I wonder if China is seeing any impediments due to people being loathe to invest in a country where personal freedoms are very restricted and millions of their citizens are swept up in re-education camps. I would be hesitant from a personal standpoint but most larger wealth funds are probably not so restricted. By the same token neither are most manufacturers.
Sort of, but that's not why. Modern authoritarian governments, historically, are volatile. The Soviet Union lasted about 75 years, and that's pretty much a record for stability. The PRC is just getting to that age now.
Who's going to buy a 30 year bond from a government that has about even odds of surviving to maturity?
You're right about the level of political risk. But even when there's a revolution or secession, the successor state is still legally liable for the debt. So investors might still get some of their money back.
Maybe, but they'll likely default. Revolutions are messy and often result in a poorer country. How can a country's government repay its debts when the country is rebuilding? Look at post-WW1 as an example of what could happen if they're forced to pay those debts.
Even if they do get their money back, it'll be late. Who wants that kind of risk?
Not only can you not move money out of China if you have some invested there, you can't even leave! => The US government is warning Americans that if they visit China they may not be able to return home https://www.businessinsider.com/us-china-travel-advisory-201...
Which is sort of part of my concern. If you visit to sort out some sort of issue concerning your large bond investment, what is to stop them from just disappearing you. No rights for the citizens generally means no rights for investors or visitors either.
By the time it gets repackaged into derivatives and index funds, who will really know. Investor's aren't amoral, just creating plausible deniability via complexity.
Complexity really is incredibly powerful. With it you can bury unspeakable evils in plain sight.
It has wide applications too: you can obfuscate everything from financial issues to political events. For example, pretend the article of the Charleston white supremacist mass murderer said the following:
"Roof was involved in the controversy of the events of June 17, 2015. After a flurry of media attention, he became the lead defendant in the trial United States v. Roof (2:15-cr-00472), which was noted for the request for a bench trial..."
The above is entirely correct, and written in a neutral, flat tone, but it completely misrepresents the situation. By noting tiny, irrelevant details like the request for a bench trial and the criminal number, the article both becomes uninteresting and hides the truth. If you read the snippet you wouldn't get the idea that he was a mass murderer.
I read something earlier by James Risen about the CIA covering up a number of horrible things. One quote I found very interesting:
"But after I filed the first story, it sat in the Times computer system for days, then weeks, untouched by editors. I asked several editors about the story’s status, but no one knew.
Finally, the story ran, but it was badly cut and buried deep inside the paper. I wrote another one, and the same thing happened. I tried to write more, but I started to get the message. It seemed to me that the Times didn’t want these stories."
They didn't even have to threaten to not publish it - all they had to do was obfuscate it! Throw in a few complex words and kick it off the front page and behold, nobody will read it, even if it contains explosive information.
You can. You can also sell derivatives on something you do own. If you get involved in human trafficking futures, you are still involved in human trafficking because your contacts could be taken to maturity, which means someone will have to provide the humans.
That's pretty much the definition of "complexity hides evil".
Index funds are a bit more direct since you're owning pieces of things you may not like instead of owning a contract that could be converted to something you don't like.
really massive ones probably have a pretty good relation with the host country government/politicians and can rely on state political tools for leverage
Communism isn’t exactly know for prioritizing the rights and well-being of investors. Why would you engage in capitalism with a country that says capitalists should be lined up against the wall and shot?
