QUOTE (Made in China @ Dec 16 2009, 03:50 PM)
Freedom of flow of information, liberal academic freedom on research publications in China is relatively restricted compared to the United States.
The key point I'm trying to make is. Given state censorship and state grips on freedom of flow of information, How can China out innovate the United States in financial sophistication and financial instruments
(EXAMPLE: complex over leveraged loans repackaged into derivatives)?
One of the key reasons Shanghai is unpopular with foreign investors (let alone the fact that foreign investors aren't allowed to invest in the mainland stock markets) is because of Shanghai's lack financial products like risk-mitigating derivatives for sophisticated investors who want to hedge bets in a volatile stock market.
Once Shanghai achieves these fundamental tools such as derivatives include options and swaps in bond and foreign exchange markets and margin trading and short selling in the stock market.
MY question is: How can China invent it's own financial instruments (innovation) for sophisticated investors after it has fully adopted Western model systems in the U.S. and Europe?
Why is this important to innovate? A market leader must always invent new financial products/instruments in order to lure investors. China must always
maintain it's financial competitive edge (after fully assimilating the Western capitalist model) by offer new sophisitcated instruments instead of simply copying them into the Chinese economy.
EXAMPLE: Hong Kong's competitive edge lies in innovative financial instruments which gives sauvvy investors risk-mitigating derivatives and options in a financial volatile market. Hong Kong's economy is far more innovative
than Shanghai in terms of variety of market instruments available for foreign investors, but Shanghai can copy most of what HK already offers.
Can China/Shanghai innovate in financial instruments give lack of free-flow of information/restricted censorship of China? It needs to if it wants to become a leader in the financial world and maintain an edge against Stanford, Harvard, MIT grads from US.
wow... That was bad, even for a white dude drunk on the kool-aid of western superiority.... you're so misguided I don't know where to start.
First, academic freedom in the west isn't as Free as you think it is. Academic research in the US is often just as affected to political pressure as China. You think the west is a bastion of freedom. It isn't. Political attitudes and political correctness often dictate the direction of academic research. Witness Climategate.
second... Shanghai's not unpopular with foreign investors. It's just that foreign investors aren't really allowed on the Shanghai stock exchanges, save for a few specialized transactions. You make it sound like investors wouldn't want to invest in Shanghai if it had the chance, when in reality, many would die for the opportunity to be the intermediary in, say, the Yuan denominated sovereign bond market. All it would take is for Beijing to give the OK, which it could easily do.
Third... you mention that China adopts a western model of development. errr.... unless you've been living under a rock, you'd know that out of all the countries in the world, China's probably the one nation that does *NOT* follow the western model of development. You might want to listen to what economic professors have to say about the Chinese model. Say for example, Joe Stiglitz. He did lots of analysis on the Chinese model vs the western model of development. You know Joe Stiglitz? He's a Nobel Laureate in economics. I'd tend to believe him just a tad bit more than you.
4th. "A market leader must always invent new financial products/instruments in order to lure investors" wow. Did you really write this? Do you not have the faintest idea how all the recession in the west started? not gonna say too much here except I'll quote some people who just happen to have far more credibility than you do.
"Finance produces nothing of value, no widgets. All we do is shuffle money around and collect fees. The more complex and opaque the instrument, the more likely that it is ripping people off."
-Jeremy Gratham, 2009 Buttonwood Gathering
"Like teenagers with their parents away, financial institutions threw a wild party that eventually tore-up the neighborhood."
-David Einhorn, 2009 Value Investing Congress
The "party" referred to by David Einhorn, was about financial derivatives. Also called financial weapons of mass destruction by Warren Buffet. The "neighborhood", if you didn't know... was America and Europe. I'd also suggest you read Also read Jim O'Neill, Head Economist at Goldman Sachs. You know... the guy who invented the term "BRIC"?
I'll leave it to you to figure out who these other people are that I've mentioned. Again, if you're gonna comment on Finance and economics, I'd suggest you do some hardcore reading first. If you don't know the people who I'm quoting, please don't talk to me because you know nothing about Finance. Then you might come to the conclusion that, If anything, the latest recession proved the superiority of the Chinese model over the Western Model.