Macro-Eggheads

How to best activate economic growth in the developing world? I investigate four ways that can quickly stimulate rapid growth in a country and up-skill and transform a traditional primary economy into a secondary economy:

2014-01-09T11:33:00.003+11:00

The injection of Foreign Direct Investment has the potential to transform an economy from zero to rapid growth. The transference of tacit knowledge and skills can help develop a country and increase the average income and standard of living. Four ways to transform an economy are as follows:
1. Provide a stable and competitively priced labour force:
Provide a stable political and social environment with enough competitively priced employees to satisfy demand.
2. Enact transparent laws with effective provisions to impose penalties and recoup business losses:
Enact laws in English, which are consistent with western laws and regulations. An effective rule of law, especially in contract, underpins commercial trust and will provide foreign creditors with sufficient security to start and continue to invest in a country. Transparent and equitable laws should provide recourse for creditors against debtors if they fail to repay their loans.
3. Low taxation on foreign investors:
Foreign investors will be induced to commence operations in a country with lower than average taxation.
4. Create user-friendly taxation and accounting (reporting) standards:
Provide accounting and taxation policies, which are simple and easy to navigate and use.
5. Encourage Foreign Direct Investment (“FDI”) through education and marketing:
Educate and market to potential investors about the benefits of commencing operations in that country. Make it easy for foreign companies to inject capital into a country and commence operations.

Are donations enough to save Cambodia? Should the West be looking to substitute charity with more knowledge capital and foreign direct investment?

2014-01-08T15:03:00.005+11:00

I just returned from a truly eye opening trip to Cambodia. A question lingers in the back of mind -- How can western nations better help these people? It was immediately evident that the next hurdle for Cambodia will be to convert charitable donations into sustainable / organic economic growth and entrepreneurial activity. The question is how?

As a tourist it is very easy to become lost in the solace of Angkor ruins, massage parlours, yoga studios and French-cuisine in the newly manufactured tourist hubs of Siem Reap and Phnom Penh. Rising scepticism is unavoidable amid the French croissants, tourist polish and glowing travel write-ups, juxtaposed to the real situation with 40% below the poverty line and strong bilateral ties with North Korea (i.e. the poverty line relates to less than USD$1 per day). The glitzy hotel polish, for western eyes does little to disguise the immense poverty, suffering and trauma of the Cambodian people. The country is plagued by deep rooted scarring (both physical and mental), the severity of which only becomes apparent from looking into the eyes of the street vendors, beggars and tuk tuk drivers.

It is quite apparent that the Khmer Rouge (1975-1979) and the Killing Fields are just the tip of the iceberg in a country where there has been a string of wars only officially ending in 1999. Experienced tourists and expatriates, whisper of continued civil unrest rumbling deep in the jungle. This hardly comes as a surprise to me in a country, where political turmoil and political unrest have become simply a way of life. Adverse poverty, physical injuries and post-traumatic stress disorder will continue to haunt the community for many years to come. It seems that everyone has a war story to tell; even my tuk tuk driver, Nga, fought for the Khmer Rouge as a child soldier. He was recruited when he was 12 years old and fought for about 17 years in the jungle near Seam Reap until the end of the war in 1999. I was somewhat shocked as he recounted his time in the Khmer Rouge with fond memories of guns and rocket launchers and complete apathy towards murder and death. This normalisation of war has a broader context in Cambodia as the community has developed an acceptance for many things which are normally perceived unethical or taboo (e.g. slavery, rape, oppression and murder). The ‘Wild-Wild East’ was coined by journalists in the 1990’s and this term is still very relevant in describing the country. Nga summed up Cambodia with one very brief sentence, ‘Phnom Penh have very nice hotels and tourist temples…then as you drive out of the city limits you can get anything that you want….cheap guns, grenades, tanks, drugs and [even] young girls’.

Amid a renaissance of Angkor tourism, tens of thousands of disgruntled textile workers took to the streets of Phnom Penh in late December 2013 to protest against the minimum wage of USD$80 per month. Prime Minister Hen Sen has taken a very hard-line against the protesters by banning all future demonstrations and street marches in Phnom Penh. The Government’s decision to increase the minimum wage by a measly USD$15 per month was considered insufficient, with expectations for it to double to USD$160 (compared to China with a minimum wage of USD$260). Subsequently the demonstrations were quickly dispersed by a small army wielding steel bars, metal pipes, batons, sticks and axes yielding four deaths. This type of violence and oppression has become normalised in Cambodia and comes as a chilling reminder to the locals and the world of the Pol pot era.

Cambodia has a very dark past and will continue to have a very dim future unless the West steps up and helps. The West have made voluntary foreign aid donations from a combination of Governments and NGO’s, estimated at about USD$5.5 billion since 1993 (Charles 2013). The next challenge for Cambodia will be to convert charitable donations to sustainable economic growth and entrepreneurial activity. Although this is not impossible, in many ways donations and economic growth are competing ideologies. The main outputs that transpire from charitable donations in Cambodia are developments in health, nutrition, infrastructure and education. Once these basic needs have been satisfied, evidence suggests that donations are no longer constructive in terms of aiding development in a society. A number of academics write about the dark side to foreign aid in Cambodia and they talk about corruption, aid dependence and the failure of free handouts developing into true organic economic growth (Ear, 2012 & Keo, 2013). A key goal for the west over the next decade should be to start transferring donations to active foreign direct investment to provide opportunities and organic growth in Cambodia. This would hence provide a continuous drip stimulus of capital into the economy (i.e. capital refers to both knowledge and financial capital). This way, we can organically increase employment in Cambodia and avert another spiral into the grasps of another oppressive regime or worse still a war.

Alibaba and its B2B, C2C and B2C Strategies (Born in 1999)

2013-10-03T10:17:00.002+10:00

Western Economists are completely wrong. There are definitely lessons that we can learn from China in terms of E-business and Omni-Channel strategy. Some words to explain the Chinese E-Commerce ecosystem include: Fast moving, aggressive, imperfect and hungry to grow-up.

A few of my Digital Omni-Channel team were fortunate to attend the Alibaba Story yesterday, featuring a very inspiring interview with Porter Erisman. Erisman worked with Jack Ma from 2000-2008 to transform Alibaba from a modest start-up into a multi-billion dollar business, which now dwarfs the likes of E-bay and Amazon combined. Alibaba now dominates the China E-Commerce market and is now one of the biggest E-businesses in the world. It boasts USD4.4 bill in revenues and an impressive market capitalisation of USD170Billion++, accounting for over 60% of the parcels delivered in China. The next step in its lifecycle is to take over competitors or become a target. Interestingly it is now looking to New York rather than Hong Kong for its recently announced IPO which will provide it with much needed capital to help satisfy its appetite for global expansion.

So, how did Alibaba become so successful? Well in a nutshell it was fast moving, aggressive, imperfect and hungry to grow up. Seizing every day of its short life, developing a multi brand, multi business strategy before anyone else (i.e. Business to Business (Alibaba.com), Consumer to Consumer (Taobao.com), Business to Consumer (Tmall.com), Online payment services(Alipay.com) and a Shopping Search Engine (eTao.com)). It basically beat E-Bay, Amazon, Google et al to the China market and now dominates.

We have a lot to learn from Alibaba and I urge everyone to hop on to You-Tube and watch this interview (http://www.youtube.com/watch?v=C53TzSDnzug) or the Crocodile in the Yangtze, which documents Alibaba’s rise to the top of the heap.

E-Business is still bullish, but for how much longer?

2013-06-25T17:09:00.000+10:00

I think we can all agree that “Online”, "E-Business" and "Omni-Channel" are the new buzz words across all industries including retail. Anecdotally speaking when I look around Linkedin or take a walk around my local bar in Manly, it seems as though every second primary school friend is now an online entrepreneur working from home. Most of the start-ups I hear about have a nearly nonsensical business case, that I can hardly grasp and these companies are probably destined to fail. A few months ago I came across the founder of one exception, Herocondoms for every condom purchased in Australia, one is donated to Africa (link here). Another notable exception is Accenture alumni Ruslan Kogan who has exponentially grown his online start-up to compete with the big boys in town (link here). Except for a couple of notable exceptions, two of which are listed above, I wonder whether the global market place is robust enough to sustain all these micro start-ups. As you know, the Michael Porter theory argues that the more players in a market the less profitable that market will become. This begs the question as to whether Online is verging towards over supply and market failure or at least failure for the majority of its participants.

All the Talk About the Next Online Bubble:

I actually had a very pertinent conversation on Friday with an Economist specialising in digital markets that I’d like to share with you. According to him all the analysts are saying that the current landscape is saturated with existing local players, foreign players and the late entrant big retail companies such as Myer, David Jones and Harvey Norman. He forecasts that there’s another .com bubble emerging, similar to the one in the early 2000’s, when there were too many market players and simply not enough business to go around. The big retail players have deep pockets and the ability to sustain the hard times in retail, whereas many of the smaller less profitable players do not. I think the simple issue is that many online businesses are inefficient and simply unprofitable. Many of the players are running their operations at a loss and are cannibalising shareholder capital to merely sustain themselves. The issue is that inefficient companies are staying above water due to the unfaltering willingness of investors to keep pumping them full of “free” owners’ equity, powered by the false promises of massive capital growth and that they will be the next Google.

Investors continue to be bullish towards online, due in part to intense hype and speculation propagated in part by glossy company prospectuses and the media. Financial Analysts say that investors have a gold rush mentality towards the online retail market and label the market as a speculative bubble that must bust. There is a notable trend and inefficient belief amongst shareholders that all new entrant start-ups will experience massive success and capital growth like seen at Kogan. The Facebook IPO is probably the best example of investor speculative value (i.e. the amount that shares are subjectively valued at) versus the actual value (i.e. the amount that the shares are objectively valued at using financial analysis). In a nutshell, the Facebook public offer was hugely overvalued (as calculated by the size of the gap between the speculative value and actual value). Unfortunately speculative shareholders bought into a dodgy business case and glossy magazine rather than analysing objective financial indicators. Within hours of the Facebook IPO the market realised that shares were grossly overvalued and the share-price slumped and then the shareholders wheeled in the lawyers and the rest is ancient history ;-)

Perhaps Facebook marks an early warning sign that the market is not buoyant enough to carry all of these overvalued assets and hence goes towards proving that there is an opportunity to “cut the crap” out of the Online market. Perhaps it will mark the beginning of a long process of aggresive attrition and M&A activity. I say may the best company win the new online saga.

Challenging a Statutory Demand in New South Wales

2012-10-20T13:02:00.003+11:00

I was cleaning up my bedroom and stumbled across some of my old law school files and found myself engrossed in the statutory powers, which protect corporations against statutory demands served against them by creditors to recover outstanding debts. I figured that a very tiny percentage of fellow Googlers might actually find the following extract interesting:-

What is a statutory demand and what is its significance?
- It represents the creditors commencement of a winding up order against a debtor.
- The statutory demand must require the company to pay the amount of debt within 21 days after the demand is served on the company (see: s459E(2)c). The demand must also provide an attached affidavit.
- If the company fails to comply with the demand, then the creditor may apply to the Court to wind that company up in insolvency (see: s459Q).

How can a debtor challenge a statutory demand?
- The company may apply to set aside a statutory demand within 21 days of the demand being served on them. The grounds to set aside are as follows:
1.There must be a genuine dispute between the parties about the existence or the amount of the debt,
to which the demand relates (see: s459H(1)a).
2. That the company has a claim offsetting that outstanding amount (see: 459H(1)b). An offsetting
claim means a "genuine counter claim or cross demand against the creditor" (even if it does not
arise out of the same transaction or circumstances as a debt to which the demand relates).

How to set aside a demand on other grounds?
- If there is a defect in the demand.
- Substantial injustice will be caused unless the demand is set aside
- There is some other reason why the demand should be set aside.

Order subject to the conditions
- Respondent may also ask the Court to make an Order subject to the conditions (see: 459M).

Costs
- Where the respondent wins and the demand is set aside the Court may order that person making the demand to pay the Companies costs in relation to the application.

The changing world order

2012-02-25T17:35:00.004+11:00

We all appreciate that much of the world's relative wealth is shifting from the western hemisphere to the eastern hemisphere. Research indicates that the actual cost of all things in the western hemisphere will increase. Even though the west will continue to grow to be "bigger and better" than it has ever been. The actual disparity between the haves and the have not nations will decrease. Such non-disparity means that more people will have access to more cash and therefore the actual relative value of that cash in terms of purchasing power will likely decrease. So perhaps China will eventually take the position of the developed world.

Why is the AUD declining?

2011-10-04T15:35:00.003+11:00

In the last 30 days the AUD has declined against the USD by about 10.67% from $1.0636 to approx $0.95. Further, the AUD has declined by 9.3% against the Yen, 9% against the Yuan, 5.38% against the Pound and 3.5% against the EURO. It appears that certain proprietory traders must be making a motza out of this decline, because the fundamentals for such a decline simply do not add up. Business Journalists justify the declining AUD by arguing that it has been caused by the Greek debt crisis, declining natural resources and a rumour that the RBA might cut interest rates. But these arguments simply fail to make any funadamental economic sense, when analysed in respect to the global predicament in the US and Europe. In fact Australia is a diversified and modern economy and produces much more than mere iron ore. Moereover, Australia has a growing GDP, whereas the rest of the world does not. So why then is the AUD being punished? The answer is that the market has been indulging in PURE SPECULATION. Unfortunately there is a ridiculous perception that the AUD is completely related to the price of natural resources and that the failure of Greece is going to lead to economic armagedon and thus lower prices of iron ore and cause the AUD to reduce to X. The fact of the matter is that, if Greece defaults, there will be many other dominoes that will fall flat before Australia. Economists doubt that even if Greece, Ireland, Portugal, Spain and Italy fail that it will cause China's demand for natural resources to decline below growth on the year proceeding. The fact of the matter is that Australia will be exporting more goods and services to Asia than the year prior, even if America and Europe slumps into depression. So this argument should not be a question of why the AUD is failing, but rather why its not gaining against the rest due to the inherently bad economies in the EU and USA. Perhaps we should be arguing about why the USD and EURO are trading at such an over inflated level given their domestic predicaments?

Quantitative Easing could mark the beginning of the end for the USD

2011-06-06T15:58:00.007+10:00

We all know that the Federal Reserve's quantitative easing is undermining the value and security of the US dollar. In an attempt to kick start domestic product supply chains and to undermine cheap Chinese imports. This type of debasement could very easily spark the end of a US Dollar dominated world. But which currency would be a suitable replacement for the USD? The EURO and the POUND have their own fair share of issues. The YEN represents yesterday's Asia in decline shadowed by the recent economic miracles of China and India. Further, China's pegged YUAN is too highly controlled and exposed to governmental manipulation to be a likely candidate. The AUD and the CHF are perceived to be too small and not liquid enough to be a safe enough bet. So, perhaps the only foreseeable solution will be for countries to hold a bread basket in reserve of an assortment of currencies (i.e. EURO, POUND, YEN, AUD, CHF, USD, YUAN, GOLD). Or, perhaps the Gold or Silver standard will return.

This chart perhaps shows the beginning of the end for the USD.

India's population growth

2011-03-01T09:22:00.003+11:00

India has over 1.2 billion people and it is exponentially growing. Unlike China, India is the worlds biggest democracy and has made no attempt at curbing its growth with a one (1) child policy. So, what will happen to a much bigger India with projections of about 1.9 billion in twenty five years, and its resources are already depleted. India will either have to spread its resources more widely amongst its population or face increased polarity between the wealthy and the poor. In essence, India's classes will all grow in number, however they will likely remain as equal fractions. The biggest issue will be food and water, the quality and consumption per head will more likely reduce or be imported from surrounding countries to replenish the gap.

Liability of Airlines for recklessness

2011-03-01T09:20:00.000+11:00

Qantas Ltd as an example has had a string of commercial accidents since it was floated on to the market in 1997. In the scenario that an airline suffers fatalities (deaths), which are attributed to by its maintenance, could the airline itself and its Directors be criminally liable under the Commonwealth Criminal Code.

In the scenario that an airline suffers a casualty the company and the Board of Directors could be criminally liable for cutting maintenance, so long as it was sufficiently connected to the fatalities. In this case the Court is empowered to make a finding of recklessness and order a fine on the company and prosecute the Directors individually. Under the Commonwealth Criminal Code at 5.4 (1)(a) a finding of recklessness will be made in the situation where a Director is aware of a substantial risk of death or injury and that the circumstances exist and that it was unjustifiable to take the risk, and the company takes the risk anyway.

Will 2011 doom the EURO?

2010-12-28T20:25:00.008+11:00

There have been escalating rumours over the last six (6) months that Germany, the EU's largest economy is planning to announce its withdrawal from the EURO in early January 2011. Although these rumours seem a bit dubious, they allegedly stem from a Bund Employee who alleged on a chat site in early June 2010 that new generation Deutsche Marks were being printed for circulation in Germany, Austria, Netherlands and Finland.

Yet the question remains as to whether this rumour will in fact crystallise into reality in early 2011 and whether this would lead to the eventual demise of the EURO?

The geopolitical ramifications of a German led EU currency exodus would be as follows:

1. Shortly after Germany's announcement, France would make their announcement to exit to the Franc.

2. Thereafter the Eastern and Southern EURO 'basket republics' would be left with an unpredictable dud currency. Perhaps these nations would be able to follow the USA's hyper-inflationary lead and print their way out of debt. Nevertheless within days the EURO would likely par with the PESO's in Latin America.

QR National Share Offer worth AUD 5 Billion dollars?

2010-11-08T13:29:00.003+11:00

This share offer worth AUD 5 billion dollars is complete ‘junk’. It is hardly different to those ‘junk’ derivatives that led to the global financial crisis of 2007. Like those worthless securitised property derivatives this Corporation has been grossly over valued. Only more heinous this QR National offer is marketed directly to ‘Mum and Dad’ retail investors rather than faceless corporate professional investors.

After reading through the QR Nat share offer prospectus and crunching some numbers the over valuation of this Corporation becomes acutely obvious to any layperson.

For example in the hypothetical that you invested AUD$1.00 in the financial year of 2010 in a five billion dollar share offer you would have earned a total of 4.0cents in profits. In the hypothetical that you invested your AUD$1.00 in QR Nat in the financial years of 2008 and 2009 your return on investment would have been 1.98cents and 2.8cents respectively. In the years between 2008 and 2010 the RBA calculates inflation at 4.4%, 1.8% and 3.1% respectively. So, had you invested money in any of these hypothetical share offers your miniscule profits would have lost out to inflation.

The RBA’s cash rate for this same period has fluctuated between 7% and 4.75%. So, comparatively if you had invested your money in a term deposit at least you would have made money.

The front page of today’s SMH Business Day quotes Deutsche Banks and Macquarie Banks valuations of QR at $2.53 and $2.75 respectively. Many smaller institutions such as Roger Montgomery give a much more realistic evaluation of anywhere between $1.09 and $1.48 per share. Yet the official share offer stands at about $2.80 per share.

The advocates for QR Nat argue that these miniscule returns are sidetracked into irrelevancy because of the potential for immense future profits and significant capital gains. Well in that case an analysis of the QR Nationals financials reveal a finding of total assets equating to 8.574 billion and total liabilities equating to 5.89 billion leaving net assets worth a total of 2.684 billion. Yet the Queensland State Government says that 2.684 billion is worth 5 Billion dollars in shares. In that case I would prefer my AUD$1.00 to remain in the Bank anytime.

Our Excessive Population Growth

2010-09-24T11:03:00.007+10:00

The World's population is booming and its not because we are having more babies. It is because less of us are dying, when we should. We currently have 6.7 Billion people and the United Nations predicts that by 2025 we will exceed 8 Billion and by 2050 we will exceed 9 Billion. This excessive growth will be detrimental to mankind as the demand surpasses the supply for the worlds resources. In effect by 2050 there simply won't be enough h2o, food and fresh air to go around.

Goldman Sachs

2010-07-01T11:00:00.002+10:00

The US Senate and various customers are running inquiries into Goldman Sachs conduct, with regard to their design and sale of certain securitised asset products. In 2007, Goldman Sachs designed mortgage backed securities that they knew would fail and then they bet on their collapse by purchasing credit default swaps, which pay out upon a default. In Australia this type of conduct may contravene the insider trading provisions of the Corporations Act and those responsible would invariably be held liable for hefty penalties including Gaol.

Hu Stern to be Gaoled for 10 years

2010-03-29T18:22:00.002+11:00

The Shanghai Court has sentenced Hu Stern to 10 years imprisonment for allegedly stealing trade secrets and accepting bribes.

The Global Financial Housing Crisis

2010-03-26T11:59:00.010+11:00

The next big financial crisis to cause havoc with the Australian Economy could be sparked by a Domestic Housing Crisis. The Australian Property Market has been unfaltering since the early 1980's increasing by more than 250% and all growth with no pitfalls is unsustainable in any market. The normal market principles here are flawed because property ownership demands huge prices, which limits new buyers from entering the market, which will inevitably result in an oversupply, unless there is a serious price correction.

Please refer to the graph below to see what happened to the property market in the US, it is reasonably foreseeable that a similar market correction might occur in Australia.

Australia's Property Market is geared to fail because the current demand, is sustained by debt and the willingness of purchasers to borrow more and more debt to pay for property. This market does not correspond with increased returns on rent or even substantially increased incomes, this market has been stimulated by fear tactics, misrepresentations and deceptions represented by real estate Agents to venders and purchasers. The only reason that this market misrepresentation is tolerated to the detriment of consumers, is because Australia's State Governments earn far too much of their revenue from Capital Gains Tax to risk any price correction to the property market.

Stern Hu v The Peoples Republic of China

2010-03-22T16:08:00.003+11:00

Sterm Hu, the Rio Tinto Executive and Australian citizen who was arrested by Chinese Police, last year and has been detained for 9 months, is facing his first day of Trial this morning. The Chinese authorities charged Stern Hu, just after the Chinese Government failed in their takeover attempt for Rio Tinto. The Chinese Authorites allege that Stern Hu has "stollen business secrets" and has been a "recipient to bribes". He is facing up to 12 years imprisonment. Stern Hu's trial began this morning and is proving to be a most untransparent process. Due to the fact that the media has already been warned by Chinese authorities not to cover the trial, and Australian consular officials have been barred from taking part. The only upside to this great injustice is that China's unsavoury approach to the Judicial Process will be put up on a pedistoll for all of the World to see and it shall prove to the world once and foreall that no company is big enough and no Western National is shrewed enough to avoid the Great Tenticles of China.

The GFC proves nothing more than a bump in the road over the last 36 years

2010-03-17T12:26:00.006+11:00

The Dow Jones - Monthly Bar Chart from 1974 to 2010.

THE TEN SECOND NEWS – MINUS THE BULL SHIT.- 16 March, 2010

2010-03-15T22:24:00.001+11:00

WORLD EVENTS

US HEALTH CARE BILL PASSES CONGRESS: Obama's 2,700 page healthcare bill finally passed US Congress and it will offer 30 million more Americans with health insurance than are insured today. The Federal Government will immediately sponsor 5 Billion dollars in healthcare insurance.

RIOTS IN THAILAND: Thousands of supporters of Thai Premier Shinawatra protest in Bangkok demanding the Thai government to step down. Riot police and soldiers were deployed outside government offices. The Thai Prime Minister rejects protesters demands for his resignation.

FRANCES ECONOMIC ADVICE TO GERMANY: Frances Finance Minister Chritine Largarde has warned Germany that its trade surpluses are unsustainable because they are built upon low labour costs.

THE CHINESE YUAN: Chinese Premier Wen Jiabao claims that the “The Chinese Yuan is not undervalued”. He further said that “if you restrict trade with China, you are hurting your own countries’ firms”.

THE ARMS BUILD UP IN SOUTH EAST ASIA: China’s increased power has caused its neighbours to increase their spending on defence.

US - ISRAEL RELATIONS AT LOWEST POINT SINCE 1975: US ties with Israel have sunk to 35 year low, over Israel's announcement to settle a further 1,600 homes for Jewish Israelis in East Jerusalem.

INDIA'S INFLATION HITS 9.9%: India's inflation hits 9.9% in February, driven by inflation in food prices, adding to pressure on policymakers to continue unwinding stimulus measures.

Is China as BIG as it claims?

2010-03-15T19:23:00.004+11:00

No one disputes the premise that China is the Worlds fastest emerging Economic Super Power. But who questions the Chinese Governments data? How can we just blindly trust all the economic data that comes out of China? China may be embracing Capitalism but it is certainly not transparent and this will definitely limit its future successes.

All outsiders solely rely upon the data released by the Chinese Communist Party and it is a real concern that all the Bankers and Economists who are investing in the region cannot trust the data that they rely upon to make their financial decisions.

A recent example of the deceptions coming out of China is the increase in housing prices over the last year. The Chinese Statistics Bureau put the rise in housing prices at 1.5% in the last 12 months, whereas the Chinese Real Estate Association put the figure at 22%. If this discrepancy doesn’t sound alarm bells for investors, how about the grossly undervalued Yuan and China's alleged 2.7% rate of inflation.

Foreigners understand one stereotypically Chinese feature and that is the fine art of 'saving face'. 'Saving Face' is considered by some as socially acceptable conduct that allows people to lie if that lie protects them from the dishonour of the unfavourable truth. So there is nothing to stop China from only releasing its 'good news' and sweeping all its 'bad news' under the carpet. The problem is that one day all this compounded bad news, which gets swept under China's enormous carpet will leak, undoubtedly causing economic Armageddon.