Wednesday, February 19, 2014

Observations From My Trip to China

1) The article I published on Friday in Seeking Alpha, Observations From My Trip to China, has been among the most read articles on the site since then:

I got back on Friday afternoon from a fascinating 10-day trip to China – the first time I've been to mainland China in 21 years. I spent the first half of my trip in Shanghai, China's most populous, modern, wealthy, capitalistic city, and the second half in Tengchong, in remote, rural, south-central China, bordering Burma, attending a conference of Teach for All, a growing network of Teach for America-like organizations in 32 countries (see this op ed in the NY Times, Meet the Makers, by Tom Friedman about it). I've posted pictures and comments from each part of my trip here and here.


I want to share a few observations about China – with the caveat that I am very emphatically not holding myself out as an expert on the country. I'm just endlessly fascinated by China on many levels, most importantly as an investor. Though I'm primarily U.S. focused, China has become such a large and rapidly growing part of the world economy that I can't ignore it – if China sneezes, the world (and my portfolio) will catch a cold.


So is China about to catch a cold? That's an important and vexingly difficult question. Jim Chanos is perhaps the best-known China bear and he makes a cogent argument (see here and here) that China is experiencing the mother of all infrastructure, real estate and financial bubbles – "Dubai times 1,000" – that is on the verge of bursting.


And it's not just Chanos. Just about every day, I read another story about fraudulent businesses, corrupt officials at all levels, crudely authoritarian and thuggish behavior by the government (censorship, jailing truth-tellers, etc.), rich people leaving (or at least stashing a lot of money outside the country), ghastly pollution, tainted products, out-of-control real estate prices, banks lying about their loan losses, untold amounts of lending that's not reflected in official statistics – the list goes on and on...


So one of the main reasons for my trip was to see the country for myself and meet with as many smart people as I could so I could form my own judgment.


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