-market capitalism and Central Planning. Globally analysts breathlessly talked about China’s insatiable demand for commodities as its economy grew by double digits for three decades straight.


Unfortunately all of this overlooked basic common sense… that China was actually just one giant debt-fueled fraud in which the politically connected got rich skimming off the top of an endless sea of loose money funneled into dodgy investments and projects.

For example, let’s say that China built a city. Regardless of whether any of the buildings are ever purchased or leased, China will count the entire city in its GDP growth. As one can imagine, this has highly incentivized China’s government to build “bridges to nowhere” or economic projects that are never actually used.

Indeed, at one point Chinese bureaucrats even resorted to detonating buildings for the express purpose of then building another one… all in the name of generating that magic GDP growth… and generating additional bribes and under the table deals for the officials who signed off on the projects.

Throughout this period, Chinese officials who were “on the take” fled the country with their bribes and Indeed, between 1991-2011, it’s estimated that between 16,000-18,000 Chinese officials fled China taking 800 BILLION RMB (roughly $125 BILLION) with them. Bear in mind China’s entire GDP was just 2.1 trillion RMB in 1991.

As the Chinese economic miracle increased in size, so did the pace of fleeing officials.

The CDIC report, which was obtained by the Economic Observer newspaper, suggested that nearly 10,000 luxury homes had been sold by government officials in Guangzhou and Shanghai alone last year.

It also claimed that an astonishing $1 trillion (£630 billion), equivalent to 40 per cent of Britain's annual GDP, had been smuggled out of China illegally in 2012.

Economists and experts cast doubt on the figure, but said the flow of money from China was dramatic. Li Chengyan, a professor at Peking University, suggested that a total of roughly 10,000 officials had absconded from China with as much as £100 billion.

http://www.telegraph.co.uk/news/worldnews/asia/china/9815998/Chinas-Communist-party-cadres-launch-property-fire-sale.html

 

To put the above numbers in perspective, this theft is equal to roughly 2% of China’s total GDP. On a per official basis, we’re looking at roughly $15.7 million… not over the course of a decade but in ONE year.

In simple terms, China’s Government signed off on serial bubbles in shadow banking investment vehicles, real estate, and stocks because they:

  1. Kept the populace from rioting by creating the dream of wealth and prosperity
  2. Were the easiest means of getting rich for corrupt officials.

Fast forward to today and all of China’s bubbles are imploding.

To deal with this China has announced that it will

  1. Halt all IPOs.
  2. Ban short-selling in some companies.
  3. Arrest those involved in undermining stock market stability (anyone it wants to arrest).
  4. Create a “balance fund” backed by the Central Bank, 21 brokerages and the Chinese sovereign wealth fund. The fund will be used as a kind of Plunge Protection Team for China.
  5. Issue a number of small bailouts of brokerages and financial firms.

Regarding #3, yes, China is now arresting short-sellers… because somehow they are responsible for the bubble bursting. Obviously Chinese officials didn’t pay attention to what happened to US financials back in 2008 when the SEC banned short-selling them: they rallied for about a week before they continued to fall an incredible 73%.

China also engaged its own version of the Plunge Protection Team and is now spending $29 BILLION per day to prop up its market.

The state-owned China Securities Finance Corp. has been spending up to 180 billion yuan a day ($29 billion) to try to stabilize stocks, a person familiar with the situation said earlier this week.

http://www.wsj.com/articles/in-china-stocks-late-jolts-are-new-normal-1438284814

The average income in China for a college graduate is $2,500 per year.  So the Chinese Government is spending the equivalent of 11.6 MILLION people’s annual incomes per day.

Most analysts seem to think that China’s stock market problems can be disconnected form the Chinese economy. They cannot. China’s economy is growing at 3.5% at best and at worst is flatlining.

According to official forecasts, China was to be responsible for 33% of global GDP growth going forward. What do you think will happen when the financial world wakes up and realizes that China is in fact imploding?

If you've yet to take action to prepare for this, we offer a FREE investment report called the Financial Crisis "Round Two" Survival Guide that outlines simple, easy to follow strategies you can use to not only protect your portfolio from it, but actually produce profits.

We made 1,000 copies available for FREE the general public.

As we write this, there are less than 15 left.

To pick up yours, swing by….

http://www.phoenixcapitalmarketing.com/roundtwo.html

Best Regards

Graham Summers

Phoenix Capital Research

http://www.phoenixcapitalmarketing.com

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2015 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Graham Summers Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules