(01-17-2017 10:45 AM)Arado Wrote: 1) Their One Belt One Road plan to create massive infrastructure in Asia will give them tremendous economic leverage over their neighbors. They also started their own infrastructure development bank, the AIIB. Finally, the RMB is now a reserve currency for the IMF.
2) China continues to be a massive violator of U.S. intellectual property rights and is making it increasingly difficult for U.S. companies to operate there.
3) China is moving into many industries that we've done well with, from apps, to airplanes, to smartphones. Their big picture objective is to buy up the world's technology and dominate manufacturing for the near future.
4) Despite the media and many on this forum insisting that China is on the verge of collapse, we've heard this same BS for DECADES now and yet China continues to chug along. If they keep investing an ever growing % of their GDP in their military, then eventually it will get to a point where the cost of projecting power into China's backyard will no longer be sustainable for a US that is facing severe demographic pressures in the next decade.
Hey I saw this topic before but I thought Id write some. I preface this that I am not a China scholar or anything but Ive read some books and lived in China for a while.
To start I don't think Trump and China are doing anything different that what Japan and China have been doing for a very long time. For decades now Japan has its leaders go to different shrines and it has some military leaders from WWII there who are war criminals. China gets all riled up, leaders denounce so and so. Japan gets all riled up, Japan says it wont back down from China or do as they say. Its all show. Its shoring up the base. Its the same with second amendment rights, abortion, whatever. Countries, political parties, nationalism, all rely on shoring up the base, getting people to look at the magic act, not on the magicians other hands. For example, Japan is massively invested in China. Japan completely relies on that huge, nearly unbelievable investment in China. They are not going to war over some rocky island somewhere that may or may not have oil (not likely). Leaders need to act tough. Trump yapping about this or that is the same deal. In China every day there is some South China Sea BS about Vietnam, Phillipines, whatever. No one is going to war. Its a complete non-issue.
There is a very good book about this by a Japan scholar who spent years in Japan.
1) The one belt idea is really good in theory but wont work financially. Their high speed rail system is a huge albatross. The nation just spent a very large amount of money, using bonds for some of the investment, to build the first stage or two. Now China wants to double or triple the size. Problem is, the trains are largely empty. I know the idea is to build satellite cities and use the high speed rail, switch over to the subway. Come on. We're talking hundreds of billions of dollars on train systems that are empty. Take the train somewhere and get off at one of the non-main stops. New train stations in the middle of nowhere, empty.
Hears the deal. Outside tier one cities in China the whole thing is a paper tiger. Where I lived in NE China there are thousands of 40-80 story buildings that completely empty. In some of the larger cities where I have been, huge 5-6 story malls that must be in the tens of millions of dollars are completely empty. Go on a Tuesday afternoon, maybe see 10-20 customers, total. Someone is paying interest on all these investments. Or, if not, then all the banks in China are insolvent. I think people are not paying interest, they dont have any customers. You can decide which would be better? I used to practice my Chinese at a Mixc Mall in Shenyang, I asked went from shop to shop and asked how many shoes or coats they sold this week, chatting in Chinese with every shopgirl. Sometimes they said 3-4 pairs of shoes, total, that week. Shanghai and Beijing are fine. Wuhan, Shenyang, Tianjin, Chongqing are building enormous malls, office complexes that are empty, bar streets, etc. Then there are all the 3rd and 4th tier cities. China has something like 150 cities with a million people, but most are complete shitholes with big malls and office complexes that are empty and those loans are either being paid for or not. Then on top of that china wants this One Belt thing. Someone added up all the costs and it was in the trillions of dollars. China does not have trillions of dollars to spend on anything, let alone a high speed rail system to Shitholistan then off to Turkey. Plane travel works just fine.
2) The idea that China has an open and free market is bunch of BS. When I watched Leader Xi talking nonsense at Davos I threw up in my mouth a little. My friend in the USA was telling me, China doesn't have import taxes, why should the USA. Good Lord. Buying a pair of Nikes in China is 50-100% more expensive than in the USA. Import taxes.
Honestly Chinese people know that Chinese stuff is largely garbage. Is it getting better, Yes. Is it still really bad quality for high price, yes. Chinese people will continue to want western things for 1)face 2) quality 3) piece of mind it wont explode or poison their children.
3) I will wait for seeing is believing if China can make the leap from garbage to high quality goods. Here's the deal. China needs full employment or the people are going to revolt. If property prices go down and all the people in China lose 20-40% on their main investment, their property, people will revolt. China must have complete working population to keep the property prices high. See the problem?
All the industries on China need constant reinvestment to keep the factories going. That is just to keep adding more factory jobs and keeping people working. Ive read some very convincing articles/books that China can not simply close those factories, top down push demand for higher tech factories to open and build, sell those goods. All the while keeping employment high, creating new jobs, etc. Its very difficult to be running full speed in low quality goods and somehow make the leap, close al those factories, train all those people, get them working at another factory, create new brands etc. Can you think of any Chinese brand in the world? Huawei? Haier? Lining? Nothing they sell is better or cheaper than other brands. Period. So the idea that they will take over the market for decent things doesn't make any sense since they don't have even one example now. At least with S.Korea, Japan, they had Hyundai, Sony, Toshiba. You could see that they made at least one or two things at a high quality so making more wasn't unrealistic. China, the second largest economy, hasn't even created one brand that isn't shit. By the time China can copy something that matters, their wages will be high enough that they cant undercut by price. That's essentially what is happening now. China won on price for decades, now they are getting close to not winning on price but still haven't invented anything worthwhile. Just stealing or coopting other brands that set up factories in China. China must get rich before it gets old, its wages increase too much, people lose faith in the party. I don't see it happening.
This book mentions and gives very solid backing for the argument I just made. It has a large China section. Worth checking out, he makes the argument much better than I just did. Again, I'm not a China scholar, I just don't see the proof in the pudding yet. Nothing is good that is made by Chinese. Not even the in the Chinese factories producing, for example, BMW cars in Shenyang. I used to drink often with the Germans who ran those factories and they said the Chinese made absolute shit vehicles compared to the same thing in German. So not only can Chinese not make their own brand, even under German supervision and training they cant put things together at a high quality level.
4) Its China that is facing the severe demographic issues. The one child that will need to support his parents and grandparents. Whats also interesting is that at some point there is going to an economic slowdown in China. I personally believe its already here, but if not, its coming sooner or later. As I mentioned above all the banks in China are loaning out billions of dollars to things that are empty and not getting any return. That, plus a slowdown in growth from no children, plus higher wages, plus no quality innovation will, eventually, hit China.
Its like looking at the housing boom in the USA and everyone said it could continue forever. Sooner or later, people would stop paying their loans. China is in the same boat. With a whole other set of issues to deal with.
So to sum up: I don't think Trump is doing anything different than Japan, Taiwan, whomever. He simply asserting that the USA is not a lapdog anymore. China does this all the time. If anyone wants to deal with China they have a list of BS that must be adhered to a mile long. They can go to hell, honestly. The USA will give their list as well. Its simply being prudent and doesn't foretell WWIII anymore than Japan and China yelling about islands as they massively invest in each others economy. What leaders need to say and what the economy does are separate.
Here are two recent topics about China's economic state and the BS Xi was spouting at Davos.
This guy is an economist based in Shenzhen, hes been there a while. If you want to know more about the economic state in China, go through and read this blog for the last few years. He received death threats, harassment, people are angry about his knowledge and assessment of China. Some of the stuff I don't understand because I lack the knowledge, but the stuff I do understand and his commentary don't paint a good picture.
Trump should not bow down to anyone, China most of all. But the idea that not bending over backward is the precursor to WWIII does not compute for me.