All The Lies in China
Ambrose Evans-Pritchard thinks the Chinese economy is running out of oomph. “Is this the long-feared hard landing? Of course it is.” He writes:
China is on the cusp of a deflationary vortex.
This was signalled late last year by the sharpest contraction in the (real) M1 money supply since modern records began. The hard data is now confirming the warnings …
The World Bank says China still has plenty of scope for fiscal largesse – cutting taxes and boosting spending – so it should at least avert full depression. If only the West were so lucky.
But at the end of the day, the country is bursting with industrial over-capacity. As Caixin reported recently, eight of the ten largest shipyards did not receive any new orders in the first five months of the year.
Albert Edwards from Societe Generale said the danger now is that China suddenly lurches into a deeper downturn, unleashing a flood of excess goods onto global markets and sending a powerful deflationary impulse across the world.
It sounds like bad news. But one analyst says there’s worse to come. He argues that recent emergence of “the hard data” has come despite and not because of the problem. A China analyst quoted by Evans-Pritachard contends that while there are many anecdotal indicators that the Middle Kingdom’s economy is slowing down, the chief uncertainty is that many of countries financial transactions take place in in the dark; that is, the opaque world of the Chinese shadow banking system.
The term shadow banking system refers to “the collection of financial entities, infrastructure and practices which support financial transactions that occur beyond the reach of existing state sanctioned monitoring and regulation. It includes entities such as hedge funds, money market funds and structured investment vehicles (SIV).”
In China, elements of the shadow system guarantee loans for each other. “This is exactly what’s happened. Tianyu Construction Co. went bust early this year, and because of the complex web of connections where companies guaranteed loans for each other, a large number of companies have been affected by the bust … a little more than a week after the Caixin report, the number of affected companies has risen to more than 600.” In reality the system had the stability of two drunks leaning against each other for support.
The linkage between these little known parts of the Chinese financial system and plunging real estate prices was highlighted by reports that businessmen in Wenzhou were desperately liquidating their properties assets to remain afloat — and those who failed to do this were literally taking to their heels or committing suicide. All too many enterprises were relying on the price of property rising forever.
Even the New York Times has woken up. Mark Mcdonald in an article titled “Apocalypse Soon” writes that he’s learned to speak the lingo.
Talk of an economic slowdown in China has become so loud and persistent that it now has its own slang: ghost cities, ghost fleets, rocket eggs, naked officials. The downturn has even led to the invention of a new financial algorithm, something called the China Stress Index — and the index remains high …
Foreign Policy magazine has a new overview of the economy called “Five Signs of the Chinese Economic Apocalypse.” (Business Insider sees that bet, and triples it, with a story headlined “Fifteen Reasons Why Everyone Is Suddenly Freaking Out About China.”) …
After a recent trip to China, Rosemary Righter wrote in The Times Literary Supplement of “tens of millions of houses and apartments as well as Ozymandian public buildings and factory estates — and what hits the eye is how much of it all stands empty. Across the country, uninhabited concrete blocks scab the land, not only in the megacities of the eastern seaboard but also in the sleepier southwest; from filthy mining towns in Henan, all the way to entire ghost towns in Inner Mongolia.”
And speaking of terms, the right word for China, says Jim Chanos in a Barron’s article, is “a thousand Dubais”. Everyone, the article the article says, who had “blind faith in the competence of Chinese authorities to manage through any cycle”, found it couldn’t.
If they had thought it through, those individuals should have realized that the problem with any authoritarian system which picks winners and losers, which has unlimited powers to “fix” the system, to paper things over, to inject money like Botox, here and there, to plump things up and thin things down eventually finishes up installing their incompetents everywhere. A thousand Dubais. A thousand Solyndras. A thousand Chevy Volts. Now these same believers in managed economies are discovering what everyone eventually finds out. Nobody ever wins against arithmetic.
It’s also of note that even some of the longtime bulls are growing concerned on the nation’s future. One is William Overholt, a respected Asian scholar who has moved smoothly between Asian investment-banking posts, think tanks, including the Rand Corp., and academia; he’s now a senior research fellow at Harvard’s Kennedy School …
The so-called SOEs boast close family and financial ties to China’s ruling party clique. Power and wealth have become one in the same—a kleptocracy of insiders skimming off part of the prodigious money flows sluicing through the Chinese economy through relatives strategically placed in state companies, consulting firms, and various financial institutions.
Unless this blatant favoritism is curbed by the incoming administration of Xi Jinping, says Overholt, China faces the prospect of long-term stagnation—a prospect potentially far worse than that of Japan some 20 years ago.
If any of this sounds like Hope and Change, it should. It ought to be a warning that nothing — not even China, nor even the EU — is too big to fail. Sooner or later malinvestment, the waste of resources, the poisoning of the financial systems value database will come back to bite everyone. Will China reform, as Overholt hopes? When it snows in hell perhaps. Everyone at the top of the system will try to keep it going, like Wile E. Coyote until they go straight over the cliff. And they’ll keep going until inevitably, they look down.
The bad news is that everybody is along for the ride all the way to the bottom of the canyon.
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“China has told South Korea that it will not allow the unification of Korea under a democratic government. North Korea will remain under Chinese “influence.” If worse comes to worse, China will send in troops to set up a North Korean government that will faithfully follow orders from China. In an effort to dampen some of the anger in South Korea (the United States, Japan and so on), China would maintain North Korea as a separate entity (and not a new province of China). China wants no misunderstanding about who “owns” North Korea.”
See:
http://www.strategypage.com/qnd/korea/articles/20120708.aspx
If the Chinese economy tanks, I wonder if they’ll want to bear the cost
of rehabbing a collapsed North Korea.
Which desire is the most evil: Power or Money?
An alternate question is which desire is more dangerous to us?
If the rulers of China desire money, then they will keep the system going, like Wretchard said, and suck as much as they can before jumping at the last second. This is happening all over the Middle East. Although it’s not very good for humanitarian reasons, this presesnts a less dangerous China to us.
If they really want power however, then it is in their interest to keep China strong. Whether or not they know how is beside the point, and may foil their desire. In my opinion, power is more dangerous for us, because it is a desire which involves the maximum possible number of people. The Empire must expand. Money on the other hand, is much more suited to pursuit by individuals, against everyone else.
Events in Europe are interesting because they provide an indicator into how the US elites will behave in a similar situation. Will they save themselves (optimize money) at the expense of their special interest or will they save the system in order to remain powerful (optimize power)? The answer, in Europe at least, is that their elites are too stupid to think even that far. Or it seems so anyhow.
China’s crisis may provide a different answer to the dilemma. How will those inscrutable, hard men of the Party fare? If history is any guide, they will not do much better than the Europeans. The phrase warlordism comes to mind; and warlordism is nothing more than than a choice of local optima over a global optimum. If the new mandarins run true to form they’ll behave just like the old mandarins. Money first and let the devil take China.
The Middle Eastern collapse I will leave out of the reckoning because their likely behavior is just too ghastly to contemplate. If they had 99 chances to obtain greatness and only one to ruin themselves, they would alas, ruin themselves.
As to the United States, one had hoped for more. But by the looks of things the US cultural elites are no better. If Paul Krugman is an example of the first team then there is little room for optimism, though the prospects for comedy are bright.
But because of North America’s strong geopolitical position it may transpire than it will witness the ghastly outcomes of managed economies in Europe and China before collapsing itself and reform out of sheer blind fear. Maybe somewhere in Bill Maher’s brain is some vestige of rationality that will see it coming and say, “uh oh”.
If North America escapes the collapse at all, it will only be because others have gone screaming over the edge in time to alert it to the catastrophe. That and nothing more. God may bless America; or maybe luck will let it off the hook, but if it were up to Jeremiah Wright and his disciples the opposite outcome is more likely. Not by merit, but by grace is all anyone can reasonably hope for.
1. dumpster4:
Names are a very tricky thing. I now consider North and South Korea to be different countries. There should be no unification. North Korea ought of course to be free and democratic, and compete with South Korea, but it is no longer the same people.
There is a phenomenon whereby we abstract a set of ideals from a group of people, say black people. At the beginning, the Black mindset and the Black skin colour track with each other. Eventually, the mindset, usually driven by a few prominent individuals, shifts around and it evolves. This is a natural occurrence, but the danger is that it’s still called Black. It can no longer apply to each black person, but we tend to think that it does. And the Thomas Sowell is despised for being Not Black. And President Clinton can be considered Black.
Basically, it’s a problem of two different things, like race and ideology, with the same name. And then people think that they match each other. The more I think about it, the more I see that this problem is very common, very subtle and very dangerous.
It isn’t “all China”. But the economic zones are pretty big. Probably the most telling sign of a slowdown will come from Intel Corporation’s 2nd quarter report due July 17th. If China’s consumer spending is slowing down, Intel’s results will show it.
China’s economy has been growing at an 8%+ clip for some time and the concern has always been whether it was sustainable.
I seriously doubt that China has a property value bubble about to burst as happened in Japan. So I’m not convinced that there is any real deflationary pressure.
But I am worried about China’s ability to absorb US debt. Since Obama has shown no willingness to reign in spending, and Congress clearly lacks the capacity, our deficit spending could cause another recession if China decides to forgo buying American debt because of internal banking issues.
So I guess any problems in China simply remind me why it is time to flush the Presidential and Congressional toilets for a fresh start.
Are you seriously considering Obama in 2012? – http://www.youtube.com/watch?v=a4nvhAZ0vr0
“So I guess any problems in China simply remind me why it is time to flush the Presidential and Congressional toilets for a fresh start.”
A GOOD start, although it is really just treating the symptoms. My cure is to go through ‘Who’s who’ and put every 10 person up against the wall. If the other 9 don’t figure it out, repeat as necessary.
The establishment needs to be reminded that their reason for existence is to make sure the masses are comfortable. Their reward is the cream off the top. Their punishment is that bullet pocked, blood stained wall.
Thomas Friedman should be forced to eat his words, page by page and without ketchup.
How many people will die violently over the next 10 years because of the greed infantilism and stupidity of the Socialists and Islamists? Can we start an office pool with regional counts and a global total?
North America: 500,000
South America: 1,000,000
Sub Saharan Africa: 4,000,000
Russia/FSU: 1,000,000
Europe: 500,000
Australia/NZ: 50,000
India: 1,000,000
South East Asia: 1,000,000
North East Asia: 10,000,000
AfPak/Iran: 5,000,000
MENA: 10,000,000
China: 50,000,000
Total: 84,050,000.
If things get unstuck though it could easily exceed 100,000. If India and China toss nukes the totals can triple. Blowing the Aswan High Dam alone could cost 20,000,000 lives.
Meanwhile Bloomberg is concerned about Big Gulps.
One of the reasons I visit this site, thoughts like these:
3. wretchard
“As to the United States, one had hoped for more. But by the looks of things the US cultural elites are no better. If Paul Krugman is an example of the first team then there is little room for optimism, though the prospects for comedy are bright.
Cluck, Cluck… I imagine it could get worse but not much more for me. keep’n powder dry and family close at hand.
Ahhh, such opportunity! We now find ourselves sitting atop endless supplies of natural gas, which can drive the engines of manufacturing cheaply. We also find vast supplies of oil, which can be turned into so many of the parts that drive the plastic-manufacturing.
So if we could get out of our own way, eliminate entire forests of useless regulations, offer tax incentives to re-shore manufacturing plants, we could take back a tremendous amount of our birthright, of the things we invented (damnit!) and sold off for 40 pieces of silver. At the same time, we’d drive a dagger into the heart of a country that is — don’t kid yourselves — ultimately our enemy and is building armed forces as fast as it can with our money and technology stolen from us (or more often just handed to them by our own internationalist traitor class, the TWANLOC).
There’s my dream for a Romney Presidency. Massive re-industrialization along with hundreds of TWANLOC traitors ground down (I would guess enough export laws were broken, or bribes made, or some damn thing or other violated to at least arrest and perp-walk enough of them to make the others think twice).
But since Romney in all likelihood is actually just another member of the TWANLOC, I don’t expect any of this to happen. We’ll just get tweaking at the margins. Unless he’s somehow a deep cover patriot running a long-term game to get himself into a position where he can get his country back. Possible? Bah!
OT, but …
RE the previous thead, many thanks to Wretchard and Teresita for their posts in response to my question about Visayan and the Aeta.
Maybe we will see a Chinese Spring and they will get democracy, like the Arabs got;
http://video.foxnews.com/v/1726986863001/
Black Bart
A’yup, ‘ol Wretch is always lifting the bar. A fitting epitaph for the 0bama administration; “Not much in the way of competence but a continuous source of amusement.”
Laughing is better then crying although if she looks like Jessica Simpson, begging is good too.
But since Romney in all likelihood is actually just another member of the TWANLOC, I don’t expect any of this to happen. We’ll just get tweaking at the margins.
Romney will likely to better than that, but how much more is a matter of debate. It has been documented in interviews and anecdotal evidence that a huge reservoir of pent-up desire has built up in the American business community. They are itching to move forward, but will not do so if Obama is re-elected — or so they tell themselves. But they do want Romney as President. Also — in spite of stupid remarks about coal he made while governor of Mass. — Romney will almost certainly allow the energy sector to be unleashed. Those ought to be the twin pillars of an American economic revival: a new round of actual wealth and job creation. The only debate should be about how big a wave/surge this will be, and how well it might ride out the likely economic uphevals elsewhere.
Other than that, Romney won’t be much more clued in then other members of the centocracy. The struggle to regain an actual America will still continue even with a Romney victory. A revived economy buys hope, and also puts more faith among more of the people that the less statist of the centrocratic branch (Republicans) are indeed the better economists, and more in tune with the real mainstream as opposed to the faux one foisted on us by the Left and the MSM. It would be a start, but that is all.
‘the problem with any authoritarian system which picks winners and losers, which has unlimited powers to “fix” the system, to paper things over, to inject money like Botox, here and there, to plump things up and thin things down’
Surely this refers to The New York Times’ claim that a socialite editor on holiday witnessed tens of millions (really?) of empty dwellings on the verge of collapse, presumably for lack of freedom and elections certified by Jimmy Carter.
That’s the real authoritarian system after all — the one in New York. They have been ‘fixing the system’ since long before Mao was born, or since the Qing had a stable empire. Now their advice to China, naturally, is reforms and investment banking in the spirit of Will Overholt, since there aren’t enough iPads for enlightened American kids to smash on release day. (Those Chinese kids are brainwashed!)
“says Overholt, China faces the prospect of long-term stagnation”
Many cultures emphasize cradle-to-grave wellness over “progress” as defined by the think-tanks, investment banks, and academic circles Mr. Overholt uses to advise foreign policy. Stagnation might be the very best plan for the lives of billions of people in this world.
Our ruling class, if you would, is connected more by culture and lazy ideology than anything else. They would turn inside-out on a whim if it suited them with no mortal implications.
China has a real ruling class connected by blood and the sword. I suspect they would do what every other ruling elite has done through the centuries – beggar the populace and their neighbors if need be to retain their privilege and wealth.
I’m curious about how cohesive the Chinese military command structure is down to the division or brigade level. Do regional commanders or units get shifted around the country often to avoid personal allegiances?
Peter Boston #15:
I think that the PRC military is rather like the global “norm” for militaries outside of the US and the major NATO countries, as in banana republic. They are yet another special interest faction in the government. They are “Peoples Army, Inc” another PRC fascist faction with strong economic interests. but with more and bigger guns. Numerous “private” firms are actually owned by the military, and that includes not just armament factories.
http://www.china.org.cn/china/2012-06/21/content_25706807.htm
“I’m curious about how cohesive the Chinese military command structure is down to the division or brigade level”
VERY good question. A simple search brought back the URL above, which isn’t a direct answer. The fact that they (The PLA) is even requiring Major’s and above to do it seems to indicate there is a problem, or at least the powers that be think there is.
One can infer that the officers must stay in one place long enough to acquire property. I do know that the US Military is unusual in it’s ‘tour of duty’ approach. Most militaries don’t have the money or the space for it.
Here is a link to a Chinese military journal;
http://jca.sagepub.com/content/19/4/392.short
It is in English, which means it is most likely disinformation. Like the Arabs, if it’s in English it is for Western consumption.
McHale’s Navy has sailed into the sunset. Ernest Borgnine has died at 95. The PT-73 was probably only second in fame to PT-109. IMDB says it was really a British boat, similar but not identical to the real thing.
2. The Dude Abides
Which desire is the most evil: Power or Money?
Neither. Desire is simply wanting a good, and there is nothing wrong with that. What matters is motivation. Stalin sought and obtained power, but so did George Washington. Same is true of money; the love of money is the root of all evil. A corollary might be that the love of power is the root of all evil.
China has become a very expensive place to live, at least in the cities. Prices, of housing, food, consumer good, has shot through the roof (eg. rocket eggs). Not only have wages (which have risen) failed to keep pace, but jobs have become scarce and even those with jobs are forced to take fewer hours and lower pay.
dla 5. I guess if entire, newly built from scratch cities standing empty across the land don’t convince you that there is a real estate bubble, I’d like to know what will?
The current situation for N. Americans is like being a flea on a dog that just jumped off a cliff. Does the flea jump off the dog into thin air, or does the flea stay put and hope it is on the top side of the carcass when the dog smashes into the ground?
“The flea’s dilemma” – sounds like something Aristotle would have pronounced on.
If you want a visual idea of what these Chinese “ghost cities” look like, this is a good place.
http://www.businessinsider.com/china-ghost-cities-2011-11?op=1
Pretty amazing stuff.
Unless this blatant favoritism is curbed by the incoming administration of Xi Jinping, says Overholt, China faces the prospect of long-term stagnation—a prospect potentially far worse than that of Japan some 20 years ago.
One problem — it CAN’T be curbed. The people at the top need the support of the mid-level and low-level Party people in order to control China, and if these people are not making money, what incentive do they have to keep the people at the top in power?
In any dictatorship, you need the support of the people you depend upon to keep the rest of the country in line. It looks like China may be failing to manage this.
Individual traders or Corzine-like figures have walked off with billions in separate incidences the last few years. The receivers of this cash have opted for the money choice or at least a cushion to buy themselves power. They seem to know they might need it.
No one knows how far the can can be kicked down the road, but apocalypse anxiety is real and growing nonetheless, such that now many people just wish the damn thing would collapse already and get it over with. Hence the core problem. Some will fight like hell to keep the can moving down the road, others will standby in a daze of dread and watch, and yet another group will be trying to trip-up the can kickers.
19. Tamquam – Government built empty cities do not a bubble make.
#3 Wretchard
First, in reference to China, it is an interesting conundrum. These are, indeed, hard men who have no qualms in killing millions of their countrymen as an example to maintain power. We have the textbook examples of them doing just that. As the waste impacts the rotating airfoil, there are going to be a bunch of people killed on orders of the Central Government in Beijing. But culturally, historically, and politically; China breaks into smaller territories and dynasties when the Mandate of Heaven is withdrawn. While it may be a stretch to consider the Neo-Maoists as having that Mandate to begin with, bear with me here.
The most dangerous time for a transition from Ancien Regime to a modern state is not when it begins. When things start, and once the benefits of change begin to show; the country unifies behind them. The crisis comes when those who are the first beneficiaries, and those immediately behind them, hit the inevitable discontinuity in progress.
The ultra-poor are, well, ultra-poor and concerned with survival. Those above them are subject to what political scientists call “The Revolution of Rising Expectations”. If things don’t continue to get better, and they now see that they have something to lose, they are going to be downright testy at whoever they blame for this.
French Revolutionary myths credit the sans culottes for the Revolution. They were mere cannon fodder. The Revolution was guided by a very few from the First and Second Estates [Church and Nobility] but in the main by members of the Third Estate. Referred to as “Commons”, they were in fact not peasants at all, but rather the rising Middle Class who actually aspired to joining the Second Estate [the Nobility was made up of the "Nobility of the Sword” (feudal style nobles] and the “Nobility of the Robe” who were the post-Dark Ages merchants who were ennobled for other (read economic) services to the Crown]. When the financial crisis started, it was the Middle Class, who had disposable income, education, and the bloody-mindedness to defend their interests; to overthrow the old order to protect their own.
From Deng on, China has had economic growth. That growth has been, uneven, to put it mildly. Large cities, and the Special Economic Zones have benefited financially [there are other drawbacks to this development]; and the Central Government has siphoned off a share, part of which has been used to build up the economic hinterlands. Life has improved in rural areas. If that stops and starts going backwards, the honey bucket gets tipped over.
Distance has always limited the view of the Emperor. And the Central Government. Despite the most effective set of Coercive Organs of the State since the Chin Dynasty [with a population of only 20 million spread over ¼ of the area]; most of the economy and much local policy is hidden from the Central Government by either deception or corruption. It is noteworthy that there have been a number of local uprisings that came from long periods of local abuse, and took a long time to quell. No, there is not going to be another overthrow like the founding of the Han dynasty. But it is an indication.
A competent political tyranny, with a competent and effective secret police, would have learned after the first few problems that there is a point where naked oppression is counter-productive to the whole regime and tried to limit the exactions of local corrupt officials. They seem consistently behind the power curve on this subject for decades. That implies either the system is too corrupt to survive, or that it does not have the control to deal with a major crisis.
Far from Beijing, undoubtably, there are those plotting their own warlord future. Whether they will succeed in the crisis is unknown; but the most likely areas are in the South, the Economic Special Zones, and Hong Kong. And the disruptions caused nationwide by the loss of those areas will make it even harder on the Central Government.
Will that lesson apply here? Probably, but not definitely, not. We do not have the Warlord in our history. But it cannot be ruled out completely when the financial/political collapse comes.
Mention was made of the PLA and its loyalties. Through the 1990’s, military units were largely regionally sedentary. During the Tienanman Massacre, the State had to bring in troops from Manchuria; because the local troops would not fire on the students who they identified with as locals. That trend was exacerbated by the military control of local industries. Countering that; in the last decade the PLA has been cut in size with attempts to modernize from a mass infantry army to a more modern force. Units have been shuffled, but not widely. Loyalties may be unclear in some cases. And those cases may be the key over there.
In the US, we have another factor that China does not have. We have a Political and Economic Class that has no loyalty to the country or those ‘icky’ bitter, clingers to guns, Bibles, and the Constitution in flyover country. Their decisions are based not on what is good for the country and its people, but based on ideology and a belief that anything that comes from a foreign country is better than anything here.
The closest thing I can think of to match it in Western history is the Roman Empire after the Julio-Claudian emperors. As Tacitus said, “The secret of Empire was out. Emperors could be made other than at Rome.”. Many of those who followed may have been Emperors of the Roman Empire, but they ruled for the benefit of themselves and the wider entity; not caring for the traditional SPQR other than as a lever of power.
When organic waste impacts the rotating airfoil, the decisions of our Political Class are not going to be made for our benefit. Expect it.
#6 stoicheion
My cure is to go through ‘Who’s who’ and put every 10 (sic) person up against the wall. If the other 9 don’t figure it out, repeat as necessary.
Sigh
My friend, I fear that you have gone soft. Y’all are off by at least a factor of 5 to get their attention.
Subotai Bahadur
Well, I figured that the supreme court would kill obamacare and that would greatly increase the confidence in the US government in the middle of the big collapse that’s slated to come this fall and winter. But with no favorable supreme court decision things will get ugly for the US as well as the rest of the world.
The upside of this is that gas prices will go back under $2.00@gallon by December (as they did late in 2008) because collapsing demand everywhere will meet higher supply everywhere. As well, events will make Obama look even worse–so his failure will be pretty starkly outlined. I heard Rush saying even though he thinks O will lose he’s amazed the election is as close as it is. He thinks that’s a sad testament to the country. But maybe even the clueless will get the message.
Nouriel Roubini and others who predicted the crack up in 2008 are now saying the crack up in late 2012 early 2013 will be worse.
http://www.fundweb.co.uk/global/analysis/dr-doom-my-perfect-storm-is-happening-now/1054279.article
http://www.smarterlifestyles.com/2012/05/25/faber-massive-wealth-destruction-coming-well-to-do-may-lose-50/?fc_id=37524&fc_app_id=4554
http://www.project-syndicate.org/commentary/a-global-perfect-storm
@24; You missed one.
There are those of us who are prepared in as much as it is possible to be prepared. We do not stand and watch the parade of circus clowns and animals on their way to the coliseum in a dread state. We have tasks to accomplish and goals to reach. We are ready and willing to make the hard choices. We will see our children and grand children through this.
Harry S. Truman was a lot of things, but of all the things he was, it was his understanding that you have to make a decision that separates him from the ordinary man. Give ‘em hell! Harry!
Subotai Bahadur
“Far from Beijing, undoubtably, there are those plotting their own warlord future.”
I was a believer in the warlord theory for China (another ‘warring states’ period) until a Korean presented me with an argument I couldn’t refute.
He pointed out that a modern military was to expensive for a warlord. He is a Major in a ROK artillery Battalion. Some of his shells cost half a million dollars. A Chinese warlord would probably pay even more. Ground combat offensive ops are based on the MBT. Even cheap, soviet knock-offs cost as much as that arty shell.
Only nations can afford modern or near modern military equipment. In China soldiers are cheap but they still need weapons. Without weapons they are just targets. Without night vision gear a soldier is helpless in the 21st century. A target.
My Korean bud says that if China breaks up into warlords the ROC’s will be across the strait as fast as they can. Grab the more lucrative areas and let the Chinese desire for order do the rest.
well my last post didn’t go thru, but all it really said is I have no idea what various flavors of Chinese collapse might do to or for us, conceivably some of the effects are positive.
still I wonder, while they have 800m of their own countrymen to still bring into the modern age, can they really have “excess capacity”? isn’t this the modern curse, too much money and goods, and no good way to distribute it?
http://www.americanthinker.com/2012/07/the_gathering_storm_within_the_gop.html
Your last point is well taken. A friend – who works for a US government agency over there – once told that China’s essentially being run by a mafia-style political organization.
The Chinese Communist Party (CCP) is unlikely to fully adopt the kind of political structural changes they would need to make in order to prevent the whole thing from eventually going bottom-up; their current way of doing business is antithetical to democratization/privatization. Yet their very legitimacy as a government since Deng Xiaoping in the 1980s has been built on the ability to keep growing the economy (and thus keeping the people fat and happy, and unworried with such problems as the wide-spread environmental destruction of industrialization, the destruction of thousands of years of culture and family structure through things like the One-Child Policy, the restriction of free speech, etc). It’s got to be a terribly difficult balance to strike between a totalitarian political system and a semi-capitalistic economic system, as China is currently having to do. I would agree that the CCP will probably choose their own power over the people’s welfare in the form of continued economic growth, and they’re going to continue pursuing that power until it’s far too late to save the country.
It’ll be interesting to see what the reaction of the general population is. As the article hints at, China has a cycle of rebellion that always kicked off when the ruling dynasty failed to deliver. Culturally, the Chinese are perhaps still capable of this. A failed economy could spell disaster for the CCP, and possibly cause a fracturing of the country and/or civil war. Hopefully, though, for the sake of the people who live there, that won’t happen.
#29 stoicheion
An interesting thought, modifiable by:
1) where are various munitions manufactured and stockpiled?
2) what unit stores will come with any units that escape Central Government control?
3) what kind of black market will arise?
and of course there is the ultimate modification:
Who has what nukes, the means of delivery, and control of the Permissive Action Links?
I also note that these same factors are NOT exclusive to China.
Subotai Bahadur
I long theorized that the US could do well if it was something of a closed economy, providing what it needed and exporting what it could while offsetting imported raw materials. The one worlder’s of course scoff at this notion though I chalk it up to a combination of greed and desire to break the bonds of an employee class that is protected by escalating wage inflation, over-burdensome US laws, and the cynical corruption of unions.
This may not be as profitable but I am certain that it is possible. That said wouldn’t China be in a position to birth a class of consumers by simply letting their economy thrive. What is all of this managed market, Maxist BS anyhow. They are starting to sound like Washington and the powers that be.
“It’s got to be a terribly difficult balance to strike between a totalitarian political system and a semi-capitalistic economic system,”
Not just difficult — impossible. Therefore, this means some assumptions are wrong…
Chiefly, the idea that CCP is so bad. Or that PLA might revolt. Or that Chen is really blind and has magical powers. These are insane lies told by CIA, like all of the other misconduct committed by them and their friends.
I am glad you are one of those who sincerely wish good for them anyway. I hope every Chinese reads American internet comments and realizes the death and suffering some wish on them for no reason. Not so they will fear U.S. bombs, but so they can laugh at the foolish men being mislead by their President.
Re Subotai #33 and Stoicheion #29 on the consequences of the high costs of high-tech weapons:
Some have argued that the next major war would likely consist of a brief very damaging series of exchanges of high tech weaponry, followed by the survivors slogging it out with much cheaper & more rapidly replaced bullets & machetes. Once the high tech stuff is gone, it would take too long to replace in any real major war situation. (Remember that Black Bill Clinton nearly depleted the US supply of Tomahawks during the Monica Wag the Dog Desert Fox attack on Iraq). And destructive as the high tech stuff may be, it would still leave lots of opposition standing. (Mao’s point that if the US wiped out half the Chinese population in a nuclear attack, the remaining Chinese would still outnumber the US 2 to 1).
This doesn’t fit the Leftie mindset, where any loud bangs immediately would cause all human beings to recoil from the horror of war, join hands, and start singing KumBaYa. The Leftie ignores experience — the Brits kept fighting after the London Blitz, the Germans kept fighting after the firebombing of Dresden, and the Japanese kept fighting after the firebombing of Tokyo. Human beings will keep fighting long after defeat is inevitable, using whatever weapon comes to hand. That stubbornness might even be one of the human race’s finer qualities.
Putin says the West is in decline.
http://www.reuters.com/article/2012/07/09/us-russia-putin-west-idUSBRE86818020120709
It doesn’t seem to have occurred to him that if the economies of the West go down hard the demand for oil will collapse as will oil prices. As a result, since Russian government revenues are dependent as Iran on high oil prices–he’s going to be in a world of hurt.
I, too, do not understand how the empty cities of China are not evidence of a bubble. What symbols of excess, absurdity and malinvestment, and on a historic scale! Where have I gone wrong?
My, look at Scranton, PA, where TSHTF. The Democratic mayor has handed out minimum wage paychecks for all city employees including himself. He’s done this despite a court order commanding him not to. His argument seems to be that he’s got $5,000 left in the kitty and you just can’t get blood from a rock. Meanwhile the city council is urging the city to take on more debt to get through the crisis. The great problem with that scheme seems to be nobody wants more Scranton debt. Tomorrow the unions go back before the courts to seek more court orders. Scranton can’t declare bankruptcy, that’s a state law, despite the obvious truth that it is wholly insolvent.
What will the already once ignored courts do? This should be an interesting exercise in denial and futility, with no doubt some spiteful words and behavior tossed in for good measure.
Nobody believes these kinds of things are really possible, even when they happen right out front on the yard.
c @ 38: look at Scranton, PA, where TSHTF
Breaking news, I see, and up on Drudge.
Veeeery interesting.
Maybe he can use the ink-jet to print some Obamabux and hand those out.
#38 Cowboy
What will the already once ignored courts do? This should be an interesting exercise in denial and futility, with no doubt some spiteful words and behavior tossed in for good measure.
Given the lack of legitimacy that the courts have, probably nothing. I rather suspect that the courts will order the city to pay the unions. They do not have the money, so things get interesting. Here in Colorado a few times in the 1970′s the legislature did not complete the annual budget in time for paydays, and the state issued “vouchers” that merchants and banks took at a 15% discount in my town, if they took them at all. That tactic might give them a month or two’s leeway before the collapse.
I recommend the Roman solution. In the late Empire, the rich and politically connected were exempt from taxation. The urban poor were also, and fed at the public dole. That left the middle class to bear the burden. Local government in the provinces had limited tax resources and it ended up with municipal officials personally liable for the costs of city government. So the officials just walked away.
Emperor Diocletian tried to make certain occupations hereditary and mandatory [called "compulsory services"] including municipal government. Did not work well, and in the crises at the end, cities in the provinces were more likely to throw their gates open to the “barbarians” than to resist.
Let the city government walk away.
What will probably happen will be court ordered tax increases, with all the consequences of that. I welcome the crisis myself, as an object lesson in the results of being ruled by Democrats right before the November.
Subotai Bahadur
18. wretchard
It’s hard to remember now that Borgnine ever did comedy. McHale’s Navy was a favorite. During the show’s run, I read of an incident involving Bob Hastings, who played Lt. Elroy Carpenter, Captain Binghampton’s brown-nosing aid. He was making an appearance and signing autographs when a small boy kicked him in the shin. The startled Hastings ask the boy, “What would your father say about that?” Answered the boy, “My dad doesn’t like you either.”
29. Stoicheion
If China breaks up into regional warlord control, I doubt the ROC will heave itself across the straits. The ROC just isn’t what it was in the 1950s-1970s. The KMT long ago gave up ambitions of overthrowing the CCP and retaking China wholesale. KMT leaders appear to have already settled on a strategy of integrating themselves into the existing CCP elite structure. In effect, I suspect that they are willing to sell Taiwan in exchange for a piece of the action in the mainland. If order collapses while the KMT is running the ROC, then the KMT will have to come up with a new plan.
In spite of watching China for many years, I have no idea how the collapse of the current regime will play out. I’m not even sure whether there will be a collapse, or just a wind-down into a new social equilibrium. The CCP has already surprised my expectations with its ability to simultaneously tighten control, maintain economic growth, protect corruption and assimulate the nascent industrialist class.
But back to Taiwan. If the DPP is in charge when the current mainland order collapses, then Taiwan will likely pull up the drawbridge and wait out the storm. The Greens may even make a bid for de jure independence. The DPP and the other Greens do not feel a strong political connection to the mainland, and would likely prefer a truly independent Taiwan nation.
The KMT response is harder to predict. The collapse or overthrow of the CCP may serve to revive long-dead KMT dreams of reconquering the mainland. But the KMT is still, in its heart, the corrupt cronyist party that was ejected from China in 1949. Unless the KMT purges its deeply-imbedded cronyist impulses, then any attempted replay of the Northern Expedition either will fail in gaining support in the mainland or will come to power on the backs of former CCP crony capitalists and Party members looking for a way to keep the casino open.
More likely, without a powerful CCP to sell out to, the KMT will probably not want to throw the dice on an attempt to retake the mainland. I can’t see such a move appealing to entrenched party elites who are already collecting their rents. It must be even less appealing when such a large part of the popultion already under their sovereignty in Taiwan is ambivalent about whether they want to be part of China. I suspect they will also watch from the sidelines, and see who or what emerges on the mainland.
As an aside, it’s amazing how much the CCP of today resembles the KMT just prior to their ejection from the mainland.
I would caution against overthinking the problems in China. China can’t really collapse, because most of it is already at the bottom. There is no lower energy level for it to fall to. Perhaps the worst that could happen to China, economically speaking, is that it shuffles off the excesses of imported Western modernity (i.e. ghost cities, which already stand empty because they cannot find any uses for them) and turns back the clock 40 years on its great industrial experiment. This would be a problem for Westerners, who are spiritually and economically invested in seeing the forms of “progress” radiated out to the farthest reaches of the globe; but it would not be much of a problem for China, who was never really comfortable with these forms to begin with, and who only adopted them as a means of accessing Western resources.
The various analysts discussing China’s future, whatever their own personal point of departure or ideological stripe happens to be, are all tainted by the same sort of provincialism in believeing that China’s situation is sortable by Western analytic techniques. Thus they speak of deflationary pressure, capital misallocation, the shadow banking system, the “inefficiencies” of a planned economy (or as Wretchard puts it, “The corruption of the database”), not realizing that these terms mean nothing whatsoever in a Chinese context. The Chinese do not think that way; they don’t care about any of that stuff. Neither ought we to think that metaphors drawn from the realms of neoclassical economics and computer theory can form the basis of a universal social science applicable to every culture, every time, every place. That vocabulary was designed to treat the spiritual and material needs of modern Westerners and is not widely valid outside its place of origin.
Those who are now “freaking out” about China, who were formally optimistic for its liberal future and its prospects for energizing the world economy, were simply deluding themselves the entire time. China is no liberal place, nor is it properly configured to be a world leader in wealth creation, nor does it even want to be. It remains a strange and poorly understood region, inwardly a world apart from anything a Western urbanite knows or believes. This will become clear in time as our worlds begin to uncouple. The peoples of the West have no future in common with the Asian nations anymore. There was a time when the possibility of colonialism remain open to us, and then they would have had a more decisive role to play in Western affairs, but that time has already passed. Now they are destined to simply slip off the edge of our map, as if Magellan had never sailed.
There is actually a huge property bubble in China. That is why the ghost cities exist. However, in places that bubble appears to have burst. That is why the property market in Hong Kong is so over the top, mainlanders are buying everything they can get there hands on there.
Also while the central government has cash reserve the provinces are often deeply in the red (Financially as well as politically.) If the provinces start to default on major infrastructure projects watch out.
I have wondered how much of the growth was just building roads and bringing the country into the 20th and 21st century? There are only so many freeways and sewer lines to upgrade
There are two or three other problems I see in China.
1. The rural children have all moved to town. Most of the farmers are probably 60+ years-old and work the land with and ox and a hoe. What happens when the old-farmers die? The land cannot be easily consolidated into larger farms because of the way the laws are written.
2. One out of six people in the world live in China but 1/2 the smokers in the world live in China. What happens when all the 3 pack a day 30 year-old Chinese yuppies are 60 year-old lung cancer patients?
3. The one child policy is about to collapse the population. I read a report that said by 2050 China expects its population to fall 800 million. The economy is built upon low cost labor. As the population ages and falls there will be fewer people able to work and fewer wiling to work for $2.50 a day. Yet there is no real plan to transition away from the cheap labor model that I have seen.
4. You have no idea what pollution looks like unless you go to China. In places it simply looks like Mordor
I’ve lived in Hong Kong a long time. The next few years are going to interesting in China
According to Barry Weingast, the distribution of goods and privileges has to match the distribution of access to violence in a limited access society. That keeps the peace, which is what the elite want.
It’s the Chicago way.
Fai Mao, interesting to see your take on it. There are answers to all of your questions, although no one has the nerve to say them out loud. They’re the answers that reality is going to leave as the only option when the time comes, so the fact that no one is admitting these problems means, perversely, that the outcomes are extremely predictable.
1) What happens when the old-farmers die? The land cannot be easily consolidated into larger farms because of the way the laws are written.
Laws can be very easily rewritten, especially when its to the advantage of the Party and the People’s Army, whose leaders will siphon off most of the profits from seizing the land in the name of “national emergency”. There will be a mass consolidation of farmland, much like the transformation of America’s farmland into vast corporate farming enterprises. With no young people left on the farmland, there will be no one left to complain.
2) What happens when all the 3 pack a day 30 year-old Chinese yuppies are 60 year-old lung cancer patients?
Social Security and Pension costs drop a great deal, that’s what happens. Expect the Chinese government to massively promote smoking and to try to suppress any anti-smoking messages as “anti-government”. Fact is, too many old people are a big problem for a collectivist government, so anything that thins the herd is a policy that the Government will see as extremely beneficial.
A lung cancer patient doesn’t cost much if you tell him there’s nothing you can do and he’s only got two weeks to live. And, sad to say, sick and dying people aren’t going to be the backbone of any revolution.
3. The one child policy is about to collapse the population.
True enough, which just emphasizes the reasons that the young are going to be very bitter and resentful about the way they are supposed to be the ones who are supposed to support this much larger population of elders.
Which means they aren’t going to complain much about the Government’s efforts to quietly get rid of those who are no longer able to contribute economically.
4. You have no idea what pollution looks like unless you go to China. In places it simply looks like Mordor.
And health problems from pollution affect the sick and the old most of all, while those in positions of power can afford to insulate themselves from this. Again, this policy serves mainly to cut future pension and social maintenance costs by cutting down on the number of people most at risk and who contribute the least.
In short, in order to survive, China is going to try to get rid of most of the old and sick people while transferring most of the land to locally powerful players, men who would have been called “warlords” in past eras.
What’s to stop this from happening? I don’t see anything that can.
In the event of a China collapse, I strongly suspect the coastal areas will reconsolidate, and may even coalesce around two natural power centers – Taiwan and Hong Kong. There are already huge cultural affinities between Taiwan and Hong Kong (I find their variety shows instructive for the sheer amount of cross-national exchanges), and it would not be too difficult for these two centers to form an alliance and pull the richer coastal areas under their protective military (ROC) and economic umbrella, perhaps even having Shanghai anchor their eastern flank.
The inland may descend into chaos, however, and it will take quite a while for the organised coastal areas to reclaim the inland.
Oh well.
The Empire,
long divided, must unite,
long united, must divide.
I don’t buy the China crack up theories at all. The problems with China are those that come with success — not failure. The most you can say is that they are at the end of an of industrial revolution such as was experienced by the Japanese and Germans from 1880-1910.
Back in december 2011 Chinese officials met with Bill Gates. He wanted help with a new reactor design he was working on. It doesn’t appear as though anything came of those talks. A Chinese delegation led by Jiang Zemin’s son Jiang Mianheng a year earlier walked off (legally) with thorium lftr designs developed 40 years ago at the US Oak Ridge Labratories. The Chinese three months later announced that they were downgrading the importance of wind and solar and emphasizing nuclear. Why? Likely because Bill Gates told them that wind and solar would never serve as base energy producers. Rather the way to go was with nuclear.China currently has about 40 or 50 of them in planning or development.
For the long term the Chinese have already begun work on two American innovations: fracking and thorium lftr reactors. Recently the US energy department announced that they are collaborating with China’s academy of sciences headed by Jiang Mianheng to develop thorium lftr designs.
These two innovations alone will solve their financial, environmental and even their aging issues for the 21st century. I go into more detail on this in my ebook. Collapsing Water and Energy Costs: How Bill Gates [Or You!] Can Create the Inventions That Spark the Next Industrial and Agricultural Revolution
For the short term, there will be adjustments in China as elsewhere.
imho the real problem for China is the same as that faced by the Japanese after 1910 or so. After +-1910 the Imperial Japanese Army and Navy slowly took over the government in Japan.
I think that what the USA is doing currently is an acknowledgement of what happened in Japan 100 years ago.
If all else fails, you can always take it on the road http://www.wnd.com/2012/07/bizarre-chinas-eerie-ghost-cities-arise/
Greetings to the Belmont community,
At one level, we are all of us pretty exercised about which candidates will be elevated to make decisions for us.
But from all the signs, there is a multi-dimensional tsunami-fault-slip building that will overwhelm whichever set of chuckleheads slithers into the control room.
Not meaning to preach doom. There is much to be done, not the least of which is simply preparing to take care of yourselves and your loved ones during prolonged interruptions to service, whatever the cause may be.
15 years ago, I found myself dating a lady with a 5-year old kid. Memories of the moronic stunts I’d pulled at that age, and the consternation they had occasioned drove me to seek training from the local Red Cross chapter. They provide all sorts of courses. This one was a three month course based on the premise that you were camping in remote places, days if not weeks distant from doctors and hospitals. The folks who went through the training were certified in a startling range of skills I’d thought were only found in EMT training.
Not emergency room Doctors, but good solid self-sufficiency in dealing with a lot of life’s scuffs and bruises.
Now I’ve got all that training, if there’s a damn great auto crash next to me, I know that if I sit down promptly and put my head between my knees, I won’t faint!
There’s been some talk here about growing up just a few decades back without air conditioning, reading BOOKS and WRITING letters. Making my living creating 2D and 3D animation with computer/video technologies ranging from a desktop workstation to a multi-format video production company has steered me increasingly toward studying and learning lower-tech skills: woodworking, carpentry, gardening, raising critters, tinkering, repairing things instead of discarding them.
(There must be a whole lot of former Boy Scouts royally pissed off at the idiocy of “Cash for Clunkers” and the
Screaming Perversity of minds that could reckon that detestable waste as anything good.)
Think about the last time you went into the kitchen department of an upscale place or your favorite hardware chain. If you checked the blenders, microwaves, coffeemakers, food processors, tools, screws, and such, most have more or less identical stickers “Made in China” or “Made in Indonesia” or several other locations ten thousand miles distant. It AIN’T just Walmart.
You don’t have to do anything freaky as paper making or felting moccasins with wool shorn from your own sheep. But as the governments around the world find they can’t keep on providing all the services they’ve BEEN, we’re likely to find fewer police patrol cars cruising, fewer libraries, hospitals and clinics consolidated or closed, grocery and clothing stores with drastically reduced choices on the shelves. Fewer container ships will ply the oceans bringing us goods we USED to make here in the USA.
I believe the adversity coming will scour away a lot of the parasites, coddled idlers. The Ants and the Grasshopper. (Imagine the collapse of certain raging ideologies when no one is buying their stinking oil.)
We will survive, and maybe emerge with a clearer sense of our own worth as a culture and our individual worth, too.