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Economics Realities of China's Global Influence

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Economics Realities of China's Global Influence

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Economics Realities of China's Global Influence

  1. 1. Economic Realities of China’s Global Influence December 2019 By Chaganomics Editorial www.chaganomics.com
  2. 2. China Debt Woes 2018-2019 Headlines ● SINGAPORE (Reuters) - The collapse in China of a complex web of debt guarantees involving several private firms highlights risks in its financial system and opens up a potentially hazardous front for an economy in the grip of its slowest growth in nearly three decades. ● HONG KONG (SMCP) - Banks reluctant to lend to non-state sector without a guarantor, so cross-guaranteeing is common and one bad loan can trigger multiple defaults. ● The private sector accounted for 126 of 165 bond defaults in 2018. www.chaganomics.com
  3. 3. Everyone is familiar with Jack Ma and Alibaba? Great examples of state enterprise mixed with private enterprise. Alibaba went public September 19th 2013 (Raised $21B). Everybody bought the stock despite the issues behind disclosure and state ownership it has made everyone money. No one discuss the state control of Alibaba anymore. Are you familiar with Ant Financial ? www.chaganomics.com
  4. 4. Economic Times of India June 09, 2018 Ant raises $14 billion in largest single mop-up; biggest-ever single fund-raising globally. Ant Financial Services Group, operator of China’s biggest online payment platform, on Friday said it raised around $14 billion in what market watchers called the “biggest-ever single fund-raising globally” by a private company. www.chaganomics.com
  5. 5. www.chaganomics.com
  6. 6. China & State Capitalism In this system, governments use various kinds of state-owned companies to manage the exploitation of resources that they consider the state's crown jewels and to create and maintain large numbers of jobs. They use select privately owned companies to dominate certain economic sectors. They use so-called sovereign wealth funds to invest their extra cash in ways that maximize the state's profits. In all three cases, the state is using markets to create wealth that can be directed as political officials see fit. And in all three cases, the ultimate motive is not economic (maximizing growth) but political (maximizing the state's power and the leadership's chances of survival). This is a form of capitalism but one in which the state acts as the dominant economic player and uses markets primarily for political gain. - Ian Bremmer www.chaganomics.com
  7. 7. State-Controlled Capitalism www.chaganomics.com
  8. 8. Since 1978, China has legalized the emergence of private enterprise, but strong pressures remain which restrain its expansion. As China’s power increases, it is increasingly likely we will see more state controlled capitalism and state owned enterprises. China’s private enterprises often exclude state debt on their balance sheets. www.chaganomics.com
  9. 9. Hong Kong was once a preiment trading hub for commerce and financials, anchored in part to the Canton System (1757–1842) which concentrated all trade in HK - Guangzhou. After that system ended the British led HK until 1997. Upon breaking apart “The Basic Law” ensured Hong Kong will retain its capitalist economic system and own currency (the Hong Kong Dollar), legal system, legislative system, and people's rights and freedom for fifty years, as a special administrative region (SAR) of China. Set to expire in 2047. China began meddling in Hong Kong elections immediately. In the last decade HK has been replaced by Singapore for global trade, and eventually it will be replaced by Shanghai. www.chaganomics.com
  10. 10. Recently the U.S. State Dept issued a warning about traveling to China. The warning included: - Private messages containing negative statements about China would be read, and those sending such messages could be detained. - Emphasized that China did not recognize dual citizenship whatsoever. www.chaganomics.com
  11. 11. Ant Financial credit scoring program is called Sesame Credit Behavior and Preferences: Reveal users’ online behavior Interpersonal Relationships: Reflect the online characteristics of a users’ "friends” www.chaganomics.com
  12. 12. China’s One Belt, One Road www.chaganomics.com
  13. 13. China’s One Belt, One Road www.chaganomics.com
  14. 14. Try 2025 or 2030... www.chaganomics.com
  15. 15. www.chaganomics.com
  16. 16. The future... China has a massive population of people. This large population that requires upward mobility (meaning impoverish >> middle class) Most of that mobility and dynamic ability will come from global trade. There is no growth in China without the United States, because a growing middle class will consume American products. However, China does not wish to be totally reliant on the United States or US influenced economies. www.chaganomics.com
  17. 17. What Do We Buy From The US? (2017 Nums.) China's exports to America amounted to $526.2 billion or 21.8% of (American) its overall imports. 1. Electronic equipment: $150 billion 2. Machinery: $112.4 billion 3. Furniture, lighting, signs: $34.8 billion 4. Toys, games: $26.7 billion 5. Plastics: $17.6 billion 6. Vehicles: $15.6 billion 7. Knit or crochet clothing: $14.9 billion 8. Footwear: $14.8 billion 9. Clothing (not knit or crochet): $13.5 billion 10. Iron or steel products: $12.4 billion www.chaganomics.com
  18. 18. China’s road to global dominance isn’t assured, but it could happen. In recent years China has beat the US in domestic patents granted, and Asia’s capital markets have been bringing in far more fees that US banks. Influence is easily bought by great IPO markets. China markets allow Chinese companies to go public without disclosing state debt and sensitive materials. No one knows how much influence the Chinese government has in these Chinese public equities. Too much Chinese influence in the global market could topple the global economy, or make us “adversely” close with China. Unless this is a new economics. Some attribute state control to their longevity. www.chaganomics.com
  19. 19. Private Industry In China: You can't accept anything for face value regarding private enterprise and wealth in China. The entire private sector in China may only be 17 - 20 % of China’s economy. The rest could be state owned. www.chaganomics.com
  20. 20. As for Chinese entities with revenue over 5M¥ (small-medium cut off) 160,000 chinese entities listed between (1998 - 2005) in a National Bureau of Statistics “Industrial China Study” individuals owners accounted for 3.7% of entity ownership. (1) All successful economies in history have been primarily private-sector and market- driven. (2) Not a single centrally planned economy has ever succeeded in attaining high income status and a living standard comparable to that of the west. (3) China has a high quantity of capitalism, but so did Brazil and India in the 1980s. (4) - Points from Yasheng Huang (MIT Sloan) www.chaganomics.com
  21. 21. This file is for educational information and is not intend for commercial sale. www.chaganomics.com

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