Friday, September 4, 2009

Is The Chinese Economic Bubble About To Burst?

How China Cooks Its Books -- Foreign Policy

It's an open secret that China has doctored its economic and financial statistics since the time of Mao. But could it all go south now?

In February, local Chinese Labor Ministry officials came to "help" with massive layoffs at an electronics factory in Guangdong province, China. The owner of the factory felt nervous having government officials there, but kept his mouth shut. Who was he to complain that the officials were breaking the law by interfering with the firings, he added. They were the law! And they ordered him to offer his workers what seemed like a pretty good deal: Accept the layoff and receive the legal severance package, or "resign" and get an even larger upfront payment.

Read more ....

My Comment: A good article for anyone who is interested in doing business in China. Long time readers of this blog know that I did business with China in the mid to late 80s. The Golden Rule was/is the following .... you work with the Chinese political leadership (the higher the better) on the Municipal, Provincial, and Federal level. To get to know these people you (and them) must spend a lot of time together. Drinking, eating, arguing, talking, planning, traveling back and forth, introducing friends and business associates .... everything is on a personal level. When you start doing business .... especially international business .... you cannot do wrong even when "the books" make no sense.

Chinese society is an authoritarian society with a strong command and control center starting form Beijing, and working outwards to the provinces. If they want to export something, and the price is cheaper somewhere else, no problem .... it becomes cheaper. Money is passed back and forth, workers work for less, and the cycle continues to the next product.

Can this continue? That is a good question of which I do not have the answer. I bailed out of that rat race a few years ago, and I am glad that I did. The stress is gone, and when I go to China it is to meet friends, be spoiled, and to have a good time. Business opportunities are always presented .... but no thanks.

I know that good times cannot last forever, and for the Chinese I can only hope that they are prepared when that day comes.

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