China's Emergence As A Global Superpower

[Billy T]

Russia & China (Putin’s three day China visit results):

“… Putin was accompanied by a group of Russian business people, who signed with their Chinese counterparts deals worth 4 billion U.S. dollars. The two countries clinched an array of cooperation documents, including agreements and memorandums on natural gas, oil, an express railway, the space industry and nuclear energy. … The launch of the China-Russia oil pipeline project marked a new stage of long-term and strategic cooperation in the oil sector. The two sides will also advance gas cooperation in accordance with a memorandum of understanding on gas cooperation reached in June. {Billy T understands that the Russian section already is at the Chinese border, but China’s section will take a couple of years to complete to major cities. There is also some discussion yet about prices.}

During Putin's visit, the two countries also signed a deal on forming culture centers reciprocally, and agreed to further exchanges between students, youth and education circles, as well as stepping up cooperation on tourism, health and care, sports, media and the film industry. More than 200 events, which involved tens of thousands of people, were staged during Year of Russian Language in China. {2009} Putin said that Year of Chinese Language in Russia {2010} would see a series of activities that would interest the young, experts and scholars, and fans of the Chinese culture. …”

From: http://english.peopledaily.com.cn/90001/90776/90883/6784995.html
-----------------------------
China replaces Dollar assets with Russian Oil (one of many such deal to hold real assets instead of US paper):

“… China Investment Corporation (CIC), the nation's sovereign wealth fund, announced Friday that it had closed the first phase settlement for the purchase of a 45 percent stake in Nobel Oil Group. The 300-million-dollar investment would be completed in two phases. In the first phase, which was completed by the end of September, CIC had spent 100 million U.S. dollars for holding the Russian oil company's stakes, and 50 million dollars for operating expense of the oil fields, according to the announcement.

It said that the remaining 150 million dollars would be paid off in the second phase, in nine months, to buy oil and gas reserves amounting 150 million barrels around existing ones. When the purchase was done, CIC will hold 45 percent of the company's stake while the Russian company will own 50 percent and the rest 5 percent will go to a Hong Kong investor.

The was CIC' second move within one month to buy shares in overseas oil and gas companies. At the end of September, CIC paid 939 million U.S. dollars for a stake in Kazakhstan oil and gas company JSC KazMunaiGas Exploration Production (KMG EP).

Zhuang Jian, a senior economist with the Asian Development Bank, said that under the forecast of excessive fluidity and devaluation of the U.S. dollars, CIC's investment in bulk commodities like oil and gas would be a better option to mitigate risks in China's huge foreign exchange reserves. …” {Exactly what Billy T predicted China would do years ago. I.e. China thinks the dollar will tank too.}

Quote from: http://english.peopledaily.com.cn/90001/90776/6785858.html

 

[Billy T]

China's first subway tunnel traversing the Yangtze River is expected to begin construction this month in Wuhan, capital of central China's Hubei Province. The 3,100-meter-long tunnel is expected to undertake 50 percent of the city's {bridge} traffic flow across the river. And it is designed to withstand a 6.0-magnitude earthquake and a flood that occurs once every 300 years, they said. … About 14.9 billion Yuan (2.2 billion U.S. dollars) will be invested in the construction of the metro line, officials said.

FROM: http://english.people.com.cn/90001/90776/90882/6786063.html

Billy T notes: I think a longer one is already nearing completion under the Bosporus near Istanbul. There is the English Channel tunnel. How long is it? Anyone know of other, longer, under-water tunnels? The main significance of this Chinese news is that it shows the CCP is investing more in the heartland, as it claimed it would, instead of just the costal cities.
-----------------------
Also worth reading is "U.S debt dilemma, no better solution?" at: http://english.people.com.cn/90001/90778/90858/90864/6786085.html
The following from is it:

"For fiscal year 2009, the government collected 2.1 trillion dollars in revenues, a 16.6 percent drop from 2008, while government spending last year jumped to 3.52 trillion dollars, up 18.2 percent over 2008. In its statement Friday, the Treasury Department estimated deficits would total 9.1 trillion dollars over the next decade unless corrective action was taken. ...

Ronald Reagan era in 1980s when the president began to think that a deficit budget was not a big deal for the country thanks to the status of the U.S. dollar as the core of global reserve currencies. George W. Bush, too, believed deficits mattered little. During his terms of presidency, Bush launched the war against Iraq and reduced taxes twice, changing the federal budget from surplus to severe deficit. ...

U.S. government's method is to borrow money from the world and devalue the dollar, ... The U.S. dollar index,... is down 14 percent since early March. It touched a 14-month low last week. The dollar's sharp drop has led to considerable anxiety about the status of the United States as the dominant force in the global economy, said Zachary Karabell, a U.S. scholar, in an article published Tuesday in the Wall Street Journal. ..."

Billy T notes: GWB is also the (only ?) POTUS to have TWO recessions start during his term. Cut Joe American's real purchasing power and that is what you get in an ecomomy that is 72% consumer lead. Under GWB the rich got richer and invested ("trickle down") in China so now China has more modern factories than the US. Sell more cars, etc.

 

[philipthegreat]

I think the fact the current superpower depends on China for pretty much everything to be made makes China coming to power only a matter of time. In other words, by allowing China to become the industrial power of the world the United States has allowed China to be put on a course towards becoming the superpower. They are fast becoming the largest exporter in the world, we owe them trillions of dollars, and Free Trade make them the most powerful country in the world. The only thing that could stop them in their rise to power is if the United States retook their position as the biggest industrialized power by reinforcing tariffs.

 

[kmguru]

The only thing that could stop them in their rise to power is if the United States retook their position as the biggest industrialized power by reinforcing tariffs.

That is not happening for 60 to 70 years. By then it would be too late. The reason is:

1. 8 out of 9 Chinese top leaders are engineers. Ours are mostly Lawyers who never produced any products (except babies) in their life. Therefore they have no idea how to create an environment to be the formidable industrial power USA once was.

2. Our politicians spend 95% of their time raising funds for the next election. They have no time to think about what needs to be done.

3. We are Bernie Madoff type financial ponzi scheme artists that try to suck global wealth to Wall Street. You can only fool so many people so long.

4. We created an environment where we spend most of our money in judicial, health care and wars while no income to support that. Debt and expenses always catch up.

 

[nirakar]

I so agree kmguru. You said it well. That is what is wrong with the USA. It is so sad and pathetic to see this once highly productive nation become a nation of scam artists.

 

[quadraphonics]

I think the fact the current superpower depends on China for pretty much everything to be made

A canard. The dependency is not on "China" but on a global system of production. China is just as dependent as anyone in this web. Note that most of China's exports are re-exports: products they import from elsewhere, screw a few parts on, and then export to another place.

In other words, by allowing China to become the industrial power of the world the United States has allowed China to be put on a course towards becoming the superpower.

There is no "the" industrial power, nor any reason there need be "the" superpower.

I notice a striking commonality in Sinophile ideation is the assumption that the world must necessarily be unipolar. There is no reason to think this.

The only thing that could stop them in their rise to power is if the United States retook their position as the biggest industrialized power by reinforcing tariffs.

The United States is the biggest industrialized power, under any coherent definition of "power." I.e., industrial output, political influence, military strength, GDP, geographic size, etc.

 

[Billy T]

"... A $7 billion mining deal between Guinea's repressive military regime and a little-known Chinese company {CIF} underscores China's full-throttle rush into Africa and its willingness to deal with brutal and corrupt governments. … CIF had been working on {only} a $1.6 billion investment plan for the country spanning infrastructure, housing, mining, transport, tourism, and food production.

In exchange, the company would theoretically gain access to Guinea's plentiful deposits of bauxite, the raw material used to make aluminum, along with diamonds and gold. Mines Minister Mahmoud Thiam said the Chinese company ''will be a strategic partner in all mining projects.'' Thiam also said that new power-generating plants, railway links, and planes for both international and local air transportation are part of the deal. …

Scrutiny and mixed emotions are rising in Africa as the volume of China's dealings soar. Trade has soared 10 times since 2001, passing the $100 billion-mark last year. Estimates of Chinese investment in Africa range upward from $6 billion … to 50 billion. {annually} … CIF, is building housing, highways and the capital's airport in Angola, which is one of China's leading suppliers of oil. ...”

From: http://www.nytimes.com/aponline/2009/10/24/world/AP-AS-China-Africa-Risky-Business.html?_r=1

Billy T comment: As I noted years ago, China is converting to a economy that will produce mainly for its growing domestic demand and its export obligations, not be a cheap goods supplier to the US and EU. It has been about a year since I last posted following bold prediction that there will come a day when China will say:

US go to Hell. Your green paper is worthless now. We no longer need you to buy our production and we will no longer finance your deficits.

BTW China is already Brazil's main trading partner, but in a few weeks a large, very high level, delgation (more than 60 Chinese companies) is coming to Brazil to further expand trade. Several multi-billion dollar deals are expected to result. Among the companies are: Sinopec (oil); ZTE (telecomunication); Shandong Wanda & Sany (both makers of heavy machinery); China Metals (mining industry supplier); and South China Locomotive (makes trains and subways).

Visit will be headed by China's vice premier, Wang Qishan, and was initiated by CCIIP (Chinese Council for International Investment Programs), which replaced a main central planning agency some years ago. Brazil has very underdeveloped rail system so the last may get a big contract. (Currently when soy beans are being taken to the port, the line of large trucks parked (bumper to bumper) on entrance road is more than 20 Km long! When Brazil moves its agricultural production by rail, the cost of production will fall dramatically.)

 

[S.A.M.]

Has China made any overtures towards outsourcing its food production to the US?

 

[Billy T]

Has China made any overtures towards outsourcing its food production to the US?

Probably, but I do not think China is much of a food exporter, especially now that its richer population is eating more meat etc.. The only natural advantage the US has IMHO, is the fertile mid-west farms. Everything else China needs, either now or soon, can be had cheaper from US competitors, (including India where the two top leaders are just now meeting. See their handshake photo here: http://english.peopledaily.com.cn/90001/90776/90883/6792751.html and brief outline of discussions.)

More on India / China trading at: http://www.sciforums.com/showpost.php?p=2395112&postcount=194

When Brazil transports its crops to market by rail instead of trucks, the US will not be able to compete with Brazil in soy beans and several other crops important to the Chinese. US and Canada do produce wheat more cheaply than Brazil can (Brazil imports wheat for Argintina and Canada, due to the seasonal difference, which may also help US export of food in the US fall)

 

[Brian Foley]

Will it supersede US one day?

The US has bankrupted itself with Libertarian economics, at present the EU is superceding the US. China floats on Western finance and industrial investment, at present China cannot grow anymore as this investment has stopped and millions are now unemployed in China, thus demonstrating the paper Tiger syndrome that has always afflicted China.

 

[Billy T]

... China floats on Western finance and industrial investment, at present China cannot grow anymore as this investment has stopped and millions are now unemployed in China, thus demonstrating the paper Tiger syndrome that has always afflicted China.

Mainly true, but "western finance" I do not understand. Is this a reference to China financing the US deficits and collecting interest payments? OR the flux of western money into China (what I call GWB's "trickle down" tax relief for the already rich?) BTW Warren Buffett’s investment in BYD has more than 10 fold increased in value - profit of over 1 Billion, (according to article of link below).

While Russia helped the Chinese space program (and other things); Germany designed the world's only MagLev train (430km/h peak speed and 7 minutes for the 30km trip to the Xhangai airport); Brazil's Embaraer joint venture in Harbin, C. provided an airplane factory for short range jets and Bowing sale of larger one more technology to copy; etc. China is beginning to develop internally by innovation. (That includes development of the internal market to by the high tech goods) For example:

"... Beijing is expanding public health care and subsidizing small cars and electric appliances. Millions of small private companies have sprouted, and hulking state industries that provided cradle-to-grave benefits have been downsized. Cities and provinces are boosting research spending, retraining workers, and courting investment in new industries such as biotechnology, which is attracting top Chinese scientists from the U.S. "China's growth seems unstoppable," says Rao Yi, a former Northwestern University neuroscientist and now dean of Beijing University's life-sciences school. ...

{China's new policy} Grimy factories will give way to renewable-energy industries and a growing service sector; Chinese consumers, rather than stretched Americans and Europeans, will underpin demand; and instead of churning out me-too goods for little profit, Chinese companies are supposed to create innovative products based on home-grown technologies. ... "

From: http://www.businessweek.com/magazine/content/09_44/b4153036870077.htm

This is possible as China is graduating nearly 10 times more engineers than the US - They may not be as broadly trained, but many are as well trained as the US's typical graduate. China has a well funded plan, about 2 years old now, to create "50 MIT equal or better" university centers, and a large budget to pirate away top notch Western professors, not all of whom are ethnic Chinese. In the hard sciences areas, they get to design and equip their labs with the latest technology of the west. A small part of what of what China is spending its horde of dollars on. (A few left the US as their university budget could not afford the equipment they wanted.) Construction cost are low so these 50 new high level mainly western professor staffed educational centers, cost only a ~1/3 what they would cost in the US (not counting the imported instrumentation).

There are a large number of Chinese who came to the US to study when Chinese schools were second rate, at best. Look at any class photo of the physics graduates of any top level US university. - The fraction of "Orientals" is much larger than their percentage of the US population. The Chinese student is typically bright and hard working. China is not yet the world's technical innovation leader, but will be in less than two generations.

 

[superstring01]

There are a large number of Chinese who came to the US to study when Chinese schools were second rate, at best. Look at any class photo of the physics graduates of any top level US university. - The fraction of "Orientals" is much larger than their percentage of the US population. The Chinese student is typically bright and hard working. China is not yet the world's technical innovation leader, but will be in less than two generations.

I was reading how the Chinese are setting up high-end universities that teach only in English and will use Australians, Americans, Brits & Canadians--mostly--to staff these universities. I find this fascinating and a remarkably brilliant idea. Instead of freaking out about the rise of English, the Chinese have accepted it and are looking to use that momentum to make China into the world's education center within the next 50 years.

By the time we pass, people will be going to Chinese universities to study medicine, economics, physics, engineering and astronomy the way they go to the USA, and they'll receive a top notch education in the world's leading language.

Who can blame them?!

~String

 

[Billy T]

related to superstring1's post:

Also China has / is setting up 50 Chinese culture centers in the US for free (I think) mandrin instruction as well as display of their culture (visitng chinese students as well as displays) The first was at the University of Maryland only a couple of years ago! Most are on College site or adjoining them. From memory, I think 500 Chinese professors are being deployed. I just read this a couple of days ago, but forget where - Possibly in the Chinese People's daily which I read everyday. (Except when it is towing the CCP line - things like how evil the Dela Lama is, etc. it is a surprizing good, up-to-date, source of global news.)

For example, I learned of the big (59 billion USD paid by end of 2010 for long term supply of LNG)* offshore natural gas deal China cut with Australia 10 days before Bloomberg had the news. Bloomberg did have nice photo of the floating production / temp storage "ship" - world's largest floating structure. See it and more details about the deal, here:
http://www.sciforums.com/showpost.php?p=2382437&postcount=79

PS My search for the article failed but hit one that shows this is a world wide effort by China to teach their culture, including Mandrin. A very interest, well at least informative, read at: http://english.peopledaily.com.cn/200605/16/eng20060516_266103.html

-------------------
* One of of the bigger of dozens of long term deals for needed supplies China is making each year now to convert it paper assets (dollars in its reserve) into real and needed assets that dollar inflation will not destroy.

 

[superstring01]

A great snippet from the Economist:

China's car market
Motoring aheadhttp://www.economist.com/displayStory.cfm?story_id=14732026http://www.economist.com/displayStory.cfm?story_id=14732026
Oct 23rd 2009
From Economist.com

More cars are now sold in China than in America



CHINA'S car market has overtaken America’s in sales volume for the first time, several years earlier than analysts had predicted before the financial crisis. Plummeting demand in the West is to blame. Earlier this year, as the American government was buying 61% of General Motors and 8% of Chrysler to prevent them from collapsing, the two manufacturers’ sales in China were rocketing. GM’s sales in China in August more than doubled on a year earlier. For 2009 as a whole the company predicted a 40% rise. Sales of all car brands in China in August were up by about 90%, helped by a cut in the purchase tax on smaller, more fuel-efficient cars. There is also huge pent-up demand as a new middle class takes to the road.

One part, of may reasons, why the rise of China is good for the USA and. . . well, everybody.

~String

 

[Billy T]

Again related to Superstring01's post (some strongly correlated data)*:

"Average oil consumption in USA in 2009 up to August was 18.75 million b/d, versus 19.50 and 20.70 million b/d respectively in 2008 and 2007.
Average oil consumption in China in 2009 up to August was 7.84 million b/d, versus 6.92 and 7.29 million b/d respectively in 2008 and 2007.
Average oil consumption in India in 2009 up to August was 2.86 million b/d, versus 2.60 and 2.43 million b/d respectively in 2008 and 2007. ..."

Note that String's graph is a few months old (as is the above data) - I.e. the two lines of String's posted graph have crossed. China is now selling more cars than US, even with "cash of clunkers" bonuses. (To boost domestic demand, China gives a 15% discount for electric appliances, at least in the rural areas, but none for cars as part of their stimulus. China is stimulating use of trains, metros, buses, etc. "public transportation," but the increasingly rich are buying cars and increasing the traffic congestion.)

Also note from my data above that despite US oil consumption not yet back above the earlier two years, it is still 2.39 times greater than China's is. China is already at new all time high and growing. (China has recovered from the "great recession.") I think this "2.39 times greater" is because there are more cars on the roads in the US and the higher average weight of US cars is fully offset by more efficient engines.

I forget the exact data but approximately there are 10 cars in China per 1,000persons and something like 400 /1000 persons in the USA so even with China having ~4 times more people they have only ~10% as many cars. A possible reason for US oil consumption being only 2.39 times greater (not 5 times greater assuming US car's are twice as efficient) probably related to Chinese industrial / chemical use of oil being both less efficient and more used for production of plastics etc. than the less manufacturing US, but I am only guessing.

--------------
*PS my above data comes from: www.theoildrum.com. They send me free each month “Oilwatch Monthly” (in pdf format). – It is about 40 pages of graphs and data on national production, use and types of oil, biofuels, etc. It is a good proxy for economic activity in different nations and regions. I wish I knew how to post the pdf graphs for US and China – The oil consumption recovery from the crash in China is dramatic (as is India’s). US graph is on page 9 and those two are on page 13. All cover 2004 thru August 2009.

 

[superstring01]

Another article on the changing relationship of the US and China.

A special report on China and America
A Wary Respect
Economist.com
Oct 22nd 2009

America and China need each other, but they are a long way from trusting each other, says James Miles (interviewed here)



“OUR future history will be more determined by our position on the Pacific facing China than by our position on the Atlantic facing Europe,” said the American president as he contemplated the extraordinary commercial opportunities that were opening up in Asia. More than a hundred years after Theodore Roosevelt made this prediction, American leaders are again looking across the Pacific to determine their own country’s future, and that of the rest of the world. Rather later than Roosevelt expected, China has become an inescapable part of it.

Back in 1905, America was the rising power. Britain, then ruler of the waves, was worrying about losing its supremacy to the upstart. Now it is America that looks uneasily on the rise of a potential challenger. A shared cultural and political heritage helped America to eclipse British power without bloodshed, but the rise of Germany and Japan precipitated global wars. President Barack Obama faces a China that is growing richer and stronger while remaining tenaciously authoritarian. Its rise will be far more nettlesome than that of his own country a century ago.

With America’s economy in tatters and China’s still growing fast (albeit not as fast as before last year’s financial crisis), many politicians and intellectuals in both China and America feel that the balance of power is shifting more rapidly in China’s favour. Few expect the turning point to be as imminent as it was for America in 1905. But recent talk of a “G2” hints at a remarkable shift in the two countries’ relative strengths: they are now seen as near-equals whose co-operation is vital to solving the world’s problems, from finance to climate change and nuclear proliferation.

. . .

Continue here

~String

 

[Brian Foley]

Mainly true

The reality is that China, despite its continuing growth, is beset by economic problems, this was evidenced by China’s Premier Wen Jiabao opening speech at the World Economic Forum:

“China’s economic rebound is unstable, unbalanced and not yet solid.”

Also Morgan Stanley Asia chairman Stephen Roach told the Financial Times:

“This [growth] trend is not sustainable and, although the Chinese economy will probably expand in the third and fourth quarters this year, the real test will be next year when it becomes clear that external demand, led by the US consumer, is in big trouble.”

He pointed out that surging investment had accounted for an unprecedented 88% of China’s economic growth in the first half of 2009.

That growth is directly attributable to Beijing’s massive $US585 billion stimulus package and a massive surge in bank lending ($1.1 trillion in the first half of the year). Such measures are simply unsustainable in the long-term. Add to that the fact that China has 41 million workers who lost their jobs, thats 40% of the world’s total job losses.

 

[Brian Foley]

One part, of may reasons, why the rise of China is good for the USA and. . . well, everybody.

Well no, if you decided to do some study into such 'good news' you might see the light, the strong growth at present is simply the result of lower taxes on car sales, which encourages consumers to bring forward their purchases. Next year the sales growth is expected to be just 2 percent, creating a huge production overcapacity.

 

[superstring01]

Well no, if you decided to do some study into such 'good news' you might see the light, the strong growth at present is simply the result of lower taxes on car sales, which encourages consumers to bring forward their purchases. Next year the sales growth is expected to be just 2 percent, creating a huge production overcapacity.

Okay. That's "next year".

I have never been under the delusion that China's growth would continue for ever. My comments were in regards to the next fifty years. Whatever the next five years hold, I really don't fret about. Within my lifetime, however, China will emerge as the world's next superpower. This fact will be good for the USA, despite what every nay-sayer predicts.

~String

 

[kmguru]

Stephen Roach on Charlie Rose.Interesting to say the least.

CHARLIE ROSE: OK. So, what China has to do, first of all, is to create more consumer spending, so there will be a demand for the products it makes.

STEPHEN ROACH: Absolutely. I mean -- and here’s the issue in China. Chinese households save to excess. Their savings rate for the household sector in the year 2000 was about 27 percent. In the year 2008, it was 37 percent. So the more income they get, the more they save, and the reason they save is because they have no social safety net. Their national social security fund, the pillar of the retirement system, has about $82 billion U.S. dollars of assets under management. That’s $90 a worker of lifetime social security benefits. They did a medical care plan earlier this year, $30 a person for three years.

So when you don’t have any security for the future, when you -- when your medical benefits don’t cover your average expenses, you’ve got to save, and that inhibits the growth of a broadly based consumer culture. They’ve got to invest in their safety net and they’ve got to do it now.

STEPHEN ROACH: Well, I think -- there is a growing consciousness inside of China that open-ended growth has a lot of negative side effects or what economists call externalities. And excess resource consumption, oil consumption, and pollution are clearly the most obvious of these negative externalities. But the question is, are they really doing something about it? And there certainly is a lot of advance going on in alternative energy technologies in China. And because of the nature of their system of governance, they can do nuclear in a way that, you know, a society like the U.S. could not even.

CHARLIE ROSE: Just order it be done.

STEPHEN ROACH: Yes, exactly. So they can move very aggressively in these areas. But the bottom line is, as long as they have this growth model that’s fixated on exports, fixated on investment, it’s dominated by the industrial production, smokestack-type industries, which are very, very biased toward pollution and excess energy consumption. They’ve got to get out of that model.

What Roach is saying is that only if China could switch to the American Model of Consumption - China will have a sustainable economy like America has. As long as the Chinese listen to him, they will not be a Super Power any time soon.