Today’s China Readings June 11, 2012

China’s weekend releases of May economic data showed China’s economy, while struggling, may not be as weak as some of the more vocal ursus sinica claim. In China Data Signal Some Strength, Aaron Back of the Wall Street Journal/Dow Jones writes that:

China’s exports and imports both rose sharply in May, while inflation slowed substantially, hopeful signs for the world’s second-largest economy….A raft of data released over the weekend by the Chinese government present a mixed picture, but overall suggest an economy stronger than many market players feared at the end of last week. A surprise-interest rate cut by the central bank Thursday prompted speculation that the monthly data for May would be especially weak.

At least one financial news site outdid itself hyperventilating about the state of China’s economy. On June 8 Business Insider published You Don’t Have To Read Chinese To See Why This Chart Has Beijing Freaked Out in which the author inserted a chart of declining inflation and concluded that “that’s why China is panicking, and cut rates on Thursday morning.”

But on June 10 the same site and the same journalist published China Gives Markets Another Reason To Surge, writing that:

“Remember, going into the weekend, there was a big fear that because China announced a rate cut on Thursday, that we’d get a slew of really hard-landing-y data. But the data hasn’t been a disaster.”

I understand writing dramatic headlines to attract eyeballs, especially when building a startup financial news site, but do not expect to be taken seriously about a serious topic if you are almost hysterically schizophrenic.

John Hempton, who runs Bronte Capital, a small Australian fund (<50m USD I believe) that has made good money shorting and exposing Chinese stock frauds, is a very influential financial blogger. He is out with a blockbuster of a post about China. In The Macroeconomics of Chinese kleptocracy, Hempton declares that:

“China is a kleptocracy of a scale never seen before in human history. This post aims to explain how this wave of theft is financed, what makes it sustainable and what will make it fail. There are several China experts I have chatted with – and many of the ideas are not original. The synthesis however is mine.”

Hempton makes some serious charges but unfortunately does not name names. For example, he claims that:

“When given direct evidence of fraudulent accounts in the US filed by a large company with CPC family members as beneficiaries or management a big 4 audit firm will (possibly at the risk to their global franchise) sign the accounts knowing full well that they are fraudulent. The auditors (including and arguably especially the big four) are co-opted for the benefit of Chinese kleptocrats.”

China has a massive corruption problem, one that has gotten significantly worse since the 20 Trillion RMB or so (USD$3 Trillion+) in various fiscal and monetary stimuli launched in response to the 2008 global financial crisis. I would guess that somewhere between 10-30% of that stimulus was stolen through various forms of corruption. That said, I think Hempton overstates his case, though based on the comments his post is generating at his site and at Business Insider, it looks like I am in the minority. What do you all think?

The New York Times reviews a fascinating new exhibition in England, arguing that it rewrites the history of Han civilization in China:

“The Search for Immortality: Tomb Treasures of Han China” on view at the Fitzwilliam Museum through Nov. 11 is one of those landmark shows that shed new light on a crucial historical period in one of the world’s great civilizations….The discoveries made in the past three decades by Chinese archaeologists have yielded so much datable evidence that books dealing with Han China must be rewritten.”

If you can not make it to the museum, you can see parts the show in your web browser, at Virtual exhibition | Tomb Treasures of Han China.

Toxic food du jour is back. The Beijing News reports that some Shandong apple growers use pesticide bags to make their red Fuji apples grow bigger–烟台红富士套药袋长大_新京报网. But perhaps it is no big deal, as a Ministry of Agriculture official says there is nothing to fear in a little bit of pesticide residue–农业部官员:农药残留不可怕 低于标准可以食用_网易新闻中心? No more apples for my kids until we get back to DC for the summer…

In Ferraris push limit on road the China Daily reports that Hangzhou police stopped eight Ferraris racing on a highway Sunday. They were clocked going between 154-198 km/h, with one driver “setting a record on that road” with a top speed of 213 km/h. Three drivers were fined 200 RMB, five had their licenses revoked, and one, who did not have his license, had his car impounded. Perhaps we should start an asshole du jour entry as well….

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The best way to see this blog is to subscribe by email, especially if you are in China, as Sinocism is still blocked here. The email signup page is here, outside the GFW. You can also follow me on @niubi or Sina Weibo @billbishop. Comments/tips/suggestions are welcome, and feel free to forward to recommend to friends. Thanks for reading.

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One thought on “Today’s China Readings June 11, 2012

  1. Re: John Hempton’s article, what he’s saying ties in with pretty much everything I have read and understood about China. Kleptocracy doesn’t seem to harsh a word. It would be great to get some names, but we can all think of examples. As a description of the current corporate/governance model, it seems bang on.

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