China & hk stocks/ etfs

[sky1978]

That is the problem, isnt it? China has massive excess capacity because their entire economy is geared towards manufacturing goods that the govt thinks the market want, this is the downfall of a centrally planned, top-down economy.

In a normal market based economy that isnt distorted by industrial policies, participants in the market take signals in the form of price, they produce more when prices rise, less when prices fall. They dun produce X number of widgets because the govt told them to and/or that they'd be able to dump the excess capacity in other markets. China's photovoltaic industry is a very good example of this, Chinese companies' losses only widened as they captured more market share. This negative unit economics is of course, great for consumers since they generate consumer surplus, but its bad for the economy and certainly terrible for investors.

It is a problem that they cannot resolve with pouring more money, that is what I am trying to say. One cannot buy away the problem of overcapacity. Even if you buy it off this year, the capacity is there the following year.

Is there any evidence pointing to China govt central plan for Solar capacity to hit 1000GW or EV capacity to hit 36mil cars per year? As far as I know, the majority of the solar industry is dominated by privately owned companies that get their funding from the capital market. A few big Chinese solar manufacturers are also listed on the US market. The same goes for those new startup EVs which went to the US market and raised a lot of capital.

I think their market is more like a free market running wild because, on the contrary, the central govt did not go and control them. Those Chinese entrepreneurs are too competitive and trying to get to the top. If you follow their solar capacity expansion plan, you will notice that they usually announce one after another. Whenever they have something new, they will rush in and do it massively. It is a market where the fittest survive. The industry has all the demand forecast going past 2030, no one forecasts demand to hit 1000GW anytime soon, and everyone in the industry knows overcapacity is in the making. There is already no discussion on Chinese solar companies capturing the market by selling at a loss because those markets without trade barriers already belonged to them for many years, no other competitors can beat them on pricing, and they will fight on price among themselves until the last few standing. In fact, for those who invest in silver and research a bit on silver usage in solar production, a 1000GW production capacity will take a huge chunk out of the silver supply leading to prices skyrocketing. So 1000GW is impossible from a demand and supply perspective. In conclusion, it is their can-do mentality, thinking that they would prevail causing the problem. Seldom will any of these high flyers, rich founder entrepreneurs entertain advice on market research about overcapacity, they will likely tell their staff to solve the problem, not bring problems to scare them.

 

[sky1978]

Perfect rebuttal below. Which is why Xi Jin Ping is always emphasizing high quality development. Because the ordinary Chinese businessmen still do too little R&D that is productive. China big tech and SOEs are leading the way in commercialising patents.

"China publishes an ENORMOUS amount of papers, most of them useless. But who started this? And who made it a meaningless corrupt system that kills real innovation? The West. So, what really counts? Well, actual products that generate revenues and profits. Patents can both stimulate and prevent innovation. Their net effect may not even be positive. The fact that they're so expensive means individual inventors can never benefit from them. So in the end, the number of patents means little. Just like satellite pictures don't tell you anything about GDP. But the success of companies such as Huawei, BYD, CATL, etc., is the real measure of innovation."

It is true, that most patents are worthless and the quantification is around 97% of them. However, it became an emphasis because China also joined in the game of patent filing and has been filing a lot.

This 2017 article, long before China started the patent game mentioned that 97% of them will not even recoup the cost of filing the patent. Seems like it was not a problem when the rest of the world filed worthless patents, but it became an issue when China also followed suit.

https://www.forbes.com/sites/stephenkey/2017/11/13/in-todays-market-do-patents-even-matter/

 

[stanlawj]

Market thinks Friday's stimmy announcement is useless.
But is that really so?

 

[homer123]

Market thinks Friday's stimmy announcement is useless.
But is that really so?

One is usd and the other is rmb

 

[mooseolly]

Baba dropped to $94, buying the dip?

 

[stanlawj]

Yeah, gold foil vs toilet paper.

One is usd and the other is rmb

What I'm reading right now the Western and Sg-based analysts all still think it is 2016 redux, without understanding the difference between then and now (Russia, Africa, Middle-East, South America).

Zero mention of how Russia-China trade has changed the future, and how Africa + LatAm America is going to change the future.

For example, scientific cooperation with US is basically dead and buried in some key areas: Space, particle physics, quantum computing, biotech, semiconductors. Russia+China scientists now working closely together. The last time I checked, China is still winning most of the Science and Math Olympiads.

Next, China's hybrid cars are dominating LatAm. No US-made car can survive the price competition in the mass-market section.

Finally FOCAC 2024 declaration on foreign direct investments has the effect of recycling China USD trade surplus into Africa. This is Singapore's playbook in China, now applied to Africa. Invest in the future of your customers, then they'll buy more from you.
https://2024focacsummit.mfa.gov.cn/eng/
https://2024focacsummit.mfa.gov.cn/eng/zxyw_1/202409/t20240923_11494692.htm

 

[boringLife-]

Market thinks Friday's stimmy announcement is useless.
But is that really so?

still it is supply side incentives. where is the demand side?

Market wants the kind of stimulus that will directly lead to money in people’s pockets so they buy sh1t

 

[homer123]

Yeah, gold foil vs toilet paper.

What I'm reading right now the Western and Sg-based analysts all still think it is 2016 redux, without understanding the difference between then and now (Russia, Africa, Middle-East, South America).

Zero mention of how Russia-China trade has changed the future, and how Africa + LatAm America is going to change the future.

For example, scientific cooperation with US is basically dead and buried in some key areas: Space, particle physics, quantum computing, biotech, semiconductors. Russia+China scientists now working closely together. The last time I checked, China is still winning most of the Science and Math Olympiads.

Next, China's hybrid cars are dominating LatAm. No US-made car can survive the price competition in the mass-market section.

Finally FOCAC 2024 declaration on foreign direct investments has the effect of recycling China USD trade surplus into Africa. This is Singapore's playbook in China, now applied to Africa. Invest in the future of your customers, then they'll buy more from you.
https://2024focacsummit.mfa.gov.cn/eng/
https://2024focacsummit.mfa.gov.cn/eng/zxyw_1/202409/t20240923_11494692.htm

I can tell you China is gone case after Trump won the election.. There is only 1 consumer in planet Earth and that is American.. The rest of the world do not matter..they are cheapo like the Ah Tiong..

 

[Mephist0pheLes]

It is true, that most patents are worthless and the quantification is around 97% of them. However, it became an emphasis because China also joined in the game of patent filing and has been filing a lot.

This 2017 article, long before China started the patent game mentioned that 97% of them will not even recoup the cost of filing the patent. Seems like it was not a problem when the rest of the world filed worthless patents, but it became an issue when China also followed suit.

https://www.forbes.com/sites/stephenkey/2017/11/13/in-todays-market-do-patents-even-matter/

Not a problem, jus a useless statistics fot measuring innovation.

 

[Brandedclassicwear]

Those are views from a random guy in a random podcast, its pure conjecture, not evidence. The National Bureau of statistics of China have numbers on this and they already include residence and household services under household expenditure/consumption. There is some argument on whether using historical cost instead of imputed rent distorts this number but it can work both ways i.e this number is inflated when property prices fall.




Most of that protein isnt meat protein (which is costlier). Anyway the problem isnt food, global food prices at pretty much at record highs so there is no overcapacity there.





That is the problem, isnt it? China has massive excess capacity because their entire economy is geared towards manufacturing goods that the govt thinks the market want, this is the downfall of a centrally planned, top-down economy.

In a normal market based economy that isnt distorted by industrial policies, participants in the market take signals in the form of price, they produce more when prices rise, less when prices fall. They dun produce X number of widgets because the govt told them to and/or that they'd be able to dump the excess capacity in other markets. China's photovoltaic industry is a very good example of this, Chinese companies' losses only widened as they captured more market share. This negative unit economics is of course, great for consumers since they generate consumer surplus, but its bad for the economy and certainly terrible for investors.

Not sure for photovoltaic industry, this overcapacity is intended or involuntary. This is a 'scorched earth' strategy, if Chinese companies are bleeding losses with increase in market share and therefore economics of scale, EU and US companies will be haemorrhaging losses. E.g for First solar, a US company, 98% of sales in US. I suppose the other 2% of sales in Canada else I cannot see why other countries will buy made in US solar products. After that will be industry consolidation and the supply will fall. Then the non US market will be cornered by Chinese companies.

 

[Tiny Shrimp]

I can tell you China is gone case after Trump won the election.. There is only 1 consumer in planet Earth and that is American.. The rest of the world do not matter..they are cheapo like the Ah Tiong..

Pivot to domestic consumption, SEA increasing demographic, greater Asia consumption, no good meh?

 

[d5dude]

It is a problem that they cannot resolve with pouring more money, that is what I am trying to say. One cannot buy away the problem of overcapacity. Even if you buy it off this year, the capacity is there the following year.

That wasnt my point, I said nothing about propping up industries that are suffering from overcapacity, my pt was that China's domestic demand is generally considered weak and deficient by many, including XJP and the CCP.

https://www.ft.com/content/36e6bf5e-1176-4156-bcfd-fd555f56b67b

Citing “insufficient” domestic demand, China’s leadership on Tuesday endorsed the acceleration of fiscal and monetary policies, including the use of government bonds to fund spending and stimulus programmes to upgrade industrial equipment and consumer goods.

Is there any evidence pointing to China govt central plan for Solar capacity to hit 1000GW or EV capacity to hit 36mil cars per year? As far as I know, the majority of the solar industry is dominated by privately owned companies that get their funding from the capital market. A few big Chinese solar manufacturers are also listed on the US market. The same goes for those new startup EVs which went to the US market and raised a lot of capital.

https://www.straitstimes.com/busine...energy-but-its-industry-at-home-is-in-trouble

Started in 2008, the solar panel manufacturer benefited early on from practically every possible subsidy.

It got 8.9ha of prime downtown land in the heart of the city almost for free. One of China’s biggest state-owned banks arranged a loan at a low interest rate. The Hunan provincial government then agreed to pay most of the interest.



Its pretty much the same thing for the EV industry.

I think their market is more like a free market running wild because, on the contrary, the central govt did not go and control them. Those Chinese entrepreneurs are too competitive and trying to get to the top. If you follow their solar capacity expansion plan, you will notice that they usually announce one after another. Whenever they have something new, they will rush in and do it massively. It is a market where the fittest survive. The industry has all the demand forecast going past 2030, no one forecasts demand to hit 1000GW anytime soon, and everyone in the industry knows overcapacity is in the making. There is already no discussion on Chinese solar companies capturing the market by selling at a loss because those markets without trade barriers already belonged to them for many years, no other competitors can beat them on pricing, and they will fight on price among themselves until the last few standing. In fact, for those who invest in silver and research a bit on silver usage in solar production, a 1000GW production capacity will take a huge chunk out of the silver supply leading to prices skyrocketing. So 1000GW is impossible from a demand and supply perspective. In conclusion, it is their can-do mentality, thinking that they would prevail causing the problem. Seldom will any of these high flyers, rich founder entrepreneurs entertain advice on market research about overcapacity, they will likely tell their staff to solve the problem, not bring problems to scare them.

The Chinese market is anything but free. In 2021 an industry (private education) was deleted overnight by the CCP even though demand was strong for these services, China is the epitome of state capitalism.

These have all been discussed extensively in this thread so I dun want to waste time reiterating these things, I'm just not going to reply anymore unless theres something new.

Oh btw Oct CPI is out and food prices are +2.9% y/y while non-food is -0.3%. Absolutely terrible.

 

[homer123]

Pivot to domestic consumption, SEA increasing demographic, greater Asia consumption, no good meh?

The size of a typical American is 3 times of an Asian or African.. Export oriented economy is doomed without US market

 

[d5dude]

Not sure for photovoltaic industry, this overcapacity is intended or involuntary. This is a 'scorched earth' strategy, if Chinese companies are bleeding losses with increase in market share and therefore economics of scale, EU and US companies will be haemorrhaging losses. E.g for First solar, a US company, 98% of sales in US. I suppose the other 2% of sales in Canada else I cannot see why other countries will buy made in US solar products. After that will be industry consolidation and the supply will fall. Then the non US market will be cornered by Chinese companies.

Scorched Earth strategy made possible with state subsidies.

Tariff walls are coming up, its the end of the road for this strategy.

 

[d5dude]

Yeah, gold foil vs toilet paper.

What I'm reading right now the Western and Sg-based analysts all still think it is 2016 redux, without understanding the difference between then and now (Russia, Africa, Middle-East, South America).

Zero mention of how Russia-China trade has changed the future, and how Africa + LatAm America is going to change the future.

For example, scientific cooperation with US is basically dead and buried in some key areas: Space, particle physics, quantum computing, biotech, semiconductors. Russia+China scientists now working closely together. The last time I checked, China is still winning most of the Science and Math Olympiads.

Next, China's hybrid cars are dominating LatAm. No US-made car can survive the price competition in the mass-market section.

Finally FOCAC 2024 declaration on foreign direct investments has the effect of recycling China USD trade surplus into Africa. This is Singapore's playbook in China, now applied to Africa. Invest in the future of your customers, then they'll buy more from you.
https://2024focacsummit.mfa.gov.cn/eng/
https://2024focacsummit.mfa.gov.cn/eng/zxyw_1/202409/t20240923_11494692.htm

The problem with shifting their customer base to Africa or LatAM is that these are very poor countries with weak purchasing power, and most of these countries still rely on trade with EU and US for income.

Economic superpowers absolutely have to have a population thats ready to consume and even run a trade deficit, a mercantilist approach simply doesnt work for such a large economy, there are no markets that can absorb all that capacity.

 

[stanlawj]

Africa + LatAm are ready to consume Chinese goods.

In most places that are not, they just need better infrastructure eg roads, water and electricity. Payment of course comes from the minerals and oil that is abundant there. Now their govts are also buying Chinese military defence goods.

Any trade surplus on China's side, is reinvested back as partial ownership in those infrastructures or local production factories. It's a fair competition between US and China.

 

[d5dude]

Africa + LatAm are ready to consume Chinese goods.

In most places that are not, they just need better infrastructure eg roads, water and electricity. Payment of course comes from the minerals and oil that is abundant there. Now their govts are also buying Chinese military defence goods.

Any trade surplus on China's side, is reinvested back as ownership in those infrastructures. It's a fair competition.

As an investor, I dun want minerals and oil as payment, I want $$$ for dividends and share buybacks.

 

[stanlawj]

As an investor, I dun want minerals and oil as payment, I want $$$ for dividends and share buybacks.

So, along the way, I believe the corporate earnings of the Chinese companies will grow.
BYD, Xiaomi, Haier, Midea? And their suppliers?

 

[Jirachi]

Pivot to domestic consumption, SEA increasing demographic, greater Asia consumption, no good meh?

He was being sarcastic.

 

[DevilPlate]

The problem with shifting their customer base to Africa or LatAM is that these are very poor countries with weak purchasing power, and most of these countries still rely on trade with EU and US for income.

Economic superpowers absolutely have to have a population thats ready to consume and even run a trade deficit, a mercantilist approach simply doesnt work for such a large economy, there are no markets that can absorb all that capacity.

Yes, US consumers will consume till no savings and swipe credit cards unlike giam ganna asians
https://finance.yahoo.com/news/much-money-americans-bank-accounts-151511484.html