Sunday, February 28, 2010

China On Our Minds At SOC

China has just postponed several military “exchanges” between Beijing and Washington -- visits by high-level officials and such. It’s the first real, tangible retaliation for the U.S. sale of $6.4 billion of military gear to Taiwan.
~Rumor has it China will buy all 191.3 tons of gold the International Monetary Fund said last week it would put on the open market. So far, only Russian news agencies are reporting this; it’s yet to be confirmed by Western sources.
We take note of these developments with a couple of looming deadlines in mind…
· Next month, the Pentagon issues its annual assessment of China’s military. It usually has alarmist language, and Beijing usually issues angry replies, but most of the time, it’s just theater. This time? We’ll see…· April opens the official window in which the Treasury Department could label China a “currency manipulator.” We’re hearing buzz from Washington that the Obama administration is keen to boost jobs by boosting exports -- which means a weaker dollar in general, and a weaker dollar versus the yuan in particular.

But we get occaisional emails here at Sound Of Cannons and this one is from a reader familair with life in China:
. “What people fail to grasp,” this individual writes, “is this place is much more capitalist than the States now:
· No capital gains tax
· No property tax
· No local or state taxes
· A reasonable 35% tax rate for the highest earners
· Corporate tax rates of zero percent for 3 years and 15% per year after that.
“Also, most importantly, it’s not a casino economy like the States. China will sell 30% more vehicles this year than in the U.S. 93% of those vehicles will be purchased cash upfront.
“For a home loan, you need 30% down. As a private business, to get a loan you have to put up the assets of the company, i.e., plant and equipment. There are no leverage games here.
“It's a one-party state, but at least it is focused on its own people. We have a two-party system that has sold us down the river. All the Asian Tiger economies needed a strong central government to launch themselves out of poverty. Not a good system for our culture, but it works for them.
“High-speed train systems going on line, 50 new airports in that last five years -- you must see this place to believe it.”

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