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Most know my China Paranoia. In the past it was because it required dealing with many unregulated companies. I still question the accuracy of many of the numbers we are fed and projections that dazzle our eyes.

More important now, or at the least, just as important, is recognizing what is happening in China, and it is major ....

(1) China is exporting less due to the world economies. This means many of the newly established manufacturing companies that crowded the coast have closed down. The people went home

(2) China is stimulating. They are building roads, buildings,utilities ........... But, unlike the US stimulating, China does not have the internal consumption that the US has. 70% of the US GDP is consumed internally. That builds business, manufacturing, distribution, services, all based on internal consumption. It strengthens the US economy long term, though it is a kick start method. When the projects in the China stimulus ends, it also means those jobs end. At some point someone will stand on a new road and say "that's the end" and all the workers will go home.

(3) The China wealth fiction. Sometimes you see headlines proclaiming that the Chinese government has 2 trillion in reserves ..... remember back (six months ago) when a trillion seemed like a lot of money? They will need all of that wealth and some, at a time when money is going down the stimulus hole when it is not coming in as in the heavy export days of the past.


(a) China has a huge aged population due to one child policies the centuries old family support system is breaking down. China is forced to run services like Social Security, Medicare, hospitals, long term care and without the 40 years to establish it we had.

(b) Farming ... we are all excited about Chinese farming. Consider that China has 45% of it's population involved in farming. In the US, we produce enough food for our own consumption, reserves and exports with only two percent of our population. What if China's agricultural plans are as successful ... where will the 43% of the population go?

(c) China has enough air and water pollution to make all the US greenies sick ... the cost to fix it will be incredible ... bad for China .. good for US and Euro companies.

(d) To maintain the present level of employment, which is not enough, China must produce a consistent 7-8 percent GDP growth every year ... to remain where they are.

(e) China is not natural resource wealthy. Every expansion, every project, every new business increases imports. They are world dependent.

(f) China is churning out 6 million college graduates per year. What happens if (and I expect it will) jobs cannot keep pace with the students looking for jobs. 6 million every year. All wanting part of the new life. In a country that was formed by revolution not that many years ago. That has seen Tiananmen Square, that has seen the ethnic rioting in Ughurs last year. Consider the effect of Television, Internet and cell phones on this unlike the non existent news media of 20 years ago.

(g) Consider that a very distinctive "have and have not" society has been established in a country where a few years ago everyone wore the same cloths. Consider that near half the population is rural, many migrant at a time that the world economies are slowing. How long before segments boil over (as they always do when economies expand to "have and have not"). They will be boiling over into a government that still has an iron hand, no political views other than the states and a military to back it up made up of leaders who would most likely relish the thought of returning to the old days.

China .... we may not wish it to be, but it is "a developing country" and facing the same problems all developing countries and economies have always suffered ... but X100 due to population and its needs.

It is a potential powder keg.

Cant happen ... lets ask Mr Putin about that ... and he faced 1/10 the problems China will.


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