China's rich, primarily driven by a sense of insecurity, are taking money out of their country. Many are actually preparing to move elsewhere. According to a new study, almost 60% of China's "high net worth individuals," defined as those possessing more than 10 million yuan in investable assets, are either considering emigration through investment programs or are completing the emigration process. The survey, conducted by China Merchants Bank and Bain & Co., also reports that 27% of those with more than 100 million yuan in investable assets have already emigrated and 47% of them are thinking about leaving the Motherland. The stunning results correspond to reports that the U.S. Treasury unit monitoring illegal money flows has, since the beginning of last summer, detected a surge in hidden cash transfers out of China. – Forbes

Dominant Social Theme: China is the most magnificent country in the world. Whatta nation! What an economy! More cities than anywhere else in the world. More skyscrapers, too. Never mind that most of them are empty …

Free-Market Analysis: We were on the case when it came to China several years ago. At the time, nary a peep could be heard about the insanity of China's "market economy" – which is about as "free" as the Chinese Internet. But now the evidence is becoming clear. China is busted.

Oh, we know that China holds over US$3 trillion in reserves, but here's the reality: It's just paper – fiat money from the US and Europe. All it does is make China accountable to the West. In fact, the Eurocrats (see other story, today) have just journeyed to China to demand "their fair share." The idea is that China benefits from Europe's visionary Union and thus China should pay for the privilege. The ChiComs, to date, are not so sure.

China is full of empty cities, empty skyscrapers and railroads that keep generating tragic accidents. The public mood is so foul that China has ceased to report on the violent protests taking place across the country. There's a military action going on in Tibet right now but the chances of it being reported by the mainstream press are seemingly nil. Have you heard about it?

Western companies continue to pour funds and personnel into China and our only explanation for this is that this mania is somehow a ploy. How is it we understand China but multi-billion-dollar nationals do not? The information is out there.

Perhaps the idea is to ensnare as much capital and resources as possible in the Chinese briar patch. Then when China goes down, the failure is that much more amplified in the West. The chaos is stronger and the solution – one world government – is enhanced.

China still has its defenders, of course. The empty cities are an aggregate "investment" and have been built in part for repatriated Chinese. The skyscrapers will be filled … eventually, because China's industrial boom shows no signs of ending. The railroad accidents are part of China's growing pains, and anyway, the railroads were built by "private" industry. As for social unrest, well … China doesn't have any.

The reality is that China is a planned economy. The empty infrastructure is merely a testament to the panic of regional ChiCom technocrats desperate to fill their annual plans. The Communist Party has decreed that China is a capitalist country undergoing tremendous "capitalist" growth and woe to any Party functionary that bucks the trend. The result, as we have pointed out, is a kind of vast Potemkin Village. Nothing in China is exactly what it seems.

And now Forbes brings us a new wrinkle. There are answers for empty cities, vacant skyscrapers, lousy railroads and overall poor construction quality. But how does one justify the panic of the entrepreneurial class? It's a significant signal. Here's more from the Forbes article:

Almost all of the funds supporting emigration applications were spirited out of China in violation of Beijing's strict rules. Chinese Entrepreneurs Are Leaving China … The country leads the world in illicit fund transfers, according to Global Financial Integrity, a nonprofit. The estimated total of China's outbound flows from 2000 to 2008 was a staggering $2.18 trillion.

The flood of "hot money" leaving China picked up in the last quarter of 2008. That was when the Chinese central government announced its stimulus plan, which initiated a new phase in the partial renationalization of the economy. Then, Premier Wen Jiabao started pouring state cash into the state sector and state financial institutions began diverting credit to state-sponsored infrastructure. As a result of the stimulus program, about 95% of China's growth in 2009 was attributable to investment, and almost all of the investment had come from the state.

The percentage for 2010 will not be too far off of that. Beijing's plan, however, was good for private entrepreneurs who, although shut out of many portions of the economy by state enterprises, rode the resulting asset bubbles to even greater wealth. The number of the country's high net worth individuals according to the China Merchants-Bain study will reach 585,000 this year, almost double the figure for 2008.

The emigration of China's wealthy has, not surprisingly, triggered controversy. "We have been working hard to develop the economy in the past 30 years, but now these elite members of society are fleeing with the majority of the wealth," said economic analyst Zhong Dajun to the Global Times, the Communist Party-run newspaper. "The loss may be even higher than all the foreign investment we have attracted. It is as if, when the time of harvest comes, we find the fruits have all gone to others' baskets."

Zhong, according to Forbes, should not be shocked as Beijing, since 2008, has been "targeting private entrepreneurs and abusing them even more than usual." Funny we never heard of that. But we're not surprised. It's part of an underlying antipathy to freedom, expressed by the craziness of China's continuous and ever-more-perilous expansion.

We don't see many positive trends in China. If a bust does come, we'll be reading anti-market post-mortems for years. The problems will be blamed on capitalism and greed. Of course, the ChiCom party itself may not last much longer than the bust itself.

We've written in the past that the Party has been given three chances by the "people." Mao's Great Leap Forward was strike one. Tiananmen Square was strike two. An economic bust might prove to be strike three. Yer out. The potential ascension of Xi Jinping is apparently set to make things worse, as he will place cronies in position of power who will further clamp down on what the West refers to as China's free market.

For the time being, the dominant social theme remains constant: China is the world's topgun, its major growth center. The ChiComs, you see, have outdone the capitalists at their own game. Prosperity is rampant and even Brussels is going cap-in-hand to China for funding to stay afloat. But wait …