Thank you for the compliment.

Here’s the thing. I have said this many times.

First, China does not want to let hard currency leave the country. HOWEVER, when one goes through an official renminbi exchange house in Canada, the renminbi are digital, not real. It is not coming out of China, it is being made on the spot. The Chinese government controls the exchange houses. They do not need to balance a ‘balance sheet’. They do not have to take the digital renminbi from any other ‘account’. Therefore, they exchange NEW made-in-Canada ‘digital’ renminbi for your real Canadian currency. They treat it like an infinite non-depletable resource. They have the Canadian currency, you have ‘not-from-China’ currency. The digital renminbi that you get does not effect how much renminbi is still circulating in China.

A variation on the Cuban experiment (also a Marxist economy) of having an internal and an external currency. Except that any Chinese external currency would now have a lot more clout.

The Americans have been doing this with the greenback since 1971 (or back further, 1933, or even further back to the Coinage Act of 1873)- ever since they went off the pure gold standard. Up until that time, the ‘balance sheet’ was balanced by gold – every new greenback was ‘balanced’ by a tangible quantity of gold (or silver). Now, there is nothing on the other side of the balance sheet. They can give away unlimited greenbacks. They take them from ‘ether’. The ‘Wizard of Oz’ did indeed become super-rich and all-powerful. His real name was Friedman. It was only the Lion that prospered – the Tin Man and the Scarecrow were sacrificed. ‘Courage’ was, in reality, ‘ruthlessness’, and it won over ‘brains’ and ‘heart’.

The second point I have been saying is that I firmly believe that China is going to completely abandon any pretense to a market-driven stock exchange. They will, instead, establish a ‘people’s market’, where the stock price is set by the state, and directly related to the tangible value of the company, not of it’s profits. This would be more inline with Marxist inclinations of the people investing in production and utility, not profit.

I do not think Marx was absolutely against interest, but he preferred to think of it as profit-sharing. That is, ‘investor returns’ would be directly from the distribution of profit, not on
the increase or decrease of share market value. A stock would only be worth the tangible utility of the company behind it divided by the number of outstanding stock.

It is a very different philosophy from Western economic ideas, but hey, it got them to the largest economy in the world from one of the worst in only a few decades (since the passing of the Chairman). Westerners attribute this expansion to China becoming a ‘capitalist’ nation at their peril. It was due to the Chinese leadership pretty much following the playbook set out by Marx, except that it is very much a modern, contemporary version, where ‘proletariat’ is replaced by ‘the working Middle Class’ and the ‘bourgeois’ by the ‘banking/financial/investor’ class. Modern China does not have, nor has it ever had, any intentions of being anything but a Marxist non-free-market economy.

See
http://theconversation.com/to-make-sense-of-modern-china-you-simply-cant-ignore-marxism-34606
https://en.wikipedia.org/wiki/Bimetallism https://en.wikipedia.org/wiki/Political_interpretations_of_The_Wonderful_Wizard_of_Oz
for further elaboration on my references.

Really, there is nothing new under the sun. Same polarization in America today as was in the 1890’s. Only then they were just emerging from the American Civil War.

Thank you for your comments JT…I really appreciate your perspective on this issue. Just proves that everyone really needs to attempt to understand cultural differences. It might even help make a positive difference on investment strategies!

But land? It is very tangible. And so far, relatively immune from being confiscated. It is not the price rising or falling that matters, but that it IS. It EXISTS, in tangible form. Weather a house is worth $3 million or $4 million, someone can live in it just the same. The value of the house is NOT in how much someone is willing to pay for it, but in its utility.

That’s why the Chinese are buying land in Canada, and leaving it vacant. Not because it might increase or decrease in price, but that it will always BE. It is something tangible, that also provides utility.

It’s an OWNERSHIP thing, not an INVESTMENT thing.

Even the value of jewelry is not inherent in its utility, but on the price someone is willing to pay for it. If no one wants to buy it, there is no inherent value. it can’t really be used. Same for stock.

As long as you continue to try to understand them based on an American ‘supply-demand’ system where the value of something to the MARKET is determined by what someone is willing to pay, instead of the Marxist concept that the value of something to the INDIVIDUAL is based on its utility to that individual.

Looked at another way, MY time only has value to ME, it has NO value to anyone else.

Hey Dave; I would be very happy to tell you more about what we used to do to support companies entering new market areas. You like to characterize this work as “subsidies” to individual companies when often other companies were benefiting from the trail-blazing of those first to venture in new markets. I am sure that the Canadian architects that benefited from the work of this urban planner, for instance, are thankful for the business opportunities and the experience they gained. I can’t tell from your comments if your business is involved in exporting outside Canada. Entering new market is not an easy thing. Often times, there are networking as well as regulatory and other non-tarif barriers standing in the way…..that was CMHC’s main focus when it used to work with exporters…NOT to subsidize the cost of the housing built, and the program was always open to any new serious company considering exporting…And, yes, when a private company works in another country, it usually ends-up hiring local people as well as the cost of doing business…this doesn’t take away the fact that Chinese buyers ended-up paying for Canadian content…which, in the end, created jobs in Canada. Finally, the suggestion that somehow the private companies involved were involved in political donations is gratuitous and unfair. Anyway, no point arguing back and forth…if you wish to discuss this further, if you want to find out more about this, please let me know, I would then gladly send you my private email. Best. André

In the article they linked to in the Globe and Mail, the urban planner hired says they built a Beijing office. Sounds like in this case they created more jobs in Beijing than in Canada.

This government subsidy situation is crap. My business requires I make sustainable marketing decisions to grow, and take on new investors when I need to expand beyond what my working capital allows. All taxpayers shouldn’t have to line the pockets of a few choice people, that just happen to be the industry that makes the most donations to the political parties running.

It’s very common in china to buy unfinished homes or apartments.. as they believe living in them devalues the property.