Tag Archives: china

A Chinese general sees a ruthless America striving to contain his nation’s growth

Summary: This series of posts provides excerpts from a recent speech by Qiao Liang, a Major General in the People’s Liberation Army. These give a glimpse into the thinking of China’s elites, unlike the US-centric perspective provided by our news media. In part 3 he gives his big picture view of the decade’s global geopolitics. As in part 2, he sees the US as a ruthless hegemon in decline — fighting to maintain its control over the world by containing its greatest rival: China. There’s enough truth in this to worry everybody; these struggles often end badly.

Globe and China Flag

Speech by Qiao Liang (乔良): part three
Major General in the People’s Liberation Army

Given at a study forum of the Chinese Communist Party, April 2015
Reported and translated by Chinascope
Reposted with their generous permission

C. Now, It Is Time to Harvest China

It was as precise as the tide; the U.S. dollar was strong for six years. Then, in 2002, it started getting weak. Following the same pattern, it stayed weak for ten years. In 2012, the Americans started to prepare to make it strong. They used the same approach: create a regional crisis for other people.

Therefore, we saw that several events happened in relation to China: the Cheonan sinking event {2010}, the dispute over the Senkaku Islands (Diaoyu Islands in Chinese), and the dispute over Scarborough Shoal (the Huangyan Island in Chinese). {The latter two are long-standing disputes.} All these happened during this period. The conflict between China and the Philippians over Huangyan Island and the conflict between China and Japan over the Diaoyu Islands, might not appear to have much to do with the U.S. dollar index, but was it really that case? Why did it happen exactly in the tenth year of the U.S. dollar being weak?

Unfortunately, the U.S. played with too much fire [in its own mortgage market] earlier and got itself into a financial crisis in 2008. This delayed the timing of the U.S. dollar’s hike a bit.

If we acknowledge that there is a U.S. dollar index cycle and the Americans use this cycle to harvest from other countries, then we can conclude that it was time for the Americans to harvest China. Why? Because China had obtained the largest amount of investment from the world. The size of China’s economy was no longer the size of a single county; it was even bigger than the whole of Latin America and about the same size as East Asia’s economy.

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A Chinese general judges America’s leadership of the world economy

Summary: This series of posts provides excerpts from a recent speech by Qiao Liang, a Major General in the People’s Liberation Army. They give a glimpse into the thinking of China’s elites, unlike the US-centric perspective provided by our news media. Here the General looks at America’s leadership of the world economy, and its effects on emerging nations. He judges us harshly.

Globe and China Flag

Speech by Qiao Liang (乔良): part 2
Major General in the People’s Liberation Army

Given at a study forum of the Chinese Communist Party, April 2015
Reported and translated by Chinascope
Reposted with their generous permission.

B. The Relationship between the U.S. Dollar Index Cycle and the Global Economy

This financial economy (using money to make money) is much easier than the real (industry-based) economy. Why will it bother with manufacturing industries that have only low value-adding capabilities? Since August 15, 1971, the U.S. has gradually stopped its real economy and moved into a virtual economy. It has become an “empty” economy state. Today’s U.S. Gross Domestic Product (GDP) has reached US$18 trillion, but only $5 trillion is from the real economy.

… Many people think that imperialism stopped after the U.K. became weak. Actually, the U.S. has conducted a hidden imperialism through the U.S. dollar and has made other countries its financial colony.

… A lot of U.S. dollars went to Latin America … {creating} the economic boom in Latin America in the 1970s. The U.S. dollar index started climbing in 1979. Dollars flew back to the U.S. and other regions received fewer dollars. Latin America’s economy boomed due to an ample supply of dollar investment, but this suddenly stopped as its investments dried up.

… The Latin American economy dropped to the bottom. … Some {Americans} took the money they just made and went back to Latin America to buy the good assets whose prices had just fallen to the ground. The U.S. harvested handsomely from Latin America’s economy.

If this had happened only once, it could be argued as a small probability event. As it has occurred repeatedly, it indicates an intended pattern.

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The American Empire, as seen by a Major General of the PLA

Summary: This series of posts provides excerpts from a recent speech by Qiao Liang, a Major General in the People’s Liberation Army. These give a glimpse into the thinking of China’s elites, unlike the US-centric perspective provided by our news media. Like any good speech, it grows more interesting as it unfolds. In part one the general describes the foundation of America’s Empire. A brief analysis follows the text.

Globe and China Flag

Speech by Qiao Liang (乔良): part one
Major General in the People’s Liberation Army

Given at a study forum of the Chinese Communist Party, April 2015
Reported and translated by Chinascope
Reposted with their generous permission.

A. The First Financial Empire in History

… On August 15, 1971, when the U.S. dollar stopped being pegged to gold, the dollar ship threw away its anchor, which was gold.

Let’s take a step back. In July 1944, to help the U.S. to take over the currency hegemony from the British Empire, President Roosevelt pushed for three world systems: the political system – the United Nations; the trade system – the General Agreement on Tariffs and Trade (GATT), which later became the World Trade Organization (WTO); and the currency financial system – the Bretton Woods system.

The Americans’ desire was to establish the U.S. dollar’s hegemony over the world via the Bretton Woods system. However, from 1944 to 1971, the dollar didn’t gain that power. What blocked the dollar? It was gold.

When the Bretton Woods system was set up, the U.S. promised the world that the U.S. dollar would be pegged to gold while every other country’s currency could peg to the dollar. One ounce of gold was fixed at US$35. With this promise, the U.S. couldn’t do anything according to its own will. In other words, the Americans couldn’t print an unlimited number of dollars. Whenever it printed a dollar bill, it had to add one additional ounce of gold into its treasury as a reserve.

The U.S. made that promise to the world because it held 80% of the world’s gold reserve at that time. The Americans thought that, with that much gold in hand, it was enough to support the U.S. dollar’s credibility.

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China introduces us to the future of warfare (asymmetric)

Summary: This series about China’s perspective on geopolitics and strategy begins with an excerpt from one of the most important and most underestimated textbooks about modern warfare, published in 1999. The following posts have excerpts from a recent speech by one of the authors, now a Major General in the People’s Liberation Army. These give a glimpse into the future that the US military, glutted with money from the fantastic growth of the military-industrial complex, refuses to see.


One of the key texts describing 4th generation warfare is Unrestricted Warfare, published in 1999 by Qiao Liang (乔良) and Wang Xiangsui (王湘穗), both Colonels in the air force of the People’s Liberation Army. They describe the 1997 attack by western hedge funds on the currencies of Southeast Asia as an example of this new generation of warfare.

Not mentioned but fitting in their paradigm is America use of economic sanctions as a weapon, which we have done with increasing frequency: against Iraq, against Burma, against Russia, and especially against Iran — hampering its trade and cutting Iran off from the world’s financial machinery (e.g., the SWIFT interbank money transfer system).

America’s military has largely ignored this book, as hegemons usually do when rivals develop asymmetric tools to circumvent their power. We exult in the superiority of our super-sophisticated (and super-expensive) carriers and  aircraft, while they use their imagination to devise new paths to victory.


When people begin to lean toward and rejoice in the reduced use of military force to resolve conflicts, war will be reborn in another form and in another arena, becoming an instrument of enormous power in the hands of all those who harbor intentions of controlling other countries or regions. In this sense, there is reason for us to maintain that the financial attack by George Soros on East Asia, the terrorist attack on the U.S. embassy by Usama Bin Laden, the gas attack on the Tokyo subway by the disciples of the Aum Shinri Kyo, and the havoc wreaked by the likes of Morris Jr. on the Internet {in 1988 created the first computer “worm”}, in which the degree of destruction is by no means second to that of a war, represent semi-warfare, quasi-warfare, and sub-warfare, that is, the embryonic form of another kind of warfare. …

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Stratfor describes the growing Russia-China alliance, allies against us

Summary: Hegemons push rival great nations into alliances against them, just as Russia and China are moving together. They’re developing deeper commercial ties, and perhaps even strategic relationships. It’s inevitable given our aggressive foreign policy, putting pressure on China and Russia. Here Stratfor explains their early steps to what might become one of the core alliances of the 21st century.

Putin In Beijing

New B.F.F. — Putin shakes hands with Xi Jinping. Photo by Greg Baker – AFP/Getty Image.

Russia’s Relationship With China Grows Slowly

Stratfor, 3 September 2015


  • Russia and China will sign 20-30 large deals worth tens of billions of dollars this week, but the two countries will continue to disagree on many issues, such as the natural gas supply deal. Therefore, substantial deals of the magnitude seen last May are not likely.
  • With Russia and China both experiencing economic slowdowns, China will continue to stall on financing many of these large projects until it can get more favorable terms.
  • In the long term, China will become one of Russia’s major partners, but not as quickly or on as large a scale as Moscow would like.


Russia has been touting its “pivot to the east” since the West’s efforts to isolate Moscow in the wake of the government change in Ukraine. Russian President Vladimir Putin said Sept. 1 that Russia and China were making consistent progress toward the creation of a strategic alliance that will play a significant role in international economic relations. Putin is in China from Sept. 2 to Sept. 3 for the country’s commemorations of the end of World War II — a reciprocal visit after Chinese President Xi Jinping visited Russia for its celebrations in May. During Putin’s visit, China and Russia are expected to sign some 20-30 so-called mega-deals, agreements with either high price tags or great strategic importance to either country.

Russia’s turn toward China has been evident in recent years; Chinese foreign direct investment {FDI} into Russia nearly tripled in 2014 from the previous year, to $1.27 billion, making China the second-largest foreign investor in Russia (behind France). This may seem like a small amount, but with FDI into Russia falling to $21 billion in 2014 from nearly $70 billion the previous year, Russia is looking for investment from anywhere.

Moreover, according to the Russian central bank, China was the second-largest source of foreign financing for the non-financial sectors in Russia’s economy in 2014. Chinese lenders let Russians and Russian businesses borrow $13.6 billion. The only country that provided more financing was Cyprus, where Russian-affiliated parties likely provided the loans.

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George Magnus explains events in China: no collapse, but serious problems

Summary: Continuing our quest to understand events at the other pole of the world economy, today’s post by A-team economist George Magnus explains the 3 key things to know about current events in China.

Globe and China Flag

China’s economy: no collapse, but it’s serious, and so are the politics

By George Magnus, 1 September 2015
Reposted from his website with his generous permission

For the sake of clarity, repeat three things after me:

  1. China’s economy is not collapsing.
  2. What’s going on China is serious.
  3. Political tensions are making things worse.

(1)  China’s economy is not collapsing

People who have become China experts in the last few weeks, point to the sharp falls in power consumption and freight traffic – two of the three indicators in the now famed Li Keqiang index –- but these and other industrial indicators don’t tell us anything about what’s going on in the services or tertiary sector, which accounts for about half of the economy.

Even if producers are having a tough time at the moment, consumers of household goods and services and buyers of real estate haven’t gone to ground. Retail sales were still up by over 10% in July, and property sales registered pretty robust year on year increases of over 13% in the second quarter and 19% in July. The government is going to continue to support the economy with infrastructure spending, monetary easing, and fiscal and debt initiatives.

In August, even though the Caixin and NBS PMI data were down, some of the high frequency data could ‘look’ better in year-on-year terms, largely because of flattering base effects following from declines this time last year. The official data are likely to continue to show the economy growing around 6.5 – 6.8% in annual terms in the next few quarters.

(2) What’s going on China is serious

The economy is the fourth year of a structural slowdown that shows no signs of ending and is becoming increasingly insensitive to the government’s stimulus measures. This chart of the manufacturing, services and total PMI indices in August captures the situation well, and points specifically to the fact that the services component, which still shows expansion, isn’t doing enough to offset the decline in manufacturing.

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The big question for the world: is China growing, slowing, or in recession?

Summary: China is both the key driver of the world economy and the least well known of the major nations. With unreliable economic statistics, a rapidly evolving economy that defies easy analysis, and deep corruption, it defies analysis. But its growth or recession might determine the course of the world economy during the next decade. This post provides a realistic outlook, debunking the dreamy consensus expecting continued rapid growth.

“God takes care that trees do not grow to the sky.”
— Ancient German proverb.

From Evercore: China might already be in a recession (red line)

Evencore: estimate of real China GGP

This graph is from a report by Evercore ISI), founded by Roger Altman (Asst Secretary of Treasury for Carter and Deputy Secretary for Clinton) — Excerpt…

“Our proprietary Synthetic Growth Index (SGI) fell 1.1% m/m in July, and was also down 1.1% y/y. No wonder global commodities are so weak. The most recent 18 months have been much weaker than the 2011-13 period. Even if we adjust our SG I upward (for too-little representation of Services — lack of data), we believe actual economic growth in China is far below the official 7.0% y/y. And, it is not improving, Most worrisome to us; the ‘equipment’ portion of Plant & Equipment spending is very weak, a bad sign for any company or country. Expect more monetary and fiscal steps to lift growth.”

A recession under way in China would explain the collapse of most industrial commodity prices (especially oil), and raise the risk of a global “recession” (usually defined as GDP growth slower than 2%). Fortunately, they are probably wrong about China’s current GDP. Such a fast slowing from 7% to -1% would create economics shocks impossible for even China’s government to hide. Like massive layoffs.

I believe their index shows the rising stress in China’s economy. See this anecdotal evidence in The Guardian: “China’s workers abandon the city as Beijing faces an economic storm. Labour disputes are rising and some workers are leaving for the country amid fears a crashing economy could cause political and social unrest.” However, I believe their underlying story is almost certainly correct: most estimates of China’s future growth are delusionally optimistic.

A recent paper by two eminent Harvard economists provides a more realistic forecast of much slower growth — which implies real recessions (falling GDP) for China, instead of just growth slowdowns. This is also likely for India. That would remove the steady wind that has helped power the world economy since 1990, with no obvious candidates to replace them as economic locomotives.

The top line in the below graph shows the common forecast that China will rule the 21st century, as its 6% or 7% GDP growth makes them number one. US GDP is almost $17 trillion, and growing at 2 – 3%, so China will equal us in roughly 10 years — if they can sustain such a high rate of growth. A transition to a slower rate of growth would change the world; doing so (as often happens) by a recession would rock the world.

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