01/19/2016, 12.34
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For China, 2016 will be a black year, the party’s bitter fruit

by Wei Jingsheng

The real estate bubble is set to burst and the golden era of exports of low-quality and counterfeit products is coming to an end. Without democratic change, it will not be possible to regulate a stock market out of control. Big stockholders are selling out because they know the truth and want to get out as soon as possible. Meanwhile, ordinary Chinese are stuck with the bill, had work, difficulties and an unhappy life. The analysis of a great dissident follows.

Washington (AsiaNews) - A new situation in the New Year that has received the most attention from everyone, and is also most important, is the economy.  The changing economy is not only related to the survival of the Communist regime, but also to the livelihoods of every household in China.

Unfortunately, I have to report the bad news.  In the year 2016, the economy in China will continue its decline and will becoming worse than it was in 2015.  Although the Communist media is saying good words about the economy, and the foreign media that have been bought out by the regime are also helping from sidelines, neither still could conceal the accelerated decline of the economic situation in China.

Right after the New Year Day, the stock markets in China once again slumped, just as violently as last summer.  The so-called stock market circuit-breaker mechanism that was just established by the China Securities Regulatory Commission (CSRC), took action immediately and stopped the trading of the whole stock market.  However, it did not work with the intended positive effect.  It had the opposite effect.  Within less than one week, there was a spate of melting of this circuit breaker, which caused the cancellation of this mechanism.  In a little more than one week's time, the Chinese stock prices fell by more than ten percent and returned back to levels before 2014.  A common phrase used in China nowadays is: "all returned to the (miserable) time before the Liberation."

Some people want to find excuses to explain this stock market crash.  They said it was due to the lift of the ban on selling stock after the slump last year, so a lot of stock flew to the market, resulting in a temporary slump. Right after that, the fuse blew up again, which made these lackeys and the Internet police have difficulty finding more excuses.

What is the stock market?  It really is a market only when people trade with confidence.  After the lifting of the ban, business executives in China threw a lot of stocks to the market, illustrating their lack of confidence in this economy.  Who has the best understanding of the economic situation?  Not those observers who earn their livelihood by cheating others, but the senior managers who operate the economy.

Regardless what they say, they would not put their wallets in a disadvantageous position.  They are frantically selling their own stock, which shows the economic situation is very bad in China, and not just bad in the short term.  If it was bad only in the short term, large shareholders would still have the patience to wait for long-term plans.  Yet they do not have the patience to wait, which means that long-term projections are very bad as well.  Even more, the forecast of the Chinese economy as a whole is very bad.  So the insiders have no confidence, and have to sell stocks in order to reduce their losses.

Smart investors will not be fooled by the big deception of the media.  They will follow those big shareholders who have inside information.  So they will also sell their stocks as soon as possible in order to reduce losses or make a small profit.  This trading makes a bad stock market even worse, causing the prices to fall even faster to form a crash.

Why don't the economic "experts" have confidence in the long-term economic situation in China?  That is because the bubble economy based on the more than ten years abnormal development in China has resulted in a very unreasonable economic structure.  There are two basic pillars in the rapid economic development of China: one is its trade overseas, the other is its overbuilt infrastructure.

Regarding China's overseas trade, it suffers from its uneven quality of products due to rapid development.  It is full of inferior products and counterfeit goods.  After being deceived for more than ten years, Western consumers have become increasingly rejecting these counterfeit and inferior goods.  Even without trade barriers, resistance in the international trade will grow.  The profits from the foreign trade have been the bulk part of China's economic profit.  Its shrinking is an inevitable trend.

The response from Xi Jinping's team is the so-called "supply-side structural reform".  This direction is right, but too far away to put out the nearby fire.  It will take years for all the export enterprises to change their direction according to the market and improve their quality, resulting in several years of stagnation in China's economy.  That is a road of adjustment that one cannot go around to pass.

We have witnessed the result of the overbuilt infrastructure.  One may argue that public construction will be beneficial to future generations, so not completely a waste.  But, there are too many vacant housing constructions, which is a real waste.  A great amount of wealth is staying out of the market for turnover, which is resulting in a shrinking market while reproduction is also short of funds.  According to the estimation of the experts, 30 to 40 trillion RMB of funds are needed in order to save this economic crisis.

This figure far exceeds the four trillion RMB fund of (former premier) Wen Jiabao when he tried to rescue the economy (in 2008).  It will be a burden of inflation that Chinese economy and society cannot afford.  In addition, with about ten trillion RMB capital fleeing China every year, it is impossible to save the Chinese economy in the short term.  There is not much hope of the long-term forecast either.  This is the root cause of the plummeting stock prices in the market of confidence.

The goal of each economic unit is to put its own property in a safe place, at least not to be quickly depreciated.  The trend of capital to flee China is irreversible.  We should not blame the incompetence of Xi Jinping's economic advisors, because the situation now has greatly exceeded the functional range of these scholars.  These economists cannot speak clearly of the complicated consequences that were brought on by the political factors.

For example, the instability of the autocratic politics is the long-term reason for the capital to flee.  Without reforming the political system, the property will be concentrated in the hands of the most insecure political class. Whether the economy is good or bad, whenever possible, they will try to transfer as much property to safe places as they can, including their wives and children.

Another reason for the market dysplasia in China is also an inevitable consequence of authoritarian politics.  Unchecked power has been controlled in the hands of a small group.  They cannot maintain the fairness of the market.  This is true in China, as well as in the hands of its little dictator brothers in the third world.  It is not an issue of who is wise and who is not.  This is a regular pattern.

One more example is the wealth loss from the foreign trade and abnormal development of the infrastructure in China.  If there is not this commanded economy from the authoritarian regime, how could the market allow such deformities to happen?  If officials at all levels were responsible to their own voters, rather than staring at the butts of their superiors, why would they waste wealth to seek for career advances and to make a fortune as they are now?  When they could get promoted and make a fortune by using billions of funds to build a ghost city, why shouldn't they?

The inferior products and counterfeit goods in the foreign trade is a product of the collusion between the politicians and capitalists of both China and the United States.  Without the guarantee of autocratic politics, would this kind of policy that treats everyone as blind while cheats and exploits the people of both countries be implemented and maintained?  On the one hand, China's manufacturing sector is deformed with counterfeit and low quality products.  On the other hand, the consumers in the United States are deceived and its workers have lost their jobs.  Only unscrupulous politicians and black-hearted capitalists earn hugely, while people and economies in both countries get in trouble.

This is the new situation for the Chinese economy in the New Year.  This bitter fruit from a long history of political deformity cannot be solved by a couple of scholars.  Xi Jinping enjoys his position comfortably, as he has yet to solve the problem.  Then people in China will have to continue their contribution to this country through their hard work and enduring difficulty in their lives.

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