TRANSCRIPT: Chinese stocks plummet
with signs of a bear market, the National People's
Congress holds elections and six out of ten are
new politicians, and is inflation and poverty
the real issue in Tibet ...
Sinomania! Volume II Webisode 52, March 17, 2008
Chinese markets plummeted on March
17 and as we speak are falling an further. In
Hong Kong, the Hang Seng Index fell over
five percent to just over 21,000, a seven month
low. The Hang Seng China Enterprise Index,
charting Chinese Red Chips, sank over seven percent.
In Shanghai the Shanghai Composite fell
over three and half percent to 3,820 below 4,000
again and as we speak it is down to 3,722. The
CSI 300 fell almost five percent to close
at 3,965 March 17. Shanghai B shares were
down over six percent to just above 270; ShenZhen
Bs sank over five percent down to 542.69.
Although the first quarter is not
yet over, at this point the only one of my four
scenarios for the Shanghai market this year that
predicted markets at this level is the “flat”
scenario with Shanghai ending the year at less
than the 2007 peak.
XI AND LI ADVANCE
Hu Jintao was reelected President
of China for a second and final 5 year term. Hu
won by a wide margin but there were 3 votes against
him and 5 abstaining. Xi Jinping was elected
Vice President, a move widely interpreted as meaning
he is in line for the presidency in 2013. Wen
Jiabao was reelected as Premier or Prime Minister
and Li Keqiang as a Vice Premier and his
possible successor. As I’ve pointed out before,
however, Li could win out over Xi for the presidency
if Jiang Zemin’s power finally fades.
All told nearly sixty percent of
the Chinese cabinet was replaced with new officials.
Along with the creation of new central ministries
2008 marks a significant shake up in the Chinese
central power structure. The National People’s
Congress will adjourn by mid-week.
SPECIAL COMMENT
ON TIBET
There are 2.8 million people living
in Tibet, an autonomous area of China called Xizang
in Chinese or “Western Storehouse.” About 486,000
live in towns and cities most of them in urban
Lhasa, the capital of Tibet.
Last Friday in Lhasa a group of
mostly young Tibetan men in their twenties, according
to eyewitness reports, rioted by smashing up Chinese
owned shops and markets, overturning cars, and
burning piles of looted debris in the streets.
The fires spread to buildings including shops,
temples, and apartments. There are an unknown
number of dead. The city remains under a lockdown
with many residents – Tibetan and Chinese alike
– afraid to go outside and government orders to
stay put.
Tibet and Tibetans have been negotiating
their status vis-à-vis China and Chinese for centuries
and centuries and there is plenty of historical
evidence to support claims on both sides. Starting
around 1854 the British and about a century later
the Americans are also involved in the struggle
with competing strategic aims.
There is a real story here but it
is lost in the din of propaganda emanating from
Beijing on one side and Dharamsala, Nepal, on
the other. Foreign press, particularly the Anglo-American
mainstream media only reports on Tibet through
the prism of Tiananmen Square 1989.
Caught in the middle of course are
the Tibetans most of whom are not monks or members
of the party but very poor. Like native peoples
in many parts of the world from the Northern Plains
Native American counties, remnants of the Sioux
and Dakota nations, to Aborigines in Australia,
Tibetans are paupers in their own country.
I believe the real culprit behind
the trouble in Lhasa is inflation and poverty.
Food prices are up over 23% on average in China.
Prices for all goods and staples are rising dramatically
including fuel and cooking oil. Remember, it was
a surge in cooking oil prices that sent the Burma
monks over the edge last fall.
Reports are that inflation may run
as high as 300% in Tibet. The Chinese state statistical
bureau does not publish individual data on Tibet.
Ethnic Chinese dominate the day-to-day markets
and businesses of Lhasa and the urban areas of
the region. When we see shops looted, markets
ablaze, and overturned Audis set afire in the
streets, something other than “democracy” is at
issue.
Beijing will probably begin to tackle
inflation very seriously now and even risk a hard
landing in order to quell popular discontent.
That will mean a more restrictive monetary policy,
possible bear market in stocks, but greater state
investment, and a faster appreciation of the Yuan.
Some forecasters now see the Yuan reaching 6.6
to the dollar by year’s end.
