Well now it’s official. The People’s Republic of China has made it past the Soviet Union. The USSR died at 69. The PRC has made it to 70.
But with the US now raising its shotgun, for how much longer will the PRC fly into the sunset?
After all, centrally planned economies don’t have a great life expectancy. Human mastery over a system as complex as an economy has never been achieved, and only ever ends in tears or worse.
Centrally planned economies can be relied upon to throw a decent military parade, however; a good, old-fashioned peacocking of weapons, brocaded uniforms, and well-drilled soldiers.
A colleague once wondered aloud how much of North Korea’s GDP was driven by military parades, as we see them so often on the news when North Korea tries out a new missile. The PRC took a page out of the Democratic People’s Republic of Korea’s book yesterday, pulling out all the stops for its birthday party.
15,000 soldiers (those allowed to on parade had to be 5 foot 9 inches or very close) and 580 tanks rumbled through Tiananmen Square, while 160 aircraft roared overhead – no racing pigeons allowed in the area, should they cause a disturbance.
The decommissioned Kalashnikov hanging above my head was made in China, a relic of the 1950s. Its plywood panels are all there, but the stamped metal is bashed and bruised from adventures in Afghanistan.
The Chinese tech being showed off certainly yesterday looks in much better shape. Cold War technology fit for a new Cold War – drones aplenty, of all shapes and sizes.
We’re looking to make more video content at Southbank Investment Research – if there’s any market topics you’d like to see discussed or investing themes you’d like us to cover, let me know: [email protected].
And with that, I’ll leave you with Eoin:
Sometimes I feel like a broken record always repeating the same point about China, but governance is everything. The ranks of apologists for tyranny continue to advocate strongly for China despite its record on human rights, the environment, intellectual property, corruption, censorship and a host of additional factors.
The one thing China has going for it, is its economic expansion. Investors will be willing to give it the benefit of the doubt provided the expansion persists. It will be an entirely different narrative if China has a recession.
The high profile, but secretive, startup Magic Leap is currently attempting to fight an intellectual property suit against a former Chinese employee who has set up a company in China producing remarkably similar goggles and software. For what is arguably a leader in the development of augmented reality software and hardware this represents an existential challenge before the company has any chance of recouping the $2 billion invested in R&D. This is just one more example of the kind of competitive forces companies are dealing with on a daily basis.
This article from South China Morning Post quoting Mike Bloomberg is also worthy of mention. Here is a section:
“You’re not going to have a revolution. No government survives without the will of the majority of its people,” Bloomberg said. “He has to deliver services.”
Hoover then said: “I’m looking at people in Hong Kong who are protesting and wondering whether the Chinese government cares what they have to say.”
Bloomberg said that in government – “even governments that aren’t what we could call a democracy” – there were many stakeholders with vested interests and “they have an impact”.
How many terminals does Bloomberg have in China? How many Chinese investors does Ray Dalio have? How many Chinese government clients does “China insider” Kiril Sokoloff have? What of Jerry Brown, starting a joint task force with China on climate change less than a year after leaving his job as governor of California? The biggest question we need to be asking is why aren’t the vested interests of advocates of Chinese appeasement questioned more fully? The irony of the world’s biggest polluter pandering to climate change advocates while continuing to build coal-fired power stations would be funny if it were not so tragic.
China has now survived one year longer than the USSR but the economy is slowing, the currency is devaluing, property prices are in a bubble, the consumer is not spending, and domestic inflation is picking up. China is the epicentre of global risk. That might very well increase potential for a trade deal because if the economy is slowing as much as I believe, then China has a clear incentive to agree terms. That is a contrarian view at present.
All the best,
Boaz Shoshan
Editor, Capital & Conflict
Category: Market updates