Tuesday, 19 June 2012

China is a country run by thieves

This photo is from the headquarters of one Chinese state owned company.  A tour of the  crazy  palace is available here.

The authoritarian communist party apparatchiks now in charge of China are received like emperors when visiting western countries. From Obama to Merkel and the Danish Queen, everybody is competing in the art of kowtowing. 

Nobody wants to admit - although they know, or at least should know - that the these "emperors" are no more than a bunch of thieves. 

China is a kleptocracy - a country run by thieves - of a scale never seen before in human history. That is the view of Australian blogger John Hempton, who´s analysis of the Chinese economy is devastating, but very much to the point: 

The Chinese banks are the finest deposit franchises in human history. They can borrow huge amounts at ex-ante negative real returns.

And those deposits are mostly lent to State Owned enterprises.

The SOEs are the center of the Chinese kleptocracy. If you manage your way up the Communist Party of China and you play your politics really well may wind up senior in some State Owned Enterprise. This is your opportunity to loot on a scale unprecedented in human history.

Us Westerners see the skimming arrangements. If you want to sell kit (say high-end railway control equipment) to the Chinese SOE you don't sell it to them. You sell it to an intermediate company who on-sell it in China. From the Western perspective you pay a few percent for access. From the Chinese perspective – this is just a gentle form of looting.

Hempton´s analysis is confirmed by this New York Times report

Publicly controlled enterprises have become increasingly lucrative, generating wealth and privileges for hundreds of thousands of Communist Party members and their families. And in a clear sign of its position, the government has moved to limit public debate on economic policy, shutting out voices for change. While political reform has always been a taboo topic in China, in economics, from the late 1970s to the early 2000s, almost anything went, with powerful voices backing strong measures that challenged the status quo. But now, despite the rise of social media, fewer prominent voices within China are able to make the case for a systemic overhaul that would prepare the nation for long-term prosperity on sturdier foundations.

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