China's Emergence as a Superpower (till 2014)

[Dayuhan]

This takes a fairly benevolent view of China's economic prospcts:

http://www.project-syndicate.org/commentary/the-tolerable-slowdown-of-china-s-economy-by-jun-zhang?utm_source=Sinocism+Newsletter&utm_campaign=8789d9343b-Sinocism07_01_13&utm_medium=email&utm_term=0_171f237867-8789d9343b-24634629

but this bit:


Given that outstanding loans already amount to nearly double China’s GDP – a result of the country’s massive stimulus since 2008 – new loans are largely being used to pay off old debts, rather than for investment in the real economy.

sticks out as a potential problem, especially given the prevalence of crony lending.

[Dayuhan]

And this one is downright scary...



Loan Practices of China’s Banks Raising Concern

... By the end of last year, China’s shadow banking activity was valued at $6 trillion, twice the level in 2010, and now equal to 69 percent of China’s gross domestic product, according to a report released in May by JPMorgan Chase. Now, even state-run banks are doing shadow lending, extending financing to companies in high-risk sectors.

Who is responsible for the loans is not always clear, and that’s where everyone starts getting nervous.

“If a wealth management product defaults, who is on the hook?” asked Michael Pettis, a finance professor at Peking University in Beijing and senior associate at the Carnegie Endowment for International Peace. “It’s all very murky. In these things, the banks are technically acting as intermediaries.”

Financial experts worry about the lack of transparency in the market when China’s economy is weakening. They also fret about whether some borrowers have the cash flow to repay their loans.

Fitch Ratings, the credit ratings agency, began warning two years ago that “wealth management activity carries unique liquidity and credit risks.” But the lending continued and increased.

In a newspaper opinion piece last year, Xiao Gang, then head of the Bank of China, a leading commercial bank, and now the nation’s top securities regulator, referred to shadow banking as “fundamentally a Ponzi scheme.”

The government has so far tolerated shadow banking because getting rid of it is all but impossible, analysts say. Wealthy customers are accustomed to getting better returns, and a large segment of the economy is desperate for capital and cannot easily gain access to regular bank loans, largely because of government restrictions. But they are willing to pay the shadow banks 9, 10, even 15 percent interest...

[Firn]

Yeah I posted something similar. From an investor's point of view it is no surprise that so little money seems to flow into stock market as long-term investment if you can get such a big return in the short-term for those WMD, sorry WMP.

If the capitalistic West bails out private banks then it is just proper that the socialist East does so with his very own.

[Dayuhan]

Sorry, forgot the link on the above...

http://www.cnbc.com/id/100858445

This is where it gets really shaky...


Consumers withdraw money from their regular savings account and put it into a wealth management product that promises a much higher rate. "Usually banks will have higher-yielding products at the end of each quarter," said Wang Yanan, a 24-year-old accountant who works in Shanghai. "If I happen to have money at those moments, I'll buy some."

Though the products are popular, their disclosure is often poor. Bank employees insist the principal is guaranteed, but contracts for wealth management products are usually vague, simply noting there could be risk. Most offer little detail about where the money will be invested.

Much of the money, analysts say, is lent to property developers and local government financing vehicles, areas that have government officials worried because of an explosion in property development and soaring housing prices. Regulated banks will not make the loans because the borrowers are too risky.

So people who think the prinicipal is guaranteed are funneling money into products that effectively just turn around and loan the money to borrowers with a risk profile too high to get conventional loans.

At the same time, you have people borrowing to the hilt and buying apartments with the intention of flipping them at a big enough profit to cover the loan.

Makes you wonder what happens when the carousel stops. Could make 2008 in the USA look like the proverbial Sunday-school picnic.

[Dayuhan]

A bit more...

http://www.project-syndicate.org/commentary/the-impact-of-slow-gdp-growth-on-chinese-politics-by-minxin-pei


The Politics of a Slowing China

Minxin Pei

The recent financial turmoil in China, with interbank loan rates spiking to double digits within days, provides further confirmation that the world’s second-largest economy is headed for a hard landing. Fueled by massive credit growth (equivalent to 30% of GDP from 2008 to 2012), the Chinese economy has taken on a level of financial leverage that is the highest among emerging markets. This will not end well...

[Dayuhan]

Interesting observations...

http://ineteconomics.org/china-economics-seminar-0/unintended-consequences-made-pboc-s-strategy-fail-work


Unintended consequences made the PBOC’s strategy fail to work

...However, there were a couple of unintended consequences of the PBOC’s hawkish action. First, more than 1 trillion wealth management products would mature in the end of June and the banks had to meet regulatory requirements at quarter end. As interbank rates soared, the banks had to issue more wealth management products at higher returns which would attract more money to the shadow banking sector and the banks would have to do more risky business because of higher funding cost. Therefore, the idea of cracking down shadow banking by lifting interbank rates failed to work...

[Dayuhan]

And more...

http://blogs.wsj.com/chinarealtime/2013/07/05/chinas-local-debt-mystery/


China’s Local Debt Mystery

Leaders in Beijing know that swelling local government debt is one of the greatest threats to China’s economy. What they don’t know, apparently, is just how big the threat is.

Speaking to reporters ahead of high-level meetings between U.S. and Chinese officials next week, China’s Vice Finance Minister Zhu Guangyao said the government was aware of the risks associated with both shadow banking and local government debt.

“A very crucial task for this administration is to clearly determine exactly how much debt there is in local financing platforms,” he said, noting that the most recent estimate was a 2011 report by the National Audit Office that put total local government debt the previous year at 10.7 trillion yuan ($1.74 trillion) – equivalent to 27% of gross domestic product at the time.

“I think this number is going to go up,” following a national survey, Mr. Zhu said...

[Dayuhan]

You know it's mainstream when Krugman jumps on the bandwagon...

http://www.nytimes.com/2013/07/19/opinion/krugman-hitting-chinas-wall.html?_r=1&


Hitting China’s Wall

...China is in big trouble. We’re not talking about some minor setback along the way, but something more fundamental. The country’s whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be...

What all this means... there's a building consensus among Western economists that China may be closing in on a major economic dislocation. That of course was inevitable, but when remains an open question: the consensus of economists is not always correct. It might, however, be correct, and there's a notable lack of discussion (at least that I've seen) of what the implications of a serious recession could be for domestic political stability and for regional security.

There's no way to know what will happen or to change what's shaping up, but it can't hurt to be prepared...

[Bill Moore]

You know it's mainstream when Krugman jumps on the bandwagon...

http://www.nytimes.com/2013/07/19/opinion/krugman-hitting-chinas-wall.html?_r=1&


What all this means... there's a building consensus among Western economists that China may be closing in on a major economic dislocation. That of course was inevitable, but when remains an open question: the consensus of economists is not always correct. It might, however, be correct, and there's a notable lack of discussion (at least that I've seen) of what the implications of a serious recession could be for domestic political stability and for regional security.

There's no way to know what will happen or to change what's shaping up, but it can't hurt to be prepared...

I would just caution these estimates are made by experts in a field (economics) where there are no experts. I suspect if someone did a non-bias study on economic forecasts more than half would turn to be incorrect, but even if they get half right, then we would just as well off flipping a coin.

I remember the projections that Japan was going to pass the U.S. and become the world's largest economy and our worthless media was bringing on "expert" talking heads and telling them that their kids needed to learn Japanese. Then when Asia had their meltdown due to globalism the U.S. economy was at great risk. It created little more than a ripple, similar to the EU crisis. It also these experts that created derivatives, and collapsed a number of major banks. The list is endless.

However, I certainly agree China's economy may take a significant downturn, and if it does we should attempt to assess the impact on the region and our interests. It may present an opportunities for us to regain some of the market we lost? It may also lead to dangerous instability within China that isn't in anyone's interest. I think we should embrace our inability to know and develop plans for multiple contingencies. Plans is really too strong of term, what we actually need to do is start thinking about multiple contingencies.

[Dayuhan]

Certainly we can't conclude that the Chinese economy is about to implode, but it's also pretty clear that the Chinese economy, much like the overhyped Japanese economy of the early 80s, is not the unstoppable world-devouring eternal growth juggernaut that it's sometimes cracked up to be.

China will, of course, eventually have a serious recession. We don't know when that will come or how it will arrive, but it will come. There are many signs that all is not well, which may or may not mean anything in the short term sense.

Of course there's nothing to be done about it, but there's a real possibility that if the domestic economy gets rocky the Chinese government may try to fire up support with some patriotic jingoism. Arguably that's already going on.

Of course in the event of serious domestic instability (very hypothetical at this point but thoroughly possible) the probable winner would be the PLA, and as you say that would do no good for anyone, except perhaps the PLA.

[Firn]

Sometimes it is good to look once again at some older articles, The End of Hypergrowth: Political and Economic Responses to a Slowing China (http://www.gwu.edu/~iiep/assets/docs/gtwoatgw/2012/naughton_endofhypergrowth_gtwoatgw12.pdf) by Naughton in late 2012.


The Opportunity for a Revival of Broad Market-#Oriented Reforms

These challenges have created a rich new opportunity for China’s frustrated market reformers. Reformers have been sidelined for years, especially since the muscular response of the Chinese government to the global financial crisis in 2008–2009. Now their fortunes have changed. Reformers can now get a hearing, and find outlets for their views. Many reformers today strike a note of doom and gloom: without major reforms, there would be big trouble ahead.

I did already write about the many issues, especially in the financial sector. China did the right thing in stimulated the economy big time in 2008 when the export-driven economy faced a collapse in demand. However they lacked in execution especially after the quick initial response which could of course not be perfect given the dire circumstances. I think the Chinese government got too complacent about the economy and their Chinese way and now China is paying the price for the lack of liberal market reforms. This has changed in the last year or so and some of recent reactions point into the right direction. For example the interest rates, partly responsible for the shadow banking system (http://www.scmp.com/comment/insight-opinion/article/1290556/how-interest-rate-controls-created-shadow-banking-system) are no longer controlled. I explained my rather similar view a couple of posts earlier.

China certainly faces big problems and will face big problems in the future. The hyper-growth of the last decades has been amazing and likely unmatched on that scale. There is IMHO still considerable scope in China for the 'old' type of growth we saw in the last decades, with a still relatively large rural population and much demand for big infrastructe, social security, education, health spending. The deep integration into the global value chain will be a key element from the market side. A very big question mark is the political aspect of China. So far only rather democratic countries have achieved a high standard of living without sitting in on a sea of oil, and for good reasons touching the heart of economics.

[Dayuhan]

China did the right thing in stimulated the economy big time in 2008 when the export-driven economy faced a collapse in demand.

I'm not entirely convinced that the stimulus will turn out to be a good move, though only time will tell. Aggressive stimulus in an economy plagued with high-level corruption and credit-sector cronyism can be a risky business. The construction boom did effectively take up the slack left by weakening exports, but the financing of much of that construction was... creative, to use a polite term, and it remain to be seen how sustainable that solution will be, and how long it will take before that creativity snaps back.

[Dayuhan]

More on the pessimistic side... much discussion of economic implications, less on potential security/stability issues:

http://www.ibtimes.com/chinas-economic-hard-landing-think-twice-gloating-over-chinas-slowdown-1361579

[Firn]

It is a good catch which addresses some of current issues and the recent reactions on the state level.

I tend to believe that the stimulus was a too big and not aimed all too well but if you think back in 2008 the world seemed to come to an end and time was dear. This plus corruption, a partly cheating hand of the state and the implications of a increasingly mature economy were headwinds against a highly efficient allocation of that captial.

We should see in a couple of years roughly how big the multiplier of all that public spending was and how wisely the private sectors invested. In the end for all that talk about an Asian or Chinese way economics are everywhere the same, even if we still have a hard time to figure some of those laws out.

[davidbfpo]

Patrick Porter, an Australian academic strategist, writes an occasional blog column and his latest examines:
...a clash over the Taiwan Strait... in the end predicting the outcome of a China-Taiwan clash would not be about the absolutes of military victory narrowly conceived, but about the issue of cost tolerance and the fear of a Pyrrhic result.

Relations between Taiwan and Beijing have eased in the latest ‘detente.’ But some worry that their mutual aims regarding Taiwan’s ultimate sovereignty are still irreconcilable and that they could still deteriorate. One thing driving this anxiety is the shifting military balance between the two, moving in China’s favour. But assessments of the clash are still predominantly quantitative. The debate should focus primarily not just on China’s superior mass and technology, but on whether it would be willing to absorb the costs of an invasion compared to the Taiwanese’ willingness to tough it out.

Link:http://offshorebalancer.wordpress.com/2013/08/23/ham-omelettes-and-taiwans-defence/

[Dayuhan]

Is an actual invasion really a likely scenario? I always figured that if it came to shooting the Chinese would try to force Taiwan into submission with missile barrages. An invasion would be... complicated. It would be an invasion on the scale of the Normandy landings, in the age of satellite surveillance and guided missiles (the Taiwanese produce their own). There would be no element of surprise. Many Chinese coastal ports are well within the range of Taiwanese missiles. It's potentially a very costly affair.

[carl]

Patrick Porter, an Australian academic strategist, writes an occasional blog column and his latest examines:

Incorporated in Mr. Porter's calculations is the possibility that the Reds might have to deal with a post invasion Taiwanese insurgency and that might be a dissuasive factor. I don't think so. The Red Chinese have enough men to garrison Taiwan extremely heavily. Taiwan is an island and would be easy to cut off from outside supply, no guns for the guerrillas. And no sanctuary but the deep blue sea either. Finally, there are only about 23 million Taiwanese and with a birth rate per woman of .9 there aren't very many young men to do the insurging. The Reds could literally almost put 1 soldier for each Taiwanese male between 15 and 29 on the island to control it. And none of this is to mention the CCP proclivity for extreme brutality. If the island were ever taken, I think the chances of any kind of insurgency are zero.

[Ray]

China’s Deceptively Weak (and Dangerous) Military

In April 2003, the Chinese Navy decided to put a large group of its best submarine talent on the same boat as part of an experiment to synergize its naval elite. The result? Within hours of leaving port, the Type 035 Ming III class submarine sank with all hands lost. Never having fully recovered from this maritime disaster, the People’s Republic of China (PRC) is still the only permanent member of the United Nations Security Council never to have conducted an operational patrol with a nuclear missile submarine.

China is also the only member of the UN’s “Big Five” never to have built and operated an aircraft carrier. While it launched a refurbished Ukrainian built carrier amidst much fanfare in September 2012 – then-President Hu Jintao and all the top brass showed up – soon afterward the big ship had to return to the docks for extensive overhauls because of suspected engine failure; not the most auspicious of starts for China’s fledgling “blue water” navy, and not the least example of a modernizing military that has yet to master last century’s technology.

Indeed, today the People’s Liberation Army (PLA) still conducts long-distance maneuver training at speeds measured by how fast the next available cargo train can transport its tanks and guns forward. And if mobilizing and moving armies around on railway tracks sounds a bit antiquated in an era of global airlift, it should – that was how it was done in the First World War.


In many ways, the PLA is weaker than it looks – and more dangerous.Yet while there is ample and growing evidence to suggest China could, through malice or mistake, start a devastating war in the Pacific, it is highly improbable that the PLA’s strategy could actually win a war. Take a Taiwan invasion scenario, which is the PLA’s top operational planning priority. While much hand-wringing has been done in recent years about the shifting military balance in the Taiwan Strait, so far no one has been able to explain how any invading PLA force would be able to cross over 100 nautical miles of exceedingly rough water and successfully land on the world’s most inhospitable beaches, let alone capture the capital and pacify the rest of the rugged island.

The PLA simply does not have enough transport ships to make the crossing, and those it does have are remarkably vulnerable to Taiwanese anti-ship cruise missiles, guided rockets, smart cluster munitions, mobile artillery and advanced sea mines – not to mention its elite corps of American-trained fighter and helicopter pilots. Even if some lucky PLA units could survive the trip (not at all a safe assumption), they would be rapidly overwhelmed by a small but professional Taiwan military that has been thinking about and preparing for this fight for decades.

Going forward it will be important for the U.S. and its allies to recognize that China’s military is in many ways much weaker than it looks. However, it is also growing more capable of inflicting destruction on its enemies through the use of first-strike weapons. To mitigate the destabilizing effects of the PLA’s strategy, the U.S. and its allies should try harder to maintain their current (if eroding) leads in military hardware. But more importantly, they must continue investing in the training that makes them true professionals. While manpower numbers are likely to come down in the years ahead due to defense budget cuts, regional democracies will have less to fear from China’s weak but dangerous military if their axes stay sharp.
http://thediplomat.com/2014/01/chinas-deceptively-weak-and-dangerous-military/?allpages=yes


The article does a very interesting analysis of the Chinese forces and its capabilities.

How far is the author valid in his contentions?

[Firn]

First I'm actually surprised that my posts were actually not that bad regarding the huge challenges facing the Chinese economy. I covered at least partly the inefficient overinvestment, the too heavy & cheating hand of the state the dangerous nature of the banking system, the financial repression and the WMP.

However I failed to note the key link between the high saving rate and the public overinvestment plus the financial repression. I likely overestimated the positive effect of the large rural labour pool and I was rather blind to the switch of a vast sector of the Chinese economy towards a capital-intensive one. All that capital with it's likely negative costs and all the bad incentives in the often corrupt public hands won't bring the corresponding return in public wealth. It is important to point out that the export sector with it's small and medium private enterprises is still labour-intensive.

A cool videographic of the Economist (http://www.youtube.com/watch?v=KNXg-kYk-LU&list=PL800D5CBC2E5E1AE4&feature=c4-overview-vl) regarding migration. Keep in mind that the 'move to the West' makes me now think about Italian's strategy of closing the North-South gap. Short-term growth was achieved by big public works but in the long term it was a mostly a big waste of national ressources with much getting sliced off by corruption and the organized crime. It generally more inefficient to bring work places to the people instead of supporting people going to the work places. Brazil failed with a similar project in the some forty years ago. *

I have no idea how strong or able the Chinese military but there are at least two likely big problems for the Chinese leadership:

1) Taiwan on it's own seems unlikely to (quickly) fall to an invasion or to give up after conventional missile 'strategic bombing'

2) Taiwans allies could, as noted in the other thread, inflict in the longer run terrible damage on the Chinese economy by choking it's martime international and possibly coastal trade.

*I think there are strong arguments that some of the big public spending in Far-Wes is intended to incentivise the settlement of Han Chinese, to 'pacify' those provinces in the long term. This is of course a classic in history, with the Roman colonists and the British settlers in Ulster and the New World being famous examples.

[carl]

Ray:

I think that report is quite tendentious. Some of the things he says are meaningless. For example when he says the Reds still use Badger bombers as if that is a horrible fault. It doesn't matter if the Badger is old, what matters is the missile it carries. Shoot, we still use the B-52. The whole report if filled with things like that.

He also says the Reds can't do something they probably wouldn't even consider, heading straight across the Strait. A very large part of Taiwan's regular forces are on Kinmen island which is right off the mainland and depends upon the mainland for water. Another large chunk of their forces are on some other islands in the middle of the strait. I read an article that said the smart thing to do would be to take those places in sequence. Besides Taiwan is an island. You can blockade the place into submission.

[Ray]

Carl,

Thanks.

So, it a bit of propaganda, right?

Firn,

What do you think of this:

World asleep as China tightens deflationary vice
http://www.wnd.com/2014/02/world-asleep-as-china-tightens-deflationary-vice/

I am asking these of you out here, to get a better perspective of issues, beyond what I read and what are said on other fora.

[Dayuhan]

Not entirely propaganda.

The article makes many legitimate points, particularly on the very conservative and limited training process in the PLA and the emphasis on loyalty rather than competence in promotions. It would be worth adding that the PLA is one of the most corrupt institutions in one of the most corrupt societies on the planet. How that will affect their ability to fight a war remains, of course, to be seen. I would agree with the author that too much of the talk on the subject of capacity focuses on hardware (even that is largely an unknown quantity) and ignores the human factor.

All of this of course is an unsettling picture for the Philippine armed forces: if China ever does decide to stage a war, it will want a short one with a sure victory, the proverbial "splendid little war", and that points directly to the Philippines. The most likely scenario would be the seizure of some islands and the sinking of some ships. The average Filipino would be unaffected, of course, but not an attractive prospect if you're in the Philippine Navy.

[Firn]

Nobody knows what will happen. In my view Evans does link events in Europe and the US too robotically to a possible hard landing in China. The USA and the EU are huge markets in which the internal developments are generally in relative terms much more importent then in smaller economic entities. Other reactions are indeed considerably less contingent, for example crashes in the commodity markets with the rather dire consequences for countries like Chile, Australia and Argentinia. This 'commodity shock' is a positive supply shock for the EU or USA (or India) with smaller 'export' demand shock stemming from the reduced demand for exports by the countries which rely on their commodity exports.



The central bank (PBOC) is tightening methodically, allowing the benchmark 7-day repo rate to ratchet up by 200 basis points to 5.21pc over the last year. It drained a further $50bn from the system this week

Its latest quarterly report has turned hawkish, even though producer prices are in steep deflation, and the M2 money supply is slowing. It complains that “reliance on debt is still rising” and that “hidden risks in the financial sphere require attention”.

Zhiwei Zhang from Nomura says China has entered a "prolonged period of policy tightening" that will push up bank lending rates by as much as 90bp this quarter, leading to a chain of defaults.

The tell-tale signs are obvious in the central bank's handling of reverse repos and maturing bills. The yield on corporate AA 1-year bonds has jumped 272 basis points to 7.15pc since June. "We think the PBOC intends to raise the whole spectrum of interest rates to push deleveraging," he said.

The Chinese central bank does what it should have done (or allowed to do) a long time ago. In short it is bringing the capital costs closer to it's natural band. Capital costs have been sometimes negative in practical terms and united with many other bad incentives this made malinvestment very likely on a vast scale. There is very little doubt that there has been much overinvestment and that part of the economy has to slow down or even contract. If we consider the dominant role Chinese demand has played in some commodities it is very likely that the price of those will come down considerably. As I sad bad news especially in countries Down Under.



China did of course blink in January when the authorities stepped in to cover the $500m liabilities of the trust fund, “Credit Equals Gold No. 1”. It is the fifth trust rescue in opaque circumstances in recent weeks. Yet it would be hasty to conclude that President Xi is backing away from his Third Plenum vows to end to the bad old ways.

The financially repressed households had to find some way to invest other then giving debitors their money away for basically free and much went into the shadowy WMP. There are good arguments to prop them up and of course strong political pressure, but the economic opportunity costs are also high.


Haibin Zhu says there is mounting risk of "systemic spillover". Two thirds of the $2 trillion of wealth products must be rolled over every three months. A third of trust funds mature this year. "The liquidity stress could evolve into a full-blown credit crisis," he said.

Officials from the International Monetary Fund say privately that total credit in China has grown by almost 100pc of GDP to 230pc, once you include exotic instruments and off-shore dollar lending. The comparable jump in Japan over the five years before the Nikkei bubble burst was less than 50pc of GDP.

I knew about the short-term nature of the WMP but the rollover rate of two/thirds of $2 trillion of three months is something new, unheard off and very frightening. I almost can not believe it. Looks like a fuze snaking through the legs of a group of chain smokers to a big bomb. Just think of the reaction to a breakdown in trust and thus lending. In a very short time the whole WMP markets could implode with the sell-offs spreading to housing and other markets.

In this case the Chinese state and in the end the households will have to pay most of the bill. A good deal of the GDP could become a write-off, because a vast amount of the building/investment is just not worth what it was calculated to be. Simple accounting logic.

It is a very delicate, vast job for the Chinese leadership in the face of much political pressure within the party. It won't be the end of China, but it could cause severe economic pain for a longer period of time. Supporting the household consumption of the lower and especially the middle class by removing the fetters of financial repression is a key elemen for 'quality' long term growth.

[Firn]

Just a quick upgrade. What do bank share prices tell us about growth?. (http://blog.mpettis.com/2014/02/what-do-bank-share-prices-tell-us-about-growth/) is likely a bit technical or wonkish for most. I have little doubt that the book value of Chinese banks is inflated by a far too optimistic, to put it that way, evaluations of loans. It is quite likely that, with a corrected balance sheet, some of big state banks have infact little or negative equity.

It is funny that the recently rescued Jilin Trust, muscled by the big Chinese Construction Bank was a coal-financer, as it reminds me about those massive coal plants getting build in Xinjiang, south of Toksun IIRC. See my post in the Chinese insurgency thread.

The German FAZ (http://www.faz.net/aktuell/finanzen/angst-vor-finanzkrise-in-china-die-lunte-brennt-12805958.html) also has an interesting info about the guys who were rescued by the state:


Doch das Minenunternehmen geriet in Schieflage, weshalb sich die Vermgensverwaltungsgesellschaft nicht in der Lage sah, die flligen 3,3 Milliarden Yuan (400 Millionen Euro) an die 700 vermgenden Geldgeber zurckzuzahlen. Der Beistand in letzter Minute ersetzte zwar die versprochenen Zinsen nicht, aber immerhin die Anlagesumme konnte erhalten werden.

So the investment per capita averaged 600.000 Euros , not exactly the working poor. The middle class and the poor get financially repressed while the wealthier get an interest rate 4-5 times as high with the capital practically getting guaranteed by the state. Nice, the political pressure from the well-connected must be indeed huge.

[Firn]

FTSE 100 pushed down by Chinese jitters (http://www.theguardian.com/business/blog/2014/feb/25/stock-markets-highs-ftse-100-china-live). Perhaps more interesting then the exact movements are the biggest losers in China and abroad.

China:


Shanghai recorded its worst day in seven months with the composite index dropping by over 2% as fears are heightened that a collapse in the property bubble is getting ever closer.

It’s been property development companies that have borne the brunt of the sell-off, but the real fear is that any slowdown in the property market will be felt across the board with consumption of everything from small electronics to cars likely to suffer.

the World:


Mining firms led the fallers, dented by the news that the Shanghai composite index had recorded its biggest fall in seven months (see 8.25am for details). Rio Tinto and Anglo American are both down over 3%, on speculation that the Chinese property market is heading for a fall.

Australia be aware.

[Firn]

Krugman (http://krugman.blogs.nytimes.com/) does once again look to China. Check the links in the original.



RED SPREADS

Uh-oh. Chinese equivalents of the TED spread and other gauges of financial stress in the US have widened sharply. The widening in the TED spread was one of the key reasons I was already very scared in late 2007. If past is prologue, we should be very worried about China now.

He points to Bloomberg (http://www.bloomberg.com/news/2014-02-26/crisis-gauge-rises-to-record-high-as-swaps-avoided.html) which has a nice article about the resent moves in the financial world of China. As usual I find the development of the trust porducts/WMP interesting. A huge growth indeed. As I have written before the combination of much capital on a short leash is big trouble if you as a counterpart have troubles to get liquidity. Even more so if the cost of capital goes up and your loans turn bad. You will get squeezed from both sides.


Trust Products

About 5.3 trillion yuan of trust products will come due this year, up from 3.5 trillion yuan in 2013, Haitong Securities Co. estimated last month. Assets in all trusts surged 46 percent in 2013 to a record 10.9 trillion yuan, the China Trustee Association said in a Feb. 13 statement.

China averted its first trust default in at least a decade in January as investors in a 3 billion yuan high-yield product sold by China Credit Trust Co. to fund a coal miner that collapsed were bailed out days before it came due. A similar product created by Jilin Province Trust Co. is also missing payments, Shanghai Securities News reported.

Careful readers will have noticed that quite a few argue for short-term interventions by the Bank of China which go against the stated long-term goals.


Default Concern

In a sign of default concern, the premium for five-year AA rated corporate notes over the sovereign widened to 337 basis points on Feb. 12, the most in two years. At least a third of China’s 200,000 steel-trading firms will collapse because of the credit crisis, the official Xinhua news agency said Feb. 7, citing industry estimates.

The slowdown may fuel bank bad loans, which surged 28.5 billion yuan in the final quarter of 2013 to 592 billion yuan, the highest since September 2008, according to China Banking Regulatory Commission data. The economy will probably expand 7.5 percent this year, the slowest since 1990, according to the median estimate in a Bloomberg survey.

Credit-default swaps on Bank of China rose 32 basis points to 153 this year while those on Industrial & Commercial Bank of China Ltd. climbed the same amount to 165, CMA prices show.

At least in that aspect the Red economy works practically the same way we have seen in the West, not surprising indeed. In the long run a higher cost of capital should be help to allocate it far more efficiently. Obviously this is bringing much pain.

[Firn]

I forgot to mention perhaps the most important aspect of the rapid increase of money flowing into the trusts, the ponzi-like stability. It is of course no pure Ponzi, but most like most bubbles it incorporats more or less of it's logic. As long there are big gains money keeps flowing in so even if the trust is unable to earn enough in the short-term there is enough liquidity to pay out the investors. Given the staggering increase of roughly 50% in wealth managed only the dumbest, most arrogant or most unlucky trust managers could blow it recently. It is perhaps no suprise that the last big fund had seemingly concentrated all the loans regionally and in single sector, coal. In this case the severe difficulties within that industry hit the trust with full force.

Overall far more trust assets are chasing good enough returns to match the ~10% promise to the rich and influential clients. They roll over mostly under a year. As I said before it feels like a fuse snaking to a big bomb through the legs of chain smokers.

It is important to point out that a similar bubble happened back in the 2005-2007 in the Chinese stock market when everybody seemed to speculate there. Prices rose incredibly fast to incredibly heights only to come crashing down to deep lows. The memory of that crash has kept many out of that particular market which would be actually quite cheap if the earnings of the SOE would be sustainable. Now the smart money seems to be mostly in trusts aka WMP.

Nobody knows when the trust bubble will burst but if something can not go on forever it will end. Hopefully the Chinese manage to make the landing as softly as possible.

[Dayuhan]

Another perspective on economic issues:

http://blogs.reuters.com/anatole-kaletsky/2014/02/24/the-case-against-a-chinese-financial-crisis/

[Firn]

It is always good to see a contrarian view. Personally I think that the respected author argues himself into a bind over credit growth.


A severe slowdown in China is viewed as among the greatest risks facing the world economy this year, and Thursday’s dismal news on Chinese manufacturing output exacerbated these fears. But the really important news from Beijing pointed in the opposite direction: Bank lending in China, instead of slowing dramatically as many economists had expected, accelerated in January to its fastest growth in four years.

...

To welcome stronger bank lending in China is not to deny that credit growing at double the gross domestic product growth is unsustainable and will ultimately have to be curbed. The Chinese authorities themselves clearly believe this. The government and the central bank want to reduce credit growth and to replace the unregulated, opaque “shadow lending” system with properly supervised, well-capitalized modern banks.

It is importat to keep in mind just how big the intertia of credit growth and how high the pressure from many sides is to keep clubbing. Public entities, SOE, banks, trusts want to keep the party going as everybody has profited for such a long time and continues to do. The behaviour has become deeply ingrained and there is no doubt that most of those credit has not gone to consumption but to investment...


Policy will therefore have to be prioritized. And the financial reform objective is proving a less important priority than industrial restructuring and maintaining an acceptable rate of growth.

Whenever possible, China will likely try to move ahead on all three objectives. But if there is a serious conflict, maintaining an adequate growth rate will trump credit restraint and financial reform

Without going into the details it seems to me very likely that under such circumstances the priorities are not caused by clear overall economic analysis by the leadership (doing also much clubbing) but by the all the understandable pressure against financial reforms.

[Firn]

There have been a few positive steps in various areas lately. Clearly it is far too early to see how those get implemented in depth and width and how they will work. I will write a longer comment in the next days.

A short video (http://www.bbc.com/news/world-europe-26639991) shows Chinese buying, effectively, a good deal of European security. This is just one example of the 'attraction value' of soft power. Perhaps more revealing then the property market are the investments in classic Portuguese agricultural business such as vineyards and pig farms. High-quality 'European' food has become increasingly attractive for the better off due to the status and all those scandals in China. This snippet pales of course in importance compared to problems above, but it fits nicely into the narrative.

[AmericanPride]

What makes a superpower? Nuclear weapons and military capabilities? If so, China is much closer to Russia than to the United States. Economic strength? If so, then we should also consider Japan, Germany, and France for nominations as 'superpowers'.

From wikipedia:


Alice Lyman Miller defines a superpower as "a country that has the capacity to project dominating power and influence anywhere in the world, and sometimes, in more than one region of the globe at a time, and so may plausibly attain the status of global hegemony."

What is 'dominating power and influence'? Is it the capability to unilaterally press one's agenda on another state? If that's the case, then it precludes the United States, since the US cannot exert 'dominating power' 'anywhere in the world' (i.e. Crimea). According to realist IR, relative power is more important than absolute power, and therefore thinking in those terms, I think we can come to a better understanding if China (or any other state) is truly a 'superpower'.

According to a national power index I am developing, the power of the top 3 states (US, China, Russia) is statisically distinct from the next 7 (Japan, France, UK, Germany, India, Brazil, Italy). If we move Japan from the second group to the first one, there is still a major difference, so perhaps we should consider Japan a candidate as a 'superpower' as well.

It's not until we reach #5, France, that the difference between the top powers and the next tier becomes more similar. So I would say that yes, China is a superpower, insofar it's ranked as the second strongest state on my index and is in the top category of powers that also include the United States (#1), Russia (#3), and Japan (#4). But that should also tell us something about the nature of a 'superpower'; it's not necessarily predicated on one profile of capabilities.

[Dayuhan]

Meanwhile, all's well on the domestic front...

http://www.worldpropertychannel.com/asia-pacific-residential-news/new-century-real-estate-china-property-riots-sun-hung-kai-centre-robert-shiller-yao-wei-shih-wing-ching-centaline-property-agency-8176.php


SWAT Team Rescues Chinese Developer from Furious Customers

[Dayuhan]

Another one:

http://www.forbes.com/sites/gordonchang/2014/03/16/china-cant-afford-its-military-thats-why-we-should-really-worry/


Furthermore, some crucial indicators were down for January-February. Residential and commercial property sales were down 3.7%, total property sales by floor area were down 0.1%, and construction starts by area were down 27.4%. This data suggests there will be a decline in the services sector later this year.

The normally optimistic analyst community was stunned. “This is terrible,” said ANZ ’s Liu Li-Gang.


So why do we have to worry about a China that will not be able to afford its military? Generals and admirals, who seem to have wide influence in Communist Party circles these days, just might not scale back their plans. They could instead think they have a limited window to achieve long-held goals, both to take territory from neighboring countries and to make the international waters of the South China Sea an internal Chinese lake. China’s “senior commanders,” the Economist reports, “are spoiling to show what their shiny new stuff can do.”

As the vital signs of the economy have deteriorated, the tempo of the country’s aggressive acts have quickened. In the last few years, the Chinese in the South China Sea seized Scarborough Shoal from the Philippines and are now ringing their vessels around Manila’s Second Thomas Shoal, sent army patrols deep into Indian-controlled territory, and infringed Japanese sovereign waters and airspace around the Senkaku Islands in the East China Sea. China’s craft threatened South Korean fishermen and harassed U.S. Navy ships on patrol. Last October, Beijing, in a coordinated effort across the main state media platforms, boasted about its ability to kill tens of millions of Americans with nuclear-tipped missiles launched from submarines. There was no apparent reason for the incendiary publicity campaign.

There may be only one thing more dangerous than a strong China—a weak and faltering one.

[Firn]

I don't want to conjure a SU-style implosion but Yegor Gaidar's book (http://www.amazon.com/Collapse-Empire-Lessons-Modern-Russia/dp/0815731140) contains a gem of quote:

When Gerorgy Shakhnazarov, aide to Mikhail Gorbachev asked in the early 80s, "Why do we need to make so many weapons?" Chief of the General Staff Sergei Akhromeyev replied, "Because through enormous sacrifice we have created first-class plants that are no worse than what the Americans have. What, are you going to tell them to stop working and make pots and pans instead? That's simply Utopian." :wry:

[davidbfpo]

Just what drives China's expansion? Well maybe it is this, with my emphasis:
Unbridled industrialization with almost no environmental regulation has resulted in the toxic contamination of one-fifth of China's farmland, the Communist Party has acknowledged for the first time.

The report, issued by the ministries of Environmental Protection and Land and Resources, says 16.1 percent of the country's soil in general and 19.4 percent of its farmland is polluted with toxic heavy metals such as cadmium, nickel and arsenic. It was based on a soil survey of more than 2.4 million square miles of land across China, spanning a period from April 2005 until December 2013. It excluded special administrative regions Hong Kong and Macau.


In a dire assessment, the report declares: "The overall condition of the Chinese soil allows no optimism."


Link:http://www.npr.org/blogs/thetwo-way/2014/04/18/304528064/china-admits-that-a-fifth-of-its-farmland-is-contaminated


There is a link to an offocial PRC news agency report and The Guardian report.


Might this loss of productive land explain Chinese interest in overseas agricultural land purchase and of course earning foriegn exchange to enter the world food market.

[Bill Moore]

Several of the recent posts indicate PRC is perhaps rotten to its core internally, and I tend to agree with many that PRC faces significant domestic challenges. Some will likely interpret this as a PRC that is too hamstrung by domestic issues to lash out, while others will see a more dangerous PRC that will seek to mitigate the impact of their domestic challenges by potentially lashing out at one of their neighbors to generate a nationalistic spirit that distracts their citizens from their dissatisfaction with their government. Some member states of the European Union think the U.S. underestimates China as a threat and sees a historical parallel to Nazi Germany's rise.

The most dangerous adversaries we have had historically since the American Revolution have been rotten on the inside (domestic/economic issues) (Nazi Germany, USSR, Iraq, Iran, etc.), but that alone doesn't prevent them from being dangerous. In may in fact make them more dangerous.

[Dayuhan]

Some member states of the European Union think the U.S. underestimates China as a threat and sees a historical parallel to Nazi Germany's rise.

Who's saying that on the European side? Not saying it isn't so, I just haven't heard it.


The most dangerous adversaries we have had historically since the American Revolution have been rotten on the inside (domestic/economic issues) (Nazi Germany, USSR, Iraq, Iran, etc.), but that alone doesn't prevent them from being dangerous. In may in fact make them more dangerous.

It does make them more dangerous. There's no telling what could happen in the event of serious domestic economic upheaval and/or social strife. As much as we dislike the current Chinese order, the last thing we'd want to see would be it's fall, because the most likely successor would be the PLA, in one form or another.

I do suspect that our fears about China may be misdirected in many ways. We hear way too much talk like "if China keeps growing at it's current rate, by 20__ they will uy us all and have us for breakfast. The danger isn't that China will grow forever and swallow the world, the danger is that China will stop growing and go berserk over it.

[AdamG]

Just what drives China's expansion? Well maybe it is this, with my emphasis:


So. Once again, Lebensraum.

Also,


China's seizure of a Japanese cargo ship over a pre-war debt could hit business ties, Japan's top government spokesman has warned.

Shanghai Maritime Court said it had seized the Baosteel Emotion, owned by Mitsui OSK Lines, on Saturday.

It said the seizure related to unpaid compensation for two Chinese ships leased in 1936.

The Chinese ships were later used by the Japanese army and sank at sea, Japan's Kyodo news agency said.
http://www.bbc.com/news/world-asia-27068466

See also
Japan in China: 1937 - 1945
http://council.smallwarsjournal.com/showthread.php?t=14255

[Dayuhan]

So. Once again, Lebensraum.

Probably not. The Senkakus and the Spratlys combined couldn't accommodate the population of one city block in Beijing or Shanghai, and Beijing isn't showing any interest in any territory that could provide lebensraum. The current efforts seem less aimed at measurable material gain that at fueling jingoism and national pride as a distraction from an increasingly lousy domestic state of affairs. If the Chinese really needed lebensraum it would be easier to move people west to Xinjiang, which has more of it than anyone the Chinese would be likely to conquer, than to go out looking to conquer it.

Somewhat superficial review:

http://online.wsj.com/news/articles/SB10001424052702303825604579515182434090254

but this quote caught interest:


Visiting Manila in February, U.S. Chief of Naval Operations Admiral Jonathan Greenert answered a hypothetical question about China seizing Philippine-controlled territory in the Spratlys. "Of course we would help you," he said initially—before adding: "I don't know what that help would be specifically. I mean, we have an obligation because we have a treaty. But I don't know in what capacity that help is."

That's obviously not a very reassuring statement, but it does raise the question of what the US could or would do if China makes a move on Second Thomas Shoal, the current object of contention.

Worth noting that China can't exactly "seize" the shoal: there's nothing to seize, it's underwater. The Philippine garrison (8 marines) lives on an ancient LST that was run up on the reef back in the 90s. The current Chinese strategy appears to be to force a Philippine withdrawal by harassing resupply missions and preventing efforts to repair the ship, which is structurally very unsound and at serious risk of collapse. The Chinese could of course take the ship or destroy it with the greatest of ease, but seem more interested in just letting it collapse, which would force a Philippine withdrawal. There's some question over whether the hull will survive another typhoon season; it's apparently in pretty bad shape (the shoal is not in the usual typhoon track but catches heavy seas from typhoons passing north and from the June-Oct SW monsoon). Typhoon season starts in July, so the window for major repair is very short.

Given those circumstances, how would the US usefully intervene? Possibly by helicoptering in needed materials, equipment, and technicians fpor repairs (large vessels can't get close enough, shallow water)...

[davidbfpo]

Once more hat tip to the Australian Lowy Institute e-briefing for its maritime dimension. First



http://unosat.web.cern.ch/unosat/unitar/images/piracy5.jpg












Then imported oil (in 2012).
http://www.lowyinterpreter.org/image.axd?picture=%2f2014%2f04%2fmap+energy+china+ import+countries+2011.jpg

[davidbfpo]

I am sure holes will be picked in this and it is not clear if the aircraft carrier is fully operational:http://www.lowyinterpreter.org/post/2014/04/22/Chinese-propaganda-of-the-day.aspx?COLLCC=454764420&

[Dayuhan]

The maritime trade graphics are interesting, and illustrative.

The the percentage of the world's merchandise and commodity trade passing through SE Asia is often interpreted as a threat from China, on the assumption that China could do great damage by interrupting that trade. What that assumption fails to recognize is that the vast majority of that trade is moving in or out of China, and that China is the party most vulnerable to any trade disruption in the area. The graphics above represent less a threat from China than a threat to China: a trade interruption in the Starais of Malacca, or further abroad in the Indian Ocean, where the PLAN has virtually no capacity to project power, would be a problem of staggering dimensions for China, which depends on trade more than any nation in the world.

[Dayuhan]

Interesting...

https://ph.news.yahoo.com/eu-firms-help-power-chinas-military-rise-051120343.html


EU firms help power China's military rise

As China boosts its military spending, rattling neighbours over territorial disputes at sea, an AFP investigation shows that European countries have approved billions in transfers of weapons and military-ready technology to the Asian giant.

China's air force relies on French-designed helicopters, while submarines and frigates involved in Beijing's physical assertion of its claim to vast swathes of the South China Sea are powered by German and French engines -- part of a separate trade in "dual use" technology to Beijing's armed forces...

[Dayuhan]

Probably exaggerated to some extent, but worth considering:

https://medium.com/war-is-boring/8a12e8ef7edc


The Chinese Military Is a Paper Dragon

...China’s military buildup, along with an aggressive foreign policy, has inspired a fair amount of alarm in the West. Some American policymakers consider Beijing to be Washington’s only “near-peer competitor”—in other words, the only country with the military might to actually beat the U.S. military in certain circumstances.

But they’re wrong. Even after decades of expensive rearmament, China is a paper dragon—a version of what Mao Zedong wrongly claimed the United States was … in 1956.

China’s military budget has grown by double-digits year after year, but inflation has eaten away at the increases. China’s army, navy, air force and missile command are wracked by corruption—and their weapons are, by and large, still greatly inferior to Western equivalents...

[AdamG]

This looks like a good starting place for a dedicated thread -
The History of the Twenty-First-Century Chinese Navy


The strategic direction of the People’s Liberation Army Navy has evolved rapidly since the end of the Cold War and China’s rise as an economic power. Yet, as Bernard Cole reminds us, the Chinese Navy being built today may owe as much to its past as to its future.

By Bernard Cole for US Naval War College

This article first appeared in the Naval War College Review (Summer 2014, Vol. 67, No. 3) published by the U.S. Naval War College.

http://www.isn.ethz.ch/Digital-Library/Articles/Detail/?lng=en&id=181186

See also http://council.smallwarsjournal.com/showthread.php?p=153209#post153209

[AdamG]

The Danger Zone in Naval Arms Races

China’s naval advantages are wasting assets, giving Beijing ever more reason to seize the initiative.

and the money shot;


I believe China and the United States inhabit a danger zone of a different sort today. In this case, the stronger contender let its margin of military supremacy dip temporarily. Shipwrights, aeronautical engineers, and weapons scientists are working to restore that margin. But while they do so, the lesser contender holds certain advantages and enjoys time and maneuvering space. It also understands that today’s opportunity could prove fleeting. A now-or-never mentality may prevail in Beijing.

http://thediplomat.com/2014/07/the-danger-zone-in-naval-arms-races/

[AdamG]

China's navy will be part of the world’s largest international maritime warfare drill for the first time ever. In a press conference after a welcoming and opening ceremony, more details of the month long biennial war games have been revealed.

The 2014 RIMPAC is officially on, after the U.S. Navy held a welcoming ceremony for the participants of the month long multinational naval drill

A total of 22 nations will take part in this year’s drill, which is organized by the US navy.

http://english.cntv.cn/2014/07/03/VIDE1404340925303111.shtml

[AdamG]

China's military is investing heavily in advanced submarines, including both ballistic and cruise missile firing vessels and attack subs.

Recently, Beijing showed off what appears to be a mock-up of its next-generation nuclear-powered attack submarine, according to veteran military analyst Rick Fisher.

http://www.washingtontimes.com/news/2014/jul/4/china-invests-in-nuclear-submarines/#ixzz36bkv6a7e

[davidbfpo]

Moderator's Note

Until 25th October 2014 this thread had the title 'Chinese infantry arrive in South Sudan', it has now been changed to 'Protecting China's investments and people abroad'. A smaller thread has been merged in (ends).


SWC has discussed China's increasing role in Africa and elsewhere, primarily as economic relationships develop into influence and power.

Now we learn via the WSJ:
China began deploying 700 soldiers (an infantry battallion) to a United Nations peacekeeping force in South Sudan to help guard the country's embattled oil fields and protect Chinese workers and installations.....While Beijing's troops will operate under U.N. command, their posting to South Sudan marks a sharp escalation of China's efforts to ensure the safety of its workers and assets in Africa and guarantee a steady flow of energy for domestic consumption. The deployment marks the first time Beijing has contributed a battalion to a U.N. peacekeeping force, U.N. officials said.Access maybe behind a wall:http://online.wsj.com/articles/china-deploys-troops-in-south-sudan-to-defend-oil-fields-workers-1410275041

A quick search found reports in June 2014 that China would deploy; I don't recall that SWC spotted that.

There are relevant threads for context:

1) UN peacekeeping:http://council.smallwarsjournal.com/showthread.php?t=8209

2) South Sudan has two recent threads, the crisis in 2013:http://council.smallwarsjournal.com/showthread.php?t=19678 and an older thread:http://council.smallwarsjournal.com/showthread.php?t=16026

3) China's expanding role in Africa:http://council.smallwarsjournal.com/showthread.php?t=2164

Somehow I doubt these Chinese soldiers will be leaving until the oil runs out or South Sudan, even the AU, demand they leave.

China contributed in August 2014 to ten UN peacekeeping missions, a total of 2,192 personnel (1,984 soldiers and 172 police), this makes them one of the mid-range contributors:http://www.un.org/en/peacekeeping/contributors/2014/aug14_1.pdf

Where? Soldiers are present in formed units in six missions (three are military experts aka observers) and in formed units (military & police):

MINUSMA in Mali 389
MONUSCO in DRC 209
UNAMID in Darfur 333
UNIFIL in South Lebanon 210
UNMIL in Liberia 689
UNMISS in South Sudan 337

See:http://www.un.org/en/peacekeeping/contributors/2014/aug14_3.pdf

[Ray]

There to bring peace or guard Chinese interests?

[davidbfpo]

There to bring peace or guard Chinese interests?

The deployment has all the appearances of a diplomatic fudge. China wants to be there to protect its interests, South Sudan wants China's help and knows the UN so far have not greatly ensured peace - largely due to their own internal feuding.

I'm not sure what Sudan's stance has been, although cozying up to China is not unknown in Africa. Other neighbours, notably Kenya and Uganda, who permit UN logistics - who knows.

Having a 'blue beret' makes this Chinese national deployment acceptable to the wider African political community, the AU I'm sure was consulted.

[davidbfpo]

A "lurker" who watches China far more than I wondered aloud that the Chinese state does not care for its nationals who live abroad.

The vast majority have personally emigrated, for a better life usually and as at least two SWC threads have touched upon how the PRC would respond:

a) How will China react to lost investments:http://council.smallwarsjournal.com/showthread.php?t=14271

b) China's expanding role in Africa:http://council.smallwarsjournal.com/showthread.php?t=2164

There also my "hobby horse" thread, the kith & kin factor:http://council.smallwarsjournal.com/showthread.php?t=8829

Then recently the PRC deployed an infantry battallion to South Sudan, wearing UN "blue berets", to protect its oil workers and investments:http://council.smallwarsjournal.com/showthread.php?t=21137

Is this deployment only to protect a state investment and staff?

Anyone else any thoughts or contributions?

[AdamG]

There to bring peace or guard Chinese interests?

What do you think?

http://youtu.be/x-2VmohG_Pk

Chinese troops are being deployed in a restive, oil-rich region in a far-off continent. What could possibly go wrong?
http://theweek.com/article/index/268407/is-china-entering-its-own-military-quagmire-abroad

[Morgan]

Could this growing Chinese interest in Africa be the early beginnings of a potential 21st Century "Scramble for Africa" by rising Asian powers in need of cheap resources? Could borders be redrawn with emphasis on interior-to-port accessibility? If Japan does manage to reassert itself militarily (in response to perceived growth in Chinese strength), could Japan join the Chinese in African ventures to secure resources as well as accessing African consumers? Maybe the ROKs? Vietnamese? Indians? Just wild speculation on my part.

[Bill Moore]

Could this growing Chinese interest in Africa be the early beginnings of a potential 21st Century "Scramble for Africa" by rising Asian powers in need of cheap resources? Could borders be redrawn with emphasis on interior-to-port accessibility? If Japan does manage to reassert itself militarily (in response to perceived growth in Chinese strength), could Japan join the Chinese in African ventures to secure resources as well as accessing African consumers? Maybe the ROKs? Vietnamese? Indians? Just wild speculation on my part.

The Indians have been competing for influence and access to Africa with China for some time now. Not to many places in West Africa where I couldn't find a Vietnamese restaurant, but I didn't see a large Vietnamese population there. A lot of Lebanese, but then again they seem to be everywhere and relatively successful.

[AdamG]

China is preparing to arm its stealthiest submarines with nuclear missiles that could reach the U.S., cloaking its arsenal with the invisibility needed to retaliate in the event of an enemy strike.

Fifty years after China carried out its first nuclear test, patrols by the almost impossible-to-detect JIN class submarines armed with nuclear JL–2 ballistic missiles will give President Xi Jinping greater agility to respond to an attack.

http://www.bloomberg.com/news/2014-12-08/china-takes-nuclear-weapons-undersea-where-prying-eyes-can-t-see.html

[davidbfpo]

Moderator's Note

This thread is now rather large and it is time for a new thread, with the same title too! The new thread will be in another arena: Global Issues & Threats as China is no longer a regional power (ends).

The new thread is at:http://council.smallwarsjournal.com/showthread.php?t=21618