http://albertpeia.com/chinafraud.htm
‘A few months ago, we asked, “is China an economic miracle or one
giant government sponsored fraud?” Our views were the latter with corruption as
one of the key driving forces for wealth creation and economic growth in China.
Consider the following:
1) In 2010 alone, 146,000 cases of corruption were
launched in China (that’s 400 PER DAY).
2) Of the 14 cases that were actually reported
in the Chinese media, the average amount stolen was 18 MILLION RMB (for
perspective, the average college graduate in China earns 2,500 RMB per year).
3) Between 1991-2011, it’s estimated that between
16,000-18,000 Chinese officials fled China taking 800 BILLION RMB
(roughly $125 BILLION) with them. Bear in mind China’s entire GDP was just 2.1 trillion RMB in 1991.
4) It’s estimated that on average bribes
comprise 5-10% of a given project’s costs in China today.
Indeed, things are so corrupt in China, that as soon as the new
Government stated it would crack down on corruption, a fire sale of luxury
properties began as corrupt officials sought to dump their illegal holdings.
Thousands of Chinese communist officials have been panicked into a
fire sale of their illicit properties and billions of pounds have been smuggled
overseas as the country’s new leaders intensify a campaign to root out
corruption…
It said the volume of deals had intensified by “a hundred times” after
Xi Jinping, the incoming Chinese president, warned that corruption could kill
the party and put one of the country’s most vigorous and resolute politicians,
Wang Qishan, in charge of stamping out graft…
The CDIC report, which was obtained by the Economic Observer newspaper,
suggested that nearly 10,000 luxurious homes had been sold by officials in
Guangzhou and Shanghai last year.... Li Chengyan, a
professor at Peking University, suggested that about 10,000 officials had absconded
from China with as much as pounds $US100 billion.
http://www.smh.com.au/world/the-great-china-corruption-fire-sale-20130122-2d3v5.html#ixzz2IobQB27X
These individuals fleeing China have been buying up luxury
properties outside of the country. As you likely have noticed, the world has
experienced a wave of Chinese buyers for high-end real estate. While some of
them are indeed individuals who have made legitimate money from business, many
are in fact corrupt officials who have fled the country with vast quantities of
loot.
A new wave of buyers from China is snapping up luxury properties across
the U.S., injecting billions of dollars into the country’s
residential-real-estate market.
The industry is scrambling to court the new buyers. Some
developers of new projects are installing wok kitchens, following feng shui
principles and putting lucky numbers on choice units; others are packaging
property sales with government programs designed to encourage foreign
investment. Real-estate agencies are flying representatives to China, and
hiring Mandarin-speaking agents.
In Los Angeles, New York and even Miami, buyers mostly from China—and
some are from Hong Kong, Singapore and Korea—are radically altering the
landscape. Last month, a Chinese couple paid $34.5 million for a
Versailles-style mansion on Sunset Boulevard in Beverly Hills, Calif. A year
earlier, a Hong Kong businessman paid around $28 million for a nearby estate.
Over the last six months in New York, several full-floor apartments in a new
Manhattan high-rise called One57, each with a price tag of roughly $50 million,
have gone into contract with Chinese buyers, according to two people close to
the situation.
http://online.wsj.com/article/SB10001424052702304765304577478573004173212.html
This sort of fraud and corruption is systemic in China but it
doesn’t show up in the GDP or other economic figures the country posts. After
all, if a poorly constructed bridge collapses China can always build another
one and count it twice for GDP growth. And since the Government controls the
media, no one is the wiser.
As a final example of how the China story will likely turn out,
consider the following:
Caterpillar Inc. believed acquiring China’s Zhengzhou Siwei was a way
for the U.S. company to boost its fortunes in a lucrative but challenging
market.
Siwei’s sales and profit growth were surging. And the company offered
access to China’s mining industry, where domestic companies were prospering.
Siwei, which sells mine-safety equipment, also boasted an American pedigree. Its
controlling shareholders were James E. Thompson III, the scion of one of Asia’s
most successful expatriate families, and Emory Williams, a former head of the
American Chamber of Commerce in China. Caterpillar paid
about $700 million in June for Siwei’s parent, ERA Mining Machinery Ltd.
Caterpillar, known for bulldozers, excavators and wheel loaders, will
have to write off about $580 million over alleged accounting misconduct at a
Chinese maker of mine-safety equipment it bought in June. The WSJ’s James T. Areddy talks about what this means for the
big U.S. industrial company.
But now, the purchase has dealt a blow to Caterpillar’s already
lackluster performance in China.
The Peoria, Ill., construction-machinery maker on Friday said it would
write down ERA’s value by $580 million, blaming “deliberate, multiyear,
coordinated accounting misconduct” that was designed to overstate profit at the
unit before the deal. The accounting surprise
contributed to the departure of a senior Caterpillar executive, a person
familiar with the matter said.
http://online.wsj.com/article/SB10001424127887323301104578255740261180404.html
What are the odds that this is an isolated case?
If Caterpillar, one of the largest corporations in the world, with
its army of accountants and consultants was duped by a Chinese company run by American
executives no less… what are the odds that ordinary investors can accurately
value Chinese businesses or the Chinese economy?
This is just one example of how a popular theme in the investment
community (in this case that China is a superpower) can in fact turn out to be
total bunk. Given how many investment professionals are banking on China
leading the world to economic growth again, this trade is extremely crowded on
one side.
This is why, smart investors are already taking advantage of the
lull in the markets to position themselves accordingly. While everyone else
continues to believe the fairytale story spun by the political class and
mainstream media, our Private
Wealth Advisory newsletter subscribers have already been warned of these issues
and are taking action (just as they did in early 2008 when others were bullish,
or in 2010 when the EU crisis first began to take off).
Private Wealth Advisory outlined several critical
investment strategies, designed to hedge our subscribers from the risks in the
market while also alerting them to unique investment ideas that 99% of
investors don’t know about.
To find out about these investments and start positioning yourself
for what we all know is coming, but no one wants to openly admit, all you need
to do is take out a trial subscription to Private Wealth Advisory.
You’ll immediately be given full access to the subscribers’ only Private Wealth Advisory website where you can find the historical archives of this
investment newsletter.
You’ll also begin receiving new, hot off the press, issues of Private
Wealth Advisory to your inbox every other
Wednesday. Running between 20 and 30 pages in length, these intensive
newsletters outline an expert understanding of what’s happening in the world,
in plain, easy to understand language so our subscribers have the best research
presented in the clearest way possible.
In this manner, our clients are always informed about the economy,
financial markets, and most importantly, their investments.
To find out more about Private Wealth Advisory and how it can help you and your investments…
Phoenix Capital Research