U.S. Sick Economy: Chinese to the Rescue?

Gordon G. Chang, writing in Forbes, provides confirming evidence that China is moving in an unhealthy, statist direction and driving out its best entrepreneurs. We must, however, keep in mind that Chang, author of 2001’s The Coming Collapse of China, is an established Cassandra on the country’s future.

In his article, Chang makes these points:

➢ almost 60% of China’s “high net worth individuals” . . . possessing more than $1.5 million in investable assets, are either considering emigration through investment programs or are completing the emigration process. . .27% of those with more than $15 million in investable assets have already emigrated and 47% of them are thinking about leaving the Motherland.

➢ There has, in the last five years, been a 73% increase in Chinese investment immigrants to the United States. [Canada is raising its] minimum investment requirements for investment-immigrant candidates due to the sheer size of the tide of Chinese cash. . . In an “unprecedented” surge of business for brokerages in [Vancouver over Chinese New Year’s], Chinese buyers snapped up homes, townhouses, and condominiums as sales skyrocketed 70% over the preceding month.

➢ U.S. Treasury . . . monitoring illegal money flows has, since the beginning of last summer, detected a surge in hidden cash transfers out of China. The country leads the world in illicit fund transfers. . . China’s outbound flows from 2000 to 2008 was a staggering $2.18 trillion.

➢ The flood of “hot money” . . .picked up in the last quarter of 2008. . . when the . . . government announced its stimulus plan, [a] partial renationalization of the economy. Then, Premier Wen Jiabao started pouring state cash into the state sector and state financial institutions began diverting credit to state-sponsored infrastructure. As a result . . . 95% of China’s growth in 2009 was attributable to investment, [with] almost all . . . from the state.

➢ private entrepreneurs who, although shut out of many portions of the economy by state enterprises, rode the resulting asset bubbles to even greater wealth. The number of the country’s high net worth individuals . . . will reach 585,000 this year, almost double the figure for 2008.

➢ [Officials not happy.] “We have been working hard to develop the economy in the past 30 years, but now these elite members of society are fleeing with the majority of the wealth,” said economic analyst Zhong Dajun [in a] Communist Party-run newspaper. “The loss may be even higher than all the foreign investment we have attracted. It is as if, when the time of harvest comes, we find the fruits have all gone to others’ baskets.”

➢ Beijing, since 2008, has been [abusing] private entrepreneurs . . . even more than usual, so it is natural they are now trying to protect themselves . . . the situation is bound to get even worse [when] Xi Jinping becomes . . .Party general secretary . . . Xi will undoubtedly bring his fellow “princelings” into positions of political power [who] will surely use their new political clout to consolidate their grip on the economy. This means. . . owners of private domestic enterprises, will have even fewer opportunities than they do today.

Last year, our progressive friends were arguing the China model, with its strong, authoritarian lines of control in contrast to our checks-and-balances democracy, was going to do us in. Now, it seems that if we can straighten out U.S. immigration policy to compete with Canada and Australia in attracting Chinese entrepreneurs, we can have the best of China helping build our economy.

Isn’t it ironic?