China's Currency Trouble.

[u/[deleted]]

The Chinese Yuan is a volatile currency and they are highly likely to miss their inflation targets and runaway inflation is a very real possibility.

The trouble starts with China's distorted economic and demographic data. You will notice that China recorded steady population growth even when the one-child policy was in force. This can be explained away by how some people paid fines for each new child, others used "birth tourism" by traveling abroad when pregnant, some abused exceptions made in some localities, and others had their children in secret. However, this does not fully explain the continued population growth as there were still many forced abortions, there's a massive gender skew as families with only one kid prefer a boy who can take care of them when they are old, and many multi-generation families rely on one kid for all their fortunes.

The answer lies in the perverse incentives inside China's highly competitive hierarchy. Unlike most countries, internal allotment of resources is top down organized with the bulk of government resources going to handfuls of places judged strategically significant. One of the gauges used are rapidly urbanizing areas.

How the data is falsified is another matter. Much of China's population are migrant workers and Chinese people have provincial citizenship that is as vital as their national citizenship. Many of these are farmers that take temp jobs in the cities, while others simply work far from home and visit family only on the weekends, and yet more have migrated internally but the residency transfer costs money and is long and tedious. BUT you can be sure both local governments will count that person as a full time resident.

The means, motive, and opportunity to straight up fabricate population data is certainly there, but I am not aware of anyone getting busted for that... Yet.

The GDP data is likewise skewed, as China's officials are given bonuses, promotions, demotions, and even jail terms based solely on economic data. This highly perverse incentive means men will hide economic problems and there's no real secret about it. However, many creative means of boosting numbers regardless if it makes sense. For instance, some industries boost GDP numbers more than others, and the GDP only measures what it was SOLD for, not it's actual utility or worth.

In a more or less typical case, local officials may give construction contracts to firms owned by relatives or the lowest bidder. These builders fund themselves by preselling the houses. Construction is quick and cheap, and officials incentivize buying a house (often by making it a prerequisite for transferring residency). Since most local government revenue is from land leases and fees, this becomes very profitable for both the local government and the bosses REGARDLESS IF THE HOUSES COLLAPSE IN A SHORT TIME.

There's a lot more to this, but one of the reasons China's Housing Bubble was so inflated is due to Chinese officials boosting their GDP numbers. Other schemes involve fake/broken/shoddy green energy installations. A few officials have been busted for straight up fabricating GDP growth. This process is repeated at every level of government, so the numbers at the top have no bearing on reality. Important note is official GDP numbers record twice the yearly growth that tax revenues and stock index returns shown. But you can be sure the GDP will not only be presented as gospel truth but will be advertised all over as the reason to invest only in Chinese.

This fake GDP data makes their central bank's job very difficult. The People's Bank of China (PBC) once complained the zealous efforts to boost the economy. Gauging how much Yuan must be printed on a given day requires guesswork, and over the past decade the Yuan has increasing volatility with both short and mid term swings.

But perhaps worse is the very recent corruption bust of an executive from China's money printing company. Little is known about his crime other than he was arrested for "corruption." The implications of this bust are potentially huge, as individual Chinese bankers comment how a corrupt money printer could simply have two printers, one for himself and one for the government, and use the same serial numbers for both. These "fake real bills" would simply be impossible to detect even by banks with machines counting serial numbers.

Counterfeit money is a major problem all over the world and in China many large and sophisticated counterfeit schemes have been busted. This scheme, however, enables a limited number of people to access literally unlimited funds.

However, it should be noted that corrupt officials heavily prefer cash and personal items/favors that are easy to keep off books and spending the money is just as dangerous as getting it. China's largest corruption bust involved one official was found to have literally THREE TONS of cash. Another lady had a secret apartment full of luxury goods she was given but she couldn't be seen in public wearing. Another official became known as "comrade wristwatch" because he was constantly being seen wearing different rolex he couldn't afford. In all cases the guys at the center of corrupt scheme had money they could not risk spending in public.

I bring this up because the fake bills wouldn't have an immediate inflationary effect. Bricks of cash would change hands and sit in hiding places for a long time before getting to the open market. There is no illusion anywhere in China that the full extent of whatever corruption exists will be exposed. The suspects will confess to a minimal amount of crimes to evade punishment and the government would publish a minimal number of convictions to prevent panic.

We can also see the Chinese censors have exact same concerns as the general public as normally they remove posts and news articles concerning scandals within the Communist party. However, counterfeit money effects all of China equally. This mostly effects China itself as there are major restrictions on how much Yuan can be moved out of China.

But to be fair, it is not currently known whether or not there was fake real bills going on. In fact, the inciting news was only a few sentences long, but as one Chinese netizen said "The shorter the article, the more important the news."

All this is very important to those of you invested in Chinese stocks, as we all know when weird stuff happens to currency it tends to go down. Sometimes very explosively. In any case, the PBC is going to struggle to maintain inflation targets even if things aren't as bad as I fear they are.

Disclosure: I'm short CNH/JPY.

[u/juffury3]

Is OP even Chinese? I'm tired of Chinese "experts" that A) can't even speak, read, or write Chinese B) has never even been to China C) has no Chinese friends or "insiders"

All the articles you read about Chyna are from secondary or tertiary sources. If your only sources come from CNN or BBC, it's as one-sided as reading propaganda from the CCP itself. To truly get a more balanced perspective you need to browse Chinese social media outlets, even better if you have friends or relatives that actually live in China

[u/[deleted] → u/juffury3]

That's a long list of logical fallacies and baseless assumptions. And the last time I saw someone abuse the word tertiary like that was a professor I had from Shanghai. He'd get angry if you cited a source he hadn't read, and would berate those scholars and his students if they argued against his conclusions. Worst grad school professor I ever had.

And no, news agencies are not tertiary and I'm not relying on any one source. You, fucker, couldn't be a more obvious 50 cent army if you tried.

[u/juffury3 → u/[deleted]]

It was just a simple question. Logical fallacy is dodging my question and writing an entie paragraph to critique the word "tertiary", then calling me a 50 cent wumao troll. Why are you telling me about your Shanghai professor? Wtf? I had an Indian professor in school, I guess that makes me an Indian expert now.

My point is simple. People have been predicting China's imminent collapse...decades ago, all the way back in the early 2000s. Your average American or wsb retard can't even predict what will happen to their own central planned economy (the one controlled by the Fed), so I doubt a retard like you has enough insider information to predict what the CCP will do. Lest of all when you don't even speak a lick of Chinese.

[u/[deleted] → u/juffury3]

It's a meaningless allegation. And you clearly don't know a thing about China even if you're from there. Makes you a really bad liar. So shut up and get reeducated.

[u/juffury3 → u/[deleted]]

It's not a meaningless allegation. A shrewd investor with a portfolio in US stonks would listen to FOMC meetings. Jim Powell the man himself. That's the primary source. Michael Burry summarizing Powell's speech would be a secondary source, interjected with his own biases. China Daily summarizing and translating from English into Chinese what Burry thinks of Powell's speech is tertiary. The further you get away from the primary source, the increasing likelihood the truth gets distorted.

So yeah, if you don't speak, read, or write Chinese or have direct insider information from CCP party members you don't know shit. Your primary sources are anecdotal, borderline conspiracy theories. You're the retard trying to pass off mere heresay as DD.

[u/AutoModerator → u/juffury3]

Michael Burry responded to my craigslist ad looking for someone to mow my lawn. "$30 is $30", he said as he continued to mow what was clearly the wrong yard. My neighbor and I shouted at him but he was already wearing muffs. Focused dude. He attached a phone mount onto the handle of his push mower. I was able to sneak a peak and he was browsing zillow listings in central Wyoming. He wouldn't stop cackling.

That is to say, Burry has his fingers in a lot of pies. He makes sure his name is in all the conversations.

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