In this week’s episode of Hidden Forces, host Demetri Kofinas speaks with Anne Stevenson-Yang. Anne is the co-founder of J Capital Research, which conducts ground-up, primary research for institutional money managers on stocks, the Chinese economy, and the Chinese financial system. She is also the author of the recent book China Alone: China’s Emergence and Potential Return to Isolation, in which she sets out her views on the Chinese economy and political system, arguing that China historically repeats a cycle of expansion and retreat.
In today’s conversation, we take a trip around the world to the land of China. Our conversation concerns itself with the contemporary changes in Chinese society that came after the death of Chairman Mao. What was life like in China before Nixon and Kissinger made their famous visit in 1971? Why did modernization and reform in China begin after 1978? Who was responsible for the opening in China? What was the role of Deng Xiaoping, and why is he remembered as “the architect” of a new brand of thinking that combined socialist ideology with pragmatic aspects of market economics – a system the Chinese call “Socialism with Chinese Characteristics?”
What changes did the Chinese experience between 1979 and 1989, during the implementation of the economic reforms of Deng Xiaoping? How did these reforms culminate into the protests in Tiananmen Square in 1989? What was the Chinese government’s reaction to the uprisings? The Chinese response differed significantly from the Soviet reaction to the fall of the Berlin Wall in the same year. The Chinese government decided to follow a different path after the massacres in Tiananmen Square, by turbocharging economic development. Explicit targets were set for GDP growth. There was selective liberalization of the Chinese economy, particularly in Chinese real estate. China placed a huge emphasis on building its manufacturing industries and on acquiring hard currency through exports. The Chinese financial system remained highly centralized and China’s currency, the renminbi, carefully controlled. All this was used towards re-investment with an almost single-minded commitment to hitting the government’s GDP targets.
Some have called the rise of China in the late 20th century a miracle. It is more appropriate to call it “the Chinese miracle.” The size of the Chinese economy has increased more than 25-fold in the last 25 years. Thirty years ago, the Chinese economy measured in at less than 5% of US GDP in exchange terms (perhaps as low as 2%). By 1992, the Chinese economy was only 6% of US GDP. By 2000 China weighed in at roughly 12-15% of US GDP. Today, China boasts a Gross Domestic Product that is roughly 60% that of United States. Loan Growth in the Chinese financial system has averaged 16 percent in the last 20 years. Loan growth in China reached an all-time high of 35% percent of GDP in June of 2009, amidst the greatest economic contraction since the Great Depression. Total debt in China recently surpassed 300% of GDP. This makes the finances of Western nations like the United States, France, and the United Kingdom seem frugal by comparison. In the first 7 years since the financial crisis, bank liabilities in the Chinese financial system grew by nearly $15 trillion dollars. This is the near equivalent of the consolidated size of all US commercial banks. China has used more cement in 3 years of massive overbuilding than the U.S. employed in all of the 20th Century. Hundreds of thousands of meters of unsold residential real estate sit empty around the country. There is a massive amount of industrial overcapacity in China. Chinese ghost cities have become almost as cliche as the fake Paris’, Venice, and Dubai’s created within mainland China. The Chinese economy is in terrible need of a recession. But the Chinese government cannot afford the recession that it desperately needs. Nevertheless, it cannot avoid the crisis that has been building in the Chinese financial system. How will the citizens of China, its trading partners, emerging markets and developed economies react when the reckoning finally arrives. How much longer can the Chinese government continue to postpone the inevitable?
Anne Stevenson-Yang co-founded J Capital Research in late 2007 and is J Capital’s Research Director. Her coverage areas include solar, internet, medical devices, property, some consumer and direct-sales names, and China’s macro-economy. Anne was formerly co-founder of a group of Online Media Businesses called Blue Bamboo Ventures and also founded and operated a CRM software company, Clarity Data Systems, and a publishing company whose flagship magazine is City Weekend. Over 25 years in China, Anne has also worked as an industry analyst and trade advocate, heading the US Information Technology Office and, 1993 through 1997, the China operations of the US-China Business Council. Anne authored the 2013 monograph China Alone: China’s Emergence and Potential Return to Isolation for the National Autonomous University of Mexico. The book set argued that China historically repeats a cycle of expansion and retreat.
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Qui convenit? Inscite autem medicinae et gubernationis ultimum cum ultimo sapientiae comparatur. In qua si nihil est praeter rationem, sit in una virtute finis bonorum; Quare conare, quaeso.
A mene tu? Respondent extrema primis, media utrisque, omnia omnibus. Sed non sunt in eo genere tantae commoditates corporis tamque productae temporibus tamque multae. Quid de Platone aut de Democrito loquar? Huius ego nunc auctoritatem sequens idem faciam. Idem iste, inquam, de voluptate quid sentit? Quod autem satis est, eo quicquid accessit, nimium est; Quem Tiberina descensio festo illo die tanto gaudio affecit, quanto L.
Eadem fortitudinis ratio reperietur. Minime vero istorum quidem, inquit. Nec lapathi suavitatem acupenseri Galloni Laelius anteponebat, sed suavitatem ipsam neglegebat; Virtutis, magnitudinis animi, patientiae, fortitudinis fomentis dolor mitigari solet. Quae cum praeponunt, ut sit aliqua rerum selectio, naturam videntur sequi; Morbo gravissimo affectus, exul, orbus, egens, torqueatur eculeo: quem hunc appellas, Zeno? Et quidem saepe quaerimus verbum Latinum par Graeco et quod idem valeat;
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Bonum incolumis acies: misera caecitas. Utrum igitur tibi litteram videor an totas paginas commovere? Universa enim illorum ratione cum tota vestra confligendum puto. Atqui iste locus est, Piso, tibi etiam atque etiam confirmandus, inquam; Tenesne igitur, inquam, Hieronymus Rhodius quid dicat esse summum bonum, quo putet omnia referri oportere? Quamquam id quidem, infinitum est in hac urbe; Sic exclusis sententiis reliquorum cum praeterea nulla esse possit, haec antiquorum valeat necesse est. Fortemne possumus dicere eundem illum Torquatum? Quae quo sunt excelsiores, eo dant clariora indicia naturae.
Quid de Platone aut de Democrito loquar? Istam voluptatem perpetuam quis potest praestare sapienti? Omnes enim iucundum motum, quo sensus hilaretur. Quod non faceret, si in voluptate summum bonum poneret. Tu enim ista lenius, hic Stoicorum more nos vexat. Facillimum id quidem est, inquam. Cur haec eadem Democritus? Dolere malum est: in crucem qui agitur, beatus esse non potest.
Neque enim disputari sine reprehensione nec cum iracundia aut pertinacia recte disputari potest. Atque ab isto capite fluere necesse est omnem rationem bonorum et malorum. Octavio fuit, cum illam severitatem in eo filio adhibuit, quem in adoptionem D. Sed potestne rerum maior esse dissensio? Sed haec quidem liberius ab eo dicuntur et saepius. Utinam quidem dicerent alium alio beatiorem! Iam ruinas videres.
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sin kakan malitiam dixisses, ad aliud nos unum certum vitium consuetudo Latina traduceret. Graecis hoc modicum est: Leonidas, Epaminondas, tres aliqui aut quattuor; Apparet statim, quae sint officia, quae actiones. Verum tamen cum de rebus grandioribus dicas, ipsae res verba rapiunt; Duo Reges: constructio interrete. Sed emolumenta communia esse dicuntur, recte autem facta et peccata non habentur communia. Tubulum fuisse, qua illum, cuius is condemnatus est rogatione, P. Quare conare, quaeso. Bonum valitudo: miser morbus.
Ergo hoc quidem apparet, nos ad agendum esse natos. Quia dolori non voluptas contraria est, sed doloris privatio. Ait enim se, si uratur, Quam hoc suave! dicturum. Sit hoc ultimum bonorum, quod nunc a me defenditur; Quid ergo hoc loco intellegit honestum? Non enim ipsa genuit hominem, sed accepit a natura inchoatum.
Iis igitur est difficilius satis facere, qui se Latina scripta dicunt contemnere. Eiuro, inquit adridens, iniquum, hac quidem de re; Ut proverbia non nulla veriora sint quam vestra dogmata. Cum audissem Antiochum, Brute, ut solebam, cum M. Curium putes loqui, interdum ita laudat, ut quid praeterea sit bonum neget se posse ne suspicari quidem. Quid, quod res alia tota est?
Te ipsum, dignissimum maioribus tuis, voluptasne induxit, ut adolescentulus eriperes P. Cur haec eadem Democritus? Universa enim illorum ratione cum tota vestra confligendum puto. Non quaeritur autem quid naturae tuae consentaneum sit, sed quid disciplinae. Etenim semper illud extra est, quod arte comprehenditur.
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Lorem ipsum dolor sit amet, consectetur adipiscing elit. Compensabatur, inquit, cum summis doloribus laetitia. Quae diligentissime contra Aristonem dicuntur a Chryippo. Restincta enim sitis stabilitatem voluptatis habet, inquit, illa autem voluptas ipsius restinctionis in motu est. Quis est tam dissimile homini. Satisne igitur videor vim verborum tenere, an sum etiam nunc vel Graece loqui vel Latine docendus?
Efficiens dici potest. Huius, Lyco, oratione locuples, rebus ipsis ielunior. Vitae autem degendae ratio maxime quidem illis placuit quieta. Putabam equidem satis, inquit, me dixisse. Haec para/doca illi, nos admirabilia dicamus. Bona autem corporis huic sunt, quod posterius posui, similiora. Ut enim consuetudo loquitur, id solum dicitur honestum, quod est populari fama gloriosum. Sed in rebus apertissimis nimium longi sumus. At quanta conantur! Mundum hunc omnem oppidum esse nostrum! Incendi igitur eos, qui audiunt, vides.
An quod ita callida est, ut optime possit architectari voluptates? Iam id ipsum absurdum, maximum malum neglegi. Videmus igitur ut conquiescere ne infantes quidem possint. Nunc de hominis summo bono quaeritur; Deinde prima illa, quae in congressu solemus: Quid tu, inquit, huc? Addidisti ad extremum etiam indoctum fuisse. Tum Piso: Quoniam igitur aliquid omnes, quid Lucius noster?
Duo Reges: constructio interrete. Sequitur disserendi ratio cognitioque naturae; Sin aliud quid voles, postea. Et hercule-fatendum est enim, quod sentio -mirabilis est apud illos contextus rerum. Quodsi vultum tibi, si incessum fingeres, quo gravior viderere, non esses tui similis; Quid, de quo nulla dissensio est?
