For those of us who can drag ourselves away from the great Thomas Kwok Prison Mutant Ears Exposure Trauma, today’s South China Morning Post business section mentions not one, not two, but three grand Chinese fantasy projects that cry out for a healthy bit of year-end skepticism.
First is the weekly China-to-scrap-capital-controls hoohah. As always, we are invited to believe that a paranoid and insecure Communist one-party regime that can’t let its own people use Google will allow international financial markets (which, we will recall, are controlled by some of the Western world’s finest psychopaths) to screw with its monetary system. As it happens, China’s whole kleptocratic power structure depends on financial repression of the people through lousy interest rates and capital controls. But even if the country were run by angels, many development economists would warn about the potential downsides to unrestricted flows of hot money.
Of course, nothing lasts forever. One day, the sun will run out of fuel and explode into a supernova that evaporates the entire solar system, and we can safely predict that this will remove China’s capital controls completely. Chances are that they will already have gone. The key thing to remember is that, for now, allowing anyone and everyone to freely move money in and out of China is pretty much incompatible with Communist Party rule. To hear international bankers tell it, that’s going to change in just three/five/ten years. How?
Next up is the ever-amusing Shanghai Free-Trade Zone. You would have thought that the officials concerned would keep quiet about this embarrassing over-hyped nothingness hub. Instead, they are enlarging it to include the city’s flashy central business district with all those grotesque skyscrapers. Reading between the lines of the Reuters report, it seems the special area’s attractions have proved so uncompelling that officials are forced into lateral thinking: if the companies won’t come to the zone, the zone must come to the companies.
As with lifting capital controls (which was supposed to be part of the Shanghai FTZ deal), there is a fundamental contradiction between free trade in goods and services and maintenance of the klepto-state-capitalist system, which keeps the Communist Party in power partly by granting public assets, business monopolies and other advantages to the elite’s families and friends. Awkwardly, the system will probably come crashing down if they don’t reform, which is why optimists like to point to Beijing’s virtuous and wise policy of taking a step-by-step approach. But it’s hard not to get the impression that crossing the river by feeling the stones has turned into feeling the pebbles and subsequently into feeling each grain of sand. The more policymakers announce intentions to change, the more they seem immobile midstream.
Far easier to unveil a major Earth-shattering new plan, like the Nicaragua fantasy white-elephant mega-flop Canal. Post writer George Chen’s child-like meanderings assume that somebody, somewhere, is serious about this bizarre pseudo-project to replicate a vastly expensive bit of infrastructure that already exists next door. The idea that China will be emulating the USA’s role in Panama suggests that history repeats itself in extreme formulaic detail: rising power digs big ditch across isthmus, rules world for following century. Add water and stir.
What the Nicaragua Canal thing is really about is anyone’s guess. There was a time when a shifty-looking little-known Chinese businessman with supposed military connections was roaming the world desperately trying to buy a scrapped aircraft carrier. He said it was for a theme park, and everyone assumed it was a ruse to enable the PLA to reverse-engineer the thing and start churning out copies. Turned out it really was for a theme park (pretty much). Another similarly sinister business-figure at one point was disturbingly eager to buy a large chunk of Iceland (also for vague ‘theme park’ purposes). Who knows who’s really behind these things, or why (or who’s ripping off whom)?
Here’s one readable case against, courtesy of Fusion, ABC’s Vice lookalike. To oversimplify: Nicaragua’s once-trendy, now pot-bellied, revolutionaries are lining their pockets by selling golf-course rights to some Chinese sleazebag. Which sounds not just believable but unremarkable to the point of being boring. A case for comes from obsessively anti-Western hyper-left sources of the sort who (say) back Beijing’s accusation that foreign forces were behind Hong Kong’s Umbrella-Occupy movement. A view from Russian state TV suggests that to paranoid autocratic regimes, it might really come down to a struggle for physical presence and influence wherever you can get it, to counter a Western world that stubbornly refuses to realize that it’s decadent and declining and not supposed to be running the planet any more.
While China’s leaders talk up freer capital flows and new mega-hub zones, they seem blissfully unaware of the Nicaraguan escapade. Maybe there’s only so much fantasy they can handle.
“Rebellion to Tyrants is Obedience to God.” -Benjamin Franklin
One of the motifs of this period, late 2014, is the partly illusory nature of the strength of two strong countries. There were two separate articles today in the FT.
One was about a huge steel company which has been kept going for several years by the local authority, even though it was losing money, because it was by far the largest employer in the district. It stopped paying its 10,000 employees six months ago, is said to have debts of US$1.6 billion, and has at last been allowed to fail. The proprietor, who is in his twenties and inherited the business from his father who was shot dead by another businessman, has done a bunk. A bankruptcy lawyer in the country says, “By stopping companies from going bankrupt, officials can maintain the illusion of local prosperity, economic growth and stable taxes.”
The other article is about another country under economic stress because of a global trend, and sanctions from abroad because of its expansionary actions. Its leader is speaking nationalist bluster. He has run a system of capitalism for friends, which has worked well for a decade and a half, though the friends have been looting the country. The regime is essentially cynical and its foundations are tenuous.
One country is Russia and the other is China. You can probably work out which is which but, at least according to this motif, they are not dissimilar.
A funny thing happened on the way to the market …
Try to deposit more than RMB 20 K cash in one day in a legal HSBC HK bank account
It cannot be done !
But one can go to any street-level , legalized money changer and do a RMB / HK$ millions deal
So where is the free RMB exchange market ?
That Nicaragua canal idea has been kicked around for almost as long as the Panama canal has been there. Blasting a trench from The Pacific Ocean to Lake Nicaragua Would mean that You could build a new canal without the size restrictions of Panama
there isn’t a free RMB exchange market…it is fluff for the foreigners…
you don’t realize that HSBC is just another chinese bank….what I found idiotic is why you still bank with HSBC when there are others better suited (Std Chartered, Citibank)
I was in a Bank of China once, I swear I would shoot them if they took any longer (90 minutes) to cash out a CD…went thru 3 people in order to get started, then wait 30 more minutes for these PRC chinese idiots count out and count in their drawers during shift change…
morons in Chinese banks don’t accept currency if there is even 1/4 inch tear on the bill…