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"STRUCTURAL REFORM" - UNSAFE FROM ANY ANGLE, AT ANY SPEED. [Copy link] 中文

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Post time 2016-7-22 13:58:31 |Display all floors
This post was edited by abramicus at 2016-7-22 14:30

"STRUCTURAL REFORM" is the literal translation of "PERESTROIKA", and Perestroika has been shown in one of the largest economic experiments in human history, involving a superpower, to be unworkable, and self-destructive, regardless of how one perceives it should be pursued, or at what speed it should be achieved.

But, simply because it is the namesake of "PERESTROIKA" is not sufficient reason to reject it.

More fundamentally, STRUCTURAL REFORM has never been fully defined as a set of principles and facts that are self-consistent or sufficiently complete, to meet the needs of any country, let alone one as big as China.

Debating on what it should mean is therefore MEANINGLESS, any more than if one were to debate what "Perestroika" should mean, as by its very ambiguity, it begets only disagreement, dissension, and most importantly, divisiveness at the highest levels of economic, political and military decision-making.

More importantly, and more pragmatically, China should continue the tradition of its past leaders, and debate what is the meaning of "Chinese modernization", or 中国现代化的意义。

The first error in the art of argumentation has afflicted practically every side of the debate in China about "Structural Reform", and that is, the error of using a borrowed foreign term that has no defined meaning, not just in terms of China's needs, but in terms of what it means in Plain English.  Further debates on "Structural Reform" can only lead to the further division of China's unity of leadership and national effort.  This is a term best left for linguists to analyze, and should be avoided like the Poison Ivy, the mere whiff of which is bound to induce the most severe allergic reaction and asthmatic asphyxiation.  Let the Western pundits debate, insist, threaten, cajole, and entice with this catch-phrase of discord and bickering.  That is their wine of disunity, let them drink it, while China should simply watch them remonstrate and condemn, while sipping its cup of pristine Oolong tea.


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Post time 2016-7-22 15:27:40 |Display all floors
Let us stop bickering over the meaning of phrases that have never been fully defined.  Structural reform can mean anything, some of which are good, some of which are bad, so there is really no point in arguing what type of structural reform is better than the others.  It is more precise to state what reforms are needed, rather than shepherding them all under the canopy of "Structural Reform", asking the country to accept the bad together with the good, when in fact, the country has the right to adopt only what is right, and reject what is harmful, even if both reforms are being promoted under the banner of "Structural Reform".

Refusing to devalue the Yuan, in order to not appear to initiate a currency war, is disingenuous, because if China devalues, it is only because all the other countries have already devalued, especially Japan.  How can a consequence of another country's intentional devaluation be construed by oneself as an act of aggression, in currency terms, when it is completely passive, and at worst, defensive?  For example, if someone keeps getting struck by a rogue, can he declare that he will not engage in a roguish war by striking back, and accept more punches and kicks from the same rogue day after day?  Is that reasonable?  Is that honest?  Is that responsible?

What is reasonable, honest and responsible is to give that recalcitrant rogue a flying kick that will stop him from ever attacking you again.  Being violent against prior violence is not aggression.  It is defense.  And all countries must defend themselves or they will get trampled all over the place, which is what is happening to China's economy as it keeps selling its hard-earned dollars to buy back its own yuans, in order to not appear offensive, even if it is the victim of repeated currency offenses by Japan.

Enough apologias for the villain, there is no reason to make oneself appear like a villain if one were to fight the villain.  A police chief who refuses to be "violent" to violent criminals is not a police chief.  He is a collaborator of the villain, in effect, allowing the public to suffer while he saves his face.

It is time for China to let the Yuan float down to where the market demand equilibrates, and thereby liberate its manufacturing power to serve the people once again.

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Post time 2016-7-23 15:58:27 |Display all floors
This post was edited by abramicus at 2016-7-23 16:16

IN CONTRAST TO THE NEBULOUS AND FAR-FETCHED OBJECTIVES OF THE SO-CALLED "STRUCTURAL REFORM", PRESIDENT XI JINPING SAID DURING A TOUR OF NINGXIA, AMONG THE HUI MUSLIM MINORITY, THAT HE PROMISES TO LIFT THE 50 MILLION CHINESE WHO ARE IN POVERTY, UP TO A MIDDLE CLASS LEVEL OF INCOME BY 2030.  STATE, PROVINCIAL AND CITY GOVERNMENTS ARE BEING MOBILIZED TO INVEST IN THE POORER WESTERN REGION OF THE COUNTRY, IN ORDER TO HELP THEM SHARE IN THE PROSPERITY OF THE EASTERN REGION THAT WAS PRIVILEGED TO KICKSTART THE ECONOMIC REFORMS OF DENG.  THIS IS CLASSIC CHINESE ECONOMICS AT ITS PRAGMATIC BEST.  THIS IS THE FOURTH RETURN OF DENG.

This is an example of how China can deploy her talents toward nation-building, instead of chasing after the latest fashion in Western economic theory.

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Post time 2016-7-23 16:59:51 |Display all floors
The structural reform is to allow China to move away from low-skilled based industry to technological based and service based industries. China is now suffering from the effects of export orientated economy and therefore the currency rate of the yuan is critical. To move away from this situation, structural reform is needed or else China is always stuck with the dependency on currency rate for the economy to do well. Currency rate will always have its importance but by moving away from export dependent industries will lesson the that.

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Post time 2016-7-24 01:05:43 |Display all floors
This post was edited by abramicus at 2016-7-24 01:54
huaqiao Post time: 2016-7-23 16:59
The structural reform is to allow China to move away from low-skilled based industry to technologica ...

Thank you for sharing your perspective, which I agree is desirable to achieve.  The problem of "structural reform" is this.  Nobody can define it, not even its proponents.  And what it purports to achieve in name, it actually opposes or destroys in practice.

Structural reform is touted by its proponents as the answer to just about every legitimate question tossed out there.  This is the real danger of Perestroika, aka Structural Reform.  As applied to the now defunct USSR, structural reform was defined by "shock therapy" of shutting down "unprofitable" state-owned enterprises, resulting in massive disruption of production, distribution and consumption, and eventual economic collapse, which in turn forced the collapse of the government, indeed of the constitution of the country, causing it to be dismembered, as it has been to this day.  This, my friend, is how "structural reform" is being implemented in China, but first, China, different from the old USSR, is a major exporting country, and therefore, its exports must be shut down in the name of "helping" Chinese make more refined products that earn better profit margins.  That is the fig leaf of ugly Perestroika infiltrating Chinese monetary and economic planning.

The method by which "structural reform" or "Perestroika with Chinese characteristics" is being implemented is through the OVERVALUATION OF THE YUAN, financed, ridiculously, with China's massive erstwhile 3.9 trillion dollars of foreign currency reserves, now reduced to 3.2 trillion, not to to count the losses in annual export revenues over the past 3 years, that could be worth another 0.5 trillion dollars at the least.  The moment the PBOC runs out of foreign exchange to buy back its yuans, the yuan exchange rate will not only fall back to its market equilibrium price of around 7.00 to 7.50, but speculators could now further aggravate the plunge of the Yuan, to bring it down to 8.50 or 9.00, which is what I am trying to prevent.

The nominal official foreign currency reserves of 3.2 trillion dollars is actually misleading.  In the past 2 years, China has absorbed possibly 2 trillion dollars of extra foreign-currency-denominated debts, reducing its true equity to only 1.2 trillion dollars.  That is not a lot for a country as large as China.

Back to the topic of structural reform.  If the goal is to make Chinese workers earn more money by helping them produce higher end products, should not the PBOC help this happen by making Chinese products cheaper than their foreign counterparts being sold in China by ALLOWING THE YUAN TO DEVALUE TO ITS REAL MARKET RATE, WHICH AT PRESENT SHOULD BE AROUND 7.00?  This will make Chinese products more competitive in Yuans against Japanese products, which while costing the same in Japan, would now cost more in China.  Where is the proof that this is the intent of "STRUCTURAL REFORM"?  None.

The opposite is the case.  The champions of STRUCTURAL REFORM are the same guys FORCING THE YUAN EXCHANGE RATE UP BY BUYING YUANS WITH HARD EARNED DOLLARS, favoring imports of foreign high-end products at the expense of Chinese manufacturers who have to shave costs to lower their prices to compete against Japanese products, and shaving costs does not make products more high-tech or the production process more efficient.  Shaving costs often mean fewer jobs, less pay, lower efficiency, and less R&D.  If structural reform is sincere about helping Chinese workers achieve a better standard of living, or Xiao Kang, it should have done the opposite of what the PBOC is doing - it should have allowed the Yuan to fall to market equilibrium rates, it should have saved all the lost 1 trillion dollars to upgrade its facilities and hire more new graduates into high tech jobs, it should have used part of that 1 trillion dollars to create more jobs in its defense industries as ALL HI-TECH COUNTRIES HAVE BEEN DOING, and be thus more capable of defending its islands, instead of letting China be insulted and invaded point blank by little countries near and big countries from afar, with no ability to simply rid itself of such inroads of territorial kleptomania now invigorating the neo-colonial empires of the 21st century.

As said, China does not need to borrow a foreign high-faluting term from the IMF or the Economist, called "STRUCTURAL REFORM" to make China a more prosperous country.  If you cannot undertand what you are using, you could very well hurt yourself using it.  And this is what is happening.  China is hurting itself very badly by using its hard-earned dollars not to create more jobs, make more high-tech products which often comes from defense industries as pioneers, but simply to buy back its own yuans, to keep up the appearance, and fallacy, that a strong yuan equates to a stable economy.  FYI, the reason STRUCTURAL REFORM has the word "structure" built into it, is because it actually touches on two aspects of China's sovereignty - monetary policy and fiscal policy - not about the real economy.  The third aspect of China's sovereignty, its territorial integrity is already under severe challenge outside, but the real challeng to China's sovereignty internally, comes in the form of STRUCTURAL REFORM, to overvalue the Yuan until China ceases to be a net-producing and therefore net-exporting country, and to tax the Chinese people so much that all surplus production goes to serving foreign-currency-denominated debts, called CAPITAL ACCOUNTS SURPLUS.

Now that you have seen the real cat come out of the bag, you know that it is a chameleon cat that can look white or black as the situation demands, but if you look closer, it is not really a cat that catches mice.  It is actually a RAT THAT LOOKS LIKE A CAT.



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Post time 2016-7-24 16:06:11 |Display all floors
abramicus Post time: 2016-7-24 01:05
Thank you for sharing your perspective, which I agree is desirable to achieve.  The problem of "str ...

Thanks for your input.

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Post time 2016-7-25 06:44:32 |Display all floors
This post was edited by abramicus at 2016-7-25 09:12

DENG WOULD HAVE SAID, "BLACK CAT OR WHITE CAT TO CATCH MICE -- NOT A RACCOON @#$%!"



At heart, "structural reform" is constitutional, legal, regulatory reform to make it easier for multinational companies to extract what is cheap from one country and sell at a profit to another country, without sharing the profit with the country selling or buying what it trades.  For example, current complaint of the EU against China on its export quotas and tariffs on rare earth metals under WTO rules, is a form of structural reform, that the EU claims unfairly disadvantaged its companies against Chinese competitors, even when the total value of what China gets in return for its global export of rare earth metals annually is a measly $1.3 billion dollars.  At such firesale prices, why on earth is China mining all this rare earths for, when the mining process is labor intensive, and environmentally destructive?  So, why is China participating in this charade that only makes Chinese coolies work harder for less money, extracting rare earth metals that the West can just as easily do, but refuse to do so because its real cost is higher than what China is getting paid?

But "structural reform" only starts there.  There is no end in sight to what can be dragged into the folder of "structural reform" as defined by the term's creators, which are the EU, IMF and the Economist, none of which has defined what they mean by "structural reform" in plain English or Chinese.  Never mind that China is disallowed access to high-tech products on the basis of their "defense" nature.  Since "structural reform" requires constitutional, legal and regulatory reform, which applies to monetary policy (as in the upvaluation of the yuan exchange rate and fixing it above the market rate) and fiscal policy (as in the matter of export taxes on rare earth metals), it is a BLANK CHECK to political and constitutional reform, without anybody knowing what "structural reform" really is.

You know how to wreck any set of equations, such as that used to model national economies, of which Wharton boasts its claim to fame?  Introduce an undefined variable in every equation, called SR (for "structural reform"), and then create a complex tree of SR(i, j, k, l, m . . . z), with each index referring to one aspect of the economic-social-political construct of the country.  Just place the variables in every parethesis, in every equation, without defining them except as "structural reform variables".  Then, as in a controlled demolition of a skyscraper, you force one of the variables to assume a certain value, such as for example, the Yuan exchange rate.  Empirically, it is evident this was the chosen variable as it affects the most parts of the Chinese economy, society and political stability.  Just tell your buddies at the Chinese leadership that the Yuan exchange rate must remain stable at current rates, knowing that "current rates" mean 6.20 yuan/dollar, because "exchange rate stability and transparency are necessary pillars of 'structural reform'", and they will set it as you say.  All of a sudden, Chinese products become overpriced in dollars abroad and in yuans at home, Chinese manufacturing begins to pile up inventory, Chinese manufacturers begin to be unable to service their debts, Chinese banks begin to feel the risk of bad debt defaults, Chinese SOES that create the primary industrial products for use by its secondary industries selling finished goods begin to become unprofitable.  But don't panic, things will get better, they say.  Yeah, Greece has been undergoing structural reform for so many rounds, you gotta believe its economy is now much, much better.  STRUCTURAL REFORM is POLITICAL REFORM, and one aimed at destroying the sovereignty of its victims, territorially, monetarily, fiscally, and commercially, in a systematic, orderly and comprehensive fashion, similar to CONTROLLED DEMOLITION of a skyscraper.  Sure, China needs to constantly improve its economy, which is what Deng advocated 45 years ago, but it is based on the welfare of China's poor, China's under-educated, classes, to raise them up from poverty, not based on making profitable companies make more money by selling out their countrymen to foreign powers.  

The Western powers know the SOES are the defenders of the livelihood of hundreds of millions of the under-educated who can make ends meet by a blend of company benefits and low skilled wages.  In the name of making them earn more money in hi-tech jobs, they intend to wipe out the SOES that employ them in low tech jobs, knowing that they will not be able to qualify for the hi-tech jobs in most cases.  What are they trying to create?  Labor unrest, social upheaval, and regime change.  This is also "STRUCTURAL REFORM" which is what PERESTROIKA did to the USSR.  And did it affect its sovereignty at all?  Look at the number of pieces it turned into, thanks to Gorby the Chef.

The main reason China's economy is healing up is because the Yuan exchange rate could not be propped up by the PBOC any longer.  It had burnt through a trillion dollars, and allowed the country to become indebted to other countries by two trillion dollars, in two years.  And when the Yuan exchange rate dropped to 6.50, things began to turn around.  It is now at 6.68, "thanks" to the PBOC's efforts to prop it back up from 6.70, and so the economy is heading back to the ICU in another month or two, and China will be fifty to a hundred billion dollars poorer for doing it.

"Structural Reform?"  What is STRUCTURAL REFORM?  Nobody knows.  If its proponents clothe themselves in the cloak of STRUCTURAL REFORM, then we can say, "Gee whiz, these fellows have no clothes" even when they parade proudly among the big wigs of the world like royalty.

NOW, IS THIS THE "CAT" OF STRUCTURAL REFORM?



Source:  Wikimedia


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