VIP Class Notes (Michael C. 28th March)

Session 2 discussion topics:

He’s a very successful trader in Hong Kong
> He’s a veteran / elite trader in Hong Kong

I still want to do portfolio management
> I would prefer the route of portfolio management as it’s my forte specialty)

Difficult for government to make decision to improve current economy status

I see 3 drivers:
> I see 3 metrics

Investment, international trader, and consumption

Consumption are relating > are related

If people are losing their jobs they don’t want people to know how high the number is losing their jobs, I think percentage is 50%, no stable income, they will not put portion (proportion) of income to consume

• Unemployment figures are obscured (hidden) at discretion to keep citizens in the dark. I estimate the figure around unemployment figure around 50% so therefore there is a lack of propensity to consume with their incomes.

International trade Trump is adding on tax (tariff) a lot of trader barrier to set up to cut the export trade portion from china (barriers to entry)

• President Trump is creating tariffs making barriers to entry of doing business with USA more difficult which hinders China’s export business and thus can potentially create a balance of trade deficit on their balance sheet.

Investment the demand side consumption is very weak, orders from international is also weak because of political impact between us and china, so investment is also dropping a lot because consumption is dropping a lot.

• With internal consumption being weak, international demand from China has also plummeted due to the geopolitical tension between China and USA which has create a negative multiplier effect causing internal investment in China to contract.

How to save the current problem? The government want to print money, give money to the people to use money to buy things drive consumption (stimulus) but the Chinese government is waiting for USA interest rates, observe the change, if the USA bond interest rate didn’t go down, the government didn’t have the room for inflation.

• What is the solution? The Chinese government needs to increase quantative easing (print more money) and encourage fiscal stimulus policies to pump money back into it’s economy via subsidies and put the money back into the people’s hands as well as local businesses.
  The Chinese government is interdependent and at the mercy of USA’s bond interest rates, if it does not get reduced the government will not have room for inflation…

But I think they cannot take action by themselves, they need to wait for a response for us and take action (interdependent, at the mercy)

• The Chinese government cannot solely operate by themselves; the PBOC is interdependent on the Federal Reserve of USA.

Other than this passive action to wait for others behavior, there are some other actions China government can take, the government will go into pay more attention of the key technology (technological) products why should they put it as priority policy.

• As the government here ‘lays low’ with a passive approach, there as some elements within its control.
  For example, the can draw more attention and allocation more resources / funds to the key technological industries where policies that encourage growth should be it’s sole priority.

The key product tech products right now is the key barrier (avenue/ conduit) for china to catch to the US.

• China’s edge are its technological products and innovations that are a crucial avenue / conduit to catch up to the USA.

Consumption:

Government is releasing more subsidies more for more housing appliances or mobile phones (30% subsidize)

• The government has made policies that subsidize housing appliances and mobile phones providing a 30% discount.

For international trade, they are waiting for Trumps policy on tax, for manufacturing in china, the orders are from international trade. The demand in china is very weak (domestic trade is weak internal demand)

• Domestic consumption with weak internal demand is withering in China, so they are ‘waiting on the sidelines’ for Trump’s tariff policy which will in turn, affect China’s demand from international trade

Vocabulary

Intuition第六感

Interdependence 相互依存

Forte 能事