Post by spatial on Apr 6, 2018 18:21:55 GMT 10
There has been another escalation of tit for tat trade war with China. Interesting article below on how fragile China is - and they are on the brink of falling over due to debt and the trade war could blow the whole things up.
The article discusses political and financial stability.
Trade Is A Matter Of Survival For China
www.zerohedge.com/news/2018-04-05/trade-matter-survival-china
Remember Tiananmen Square?
Rather than showing the power and unity of the Chinese government, Beijing took a different lesson from Tiananmen Square.
As my colleague Kevin Massengill has pointed out, it revealed China’s political fragility.
We all know about the massacre. But what is not widely known is that several army officers refused orders to crush protests throughout China.
Seven retired generals, including a former defense minister, signed a letter opposing the use of force against the people of Beijing:
“Due to the exigent circumstances, we as old soldiers, make the following request: Since the People’s Army belongs to the people, it cannot stand against the people, much less kill the people, and must not be permitted to fire on the people and cause bloodshed; to prevent the situation from escalating, the Army must not enter the city.”
“I’d rather be beheaded than be a criminal in the eyes of history,” said one general commanding forces in the Beijing military district.
They were not the only one who felt that way. As Kevin has noted, armored divisions of 10,000 soldiers allowed themselves to be stopped for days by crowds of students and ordinary citizens who brought them food and water while explaining why their cause was just.
An estimated 3,500 PLA officers disobeyed orders to crush protests. Many Chinese army officers were reportedly executed. Others were demoted, or faced court martial and imprisonment.
The Tiananmen Square Massacre, Kevin says, is an example of why and proves that the position of the Chinese Communist Party is more precarious than is widely understood, even now, almost 30 years later.
Here’s something else not widely known about the protests…
The Tiananmen Square protests and massacre of 1989 did not start out as a liberty movement, although that’s how they are remembered in the West. It started out as an anti-inflation protest, and that’s how the Communists remember it.
And given China’s current economic problem, Beijing’s challenge is becoming more difficult every day. Consider what’s happening in China right now…
GDP/Growth/Debt
Growth in GDP is conventionally defined as the sum of consumer spending, investment, government spending (excluding transfer payments) and net exports.
Most large economies other than oil-producing nations get most of their growth from consumption, followed by investment, with relatively small contributions from government spending and net exports.
A typical composition would show a 65% contribution from consumption plus a 15% contribution from investment. China is nearly the opposite, with about 35% from consumption and 45% from investment.
That might be fine in a fast-growing emerging-market economy like China if the investment component were carefully designed to produce growth in the future as well as short-term jobs and inputs.
But that’s not the case.
Up to half of China’s investment is a complete waste. It does produce jobs and utilize inputs like cement, steel, copper and glass. But the finished product, whether a city, train station or sports arena, is often a white elephant that will remain unused.
What’s worse is that these white elephants are being financed with debt that can never be repaid. And no allowance has been made for the maintenance that will be needed to keep these white elephants in usable form if demand does rise in the future, which is doubtful.
Chinese growth has been reported in recent years as 6.5–10% but is actually closer to 5% or lower once an adjustment is made for the waste. The Chinese landscape is littered with “ghost cities” that have resulted from China’s wasted investment and flawed development model.
This wasted infrastructure spending is the beginning of the debt disaster that is coming soon. China is on the horns of a dilemma with no good way out.
The article discusses political and financial stability.
Trade Is A Matter Of Survival For China
www.zerohedge.com/news/2018-04-05/trade-matter-survival-china
Remember Tiananmen Square?
Rather than showing the power and unity of the Chinese government, Beijing took a different lesson from Tiananmen Square.
As my colleague Kevin Massengill has pointed out, it revealed China’s political fragility.
We all know about the massacre. But what is not widely known is that several army officers refused orders to crush protests throughout China.
Seven retired generals, including a former defense minister, signed a letter opposing the use of force against the people of Beijing:
“Due to the exigent circumstances, we as old soldiers, make the following request: Since the People’s Army belongs to the people, it cannot stand against the people, much less kill the people, and must not be permitted to fire on the people and cause bloodshed; to prevent the situation from escalating, the Army must not enter the city.”
“I’d rather be beheaded than be a criminal in the eyes of history,” said one general commanding forces in the Beijing military district.
They were not the only one who felt that way. As Kevin has noted, armored divisions of 10,000 soldiers allowed themselves to be stopped for days by crowds of students and ordinary citizens who brought them food and water while explaining why their cause was just.
An estimated 3,500 PLA officers disobeyed orders to crush protests. Many Chinese army officers were reportedly executed. Others were demoted, or faced court martial and imprisonment.
The Tiananmen Square Massacre, Kevin says, is an example of why and proves that the position of the Chinese Communist Party is more precarious than is widely understood, even now, almost 30 years later.
Here’s something else not widely known about the protests…
The Tiananmen Square protests and massacre of 1989 did not start out as a liberty movement, although that’s how they are remembered in the West. It started out as an anti-inflation protest, and that’s how the Communists remember it.
And given China’s current economic problem, Beijing’s challenge is becoming more difficult every day. Consider what’s happening in China right now…
GDP/Growth/Debt
Growth in GDP is conventionally defined as the sum of consumer spending, investment, government spending (excluding transfer payments) and net exports.
Most large economies other than oil-producing nations get most of their growth from consumption, followed by investment, with relatively small contributions from government spending and net exports.
A typical composition would show a 65% contribution from consumption plus a 15% contribution from investment. China is nearly the opposite, with about 35% from consumption and 45% from investment.
That might be fine in a fast-growing emerging-market economy like China if the investment component were carefully designed to produce growth in the future as well as short-term jobs and inputs.
But that’s not the case.
Up to half of China’s investment is a complete waste. It does produce jobs and utilize inputs like cement, steel, copper and glass. But the finished product, whether a city, train station or sports arena, is often a white elephant that will remain unused.
What’s worse is that these white elephants are being financed with debt that can never be repaid. And no allowance has been made for the maintenance that will be needed to keep these white elephants in usable form if demand does rise in the future, which is doubtful.
Chinese growth has been reported in recent years as 6.5–10% but is actually closer to 5% or lower once an adjustment is made for the waste. The Chinese landscape is littered with “ghost cities” that have resulted from China’s wasted investment and flawed development model.
This wasted infrastructure spending is the beginning of the debt disaster that is coming soon. China is on the horns of a dilemma with no good way out.
