China Internal Disturbance Risk

[Dona Ferentes]

In 1980, a 12-year-old Ma met an Australian family from Newcastle, the Morleys, who were visiting his home town of Hangzhou. The family’s patriarch, Ken Morley, an electrical engineer, became a mentor figure to the young Ma, helping him improve his English and flying him to Australia in 1985 on his first overseas trip...​

Another 'early years' visitor, with perhaps less generosity of spirit:

• Feb. 15, 2012

MUSCATINE, Iowa — Twenty-seven years ago, a young man named Xi Jinping, on an agricultural research trip from his home in China, came to rural eastern Iowa and slept in Eleanor and Thomas Dvorchak’s sons’ room. The boys had just gone off to college — their room still stuffed with the things of childhood — and Ms. Dvorchak said she felt bad. She had grown up reading Pearl S. Buck novels about the travails in rural China, and now here was a visitor, perhaps from that same hard place, and they had put him in there with the Star Trek action figures.
“He did not complain,” said Ms. Dvorchak, 72, who is now retired and living in Florida. “Everything, no matter what, was very acceptable to him — he was humble.”

 

[JohnDe]

I do hope our major ASX listed companies have a plan B for when China either becomes more externally aggressive or descends in to internal disorder. It is very difficult to stop a billion people from catching a cold. I doubt if they will succeed. The constituent companies of the XAO need to be prepared.

gg

I also hope that there is a chance of a plan B, looks like we will need it.

In the halls of government Communist Party officials denounce what they see as America’s bullying. They say it is intent on beating China to death. Western diplomats describe an atmosphere laced with intimidation and paranoia....Each side is following its own inexorable logic. America has adopted a policy of containment, although it declines to use that term. It sees an authoritarian China that has shifted from one-party to one-man rule. President Xi Jinping is likely to be in power for years and is hostile to the West, which he believes is in decline. At home he pursues a policy of repression that defies liberal values. He has broken promises to show restraint when projecting power outward, from Hong Kong to the Himalayas. His meeting with Vladimir Putin this month confirmed that his goal is to build an alternative world order that is friendlier to autocrats.​

Why the China-US contest is entering a new and more dangerous phase
Chinese officials rage at what they see as American bullying

You may have hoped that when China reopened and face-to-face contact resumed between politicians, diplomats and businesspeople, Sino-American tensions would ease in a flurry of dinners, summits and small talk. But the atmosphere in Beijing just now reveals that the world’s most important relationship has become more embittered and hostile than ever.

In the halls of government Communist Party officials denounce what they see as America’s bullying. They say it is intent on beating China to death. Western diplomats describe an atmosphere laced with intimidation and paranoia. In the Diaoyutai State Guesthouse, multinational executives attending the China Development Forum worried what a deeper decoupling would mean for their businesses. The only thing both sides agree on is that the best case is decades of estrangement—and that the worst, of a war, is growing ever more likely.

Each side is following its own inexorable logic. America has adopted a policy of containment, although it declines to use that term. It sees an authoritarian China that has shifted from one-party to one-man rule. President Xi Jinping is likely to be in power for years and is hostile to the West, which he believes is in decline. At home he pursues a policy of repression that defies liberal values. He has broken promises to show restraint when projecting power outward, from Hong Kong to the Himalayas. His meeting with Vladimir Putin this month confirmed that his goal is to build an alternative world order that is friendlier to autocrats.

Faced with this, America is understandably accelerating its military containment of China in Asia, rejuvenating old alliances and creating new ones, such as the aukus pact with Australia and Britain. In commerce and technology America is enacting a tough and widening embargo on semiconductors and other goods. The goal is to slow Chinese innovation in order that the West can maintain its technological supremacy: why should America let its inventions be used to make a hostile regime more dangerous?

To China’s leaders, this amounts to a scheme to cripple it. America, in their eyes, thinks it is exceptional. It will never accept that any country can be as powerful as itself, regardless of whether it is communist or a democracy. America will tolerate China only if it is submissive, a “fat cat, not a tiger”. America’s Asian military alliances mean that China feels it is being encircled within its own natural sphere of influence. Red lines agreed on in the 1970s, when the two countries re-established relations, such as those on Taiwan, are being trampled by ignorant and reckless American politicians. China’s rulers think it only prudent to raise military spending.

In commerce, they view American containment as unfair. Why should a country whose gdp per head is 83% lower than America’s be deprived of vital technologies? Officials and businesspeople were appalled by the spectacle of TikTok, the subsidiary of a Chinese firm, being roasted in an American congressional hearing this month. Although some Chinese liberals dream of emigrating, even worldly, Western-educated technocrats now loyally condemn shows of wealth, promote self-reliance and explain why globalisation must serve Mr Xi’s political priorities.

Given two such entrenched and contradictory world-views, it is naive to think that more diplomacy alone can guarantee peace. A meeting in Bali between President Joe Biden and Mr Xi in November eased tensions, but the deeper logic of confrontation soon reasserted itself. The spy-balloon crisis (Chinese officials mock America for downing what they call a stray “naughty balloon”) showed how both leaders must appear tough at home. America wants China to adopt guardrails to control the rivalry, including hotlines and protocols on nuclear weapons, but China sees itself as the weaker party: why tie yourself down with rules set by your bully? Nothing suggests the hostilities will ease. America’s election in 2024 will show that China-bashing is a bipartisan sport. Mr Xi faces a slowing economy and has tied his legitimacy to a vision of a muscular and “rejuvenated” nation.

Faced with such an opponent, America and other open societies should adhere to three principles. The first is to limit economic decoupling, which the imf reckons could cost anything between a manageable 0.2% of world gdp and an alarming 7%. Trade in non-sensitive sectors also helps maintain routine contact between thousands of firms, thereby narrowing the geopolitical divide. Embargoes should be saved for sensitive sectors or areas in which China has a chokehold because it is a monopoly supplier: these account for a minority of Sino-American trade. Where possible, businesses that straddle both sides of the cold war, such as TikTok—accused of spreading Chinese misinformation—should be ring-fenced, sold or spun off, not be forced to close.

The second principle is to lower the chances of war. Both sides are locked in a “security dilemma” in which it is rational to shore up your position, even as that makes the other side feel threatened. The West is right to seek military deterrence to meet a growing Chinese threat—the alternative is a collapse of the American-led order in Asia. But seeking military dominance around flashpoints, notably Taiwan, could spark accidents or clashes that spiral out of control. America should aim to deter a Chinese attack on Taiwan without provoking one. This will take wisdom and restraint from a generation of politicians in Washington and Beijing who, by contrast with the leaders of America and the Soviet Union in the 1950s, have no personal experience of the horrors of a world war.

The last principle is that America and its allies must resist the temptation to resort to tactics that make them more like their autocratic opponent. In this rivalry, liberal societies and free economies have big advantages: they are more likely to create innovations and wealth and to command legitimacy at home and abroad. If America sticks to its values of openness, equal treatment of all and the rule of law, it will find it easier to maintain the loyalty of its allies. America must be clear that its dispute is not with the Chinese people, but with China’s government and the threat to peace and human rights that it poses. The 21st century’s defining contest is not just about weapons and chips—it is a struggle over values, too.

 

[Garpal Gumnut]

I also hope that there is a chance of a plan B, looks like we will need it.

In the halls of government Communist Party officials denounce what they see as America’s bullying. They say it is intent on beating China to death. Western diplomats describe an atmosphere laced with intimidation and paranoia....Each side is following its own inexorable logic. America has adopted a policy of containment, although it declines to use that term. It sees an authoritarian China that has shifted from one-party to one-man rule. President Xi Jinping is likely to be in power for years and is hostile to the West, which he believes is in decline. At home he pursues a policy of repression that defies liberal values. He has broken promises to show restraint when projecting power outward, from Hong Kong to the Himalayas. His meeting with Vladimir Putin this month confirmed that his goal is to build an alternative world order that is friendlier to autocrats.​

Thanks @JohnDe .

I haven't read the Economist for about 2 months.

It is a timely reminder of China's mindset atm.

Is it sufficient to make one go to cash, I ask myself, as a thought experiment.

Interesting times.

gg

 

[Dona Ferentes]

04 June 1989
Tiananmen Square.

 

[frugal.rock]

Hong Kong's leader says libraries must not violate laws as Tiananmen massacre books removed

Hong Kong — which returned from British to Chinese rule in 1997 with a promise of wide-ranging freedoms — has in recent years curbed liberties under the China-imposed national security law, but is now cracking down on Tiananmen Square massacre content.

www.abc.net.au

China's 34th Tiananmen Square anniversary marked in private for activists in face of pressures

As the 34th anniversary of China's Tiananmen Square crackdown approaches on Sunday, many in Hong Kong are trying to mark the day in private ways in the shadow of a law that prosecuted leading activists in the city's pro-democracy movement.

www.abc.net.au

 

[TimeISmoney]

I also hope that there is a chance of a plan B, looks like we will need it.

In the halls of government Communist Party officials denounce what they see as America’s bullying. They say it is intent on beating China to death. Western diplomats describe an atmosphere laced with intimidation and paranoia....Each side is following its own inexorable logic. America has adopted a policy of containment, although it declines to use that term. It sees an authoritarian China that has shifted from one-party to one-man rule. President Xi Jinping is likely to be in power for years and is hostile to the West, which he believes is in decline. At home he pursues a policy of repression that defies liberal values. He has broken promises to show restraint when projecting power outward, from Hong Kong to the Himalayas. His meeting with Vladimir Putin this month confirmed that his goal is to build an alternative world order that is friendlier to autocrats.​

They won't have any chance as the Western world is the biggest consumer AKA (their best customer), and manufacturing companies are running from China left, right, and center. My personal opinion at this stage is that they're digging their economic hole deeper. Russia and Africa are broke, they might get raw materials from them but who is going to buy the end products from them when cheaper manufacturing can be had in other countries? It's business as usual, the transition of companies will come at a cost but economies will stablise rather than halt from trading embargoes and geopolitical tensions in the south china sea.

 

[frugal.rock]

Just quietly, some commies are getting dropped off the perch, mainly internally, but some externally also.

 

[JohnDe]

It looks like the world economy and share markets are in for a bumpy ride for at least a few years, the USA juggernaut of old is up against a shrinking world.

With China's economy, second largest in the world, in slow motion, and its increased aggression towards Nations that do not follow their political view, world business and governments are becoming jittery. And that is before we even take into account the war in Europe, the battles in Africa, and the threats from North Korea and Iran. To top it all off, central banks are trying to kill inflation by increasing cost of money.

Imagine a world where China was a democratic country, one like Japan or South Korea. We can only dream, for now.

Why China’s economy won’t be fixed

An increasingly autocratic government is making bad decisions

Whatever has gone wrong? After China rejoined the world economy in 1978, it became the most spectacular growth story in history. Farm reform, industrialisation and rising incomes lifted nearly 800m people out of extreme poverty. Having produced just a tenth as much as America in 1980, China’s economy is now about three-quarters the size. Yet instead of roaring back after the government abandoned its “zero-covid” policy at the end of 2022, it is lurching from one ditch to the next.

The economy grew at an annualised rate of just 3.2% in the second quarter, a disappointment that looks even worse given that, by one prominent estimate, America’s may be growing at almost 6%. House prices have fallen and property developers, who tend to sell houses before they are built, have hit the wall, scaring off buyers. Consumer spending, business investment and exports have all fallen short. And whereas much of the world battles inflation that is too high, China is suffering from the opposite problem: consumer prices fell in the year to July. Some analysts warn that China may enter a deflationary trap like Japan’s in the 1990s .

Yet in some ways Japanification is too mild a diagnosis of China’s ills. A chronic shortfall in growth would be worse in China because its people are poorer. Japan’s living standards were about 60% of America’s by 1990; China’s today are less than 20%. And, unlike Japan, China is also suffering from something more profound than weak demand and heavy debt. Many of its challenges stem from broader failures of its economic policymaking—which are getting worse as President Xi Jinping centralises power.

A decade or so ago China’s technocrats were seen almost as savants. First they presided over an economic marvel. Then China was the only big economy to respond to the global financial crisis of 2007-09 with sufficient stimulatory force—some commentators went as far as to say that China had saved the world economy. In the 2010s, every time the economy wobbled, officials defied predictions of calamity by cheapening credit, building infrastructure or stimulating the property market.

During each episode, however, public and private debts mounted. So did doubts about the sustainability of the housing boom and whether new infrastructure was really needed. Today policymakers are in a bind. Wisely, they do not want more white elephants or to reflate the property bubble. Nor can they do enough of the more desirable kinds of stimulus, such as pension spending and handouts to poor households to boost consumption, because Mr Xi has disavowed “welfarism” and the government seeks an official deficit of only 3% of gdp.

As a result, the response to the slowdown has been lacklustre. Policymakers are not even willing to cut interest rates much. On August 21st they disappointed investors with an underwhelming cut of 0.1 percentage points in the one-year lending rate.

This feeble response to tumbling growth and inflation is the latest in a series of policy errors. China’s foreign-policy swagger and its mercantilist industrial policy have aggravated an economic conflict with America. At home it has failed to deal adequately with incentives to speculate on housing and a system in which developers have such huge obligations that they are systemically important. Starting in 2020 regulators tanked markets by cracking down on successful consumer-technology firms that were deemed too unruly and monopolistic. During the pandemic, officials bought time with lockdowns but failed to use it to vaccinate enough people for a controlled exit, and then were overwhelmed by the highly contagious Omicron variant.

Why does the government keep making mistakes? One reason is that short-term growth is no longer the priority of the Chinese Communist Party (ccp). The signs are that Mr Xi believes China must prepare for sustained economic and, potentially, military conflict with America. Today, therefore, he emphasises China’s pursuit of national greatness, security and resilience. He is willing to make material sacrifices to achieve those goals, and to the extent he wants growth, it must be “high quality”.

Yet even by Mr Xi’s criteria, the ccp’s decisions are flawed. The collapse of the zero-covid policy undermined Mr Xi’s prestige. The attack on tech firms has scared off entrepreneurs. Should China fall into persistent deflation because the authorities refuse to boost consumption, debts will rise in real value and weigh more heavily on the economy. Above all, unless the ccp continues to raise living standards, it will weaken its grip on power and limit its ability to match America.

Mounting policy failures therefore look less like a new, self-sacrificing focus on national security, than plain bad decision-making. They have coincided with Mr Xi’s centralisation of power and his replacement of technocrats with loyalists in top jobs. China used to tolerate debate about its economy, but today it cajoles analysts into fake optimism. Recently it has stopped publishing unflattering data on youth unemployment and consumer confidence. The top ranks of government still contain plenty of talent, but it is naive to expect a bureaucracy to produce rational analysis or inventive ideas when the message from the top is that loyalty matters above all. Instead, decisions are increasingly governed by an ideology that fuses a left-wing suspicion of rich entrepreneurs with a right-wing reluctance to hand money to the idle poor.

The fact that China’s problems start at the top means they will persist. They may even worsen, as clumsy policymakers confront the economy’s mounting challenges. The population is ageing rapidly. America is increasingly hostile, and is trying to choke the parts of China’s economy, like chipmaking, that it sees as strategically significant. The more China catches up with America, the harder the gap will be to close further, because centralised economies are better at emulation than at innovation.

Liberals’ predictions about China have often betrayed wishful thinking. In the 2000s Western leaders mistakenly believed that trade, markets and growth would boost democracy and individual liberty. But China is now testing the reverse relationship: whether more autocracy damages the economy. The evidence is mounting that it does—and that after four decades of fast growth China is entering a period of disappointment.