
Episode 16
The Chinese Financial System and the Prospects for a Hard Landing in China | Anne Stevenson-Yang

Episode 16
Anne Stevenson-Yang
The Chinese Financial System and the Prospects for a Hard Landing in China | Anne Stevenson-Yang
summary
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?
Producer & Host: Demetri Kofinas
Editor & Engineer: Stylianos Nicolaou
Join the conversation at @hiddenforcespod
bio
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.
transcript
content locked
or Subscribe to Access Premium Content
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Summus dolor plures dies manere non potest? Quae est igitur causa istarum angustiarum? Quod idem cum vestri faciant, non satis magnam tribuunt inventoribus gratiam. Quia, si mala sunt, is, qui erit in iis, beatus non erit. Duo Reges: constructio interrete. Nec vero alia sunt quaerenda contra Carneadeam illam sententiam. At, si voluptas esset bonum, desideraret. Cur iustitia laudatur? Quid turpius quam sapientis vitam ex insipientium sermone pendere? Deinde disputat, quod cuiusque generis animantium statui deceat extremum. Aufert enim sensus actionemque tollit omnem.
Sed quot homines, tot sententiae; Unum est sine dolore esse, alterum cum voluptate. Tum Lucius: Mihi vero ista valde probata sunt, quod item fratri puto. Sed eum qui audiebant, quoad poterant, defendebant sententiam suam. Nam, ut sint illa vendibiliora, haec uberiora certe sunt. Negat enim summo bono afferre incrementum diem.
Quod autem principium officii quaerunt, melius quam Pyrrho; Quid ergo? Praeclarae mortes sunt imperatoriae; Quam si explicavisset, non tam haesitaret.
Inde igitur, inquit, ordiendum est. Cum audissem Antiochum, Brute, ut solebam, cum M. Non enim ipsa genuit hominem, sed accepit a natura inchoatum. In motu et in statu corporis nihil inest, quod animadvertendum esse ipsa natura iudicet? Idem iste, inquam, de voluptate quid sentit? Huius, Lyco, oratione locuples, rebus ipsis ielunior.
Full Episode
content locked
or Subscribe to Access Premium Content
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Universa enim illorum ratione cum tota vestra confligendum puto. Tu quidem reddes; Quid, de quo nulla dissensio est? Et harum quidem rerum facilis est et expedita distinctio. Ex eorum enim scriptis et institutis cum omnis doctrina liberalis, omnis historia. Duo enim genera quae erant, fecit tria. Duo Reges: constructio interrete. Quid censes in Latino fore?
Deinde prima illa, quae in congressu solemus: Quid tu, inquit, huc? Scientiam pollicentur, quam non erat mirum sapientiae cupido patria esse cariorem. Illud mihi a te nimium festinanter dictum videtur, sapientis omnis esse semper beatos; Sic enim censent, oportunitatis esse beate vivere.
Si quidem, inquit, tollerem, sed relinquo. Eam stabilem appellas. Quae similitudo in genere etiam humano apparet. Nihil minus, contraque illa hereditate dives ob eamque rem laetus. Ab his oratores, ab his imperatores ac rerum publicarum principes extiterunt. Maximus dolor, inquit, brevis est. Qua tu etiam inprudens utebare non numquam.
Unum nescio, quo modo possit, si luxuriosus sit, finitas cupiditates habere. Quid, cum fictas fabulas, e quibus utilitas nulla elici potest, cum voluptate legimus? Quid autem habent admirationis, cum prope accesseris? Bonum incolumis acies: misera caecitas. Dicet pro me ipsa virtus nec dubitabit isti vestro beato M. Utrum igitur tibi litteram videor an totas paginas commovere? At ille non pertimuit saneque fidenter: Istis quidem ipsis verbis, inquit;
intelligence report
content locked
or Subscribe to Access Premium Content
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Quae animi affectio suum cuique tribuens atque hanc, quam dico. Itaque ad tempus ad Pisonem omnes. Tum Quintus: Est plane, Piso, ut dicis, inquit. Universa enim illorum ratione cum tota vestra confligendum puto. Age, inquies, ista parva sunt. Quamquam te quidem video minime esse deterritum.
Quam ob rem tandem, inquit, non satisfacit? Negabat igitur ullam esse artem, quae ipsa a se proficisceretur; Quis istud possit, inquit, negare? Inde sermone vario sex illa a Dipylo stadia confecimus. Quae autem natura suae primae institutionis oblita est? Si quae forte-possumus.
Duo Reges: constructio interrete. Quis est, qui non oderit libidinosam, protervam adolescentiam? Ut in geometria, prima si dederis, danda sunt omnia. Si enim ita est, vide ne facinus facias, cum mori suadeas. Est enim effectrix multarum et magnarum voluptatum. Quamquam in hac divisione rem ipsam prorsus probo, elegantiam desidero. Consequens enim est et post oritur, ut dixi.
Quo plebiscito decreta a senatu est consuli quaestio Cn. Nam quibus rebus efficiuntur voluptates, eae non sunt in potestate sapientis. Hoc loco tenere se Triarius non potuit. Quae hic rei publicae vulnera inponebat, eadem ille sanabat.
related episodes
Video
content locked
or Subscribe to Access Premium Content
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Utrum igitur tibi litteram videor an totas paginas commovere? Sequitur disserendi ratio cognitioque naturae; Facillimum id quidem est, inquam. Duo Reges: constructio interrete. Quod ea non occurrentia fingunt, vincunt Aristonem; Quas enim kakaw Graeci appellant, vitia malo quam malitias nominare.
Rationis enim perfectio est virtus; Quod autem magnum dolorem brevem, longinquum levem esse dicitis, id non intellego quale sit. Non autem hoc: igitur ne illud quidem. Sin kakan malitiam dixisses, ad aliud nos unum certum vitium consuetudo Latina traduceret. Bonum integritas corporis: misera debilitas. Nihil acciderat ei, quod nollet, nisi quod anulum, quo delectabatur, in mari abiecerat.
Atque his de rebus et splendida est eorum et illustris oratio. Qui-vere falsone, quaerere mittimus-dicitur oculis se privasse; Ut in voluptate sit, qui epuletur, in dolore, qui torqueatur. Quid, quod homines infima fortuna, nulla spe rerum gerendarum, opifices denique delectantur historia? Egone non intellego, quid sit don Graece, Latine voluptas? Tu vero, inquam, ducas licet, si sequetur; Quid ergo attinet gloriose loqui, nisi constanter loquare? Hoc est non modo cor non habere, sed ne palatum quidem. Illud dico, ea, quae dicat, praeclare inter se cohaerere. Ut id aliis narrare gestiant?
Qui non moveatur et offensione turpitudinis et comprobatione honestatis? Nam si beatus umquam fuisset, beatam vitam usque ad illum a Cyro extructum rogum pertulisset. At, si voluptas esset bonum, desideraret. Atqui reperies, inquit, in hoc quidem pertinacem; Hoc tu nunc in illo probas. Satis est tibi in te, satis in legibus, satis in mediocribus amicitiis praesidii. Sed in rebus apertissimis nimium longi sumus. Quem ad modum quis ambulet, sedeat, qui ductus oris, qui vultus in quoque sit? Quae cum dixisset paulumque institisset, Quid est? Illa sunt similia: hebes acies est cuipiam oculorum, corpore alius senescit;