Monday, June 20, 2011

Place your bets, ladies and gentlemen!

In the midst of what looks like an investment scandal involving a Canadian forestry company active in China, various business writers and commenters are arguing about whether China is now a good place to invest.  There are plenty of China-boosters saying that its economy will go up, up, up, presumably forever; and then there is this writer, who thinks there are good reasons to steer clear, for instance:
Lack of transparency: China is a dictatorship where analysts find it difficult to perform due diligence on prospective investments – just ask any analyst who has tried to research a Chinese company. What’s more, official Chinese statistics are notoriously unreliable, leading some observers, such as Stratfor, a private intelligence consultant, to label the country’s economy an unsustainable Ponzi scheme.
Few China fans address this charge, which should have a lot of force.  Think of all the countries that are not dictatorships and which do have traditions of transparency that had crashes in 2008-9 because large parts of the economy were, despite the advantages of past good governance, Ponzi schemes.

Do you really think that the most powerful people in China, many of whom were raised under Maoism, play fairer than the Icelanders?


Image:  The great teacher.

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