Alan Kohler is one of Australia’s most experienced commentators and journalists. Alan is the founder of Eureka Report, Australia’s most successful investment newsletter, and Business Spectator, a 24-hour free business news and commentary website. He also hosts Inside Business, a half-hour Sunday programme on the ABC, is the finance presenter on the ABC News - and producer of the nightly graph (or two).
In this week's essential reading guide Bartholomeusz predicts a Ford domino effect, Koukoulas runs the ruler over Australia's economy, Burgess foresees a carbon flip and Irvine surveys a Bernanke brainwave.
There is room for reform at the nation's tax office but Joe Hockey's proposal to knock tax administration and policing into place could be counterproductive.
A co-founder of corporate governance firm Ownership Matters, former journalist Martin Lawrence says he wants to help markets function better.
Cromwell Property Group has successfully sold stock to help fund the purchase of seven NSW properties.
In this week's essential reading guide Bartholomeusz predicts a Ford domino effect, Koukoulas runs the ruler over Australia's economy, Burgess foresees a carbon flip and Irvine surveys a Bernanke brainwave.
There is room for reform at the nation's tax office but Joe Hockey's proposal to knock tax administration and policing into place could be counterproductive.
In the ultra-fluid technology sector, many an acquisition shock has paid off – and vice versa. Yahoo's big cheque for Tumblr isn’t the only deal that may be judged differently in hindsight.
The cloud ERP vendor is starting to move up the software as a service food chain but it will have to surmount a few hurdles before its ready for big time.
The Solar 2013 conference in Melbourne carries the theme of an industry trying to prevent a possible race to the bottom, where weaker firms damage the industry in compromising quality for price.
The reverberations from the Newman government’s bulldozing of Queensland’s vegetation protection laws will be felt in Canberra, with the Coalition's Direct Action plan now at risk of a $1 billion budget blow-out.
CEOs outline changing views on corporate spending and profits, their economic expectations and political dissatisfaction, including advice for Julia Gillard and Tony Abbott.
UK-based Zeebox wants to be the intermediary for all social media-television interactions. It will not only have to lure viewers, but the networks themselves.
Those who believe China's great rebalancing will solve its ills fail to understand the consequences of growing inequality. The only consumers are the already rich, funded by the bureaucratic industrial complex.
Business Spectator is available on all of your devices so you can access the latest news and commentary where and how you like
Comments on this article
Comments PolicyI should like to thank Doctor Lee for this outstanding contribution which, for me at least, clarifies the situation in China and highlights the potential hazards of the present situation in that country (China can't grow out of its problems, February 6)
Agree, John, thanks for the article (China can't grow out of its problems, February 6). The other side of the analysis is what level of consumption should we be enjoying in advanced economies. Back 40 years ago the consumption variable moved between (approx.) 62 and 66% of the economy, depending on whether the economy was in recessionary or expansion phases. Now it seems writ in LAW that we must have consumption at 70%. Why?
To me the rebalancing of advanced economies toward that lower figure is where we are headed. The massive expenditures on retail space to flog stuff (which generated the debt load we have) which still seems to persist, eg. Coles and Woolies further roll-out of new shopping centres, is a sympton of the failed policies of greed.
At least our economy has some things in its favour as our wages have maintained purchasing power as against the USA where wages have gone backwards.
Economy wide statistics often mislead. Hence the supposed rapid growth of wages in China theoretically should help the rebalancing of equity it that economy. The picture painted by Dr Lee, however, still suggests otherwise.
China is a massive black swan which will one day smash world stock and commodity markets - its only a matter of time. (China can't grow out of its problems, February 6)
What a great article. Dr. Lee has explained what everyone else may suspect( when one feels the China growth "story" is not quite correct, or lacks full explanation)very much to the illustrative point with understandable explanation. (China can't grow out of its problems, February 6) China would appear to be growing along similar lines as all other underdeveloped (financially) Countries that have embraced the "mixed" economy examples set by the Western societies.
We should beware of this for it therefore is capable of destruction as well as construction in equal proportions as it seemingly progresses.
The problem of an academic simplification is that whilst the Gulliver's Travels neme is cute I would assume someone who is an associate professor in international security studies might have picked up and read this mornings several news items that the degenerating relationship between China and Japan - and by direct correlation the US and we too in the Antipodes - is quite literally just a hair trigger from a hot confrontation. All the economic malarky and philisophising will be quite redundant. Perhaps an insightful essay into whether or not the US is going to roll over easy and allow China ascendency to the unilateral power in the Pacific and beyond may be timely?
I agree with you Ross. Though in the very long term (50 years or so) China will become a developed and sophisticated country, the current path in the medium term is unsustainable for both economic and political reasons.
The current system is not socialist or marxist, nor is it western free market/social-liberal democracy. It resembles a bizarre corporate-fascist state.
Eventually the 80% will rise up and smash the current system, and though in the long term that will be positive for China, in the immediate aftermath of Chinese Revolution II there will be much economic and market disruption.
Australian stocks and housing market will be the first to crash.
A good and easily understood outline of the issues facing China's new governing team if it is to transition its nation into an "efficient" market based economy with appropriate checks and balances.
How to address these issues becomes even more complicated if you overlay the combined pressures of; concern about the potential for being excluded from sources of raw materials/markets for finished goods; aspects of a "build it and they will come" investment philosophy (especially non productive speculative real estate); evidence of low income free enterprise savers transferring their underperforming savings into better performing assets (i.e. stockpiling physical metals, slow perishable food items etc); an ageing population and its impact on the cost of labour and social funding costs; the normal aspirations of parents for their children; the frustration of entrepreneurs (especially the 20 - 40 year olds) who do not have access to the privileges of favoured business networks; the competing interests of the major investors into China; the short to medium term dependence on exports to the USA/EU markets (and exports to nations also dependent on exports to the USA/EU); and perhaps of the greatest concern to China's new governing team - how to avoid the social disruption which accompanied liberalisation in a number of other nations whose population comprised multiple large people groups with different corporate memories.
What a succinct but oh so insightful outline of such a seemingly complex subject - thank you Dr. Lee.
The upshot of Dr. Lee's analysis is that the Chinese economic 'miracle', in its current form, is not sustainable. Sooner or later the 80 odd Lilliputians won't be satisfied with the economic 'crumbs' off the table.
With China being our largest trading partner, Australia's economic wellbeing is largely dependent on this unjust economic model.
Now I understand why the Chinese Communist Party has the largest standing army in the world. It's not to protect them from any external threat, it's to ensure that 80 odd Lilliputians are kept in their place.
The bottom line is that our recent economic health/outperformance has been - to a large extent - built on an unfair and unjust political and economic regime.
This begs the question - what are we as a free democracy - doing to highlight the unfairness of it all.
Well written, succinct and absolutely on the money.
What is of increasing concern is that the aspirational class (the 80 poorest Lilliputians) are finding the ability to move up the socio-economic ladder harder and harder which makes re-balancing to an increased consumption model all that more difficult.
The argument by Dr Lee sounds quite convincing as it is logically flawless. But before we accept his conclusion we should always ask a too often forgotten question - are his argument based on correct premises? Are his arguments based on unbiased facts or his own biased opinions or his wild imaginations or rumors? Has he done in-depth study of Chinese economy, of Chinese modern history and its political system?
China is a very complicated story as it has gone through tremendous changes over the past 200 years. (China can't grow out of its problems, February 6)
A great article. I wonder which will come first - rebalancing of rates of return to give the 80% the return they deserve, revolt by the masses, or economic decline caused by long term mismangement/misallocation of capital? (China can't grow out of its problems, February 6.)
Thank you John, great insights. (China can't grow out of its problems, February 7.)
China has a 6 terra hertz computer, 3 stories tall and requires 3,000,000 volts to power it. The USA has a 4,8 terra hertz computer. So, never underestimate what China can, or can't do (China can't grow out of its problems, February 7).
Oh, yes and lets not forget who introduced us to paper money, the Yuan dynasty, Oh! mus'nt, forget the largest trading empire in our history, that of Genghis Khan. Lets not forget who invented the watch (China), irrigation, gunpowder......
Brilliant piece of writing Mr Lee (China can't grow out of its problems, February 6). Modern China was undreamed of when Jonathan Swift wrote Gulliver's Travels - a tale I loved as a child! The allegory then represented power/money and politics of Swift's time. For me today has mirrored our western, uneconomic - if we view its waste, greed and injustice - Economy equally well. Sure is perfect for China in 2013. The lowest common denominator of course is human nature.
Like The Economist, which has predicted the imminent doom of the Chinese economy 56 times in the past 35 years, Dr. Lee completely misunderstands the unique structure that enables its dynamism (China can't grow out of its problems, February 7). Take a look, for example, at this analysis: http://inpraiseofchina.blogspot.com/2011/01/chinas-productivity-miracle.html
China's economic growth is a fabrication, a mirage. Of course it's hard to predict when it will collapse, because the Party can (and does) resort to just making up GDP growth figures to sell to gullible economic commentators. It won't be able to hide the effects of a slowing, bad debt-ridden economy forever though... (China can't grow out of its problems, February 6)
certainly there are mis-allocation of resources in the process of creating GDP (China can't grow out of its problems, February 6). During my recent travel to quite remote 3rd/4th tier cities/towns, I saw small villages and subburbs got government offices bigger than those states and cities in the West, with vast space/gardens converted from farmlands. Such wasteful use of land horrifies me. There are always new toll roads to scenic areas where few tourist would go. I wonder how they get the investment back.