When China Stopped Acting Chinese
August 1, 2015
A Transformation Like No Other
China GDP Versus China Beige Book
Economic Stimulus, Like It or Not
Insanely Leveraged Farmers
The Plunge Protection Team – Chinese-Style
The Silver Lining
New York, Maine, New York, and Boston
“The one thing I know for sure about China is, I will never know China. It's too big, too old, too diverse, too deep. There's simply not enough time.”
– Anthony Bourdain, Parts Unknown
Much of the world is focused on what is happening in Greece and Europe. A lot of people are paying attention to the Middle East and geopolitics. These are significant concerns, for sure; but what has been happening in China the past few months has more far-reaching global investment implications than Europe or the Middle East do. Most people are aware of the amazing run-up in the Shanghai stock index and the recent “crash.” The government intervened and for a time has halted the rapid drop in the markets.
There have been a number of concerns about what this means for the Chinese economy. Is China getting ready to implode? Certainly there are those who have been predicting that outcome for some time. In this week’s letter I am going to try to explain both what caused the Chinese stock market to rise so precipitously and then fall just as fast and why we have to view China’s stock market differently from its economy.
As I have been saying for several years, in order for the Chinese economy to continue to grow, the Chinese must shift their emphasis from industrial production and infrastructure investment to a services-oriented economy. That is indeed what they are trying to do, and we are beginning to see signs of the services sector taking on a role as important to the Chinese economy as...