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Tuesday, February 8, 2011

China tweaking 5 year plan in opposite direction

Recently China has declared a change in their financial planning for the next 5 years. As I wrote previously speculating or postulating this shift, the results will be progressive and finally will see a "be careful of what you wished for" scenario - especially for USA.

Instead of focusing GDP growth, this strategy and policy will go the opposite. Through the years since the invention and reliance on the "GDP factor" as an economic health indicator, countries around the world blindly followed this capitalist propaganda. Because the proof was sort of in the pudding. It is true, GDP growth means a better consumption rate, better disposable income, better life, more products, bigger homes, car ownership, expansion of the urban sprawl, creating of suburbs (because we can afford to drive an hour to work), better gadgets, improvement in IT products because of demand and thus competition. So on and so forth. And obesity!

So grab that last sentence: obesity. GDP growth if applied to a human body would be like this following short story.
A baby is born needs alot of nutrients, mother's milk, love, care, food, to grow. The cells will multiply. The baby's weight has a superb "GDP growth". Good because that is what a human baby needs. Growth. Then teenage more different types of growth - hormonal, physiological, psychological, mental. Language skills. But the body now grows in different manners. More muscles, more shape. Some acne. Bone growth slows but still growing. So during the 20s, the body literally doesn't grow anymore. If it did, imagine a humongous monster, devouring anything in sight!

Apply this to basic economics whether the experts agree or not. Growing just by GDP is a fallacy. You can grow in other ways. Manage the growth. Grow mentally. Grow the education and healthcare. Grow the mindset - self-sufficiency. Instead of unlimited multi-storey villas and five swimming pools. Do you ever swim like 12 hours a day, every day? And what is with the golf course. This resource intensive "sport" is a very big sin. Water is consumed in the value of 5 elephants per day. Plus maintaining the "green grass". Why not maintain green vegetables? And water for plants and animals? The space itself for a golf course, could have been a nice shady tree-filled park.

Many times I meet people from the First World Countries - and they have nice things to say about Asia. Then one or two times, they will say this. I find it strange Asian always thinking about "saving face". Well saving face is not a concept created in Asia. It was created in the West! Have you noticed that it is quite strangely white those people on TV (politicians, actors, etc) have - for their teeth?!! And bronze lobster-red body with a high potential of the big C - cancer - imprinted? And what about coats and ties, plus unbelievable prices for a dinner and alcohol?

USA is wishing and pressuring China to increase the value of the yuan. Reduce their exports and start importing. Reduce their GDP. So China has been thinking (and perhaps reading my blog and articles through the years) - yes, let us give them what they requested.

So the scenario will surely be good for USA. Or not?
These scenario will eventually happen:
1) The yuan (oh, and if you cannot pronounce it correctly, it is not "you-wan", it is yuan) will increase in value. Those who hold the yuan or earning yuan, will have a better and higher disposable income. Meaning more chance to buy products from another country, or more expensive, higher quality (maybe) products.
2) Treasury Bills will be slowly discarded and buyers will be few. Meaning a direct reduction in the demand for US Dollars. US policies that rely on these loans will be diminished. Meaning US influence and stranglehold (hegemony) will disappear throughout the globe. Military bases will have to be closed because of insufficient funding.
3) As opposed to completely-free democracy, whereby land/property is openly offered, and thus creating property boom and bubbles, such as in USA, UK, possibly Thailand and so on and so forth, China doesn't have such as system. Perhaps they will extend a hand to "overseas Chinese" - those with Middle Kingdom heritage can now purchase property in the motherland. So whatever happens, it will have a loyalty effect. Property will keep growing, wealth flowing into China. Chances are overseas Chinese from Singapore, Canada, French Reunion Island, Indonesia, Malaysia, Antigua - everywhere - could have a shot at buying and owning a property in China.
4) US Dollar would have dropped (gradually) 10%, maybe 40%. Low enough for middle and higher income investors from China to buy out corporations in USA. Or via Mergers and Acquisitions. Not that the anti-trust law will be rearing the protective nationalistic front. So perhaps not. China will instead invest in itself, and other commodity filled countries. Thereby reducing not just indirect investments in USA (T-Bills) and now direct investments - from stocks, corporations and even education.
5) It is possible to employ a maid from the USA for about 2% of your salary - in the year 2020.

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