
‘The China Hustle’, a finance documentary - cmurf
https://www.marketwatch.com/story/finance-documentary-the-china-hustle-revisits-chinese-reverse-mergers-and-activist-short-sellers-2018-03-30
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thisisit
I remember reading about these _reverse mergers_ about 6-7 years ago in a
series of articles on ZH. They had even created a basket of short trades which
closed at 40% profit in a year:

[https://www.zerohedge.com/news/2012-12-03/two-years-too-
late...](https://www.zerohedge.com/news/2012-12-03/two-years-too-late-sec-
wakes-chinese-reverse-merger-fraud-closing-chinese-fraudcap-b)

~~~
onlyrealcuzzo
It's kind of crazy how people have been talking about this and the real estate
and shadow banking and zombie companies for almost an entire decade, but the
Chinese economy remains resilient.

I wonder: were people talking about the subprime mortgage crisis that long? Do
we just hear about stuff sooner because of the Internet being more mainstream?
Is China possibly immune to a downturn just given its sheer size in
population, the fact that it's basically a dictatorship, and that it's not
affected much by outside money?

I've been bearish on the Chinese economy since 2012. Luckily I didn't bet on
it.

~~~
bobthepanda
If China had normal capital flows, their economy would’ve corrected Japanese-
style a while ago.

However, they don’t. And like Japan, they have a huge amount of reserves. But
it is supressing future growth, probably.

~~~
brownbat
Has Japan ever gotten "correct?" To your point, economies can be weird for a
long time.

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iforgotpassword
Seeing how American investors sucked the last drop of blood out of several
German companies over the last decade or two by "restructuring" those
companies, effectively signing ridiculously expensive consulting contracts
with themselves, I can't feel too bad about this. Capitalism gets glorified
and justified unless someone else starts beating you at your own game.

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krona
Presumably, these _restructuring_ s were fraudulent under German/EU law?
Otherwise I don't see how your comparison works.

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coldtea
Perhaps his point is that law and morality are not the same thing.

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sparkling
Can't watch in outside the US, well going to wait for a torrent then.

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booomagnolia
For folks living where this is not available ...
07b34e798b700abb19ecdcd81bccaff721838e0b ... ^U in your favourite client,
paste this DHT id

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yange
I want to comment as a Chinese. All the facts presented in the film are solid
and true, but the problems lie in the interpretations and implications.

Lack of law enforcement doesn't mean there's no rule of doing business in
China. In fact like an old saying in China, 'no rules, no shapes.' Rules
aren't necessarily laws, as mentioned in the film, 'Guanxi' is something you
have to build up if you want to do business in China. Larger your 'Guanxi'
network, faster and easier you can do things than others. And there's 'Koubei'
come into play. It means the trustworthy of an entity, not defined by some
auditing companies, but complimented by other fellows in the field. A decent
'Koubei' worth more than any auditing report. Like in the film where a company
can buy auditing reports to fraud investors, but a company with decent
'Koubei' but no auditing reports would never do that (at least not to local
investors). So the rule here is you have to build your 'Guanxi' network with
people of decent 'Koubei', meanwhile maintaining your own decent 'Koubei' so
others want to build 'Guanxi' with you.

This is something even Chinese kids would know, but just appears to be
difficult for the West to get a grasp of it.

Can't trust the government doesn't mean you can't trust anyone. At least we
trust in common interests. There's another saying in China, 'only kids talk
justice, adults talk interests.' In a market where you can basically do
anything with your 'Guanxi', there's no right or wrong in doing things, what
only matter is your profits. (Of course there are red lines you should never
cross and none of these were written in the law neither. They are the
'unspoken rules'.)

This is where things get funny when foreign investment firms like Roth Capital
entered the market. They know nothing about the rules here, and neither these
hungry American investors who wanted so hard to take a bite on the largest pie
in the century. And they don't even know how to protect their selves in China.
No surprise they will be fooled.

But seriously, who can you blame for? There's another old saying in China,
'you came to the town, you play by the rules.' You should do your research
before betting your pensions on some random factories oversea.

The last part of the film made me laugh. They were implying that since these
crappy factories are frauds, all Chinese companies including Alibaba and
Sinopec are lairs. This just shows how ignorant they are and they still don't
understand the Chinese rules. Sinopec is the second largest SOC in China.
Their don't even need to have 'Guanxi', they ARE the 'Guanxi'. And Alibaba is
like Amazon, YouTube, eBay, PayPal, Yahoo etc. all combined. It's the monopoly
in this field in China. It's simply too large to fail. If you are comparing
companies like these with random crappy factories out of nowhere, you just
don't seem to understand how powerful these companies are in China, and
clearly you don't understand how the Chinese market works.

The last part is mainly pathos-based, and full of logical mistakes. But I
don't know, since this is basically what they've always been doing, getting
people worked up against the companies so they can make money from shorting.

Here are some short reviews from Chinese viewers [1], and I think they
represent the mainstream opinion of Chinese people.

[1]:
[https://movie.douban.com/subject/27115571/comments](https://movie.douban.com/subject/27115571/comments)

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alottafunchata
I enjoyed the documentary! I would recommend watching and supporting it.

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tanilama
The trailer is pretty heavy-handed and sensationalized.

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bogomipz
Yes the whole point of a trailer is to hype the release.

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dmix
Those trailer is using clips directly from the film, watching it now, and it's
no less sensationalized than the trailer.

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mathattack
This happens all over the world, not just China.

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jyriand
Dear Magnolia Pictures,

I would like to watch this documentary and in return give some of my dollars
to you. These dollars don't smell and they don't look different. These dollars
are all digital and not contagious, you will not catch a virus, I promise. I
know that I don't live in USA, but does it make my dollars worth less? You
have 18 different streaming options, I tried a few, but all of those sites
discriminate me based on my location.

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Jaygitau
It's on Netflix.

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gingerlime
Can't find it on Netflix Germany.

~~~
phyalow
It's on Netflix Hong Kong :)

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Theodores
Kind of know the story and fearmongering without watching the film. World
invest gigatrillions in China, it is all a scam and innocent mom and pop types
lose everything, watch this film now so you can survive the inevitable
meltdown that will make 2008 look like a blip, right?

The reviews for this film go back six months and that makes this video already
old.

~~~
mistermann
Not right.

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bitxbit
The timing on this documentary is quite off. Though it’s worth mentioning how
China has seemingly hustled the West particularly the U.S. on a bigger scale.
They have not only usurped the already dwindling middle class but are in the
process of destroying the education system wholesale. And I am not just
talking about undergraduate and graduate schools. This is happening in K-12.
US is effectively using tax dollars to educate millions of Chinese. The only
benefit I see is the asset bubbles, namely the housing market, that will help
the forthcoming demographic offset (baby boomer retirements).

~~~
mikeash
Can you elaborate on how we’re using tax dollars to educate millions of
Chinese?

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bitxbit
Over 350K Chinese students in the US every year which implies only three years
of churn to reach one million. Increasingly more of these students are in K-12
and in public systems. But private institutions benefit from tax dollars and
are often drivers of regional economies which then ties back to tax dollars.
Moreover, the top schools across the country have limited seats for both
international and domestic students. If these institutions then prefer and
accept more Chinese international students who almost always end up paying
full tuition instead of domestic students in need of financial aid then it is
easy to make such an argument. Anecdotally, go to any nice neighborhoods with
good schools and you will more than likely find a house with a single Chinese
high school student living in it. I am not saying international (and Chinese)
students do not add value to the education system here in the US but when
there are so many of them flooding the market effectively pricing out well-
deserving domestic students then we clearly have a problem.

~~~
mikeash
At the college level, they pay exorbitant tuition, so there’s no reasonable
case that they’re getting taxpayer support. More like the other way around:
international students paying enormous tuition subsidize other students.

I know a lot of Chinese people in the US, in wealthy neighborhoods with
excellent schools, and I’ve never even heard of high school students living
alone in a house like you describe. I’m sure it’s been done, but I’m more than
a little skeptical that it happens in any significant number.

~~~
bitxbit
On the surface, you are right, it appears international students help cross-
subsidize domestic students and I would even concede that this is true when
you look at the immediate impact ceteris paribus. However, I also think you
have to consider the fact that NPV of college education even at full tuition
is positive. And that NPV actually declines quite a bit as you move down the
quality axis which comes back to my point of displacing domestic students who
now face lower NPV and lower quality education. Supply is always limited. I
understand it cuts both ways but the current dynamic is very much one sided in
my view.

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mikeash
Supply isn’t particularly limited. Schools can expand, given enough money.
International students pay more than enough.

If international students disappeared, the result wouldn’t be all those spots
filling with American students, it would be a bunch of spots disappearing due
to lack of resources.

Education is not fundamentally different from any other product here. When
China gives Boeing a couple of billion dollars for some airliners, they’re not
taking airliners away from Americans.

