Aussies Now Trading Blind with China — The Lack of Transparency

Aussies Now Trading Blind with China — The Lack of Transparency

Dear Reader,

After a rather dramatic standoff between high ranking Chinese officials and Australian consulate officials, two Aussie journalists were booted out of the country.

There are now no journos representing Australian papers in China.

This is the first time we haven’t had an official correspondent in the Middle Kingdom since 1972.

Given that the Chinese Communist Party (CCP) has been actively kicking out Western media this year, it’s no surprise that Big Xi is clamping down on anything that could paint him in a bad light.

The problem is this creates a whole host of problems for Aussie investors.

As of today, Australia is effectively blind when it comes to understanding our largest trading partner.

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Lack of information

The US–China trade war is no longer a tit-for-tat tariff exchange between two economic giants.

It’s morphed into a war on information.

The Middle Kingdom that opened its doors to the world and mimicked Western capitalism markets never relented its grip on the population.

Failing the Western political thought bubble that eventually the people in China will demand the same freedoms we in the West enjoy. (OK, everyone except those in Melbourne. But we’ll tackle those another day).

Dare I say it though, a key difference between those in Melbourne and those in China, is that Melburnians can criticise their leader without fear of government repercussions.

The Chinese don’t enjoy the same privilege.

And for several decades now, us outside of China have been given a peek into the country because of foreign journalists working there.

For Aussies, this peek is critical. We sell the Middle Kingdom everything we can dig up, and when they’ve bought all they can there, we then flog our overpriced high-rise apartments as a way for wealthy Chinese to get capital out of the country.

While Australia was always going to be collateral damage in the trade war, booting out our journos changes the tone.

It’s no longer about what companies lose out in the tariffs, but how retail and institutional investors lose access to critical information.

We only need to look back to January this year where the CCP were actively trying to stamp information on the coronavirus.

The impact of the virus was supressed by local officials. Locals in Wuhan were arrested or simply disappeared as they tried to share information on the ground about the virus.

The World Health Organization (WHO) under the thumb of CCP politics even aided the narrative by simply confirming everything the CCP officials said.

The blatant misinformation out of China meant governments had severe reactions as the virus arrived into a new country. Had CCP officials shared accurate information freely perhaps we wouldn’t have witnessed the halting of economies worldwide.

The world was caught off guard with the coronavirus based on the little information we had. The effects of this have been felt globally. Now imagine having no foreign journalists that report to papers outside of China. How much more damage would’ve been done had we only been given CCP authorised information?

Of course, this is fresh in our memory. But we only need go back five years to see the catastrophic effects of what happens when even truthful information is poorly communicated by China.

The day commodities crashed

Today stock markets around the world are acting like nothing has happened. Though extensive central bank invention will do that.

This is only the most recent instance of the CCP hiding information that Western journalists were able to uncover.

Nonetheless, we only need to look back to 2015, when the People’s Bank of China (PBoC) devalued the yuan. The event was poorly communicated by officials and coverage by state-backed media was even worse.

This rattled global markets worldwide. Commodities, currencies, indices, and stocks fell. In market terms this was a major event.

Western markets relied on explanations from foreign journalists inside China. These journalists effectively communicated to markets what has been happening and what the intention of the PBoC is. Whether we agreed with the intention didn’t matter.

Yet for those of us looking into the Middle Kingdom for answers, it was a timely reminder of not only how much global markets were linked to moves from China…but how we need the transparency of information to communicate what’s happening.

With CCP officials stomping through Hong Kong — until recently a democratised major financial hub which gave us a window into Beijing — both retail and institutional investors are now left to trade and associate with nothing more than state-backed propaganda.

Any events that come out of China may shock markets even more because of the increasing lack of transparency within China.

Australian investors needed foreign journalists in the country. Today we have none.

Aussies investors are now reliant on the very few American and UK journos left in the region.

Effectively, we’re blind when it comes to working with our biggest trading partner.

Until next time,

Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia

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