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#1 User is offline   pepperonikkid 

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  Posted 21 October 2019 - 09:14 AM

Leadership: China Blues


https://www.strategypage.com
October 12, 2019


Article:


China is losing its trade war with the United States. In hindsight that should not be surprising. Foreign economists and financial specialists have plenty of verifiable data on the state of the Chinese economy, and for a decade now those independent assessments have accumulated and revealed a different and more accurate picture of the Chinese economy.

One finding that has slowly come into focus is the net result of false reporting by provincial and other local governments for decades. It is now believed that, after 2008, GDP growth fell to four percent, or less, not the six percent the government reported. This weakness was more important when China found itself, in early 2018, on the receiving end of American tariffs and other forms of economic retaliation. In the beginning, it was thought the Chinese could outlast the Americans because China was still a Communist police state where the government was not as vulnerable to public anger over government inability to quickly deal with the foreign economic pressure.

That view has since changed as China turned out to be more vulnerable, and American voters more resolute, than was originally thought. The trade war triggered an exodus of American and other foreign firms from China. The United States was not the only trading partner angry at the Chinese. Other Chinese trading partners, especially those in Asia, were eager to take a swing at their economic, and sometimes political, oppressor.

American farmers were more willing to endure the Chinese retaliation (halting or reducing purchases of agricultural products) than the Chinese expected. The American president was doing something American farmers and manufacturers had long called for and were told that the Chinese would retaliate but were less capable of enduring the pain. This weakness became obvious when a pork shortage developed in China. This was initially due to the government's inability to deal with a massive outbreak of African swine fever. This eliminated so many live and breeding hogs that supply of pork was cut in half and pork prices skyrocketed. Pork, long a staple of the Chinese diet, and other meat products became much more expensive. Since newly affluent Chinese used their larger incomes to buy a lot more pork and other meat products, the government was forced to lift retaliatory economic measures directed at pork imports and grains used to feed all manner of farm animals in an effort to deal with the pork crises. Chinese leaders learned that even in a police state if you use economic growth to gain more public support, you lose that support quickly when, for example, pork is no longer affordable for a lot of Chinese.

Then there was the problem of oil imports. China is the largest importer of oil in the world and remained an ally of Iran despite American sanctions on Iran. Then Iran attacked Saudi oil facilities in September that interrupted shipments to Asian customers. This also sent oil prices up momentarily. China eventually retaliated by canceling a $5 billion natural gas development deal that Iran was depending on. Iran offended China and had to pay. Some American businesses got the same harsh retribution when they tolerated support for the Hong Kong protestors.


With all these problems and more on the way, China can no longer afford to keep the trade war going until there might be a new American government in 2020. This is especially true when China realized that political opponents of the current American government are not talking about ending the trade war, not while the U.S. was obviously winning and most Americans supported it. Chinese economic problems are getting worse while the American economy improves and Chinese long-term economic prospects are much more in jeopardy and the Americans are taking advantage of that in ways the Chinese did not anticipate.

Even before the United States began its current trade war with China international credit rating firms began, in 2017, downgrading the long-term credit rating of Chinese government debt. This was mainly about too much debt and how much of that debt was uncollectable ("bad" debt). To make matters worse Chinese banks are suspected of using the same deceptive banking methods by trying to repackage bad debt as good debt. This is what brought on the 2008 financial crises in the United States. That economic crisis went worldwide and the Chinese government was forced to use a lot of additional borrowing to keep the economy moving. But if too much of that debt is bad there is an increased risk of an economic crisis that would halt economic growth and take years to fix.

The Chinese made this worse by allowing economic data reporting to be "adjusted" to suit the needs of local (provincial) officials. That was bad enough and efforts were made to halt the practice. There was a lot of "correction" required because, during several decades of rapid economic growth this flawed data allowed the state-owned banks, which still dominate the economy, to lend too much money. Thus debt in China keeps rising. It went from 254 percent of GDP (nearly three times what it was before 2008) in 2015 to 277 percent in 2016 and keeps resisting efforts to come up with a solution.


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#2 User is offline   gravelrash 

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Posted 21 October 2019 - 05:01 PM

Ticker tape tiger
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#3 User is online   Tikk 

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Posted 22 October 2019 - 10:54 PM

View Postgravelrash, on 21 October 2019 - 05:01 PM, said:

Ticker tape tiger


I'm curious how they will respond. They know they are losing.

Do they tighten the screws on their population? Perhaps to the point of confiscating property of the very wealthy? I doubt that one, there's too much of a return on bribes in a communist economic system.

Hong Kong is their crucible of the boon of wealth created by free markets vs. the the iron grip of communism and top down control. They are discovering, much to their fears, that you can't have one without the other. Their bribing of Hollywood will blow up in their faces much like it did the Japanese in the 80s and 90s (e.g. Black Rain, Die Hard, etc.)


They have had a free ride by stealing intellectual property and manipulating currency. But all those checks their banks wrote are now being cashed.


Hard workers make money. Slaves don't.
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#4 User is offline   gravelrash 

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Posted 24 October 2019 - 09:11 AM

View PostTikk, on 22 October 2019 - 10:54 PM, said:

I'm curious how they will respond. They know they are losing.

Do they tighten the screws on their population? Perhaps to the point of confiscating property of the very wealthy? I doubt that one, there's too much of a return on bribes in a communist economic system.

Hong Kong is their crucible of the boon of wealth created by free markets vs. the the iron grip of communism and top down control. They are discovering, much to their fears, that you can't have one without the other. Their bribing of Hollywood will blow up in their faces much like it did the Japanese in the 80s and 90s (e.g. Black Rain, Die Hard, etc.)


They have had a free ride by stealing intellectual property and manipulating currency. But all those checks their banks wrote are now being cashed.


Hard workers make money. Slaves don't.


There might be a certain amount of Chinese arrogance to the Hong Kong situation. Ok... a huge amount. The septuagenarian mainland overlords did not expect much resistance from the citizens of Hong Kong who have known freedom all their lives. Another path of resistance to reforming China is coming from our own Congress. No doubt because so many of its members will lose millions should PRESIDENT Donald J. Trump's fair trade policy win.
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#5 User is offline   Howsithangin 

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Posted 25 October 2019 - 05:55 AM

The writer clearly hasn't grasped the use of commas.

That said, interesting article.
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