Catalyst to Learn More About China

I invested a big chunk of cash in JD.com in December last year cuz it looked crazy cheap and the economics looked great. I discounted the fact that I had little idea how China really operated. I had never read a book on China, just financial reports and analyst reports on JD.com and some podcasts. So, I sold my JD.com shares in April, because I was ok with being approximately right. When I read "Prisoners of Geography" by Tim Marshall--an excellent read!--I decided I would learn more about China.

Books on China I Read in August - October

1. The Party - Richard McGregor
2. Asia's Reckoning: China, Japan, And the Fate of U.S. Power in the Pacific Century - Richard McGregor
3. Xi Jinping: The Backlash - Richard McGregor
4. Red Flags: Why Xi's China is In Jeopardy - George Magnus

So now, I'm a little bit less of an ignoramus concerning China, and I have a better idea of what I don't know. But I've learned a little bit. A helpful recommendation from ag4cougs was to subscribe to the sinocism emails because there you find more recommendations on what you should read. I went through those as another filter of what books I should read besides google, amazon etc. Richard McGregor, a Financial Times writer was highly recommended as quite knowledgeable about Sino-US-Japan-Korea relations and has THE book called "The Party." I enjoyed his writing style so much I read 2 others by him that were more recent.

My Thoughts on the CCP

The track record of the CCP and current events paint the picture that CCP is intent on keeping power, at pretty much ANY cost, without remorse (the most extreme example would be the great famine and mass executions resulting in the death of 10's of millions under Mao). That same CCP is in power today. The CCP's goal is NOT economic prosperity, only control. Inasmuch as capitilism benefits the CCP, they will shrewdly support it. 

China will grow as a super-power (militarily and economically) but they do not have "Soft Power" (from George Magnus) nor do I see that growing. No one wants to do what the CCP says because they like them, nor does any country want to support the CCP because they like them. The level of hatred between powers in the Asia Pacific has been intense at times, even moreso recently. 

A Trade Deal?

I've had no luck trying to predict what Trump will do or say next, but I am in the camp that China (the CCP) and the U.S. are very far apart on a full trade deal. I could see some creative story telling from both sides on Phase 1 (LOL), but Disney offices in China will continue to display the pick and shovel symbol at their entry ways as long as they exist there. The CCP will not relent on absolute total control of businesses.

Interesting Snippets From "The Party"

The Reach

The modern world is replete with examples of elite networks that wield behind-the-scenes power beyond their mere numerical strength. The United Kingdom had the ‘old boy network’, originally coined to describe connections between former students of upper-class, non-government schools; France has ‘les énarques’, the alumni of the exclusive Ecole Nationale d’Administration in Paris who cluster in the upper levels of commerce and politics; and Japan has the Todai elite, graduates of the law school of Tokyo University, an entry point into the longtime ruling Liberal Democratic Party, the Finance Ministry and business. In India, the exclusive Gymkhana Club symbolizes the English-educated elite. The US has the Ivy League, the Beltway, K Street and the military-industrial complex, and a host of other labels to signify the opaque influence of well-connected insiders.

None can hold a candle to the Chinese Communist Party, which takes ruling-class networking to an entirely new level. The ‘red machine’ gives the party apparatus a hotline into multiple arms of the state, including the government-owned companies that China promotes around the world these days as independent commercial entities. Critics of the Republican administration of George W. Bush decried what they said were the cosy links between Dick Cheney, the vice-president, and the energy industry, to take one example. Imagine the case the critics could have mounted if Cheney and the CEO of Exxon-Mobile, and America’s other big energy companies, had secure phones on their desks establishing a permanent, speed-dial connection with each other. In turn, to extend the analogy, what would they have made of the Exxon-Mobile CEO receiving a steady stream of party and government documents, available to the executives of Chinese state companies by virtue of their office and rank? The ‘red machine’ and the trappings that go with it perform precisely these functions.

LOL, Boards of Directors

The idea that the boards really run companies is basically as credible as the constitutional guarantee of free speech and religious freedom in China. It does not happen in reality,’ the banker said. ‘At all the major state companies, the party meetings are held regularly before the board meetings. Operating costs, capital commitments and the like are discussed at the board meetings, but personnel remains in the hands of the Party. No matter how many independent directors there are and what oversight they provide, at the end of the day, if all management are appointed by the Party, nothing will change.’

Soft Power over the Chinese People?

The party leaders realize that they don’t have a dominant ideology they can use to run the country any more. For them, there is no core social value. At this moment, the sole, dominant ideology shared by the government and the people is money worship.’

Chinese people are not that nationalistic,’ he said. ‘They are very money oriented. The dominating ideology is money worship. As long as the situation in Taiwan is favourable to making money, we don’t care if [the island] becomes independent.’

If tomorrow the Chinese government says, we hate Americans and anyone who damages the American embassy and McDonald’s is safe, the students will flock there, throwing stones. But if the central government says, anyone who dares to throw stones at McDonald’s will be punished, not a single person will do it,’ Yan said. ‘As long as society is fully engulfed by money worship, you will have a lot of social crimes, but no political violence. People may kill and rob banks and do a lot of illegal things. They might risk their lives to steal money, but they will not do it to attend a political demonstration.’

Yan omitted to mention that students had long been warned that their careers would suffer if they got involved in anti-party politics. But he was making a broader point about the values of the entire society. ‘The government does not care how you become rich, no matter by prostitution, drug-trafficking, smuggling, corruption, bribery or even if you sell the territory to others,’ he said. ‘That’s why, on Taiwan and issues of sovereignty, the government gets people’s support. The government tells you, we do not insist on sovereignty in the east China Sea [with Japan], because that brings favourable economic development. We do not protest against the Philippines [in a territorial dispute in the South China Sea], because that favours economic development. We allow Taiwan to have sovereignty, in favour of our own economic development.

Big Brother

A local lawyer, arrested and re-arrested numerous times after he persisted in taking up the complaints of residents, was not exaggerating when he denounced Shanghai’s top leaders in an open letter to Hu Jintao ahead of the 2007 congress. ‘People have been driven from one corner to another corner of the city,’ Zheng Enchong said, referring to the residents uprooted from their homes and communities in the city centre and then sprinkled randomly into small new apartments in the distant suburbs. ‘Many among us also have to endure illegal surveillance, home searches, forced repatriation, detention, re-education through labour, being locked in psychiatric asylums, phone-tapping, harassment and other ways of suppression.’