4 ms·

This is really good news. Unlike the US it seems these companies need to proof that they can turn a profit. Economists have been crying out "bubble bubble !" o

by 1971genocide 12y ago

This is really good news. Unlike the US it seems these companies need to proof that they can turn a profit. Economists have been crying out "bubble bubble !" on china for 10 years. The science of capital as applied to western countries do not apply to a system like china where there are so many SOE. Imagine if economists applied the same type of thinking during WW2 and the space race. China seems to be in a similar "war" mode, with there economy. This is a good thing since their goal seem to be allow billions of asians to have the same level of living standard as western countries. The growth of tech outside of silicon valley is good news for everyone. It creates an alternate market for competition, rather than the current monoculture.

Gustomaximus 12y ago
I really like your point about competition and mono-culture. It's great seeing tech sectors spring up around the world. I'd personally love to see more Aussies where I am from staying local rather than heading stateside when their funding needs come up as well as the benifits this can bring to poorer countries. However it's really not good news if it is a bubble. My take from the article, while companies may be pulling a profit, given the average valuations they are still extremely overvalued. If this is the case absolute profit means diddly without income to value ratio and there will be a rude awaking when people realise this as we have seen repeatedly in history. Unfortunately finance world errors like this flow heavily into day to day life of everyone else. And as for people crying out "bubble bubble !" on china for 10 years. In my life typically people make these claims for years pre-implosion (see dot-com bubble) almost to the point you get skeptical and think they are naysayers, and then it happens. And if this market pops, people wont trust the sector for some time after a bust forcing people out of the tech industry, general flow on repercussions to the economy, let alone the international repercussions for an economy the size of China.
- ekidd 12y ago
  As Keynes famously observed, "Markets can remain irrational longer than you can remain solvent" (while betting against them). Markets can look bubbly for many years before the bubble bursts. Having lived through both the first dot-com bubble and the recent real-estate bubble, I've noticed a pattern: 1. Natural cynics think things are looking a bit bubbly. 2. Years pass. 3. Society as whole becomes heavily invested in the bubble. I can't go to a cocktail party or family reunion without people buttonholing me to talk about tech stocks or real estate. 4. An ideology is invested explaining why assets of category X will undergo very long-term exponential growth. During the dotcom boom, it was "Dow 36,000". During the real estate boom, it was "If you don't buy a house now, you'll never be able to afford one." (If you're cynical, you might assume this kind of delusional hype is an effort to find one last fool to buy in before the party's over.) 5. The whole thing explodes messily. So for me, those are the warning signs: Society-wide buy-in, and new ideologies that explain why "X will always go up." Oddly, this means I'm not too worried by a near-term tech bubble, despite the hype and money in San Francisco: I'm not seeing the widespread public buy-in and rampant wishful thinking I've seen before. Of course, this may be because few companies are undergoing IPOs, and the bubble is limited strictly to private capital.
  - wahsd 12y ago
    That last sentence is rather valid. The US alone has been pumping trillions after trillions into the US and global economy, which has not resulted in general official inflation. But that money went somewhere, and it went into corporate coffers, financial houses, and the private pockets of the wealthy who are all "investing" it like it's not their money, which it isn't really. I am not sure, but it does not strike me that there is another example of the current type of scenario in all of humanity's history. It's not like the lead up to the 1929 market crash because there are no margin calls since the government just gave away free money and even paid the wealthy and their shell organizations, aka, corporations to steal even more money. It's just unimaginable amounts of money sloshing around in the global market without anything productive to apply itself to. It doesn't want to construct residential in the US because that would depress prices and rents, it keeps being pumped into land and real assets and maintaining artificial housing and rent prices, .... Although I think there is a great storage of inflation just barely being held back by a policy dam, if that dam doesn't break, I think the outcome, the effect will be a social one. Desperate regimes of the wealthy paranoid about losing the wealth they looted will resort to ever increasing repression to assure their Precious remains with them and their heirs for generation after generation. Progress is made when there are constraints and problems need solving and things need improving. But what happens when we are all essentially trust fund babies that have no parameters, no limitations, losses are meaningless because it's not money we earned, and "success" is easily seen as such because it is measured by state rather than delta. By all current measures, if you have a successful business / economy no one really cares that you essentially bought the facade of success with your undeserved trust fund / made up money. We can see the effects on the poor, where the impact of our policies are being felt in silent suffering. I suspect the result of at least the last 10 years of policy will be an era of impoverishment not seen in 100 years in the USA in the short term, and another era in human history of stagnation and eventual oppression as humanity turns in on itself if the unearned, and unwarranted wealth is not recalled. Ultimately, what wealth, i.e., money is, is a relative measure of power and especially the US government gave the crooks that defrauded us and almost destroyed America the keys to the vault.
    - happyscrappy 12y ago
thewarrior 12y ago
I don't think you can claim that a company trading at 300 times its earnings is fairly valued. That's just way out of whack and can't last.
- _delirium 12y ago
  Eh that's pretty common in the US too, the usual explanation being that they're reinvesting their income in growth. For example Amazon typically trades at multiples of 700x earnings or more. In Amazon's case they claim that they could make a bigger profit if they wanted to, and investors appear to believe it.
  - jacquesm 12y ago
    Tech scales a lot easier than ketchup or school uniforms.
    - toomuchtodo 12y ago
      Yes. Tech has leverage like no other industry.
  - thewarrior 12y ago
    Yes. And it won't last. Either Amazon gets bigger or the stock price comes down.
marincounty 12y ago
"Unlike the US it seems these companies need to proof that they can turn a profit." Not NQ Mobile.
jerf 12y ago
"Economists have been crying out "bubble bubble !" on china for 10 years. The science of capital as applied to western countries do not apply to a system like china where there are so many SOE." Ah, there it is... the "this time it's different!" argument. I fear that the different that the number of "State Owned Enterprises" will have is that where the bubble would "naturally" be popped by "natural" market forces, the incentives in China will cause it to inflate even farther, even faster, until it pops even harder. Bubbles are not created by "capitalism". Bubbles are created by feedback loops feeding on themselves, which are unavoidable (where there is any form of negative feedback, there are oscillations). A State may well keep a bubble alive where capitalism would have popped it. That it hasn't popped yet could really be a sign that this time it's different; China does have greater capacity for growth on the same tech stack than the US does. But it could also mean that the malinvestment is getting even farther than the US tech bubble ever did. Bubbles being what they are, the greater capacity for growth could even be making it worse... if the economy could support X more growth but the bubble inflates that into 10X more investment, that could mean the greater capacity for growth is itself a participant in the inflation. The "pop" isn't caused by "capitalism" either... bad investments that can't pay for themselves are bad investments that can't pay for themselves, regardless of the economic system in which they occur. (I fear, because no one will escape this unscathed if it happens. The Western economies still haven't recovered from their last recession and are quite rickety themselves (since the West seems to have fallen in love with centralized management once again itself, and there is perhaps not a bit of book cooking here too). If a Chinese bubble does pop and it is that bad, it's not going to be any fun for anyone.)
AustinG08 12y ago
If you don't think there is massive 'cooking of books' going on then I have some stock of a Chinese tech company I would like to sell you
toomuchtodo 12y ago
"This is a good thing since their goal seem to be allow billions of asians to have the same level of living standard as western countries." Unfortunately, there aren't enough resources on Earth to allow all Chinese citizens to live at US standards; possibly EU standards if people cut back meat consumption, no longer need fossil fuels, etc.

Gustomaximus 12y ago

I really like your point about competition and mono-culture. It's great seeing tech sectors spring up around the world. I'd personally love to see more Aussies where I am from staying local rather than heading stateside when their funding needs come up as well as the benifits this can bring to poorer countries. However it's really not good news if it is a bubble. My take from the article, while companies may be pulling a profit, given the average valuations they are still extremely overvalued. If this is the case absolute profit means diddly without income to value ratio and there will be a rude awaking when people realise this as we have seen repeatedly in history. Unfortunately finance world errors like this flow heavily into day to day life of everyone else. And as for people crying out "bubble bubble !" on china for 10 years. In my life typically people make these claims for years pre-implosion (see dot-com bubble) almost to the point you get skeptical and think they are naysayers, and then it happens. And if this market pops, people wont trust the sector for some time after a bust forcing people out of the tech industry, general flow on repercussions to the economy, let alone the international repercussions for an economy the size of China.

ekidd 12y ago
As Keynes famously observed, "Markets can remain irrational longer than you can remain solvent" (while betting against them). Markets can look bubbly for many years before the bubble bursts. Having lived through both the first dot-com bubble and the recent real-estate bubble, I've noticed a pattern: 1. Natural cynics think things are looking a bit bubbly. 2. Years pass. 3. Society as whole becomes heavily invested in the bubble. I can't go to a cocktail party or family reunion without people buttonholing me to talk about tech stocks or real estate. 4. An ideology is invested explaining why assets of category X will undergo very long-term exponential growth. During the dotcom boom, it was "Dow 36,000". During the real estate boom, it was "If you don't buy a house now, you'll never be able to afford one." (If you're cynical, you might assume this kind of delusional hype is an effort to find one last fool to buy in before the party's over.) 5. The whole thing explodes messily. So for me, those are the warning signs: Society-wide buy-in, and new ideologies that explain why "X will always go up." Oddly, this means I'm not too worried by a near-term tech bubble, despite the hype and money in San Francisco: I'm not seeing the widespread public buy-in and rampant wishful thinking I've seen before. Of course, this may be because few companies are undergoing IPOs, and the bubble is limited strictly to private capital.
- wahsd 12y ago
  That last sentence is rather valid. The US alone has been pumping trillions after trillions into the US and global economy, which has not resulted in general official inflation. But that money went somewhere, and it went into corporate coffers, financial houses, and the private pockets of the wealthy who are all "investing" it like it's not their money, which it isn't really. I am not sure, but it does not strike me that there is another example of the current type of scenario in all of humanity's history. It's not like the lead up to the 1929 market crash because there are no margin calls since the government just gave away free money and even paid the wealthy and their shell organizations, aka, corporations to steal even more money. It's just unimaginable amounts of money sloshing around in the global market without anything productive to apply itself to. It doesn't want to construct residential in the US because that would depress prices and rents, it keeps being pumped into land and real assets and maintaining artificial housing and rent prices, .... Although I think there is a great storage of inflation just barely being held back by a policy dam, if that dam doesn't break, I think the outcome, the effect will be a social one. Desperate regimes of the wealthy paranoid about losing the wealth they looted will resort to ever increasing repression to assure their Precious remains with them and their heirs for generation after generation. Progress is made when there are constraints and problems need solving and things need improving. But what happens when we are all essentially trust fund babies that have no parameters, no limitations, losses are meaningless because it's not money we earned, and "success" is easily seen as such because it is measured by state rather than delta. By all current measures, if you have a successful business / economy no one really cares that you essentially bought the facade of success with your undeserved trust fund / made up money. We can see the effects on the poor, where the impact of our policies are being felt in silent suffering. I suspect the result of at least the last 10 years of policy will be an era of impoverishment not seen in 100 years in the USA in the short term, and another era in human history of stagnation and eventual oppression as humanity turns in on itself if the unearned, and unwarranted wealth is not recalled. Ultimately, what wealth, i.e., money is, is a relative measure of power and especially the US government gave the crooks that defrauded us and almost destroyed America the keys to the vault.
  - happyscrappy 12y ago

thewarrior 12y ago

I don't think you can claim that a company trading at 300 times its earnings is fairly valued. That's just way out of whack and can't last.

_delirium 12y ago
Eh that's pretty common in the US too, the usual explanation being that they're reinvesting their income in growth. For example Amazon typically trades at multiples of 700x earnings or more. In Amazon's case they claim that they could make a bigger profit if they wanted to, and investors appear to believe it.
- jacquesm 12y ago
  Tech scales a lot easier than ketchup or school uniforms.
  - toomuchtodo 12y ago
    Yes. Tech has leverage like no other industry.
- thewarrior 12y ago
  Yes. And it won't last. Either Amazon gets bigger or the stock price comes down.

marincounty 12y ago

"Unlike the US it seems these companies need to proof that they can turn a profit." Not NQ Mobile.

jerf 12y ago

"Economists have been crying out "bubble bubble !" on china for 10 years. The science of capital as applied to western countries do not apply to a system like china where there are so many SOE." Ah, there it is... the "this time it's different!" argument. I fear that the different that the number of "State Owned Enterprises" will have is that where the bubble would "naturally" be popped by "natural" market forces, the incentives in China will cause it to inflate even farther, even faster, until it pops even harder. Bubbles are not created by "capitalism". Bubbles are created by feedback loops feeding on themselves, which are unavoidable (where there is any form of negative feedback, there are oscillations). A State may well keep a bubble alive where capitalism would have popped it. That it hasn't popped yet could really be a sign that this time it's different; China does have greater capacity for growth on the same tech stack than the US does. But it could also mean that the malinvestment is getting even farther than the US tech bubble ever did. Bubbles being what they are, the greater capacity for growth could even be making it worse... if the economy could support X more growth but the bubble inflates that into 10X more investment, that could mean the greater capacity for growth is itself a participant in the inflation. The "pop" isn't caused by "capitalism" either... bad investments that can't pay for themselves are bad investments that can't pay for themselves, regardless of the economic system in which they occur. (I fear, because no one will escape this unscathed if it happens. The Western economies still haven't recovered from their last recession and are quite rickety themselves (since the West seems to have fallen in love with centralized management once again itself, and there is perhaps not a bit of book cooking here too). If a Chinese bubble does pop and it is that bad, it's not going to be any fun for anyone.)

AustinG08 12y ago

If you don't think there is massive 'cooking of books' going on then I have some stock of a Chinese tech company I would like to sell you

toomuchtodo 12y ago

"This is a good thing since their goal seem to be allow billions of asians to have the same level of living standard as western countries." Unfortunately, there aren't enough resources on Earth to allow all Chinese citizens to live at US standards; possibly EU standards if people cut back meat consumption, no longer need fossil fuels, etc.