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[Famous Famous Column] The deterioration of the Chinese Communist Party’s investment environment and the decline of the economic decline

[The Epoch Times, March 24, 2024] (The Epoch Times columnist Matt Cole & Jeff Sherman wrote / compiled by Xinyu) In the past decades, China has risen rapidly becoming a global economic power, but it seems that it has encountered stagnation now.EssenceAt present, the tightness of the currency is imminent, the economy is sluggish, and the world -renowned asset management companies are scrambling to explain these newly discovered Chinese risks. The headquarters of Strive asset management companies in Ohio (OHIO) has been vigilant since its establishment.

The popular theory in the market attributes the recent recession to the excessive leverage, large and not falling real estate industry, as well as the CCP’s cultural constraints that have hindered China’s transformation to consumer economy (links).

All these may be facts.However, many people ignore a bigger problem: the macroeconomic factors that have led to the rise of China have now become the cause of China’s decline.American investors should consider the investment portfolio that appropriately reduce China’s investment risk.

According to the Cobb-Douglas Production Function, economic output comes from three inputs: the full factor productivity of labor, capital and economists (TFP).The full factor productivity can be understood as the efficiency of labor and capital utilization, which is usually achieved through technological innovation.It is the full factor productivity that makes countries stand out.Although labor and capital are relatively commercialized, the full factor productivity is usually considered the main factor of GDP growth.It is precisely because of the full factor productivity that the United States such as the United States has never exceeded one -tenth of the world’s population that it can continue to contribute more than one -third of GDP in the world.

This model explains why China has become the world’s second largest economy in the past 70 years.For centuries, China has been the most populated country in the world, which has made it rich in labor (links).The only child policy temporarily expands China’s labor team.Women have spent more than ten years to raise children at home, and they can work freely later.Women’s labor participation rates have increased, increasing productivity and family income (links).

China’s increasing prosperity in turn has stimulated investment.On the other hand, Western society and its stable pension systems that are usually supported by the state begin to provide investors with billions of dollars of funds.

Since the “Cultural Revolution”, China has not relying on its own strength to develop advanced technologies, but to improve the original production potential by imitating or directly stealing intellectual property rights in many cases.Most of the largest companies in China, such as Tencent, Alibaba, Baidu, and Luckin Coffee, are mostly cottage versions of well -known Western innovation results.The existence of these Chinese companies depends on Western Capital, the CCP’s protectionism and Internet censorship system. These systems protect these imitators, so that they can avoid the impact and influence of international competitors that are more dominated by the market.

However, even if China ’s successful central plan policy has brought bad luck today.Although the CCP ’s policy of decades has been officially abolished in 2016, it has led to the transformation of intergenerational and culture. Women of childbearing age decreased by several million each year, and the fertility rate was less than half of the alternative rate (link).

In 2023, the number of Chinese population is historically lower than India, which means that China is no longer the country with the largest population in the world, and this title is unlikely to recapture.The reduction of labor force not only threatens China as its position as a global producer, but also threatens China as a global consumer country.The multinational company will no longer be rushing to China’s consumer groups, and will no longer be willing to put aside common sense and business judgments, just to expand the opportunity to expand its business in China.

Capital is also running away.China National Bureau of Foreign Exchange issued a report last month that foreign direct investment in China has decreased by 82%, a new low (link) in the past 30 years.This sudden change highlights how foreign companies withdraw funds out of the Chinese market.Considering that the numbers reported by the CCP government agencies are often not accurate enough, it is certain that the actual number may be worse.

Transnational companies are not fighting alone.Investors around the world have shifted their emerging market investment to global emerging markets outside China to manage Chinese risks separately, and even completely eliminate the risk of the CCP’s institutional.In 2023, global emerging market funds outside China absorbed US $ 5.6 billion; in comparison, China is one of the worst stock markets in the world, with a loss of more than 10%(links) throughout the year.

Another consideration is full factor productivity.Globally, the CCP’s aggressive intellectual property theft has become so bold, so that both the Western government and the company have begun to notice this and have to take measures.The Biden government is restricting our most advanced artificial intelligence hardware to export to China.The decline of the Chinese economy also means that American companies have formed a joint venture or hand over technical information as a bargaining chip for the conditions for business in China.The large -scale outflow of Western companies means stealing technology.

China cannot rely on its own power to develop innovative technologies obtained by stealing.In terms of design, China lacks personal freedom, economic freedom, and profit motivation, and these are necessary for innovation, and innovation has promoted most of the economic growth of the modern world.

There is no doubt that the result brought by this is the spiral decline of self -loop.The more foreign capital escaped, the more courage to the country and the company to protect itself from the stolen of the CCP, and the more the CCP tries to strengthen the control of everything that considers it within the scope of its power, thereby further scaring foreign investment.From the perspective of Chinese officials, the only remedy for the failure of the central plan is more central plans.However, forcing and force alone cannot bring innovation. Just as China is drawing a painful lesson, we cannot control the objective fertility rules at will, nor can we achieve prosperity (link) by controlling.

China has risen into the world’s second largest economy in the past half a century. This is an impressive achievement and proves the importance of economic freedom. Even the smallest improvement can bring strong power.However, the CCP’s strict control of production factors is increasing China’s investment risk, and it has also laid seeds for its economic recession.This phenomenon is worthle in the United States and Western investors.

About the Author:

Matt Cole is the CEO and CEO of Strive Asset Management Company, which is located in Ohio and manages more than $ 1 billion in assets.

Original: Communist China ’s Rise Sowed The Seeds for its Fall is published in the Epoch Times.

This article only represents the author’s own point of view, and does not necessarily reflect the Epoch Times.

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