Tag Archives: china

A reason for the US military expansion into Africa

In 2004 the US military began to expand into Africa. In 2007 they created Africa Command (Africom). Since then they’ve accelerated and expanded operations. Africa has great natural resources, but why more interest now?

Here is one possible explanation: the great game. A rival great power expands its reach and things of no interest to us suddenly become worth contesting.  China has become a major importer from many African nations, and the US replies to this challenge in the only way it knows how.

From Bloomberg Briefs, 26 February 2013

From Bloomberg Briefs, 26 February 2013

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What will China’s new leaders do? Bold or incremental reforms?

Summary:  China is one pole of the 21st century world. Skeptics have predicted China’s crash for over a decade.  Even the IMF has began warming about China’s over-investments and shake banking system. Now a new generation of leadership take command. Much depends on their decisions, which will affect both China and the world.

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Western experts believe China’s new leaders will act cautiously and conservatively on their major domestic programs:

  1. they will prioritize steady strong economic growth over structural economic reform,
  2. they will avoid potentially destabilizing (ie, large) political reform, hoping that steady economic growth maintains the Communist Party’s legitimacy.

Both of these goals seem unwise. The combination might be lethal for China.

China has long-deferred problems, and a window of strong growth in which to act. The alternative, so common in history, is to delay until an economic crisis forces action — under difficult circumstances. Most leaders believe that delay preserves options.  False. Time inexorably closes more options than it opens.

Another scenario:  China’s new leaders, who take office in March, act boldly to take advantage of the “new team” honeymoon. Political capital is usually strongest on day one, and tends to decline over time (ie, friends come and go; enemies accumulate).

However, even bold action might prove futile since these goals are contradictory.

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BRIC building: the future of Brazil, Russia, India and China

Summary: Today we have a follow-up by Paul Schulte to Does corruption limit China’s growth, or pose a threat to its existence? He looks at the leading emerging nations, comparing them to the US and UK at similar point in their evolution to greatness.

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BRIC building: the future of Brazil, Russia, India and China

By Paul Schulte
Institutional Investor magazine, in press
Republished here with his generous permission.

The challenge of the BRICs

The November/December 2012 edition of Foreign Affairs Magazine had an article called “How the BRICS Are Crumbling” by Ruchir Sharma (head of Emerging Markets at Morgan Stanley). The tone of the article seems off the mark. The BRICs {Brazil, Russia, India, China} are slowing because they are trying to slow credit growth due to the links of their currencies to the US dollar. They are trying to slow down credit growth while the West desperately uses zero interest rates to accelerate credit growth. So, the West and the BRICs are operating at cross purposes.

The BRICs countries have dollar-linked currencies, so when interest rates are zero in the West and high in BRICs countries they will be bombarded with capital seeking a higher return. This causes their currencies to appreciate, jeopardizing growth. Or, the BRICs countries must intervene domestically to force banks to slow credit growth as these banks fill with cash. Either way they encounter forces which cause their currencies to rise and credit growth to accelerate. This is a classic cocktail for a real estate bubble and accelerating inflation.

Brazil and China are experiencing the same phenomenon now. Both are essentially trying to slow down their respective economies, although China has been more successful.

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Does corruption limit China’s growth, or pose a threat to its existence?

Summary:   Critics of China often cite its high level of corruption as a limiting factor to its growth, or a possible cause of its fall — or even disintegration. Like so many of American’s views about China, it’s false. Probably a way to diffuse awareness that a powerful rival has emerged on the world stage.  Here we compare China’s corruption to that of America’s past — and present.

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Contents

  1. China today
  2. Late 19th century America
  3. America today
  4. For More Information

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(1)  China today

Is Corruption in China ‘Out of Control’? A Comparison with the U.S. In Historical Perspective“, Carlos D. Ramirez (Assoc Prof Economics, George Mason U), 4 December 2012 — Abstract:

This paper compares corruption in China over the past 15 years with corruption in the U.S. between 1870 and 1930, periods that are roughly comparable in terms of real income per capita. Corruption indicators for both countries and both periods are constructed by tracking corruption news in prominent U.S. newspapers. Several robustness checks confirm the reliability of the constructed corruption indices for both countries.

The comparison indicates that corruption in the U.S. in the early 1870s — when it’s real income per capita was about $2,800 (in 2005 dollars) — was 7 to 9 times higher than China’s corruption level in 1996, the corresponding year in terms of income per capita. By the time the U.S. reached $7,500 in 1928 — approximately equivalent to China’s real income per capita in 2009 — corruption was similar in both countries.

The findings imply that, while corruption in China is an issue that merits attention, it is not at alarmingly high levels, compared to the U.S. historical experience. The paper further argues that the corruption and development experiences of both the U.S. and China appear to be consistent with the “life-cycle” theory of corruption — rising at the early stages of development, and declining after modernization has taken place. Hence, as China continues its development process, corruption will likely decline.

(2)  Late 19th century America

This unflattering comparison of modern China with late 19th century America should not surprise us. Post-civil war America (especially the Gilded Age) America was a horror show. Public and private force was used to suppress Blacks, American Indians, Asians, and workers (see the Wikipedia entry, also for the 1892 Homestead Strike and the 1894 Pullman Strike).  When the cavalry arrived, it was often to help the bad guys (or one of the groups of dueling bad guys, as in the Lincoln County War).

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Why does the US government seek a hotter conflict with China?

Summary:   The long-simmering trade conflicts with China have taken a turn for the worse. Romney’s foreign policy team contains some extreme hawks eager for some form of war with China.  DoD, desperate for threats to justify its existence, has fired a propaganda barrage at us about the cyber-threat with China. And some national security agencies, having exhausted the specious domestic threat from jihadists, turn to China as the only game left to justify their jobs.  The US might single-handed insure that peace does not reign in the 21st century.

Contents

  1. Cyber-threat inflation
  2. Brewing up a Trade War
  3. Looking ahead to the Romney doctrine
  4. Other articles about inciting conflict with China
  5. Other posts about China

(1)  Cyber-threat inflation

The context to these articles hyping China’s cyber capabilities is quite delusional. The US government draws on the world’s largest and most advanced pool of information technology talent, and has almost certainly far outspent any other nation on cyberwar (with so many agencies seeing this as a source of preeminence in the 21st century).  The US (with Israel) have launched the world’s first cyberwar, against Iran (Stuxnet and follow-up rounds). None of these facts interfere with the carefully constructed narrative of US inferiority and victimhood propagated by the government’s engines of propaganda.

Here are some recent samples.

(a) China’s cyberwar“, editorial in the Washington Post, 15 December 2011

(b)  Occupying the Information High Ground: Chinese Capabilities for Computer Network Operations and Cyber Espionage, Prepared for the U.S.-China Economic and Security Review Commission by Northrop Grumman Corp, 7 March 2012 — Executive Summary:

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What you’re not being told about the world economy, but should know!

Summary: The secret key to the FM website’s great forecasting record is that we do only the blindingly obvious, and give no dates. Such as the long forecast of stability for the world economy, to be followed by ugliness. We revisit this again, showing that almost nothing is happening yet in the global economy. All the Sturm und Drang in the news media is exaggerated. There is only one new development, and that has not received sufficient attention.

OECD’s Composite Leading Indicator

Contents

  1. A look at the world using the OECD’s CLI
  2. US unemployment
  3. Europe: slow decline, cohesively
  4. New ECB policy: not a game-changer
  5. New FED policy: not a game-changer
  6. The new element disturbing the global economy
  7. For more information

(1) A look at the world using the OECD’s CLI

The OECD’s Composite Leading Indicators are one of the best economic leading indicators. Perhaps the most reliable, but also reported with the longest lag (yesterday they released the July numbers). It’s been flat since early. During the past 24 months the peak was 101.1 in February 2011. The trough was 100.0 in October 2011; it’s now 100.2.

The July report continues in its boring fashion of late. The tension builds across the globe, but so far remains contained:

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The end of the post-WWII world is not the end of the world

Summary:  Slowly people become aware that the post-WWII economic and geopolitical order dies a little every day.  The transition might be long and difficult.  We can only guess at what lies beyond.  Yet we need not fear these things, as they’re less dangerous than what we survived in the 20th century.  Here we take a broad look at the global situation.

Contents

  1. The old world ends; a new world will be born
  2. Europe
  3. Japan
  4. America
  5. The emerging nations:  China, as an example
  6. No fear

(1)  The old world ends; a new world will be born

We’re in the midst of a transition from the post-WWII era to something new, an evolution in many dimensions.

  1. A the new economic regime:  resolving the excess debt (public and private), managing global capital flows, ending instability in currency valuations.
  2. Geopolitical rebalancing to a multi-polar world of great powers — including emerging nations such as China.
  3. A new energy regime:  navigating thru peak oil to new sources.
  4. A world where 4th generational war becomes the dominant form of armed conflict (e.g., insurgencies, piracy, failed states, al Qaeda & its franchises).
  5. Demographics (the age wave):  aging societies dying gracefully (or not), young societies growing to maturity, and the next fertility collapse following development of a male contraceptive.

How long will it take to complete this transition?  Past ones have been multi-generational (see here for details), and tend to accelerate as they develop.   The last one was painful and took almost 2 generations (1914-1950).  This cycle started (arbitrarily) in 1989 with the fall of Berlin wall (starting global unification, ending the threat of a nuclear firestorm destroying the world), the start of serial US banking crises, and accelerated debt growth.   Guessing, it should be competed by 2040.

The transition will be driven by our responses to the specific crises that are destroying the post-WWII regime.  The choices we make will define the new order.  This post examines only the first two on the list.  For more information:

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