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(Business Insider)   Chinese Kleptocracy   (businessinsider.com) divider line 47
    More: Scary, PRC, Chinese Kleptocracy, Chinese, currency crisis, capital control, inflation rate, Bo Xilai, Bronte Capital  
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5513 clicks; posted to Business » on 11 Jun 2012 at 1:07 PM (2 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-06-11 11:51:09 AM
At least the trains run on time.
 
2012-06-11 12:48:11 PM
From wiki's definition: (link in tfa)
Kleptocracy... is a form of political and government corruption where the government exists to increase the personal wealth and political power of its officials and the ruling class at the expense of the wider population.

Sounds like a lot of governments could be covered by this.
 
2012-06-11 01:25:53 PM
wow, that was pretty fascinating. short on citation, but big on concept. i need to read the few links he had in there before i start siding on any of the ideas there though.

/interesting
 
2012-06-11 02:24:37 PM
Sounds like somebody just lost a shiat ton of money...
 
2012-06-11 02:25:36 PM
This is why the PRC will never be a world power, they are always behind the times. We, here in the USA, decriminalized theft by the ruling class many years ago.
 
2012-06-11 02:33:04 PM
I thought this was about Axl's jewelry getting stolen.
 
2012-06-11 02:53:01 PM
Welcome to just about every municipality in the US.

Step 1: Real Estate bubble! Increase assessments, raise taxes!
Step 2: Real Estate Bubble pops! Residents sue to lower their assessments and win. Raise tax rate!
Step 3: Profit.
 
2012-06-11 03:04:56 PM

The Flexecutioner: wow, that was pretty fascinating. short on citation, but big on concept. i need to read the few links he had in there before i start siding on any of the ideas there though.

/interesting


Article sounds about right to me.

My wife is from China and that has afforded me at least some shallow level of insight. However, I have directly experienced the "selling kit" into China scenario. We got our asking rate, but the intermediary ass-raped the end (government) customer. Supposedly they were to provide some on-site, value-added services, but in reality were useless.
 
2012-06-11 04:13:47 PM
Yadda Yadda...

Unless the Chinese can get the inflation rate up expect a revolution.


FAIL.
 
2012-06-11 04:18:52 PM
ecx.images-amazon.com

A version of the same idea, though centers on the Confucian-Industrialist attitude, instead of the SOE aspect. The culture of cutting corners and cheating is rampant, and the Chinese industrialists have no sense of the long term. They'd screw their customers out of a dime today without any fear of losing business over it tomorrow. It's "do anything you can get away with, and as soon as you're found out, keep doing it as if nothing happened"

Poorly Made In China
 
2012-06-11 04:20:52 PM
I waited years for this GNR album to come out ...
 
vpb [TotalFark]
2012-06-11 04:23:18 PM
It is still an industrializing third world country, so it's not really that surprising.
 
2012-06-11 04:43:39 PM

RatOmeter: The Flexecutioner: wow, that was pretty fascinating. short on citation, but big on concept. i need to read the few links he had in there before i start siding on any of the ideas there though.

/interesting

Article sounds about right to me.

My wife is from China and that has afforded me at least some shallow level of insight. However, I have directly experienced the "selling kit" into China scenario. We got our asking rate, but the intermediary ass-raped the end (government) customer. Supposedly they were to provide some on-site, value-added services, but in reality were useless.


the impact of the one-son policy caught my eye. i hadnt thought about it in a long time. i remember my dad saying something similar in the late 80s/early 90s when i was in high school and first learned of it. of course i was too young to appreciate such stuff but im old enough now, haha.
 
2012-06-11 05:16:24 PM

WTF Indeed: At least the trains run get cleared off the tracks after a crash on time.


FTFY
 
2012-06-11 06:08:26 PM
And we're not? Pffftt... non-story.
 
2012-06-11 06:33:10 PM

StopLurkListen: [ecx.images-amazon.com image 300x300]

A version of the same idea, though centers on the Confucian-Industrialist attitude, instead of the SOE aspect. The culture of cutting corners and cheating is rampant, and the Chinese industrialists have no sense of the long term. They'd screw their customers out of a dime today without any fear of losing business over it tomorrow. It's "do anything you can get away with, and as soon as you're found out, keep doing it as if nothing happened"

Poorly Made In China


:::sigh::: so much THIS.

When I was helping develop a car radio, we had the processes and factories certified by the customer...decent quality, everything set.... then we started hitting an 80%+ failure rate. Turned out some factory manager farmed out the wave soldering to another outfit to save a few pennies per motherboard; they used real shoddy materials (and you can't skimp when you are meeting environmental guidelines these days) and processes. We had to send people over there to get it straightened out and watch over them full time. WTF? Sold out over a few pennies. They had no concept of "certification".

Not that my experience in Indian offshoring work is any better. Dealt several times with outfits that sent decent technical guys, then foisted crap code monkeys that couldn't code a for loop without getting into trouble, let alone do anything resembling "engineering" - with crap facilities that often took several hours just to back up a couple of megabytes of source code, thanks to sharing a single ISDN line among 10 companies and a thousand employees.

It's bigger than China - it's an East Asian issue.
 
2012-06-11 07:07:53 PM
images.tribe.net

They have some other issues, too.
 
2012-06-11 07:46:46 PM
Interesting but kinda sketchy on the details and sources. Expand it into a book, with end notes, and I'll read it if it's decently written.
 
2012-06-11 07:52:30 PM

StopLurkListen: [ecx.images-amazon.com image 300x300]

A version of the same idea, though centers on the Confucian-Industrialist attitude, instead of the SOE aspect. The culture of cutting corners and cheating is rampant, and the Chinese industrialists have no sense of the long term. They'd screw their customers out of a dime today without any fear of losing business over it tomorrow. It's "do anything you can get away with, and as soon as you're found out, keep doing it as if nothing happened"

Poorly Made In China


Did you read the same book that I did?

I'd agree that the author provides many examples of howit appears to the Westerner that the Chinese industrialists have no sense of the long term. But as the final chapter of the book shows, they do - it's just their way of doing things is much more oblique or that they value things that Westerners do not.

Examples: quickly growing a factory by any means necessary, including screwing over long-term prospects - because it's a great way to make a land investment worth a multiple of what you paid. Or likewise making purely short-term decisions to get quick growth and ingratiate yourself with the Party (which provides other benefits).

Perhaps most interesting part of the book was the speculation that China's population could be a fraction of the official estimate (they don't have a census), having been inflated due to other cultural quirks, and how Western business is going to be disappointed that their deal with the PRC devil doesn't work out so well.
 
2012-06-11 08:26:30 PM

TsarTom: Sounds like a lot of governments could be covered by this.


The conservative South Korean government is a fine recent example of kleptocracy. Same goes to Japan too. Wait. Pretty much most governments in Asia have kleptocracy.
 
2012-06-11 09:06:24 PM
The SOEs are the center of the Chinese kleptocracy. If you manage your way up the Communist Party of China and you play your politics really well may wind up senior in some State Owned Enterprise. This is your opportunity to loot on a scale unprecedented in human history.

If you want to know why thousands of people died at Tiananmen Square, now you know why.

BTW, the symbol of those protests might remind you of someone else.

upload.wikimedia.org

She was called the Goddess of Democracy. She was toppled and destroyed by a People's Liberation Army tank.
 
2012-06-11 09:15:56 PM

Trolljegeren: [images.tribe.net image 640x426]

They have some other issues, too.


Don't just sit there taking pictures, whitey! Help me with these farking CORDS!

-ibetthejewsdidthis.jpg-
 
2012-06-11 10:10:43 PM
Ruled by a level 49 rogue...
 
2012-06-11 10:56:04 PM

LesserEvil: StopLurkListen: [ecx.images-amazon.com image 300x300]

A version of the same idea, though centers on the Confucian-Industrialist attitude, instead of the SOE aspect. The culture of cutting corners and cheating is rampant, and the Chinese industrialists have no sense of the long term. They'd screw their customers out of a dime today without any fear of losing business over it tomorrow. It's "do anything you can get away with, and as soon as you're found out, keep doing it as if nothing happened"

Poorly Made In China

:::sigh::: so much THIS.

When I was helping develop a car radio, we had the processes and factories certified by the customer...decent quality, everything set.... then we started hitting an 80%+ failure rate. Turned out some factory manager farmed out the wave soldering to another outfit to save a few pennies per motherboard; they used real shoddy materials (and you can't skimp when you are meeting environmental guidelines these days) and processes. We had to send people over there to get it straightened out and watch over them full time. WTF? Sold out over a few pennies. They had no concept of "certification".

Not that my experience in Indian offshoring work is any better. Dealt several times with outfits that sent decent technical guys, then foisted crap code monkeys that couldn't code a for loop without getting into trouble, let alone do anything resembling "engineering" - with crap facilities that often took several hours just to back up a couple of megabytes of source code, thanks to sharing a single ISDN line among 10 companies and a thousand employees.

It's bigger than China - it's an East Asian issue.


That book, while very entertaining, focuses mainly on the years directly after the opening up of China, when it truly was the Wild East. Things like that still exist and will continue to exist for a while, but a the same time China changes, and changes faster than many in the West can comprehend. Don't make the assumption that everything made in China is crap and every Chinese company is badly managed; there is a ton of upcoming,well-managed companies out there, there are crooks, and there is a lot of different grey inbetween where you can have good products made as long you supervise and control properly.

In my experience of 5 years in China advising companies on doing business here, the majority of horror stories you hear are caused first and foremost by a lack of cultural insight, preparation, supervision and control on the side of the Western buyers/companies. Companies come here thinking they can get a free lunch and have cheap products made easily. There is no free lunch.

If you want to have good quality products made in China for an affordable price, you have to realize you are still dealing with a fastly developing country, with a largely uneducated workforce, with many people who lack business principles as we know them, with a lot people who want to piece of the pie and get rich quick, and all of that in every step in the supply chain of your product. It means you have to invest in people who are experienced in doing business here to give advice, in good China-experienced lawyers, in constant quality control either by yourself or a third party. That is going to increase your prices, but if you don't do that, you still risk failure. Again, there is no free lunch. As I said, it is changing and it no longer as bad as in the days "Poorly made in China" talks about, but if you are not careful, prepared and dilligent while doing business in China, the risk of failure is high.

As for the article, I don't think the Chinese government is anymore kleptocratic than in the most other countries, same story, different system. Corruption in Russia for example is on a much grander scale than here. Corruption in China is a problem especially in the middle ranks of the province, but I doubt that the CCCP leaders all of have billions of dollars tucked away in tax-havens; it's all relatively small-scale. The main concern of the CCCP is to remain in power, and most of the top leadership are actually technocratic nationalist idealists, who believe in what they are doing and who believe rule by the party is the only way to keep China stable and growing. I am not saying they are right, but to paint them of as nothing but thieves like in any random banana republic is an extremely simplistic view of a very complex system and situation.
 
2012-06-11 11:03:01 PM
So when the Chinese do it it's called kleptocracy but when we do it it's called free market capitalism?
 
2012-06-11 11:19:28 PM

bikkurikun: If you want to have good quality products made in China for an affordable price, you have to realize you are still dealing with a fastly developing country, with a largely uneducated workforce, with many people who lack business principles as we know them, with a lot people who want to piece of the pie and get rich quick, and all of that in every step in the supply chain of your product. It means you have to invest in people who are experienced in doing business here to give advice, in good China-experienced lawyers, in constant quality control either by yourself or a third party. That is going to increase your prices, but if you don't do that, you still risk failure. Again, there is no free lunch. As I said, it is changing and it no longer as bad as in the days "Poorly made in China" talks about, but if you are not careful, prepared and dilligent while doing business in China, the risk of failure is high.


And they had pretty much done that. The problem stemmed from a greedy manager who took advantage of not having somebody standing over him constantly. They had very good QA, at several points of the distribution chain, and most of the people and factories involved were fairly well vetted. We just suddenly started having major quality issues with the radios. Thankfully, it was caught while we were still in limited pre-production runs. We also shortly instituted some pretty good QA on site (thanks to vehicle and module simulation software I wrote)

It's just that the idiot had the mindset that he could throw out the process and vendor that was certified (and everything that made it certified) to shave - literally - pennies from the per-board cost and pocket the difference. In return the boards shipped with all sorts of intermittent problems because of faulty solders. Our "obvious" failure rate was ridiculous, and we didn't want to trust the few radios that seemed to work (particularly with automotive environmental extremes). In short, the guy shipped 100% USELESS PRODUCT for skimming a fraction of a percent of the cost of the product.

If you have to babysit them at every point in production, doesn't that point to a problem with cultural attitudes?

My experience is also why I have a bit of sympathy for Microsoft Xbox360's RRoD issue. I'm sure a lot of the problem arises from a poor soldering process (as evidenced by the usual fix - a reballing or reflow of the chips on the motherboard). I can't help but think somebody at Foxconn is farming out some of these components, but being a bit smarter than our idiot in at least getting them to pass QA.
 
2012-06-11 11:43:06 PM

Arthen: So when the Chinese do it it's called kleptocracy but when we do it it's called free market capitalism trickle-down economics?


FTFY
 
2012-06-12 12:34:25 AM
Is it really theft when Bill Clinton gave it all to them?
 
2012-06-12 01:20:43 AM

LesserEvil: If you have to babysit them at every point in production, doesn't that point to a problem with cultural attitudes?


There's that and (I'm not saying that this is your case) a lot of companies outsource what they don't do well. Somehow doing something 5000 miles away in a 12.5 hours off by people that aren't from here and understand what you want will magically start to work.

The rule should be "can you do this one thing really well and repeatably but it is costing you a lot of money" then you can start to think about outsourcing it. Until then you're way better off keeping it inhouse till it gets down to a system.
 
2012-06-12 04:21:59 AM

Nemo's Brother: Is it really theft when Bill Clinton

and George HW Bush gave it all to them?

FTFY; Bush I was always bending over (and not always backwards) to give China
"Most Favoured Nation" trade status so the GOP's business backers could take
advantage of a more lax regulatory environment. Clinton only continued a GOP
trend.
 
2012-06-12 05:47:44 AM

neversubmit: This is why the PRC will never be a world power, they are always behind the times. We, here in the USA, decriminalized theft by the ruling class many years ago.


They are already a world power, second only to the US and moving up fast.
 
2012-06-12 06:38:50 AM
FTA: "When you have copious funds at a negative cost a lot of investments that look stupid under some circumstances suddenly look sensible."

This should be tattooed, backwards, on the inside of Paul Krugman's eyelids.
 
2012-06-12 06:55:14 AM
Kleptocracy? Eh, mebbe. Though I'd say more at the provincial level with land grabbing, not pretending that interest rates and inflation constitute 'theft'.

China has huge underlying economic growth from moving peasants into the modern economy? Modernization isn't easy.

The one-child policy drives massive savings rates? Actually it's more of a cultural phenomenon than a result of the one-child policy.

Low and middle income Chinese have very limited savings options? Low-Middle income ANYWHERE has limited savings options, China or elsewhere.

Bank deposits and life insurance as a savings mechanism in China? Wait... what?

The Chinese property market as a savings mechanism? Property is an investment, who knew.

Negative returns on bank deposits and the Chinese kleptocracy? When inflation outpaces interest rates, yes that happens.

The cost of funds in China and the willingness to hold foreign bonds? One goes with the 'safe' return, and that would be T-bills.

Monetary threats to the Chinese establishment? Mild inflation is preferred over all other options.


The whole thing is about as well thought out as pissing into the wind.
 
2012-06-12 07:43:34 AM
Obvious tag in a labor camp?
 
2012-06-12 07:51:58 AM
Chinese economic growth is a fallacy. Their construction boom is just creating ghost towns with no occupying residents or business. New malls are empty. Millions of single men are unemployed with a job or family prospects. This is unsustainable. It is going to collapse. Harshly. It will either mean another revolution or something worse.
 
2012-06-12 08:14:20 AM

TsarTom: From wiki's definition: (link in tfa)
Kleptocracy... is a form of political and government corruption where the government exists to increase the personal wealth and political power of its officials and the ruling class at the expense of the wider population.

Sounds like a lot of governments could be covered by this.


Has any government in the history of humanity not been accused of it?
 
2012-06-12 08:50:28 AM

Millennium: TsarTom: From wiki's definition: (link in tfa)
Kleptocracy... is a form of political and government corruption where the government exists to increase the personal wealth and political power of its officials and the ruling class at the expense of the wider population.

Sounds like a lot of governments could be covered by this.

Has any government in the history of humanity not been accused of it?


Has any government in the history of humanity not done it?
 
2012-06-12 09:04:52 AM

DjangoStonereaver: Nemo's Brother: Is it really theft when Bill Clinton and George HW Bush gave it all to them?

FTFY; Bush I was always bending over (and not always backwards) to give China
"Most Favoured Nation" trade status so the GOP's business backers could take
advantage of a more lax regulatory environment. Clinton only continued a GOP
trend.


Both were very, very wrong.
 
2012-06-12 09:30:17 AM

Cinaed: The whole thing is about as well thought out as pissing into the wind.


The one thing he's got right is that due to very high personal savings rates (which is something that's been happening since long before the one-child policy) there's massive personal capital in China, and there's not a whole lot of outlets for it.

As he pointed out, Chinese banks pay shiatty interest rates, their stock market is a crapshoot (and the average Chinese citizen-investor makes the "dumb money" in the US look like Warren Buffett), and there are all kinds of controls to prevent people from moving their yuan out of the country. None of this is exactly groundbreaking.

Those factors are the reason there's been such a massive housing bubble in China - it's one of the few realistic outlets for investing. But instead of tinfoil-hattery about a central gov't kleptocracy, the real problem for the Chinese is that sooner or later this bubble is going to pop. And when it does, our housing bubble is going to seem like child's play. Mortgages are almost unheard of there, so most of those speculative properties were bought 100% outright by someone's cold hard cash.

So when the prices crash, it's not going to be profiteering megabanks writing off the loss, but millions of ordinary citizens watching their life savings evaporate. For a government that values stability above all else, this is a Very Bad Thing.
 
2012-06-12 10:57:18 AM

schief2: Cinaed: The whole thing is about as well thought out as pissing into the wind.

The one thing he's got right is that due to very high personal savings rates (which is something that's been happening since long before the one-child policy) there's massive personal capital in China, and there's not a whole lot of outlets for it.

As he pointed out, Chinese banks pay shiatty interest rates, their stock market is a crapshoot (and the average Chinese citizen-investor makes the "dumb money" in the US look like Warren Buffett), and there are all kinds of controls to prevent people from moving their yuan out of the country. None of this is exactly groundbreaking.

Those factors are the reason there's been such a massive housing bubble in China - it's one of the few realistic outlets for investing. But instead of tinfoil-hattery about a central gov't kleptocracy, the real problem for the Chinese is that sooner or later this bubble is going to pop. And when it does, our housing bubble is going to seem like child's play. Mortgages are almost unheard of there, so most of those speculative properties were bought 100% outright by someone's cold hard cash.

So when the prices crash, it's not going to be profiteering megabanks writing off the loss, but millions of ordinary citizens watching their life savings evaporate. For a government that values stability above all else, this is a Very Bad Thing.


Yep.

The PRC is a financial house of cards that has managed to keep growing it's way out of trouble, but they can't do that forever.
 
2012-06-12 11:04:52 AM

bikkurikun: foremost by a lack of cultural insight


Such as not understanding that the government is a criminal enterprise? I understand that people who deal with the Mafia often have similar problems due to their lack of insight into that culture.

The first step to fixing things is to stop apologizing for them.
 
2012-06-12 11:08:00 AM

CheatCommando: bikkurikun: foremost by a lack of cultural insight

Such as not understanding that the government is a criminal enterprise? I understand that people who deal with the Mafia often have similar problems due to their lack of insight into that culture.

The first step to fixing things is to stop apologizing for them.


It's fascinating to me that people want to blame everyone but a corrupt government when, I believe, virtually every corporation in PRC has a party member on its board. If the state has that much intrusion into the mafia, then the state is the mafia.
 
2012-06-12 12:09:00 PM

TheShavingofOccam123: If the state has that much intrusion into the mafia, then the state is the mafia.


Precisely.
 
2012-06-12 01:06:03 PM
Obviously China must be destroyed. Or at least divided into three parts.

(I'm really taking about the Chinese government and its ruling "Communist" Party; I have nothing against the exploited broad masses of the Chinese people, even if there are too damn many of them.)
 
2012-06-12 01:49:44 PM

LesserEvil:

It's just that the idiot had the mindset that he could throw out the process and vendor that was certified (and everything that made it certified) to shave - literally - pennies from the per-board cost and pocket the difference. In return the boards shipped with all sorts of intermittent problems because of faulty solders. Our "obvious" failure rate was ridiculous, and we didn't want to trust the few radios that seemed to work (particularly with automotive environmental extremes). In short, the guy shipped 100 ...


RoHS compliant parts, especially when mixed with non-RoHS parts, can really throw a wrench in your fab processes. We've still got old designs where a manufacturer might switch us to a RoHS part with almost no warning... we're primed to watch out for that now and carefully examine and enviro-test the first board to come off the line after a part substitution. Regardless of RoHS, we still have occasional reflow problems with BGAs.
 
2012-06-12 03:02:18 PM

RatOmeter: LesserEvil:

It's just that the idiot had the mindset that he could throw out the process and vendor that was certified (and everything that made it certified) to shave - literally - pennies from the per-board cost and pocket the difference. In return the boards shipped with all sorts of intermittent problems because of faulty solders. Our "obvious" failure rate was ridiculous, and we didn't want to trust the few radios that seemed to work (particularly with automotive environmental extremes). In short, the guy shipped 100 ...

RoHS compliant parts, especially when mixed with non-RoHS parts, can really throw a wrench in your fab processes. We've still got old designs where a manufacturer might switch us to a RoHS part with almost no warning... we're primed to watch out for that now and carefully examine and enviro-test the first board to come off the line after a part substitution. Regardless of RoHS, we still have occasional reflow problems with BGAs.


RoHS's? I don't think they exist.
 
2012-06-13 08:20:15 PM

DjangoStonereaver: Nemo's Brother: Is it really theft when Bill Clinton and George HW Bush gave it all to them?

FTFY; Bush I was always bending over (and not always backwards) to give China
"Most Favoured Nation" trade status so the GOP's business backers could take
advantage of a more lax regulatory environment. Clinton only continued a GOP
trend.


That is NOT what MFN status is. The title of MFN reflects the nation against whom we levy the lowest aggregate net tariff rate.

And they're earning it. China has made itself the outlet for the worst aspects of our industrialization -- namely, pollution and boring work.
 
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