Tag Archives: china

Stratfor: What Kind of Great Power Will China Become?

Summary: How China wields its growing power will help shape the geopolitical world of the 21st century. Here Stratfor looks at China and speculates at what it might become. {1st of 2 posts today.}

Stratfor

What Kind of Power Will China Become?

Stratfor, 3 February 2016

These are grim times for the Chinese economy. In the two years since property markets peaked and subsequently began to slow in most cities across China, it has become abundantly clear that the approach to economic management that sustained double-digit annual growth for two decades has exhausted itself. The unprecedented stock market volatility of the past year, along with signs of spreading unemployment and labor unrest in many regions, are important reminders that the transition to new foundations of national economic growth will in all likelihood be bitter, slow and unnervingly uncertain.

In times like these, it is tempting to embrace visions of irreversible decline — just as it was easy, in the expansive years of consistently high growth, to view China’s rise as straightforward and inevitable. As Stratfor pointed out well before the 2008-09 global financial crisis, which set in motion many of the policies and processes that underlie China’s current woes, the only certainty in the high-growth years was that they would someday end. Their ending, we predicted, would unleash tremendous and potentially destabilizing social pressures long kept at bay by the promise of universal employment and rising material prosperity. At the least, this process would slow China’s political, military and economic rise as the decade ends. At worst, it would send China into a more debilitating and longer-lasting period of crisis and fragmentation.

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Magnus: China’s leaders must choose: political power for them, or economic growth for China

Summary: Today’s post by A-team economist George Magnus discusses China’s economic challenges, especially the clash between its political and economic transitions. These are among the major unknowns affecting the future of China, that other pole of the world economy, {1st of 2 posts today.}

Globe and China Flag

Will, or can China put change before control?

By George Magnus, 29 January 2016
Reposted from his website with his generous permission

One of John McDonnell’s economic advisory team, David Blanchflower, recently wrote in the New Statesman, “The new Labour leaders are not economists and are going to have to learn fast. They will have to accept the realities of capitalism and modern markets, like it or not.” He makes a fine point, and on reading it, I immediately thought that it could equally be made about China.

The leadership is no longer new, and for them the realities of capitalism and markets are not the same: they are prepared to incorporate market mechanisms and go along with western capitalism only to the extent that they, a) do not compromise the interests and primacy of the Chinese Communist Party; b) help the Party further Chinese economic and political power;  c) bolster the competitiveness and efficiency of state institutions. What the leadership does not want is a central role for markets and prices in the determination of the ownership, allocation and distribution of resources.

This much, if you did not know it before, has become evident to global audience in the seemingly parochial world of finance.

On the one hand, China has taken the initiative to set up the Asian Infrastructure Investment Bank under the umbrella of what President Xi Jinping has called the One Belt, One Road project, or to you and me, a 21st century Silk Road by land and by sea; and most recently won the IMF’s backing to include the Yuan in the so-called Special Drawing Right, the IMF’s accounting unit. We could also point to other initiatives to encourage greater use of the Yuan in the settlement and invoicing of trade, the denomination of international bonds, and the composition of central bank currency swaps; and to encourage foreign capital to come into Chinese financial markets.

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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.

Excerpt

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

Forecast

  • 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.

Analysis

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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