The Curious Case of Communist China

          The People’s Republic of China (PRC), a single-party state run by the Communist Party, was established by Mao Zedong in 1949.  Through late 1978 it sported your prototypical Soviet-style centrally planned economy.  Since then the PRC has adopted a policy dubbed “state capitalism”, privatizing farmland and creating special economic zones for private enterprise outside “pillar” sectors like energy and heavy industry, owner-managed by the Party, and the Commies have brought private operating capital in from outside China, mostly through one-sided partnerships placing the Party in majority control of those enterprises.

         Media reports claim that Western technology is stolen this way and then transferred to Chinese-owned competitors, which soon dominate the domestic market and compete effectively against the original “partner” throughout the globe.  Furthermore, China is known as 1) the world’s Number One manufacturer of counterfeit goods, 2) a predatory manipulator of foreign exchange rates, and 3) the leading provider of the kind of scab labor that destroyed the demand side of the American economy through the loss of “outsourced” blue collar jobs.

         On top of all this, good old American stupidity has made the PRC one of this nation’s largest creditors, and now, we’re recently told, mobs of Communist functionaries have been flocking to these shores snagging upscale homes at distress prices with the exchange rate-rigged money we’ve been squandering over there amidst the flat-out destruction of our own Middle Class.

         Common stock in Chinese corporations has been sold to private investors, including US citizens, who’ve been buying into whatever is going on here, as nobody owns up to the blatantly abusive nature of this relationship.  Macro statistics supplied by the PRC indicate the Chinese economy grew by 10.5% from 2001 to 2010, but exactly what was growing isn’t at all clear, nor what part of that could possibly be owned by anybody other than the Communist Party, and this claimed success story has not filtered down to the Chinese stock market at all.  Apparently there are empty cities over there, if our own media is to be taken seriously, and populations get shifted en masse for the benefit of Western photographers documenting Chinese progress.  Maybe that has something to do with the growth/stock market disconnect.

         Years ago, a savvy B-school professor convinced us that a huge part of what you’re getting when you invest American is this magnificent legal infrastructure of ours and everything it means for the protection of your financial interests.

         Play the PRC market, and, clearly, what you’re dealing with is a lawless Commie house of cards.