When all that's left in China's economy is real property

By He Qinglian on September 16, 2013.

In a report published on September 13, Southern Weekend said that Wenzhou housing speculators are now dumping real property, and that property owners have relinquished over 10,000 units of flats or commercial property with outstanding mortgages or were pledged to banks. This number exceeded the total supply of new flats in Wenzhou in 2012.

Since the funds used to speculate real property in Wenzhou came almost entirely from private capital, other areas were not too worried if Wenzhou would be the first fallen domino leading to the burst of property bubble.

Yet, whether or not this bubble would burst in the near future, one cannot help but feel that this so-called golden age (better called as "gilded age") of China is a period of absurdity when reviewing this unitary “pillar industry” of China and all the tragedies and bizarre things that happened around it.

Withdrawal of foreign funds: the People's Daily's Rebuttal, and the secret leaked

By He Qinglian on September 13, 2013
Source Article in Chinese: 人民日报“十大外资来源地”背后的秘密

China claims to be the world's second largest introducer of foreign investment. Yet when it comes to the origin of foreign investment, there is an embarrassing fact that the Chinese government would not want to admit: a large part of foreign capital is actually Chinese funds posing to be investment from overseas. 

The People's Daily published on August 12 an article saying that foreign funds have not withdrawn from China en masse, and included in it a chart listing the “top ten places of origin of foreign investment in China”. That chart debunked this lie. 

Foreign Capital Withdrawing from China

By He Qinglian on September 11, 2013 
Source Article in Chinese: 外资撤离成势,官媒为何否认?

The withdrawal of foreign capital from China has been a trend that began in 2009. Although at times there were new funds entering the country, they were not enough to change that trend. What drew my attention is that the People's Daily published articles time and again, asserting on one occasion that “the mass exodus of foreign funds is a purely groundless statement”, and claiming on another that “the withdrawal of part of the foreign funds was merely a temporary adjustment, its impact on China's economy is limited”. 

That the withdrawal of foreign investment is an issue important enough to drive an official newspaper of CPCCC to running several pieces to “set the record straight” made one feel very interested in the key arguments of Chinese official media.

Reading closely, I found that Chinese official media used three main arguments.

Xi Jinping’s “Speech 8.19” misinterpreted

By He Qinglian on September 8, 2013.
Source Article in Chinese: 被左右两方曲解的习近平“8.19讲话”

The recent debate about constitutionalism is very lively. While Maoists and Leftists took Xi Jinping’s remarks that showed his admiration for Mao as indications of a full turn to the left; the pro-constitutionalism faction (aka the “faction of universal values”) expected the Communist Party of China (CPC) to put political reform on the agenda during the Third Plenum this fall. And so the two factions talked past each other, oblivious to the strong political signal Xin Jinping released in his speech “Ideology work is a paramount task of the Party” (known among the Chinese media circle as “Speech 8.19”) and continued to make interpretation following their wishes.

Likonomics scrapped

By He Qinglian on August 13, 2013.
Source Article in Chinese: 政府投资号急吹 “克强经济学”破产

This is a time when economic bubbles exist side by side with conceptual bubbles, a time in which concepts get invalidated quicker than they take shape. One such example is Likonomics, introduced by Barclays Capitals in June this year. Of the three main points of this concept, “no stimulus” and “deleveraging” have been nullified. As for the “structural reform”, under the influence of government investment, it would bring about no change but instead give way to the old methods.