Since the China US trade war began this year, it affects the global financial markets. Just from the perspective of stock market, the most interesting phenomenon is the continuous downturn in China’s stock market and the slow growth of stock markets in various countries. However, it seems like Beijing does not concern about the current state of the stock market and even it is too lazy to say anything.
It is hilarious that it was tweeted to claim credit for China’s stock market, which is not the barometer of China’s economy. This comic behaviour in Chinese is giving yourself a bonus. Economists who are familiar with the Chinese economy must admit that in recent years, the China’s economy links to China’s real estate and other infrastructure construction rather than the stock market.
There are always Chinese who attribute China’s financial risks to the US government, which is transparently wrong. The biggest financial risk is not from the US government but the inner China. Although China opened some financial markets and adopted different monetary policies after Deng’s era, the US dollar cannot circulate in China. Even if more green paper is imported into China, the red money printed with Mao’s head is always the only currency in circulation.
Ironically, due to the particularity of domestic currency, investment in China is a safe choice instead. In China, measuring capital or asset thorough RMB is more accurate. Many investors ask whether should continue investing in China or not. My answer is generally at least China does not and will not have Detroit in the next 20 to 30 years.
This article is not about international politics or ideology, as economists are not politicians and do not need to consider these issues. I only serve investors. Now some investors ask where is the risk of China’s finance? As Beijing released a signal to open its financial markets, what should be aware to invest in China?
These two questions are the core questions need to be answered. Undoubtedly, US dollar will flow back to the United States, while RMB belongs to the human common destiny. I quoted the concept from President Xi If RMB is not linked to the US dollar directly to the Euro, Sterling, Japanese Yen and other currencies, it becomes the new US dollar that red paper will replace green paper.
I am not saying without foundation or against the US dollar. Instead, I mean US dollar cannot be separated from a reality from its connection with gold to oil, and to commodity trade: US dollar stably links to various currencies. This is originally the core interest of the United States, and it was the foundation of the strength of US dollar. All countries in the world rely on these connections to maintain their relations with the United States. The United States pays some benefits as the responsibility of the world’s first. Other countries are unnecessary to express gratitude in that a responsible boss should be friendly to employees.
This is actually a trick of the old style. In 1949, the ruling authorities won China through uniting the poor and became China’s current legal regime. On contrary, President of the United States tries to represent the poor in the United States regardless of he is not a poor. Only one question needs to be considered here: does the president, a real estate dealer, really not understand the significance of real estate to China? Perhaps he is more worried about the sudden discovery by Americans of the significance of American real estate to Americans.
Since US dollar is going back to the United States and RMB is going to humanity, the United States is not the main reason for China’s financial risk. Therefore, the main reason is inside China, not outside.
According to the information provided by Pro. Li, state-owned investment companies is the most important component of Chinese finance. Corruption, on the other hand, is weakening the credibility of state-owned investment companies. In Pro. Li’s words, the risk of China’s finance cannot be ruled out until Branch Manager Wu of China Cinda Asset Management Co., Ltd and Qiu, are faced legal sanction. Manager Wu and his good friend Qiu are only the tip of the iceberg that sank the Titanic.
Many economists always try to research through the Chinese stock market, which is obviously inappropriate. Manager Wu and his good friends are the one who really could break China’s financial system.
Regarding to signal of opening financial markets released by Beijing has released, what should be aware if invest in China’s finance? It is transparent after knowing above information. Mostly, we need to carefully identify the investment targets. China’s market ensures development of manufacturing industry in China. It is noteworthy that the development refers to private enterprises with manufacturing entities rather than state-owned investment companies.
Similarly, if asked to invest in China’s service industry, I have the same answer, which is to go for private enterprises but not companies endorsed by state-owned investment companies.
Finally, investors should be reminded that Chinese businessmen and Chinese officials are two completely different groups, while managers of state-owned investment companies are officials not businessmen. Do not attempt to obtain fine assets through investing state-owned investment companies. Such investments will only infuriate the Chinese ruling authorities. It will confiscate capitals and properties directly via Discipline Inspection Department. I often tell my friends that the first criterion to invest in China is do not touch the cheese of the ruling authorities.
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