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China’s Kleptocracy

A reader with long experience in the Asian financial markets passes this essay along, saying it is “well-regarded by people in the know,” though many cannot acknowledge this publicly. Excerpts:

China is a kleptocracy of a scale never seen before in human history. This post aims to explain how  this wave of theft is financed, what makes it sustainable and what will make it fail. There are several China experts I have chatted with – and many of the ideas are not original. The synthesis however is mine. Some sources do not want to be quoted.

The macroeconomic effects of the Chinese kleptocracy and the massive fixed-currency crisis in Europe are the dominant macroeconomic drivers of the global economy.


I start this analysis with China being a kleptocracy – a country ruled by thieves. That is a bold assertion – but I am going to have to assert it. People I know deep in the weeds (that is people who have to deal with the PRC and the children of the PRC elite) accept it. My personal experience is more limited but includes the following:

(a). The children and relatives of CPC Central Committee members are amongst the beneficiaries of the wave of stock fraud in the US,

(b). The response to the wave of stock fraud in the US and Hong Kong has not been to crack down on the perpetrators of the stock fraud (so to make markets work better). It has been tomake Chinese statutory accounts less available to make it harder to detect stock fraud.

(c). When given direct evidence of fraudulent accounts in the US filed by a large company with CPC family members as beneficiaries or management a big 4 audit firm will (possibly at the risk to their global franchise) sign the accounts knowing full well that they are fraudulent. The auditors (including and arguably especially the big four) are co-opted for the benefit of Chinese kleptocrats.

There follows a remarkable and enlightening analysis of how the Chinese economy works, and what the one-child policy has to do with it. If the analyst is right, then China is built on the grotesque exploitation of the workers and lower classes. I know, surprise, surprise. What’s interesting about this analysis, at least to me, is how fragile the whole thing is, and how much it depends on extorting money from people who have to save like crazy because they have no other way to provide for themselves in their old age. The conclusion:

Unless the Chinese can get the inflation rate up expect a revolution.

I hope you readers who know something about China and economics will read the whole thing and offer your view. On this analyst’s view, China is a mafia state that will not be able to keep this false economy going forever. If China crashes, though, what about the rest of us?

about the author

Rod Dreher is a senior editor at The American Conservative. He has written and edited for the New York Post, The Dallas Morning News, National Review, the South Florida Sun-Sentinel, the Washington Times, and the Baton Rouge Advocate. Rod’s commentary has been published in The Wall Street Journal, Commentary, the Weekly Standard, Beliefnet, and Real Simple, among other publications, and he has appeared on NPR, ABC News, CNN, Fox News, MSNBC, and the BBC. He lives in Baton Rouge, Louisiana, with his wife Julie and their three children. He has also written four books, The Little Way of Ruthie Leming, Crunchy Cons, How Dante Can Save Your Life, and The Benedict Option.

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