Building “Charming” Developments

One of the foremost lessons of Sun Tzu in The Art of War is that a good general does not seek to fight and always looks for an alternative, particularly a back door. The Government of Taiwan especially embraced this strategy when they started ‘encouraging’ investment in Mainland China, and indeed they subsidized almost all the losses that occurred to their industry’s Mainland subsidiaries in the 1970’s and 1980’s. The theory was that the Communist Government could not survive if the country opened up to foreign business, foreign thought, foreign requirements. Oopsies – the Mainland Chinese read the same book – fast forward 40-50 years and they are (and have been) pouring tons of money into deals with Foxconn who is owned by a Taiwanese, Terry Gou, who is now, as Nikkei put it on April 30th/19, “making a bid for the presidency (of Taiwan)” (no mention about the sea goddess, Mazu, whom Mr. Gou credits with telling him to run). And, by the by, over the years they have also been an old friend supporter of Li Ka-shing of CK Hutchison Holdings in Hong Kong, too. Just saying!

On another note, according to SCMP of May 2/19, China’s population will peak in 2023, not 2028 according to the ‘official estimate’ – gee, official estimates are wrong, who knew? The report states that, and I quote, “a major driver in the falling birth rate was the decline in the number of women of childbearing age”. It then goes on to state that childbearing age is “between 15 and 49”. Complete Intelligence and Global Demographics co-authored the report but it does not appear that they made any conclusions as to effects – I guess that they are leaving this to the same officials who are still sticking by 2028. One conclusion, I guess, is that it’s going to take longer to get a beer in the KTV as there will be fewer staff and the staff will be older (and slower). Just saying!

A very unhappy event last week – SCMP reported on May 1st/19 the collapse of JC Group of Hangzhou, a high profile company that was engaged in building “charming” developments. Its leader and many other senior executives are now detained on suspicion of “illegal fundraising”, but, as one investor put it – how could they be fundraising illegally when so many party groups supported it and, if they were, how come they had this support. To say that this investor, who apparently did his due diligence, is about to lose most (if not all) of his stake (as will everyone else) is a sad commentary of how sure a ‘sure bet’ is in China. Just saying sadly.

On a different ‘higher’ (sic) note, an evaluation by King’s College London found a high incidence of cocaine in some rural wetlands, as published last week. Who knew? And, closer to (my) home, the booming metropolis of Halifax, Nova Scotia, Canada (estimated 2019 population by WorldPop of 411,000), has signed a contract to purchase an armoured vehicle with 8 gunports. I guess they are expecting an invasion of radioactive crabs and lobsters. Or maybe they are going to offer scenic rides of the city, like they do in a tank at the Ice Festival in Harbin? No word yet as to whether they have considered the damage that will be done to the roads – maybe they hope to use the machine to rip up the asphalt and get down to the cobblestones beneath, instead of just waiting for the potholes to join up.

Hong Kong, as everyone knows who reads this column, has been having a love/hate relationship with tour groups from Mainland China ie. love the money but hate the people (oops, I mean crowds – my bad). Anyway, recent reports (SCMP May 3, among others) show that GDP for the first quarter grew just ½ of 1% and that retail sales fell 1.2%. Holy moly, treat people like crap and then wonder why they don’t come back and why their friends don’t come at all – nothing like snatching defeat from the jaws of victory.

China has apparently blocked two Canadian pork exporters from Quebec over ‘concerns’ – according to Canadian politicians, it’s a “labelling” issue…glad those officials in China have time to worry about labels when an estimated 30% of their 40+ million hogs are either dead or expected to die from this “pork Ebola”. One thing for sure, it is not going to be these same officials who are going to be stuck disposing of the carcasses. And this mess has already spread beyond China’s borders. The Year of the Pig is certainly going to be memorable. Looks like Omnipork’s (etc.) fake pork products are going to be more popular than DT’s fake news. Just saying.

Finally, there has been a lot of talk about Xi Jinping’s Road and Belt Initiative ie. the new Silk Road. Frankly, in my opinion, the idea is masterful on so many levels that it’s truly awe-inspiring. It promotes China; it promotes Chinese technology; it promotes Chinese industry; it promotes Chinese labour; and it does so presumably at a profit. But, cutting through all the hype, one thing that it will not do, at least for the foreseeable future, is promote the use of the RMB. All the deals contracted for so far (about US$630 billion) have been negotiated and signed for in US dollars. And, as I reported previously, China is running out of dollars. David Lubin, an economist at Citibank stated it very clearly, “(as) China lacks an infinite supply of dollars, it therefore lacks an infinite capacity to meet its goals (vis-à-vis Belt and Road)”, not that all those goals have been ever clearly stated, much less delineated. Just saying.

Have a good week.


LJ Capundag

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