# Chinese Stock markets



## Marcus (May 13, 2012)

http://www.breitbart.com/national-s...just-nationalized-6-trillion-of-stock-losses/

"China's stock market had what traders call a "Dead Kitty" bounce on Thursday as *the communist authorities dispatched police and security personnel to "encourage" insider-buying and to arrest short sellers.* With the Chinese market still highly inflated even after falling $3 trillion in value, China took action last night to "nationalize" about $6 trillion in losses.

China is about to show its third straight quarter of negative real (after inflation) GDP growth. The nation had been relying on a stock market boom to play a "decisive role" in funding the nation's "Silk Road" reforms to transition to a consumer economy.

But as Breitbart News warned in "China's Lehman Brothers Weekend Begins," the "Red Dragon" has suffered a financial collapse equivalent in degree to the U.S. stock crash in 2008-9. Unlike the U.S., which used a formal government bailout to stabilize markets, the Communist Party instructed the nation's banks to use their own balance sheets to guarantee the current $8 trillion stated value of all of China's 2800 listed stocks.

As Stratfor's John Minnich points out, "market capitalization of Chinese stock markets hovered around $1 trillion to $2 trillion" before the recent stock boom. At its peak on June 12, "China's stock market capitalization, all the markets across the country, was something in the area of $10 trillion to $11 trillion."

Minnich comments that people before the boom might gamble some of their personal savings into the stock market, but "it wasn't critical to financing, corporate financing in the Chinese economy. Almost all corporate finances came through the state-owned banks."

But President Xi Jinping's Silk Road reforms aimed to "privatize" the risks of financing state-owned-enterprises off of the balance sheets of state-owned-banks and onto the balance sheet of the public. Over the last two years, the number of Chinese stock brokerage accounts for small individual investors grew from 20 million to about 100 million as the markets boomed.

The vast majority of these new "investors" came from middle class families along the advanced coastal regions of China. They were expected to be the vanguard that would lead the rest of the public to play a "decisive role" in deepening the financial markets (equity capital) to fund China's "Silk Road" domestic reforms and consumer expansion.

A bull market in stocks was crucial to the communist leadership, because during the boom period that Chinese stocks rose by 150 percent, the real (after-tax) output growth in China was actually negative, despite official figures showing 7 percent growth, according to Lombard Street Research.

Those GDP numbers would have been much worse, except that 85 percent of stock trades in China come from small individuals who experienced a "wealth effect" from about a $9 trillion increase in China stock prices. The fact that people seem to have felt richer probably stimulated a $2 trillion increase in consumption.

*But with the Chinese people suffering $3 trillion of losses since June 12, over half of all shares suspended from trading for up to six months, and banks stretched to finance the entire economy and bail out the stock markets, China is about to suffer the worst negative "wealth effect" of any nation since the US Great Depression.*

As Breitbart News reported in "China Debt-Bomb Fuse is Burning," China is buried under "crippling local government and corporate debt". The country's debt restructuring plan has consisted of banks rolling over all their non-performing state-owned-enterprise loans and relying on individual investors to bail out the banks by having unsophisticated retail investors buy new public offerings of insolvent state-owned companies.

But with the Silk Road reforms amounting to "little more than creative financial-engineering," Lombard Street Research assumed that the Chinese government would eventually still have to nationalize $4 trillion, or about 50 percent of GDP, worth of insolvent state-owned-enterprise loans that were still on the books of their state-owned-banks.

And now, with their creative financial-engineering scheme to inflate the stock markets having steered the nation into a 1929-style stock crash, the Chinese Communist Party was just forced to have state-owned banks nationalize another $8 trillion loss, or about 100 percent of GDP."

Boldens are mine.

As Yakov Smirnoff would say, "What a country."


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## VoorTrekker (Oct 7, 2012)

What are the ramifications of this towards the U.S.? Will it cause a war, or crash our economy?


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## crabapple (Jan 1, 2012)

The US Market seem okay when I checked.


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## VoorTrekker (Oct 7, 2012)

Not our computer networks! Think strategically, in the long term. Which affects and could it (they) cascade?


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## hiwall (Jun 15, 2012)

World GDP growth is mostly stagnate and has been for years. At the same time world stock markets have continued to grow and set record highs. You do not need a financial degree to figure out that the record market numbers are not sustainable without corresponding GDP growth. What China did this week to stop the fall of their markets is different from what the rest of the world is doing but not much different. Many in the financial world are wondering just how long all of this can continue and wondering just what will happen when the ball drops. Interesting times.


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## crabapple (Jan 1, 2012)

You are not talking adjustment, but a fall.
Some stocks do better when we are in recession.


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## readytogo (Apr 6, 2013)

I hope they all go to hell and the greedy companies that deal with them, I wonder how many American families have lost their jobs because of it.A totalitarian regime has no purpose on this world, Hitler,Castro, Putin, Maduro ;the Chinese government is a threat to the world.

http://csis.org/files/publication/130311_Chinese_hacking.pdf


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## crabapple (Jan 1, 2012)

readytogo said:


> I hope they all go to hell and the greedy companies that deal with them, I wonder how many American families have lost their jobs because of it.A totalitarian regime has no purpose on this world, Hitler,Castro, Putin, Maduro ;the Chinese government is a threat to the world.
> 
> http://csis.org/files/publication/130311_Chinese_hacking.pdf


Many middle class worker invest in company stocks, it is not just the top 1% that POTUS alway blames.
At least they are working & not living off the GOV. hand outs.


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## BillS (May 30, 2011)

crabapple said:


> The US Market seem okay when I checked.


No, it's heading for a crash too. The stock market is being manipulated by high frequency trading by the too big to jail banks and by the Federal Reserve.


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## Marcus (May 13, 2012)

VoorTrekker said:


> What are the ramifications of this towards the U.S.? Will it cause a war, or crash our economy?


That's the proper question IMHO.

China is the US's 3rd biggest export market (after Canada and Mexico) accounting for $124 billion or 7.6% of total US exports.

These are the top 10 export products to China:
1. Oil seed: $15.3 billion
2. Aircraft, spacecraft: $13.9 billion
3. Vehicles: $13.2 billion
4. Machines, engines, pumps: $12.5 billion
5. Electronic equipment: $12 billion
6. Medical, technical equipment: $7.5 billion
7. Plastics: $5.1 billion
8. Woodpulp: $3.4 billion
9. Copper: $2.9 billion
10. Wood: $2.7 billion

Source: http://www.worldsrichestcountries.com/top_us_exports.html

Another site gives the number as $120.8 billion.
http://www.washingtonexaminer.com/u.s.-exports-to-china-hit-record-120.8-billion/article/2566487

So WTH is oil seed? Soybeans. 
"In 2012, grain-belt states sold $14.8 billion worth to the People's Republic, which uses it to feed pigs and other livestock."
http://www.globalpost.com/dispatch/...news-us-exports-china-soar-setting-new-record

Here is an older breakdown by US state:
http://visualeconomics.creditloan.com/us-exports-to-china-by-state/

There _might_ be some elasticity in demand for soybeans if China's problems cause its' population to choose to forego meat products in its' diet. I don't rate that as being that much of an issue.

*However,* most of the other export categories aren't nearly as fortunate. I can see drops in aircraft (affecting Washington state), vehicles (primarily US automakers, truck, and construction equipment makers), plastics (Texas & Louisiana), machines (midwest?), & Copper (mining states) pretty easily. I know Copper is already down, and I expect so are wood and woodpulp since China's housing market bubble has burst.

Looking at the last turn down in 4Q 2008 (7%) and guesstimating the effects this time, a 15% drop in exports to China would equal about a 1% drop in US GDP. I don't really see much of a risk that the drop in US GDP would exceed 2% *unless there are major political problems within China itself.*

Chinese aggression will depend somewhat on its internal political stresses. If large segments of the Chinese population demand political and economic reforms, there may be attempts to distract the population through adventurism.

It wouldn't be in China's best interest to engage in such acts, but they could happen regardless. Should China choose to do so anyhow, the ensuing sanctions would quickly collapse their economy and likely lead to war or war-like acts (massive cyber attacks) by China against the US and its allies. Such an attack would probably disrupt the US economy and lead to retaliatory EMP attacks against China. Since China really doesn't have a credible nuclear deterrent, they would probably respond with their own EMP attack against the West.


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## VoorTrekker (Oct 7, 2012)

My point, Marcus, is what you have just explained. China did hack our government computer networks. It may have been with the tacit approval of the Bamster Administration. But will China attack the U.S. or somewhere else? 

Will the cyber warfare escalate before the 2016 elections and what will be the end result of a neutered government in defense and retaliation?


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## Marcus (May 13, 2012)

If China attacks anywhere, it will probably be Taiwan. I don't see that as probable since they can afford to wait while the US degrades its military forces. Why risk a war when you can wait ten years or so and not risk one?
I can see China being more aggressive in the South China Sea as they try to assert their claims. The other countries involved rely on the US to stop such aggression. Until we get a new leader, that is a very risky strategy.

The cyber warfare attacks so far have been more of intelligence gathering and testing of their capabilities missions. They really haven't gone after banking or the power grid. A real attack would take down those two sectors along with communications, the Internet, and degrade the military's C³I. I can also see them posting the names of *all* of our intelligence agents worldwide. The idea is they might attempt to destroy our economy over the short term in order to distract us from their adventurism without actually physically harming anyone. It would take at least a day to get everything back up assuming there are no permanent effects.

I get to your last question later after Le Tour is over for the day.

Will cyber warfare escalate? Yes, as long as our pansy in chief takes no steps to stop it or punish the instigators. For more info: https://en.wikipedia.org/wiki/PLA_Unit_61398
If I were President, there would already have been an unfortunate explosion at that building off Datong Road in Shanghai. Perhaps it would have been caused by missile launches from stealth drones, or perhaps it would have been caused by stealth cruise missiles. Either way, the building would be destroyed along with everyone in it. That's how you send the proper message.

The end results of a lessened conventional capability will be a heavier reliance on what few allies we have left and our nuclear capabilities. That will lead to a new cold war.


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## VoorTrekker (Oct 7, 2012)

I believe the Chinese cyber attacks have been to determine our responses and to see how effective was their infiltration and their exfiltration (cover their tracks.) I believe that their broader strategy is more intelligence until they need to strike unabated. At that point we are toast and there may not be a quick recovery.


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## Starcreek (Feb 4, 2015)

If you are a foreign power, and you intend to attack the United States -- let's say with an EMP, for example, knock out the electric/electronics grid. What will you do before you attack, if you want information about American citizens that might be armed or might be a threat? You extract all that information from government databases first....


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## VoorTrekker (Oct 7, 2012)

There is a difference between attack and invade. 1941 Pearl Harbor was an attack. 1812 District of Columbia was an invasion. Any country which desires to invade with an army may do so with its most undesirable and least common denominator people, because they will have an epic failure.

Information and Intelligence are far more valuable and of greater strategic value than bomber squadrons and land divisions.


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## Marcus (May 13, 2012)

Yeah but it's a whole lot easier to invade if 20%+ of the population has starved to death and the rest are hungry.


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## pawpaw (Dec 21, 2011)

*Could they call in their markers?*

As a casino would do when its no longer confident of one's ability to pay? I'm talking about China loaning us trillions. Our Gubmint sends 'FOREIGN AID' to other gubmints and borrows it from China to do it.
I admit, the less I know about world affairs, the more I am concerned that something complicated could happen literally overnite forcing me into my modest preps.
Ignorance is NOT always bliss- So some of you who are far more savvy than myself, please jump in & help me know with certainty that this couldn't happen. :scratch


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