A Maoist great leap forward requires that every Chinese investor move in the same direction, long rather than short, into stocks rather than out of them. And to make sure this happens, the Chinese Securities Regulation Commission is demanding records from Chinese and foreign brokerage firms in Hong Kong and Singapore who will have to prove that they never funded or acted to help short sellers.
Local moguls like the head of Zhonguong Aluminum, a stock sold short, are issuing statements saying they were not the sellers. A US hedge fund, inevitably, is the focus of accusations that it triggered a nefarious plot against healthy Shanghai growth stocks which otherwise would have grown to the sky.
In fact, the big sell-off can be explained without conspiracies. The latest Caixin purchasing managers' index came in at a near 4-year low at 47.8. That is a long way from the 50 level which marks the border between and expanding economy (with orders going up) and a falling one (where they go down.) This is one of 3 PMI indexes of varying objectivity, probably the intermediate one between massaged government figures and those from HSBC‘s Hong Kong sub.
Maoism works when China mobilizes an army to build islands on tide-washed reefs in the South China Sea. But it doesn't work in managing a huge economy by interventions by the ruling Communists over things not in their Little Red Books: stock markets, foreign exchange rates, consumption stimulus, off-balance sheet lending, commodity pricing, trade liberalization, and other capitalist elements. It also doesn't work against the pervasive corruption of the state sector at all levels, which blocks allocation of funds and resources to where they are needed rather than to those who have power.
All predictions of China's rise to become an economic powerhouse competing with the USA have to be extended in time and reduced in impact because of the impact of Maoist thinking.
Industrial Firms
*Malgré août, Veolia (VEOEF) reported on its Q2 last week. Turnover was up 7.3% to euros 12.32 bn, or 3.3% without currency effects. Its net profits came in at euros 321 mn, up 110% (in current currency). It gained from a 4.2% rise in the value of its foreign receipts converted into euros and these grew in Britain, central and eastern Europe, the US except for energy business, and the Far East and Latin America. The water and sewage business, where France has not one but two multinational companies operating, is growing more international. These account for 83% of VEOEY's business.
