China has been inside a decade long Economic DOWN Bubble. The 25% growth of prior decades has reached just over 6% with a year to year fall for over ten years. Everyone understands a down graph. China as 300 Million in a developing form of middle class China style, and over 1 billion living as they did 500 years ago AD. No roads in the rice patties with bear feet. You really have to SEE IT to GET IT. They have cities entire cities that have no population all fueled by Chinese economics, where politics drives economics versus economics drives politics. This abuse of economics has led to a 300% debt spending to maintain the 6% growth annually.

Today even that is no longer working.

A RUN ON THE NATION has been quietly taking place. This means:

  1. Inside China the Chinese wish to have their dollars outside the Chinese System and currency they lack confidence in long term.
  2. Outside China investors have sought to remove their stake in China, selling out, running out moving money out and stopping forward investment. Even commitments for future investments are having second thoughts, delaying start dates and looking for other alternative Asian partners and BETTER DEALS.
  3. Manufacturing has been quietly moving to Indonesia Bangladesh Vietnam and other Asian partners giving far better DEALS to those who relocate. This job base is never to return to China.
  4. Buyers and customers seeing quality fall prices rise and shipping dates uncertain are moving to other locations – improving their own economics – and forever leaving China never to return.
  5. Imports of Chinese “everything” are falling “everywhere”. If the EU splits apart it would sink China given its debt. Virtually over night. Huge risk.

The sun has risen on China. The Sun also sets.

China is increasing regulatory laws, layer by layer, Communist style, to control the RUN ON THE NATION. This has created a down market in stocks, a down market in bonds, and further moved the RUN OUT OF CHINA as regulatory costs and burdens rise, to accelerate. An unintended consequence.

Further, the cost of borrowing for China as a nation, and for the leading borrowers and State Run Organizations and industries is soaring. Bankruptcy under Communism was not permitted until 2014. By 2015 23 major bankruptcies were allowed including State Run organizations that were allowed to fail. In 2016 over 70 bankruptcies or 100% rise in ONE YEAR. This year a new record will be set as the borrowing cost has risen from near zero to almost 4% and is soaring at the moment.

This effects the fuel of the Chinese markets for stocks and bonds – MARGIN or LEVERAGE which is now increasing in cost and qualification. Hence the markets are DOWN when the cost to margin is soaring keeping many who would be in the market speculating out. Keep in mind the Harvard leadership of the PARTY understands the market costs to reign in the speculation. They would rather bite that bullet now and we all want China to WIN for the world and its people. Its economics.

SUPER BOND THEORY is the way back UP and the way to resolve the problem but hey they have not hired me to help them yet. Smile.

So the SPIRAL RUN OUT OF CHINA is picking up Tornado speed and the issue is buyers world wide are beginning to see quality drop in Chinese products. Keep in mind Steven Jobs Famous Words to guide Apple:

..leaders in quest to make mindless profit forget what it is like to super focus on producing really outstanding products. They truly lack the heart and intention to care about what their own customer base truly deserves and requires in the market place….we at Apple live and breath for our customers like no company on earth which stands us apart from the mail room to the board room to THINK DIFFERENT. If we ever forget THAT ..we would cease to BE APPLE……..

Now having known Steve since we were kids in Silicon Valley I still relish those words. In the end even Nations who fail to ascribe to the quality the market DESERVES lose their market share. Today it is not about price. It is about quality. Today it is not about bribes or manipulations it is about MARKET SHARE. Market share is impossible to retain without quality.

Now keep in mind oil cut backs by OPEC are taking place, when China cut back in use of oil off sets the OPEC cut backs. China is buying cheaper oil it believes can be supplied without political manipulation or interruptions over time from new market share. Opec has lost enormous MARKET SHARE and PAID BILLIONS in lost production and income to allow NON OPEC suppliers like the USA and many others to pick up FOREVER the market share OPEC IS LOOSING. Also China is getting better product quality at a lower price for oil from non OPEC Suppliers. When you see CHINA’s oil as MANUFACTURED GOODS or RARE EARTH’s China is now LOOSING MARKET SHARE FOREVE on EVERYTHING as other suppliers provide Steven Jobs quality, at ever more reliable prices, without the lack of customer service, shipping precision, and reliabilities China in recent years has declined service and price stability upon. The market is moving from China as a RUN ON THE CHINESE NATIONS is a market FORCE.

Tightening up controls to ECONOMICALLY CONTROL THE RUN OUT OF CHINA will in our investment banker economist opinion fail to produce desired outcome of stability and growth. Why? The controls always produce a tightening of the spiral as the single is PANIC by leadership that things are spiraling out of control. The market is so smart. The end game is a contagion trigger and a SUPER CRASH brought on by massive bankruptcy surge as the 100 trillion in non performing bad debt now showing as GOOD ASSETS on Communist entity ( Bank of China ) Balance sheets will turn to what it is – a liability – and the institutions will be bankrupt like Deutsch Bank. In the end the BANKS fail beside the financial institutions as the bankruptcies reach rebalance velocities.

The Communist desire to avoid Big Bang ECONOMICS will have to be revised following th Chinese SUPER CRASH, to massively REFORM ECONOMICS such that ECONOMICS drives the politics in the future reforms that must come to rebalance all systems that invested decades of credit ad debt abuse to economics.

Economics is unforgiving for mistakes and accounts must always rebalance.

Berny Dohrmann – Keeping the Economic Light on For you In China Today