Sunday, September 28, 2008

China encourages finance capitalists

As the Western capitalist world is forced by the current version of credit crisis to temporarily embrace some forms of stock market regulation, China is heading in the other direction and giving free rein to the finance capitalists it has created through restorationists policies.

China’s State Council has authorised a plan submitted by the China Securities Regulatory Commission to allow margin lending and short selling. The plan is expected to be formally announced either before, or just after, the October 1 holiday that celebrates the Communist Party’s liberation of the working class and peasants from imperialism, feudalism and bureaucrat-capitalism, a victory since squandered by the restorationists.

Margin loans are a fairly risky form of obtaining credit for investment. The loan is underwritten by the value of the investments and is good so long as the investments retain their market value. These are typically shares, securities and other financial products. If these investments fall below a certain value, the borrower will get a “margin call”, a requirement to increase the assets securing the loan. In the very likely event that the borrower lacks the cash to pay the lender (interest payments are already soaking up whatever cash store is at hand), then the borrower will either have to go deeper in debt or sell of part of his/her assets to pay out the lender.

This is the nature of the problem that engulfed ABC Learning’s Eddie Groves.

Short selling is the practice of selling a sufficient quantity of shares at, for example, $2 each in the hope that the price will drop, then buying back the shares at say, $1 each, and hoping that the market rebounds.

It is simple speculation by that section of the capitalist class that does not invest in production. It is notoriously the practice of hedge funds that either borrow stock that they do not own in order to short sell, or simply sell stock that doesn’t exist. To reduce the risk that they won’t be able to purchase stock at the cheaper price from the profit made by selling the same stock in name only, hedge funds often ramp down the market value of the stock at the same time that they are dumping it through their sales. They do this by spreading rumours about the future of the company holding the stock, or its directors or its capital value.

Shorting has been placed under a three month ban in countries like the US, the UK and Australia, and naked shorting, the sale of non-existent stock, may even stay banned.

But China is embracing these practices.

It has also scrapped the tax on stock purchases, further assisting accumulation by the rich.

And it has used public money held by the China Investment Corporation to buy back shares in three large state-owned banks in order to improve their liquidity.

China had previously curtailed unauthorised margin trading in 1997 and 2001, when banks were found to have illegally channelled money into the stock market.

Regulations will control some of the margin trades and shorting after October 1 by ensuring that only players with large enough assets to cover losses will be authorised to speculate.

But since when has this ever stopped a crisis?

Me, I’m off to re-read Mao Dun’s 1930s classic of the stock market parasites in Shanghai (the class that lost its power before the creation of the new Shanghai stock exchange above), and the workers’ struggles against them: Midnight.


Anonymous said...

Now do not be like that Mike ,everything is going great in socialist China.
All is fine under the marxist Theory of productive forces of the Deng type that was correctly imposed after the gang of four criminals were removed by patriotic elements in the peoples army itself.

the great vision of Deng.

Profits are scientificaly in command in order to gain maximum development for an export of wealth to the imperialists economy in order to benifit the working class in a harmonious society free from disruptive class struggle .
It is of little importance if the bulk of the value created is exported and realised as profits in the imperialist countries, as long as a small cut is retained in china as payment for managing labour in a socialist way.

This great marxist contribution to the 'theory of the productive forces was creatively developed by liu and deng and continues today to lead the people to socialism.This is called the theory of socialism with chinese characteristics.
everybody just needs to rid themselves of backward Maoist /gang of five theories of putting peoples politics in command in order to ensure development of greater profits.

Socialism is clearly in the bag already all that will be required after a few more years will be to find or rebuild an environment where people can actualy live and enjoy the great way of life possible in a profit system.
As shown in hollywood movies.

Sure some will and have got rich first in china but this is indeed a glorious thing .
What kind of leftists would deny the human rights of some getting rich first? Didnt america have its robber barons ?This is completly normal and their just reward in a putting profits in commandeconomy .
Some will get rich but with trickle down economics the other billion or so people are sure to follow anyday soon.

Any temporary difficulties in profit making in the growing economic crisis are sure to be overcome as long as harmony on this road to socialism is continued and class struggle minimised as speculators with chinese characteristics
are turned loose as in the above story .
The marxist idea or theory that the rich create the poor and the poor create the rich is surely outdated dogmatism that the dengists have overcome.

Sniping and grumbling from the "ultra left" at home and abroad is anti socialist and should be rectified by studying the theory of socialism with human characteristics.
Australians are well advised that they too can win socialism by developing an efficient export of wealth economy .
If they only develop a socialism with aussie characteristics theory .
The material basis for such a theory is not cheap labour surplus value export as in china but natural resources.Our future could be bright too if we remember the breshnevian idea of the proper international division of labour in a socialist world order.

'Hu Jintao urges Party members to better learn socialist theory 2008-09-29 23:46:48

BEIJING, Sept. 29 (Xinhua) -- Communist Party of China (CPC) chief Hu Jintao has urged Party members to learn the theory on socialism with Chinese characteristics more conscientiously.

Hu, general secretary of the CPC Central Committee, made the remark at a seminar which was participated in Sunday afternoon by members of the Political Bureau of the CPC Central Committee.

Prof. Yan Shuhan from the Party School of the CPC Central Committee and prof. Qin Xuan from the Renmin University of China delivered speeches at the seminar and put forward their views on applying the theory into practice.

Presiding over the seminar, Hu said the theory on socialism with Chinese characteristics is a fundamental guideline of the Party and government for social and economic construction.

Party members should understand the basic principles of the theory and use them in their practical work, he added.

Hu asked Party organs at all levels to make the theory accessible and understood by every Party member and draw long-term plans to promote and develop the theory.

Anonymous said...

Speculators already on the loose in a China State Council controled company?

Citic Pacific chairman Larry Yung Chi-kin on October 21 warned of losses of up to HK$15.5 billion (US$2 billion) from unauthorized foreign currency trades. He said the company had booked a HK$808 million loss on the termination of leveraged foreign exchange contracts, or "currency accumulators", and warned of a further HK$14.7 billion loss on outstanding contracts.

So far, the Hong Kong government has not indicated any action it intends to take, raising questions as to whether the company's directors will be protected by the close links between Citic and the ruling elite in China. Similar losses at other Chinese companies based in Singapore and in the mainland have led to criminal prosecutions.

Citic Group was established in October 1979 by Yung’s father, Rong Yiren, a former vice president. Citic was conceived by then Chinese leader Deng Xiaoping as a window for China’s opening up, and it has since played an important role in attracting foreign capital to China. In 1986, Citic Group acquired Hong Kong-listed Pacific Development and renamed it Citic Pacific, which become the first red-chip company in Hong Kong.

The company is one Hong Kong's 93 "red chips" - that is, mainland companies incorporated and listed in the former British territory, with Chinese controlling shareholders. Citic Pacific’s largest shareholder is Citic Hong Kong (Holdings) Ltd, a wholly owned subsidiary of Citic Group, which comes under the control of the Chinese government's State Council, or cabinet. ..
Zhang Xing, at the research institute of trust and wealth management under the Southwest University of Finance in Chengdu, said Citic needed to buy currency forward contracts to protect an investment in an iron ore mine in Western Australia. But the contracts allowed only limited profit on the upside and exposed the company to unlimited losses on the downside, which is the opposite of a property hedging strategy,"

...Similarly in the mainland three years ago, a former export-import director of the the State Regulation Center of Supplies Reserve, which manages China's metal reserves on behalf of the State Reserve Bureau, lost about US$200 million by betting on overseas copper prices. He was sentenced by a Beijing court to seven years in jail for his role in the scandal.

A high bankers bonus driven player ? from a well connected family .
The "Red Princess" simply got "demoted "and "salary cut".
main source :