I tend to think that the Chines bubble will burst within ten years. But in the meantime, they will reign over a trash heap of a world economy in days to come. In other words, the man with one eye reigns as king in the land of the blind sort of thing… You can only build so many distribution centers (ie, Walmarts, Targets, etc.) in this country and wipe out the competition, before consumers run out of credit/cash for Chinese products.
The Chinese have a centrally- planned Soviet style economy playing a shell game with their currency like the Soviets. The difference is, the Soviets were not an open trader with the rest of the world and the Ruble was never traded. You could only do product exchanges with the Soviets like vodka for grain.
China has good cash flow but no underlying equity. They are a crap producing nation with a crap equity underpinning.
When their businesses fail, a state owned bank fails as well. They then transfer the bad debt to another state owned bank and keep the ruse going. Sound familiar?
Nearly all the major producers in China are crony communists. None of them have a clue how to run businesses in a market economy, so they instead enslave their people by paying slave wages in factory jobs to undercut prices in world markets. The Chinese marketing strategy is to make something for $5 sell it for $3 and make up the difference with volume. That's a hell of a way to run a railroad. Great cash flow, no profit, paper over the losses.
There is tremendous social unrest in China now because younger Chinese are tired of being factory slaves for the western world. They are going to have a major meltdown at some time in the near future.
Will we be able to pick up the pieces & regain our rightful place on the world economic stage after this happens?
Stay tuned.
