Trade War with China

weig2000 · Jan 24, 2019

Jura said:
now noticed the tweet
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The Foreign Ministry confirmed on Thursday that Australian citizen Yang Hengjun had been detained on suspicion of engaging in activities that threatened China's national security

Does this have anything to do with US trade war with China? Why is it in this thread?

gelgoog · Jan 24, 2019

Ultra said:
First, I never said "infrastructure investments is short-sighted". I fully support critical infrastructure investment when it is needed.

My main point is that China structured the deals to be a debt trap. It is a very high percentage for all those countries who goes into deal to be trap in unescapable debt.
Sure you can argue that's their own fault for not reading the contract and mismanage their own country finance to be in that situation.

BUT You guys are too short sighted to see the whole picture.

These countries are mostly chinese allies, or potential allies. What China invested in them (giving massive loans to them) is Chinese people's money. ALL of these investments have critical strategic value for China. China doesn't just benefit monetarily from just giving the loan out, they form part of China's geo-political strategy. The US-led allies can't wait to dismantle them. Becauses it is against their own interest.

Now when these debt-trapped countries starting to fail because the deal structure make them poorer and has critical snowball effect to the rest of their economy, do you know what will happen? The west will apply pressure economically and politically to destablize the incumbent political leader and the country until it breaks while supporting politcal rival that's friendly to the west to prepare to take control over the chaos. The end result is China's total loss - economically (country no longer service the debt to China) and geo-politically.

Just look at Venezuela. China is about to lose all of its investment in that country.

What China need to do is to structure country that benefits both parties, at the same time give timely advise to guide them and assistance to help them out of any situation. Failing to do so is only a ticket for the west to take advantage of to destablize the country for their own gain. A stablized and economically strong country is a strong ally. Look at South Korea, Japan, EU. They are strong US-allies because they are economically stabled, and when they are not US came helping out (eg, IMF - South Korea).

And another thing you guys don't seem to understand is, US-led west is playing a zero-sum global politcal game, to their view any China/Russia/opponent's loss is their gain, and they will do ANYTHING to gain. Look at Syria, Middle East, South America...

You claim these are high interest rate loans. Yet compare them with the World Bank's interest rates or market rates. The fact is these countries are getting a better deal than they would otherwise. There are claims because the Chinese force the loans to be used with Chinese builders that this inflates project prices. But there is no actual evidence of that. Quite the contrary. Plus the USA made basically the same sort of deals after WW2 yet no one considered that to be exploitation back then...
Where I would agree the most is with the lack of use of local workers in projects. But as the OBOR projects shows it depends on how the contract is structured. Some of the contracts actually stipulate the use of local construction workers. In the case of the port in Sri Lanka, which is often bandied around, the Chinese actually converted the debt into a 99-year lease in lieu of payments. So it did not cost the Sri Lankan government a single penny in the end. You cannot even claim lack of competition or monopoly since Sri Lanka has other ports including the one in their capital.

The problem with Venezuela is two fold. The oil price has come down by quite a lot. At the same time they are embargoed from using their own refineries abroad. Their oil is quite hard to refine i.e. it cannot be processed just anywhere. Which means they are severely cash strapped. So no the problem is not just "socialism" or whatever.

Also if Maduro followed the policies of the current central bank of Russia instead of instituting price controls at least the supply situation would be mitigated. He needs to talk with someone who knows real economics.

weig2000 · Jan 24, 2019

This report from BBC is a rare piece in MSM when it comes to Huawei reporting these days - it's frank and straightforward, no window-dressing code words, no insinuation, no hypocrisy. It helps its reader understand what's really going on.

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Technology correspondent
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All sorts of British companies and institutions have been eager to do business with the Chinese giant. So
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that has suddenly made them change their minds about taking its money?

In a word, nothing.

The only thing that has changed is the political climate.

If you are concerned about Huawei's ties to the Chinese government, then that was just as big a worry 10 years ago. After all, it's long been known that the founder, Ren Zhengfei, was once an officer in the People's Liberation Army.

Perhaps there is a fear that Huawei may be building secret backdoors into its equipment to allow the Chinese government to spy on or interfere with Western telecoms networks?

'Phew!'
At a recent event, a panel of journalists - including me - was asked by a UK telecoms executive what evidence there was of this.

We scratched our heads and couldn't come up with anything much. While a GCHQ unit set up to examine Huawei equipment has criticised sloppy engineering processes that could pose a cyber-security risk, no backdoors have been found.

"Phew," said the telecoms executive. "We're spending £100m with them this year."

No, what has changed is a new aggressive stance towards Chinese companies, and Huawei in particular, from the United States.

This is based on perfectly legitimate, but long-running, concerns about China's aggressive business tactics, its attitude towards the intellectual property of Western firms and its government's control over how companies operate.

There is one other factor - the arrival of 5G networks which will be woven into our industrial infrastructure, providing new security risks and opportunities for hostile actors bent on mischief.

In the short term, the United States has one key objective - to shut Huawei out of the lucrative market for 5G equipment.

Particular pressure is being exerted by the Americans on its Five Eyes intelligence partners, and it seems to be working, with Australia already shutting out the Chinese firm and New Zealand apparently considering a similar move.

As they prepare to roll out their 5G networks, UK mobile operators are waiting nervously for guidance from the government. They are all likely to keep Huawei out of their core networks, but would like to have the option of using its equipment at their base stations.

"They're extremely good." one operator told me. "Four to five months ahead of the rest."

British and American attitudes to China are a constant push-me-pull-you between a wary security lobby and gung-ho free trade advocates.

Right now the security and intelligence agencies are in the ascendant - and that means more organisations are likely to fight shy of doing business with Huawei over the coming months.

Equation · Jan 24, 2019

Ultra said:
First, I never said "infrastructure investments is short-sighted". I fully support critical infrastructure investment when it is needed.

My main point is that China structured the deals to be a debt trap. It is a very high percentage for all those countries who goes into deal to be trap in unescapable debt.
Sure you can argue that's their own fault for not reading the contract and mismanage their own country finance to be in that situation.

BUT You guys are too short sighted to see the whole picture.

These countries are mostly chinese allies, or potential allies. What China invested in them (giving massive loans to them) is Chinese people's money. ALL of these investments have critical strategic value for China. China doesn't just benefit monetarily from just giving the loan out, they form part of China's geo-political strategy. The US-led allies can't wait to dismantle them. Becauses it is against their own interest.

Now when these debt-trapped countries starting to fail because the deal structure make them poorer and has critical snowball effect to the rest of their economy, do you know what will happen? The west will apply pressure economically and politically to destablize the incumbent political leader and the country until it breaks while supporting politcal rival that's friendly to the west to prepare to take control over the chaos. The end result is China's total loss - economically (country no longer service the debt to China) and geo-politically.

Just look at Venezuela. China is about to lose all of its investment in that country.

What China need to do is to structure country that benefits both parties, at the same time give timely advise to guide them and assistance to help them out of any situation. Failing to do so is only a ticket for the west to take advantage of to destablize the country for their own gain. A stablized and economically strong country is a strong ally. Look at South Korea, Japan, EU. They are strong US-allies because they are economically stabled, and when they are not US came helping out (eg, IMF - South Korea).

And another thing you guys don't seem to understand is, US-led west is playing a zero-sum global politcal game, to their view any China/Russia/opponent's loss is their gain, and they will do ANYTHING to gain. Look at Syria, Middle East, South America...

Everything you are saying is in vague terms that anyone can say is anybody's fault. If you want to be believed, you need to be specific.

So I asked you before, specifically what loan, what terms, you felt were unfair, and what kind of revision you think would make them fair. Be specific, because right now, your argument sounds like, "I don't like that kid and I don't know why."

If you can't answer that question, then it's obvious that you don't know what you're talking about but you're just regurgitating Western media.

But anyways, what I said before will always stand: there is no such thing as a predatory loan. All you need to do is walk away and refuse to sign for it. Every loan is a voluntary opportunity. It is NEVER the bank's fault that you are in debt as long as all the terms were disclosed to you before you signed.

Gatekeeper · Jan 25, 2019

Equation said:
Everything you are saying is in vague terms that anyone can say is anybody's fault. If you want to be believed, you need to be specific.

So I asked you before, specifically what loan, what terms, you felt were unfair, and what kind of revision you think would make them fair. Be specific, because right now, your argument sounds like, "I don't like that kid and I don't know why."

If you can't answer that question, then it's obvious that you don't know what you're talking about but you're just regurgitating Western media.

But anyways, what I said before will always stand: there is no such thing as a predatory loan. All you need to do is walk away and refuse to sign for it. Every loan is a voluntary opportunity. It is NEVER the bank's fault that you are in debt as long as all the terms were disclosed to you before you signed.

There are two points to his post. The first regarding "the debt trap" definitely came straight out of the pages of any western media.

It is exactly when countries through their own actions decided to borrow to fund their growth but somehow mismanaged the process that the west is trying to pin the blame on China. They won't miss an opportunity like this not to criticise without any critical thinking of their own.

However. The second part of his quote regarding how the west is keen to exploit any countries that gets into difficulties and quick to blame China and destabilise the country concerned to move it into their geopolitical influence is, to my opinion, is quite valid.

But this does not mean China is at fault to put this countries into a "debt trap". It just that the west are playing a smarter game than China. But than China didn't have much chioce given the "best allies" (like korea. Etc) of the west have already been picked by the west. After that there's not much "allies" left for China to choose.

Biscuits · Jan 25, 2019

The military is on Maduro’s side. Unless US invades, he’ll survive. And if US invades, it could turn into a quagmire, something they don’t afford given their dire economy.

China/Russia might not be able to lend much support into the US backyard, but it will be an illegal conflict and international support can be rallied against US. They can provide training and weapons to Venezuela until international pressure forces US to leave.

If US attempts to steal past investments into the country, Russia and China would threaten countervalue targets with western investments, that’s a big red line which US wouldn’t dare to cross, even with the “tyranny of distance” on their side. Expect Ukraine to be seized and all US monetary assets in Taiwan taken to Beijing.

Ultra · Jan 25, 2019

Gatekeeper said:
There are two points to his post. The first regarding "the debt trap" definitely came straight out of the pages of any western media.

It is exactly when countries through their own actions decided to borrow to fund their growth but somehow mismanaged the process that the west is trying to pin the blame on China. They won't miss an opportunity like this not to criticise without any critical thinking of their own.

However. The second part of his quote regarding how the west is keen to exploit any countries that gets into difficulties and quick to blame China and destabilise the country concerned to move it into their geopolitical influence is, to my opinion, is quite valid.

But this does not mean China is at fault to put this countries into a "debt trap". It just that the west are playing a smarter game than China. But than China didn't have much chioce given the "best allies" (like korea. Etc) of the west have already been picked by the west. After that there's not much "allies" left for China to choose.

Good allies didn't come out of no where. It takes time, massive investment and nurturing. Both Japan and South Korea were a basket case back in 50s, they were both extremely poor and didn't look like it had any hope to turn it around. If China wants to be a "leader" it needs to do what US did - to lead, to guide, to nurture. If China can't even turn its closest allies near it to be a success story, the outcome is quite simple, these countries will simply be turn into another US pawn to encircle China.

Nutrient · Jan 25, 2019

You have no answer for the main point of my argument, that the Donald's betting on a busted flush. So you pick some minor nit. Fine.

AndrewS said:
10% inflation does not spell the end of an economy, despite what you say.

No, that is not what I said. Please address my actual words.

What I did say was, "Even 10% inflation would rapidly destroy most Americans, more than 50% of whom have less than $1000 in the bank." Most Americans do indeed have less than $1000 of savings, and they would indeed be destroyed by sustained inflation rates of ten percent or more. Half the country would be ruined; the disaster would be even huger if the Volcker remedy for high inflation (interest rates to 20% and a deliberately induced recession) were applied again.

During the 1970s, we did have stagflation when inflation rates of 10-15% did occur in the USA and elsewhere.

And Volcker's remedy for those inflation rates was to induce a deliberate recession. That would not work now, with half of America just a paycheck (or less) from ruin.

In the early 1990s, China's inflation rate touched 24%.

I assume you're referring to the 1993-1996 period. China's government responded almost immediately; by 1996, inflation was back down. As a socialist country, China could do it, but the US has few inflation-curing tools; that's why Volcker had to force a recession.

In the 1930s, the US economy was already in a recession.
Yet they cut government spending and took out even more economic activity, thereby making it a depression where nobody had any jobs or a social security net.
So it won't happen again

Not so. If the US stops being the issuer of the world's favorite reserve currency, and it continues to print the dollar, high inflation will return. The US would have two choices then: allow the inflation to continue, which would ruin half the country; or force a recession, which would also ruin half the country. Good luck.

Trump knows very little about nearly everything, but some of his advisors must know that he is betting on a busted flush.

You really need to get a better economics education.

I think I need less educating than you do.

AndrewS · Jan 25, 2019

Nutrient said:
You have no answer for the main point of my argument, that the Donald's betting on a busted flush. So you pick some minor nit. Fine.

It's obvious that Donald trump is pursuing a losing strategy, but it doesn't mean the US is doomed to poverty.
When the dollar inevitably loses its reserve currency status, there will be a devaluation of the US currency.
Yes, it will drive inflation higher, but it will also spur a boom in exports, because the US does produce a lot of stuff.
That will limit the currency devaluation as there will be a demand for dollars.
That also limits the inflationary effect of the currency devaluation.

No, that is not what I said. Please address my actual words.

What I did say was, "Even 10% inflation would rapidly destroy most Americans, more than 50% of whom have less than $1000 in the bank." Most Americans do indeed have less than $1000 of savings, and they would indeed be destroyed by sustained inflation rates of ten percent or more. Half the country would be ruined; the disaster would be even huger if the Volcker remedy for high inflation (interest rates to 20% and a deliberately induced recession) were applied again.

A 10% inflation rate is not going to destroy Americans And it will certainly not be sustained.
We're looking at a short term spike which will settle back down once the economy adjusts. And at the same time, there are going to be more export jobs and wage increases to offset the increase in inflation.

And you're trying to tie the inflation rate to savings, which is illogical. Inflation has to be compared with disposable income.
In the past, when oil prices have increased, Americans have just spent less on other goods/services so as to live within their monthly paychecks, because they don't have much in the way of savings.

And Volcker's remedy for those inflation rates was to induce a deliberate recession. That would not work now, with half of America just a paycheck (or less) from ruin.

Look at how the exchange rates in the US/Europe/Japan have varied by at much as 50% over the past 2 decades.
Yet there have only been minor increases in the inflation rate, because the economies adjust to the new level.
So there's no need to go to extremes on the interest rates.

I assume you're referring to the 1993-1996 period. China's government responded almost immediately; by 1996, inflation was back down. As a socialist country, China could do it, but the US has few inflation-curing tools; that's why Volcker had to force a recession.

Not so. If the US stops being the issuer of the world's favorite reserve currency, and it continues to print the dollar, high inflation will return. The US would have two choices then: allow the inflation to continue, which would ruin half the country; or force a recession, which would also ruin half the country. Good luck.

Trump knows very little about nearly everything, but some of his advisors must know that he is betting on a busted flush.

I think I need less educating than you do.

When (not if) the US stops being the favourite reserve currency, what will happen?
The demand for dollars will drop, which means the currency devalues and the US has to attract currency inflows.
The currency devaluation will reduce imports and spur exports from the US economy.
It will also attract heavy foreign investment flows into the country.
But all this will likely be a long drawn out process, because dollars can always be used to buy up huge swathes of the assets located in the USA.

The US currently has a net investment position to the negative of $8Trillion.
But there is $200Trillion+ of financial assets in the USA and $70Trillion+ of non-financial assets that could be sold to foreigners.

Plus why do you feel the need to exaggerate the impact of 10% inflation, saying it will destroy America? It'll be painful for a few years until the economy adjusts, but it is manageable.

Equation · Jan 25, 2019

Gatekeeper said:
There are two points to his post. The first regarding "the debt trap" definitely came straight out of the pages of any western media.

It is exactly when countries through their own actions decided to borrow to fund their growth but somehow mismanaged the process that the west is trying to pin the blame on China. They won't miss an opportunity like this not to criticise without any critical thinking of their own.

However. The second part of his quote regarding how the west is keen to exploit any countries that gets into difficulties and quick to blame China and destabilise the country concerned to move it into their geopolitical influence is, to my opinion, is quite valid.

But this does not mean China is at fault to put this countries into a "debt trap". It just that the west are playing a smarter game than China. But than China didn't have much chioce given the "best allies" (like korea. Etc) of the west have already been picked by the west. After that there's not much "allies" left for China to choose.

Well, he does think it's China's fault and went as far as to criticize its leaders for being short-sighted but now, he doesn't know what should have been done. I asked him twice now, what specific terms he thought were predatory and how they should have been revised and he answered neither of the 2 times. "Guide and nurture" doesn't mean anything; the key word is "specific." From what I see, China has already guided and nurtured them by providing them with infrastructure plans and the funding to realize them. So now that he liked your post in which you said it's certainly not China's fault, maybe after thinking about it, he changed his mind on that point. He's welcome to do so.

Yes, I see your point of course, we all know what result would have been better but nobody seems to know what course of action would have been better to achieve that result. I want as much as anyone else to see those countries that China made loans to succeed, but when you are dealing with the bottom of the barrel in competence, you need to know that there will be losses and that kind of incompetence is not readily remedied simply by more financial support.

So once again, I'm with you in wanting to see these nations manage their Chinese loans better and walk out into the modern world with this opportunity that China has generously provided, but where I split with Ultra (before) is that I would never point fault on the Chinese government that this did not happen because like everyone else here, I simply don't know what could have been done better. Some people just don't have their act together. You can drive, pivot, maneuver, outrun 5 defenders to gently put the ball in your teammate's hands as he waits 2 feet under the net and sometimes, he'll still miss the shot. I'm not going to blame my hands on that one.

Trade War with China

weig2000

Captain

gelgoog

Lieutenant General

weig2000

Captain

Equation

Lieutenant General

Gatekeeper

Brigadier

Biscuits

Major

Ultra

Junior Member

Nutrient

Junior Member

AndrewS

Brigadier

Equation

Lieutenant General