Deprival Super-Reaction Syndrome And Investing. Part four of a short series on Charlie Munger’s Human Misjudgment Revisited. Charlie Munger On Avoiding Anchoring Bias Charlie Munger On The Power Of Prices The Munger Series - Learning . . . SORRY! This content is exclusively for paying members. SIGN UP HERE If you are subscribed and having an Read More
The CPC (Communist Party of China) was founded on July 1, 1921 in Shanghai with a large working class support base. After the death of Dr. Sun Yat-sen (???)–China’s Founding Father (recognized by both Beijing and Taipei)–in 1925, a lengthy civil war soon ensued between the CPC and the ruling political party at the time–the Kuomintang (KMT or ???).
In between the Second Sino Japanese War and WWII, the CPC eventually seized control of the entire mainland China in 1949. The KMT, led by Chiang Kai-shek (???), who was a close ally of Dr. Sun Yat-sen, retreated to Taiwan and formed TheRepublic of China. The hostility, although greatly diminished with the passage of time, still remains between the two sides to this day.
From 1966 through 1976, Mao Zedong (???), then Chairman of CPC, went on with his peasant revolution vision and practically brought the entire Mainland China into a “dark age” with the Cultural Revolution (?????). (One of the reasons the term “Made in Taiwan” came a lot earlier than “Made in China.”)
At the end of 1978, the CPC, under Deng Xiaoping (???), made a pivotal decision to shift the focus of Party and government to economic reform and open up its policy.
Since then, China and CPC has never looked back. The nation roared into the second largest economy in the world surpassing Japan in 2010 boasting a GDP of $5.879 trillion.
Throughout the past 60 years or so, China has never deviate much from socialism. The CPC is said to be the world’s largest political party with over 80 million members, or about 6.0% of the total population of mainland China.
With rapid growth, cracks are starting to surface. Chief among them are rising price inflation, increasing civil unrest demanding higher wages, growing inequality of social and economic development between the rural and urban areas, overcapacity, and high debt leverage in local governments.
China has now entered into a new 12th Five-Year Plan (2011-2015) with targets such as achieving an average GDP growth of 7% per year, and creating more than 45 million jobs in urban areas. China is also set to undergo a major leadership turnover at the 18th CCP National Congress in fall 2012, which means the leadership transition will be the main focus of Beijing for the next two years.
So it is understandable that the recent messages from CPC party leaders have been centered on maintaining stability, and improving the economies of rural areas. If history is any indication, in China, stability means citizens need to have a satisfactory living standard through steady growth to fuel sufficient job creations.
It is too early to tell if CPC and Beijing would eventually rise or fall with this monumental challenge as it could take decades; nevertheless, it will no doubt have a profound impact on the rest of the world.
The video below is a good summary of the past and future challenges of China
Deprival Super-Reaction Syndrome And Value Investing