China has no surprises

Spend a lot of time in China or working with Chinese businessmen and you are not shocked or even surprised at the volatility combined with hesitant interventions by authorities leading (of course) to more volatility.  Expect more or the same.

First I want to express admiration for a summary broadcast on 7 January on Charlie Rose http://www.charlierose.com/  where Gillian Tett (FT) and Henry McVey (KKR) provided a fast paced and comprehensive (with some humor) overview of the current situation. They were diplomatically reserved in their views.  I am not.

Chinese decision makers do what they do very well – focus enormous scale with blunt and clear results. The management of the industrial (probably bubbled) boom was both brilliant and very successful, but that era ended quite some time ago.  The shifting of a billion people from a totalitarian industrial regime to a mixed market economy will have many speed bumps along the way.  These speed bumps are compounding.

The global economy faces further and complicit volatility simultaneously.  The Chinese are ill prepared to deal with extreme volatility across currencies, commodities, economic growth, and above all trade. The markets in Asia ex Japan and Hong Kong are thin, leading to further volatility.  The old guard in PRD still believes they should ‘do something’.  The good news is that the governor of the PBOC, Zhou, is brilliant and reliable.  Personally I believe that in the long term the macro environment will be favorable.  Short term investment is a crap shoot.

Listen to the shouting bloviators with a deaf ear --  these are long term phenomena working their way through the global economy.  Perhaps some intervention in the political arena can help, but I doubt it.