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Battening Down the Hatches
Stocks Fall as China Attempts a Rebalance
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  • Jacksonian_Libertarian

    The problems for China are different than those of countries with much freer markets like America. Much of China’s economy is owned by the government and doesn’t receive the “Feedback of Competition” that forces continuous improvements in Quality, Service, and Price in free markets. China’s manipulation of its currency has reduced the all important competition that China’s exporters have had to face and weakened them accordingly. Also, China’s success was due to the foreign investment that built new state of the art factories (now dated) in China to take advantage of China’s cheap labor, but the labor is no longer cheap, and the risks of investing in Communist China which is known for nationalizing (stealing) businesses that it wants is very high. In addition China’s belligerence on all its borders is likely to result in an embargo that would destroy, probably for decades, China’s foreign trade. It is that foreign trade built by foreign investors that is responsible for all of China’s success, without it China will fall back into abject poverty.
    At the moment foreign investors measuring the risks and rewards, look at America as by far the best place to invest. America has a booming energy sector that will continue for years (making energy costs the best in the world), a highly educated work force with a strong work ethic that is seriously underemployed (labor is cheap and plentiful), arguably the finest infrastructure in the world with roads, railroads, ports, airports, electrical grid, communications, education (no worry about getting the resources to make them, or shipping your products to market), as well as a “written in stone” rule of law protecting personal property and so foreign investors (no bribes needed and investments are protected from being stolen).

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