Great Leap Backward
China’s steel industry group is apparently upset with a proposed iron ore price increase of 24% from Brazilian producer CVRD. The Brazilian company’s request was recently described by the China Iron and Steel Association as “inappropriate”, “not rational” and “unacceptable”.
Funny, I would use exactly those same words to describe the latest news that China’s General Administration of Press and Publication (GAPP) is shutting down the local edition of Rolling Stone magazine, just one month after it began publication. The Reuters story notes that:
The GAPP official, who spoke on condition of anonymity, said the internal rule would mean sports, entertainment and fashion magazines cannot expect approval to enter China’s expanding media market for the time being.
As if this isn’t bad enough, the Chinese are trying to shift the blame to Rolling Stone!!
“Rolling Stone should have reported and sought approval from the relevant state authority — which is us, GAPP — but they never did even that,” [the official] said.”It wasn’t a question of their content. It’s just like they were driving a car without a license.”
Yeah, whatever.
China’s stock market is up 16% year-to-date. My guess is that most investors who are cashing in on “China Fever” could care less whether or not there’s a Chinese language edition of a rock-and-roll magazine or if Brazilian miners get a fair price for their iron ore.
But at some point, all this stuff begins to matter–a lot.
It means that you are investing in a place that, despite all of its wonderful economic potential–is run by people who are entirely and hopelessly out of touch with the rest of the world and the desire of their own citizens for a better, more enjoyable life.
Think about it: if you were an entrepreneur, would you go into business with a partner who behaved or thought this way? I sure wouldn’t, but that’s exactly what you are doing when you invest in one of the many Chinese companies that are still controlled by the state.
If the Chinese think nothing of shutting down a music magazine, what makes you think they’d be any less hesitant to wipe out or dilute the value of your shares?
I’m not saying this will happen, but I think it’s high time we stop talking about how fast China’s economy is growing and pay a little more attention to some of the really dumb stunts they are trying to pull before our very eyes. Otherwise the party is going to end, and it won’t be pretty.
