China may be once again beating us at our own game. But instead of ripping off American goods and producing them at a fraction of the cost, this time they’ve copied our monetary policy. And like everything the Chinese do, they are doing it big.

The Chinese government has been pumping the economy with liquidity by printing money at an alarming rate. Much of that money has ended up in the hands of wasteful state-owned enterprises, or SOEs lent to them by a banking cabal.

According the Motley Fool,
http://www.fool.com/investing/international/2012/06/15/the-biggest-...
 
The SOEs are like the profligate Real Housewives of Beijing. They get tons of money to splurge on fancy, wasteful items, get wined and dined by the country's most powerful figures, yet contribute relatively little to the economy. In many cases, they're profitable solely because they're the only players allowed in strategically important industries.
Meanwhile, the small and medium-sized businesses (SMEs) do the grunt work, contributing two-thirds to taxes and total industrial output, and employing more than 75% of the Chinese workforce. Yet they get no love. Despite the surge in bank credit, many are either denied access altogether or charged absurdly high rates on loans.

Of course, the nation's four largest banks -- themselves majority state-owned -- have a tremendous bias in lending to SOEs. And the government's vested interest in protecting the status quo has led to major restrictions on multinational banks looking to expand within China.
 
At least China makes no bones about being an authoritarian government exercising tight control on a centrally planned economy which is more than we can see here in the U.S.S. of A.

Trade well and follow the trend, not the so-called “experts.”

__________

Larry Levin

President & Founder - TradingAdvantage