China's Emergence As A Global Superpower

[Billy T]

Here is why China, especaily FoxComm with 1 million production line robots ordered, is turning more to automation:

"... China's one-child policy has lessened this pool of workers. At the current pace, the growth in China's labor force is expected to level off and start shrinking by 2017. Chinese companies already commonly face both labor shortages and wage inflation, and government priorities have also shifted from creating jobs to raising living standards.

China's new plan includes strengthening its social safety net with better education, health care and social security. In the meantime, minimum wages are expected to increase by at least 13% each year. ..."

From: Email of Henry Zhang, CFA
Portfolio Manager, Matthews International Capital Management, LLC

 

[Billy T]

"... The 137-year-old London Metal Exchange has agreed a £1.4bn takeover from Hong Kong Exchanges and Clearing (HKEx) after a nine-month auction process ..."
From: http://www.independent.co.uk/news/b...-metal-exchange-in-14bn-takeover-7855200.html

Billy T comment:I forget the details, but in Honk Kong, I think they are or already have, opened a gold exchanges - where you can store your gold, sell it or take delivery that was expected to become more important than the LME.

Now as world´s largest producer and largest buyer, soon Gold will almost be worth what ever the Chinese say it is. (Where else will it trade in volume without Chinese control of it?)

 

[Billy T]

She (and two men) now in sided China´s growing space station for 13 days. Hope all goes well for their safe return to Chinese soil.

 

[quadraphonics]

China's new plan includes strengthening its social safety net with better education, health care and social security.

China can't afford much social security to speak of, since the one child policy means that the ratio of retirees to workers is low and will only get lower. Some developmental economists refer to it as the "four grandparent policy," to emphasize the consequence that any social welfare system in that context faces the problem of each young worker needing to support four grandparents. As your post highlighted, China will go into labor force decline before they can set up any such system - so it can't ever be much more than an afterthought.

Same argument applies to health care, basically, although they can probably improve healthcare for those currently working. But they'll never be able to afford to give healthcare to the elderly - not enough workers to support that.

 

[iceaura]

But they'll never be able to afford to give healthcare to the elderly - not enough workers to support that.

They don't have to pay US prices for health care, do not have to provide the very high end expensive stuff to everybody's grandparents, and will have a large productivity gain to cushion the necessary taxes: workers can receive steadily increasing pay simultaneously with a steadily increasing quality of health care for the elderly paid for with a steadily increasing tax bite, and everybody happy.

That's presuming an unearthly and unprecedented level of selfless competence and good judgment among China's governing class, at the same time as it is presented with the apparent option of becoming filthy rich and worldwide powerful instead. It's not impossible.

 

[quadraphonics]

They don't have to pay US prices for health care, do not have to provide the very high end expensive stuff to everybody's grandparents, and will have a large productivity gain to cushion the necessary taxes: workers can receive steadily increasing pay simultaneously with a steadily increasing quality of health care for the elderly paid for with a steadily increasing tax bite, and everybody happy.

Granted, if one begins at a low enough baseline, it's always possible to offer "increasing quality."

The larger implication BillyT is getting at, though, is that China is going to provide a sufficient safety net (both retirement and healthcare) for the elderly so that the crazy high savings rate you see there can come way down, which is required for transition to a consumption-led economy. This is a crucial precondition for the part of his pet fantasy wherein China tells the USA to go get stuffed. He has been very explicit about this, on many occasions over several years now.

I contend that the Four Grandparent policy renders such a premise unaffordable - if you look at countries with consumption-led economies, they're already having a lot of difficulties maintaining the social welfare programs in question due to declining ratios of workers to retirees. And China is already at a comparable ratio to those countries today - and set to run off a cliff in the near future. There's just no way that the safety net can be generous enough to put a serious dent in the incentive for Chinese workers to save at a high rate, if there's going to be more retirees than there are workers.

That's presuming an unearthly and unprecedented level of selfless competence and good judgment among China's governing class, at the same time as it is presented with the apparent option of becoming filthy rich and worldwide powerful instead. It's not impossible.

It's also missing the point that the entire CCP kleptocracy is already itself premised on the extremely high savings rate in China. That extreme demand for savings - which is caused by the absence of social safety nets and the four grandparent policy - combines with capital controls to present Chinese banks with a huge pool of extraordinarily cheap money. Chinese banks pay savers negative real returns to the tune of ~-5% annually. The banks, then, can afford to lend money at rock-bottom rates (again, including slightly negative real rates) and still remain solvent. So political power in China is all about who controls the banks and so gets to dole out the free loans to his favored businesses (and collect their own spoils in the process). So it is no surprise that the banks are all state-controlled, still manage to incur tons of bad debts that must be offloaded onto other state institutions, etc.

So while I have no doubt that the CCP will throw whatever bones to the population as are necessary to keep a lid on unrest, they also have a fundamental, vested disinterest in ever doing away with the basic incentive for Chinese workers to save at dramatically high levels. The upshot is that these efforts will always be sideshows undertaken around the margins, and are not precursors to a larger opening of Chinese capital controls, internationalization of the yuan, consumption-led economy, displacement of the USA/dollar, etc. Such requires both radical change in the CCP (realistically, to the point of something like a revolution) and a bunch of population growth (which China's ecology cannot support regardless).

 

[Billy T]

China can't afford much social security to speak of, since the one child policy means that the ratio of retirees to workers is low and will only get lower. ...
Same argument applies to health care, basically, although they can probably improve healthcare for those currently working. But they'll never be able to afford to give healthcare to the elderly - not enough workers to support that.

Both points would be true if the productivity of a society were a function of only the number of workers - But the main reason China´s productivity is soaring is not due to the slight population increase.

It is due to things like Foxcomm installing 100,000 production line robots, things like the better education the masses streaming into the cities are getting. (Greatest and fastest urbanization in human history.) And yes even fact China is forcing companies, which want to sell to the world´s fastest growing market*, to build modern technology plants in China often with a Chinese partner who will steal the technology. For these reasons the productivity of China will continue to increase even when it populations is not.

*Or to have assured access to critical materials (especially rare earths metals) to bring their magnet etc. technology and high productivity plants to China. (last I heard Japan´s, Hitachi, world leader in rare earth magnets, was negotiating with China, to relocate its world leading technology there.

SUMMARY: Your view that only the size of the labor force determines how well the old can be supported is too simple minded. As far as health care is concerned, it has already been proven wrong: At least two years ago when sick Chinese person went to hospital or clinic, he was charged 2/3 of the cost (state paid 1/3) now in and effort to decrease the ~50% saving rate, grow the size of the domestic market for goods and services, that is reversed. Patient pays 1/3 of the cost and state 2/3. From the POV of the Chinese worker his expected health care cost in old age has been cut in half!
And of course in China, like in the US, most of the medical services are for the elderly - China has cut their costs in half with only a few more workers.

Unfortunately for the CCP, the high saving rate is a deeply ingrained habit, not immediately changing to produce rapid growth in domestic sales. (Much like the older US adults who lived thru the 1929 depression continued to save when there was little rational need for their high saving rate.)

 

[quadraphonics]

Both points would be true if the productivity of a society were a function of only the number of workers - But the main reason China´s productivity is soaring is not due to the slight population increase.

I never suggested the productivity was a function of the number of workers, nor does anything I've said imply such. That idea doesn't even make sense. Productivity has nothing particularly to do with the size of the workforce.

It is due to things like Foxcomm

That company is called "Foxconn."

installing 100,000 production line robots,

Actually, Foxconn's installation of all those robots is going to decrease the productivity of the Chinese workforce. The reason for this is that they will be booting many thousands of currently-productive Chinese workers out onto the streets in favor of robots. While this will increase the producitivty of Foxconn as an enterprize, that will not show up as Chinese productivity. The reason for that is that Foxconn is not a Chinese company. It's a Taiwanese company that owns factories in mainland China in order to exploit the cheap labor and lax environmental regulations there. The increased productivity of their operations due to those robots will show up in the balance sheets of Foxconn in Taiwan, not in CCP China.

things like the better education the masses streaming into the cities are getting.

You seem to be very confused about how the migration in question operates. It does not consist of rural families relocating to the cities and availing themselves of the superior services there (that is actually outright banned in China, exactly because said migrants would overwhelm the social systems built for the affluent, less-numerous city-dwellers). Rather, it is very similar to the "guest worker" type of migrations that you see elsewhere in the world: working-age people leave their kids and parents at home and head off to work in some distant city. They live in dorms at the factory, and send most of the money back home to support their kids and parents. After some years, they retire back in the rural areas, and their children go do migrant work in the cities to help support them while they watch over their grandchildren.

The productivity gain is not from education. It's from taking rural populations that are currently working in subsistence agriculture and sticking them in factories that produce more valuable goods (by dint of the capital investment and export markets and state financial support). The urbanization these days is not so much due to rural people moving to the big coastal cities, so much as the development of cities in the interior.

That's not to say that there isn't a (very) large pool of people residing in cities that came from the rural areas. But they are not technically "residing" there, and so are barred access to social services like education. They're the equivalent of illegal immigrants in the USA.

And yes even fact China is forcing companies, which want to sell to the world´s fastest growing market*, to build modern technology plants in China often with a Chinese partner who will steal the technology.

Technology adoption is the other leg that Chinese productivity walks on. But you like to remind us that China already has plenty of modern factories - they've spent decades building lots of them, now - so they can expect to hit a wall on that process at around the same time as they run out of rural dirt farmers to upgrade into factory wage slaves.

Moreover, technology adoption only gets you up to the level of productivity of the West. And the West isn't productive enough to support a social welfare system with a lower worker-to-retiree ratio than it has now - let alone, the ratio that China will exhibit in a few years.

For these reasons the productivity of China will continue to increase even when it populations is not.

The question is whether productivity growth can hope to match the explosion of retirees, not whether it will simply "increase." The Four Grandparent policy guarantees that you will see an explosion in the retiree population starting in about 8-10 years from now - where is the comparable explosion in Chinese producitivity? By that point they'll be all out of dirt farmers and easily-stealable foreign technologies.

Well, that, and why the CCP kleptocracy would countenance the demolition of the basis of their power and wealth.

SUMMARY: Your view that only the size of the labor force determines how well the old can be supported is too simple minded.

I never made any such statement, nor implied such. It is blatantly dishonorable for you to attack such an obvious strawman, and to insult my intelligence on the basis of such. I demand that you retract that bit of fallacy, and apologize for insulting me.

As far as health care is concerned, it has already been proven wrong: At least two years ago when sick Chinese person went to hospital or clinic, he was charged 2/3 of the cost (state paid 1/3) now in and effort to decrease the ~50% saving rate, grow the size of the domestic market for goods and services, that is reversed. Patient pays 1/3 of the cost and state 2/3.

The fact that China could afford big boosts to its social safety net while they still have a high ratio of workers to retirees doesn't disprove anything I've said - rather the opposite. It's in the next decade or two, when the long-term effects of the Four Grandparent Policy start to make themselves felt, and the existing fast-growth strategy has run dry, that they problem asserts itself.

 

[Billy T]

... You seem to be very confused about how the migration in question operates. It does not consist of rural families relocating to the cities and availing themselves of the superior services there (that is actually outright banned in China, exactly because said migrants would overwhelm the social systems built for the affluent, less-numerous city-dwellers). ... After some years, they retire back in the rural areas, and their children go do migrant work in the cities to help support them while they watch over their grandchildren. ...

I have explained in prior post to you below that this idea of yours ("they retire back in the rural areas... ") is not only false, but IMPOSSIBLE. The former farmers cannot go back to their tiny plots as they no longer exist. - They have been integrated into large scale commercial farms, much like the US family farm has essentially disappeared. (And for the same economic reason - massive, capital-intensive "industralized farming" is much more productive.)

China in this and next 5 year plan is building 100 new cities, each for a population of at least 1 million. That is where the former farmers will work and live. No return to their non-existent traditional tiny plots is possible. That is your false fiction.

... Farm land is still owned by the state. Until about three years ago, the farm families historically living on tiny inefficient plots could not lease it to anyone else. (Now much of it is large efficient corporate farms.) The rules were changed (despite Communistic doctrine) as tiny farms were producing too little food for the growing urban populations.

Also the huge, perhaps excessive and certainly not sustainable for many more years, capital investments in infrastructure, (100 new cities for 1 million people each, with everything that implies from new buses to trash cans) and new faster railroads being built, etc. caused a great need for more urban construction workers.

This, no doubt was also big factor in the trashing the traditional communistic doctrine about no private large corporate farms.

These two changes are the reason why China's population is surging into the cities. The former pig farmers now have their farm lease money PLUS salaries from new jobs in the cities (both new and old), building the new cities or as railroad laborers tying China together with world's fastest trains, or in building thousands of miles of new, large diameter, gas pipelines, or new power plants (one coming on line every two weeks!), smart grids and world's fastest expansion of "green energy" facilities etc. ...

Fundamentally, China's CCP had no choice: The old "export to US and EU" economic model was broken - only held up by huge annual loans from China to these buyers of China's exports. There is (and CCP knew it) danger to the CCP's control with a prospering population (especially an internet connected one). If there had been anyway the CCP could have kept the urban population under paid and slaving way, 12 hours day in "sweat shops," producing good for export and the pig framers back on their inefficient tiny farms, they would have. ...

From: http://www.sciforums.com/showpost.php?p=2871533&postcount=491

... China is developing retirement and pension systems. (To reduce the population's traditional ~50% saving rate). Why China has cut the out of pocket cost of heath services 50%. Why China's salaries are growing in real purchasing power ~ 10% annually. Why China is now allowing millions of tiny farm plots to be leased to corporations with tractors etc. to make only a small part of population work as farmers (and the big commercial farms are much more productive. - {China now} has world's highest wheat yield / per acre.) Etc. ...

At least 500 million former farmers will move to cities during the next decade. With the land rent lease money and their city jobs, their purchasing power will then exceed that of all Americans. (And not just because the US & EU will be in deep depression then.) ... The first sector where this growing demand is striking / inflating / is food.

Living on greens and rice is no longer acceptable to the Chinese masses. The price of pork is doubling every year and half! China has more pigs now than the rest of the world does, but it is not enough. China needs twice as many pigs as the rest of the world’s total! China’s imports of gains to feed them will also grow proportionally. Etc. China is the “engine of economic growth” for all the world by 2020....

From: http://www.sciforums.com/showpost.php?p=2826385&postcount=459

 

[quadraphonics]

I have explained in prior post to you below that this idea of yours ("they retire back in the rural areas... ") is not only false, but IMPOSSIBLE. The former farmers cannot go back to their tiny plots as they no longer exist.

They don't need plots of farmland to retire on. Farms are things that people work. Retirees don't work.

China in this and next 5 year plan is building 100 new cities, each for a population of at least 1 million. That is where the former farmers will work and live.

Right - those are out in the interior, in the currently rural areas where those farmers already live.

Meanwhile, I notice that you have siezed onto one tangential issue raised in my last post, and completely avoided the actual substance of the issue we were talking about (affordability of social welfare systems in China, and the relationship to the prospect of a consumption-led economy). In light of that, I will consider you to have conceded all of the points I made, and to be pursuing a tactic of distraction to avoid admitting such. That is highly dishonorable, as is your failure to aknowledge your blatant strawmanning and insulting of me in your previous response, as I rightfully demanded. Furthermore, I fully expect that you will compound this misbehavior by re-asserting the exact points that you have failed to defend here the moment you think I've stopped paying attention.

All of which would be embarassing enough behavior for a regular poster. But from the moderator of this very subforum? It's an outright disgrace.

 

[Billy T]

They don't need plots of farmland to retire on. Farms are things that people work. Retirees don't work. ...

They will not just retire there either BECAUSE THEIR FORMER TINY PLOTS NO LONGER EXIST. They are now parts of massive corporate agriculture - how China is producing much more food than it did a decade or more ago.

You missed that point?

 

[Billy T]

... I notice that you have siezed onto one tangential issue raised in my last post, and completely avoided the actual substance of the issue we were talking about (affordability of social welfare systems in China, and the relationship to the prospect of a consumption-led economy). ...

No, it seems you missed my point about that the volume of goods and services does not depend only upon number of workers but much more on the capital they have to work with - modern automation and machines making one worker produced what dozen did by China´s old un-skilled workers slaving away 12 hours per day in "sweat shops"

China now has many factories more modern and productive than the US does AND is a world leader in automating production. Even in high tech area. For example when US astronauts docked with the space station, they were active; but the three Chinese who docked (and now for 13 days ride inside) with their growing space station - computer automation and sensors did EVERYTHING. The Chinese astronauts were just an unused back-up system. This fully automatic docking was tested with an unmanned ship about three months ago.

Either China (or perhaps only Japan?) is now testing robots as attendants in old folks homes. Russia will be unpopulated before China has problems caring for its old due to increasing average age of the population. Russia has a very serious aging population problem, not China.

 

[Billy T]

To Quad : You are worrying about the wrong country!!!!

With only 8.9% of its population 65 or older China is number 84 in the list of old populations. Every other important country (83 of them) has a higher fraction of older people. Japan is in second place with 22.9% - data form: http://www.nationmaster.com/graph/peo_age_str_65_yea_and_ove-age-structure-65-years-over

Many countries are well below replacement rates:
Mainland China has 1.55 children born (fertility per woman). Obviously the one child per family has many exceptions as I stated in a prior post:

Here are some important countries with more serious problems than China, which is relaxing its one child rule (even now having discussion about the total end to it).*
Portugal 1.51
Spain 1.48
Switzerland 1.47
Russia 1.43
Germany 1.41
Austlria 1.41
Hungary 1.41
Italy 1.39
Japan 1.39
Greece 1.39
Poland 1.31
From 2012 List from the CIA World Factbook quoted at: http://en.wikipedia.org/wiki/List_of_sovereign_states_and_dependent_territories_by_fertility_rate

I.e. all these countries have both lower birth rates AND already much higher fraction of old people (with far less financial resources than china too!)

* Last week that became a very "hot topic" in China as a husband killed his week old daughter as he could not pay the 6,000 yuan fine for second child.

 

[WINSTON]

Billy, you make a lot of good points about China, and how it has many things going for it, but you assume that the u.s, and west will play fair, and just allow China to ascend. Here are a few things to consider, and I would like to hear your take on it. How do you think China will overcome the sabatoge coming from the west?
How will Chinese people not fall into the same trap that westerners did? Chinese people are now buying things like iphones, and ipads. As far as I know, most people in western countries can't even afford this, so it seems that Chinese people are going into debt by buying these things. You said that this trend seems to be getting worse as Chinese are spending like there's no tomorow. Buying imported items like the iphone also threaten the existance of Chinese industries. So how do they stay alive when so many people are buying imports?
I have heard that the west has successfully sabatoged the tire, and steel industry of China. The west has sabatoged Chinese interests in Libya, and Sudan, first by overthrowing Gadafi, and then by creating the pupet regime of south Sudan.
There are also lots of traitors within China. Many Chinese send their kids to western countries. How do you guarantee they will not return to China and start some kind of revolution that would throw China into chaos? Even if they don't start a revolution, they could return with corrupted ideas that could potentially prevent Chinese development.
Then there are always taiwanese, and hongers that will undermine their own country because facebook says it's cool to hate your own country. The biggest threat to China may not be the west, but traitors. 80% of taiwanese can't finish a sentence without bad mouthing their own country. Even on the mainland, there seems to be a very large pro western faction. Either the Chinese are incredibly gifted actors, or they really are fascinated by the west.
Hong Kong has long been a ticking time bomb for China. How do you think China will handle destabilisation attempts by the west via hk? Thats a few million useful idiots in hk, as far as the west is concerned. Western regimes and their pupets now have China surrounded.
Since the west's economies will tank anyway, what is to stop them from attacking China? Desparate regimes do desparate things. The u.s has so far comisioned the philipines, india, and viet nam to attack China. Then there are the usual suspects, south korea, and japan. There is now talk of the u.s regime overthrowing the Malaysian leader and replacing him with a u.s pupet.
If China does prosper, what do you expect will happen to all the China haters today? I mean what will the guy writing disinformation for the wall street journal and the various foundations, be doing once China rises, and the west falls? What about those military contractors who prosper so much from conflicts? What will their new job be? How about all the rent a trolls/cybercom trolls?
You quote sources that are known to disinform the public such as forbes, bloomberg, economist, etc. If they lie time and time again, why on earth would they start telling the truth all of a sudden?
You said you were inspired by 0bama's ability to lead? To lead what? I think he has made america worse than it was under bush. Also, wouldn't you say that the same people who directed bush, are in fact, the same people directing 0bama today? What difference does it make who is president? It's the ruling class behind them that make real decisions.

 

[Billy T]

Thank you for an interesting and thoughtful set of questions and comments. It will be my pleasure to reply in detail (even if that make it a long reply).

Billy, you make a lot of good points about China, and how it has many things going for it, but you assume that the u.s. and west will play fair, and just allow China to ascend.

Yes, I do assume that these two nuclear powers will not go to the limit of mutual destruction in all out war. Both have nuclear ICBMs, both have demonstrated ability to place men in space and to destroy orbiting objects with ground (or in US case an Aegis ship) launched rockets.

I am even beginning to believe that China will control and dominate the South China Sea and its resources; mainly because US naval intelligence evaluated their test of an 1800 mile range “ICBM” that with just a conventional warhead can sink a high-speed “zigzagging” US aircraft carrier. China has three or four times more submarines in that area than US could even put there and many more small warships, plus mobile shore missile systems that have range to hit Taiwan, etc. I.e. US may have better assets but less than 10% of the forces China could put into a conventional naval war in the South China Sea.

Thus I assume that will not occur too. Slowly by continued colonization (or just permanent manned observation and weather platforms if occasionally highest storm tides leave no land above sea level) of the small islands China claims in the South China Sea, and probably with some sharing of those resources with neighbors, especially its major trading partners in the area like Vietnam, China will exploit most of the S.C.S. resources. US oil companies are already helping them do this, and have refused to help the Philippines do so even though the Philippines has claims to some of the same resources.

“ICBM” Is in quotes as it is not ballistic, but guided to the carrier target in the terminal very super sonic phase at least by on board optical and radar sensor, and quite possibly also by remote control with information collected by orbiting assets China has. China is very good at complex remote control. For example, the three Chinese astronauts now in China´s growing space station were just back up passengers for the difficult joining of their approaching space craft with the station – docking was by remote control from China, but of course local sensor did provide the data and monitor the joining.

… How do you think China will overcome the sabatoge coming from the west?

In kind, until some mutual accord is reached (like world does not use poison gases, etc.) I have no way to be sure, but suspect, China is already stealing many industrial secretes and has hacked into some of the US militray´s most sensitive data bases. They are very good with computers (two years ago had the world most capable one) and probably have at least as many very intelligent people working in this computer warfare area. I am 99% sure China now has the full codes of ALL the computer warfare codes the US an Israel sent into Iran:

Makers of Flame have begun to fear it may be captured by "bad guys" / reversed to attack the US, perhaps causing airborn planes to crash or nuclear power plants to melt down (with full extraction of control rods and safety logic blocked), etc.... Billy T comment: Iran and some others probably have many Stuxnet, Duqe and Flame infected computers that are no longer have any connections to the internet. {This post told of newly released US code that overwrites infected disks IF still connected to the internet} I.e. they have in their disks the these powerful cyberwarfare codes. …Iran has demonstrated considerable computer abilities by the logical capture of a US drone and directing it to land with zero damage, instead of shooting it down. Thus there is a good chance, the US will someday regret having filled Pandora´s box with Stuxnet, Duqe, Flame etc.

Quote from the “Flame hit me” thread. China probably helped Iran bring down that drone undamaged by logical capture and is now has dozens of “Chinese nerds” reverse designing their own versions of Stuxnet, Duqe and Flame for attack of US etc.

… How will Chinese people not fall into the same trap that westerners did? Chinese people are now buying things like iphones, and ipads. As far as I know, most people in western countries can't even afford this, so it seems that Chinese people are going into debt by buying these things. You said that this trend seems to be getting worse as Chinese are spending like there's no tomorow. Buying imported items like the iphone also threaten the existance of Chinese industries. So how do they stay alive when so many people are buying imports?

Your facts are quite wrong here. Chinese controlled Foxconn, makes iphones, ipads and dozens of other most important modern electronic devices for companies other than Apple. Foxconn is in the process of replacing humans with 100,000 production line robots as wages in China have been rising in real terms by double digits annually.

Aslo the CCP´s major problem with boosting domestic consumption is the deeply ingrained saving culture of the Chinese masses – they still are saving ~50% of the salaries! (In the US 50% of the population is not saving even one cent!) The CCP has cut in half the cost of their health services (one prior rational reason why Chinese saved) and grown their incomes very rapidly, yet domestic buying is only slowly increasing. Even if Helicopter Ben were to fly over China throwing Yuan out by the basket full, there would be little stimulus to the domestic market – the centuries of “save all you can” is just too deeply part of the Chinese culture to change in less than a generation. (Memories of mass starvation do not easily disappear.)

In a hundred years or so, perhaps some Chinese will become like Americans – I.e. spend more than they earn, but who will be lending to them to make that possible? China did much of the lending for the US´s self destruction (and sold us the hoolow-hoops and plastic junk of no lasting value).

… There are also lots of traitors within China. Many Chinese send their kids to western countries.

Again you are wrong. The “traitors” are in the US Congress that will not let them stay in the US when they graduated very well educated! At the highest levels the US still has the world´s best schools. The Chinese getting educated in them and returning to China are part of why China is doing so well.

… The US How do you guarantee they will not return to China and start some kind of revolution that would throw China into chaos? Even if they don't start a revolution, they could return with corrupted ideas that could potentially prevent Chinese development.

Again wrong. Non-violent revolution lead by the educated who know how things work in the west is exactly what will make China even more productive. Chinese communism did not copy the USSR mistake of full central planning – the consumer market place is guided by the invisible hand of Adam Smith. Only the infrastructure is centrally planned, and done very well as by engineers, not lawyers as in the US Congress. I don´t know about the new mix of CCP´s highest leadership, but last group were all engineers by education, except one who was a geologist - not a lawyer in the bunch! 100% of the top level of the US administration and at least 90% of the Congress were educated to be lawyers! Ron Paul is quite an exception - a former doctor who has delivered more than 100 babies. No wonder he has a very different POV about government and DC than the lawyers do.

The Chinese have 10 “five year plans” and make capital investment even with no expected return for decades. For example, spend dollars from their reserves in paid up front long term contracts for supplies need two decades or more from now. (The 10 billion they gave Brazil´s PetroBras is sending then 200,000 barrels of oil per day (on average) for 20 years. Etc.) They are bring on line an new power plant every two weeks! Lead the world in investments in Green Energy Systems. Building in this and next 5-year plan 100 modern cities for 1 million population each, some of which have no residents yet but half of the Chinese population is still rural. (170 million people)

China´s CCP is even scraping some nearly sacred communistic doctrines, (as it learns from the west). The most important example took place about three years ago. Large private ownership of tracks of land is still not possible, but the framers on tiny low efficiency plots were allowed to lease them long term (forever) to corporations. Now agro-industry is growing much more and more cheaply as it does in the west.

The former “pig farmer” now are moving into the new cities getting jobs building them and world´s largest and fastest network of railroads etc. With their greatly increased purchasing power (Salaries Plus farm lease rents) they could buy more, but taking the farmer out of the farm is not same as taking the farm out of the farmer: – They piss in the streets, and still save.

BBC did wonderful TV series on one of the first completed new cities (named after the tiny village it replaced) called “White Horse Village" several years ago. Try to watch it – part at least was on line.

The western educated youth returning to China will make a peaceful revolution that makes China even stronger – for example, now with modern agro-corporate farms, China leads the world in wheat production per acre! (They use a lot of fertilizer as they lack agricultural land.) By far the world´s largest irrigation system is just now (or soon will be) starting to operate:

... It will remove nearly 36 billion cubic metres of water every year from the Yangtze River Basin – which drains much of the nation’s central and western regions – and ship it to the arid North some 3,000-kilometres (1,900 miles) away!

Those pipes are 8.5 meters in ID – 18 wheeler trucks can easily drive thru while they are dry!

If scheduling and operations projections are accurate, in 2014 some 13 billion cubic metres (3.4 trillion gallons) of water per year will pour through the tunnels of the central line, under construction in Henan Province, and will be sent north to help curb water shortages in more than a dozen cities, including Beijing. The eastern line, a second transfer project, should already be operating by then, transporting 14.8 billion cubic metres of water annually from the lower Yangtze River to Tianjin. ...

from: http://www.sciforums.com/showpost.php?p=2946273&postcount=105

The US Congress could never under take a project like this with zero payoff for more than a decade. Congressmen rarely fund anything large with first benefits starting years after their next election – China has a much better political structure for economic advances. Why their GDP is mainly things of lasting value (does not include money spent on last year´s NFL season, etc,) and is nearly five times the US´s current 1.9% annual growth rate. Only the US´s debt grows five (25?) times faster than China´s does!

… Hong Kong has long been a ticking time bomb for China. How do you think China will handle destabilisation attempts by the west via hk? Thats a few million useful idiots in hk, as far as the west is concerned. Western regimes and their pupets now have China surrounded.

I think western dreams about uprising in China being more than minor local problems for the CCP are just that –dreams. Here I think you will find the POV of most Chinese well expressed: http://www.sciforums.com/showpost.php?p=2668027&postcount=358

To the extent they know about it the typical Chinese is very proud of China´s achievements (Three Chinese now in orbit, starvation only a memory, world´s fastest trains, RMB´s growing global status, largest and fastest urbanization in human history, better than US educational scores in math and sciences for average student, world main supplier of advanced consumer electronics, leadership in green energy installations (including world´s largest hydro-electric dam), number 1 producer of cars, computers, cells phones and many other products plus materials like steel, tungsten, gold and critical Rare Earth metals, having more pigs than rest of the world´s total (pork being the best possible meat from Chinese POV) etc.)

…Since the west's economies will tank anyway, what is to stop them from attacking China?

Mainly the high cost to US of doing so.

… If China does prosper, what do you expect will happen to all the China haters today? I mean what will the guy writing disinformation for the wall street journal and the various foundations, be doing once China rises, and the west falls? What about those military contractors who prosper so much from conflicts? What will their new job be? How about all the rent a trolls/cybercom trolls?

US military has already learned funds for it are being reduced. I don´t know what will emerge in US after GWB´s depression – I expect a period of marshal law to control food riots etc. and then slow transition to a political economic system shown to be better economically – I.e. much like China has, but anything could happen.

…You quote sources that are known to disinform the public such as forbes, bloomberg, economist, etc. If they lie time and time again, why on earth would they start telling the truth all of a sudden?

I don´t think they are a bad as one of my main sources – the on-line English addition of ChinaDaily. Also as I live Sao Paulo in Brazil, which has IMHO two of the world´s best newspapers (if you don´t mind half of their news being a day or two late). – They steal stories from all the world´s best news sources. – So I get many conflicting POVs. I sometimes even make translations from the Portuguese into English to post for stories that my US sources (CNN international included) don´t tell.

I am curious: Did the US version of CNN tell what the Saudis do to 100 or so girls bought in Nepal each month as part of their anti-slavery freedom series? (After a few years of terrible abuse in the kingdom about 30 per month return home in wooden boxes) I don´t know why the bodies are not just burnt or dumped in the sea. Perhaps desperately poor Nepal requires the return of the bodies to allow the continued export of young girls (and some boys).

Very little of Saudi human rights abuses makes the US press. Many years ago, when a Saudi girl was gang rapped by 7 or 8 men, she was sentenced to 16 lashes and a year in jail. I did read about that in the US press. She had “provoked” the men by going out without the legally required close relative male escort. The men were thus not punished.

US has a long standing deal with the Saudi Kingdom: they pump oil at the rate US tells them and US supplies the weapons needed to suppress /control the population and other wise defend the Kingdom from it local enemies (Iran and Saudi shiites especially) and looks the other way (usually) about human rights abuses. I can read about it in my local papers and many other things that I doubt you can in the US.

…You said you were inspired by 0bama's ability to lead? To lead what? I think he has made america worse than it was under bush. Also, wouldn't you say that the same people who directed bush, are in fact, the same people directing 0bama today? What difference does it make who is president? It's the ruling class behind them that make real decisions.

I probably said that, if I did, about his initial generation of support in young voters but that no longer exist –too high a level of no jobs for college grads now. I think nothing other than delay of the start is possible to avoid GWB´s depression – said so while GWB was still POTUS. Thus, I´m not very much interested in the election, except I hope Romney wins as don´t want GWB´s depression to take place when a black man is POTUS and I fear that Obama will not be able to “kick it down the road” for a full second 4 year term.

SUMMARY: If under 30, start leaning to speak and write Mandarin and get ready to move to China for a better life, if you can keep your mouth shut politically.

 

[Billy T]

After the 18 June 12 automatic docking (with remote control from Chinese mainland) yesterday the passenger craft decoupled (as shown above) and re-docked under manual control of the astronauts - test of their "back-up" abilities.

More details at: http://www.bbc.co.uk/news/world-asia-china-18567115

 

[WINSTON]

Billy, you keep saying that the u.s is going to collapse, but from what I know, the u.s has a lot of natural resources. Couldn't it just start selling natural resources to prevent a collapse? Also, there is always the chance that americans can overthrow their oligarchs, and create a more reasonable government. Or are americans too weak to do that? I am also curious about this. If the u.s is going to collapse, and it seems like a lot of people are saying that, then why doesn't the u.s military industrial complex move to China? I mean you might as well pick a winner if you are going to make weapons. I assume that these guys are out to make a profit. If the u.s does collapse, would these weapons manufacturer try to make a final buck by selling their technology to China?

 

[Billy T]

Billy, you keep saying that the u.s is going to collapse, but from what I know, the u.s has a lot of natural resources. Couldn't it just start selling natural resources to prevent a collapse?...

Probably greatest US resource, in a soon to be hungry world is the fertile Mid West. We are and increasingly will be selling food to Asia. US also has a lot of natural gas and coal, but most of it is thermal coal, not the more valuable coking coal. Read more at end.

These energy assets will be exported, at least for a few years more, but less than 5% of the US can get a job directly in these industries. What will the 95% do, when all the service industries now can be done by others more cheaply? Only local services jobs (Fliping burgers at Mac Donalds, cutting someone hair, driving a taxi, etc.) will not support an important economy and export nothing.

US´s not yet started exports of NG will be over in a few years as China has even more than the US does and other Asian demand centers will get NG from the newly opening NG rich fields in East Africa and the already producing fields of Australia, where the huge off-shore field* is just starting to be tapped. (Much smaller transport distances, and much lower production costs compared to "fracking" for NG. Especially the E. African fields which have very thick and very porous gas filled rocks. )

What is killing the US is the negative feed back of too many not buying as jobless (Fraction of potential workforce actually working is at a 30 year low.) 1 in 7 is now on food stamps to eat. Baby Boomers are retiring and collecting their Social Security no longer in their peak earning (AND TAX PAYING) years. I.e. US debts, federal, state, and private are just too high to be paid any means except by making the dollar have much lower value.

War destroys things that are produced but workers making them still get salaries with no increase in the goods in the market place - strong force for inflation. Do you recall that we were told the Iraq war would pay for its self with the oil exports after we won it? Well it has not and those exports are not yet back to the level when Saddam was in power. The new Iraq government is giving many of the better (now producing) fields to China etc., not the US. What do you think the US would gain by making war on others, especially strong nations, like China, when an easy victory in oil rich Iraq has produced a huge and continuing loss for the US?
---------------
*

"... will dwarf the largest aircraft carrier; even the biggest container ships will look like motor launches alongside it. Floating liquefied natural gas (FLNG) facilities will be so big that they’ll put pretty much every man-made structure barring the very largest super skyscrapers into the shade. ... The first vessel is being built to exploit Shell’s Prelude gas field, which is 200km off Australia’s northwest coast, with another planned for the Sunrise field, between Australia and East Timor. ..." This FLNG will stay over the field as a LNG tanker "filling station" for at least 25 years! (I´m not sure if it even has main motors - just "small" ones I think for orientation into wind control during storms, I think.)

Read more: http://www.theengineer.co.uk/in-dep...ating-structure/1009213.article#ixzz1yjlmaxdc

As far as coal export are concerned US is important but minor, especially as Indonesia´exports are growing about 20% per year now and can soon supply all the thermal (steam) coal the US once did, cheaper and closer to the main Asian markets (China). Coking coal will continue to mainly come Australia** as they are making huge investments in mine expansions now.

"... Indonesia is emerging as an important supplier.
Top Coal Exporters (2010e)
Country......Total .. = .. Steam ..+.. Coking
Australia.... 298Mt....... 143Mt....... 155Mt
Indonesia... 162Mt....... 160Mt....... 2Mt
Russia....... 109Mt....... 95Mt......... 14Mt
USA.......... 74Mt......... 23Mt......... 51Mt ..." Data from: http://www.worldcoal.org/coal/market-amp-transportation/

Note the demand for US steam coal is dropping fast as new EPA rules take effect and NG replaces it in power plants. It never was in much demand in Asia as more costly to ship and to mine than closer sources, especially Indonesia which is a rapidly growing source of cheap thermal coal.

Question for you: When world recognizes that dollars are just printed green paper, how will US pay for essential imports? Many countries are already not using the dollar in trade.

** later by edit. Here is part of that: "... June 22 - BHP Billiton has announced an investment of $845 million to sustain operations at Illawarra Coal in southern New South Wales by establishing a replacement mining area. It will have production capacity of 3.5 million tonnes per year (Mt/y) of metallurgical coal to keep Illawarra Coal’s production capacity at 9Mt/y. ..." from: http://www.internationalresourcejournal.com/resource_news/4186.html

 

[Michael]

The thing about China, that I think will spell it's eventual doom, are the Chinese people themselves. I love Chinese and I think they're very hard working industrious people but they have a sort of callousness to their culture that I think develops from living in these massive megalopolis cities. Speaking of which> I can only imagine what it will be like living in those in 15 years time. You want to talk about slums....

Even when I go to China Town in Japan (outside of Kobe, lets say Yokohama) it's the same as China Town everywhere. Everything is dirty and cheap. Yeah, it's nice you can pick up cheap stuff, but no one seems to try very hard to do their best (get what you pay for I suppose). It's not like we don't suffer from a similar like-mindedness in the USA, but, it's just MORE in China. It's no surprise that they get caught making schools out of materials that collapse with the slightest tremor. Or grinding hair to make fake soy sauce (to go with their fake eggs and artificial meat). And the spitting, I know it's just a cultural thing, but IN your own house? Chew off a finger nail and spit it on your own carpet?!? Japan is so different than China. The Chinese THINK they're going to follow Japan's example. I don't know if they can, or, at least not over the long run. It's just a totally different way of approaching life. Japanese generally try to do their best. Not to do the minimum you can get away with. If anything, Japanese might actually be trying TOO hard to do TOO good in a world that want's crap.... but, who knows?

So, while I think China is in the rise, I also think they'll seal their own fate and that this is THE China-Cycle. We just happen to be catching the latest one in a series that spans 1000s of years.

 

[Billy T]

Before June 2012, China limited total foreign investments to 30 billion dollars, so Central banks, sovereign wealth funds and large financial institutions wanting to reduce their holding of Euros have been forced into the “safe” haven dollar market (bonds and stocks helping the FED drive down interest rates and boost stock prices) instead of RMBs but that is now changing:

“… Central banks, sovereign wealth funds and financial institutions are looking to China to diversify their assets as Europe’s debt crisis roils financial markets. China said this month it will lower the entry barrier for foreigners seeking to invest in the nation’s capital markets under the Qualified Foreign Institutional Investor, QFII, program after more than doubling the total quota to $80 billion in April. …”

And is making it easier for smaller institutions to invest in China:

“…The {Chinese}commission said on June 20 it plans to cut the minimum requirement for assets under management to $500 million from $5 billion for companies seeking a QFII license. It will also allow them to invest in the country’s interbank bond market. …”

I.e. China is moving to increase the size of its capital markets, but still they will be small compared to London and NY City. China always proceeds with caution but where they are going is clear – China wants the advantages of being world´s reserve currency.

“…The State Administration of Foreign Exchange decides on the amount of foreign-currency funds an institution can invest. It said last month it will speed up the approval process … to give the nation’s bond market a bigger role in financing growth and help divert risk from the state-owned banking system that provides 75 percent of the nation’s credit. …

"... Qatar’s sovereign wealth fund is applying for a license and a $5 billion quota to invest in China under the QFII program, the China Securities Journal said on its website yesterday. ... Bank of Korea, the Kuwait Investment Authority and the Monetary Authority of Singapore are among the 172 entities granted QFII licenses since the program was introduced in 2002 to allow foreign institutions to buy and sell yuan-denominated securities.

"... Of the total, 145 have been awarded a combined quota of $27.26 billion on June 20. (The total amount allowed before April’s increase {to 80 billion}was $30 billion.) Singapore’s state-owned investment company Temasek Holdings Pte has already applied to increase its quota after the regulator’s April announcement, according to an e-mailed statement on June 14. …”

Quotes from: http://www.bloomberg.com/news/2012-...china-qfii-quota-securities-journal-says.html Inserts are Billy T´s comments.