Why Capital Is Fleeing China: The Crushing Costs of Systemic Corruption

Who are you going to complain to? The government? Good luck.

People don’t want to do business where the whole system is rigged. Sure lots of legal graft can be tolerated if the location for whatever reason is especially good. California comes to mind. But eventually capital, human and otherwise, leaves. People are only going to be jacked for so long.

One of the ways people can be stolen from is through externalities like pollution. As Charles Hugh Smith explains,

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China stockmarket: Journalists, traders, officials rounded up in wake of ‘panic and disorder’

China is going all coo coo bananas here lately. Not that arresting journalists and other people is outside the norm for The Ultimate Crony Capitalist State, but still. Tianjin, the yuan devaluation, the stock crash, this new explosion, the big military parade on the 3rd. Lots of stuff going on. Lots to keep the jailers busy.

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Short-seller Chanos on China: ‘It’s worse than you think’ (Video)

Is all this going to crumble into the ground? No way. But China does have some serious soul searching in front of it.

The point we’ve made with China, The Ultimate Crony Capitalist State, is that much of the “growth” the country has seen has been driven by central planning, which in the end is doomed to fail. One can not centrally plan an economy the size of China’s over the long term.

Self dealing.

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(VIDEO) Raw footage of the MASSIVE explosion from multiple views in the Chinese port city of Tianjin. Comes on heels of stock cash, yuan devaluation

China, the country we often refer to as the Ultimate Crony Capitalist State is in the midst of serious upheaval. Its stock market has been in precipitous decline, the government has devalued the currency, and now this, a truly massive explosion in a vitally important port city a stone’s throw from Beijing.

Initially reports were suppressed by the government but footage is hitting the broader world. So, in case you missed it, here it is.

This will have impact (so to speak) on the already tenuous Chinese economic situation.

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China the Ultimate Crony Capitalist State devalues its currency, World markets shudder, expect more trouble going forward

In case you haven’t noticed things aren’t so hot in China. In fact the country, the Ultimate Crony Capitalist State is in serious trouble. Today it devalued the yuan, its currency.

We have been sounding the alarm on China for a very long time. Not that we’ve been the only ones. That China has been headed for real trouble has been obvious to many for quite a while, years. Regardless, trouble is here now. The world’s second largest economy is pretty much in crisis mode,

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Turmoil in China’s Stock Markets Takes a Psychic Toll

A few posts ago we made the point that we should all count our lucky stars that we were not some newly middle class guy in China who leveraged his home to play the stock market.

If however you are that guy and you are reading this know that at the very least you have our sincerest sympathies. Though that doesn’t pay the margin call we understand.

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“A grave mistake,” China steps up support to arrest stock market slide

The Ultimate Crony Capitalist State is feeling a bit unstable right now. Instability is the great enemy of the Chinese Communist Party. The market mechanism continues to bleed through all across the Chinese economy and Beijing is getting (more) nervous. The state “capitalism” miracle is looking a lot less miraculous these days.

The Chinese stock market is off over 20% since mid June. (Though still up more than that for the year.) A property bubble continues to pop.

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Today is the 26th anniversary of the Tienanmen Square Massacre, A documentary of the slaughter, Tank Man

I remember seeing this image on TV as a kid. I remember the thousands of students in the square. The paper mache statue of liberty they’d erected. There was a feeling that communism was about to come crashing down in China.

Then the army came and laid waste.

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De-Dollarization Accelerates As More Of Washington’s “Allies” Defect To China-Led Bank

He who is prudent and lies in wait for an enemy who is not, will be victorious. – Sun Tzu, The Art of War

Being unconquerable lies with yourself; being conquerable lies with your enemy. – Sun Tzu, The Art of War

As we’ve said before, the SHTF moment to watch for is the day the dollar loses reserve currency status. As we’ve also said, this day is still probably pretty far off.

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In perhaps an “unprecedented” move UK joins Chinese rival to World Bank as a founding member

This is a big deal and reflects the profound lack of confidence the world has with the current global banking regime. That Britain would do this, in spite of our general objection, is very significant.

As we have said in the past, an important thing to watch for is the moment the dollar is no longer the “world reserve currency.” When that happens the game fundamentally changes. We can’t print forever any longer and the reality of the market hits.

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China Reports Worst Industrial Production Data Ever Outside Of The Global Financial Crisis

China is the ultimate crony capitalist state, surpassing even Russia (see the previous post) in that regard.

I recently had the pleasure of talking with an economist who specializes in China and who works for the US government. He said that getting some types of business done in China, particularly anything around energy is nearly impossible. The Chinese government sets a price for energy, tells the plants how much to produce whether or not that works with the set price (which it typically does not) which then creates all sorts of downstream distortions in other parts of the economy.

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“Magic” Collateral: A Frank Look At The Sheer Credit Horror About To Be Unleashed In China

China is an amazing political and economic entity. Watching it is fascinating.

Is it slowing? How much? Is it a lot? Is it a lot more than even the pessimists think? Is the Chinese banking system looking at a “black hole moment”? Can the banks be bailed out by the Chinese central bank without setting off a worldwide economic wildfire? No one knows the answer to these questions, including the powers that be in China.

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