Comparing Economy Management – China versus the United States

April 28, 2012

Over at CNN World, Stephen S. Roach wrote a post about America’s renminbi fixation.  Many of the comments that responded to the post were obviously from Internet Trolls that lack the skills for an intellectually reasoned response. Instead, the trolls resort to logical fallacies to divert attention away from Roach’s message (I left a comment and a few replies too).

While many in the West have predicted for about three decades that China is going to have a hard landing after an economic bubble of some sort bursts, it hasn’t happened yet.

I Reblogged Roach’s piece and you may reach it by scrolling down or clicking on this iLook China link.

To research this post I Googled “financial crisis in China since 1980” and found no results that answered what I was looking for.

However, I found this at, which said, “It is now just over twenty years after China initiated its economic reform in 1978. Since then the average rate of growth of GDP has been a phenomenal 9.5 percent per year. This essay reviews the reform process, discusses the impact of the current Asian financial crisis and attempts to assess the prospects of China’s economy in the future…

“In summary China’s reform process has been an experimental and gradual process. It was to be continued before the Asian financial crisis (1997). State-enterprise reform, financial reform and the opening of the Chinese economy have all been affected by the crisis, but there is no question that as soon as conditions allow the reform process will continue, incorporating the lessons learned from the crisis…

“In conclusion, economic reforms in China are likely to continue in the manner and directions as described above. Because of the strong fundamentals of China’s economy as demonstrated by its good performance during the financial crisis substantial growth will continue perhaps for another decade after the current crisis.”

In addition, in an April 2008 economic study from Harvard, we discover, This Time is Different: A Panoramic View of Eight Centuries of Financial Crises.

The Harvard study said, “As the first paper employing this data, our aim is to illustrate some of the broad insights that can be gleaned from such a sweeping historical database.  We find that serial default is a nearly universal phenomenon as countries struggle to transform themselves from emerging markets to advanced economies.  Major default episodes are typically spaced some years (or decades) apart, creating an illusion that “this time is different” among policymakers and investors.  A recent example of the “this time is different” syndrome is the false belief that domestic debt is a novel feature of the modern financial landscape.  We also confirm that crises frequently emanate from the financial centers with transmission through interest rate shocks and commodity price collapses…

“The ability of governments and investors to delude themselves, giving rise to periodic bouts of euphoria that usually end in tears, seems to have remained a constant.”

Since not much time has passed since China’s economic reforms in 1978, we will look at the United States for examples.

The current total US deficit (national debt) as of today is more than $15.5 trillion and the average credit card debt per household based on 609.8 million credit cards held by US consumers is almost $16,000.

However, “Chinese households save a large share of their disposable incomes and their average saving rate has increased over the last decade and a half. This pattern is particularly pronounced for urban households, which account for about two-thirds of national income. After remaining relatively flat during the early 1990s, the average saving rate of urban households relative to their disposable incomes rose from 18% in 1995 to nearly 29% in 2009.”

In addition, if we study “Panics, Depressions and Economic Crisis Prior to 1930 in the United States”, we discover that “Those most disastrous have usually followed general injudicious speculation in lands or inflated securities. The crisis of 1816-1819 in the United States, it is claimed was due to the speculation and disorder following the War of 1812. The next occurred in 1825. A very memorable panic was that of 1837.” Source: The History lists the Top 10 Worst Financial Crisis in U.S. History starting with the Crash of 1929/Great Depression; our current and continuing Mortgage Crisis of 2007; the Panic of 1893; The Banker’s Panic of 1907; the Panic of 1873; the Panic of 1819; the 2001-2002 Recession (known as the dotcom bubble that wiped out $5 trillion in market value of technology companies);  the Kennedy Slide in 1962 which caused a 22.5% drop in the S&P 500; the Panic of 1837, and The Oil Crises of 1973.

In addition, there have also been recessions in 1937, which followed the Great Depression (1929 – 1933); 1945, 1949, 1953, 1958, 1960-61, 1969-70, and 1973-75.

As for China, the predictions of an economic crises/crash keep coming as if they were being manufactured on an assembly line — but one hasn’t arrived yet and it has been 34 years since China’s 1978 economic reforms, while for the same period in the US there have been several economic recessions running from January – July 1980; July 1981 – November 1982; July 1990 – 1991; March -November 2001, and December 2007 – June 2009.

When an economic crises does appear in China (the odds favor that it will), it may be part of a global universal phenomenon as the Princeton and Harvard studies reveal, so it is a good bet that sooner or later China’s economic critics will be able to step up on their soap boxes and crow, “I told you so (a hundred times over the last several decades that it would happen one day)!”

I suggest watching the two videos with this post to learn about manufactured financial panics in the United States, which leads to a question: Is the American fixation on China’s currency manufactured too?


Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

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The Controversy, Complexity and Reality behind China’s One-Child Policy

October 3, 2011

Louise Watt of the Associated Press writes of China’s wealthy wanting to leave China, and once again demonstrates the West’s ignorance of the one-child policy.

Pub Med Central provides a better history of the one-child policy.

“In 1979, the one-child family policy was developed and implemented in response to concerns about the social and economic consequences of continued rapid population growth,” Pub Med said, and, “implementation was more successful in urban areas than rural areas.”

Pub Med says, “It was hoped that third and higher order births could be eliminated and that about 30% of couples might agree to forgo a second child… In some of the largest and most advanced cities like Shanghai, sizeable proportions of couples already chose to have only one child (regardless of the law).

“As a result, it was not long before 90 percent of couples in urban areas were (easily) persuaded to restrict their families to a single child.”

However, Pub Med says, in rural areas of China the opposite happened, and 90 percent of women with one child went on to have a second (regardless of the law) and there wasn’t much the Communist Party could do to stop them.

AP’s Louise Watt writes, “Under China’s one-child policy in place for the last three decades to control population growth, couples can be penalized for having more than one child. In Beijing, the penalty is a one-off fee 3-10 times the city’s average income, a maximum of 250,000 yuan ($40,000).”

Watt also tells us that among the 20,000 Chinese with at least 100 million yuan ($15 million) 27 percent have already left China and 47 percent are considering it, and they want to leave so they can have more children on the cheap and buy land that does not belong to the government.

These wealthy Chinese Louise Watt writes of may be surprised to discover that if the U.S. wants to build a school, park, freeway or shopping center, and your house is in the way, it will be bought and bulldozed.

The law for this is called Eminent Doman and 60 Minutes at CBS News reported on possible abuses of this in the United States in February 2009. Rebecca Leung of CBS News wrote, “But did you know the government can also seize your land for private use if they can prove that doing it will serve what’s called ‘the public good’?”

In addition, it would be interesting to discover if some or all of the wealthy Chinese claiming to have left China to have more children and buy a home left for other reasons they are not talking of.

In The Danger of False Truths, I mentioned that thousands of corrupt Chinese officials stole more than $120-billion U.S. and fled overseas—and the U.S. was a top destination.

If so, the real reason many of these “wealthy” Chinese left China may have been to avoid going to prison or being executed.

In addition to Eminent Domain, if an American cannot pay the annual property tax or income tax in the United States, the house will be lost to the government.  I estimate that the property tax I paid since I first owned a home in 1973 would have paid the penalty for a dozen extra children in China.

In fact, due to property tax, no one really owns their homes in America and everyone is just a tenant, and the U.S.  Government is the landlord. In China, they call it like it is, while in the US, most people believe in fairy tales.

I suggest you read what Foreclosure has to say on this topic.

And if you were worth $15 million dollars and wanted a second or third child, $40,000 a child would not dent that fortune.  In addition, in China when someone buys a house for that 70-year lease, the property tax is paid only once at the time of the purchase and currently there is no law that says you have to pay any property tax again unless it is an investment property.

When these rich Chinese arrive in the US and buy a million dollar house, they will be paying property tax annually. Taxes on land and the buildings on it are the biggest source of revenue for local governments.

In California, for example, property tax for a million dollar house costs about $10,000 a year, and forty years of property tax would cost about a half million dollars, which is much more than $40,000 for the second child and another $40,000 for the third child.

Maybe Louisa Watt should have also mentioned that U.S. citizenship is for sale for foreign millionaires and the details may be found at All, and most Americans could not afford this legal bribe (sorry, I meant deal).

In fact, there’s a lot about China’s one-child policy that Louise Watt isn’t revealing, and what she writes may have to do with America’s busy-body, do as I say morality, which interferes as often as possible in the domestic philosophies and affairs of other countries—something China does not do.

For decades, China’s one-child policy has been criticized in America and/or the West mostly by evangelical, fundamentalist Christians that represent one of American’s squeaky wheels with a political agenda to force their beliefs on others.

However, what these critics do not know may shock them, but I doubt if it will deter their misguided zeal.

In the September/October 2011 issue of Foreign Policy magazine, Phillip Longman wrote The World Will Be More Crowded With Old People, and said, “Another related megatrend is the rapid change in the size, structure, and nature of the family. In many countries such as Germany, Japan, Russia, and South Korea, the one-child family is now becoming the norm (without a law)… Today about one in five people in advanced Western countries, including the United States, remains childless.”

AP’s Louise Watt also doesn’t tell us the one-child policy does not apply to the hundred million people in China that belong to one of the fifty-six minorities or many of the Han Chinese living in rural China where most Chinese don’t pay property tax, rent or a mortgage payment since the land is owned collectively and may not be sold.

Since minorities in China are a small segment of the population, China’s government practices flexibility with the minority birth rate in order to keep minorities an important part of China’s culture.

For example, Tibetans may not live the feudal, nomadic lifestyle with the 35-year lifespan they once had under the Dalai Lama (the average lifespan in Tibet today is more than 60 without the Dalai Lama), which they had before Mao sent the People’s Liberation Army (PLA) into Tibet in 1950.

Isn’t it horrible how the Tibetans were forced to give up that shorter average lifespan and feudal servitude?

However, as a minority, Tibetans may have as many children as they want and the penalty Louise Watt writes of does not exist for them.

We often hear of the Uighur Muslims since this minority has an Islamic separatist movement in the northwest near Afghanistan where the US is fighting a war against a similar insurgency, but the Uighurs are a minority so the one-child policy also does not apply them, and they are not the only Muslims in China.

The Hui are unique among the fifty-six officially recognized minorities of China in that Islam is their only unifying identity. They do not have a unique language as the other minorities do and often intermarry with Han Chinese.

In fact, many live outside the Hui autonomous region. Since the Hui are considered a minority, the one-child policy also does not apply to them.

The Chinese government says if it weren’t for the one-child policy, there would be another four-hundred million mouths to feed and provide shelter for. Instead of 1.3 billion people in China, there would be almost 2 billion—more than six times the population of the US, and China cannot grow crops on about 90% of its land.

France 24 International News reported another recent exception to China one-child policy for Shanghai.

Chinese law allows married couples in Shanghai that are both the only child of their parents to have two children even if they are Han Chinese.

To make sure these married couples are aware of this exception, China provides support from government run family planning centers that check on women’s health and inform them of their rights and responsibilities to have more than one child.

The Shanghai government encourages married couples eligible to have more than one child to do so, which, in Shanghai, means most married couples.

The Shanghai Family Planning Commission first promoted this policy in 2009. The reason for this campaign lies in Shanghai’s population demographics.

Because of the one-child policy, Shanghai has been particularly hard hit by an age disparity, and 22 percent of the citizens of Shanghai are over sixty and these numbers are expected to grow.

Xu Xihua, the director of Shanghai’s Aging Development Center says that by adjusting the one-child policy in Shanghai, this disparity in ages can be partially reduced and giving couples an opportunity to have two children is part of the plan.

However, the central government stresses it is not abandoning its family planning policies or its control over the number of births. Fear of overpopulation and potential famines remains high in a country that has a history of droughts, floods and famines, which is something the U.S. has not yet experienced in its brief history.

France 24 International News also reported how one Chinese couple wanted to have more than one child and the couple took advantage of loopholes in the one-child policy to have three.

The mother’s first child was a boy, and she was desperate to have a girl.

Since fines are less for a second child if delivered in a remote rural province, the couple moved south.

However, the mother discovered she was pregnant again soon after the birth of the second child, which was a girl, and the doctor told her that because of health reasons she couldn’t have an abortion.

And recently, authorities in China’s most populous province have asked Beijing to ease the one-child policy.

In addition, wealthy Chinese businessmen, television and movie stars often avoid the one-child policy since they have money to pay the fine Louise Watt writes of in her AP piece, and ten percent of rich Chinese have an average of three children and this practice is spreading among the upper-middle class. Since they stay in China, these wealthy Chinese avoid paying annual property tax in America.

Peng Xizhe, dean of social development and public policy at Fudan University, says “In the Maoist era everyone was controlled by his work unit. It’s over now. Many workers are independent. It becomes more and more difficult for the government to pressure people to having only one child.”

In fact, according to some experts, China will adopt a two-child policy in several years.

However, unexpected problems besides an aging population may have developed from the one-child policy, which is explained by a NPR All Things Considered report by Louisa Lim’s Lightning Divorces Strike China’s ME Generation.

Lim says Beijing has the highest divorce rate in China with 39 percent of all marriages ending in a split.

One Beijing woman, Cheng, tells Lim of her six-month marriage that ended as fast as it started. Cheng blamed the divorce on belonging to the generation of spoiled singletons (one-child), known as the post-1980’s generation.

Dr. Perry, a professor of economics and finance in the US, agrees that the upsurge in China’s divorce rate is because of the selfish and narcissistic generation of spoiled one-child children in China (have you already forgotten that many of these urban parents decided to have only one child before or in spite of the law).

But hold on, there may be another explanation why Beijing’s divorce rate is soaring. Eight years ago, a married couple needed permission from their work unit to divorce. Today, couples have the freedom to divorce in China without asking.

Although it may be difficult to link China’s changing divorce rate to the one-child policy, there is another outcome that cannot be denied.

China may have cut off a foot to save its stomach from starvation.

Studies predict that China will soon be short 24 million wives. It doesn’t matter that it is illegal in China to take a test for non-medical reasons that determines the sex of the fetus.

Since China’s culture traditionally prefers boys to girls, many parents go to underground private clinics to find out what the sex of the fetus is. If it is a girl, many terminate the pregnany with an illegal abortion.

The results is a growing shortage of women leading to illegal forced marriages and prostitution (sex slaves), which is a challenge for the police and courts to deal with.

After you learn more of the details of China’s one-child policy, you discover that it was a law without many teeth and didn’t deserve the criticism it received, which leads to the conclusion that the American and/or West’s reaction is due mostly to racist Sinophobia.


Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

To subscribe to “iLook China”, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.

Note: Information that appears in this post first appeared on March 7, 2010 in One Child, on March 18, 2010 in The One-Child Tragedy, on November 5, 2010 in Exemptions in China’s one-child policy,  on November 28, 2010 in Reversing China’s one-child Policy, and on November 29, 2010 in Avoiding China’s one-child Policy.

Building China too Fast and the Struggle to Slow Down

August 18, 2011

Andrew Thomas of Aljazeera English reported from Chuzhou, China July 13, 2011.  He tells us about real estate agents in Beijing canvassing the traffic during rush hour, which happens to be most hours in China’s capital.

In the U.S., we might see homeless people going car to car offering to clean windows for a dollar but in China, the odds are those people going car to car will be real estate agents handing out flyers urging people to buy homes.

During most of the day, one can get around Beijing faster on foot or using the subways than driving a car or taking a taxi, which usually results in sitting dead in traffic breathing fumes from other cars.

Thomas reports that the real-estate agents will do just about anything to sell apartments hitting the market. The reason is that the Chinese are building more new apartments than any country on earth.

In Chuzhou, three hours from Shanghai, Thomas takes us on a tour of what he calls an “unremarkable town” and says this level of housing development is happening all over China.

Thomas says, between 2009 and 2010, there was a 41% rise in housing construction as prices soared. He then questions if Chinese speculators are driving this housing bubble.

In addition, he says China’s electricity authority, last year, reported that over 65 million homes use no power because they are standing empty as prices keep going up.

Thomas says China’s government is worried and wants to avoid a real estate bubble bursting so they have raised interest rates and increased the minimum down payment people must pay for second homes.

Stephen Joske of the Economist Intelligence Unit says, “We are not looking at a bubble burst resembling anything like what’s happened in the U.S.—probably a short correction.”

Therefore, for economists in the West that keep predicting China’s housing bubble will burst and slow China’s growth, think again.

As for aspiring home buyers, many in China are waiting to see what happens and are hoping prices go down. Thomas says a price drop could hurt many overseas markets that depend on China’s growth and development.

If a real estate bubble bursts in China, the odds are that the shock waves will be felt worse outside China in countries still recovering from the 2008 global financial crises caused by the private banking and financial sector in the United States, and Thomas explains why that may happen.

The reason for this speculation may be the central government’s plans to move a few hundred million more rural Chinese into newly built urban cities and new homes in older cities as China transitions from an economy dependent on exports to one driven by middle class consumption.

These property speculators are betting on the future.

Discover more from The “What if” Housing Bubble in China


Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

To subscribe to “iLook China”, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.

Hard Landing for Who?

July 15, 2011

A friend sent me a link to a CNBC piece, and said, “I’m concerned how we are all so linked together economically.  if the republicans and democrats don’t come together, and the US defaults at some level of government, that could screw up China and other places as well setting off some sort of global chaos—that really scares me.”

After reading the CNBC piece, I could see why my friend was concerned.

On June 14, CNBC played on the “fear factor” and it worked.  The headline for the CNBC piece was ‘Meaningful Probability’ of Hard Landing for China: Roubini.

In the third paragraph, CNBC tells us “New York-based Roubini is closely followed by Wall Street because he predicted the U.S. housing meltdown that precipitated the global downturn.”

After establishing Roubini’s credentials, the piece focused on the US’s economic future and the language changed to “it is a glass that is half full and half empty,” while Europe is described as “kicking the can down the road”.

After reading the CNBC piece, if you were to pick one answer as the one with the most dire potential consequences, which would it be?

A.  ‘Meaningful Probability’ of Hard Landing for China

B.  The US is a glass that is “half full and half empty”.

C.  Europe is “kicking the can down the road…” (so is the US)

However, a clearer picture appears after reading what “The DailyTicker” published June 13, 2011, at, Roubini Says “Perfect Storm” May Clobber Global Economy.

Henry Blodget wrote, “Roubini’s perfect storm consists of four factors: The U.S.’s basket-case of an economy and budget deficit, a potential slowdown in China, European debt restructuring and stagnation in Japan.”

Roubini predicts there’s a one-in-three chance that these factors will clobber the global economy in 2013. One-in-three means there is a 33.3% chance this will happen and a 66.6% that it won’t.

As for “Kicking the can”, Blodget writes that Bloomberg quotes Roubini saying, “Everybody’s kicking the can down the road of too much public and private debt (except China). The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest.”

Does a “potential slowdown in China” mean the same as CNBC’s “Meaningful Probability of Hard Landing for China”?

Consider that in January 2011, the Economist’s View said, “China’s current-account surplus … is the largest in the world. … China’s external surplus stands at $316 billion, or 6.1% of annual GDP.”

Then Ethics Sage says, “On February 1, it was reported that China’s foreign currency reserves totaled $1.2 trillion. That’s about 8% of the US National Debt,” which is $14.3 trillion and growing.

Bloomberg paints a better picture for China of $2.85 trillion in currency holdings.

Who is going to land harder if Roubini’s “Perfect Storm” strikes?

A. China

B. Europe

C. the US

D. B and C

E. none of the above

Now that you have read more than what CNBC had to say, your answer to this question stands a better chance of being correct.

Isn’t it interesting how easy it is for a major element of the media (CNBC) to  be misleading?

Learn more from A Panel Discussion on China’s Economy


Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

To subscribe to “iLook China”, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.

Bobbleheads Still Predicting Bursting Bubbles in China

June 17, 2011

It wasn’t that long ago (May 17) that I wrote about a Chicken Little-Henny Penny predicting a real estate bubble bursting in China and wrecking its economy as it did in the US in 2008.

Then a friend recently sent me another link to another “sky is falling” piece.  This time, the “want-to-happen” bad news came from Jeff Cox, a staff writer for CNBC.

Cox wrote, “China’s economy is showing real signs of weakening, particularly in real estate, and even could tip into a recession, hedge fund manager Jim Chanos told CNBC.”

I’m surprised that Cox looked under a Hedge Fund rock to find a quote predicting a bad economic future for China.

Basically, Hedge Fund managers do two things: they use small amounts of money, or leverage, to promise large amounts of stocks or commodities. Secondly, they all say they will deliver this stock or commodity at a particular point in time. In that sense, hedge fund managers are trying to time the market, which some would say is very difficult if not impossible to do unless they manage to manipulate the market in some way or have a crystal ball.

Using other sources, we discover a few facts that tell us Cox should have left that quote under the Hedge Fund rock where he found it and called someone else.

Discover how many Chinese buy real estate.

First on May 5, Jason Simpkins writing for Seeking
Alpha says,
 “Yes there are probably pockets of bubbles in China and in the real estate market, but against that backdrop you have 500 million people expected to move into Chinese cities by 2020. That means the number of people expected to move into cities is almost double the population of the United States,” said Money Morning Chief Investment Strategest Keith Fitz-Gerald. “So in the context of China’s explosive growth, what we’re looking at are some moderate setbacks over an extended period of high growth.”

Second, on May 9, James Kostohryz writing for Minyanville says, “China’s Housing Bubble: Mainly Hot Air… Studies by the World Bank, The Economist Intelligence Unit, and UBS have noted that average home prices in China as a whole have risen by roughly 6%-7% per annum in the past decade.

Third, China’s real estate investment accounts for roughly 11% of its GDP, and from Chris Oliver writing for Marketwatch on May 18, we discovered that “New home prices rose across leading Chinese cities in April, even as many key cities saw the pace of appreciation and sales volume cool, according to official data Wednesday.… Of 70 cities tracked in the survey, 56 reported gains in new home prices.”

“So, I think that it should be clear by now, that there is no generalized price or quantity bubble in the Chinese residential real estate market,” Kostohryz wrote, “Home prices have actually been getting substantially more affordable in China in the past decade relative to income levels.”

To learn more, I recommend reading what Simpkins, Kostohyrz and Oliver wrote on this topic. The links have been provided.


Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

To subscribe to “iLook China”, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.