The Wise: Helmut Schmidt, ex. Chancellor of West Germany from 1974 to 1982. The talk below was on 2008.05.20. When I get time I’ll try to translate it into English.
The complete interview can be found here.
If only Angela Merkel were as half as wise as Helmut Schmidt is, Germany would have much less problems now. Yes the economics of Germany has been rising since last several years, but in my opinion, that’s more of a cyclic rise, and it’s the entrepreneurs in Germany who contributed most to the recent German economic rise. Angela Merkel talked a lot about human rights (by western standards) whenever she visited China, as if she is the center judge of the world and as if she is the only one who knows about principles. Ha! Haha! How I want to tell her “Mind your own business please and reduce the domestic taxes in Germany….” every time when she was selling off ideology in China.
Helmut Schmidt articulates amazingly well. Knowledgeable and sharp. I like him and his stylish way of burning cigarettes!
The Silly: Frank Pöpsel, chief editor of the German economics magazine Focus Money.
In the latest issue of “Focus Money”, there was an article titled “Die China-Blase (The China bubble)” under the name of Frank Pöpsel.
Again and again, Pöpsel reminds people that China is a communism country. The truth is, most people in sophisticated cities such as Shanghai and Hangzhou do not make slightest fuss about any -ms any more and less-educated people in less-sophisticated area have very little idea about any -ms whatsoever. Poor people thrive to get out of poverty and rich people thrive to create more assets. People work as aggressively as they can and spend like crazy. Like the proven talent Jim Rogers said, the best capitalists are in China. In China, people do not worry about how many vacations they would have, but worry about how many days they are allowed to work. I guess Pöpsel does not understand this mentality.
He asked “Hatte Lenin also doch Recht?”. Well, Lenin has been since long not hip in China. And, our current politics have very little to do with Lenin’s imagination about the world. I see the root of Pöpsel’s problem (when he talks about China) is, he does not understand Chinese people’s mentality well enough or he does not want to understand. In Shanghai, even many Taxi drivers and cashiers of supermarkets trade stocks and futures often. Whether they trade well is another thing. The point is, average people in China have amazing willingness to be capitalists. With such kind of huge capitalism momentum, it is hard to stop the Chinese economic from rolling ahead.
Then he said about efficiency. First of all, I don’t know where his data comes. In the latter part of this article, he said the official inflation rate is 5%. That’s a wrong number. The latest official CPI is 8.5%. This mistake makes me doubt about the other numbers in his article. The data-correctness aside, China knows her problems and measurements are being carried out. Every country has its economic problems, China has many too. As long as China is willing to deal with them, bad things can be fixed. We have had much harder times and much bigger problems. We have managed to keep the economics going and we will manage to get it going in the future, too. Normally, a country’s economic booming period is 30 – 50 years. Twenty years are gone for China, we will have at least 10 years of high increase rate ahead.
So Pöpsel was also talking about the “Liquiditätblase(excess liquidity)” and he believes China is the next Japan in 1990s. The good news is, before Pöpsel saw China’s excess liquidity, finance experts and top bankers in China had seen this problem already. And the Japanese bubble taught us a great lesson. Fact is, we have very conservative policies in the finance market. USA urged us to rapidly appreciate the value of our currency, but we are doing a fabulous job of soft-landing here. It’s very different from the situation of Japan in early 1990s. Japan was under USA’s military protection, if USA forced to rise the value of Yen, they had very few other choices back at that time. What’s more, our companies, especially blue chips and the big banks and insurance companies have excellent investment teams. They do have a clue about how to reinvest in their own companies and how to invest somewhere else. An example, the biggest Chinese insurance company China Life, bought a $300 million holding in Visa’s IPO, which brings immediate and long-term capital appreciation. In early 1990s, Japanese companies basically poured all their money into cyclic immobile markets and created chances of financial attacks. I can go on and on on this topic, if Pöpsel is going to pay me tuition, I would consider giving a lesson on the Chinese macro economics, fundamental analysis of the blue chip companies and the companies in the finance sector and the history of the 1990 Japanese bubble.
Pöpsel knows that production cost in China is no longer the lowest in the world, but he does not know that China realizes that too. I don’t think this would be an issue because:
- The domestic market is huge enough to support high increase of production, sales and profit.
- Our R&D is getting stronger too. High value-added productions are growing rapidly in China.
- Our currency, namely Ren Min Bi, is strong compared to USD. Our companies imports oil and other raw materials at a reasonable price thanks to the strong Ren Min Bi.
Finally Pöpsel said the China bubble will probably crash after the Olympic game, and he would not be suprised to see the price of oil and raw material fall significantly then. I think Jim Rogers will give such un-enlightened speculation a good laugh. If Pöpsel is willing to pay Jim a lot of tuition, he might consider giving Pöpsel a lesson on the Chinese fundamentals and commodities. 
