China Has $3T of ‘Hidden’ Currency Reserves, Setser Says
bloomberg.com
bloomberg.com
The article has an interesting premise, calling it a problem for China to have cash - because China is an adversary. I've not seen this stated so explicitly in normal business news before. Warning of the potential for it to be invested abroad in the B&R initiative really shows that the US is gearing up for great power competition again.
N.b. Brad Setser is perhaps the most insightful expert on debt and international monetary flows. He often speaks about African refinancing deals - or why they're nearly impossible to refinance, due to insane complexity.
Here are some:
Economically, they're an adversary; they undercut western manufacturing and all our manufacturing went there. They manipulate their currency. They interfere with foreign owned businesses. They steal IP. They're seeking to upset the global money standard. They entrap other nations with predatory loans for infrastructure. They trade with our other enemies and flaunt sanctions, etc, etc.
Ethically, they're our adversary: They use (basically) slave labor, unethical materials (e.g. live plucking), environmentally damaging materials (e.g. banned CFCs), they happily pollute the earth as if tomorrow isn't a concern. They are scraping the ocean clean to feed their people. They oppress their citizens, they operate a crude faux-democracy, they have embarked on an extremely damaging zero covid approach long after it ceased to be relevant to save face for creating it, etc, etc.
Politically, they're our adversary, insulting foreign politicians, trying to annexe land and sea that definitively isn't theirs (Tibet, "South China" Sea), engaging in brinksmanship to force the issue, etc.
These are all things from media stories that I can think of from the top of my head. Not exactly representation as a best friend.
Aside from the money standard and zero COVID bits, every part of this is true of the US. This conflict just boils down to “the hegemon doesn’t want any competition.”
> they undercut western manufacturing and all our manufacturing went there.
America’s oligarchs did this to the country. China just leveraged their short-sightedness and greed to the country’s own advantage.
We’ve changed our laws to legalize corruption and subsidize export of key industries. Steel is hardly made in Cleveland and Pittsburgh anymore for a simple reason: our tax and regulatory structure was reformed, and makes it more profitable to ship that business to China or Mexico.
Recently, they've also sanctioned Australia after the Australian government requested an independent investigation into the origins of the virus. This escalated into a one-sided trade war, particularly targeting Australian barley, wine and iron/steel exports.
As well as Norway, in 2010, after the independent Norwegian Nobel committee granted the Nobel Peace Prize to jailed Chinese human rights activist Liu Xiaobo.
What is your opinion?
I offer this more for the sake of enlightenment and amusement than anything else.
Those interested might want to look at this as well: https://creativelawcenter.com/dickens-american-copyright
Predatory infrastructure loans: that's what USAID, IMF and World Bank are basically set up to do.
He was the most spectacular but hardly an isolated case. https://hbswk.hbs.edu/archive/trade-secrets-intellectual-pir...
The policies could be hidden from the vast majority of informed public opinion in a way Western conspiracists or whataboutists alike can only dream is really correspondent or directly analogous to mainstream media manipulation.
It can still be true that China’s no one’s enemy except that the Party is everyone’s enemy (while the Chinese population will be the last ones to realize it).
We've been narrated to over the years that they are our enemies, yes.
> They use (basically) slave labor, unethical materials (e.g. live plucking), environmentally damaging materials (e.g. banned CFCs), they happily pollute the earth as if tomorrow isn't a concern.
Why is this all of a sudden a problem when China does it, but not when our firms do this in their off-shore sweatshops and subsidiaries and mining and agricultural interests?
It sounds like all of these things aren't a problem, it's that we aren't profiting from them that's the problem.
Ethically, they are our enemies in the same scope that our multi-nationals are our enemies. They too are incompatible with human rights and democracy.
It's certainly a problem! But the only thing we can really do about it is pass laws.
If it were a problem, Washington could get it resolved in a year.
It's not a problem, because half the people bankrolling political campaigns are neck-deep in it! Their businesses are built on it! On cheap labour, on captive markets, on sources of third-world resources that are accessed through theft, violence, or corruption!
And even if you aren't directly involved, our society will not function very well if we stop reaping the benefits of all the practices I've described. Nobody wants to pay $90 for a t-shirt, or $9 for a gallon of gas.
1. The west is doing immoral things and hiding it. Let's talk about it and force people in charge to change things or change the people in charge!
Or:
2. The west is doing immoral things. Let's root for these other guys who are also doing immoral things; eventually they will replace the west and then somebody will figure out how to stop them from doing the immoral things.
I think (2) is predicated on the fact that the west wrong doings are so old and irreparable and so they can be only washed away through a complete blank slate rewrite of the geopolitical order.
I think this is a relatively "natural" effect of our human psychology. We have an innate sense of "punishing" people and we often find ways to rationalize and explain why they should be punished. However these instincts are ill suited to handle geopolitics because there are many more people involved that the "tribe" size of our natural selection environment and also because the time scale of the changes is usually much longer than what people are used to in their day to day relationships.
I think logic (2) is flawed because once the new power structure is formed it will be hard to change exactly like (1) or even worse. Furthermore it will have done immoral things for quite some time by then because changes to geopolitical power balances will take a long time to actuate and thus they new power will also become "irreparable" and the only thing left to do will be to root for the next "underdog".
"The west is doing immoral things and hiding it"
The propaganda aspect you're mentioning is an integral part of "hiding it".
I don't think you're framing changes the options on the table: either you try to fix the system from within our you somehow hope that the others will be better just because.
Those factories migrated to the US South, then to Mexico, then to China. Not because of some conspiracy, but because we run our institutions based on quarterly financials.
I worked a long time ago on an effort to sue a large manufacturer whose supply chain was shipping counterfeit parts to certain customers. The Chinese partners ran a third shift with no QC and stuffed these parts into the distribution chain. They also stole defective parts and did the same thing. Everyone knew this was happening. But everyone was making money, so nobody gave a shit.
With respect to politics, well yeah, they are the other great power now. It’s in their interest to buffer themselves from whatever they perceive as a threat. The US is no babe in the woods here - our war plan from the 1950s onward was to attack China with nuclear weapons if the Soviets rolled into East Berlin - just in case.
The Chinese can’t compete with the US with air or sea power, so they seek to control their sphere of influence in other ways, and slowly build in preparation for the US decline in power.
China won this round fair and square... The smartest thing the west can do from now on is dump fiat currencies, switch to crypto and leave China holding the paper, but the longer the west fails to acknowledge that China beat it at its own game, the further it will fall.
Seriously? WTF?
As if China is the only country that holds US paper. This sort of idea is what could very well start WWIII.
No one has solved the elderly exploitation problem yet for the existing banking system. Not sure why it would be fair to hold crypto to a higher standard.
How did the government anoint Microsoft, Apple, Google, and Facebook?
If Americans could vote on their preferred time intervals to manage towards, they wouldn't pick quarterly. Quarterly screws the overwhelming majority of people who care about the future.But it's not up for discussion, debate or the political process.
It's similar to US foreign military aid. Nothing anyone says or does will change it. Whoever or whatever controls it is beyond the reach of the political process, at least the part that 99% of people can participate in.
People treat quarterly myopia like an emergent phenomenon, like it's some kind of maximum that the country naturally converged upon. Except there's nothing natural about it, and it only benefits a small number of unaccountable people.
I know someone who quite recently died of Covid. There is no longer a pandemic, but the virus is still deadly. Their concern is justified.
Economically, the US is critically dependent on China for facilitating consumer demand. The US cannot afford an adversary in China.
Ethically, the US is not offering a compelling framework or alternative that alleviates the issues you raise. This is a real concern.
China has lifted hundreds of millions of people directly out of extreme poverty. This is their prerogative and modus operandi.
The only way forward is cooperation, adjustment and coordination.
Regarding “lifting people out of poverty”, did hundreds of millions of people’s hard work have anything to do with lifting _themselves_ out of poverty or does the CCP get all the credit? If CCP gets the credit, there was certainly a lot of “trial and error” before they got it right. Was it worth the lives of 30 million people?
[1]: https://www.businessinsider.com/wuhans-mask-less-pool-party-...
Of course the moment you let Americans in to your country, you've given up your battle against COVID since we decided to just let it rip.
China's not the only country that tried a zero COVID policy and for a while it was working in other places too thanks to management techniques, travel restrictions, quarantines, etc. (New Zealand is one, iirc) But when one of the biggest and most powerful countries in the world decides to just give up on the fight nobody else is going to win.
I mean it is not actually a matter of belief. We know how infectious COVID was, and we know life in China pretty much resumed as normal by August 2020, except for hard lockdowns wherever a case popped up. You cannot hide exponential growth of infections, it is simply impossible.
China made the wrong decision and almost sparked an internal collapse. They lost the youth and the hopelessness in the country is palpable.
Did anyone try and fail at that point? Were there experiments that tried to achieve zero covid, exhausted all practical methods and still failed?
I'd argue that even today, zero covid is not "scientifically" proven practically impossible. The fact that China tried and failed does not mean it's inherently practically impossible. For all I can tell, it's only "practically impossible" because only China was able to pull off the authoritarian measures to suppress the spread of the virus. In a more authoritarian world, we might have been able to eradicate covid. Does your "science" include a deep discourse in political systems?
-R0 was quite high
-Animals can hold and spread the virus, so even after vaccinations of humans it was going to be in the background
-not every country was trying for zero Covid, therefore at some point in the future if you ever hope to have an open border with a country that has open borders with that country, you get it eventually.
-there are no 100% secure borders
The matter of Tibet is complex, and I think "definitively" is handwaving away a lot of Tibetan history.
I think yours is the best reply to the post that reads more like a tantrum.
Wow, you make it sound like it was some devious Chinese plan where they intentionally made their people work for American manufacturers and lured them in with bribes.
The reality was that American corporations willingly went over to China because number must go up and paying their own people living factory wages wasn’t cutting it.
So tired of this stance - “China did it to us!”
America did it to itself.
Corporations outsourced manufacturing to China, because American corporations are independent from the US government and profit-motivated.
American citizens could have voted with their wallets, and they could have voted at the booths to elect governments that would regulate the flow of American jobs overseas. But they didn't, and so here we are.
In the Chinese system, that's the market but always capped by political and CCP decisions, if they deign to care.
In the American system, that's resolutely only the market. The government has some limited second order control (tariffs, industrial policy, national security exclusions), but generally didn't use them against China 1990-2018.
Ergo, the deciders moving manufacturing to China were the CEOs of American companies, optimizing their own production costs.
I'd be curious to see an analysis of the rise of Walmart (and immolation of Sears) and later Target vis-a-vis Chinese manufacturing of consumer goods sold in America. I'd be surprised if the centralization of point-of-sale (vs previous more diverse and independent stores) didn't incentivize bulk, low-cost offshore manufacturing via volume.
So it's really more accurate to say that America chose to allow it to be profitable for corporations to outsource. Government policy could easily have been the opposite. So ultimately, America did do it to itself.
(BTW I'm not arguing this would have necessarily been good policy. Just that it is very much an explicit governmental decision.)
That's not how the world works. It takes years to switch a manufacturer depending on terms, who owns the molds, etc.
Placing tarrifs on China hurts American consumers. Instead, there should be tax incentives for producing stateside.
> It's the US companies that pay the tarrifs.
No, customers pay the tarriffs at the end of the day. Companies raise the prices of imported goods to cover the tarriffs, and tarriffs in this case are set so that the final retail price of imported goods matches (or exceeds) the domestic manufacturing price.
> The concept of 'if we increase the tarrifs, US manufacturing will come back"... It takes years...
The idea is generally to have tarriffs from the beginning so manufacturing never leaves. Because you're right, otherwise it does take years.
> Placing tarrifs on China hurts American consumers. Instead, there should be tax incentives for producing stateside.
There's no difference, they harm consumers equally. Corporate tax incentives mean reduced government income which needs to be made up for with... higher personal taxes. Or higher corporate taxes in other sectors which lead to higher prices. No matter what, the consumer is paying.
Tarriffs or tax incentives have the same effect, but tax incentives are usually much more difficult to design and limit corporate flexibility in bad ways that are hard to foresee. Tarriffs have much more reliable enforcement and predictable effects.
This depends on the product and the type of demand. If it's inelastic, yes. if it's consumer focused, yes. But most of the time that's not the case. Tarrifs on material exports ar b2b, where pricing agreements are common.
At the end of the day, tarrifs create downward pressure on companies profit margins. If you instead, gave incentives it would put upward pressure on the companies who created fucundity for the economy.
Most people on HN basically have no idea what Marxism is, what the road to socialism is about, the stages of socialism, or why China really does what they do. I don't watch Xi's speeches on YouTube, but you could if you really wanted to.
They treat "not free market capitalism" as a monolith of ideas and states.
Even a light reading of Marxist economic theory with some other adjacent authors like Lenin, Mao, Trotsky, etc. would make clear exactly why Dengism was needed and why it worked and why Xi finds it necessary to return to straight Marxism.
The worst part is how greedy corporate oligarchs of the US sent all the jobs to China. That made Dengism work really well.
I mean, I don't really know what to say. If you wanted China to lose or not be Marxist, the US did a really bad job. It's really clear the only long-term planning the US does is lining pockets and that's probably going to be the death of the country.
But this is HN, so please pretend like I was complaining about wokeness or whatever other imaginary problem is popular here.
Notice that western itself is a collective of nation but all hell breaks lose if non western got manufacturing am I rite?
Having said that be thankful for ultra scaling up manufacturing in East Asia. Appliances and electronic prices keeps falling. Compare that to services or "western" exclusive manufacturing like vehicles, getting inflated like crazy.
I mean, not to say they aren’t bad but we need to have more acknowledgement of the things our countries did in the past and why they were wrong, and looking to make reparations where possible, and not just hypocritically pretending that we didn’t do them while accusing other emerging powers of the things we did…
The disturb the global standard, which happens to benefit the US greatly while hurting the rest of the world (especially the global south). Terrible!
> They use (basically) slave labor,
While it is true that China has a lot of manual labor and less worker rights than most western states, China isnt the sweatshop it used to be anymore.
Nearly every "simple" labor intensive industry, like textile industry, has moved to countries like Bangladesh, while strangely no one seems to care about their slave labor.
Also, wasn't the "slave labor" the reason why the US cooperated with China, essentially making them what they are today? [1]
> They manipulate their currency.
How dare they? https://brrr.money
> They entrap other nations with predatory loans for infrastructure.
I could write a book about this but whatcha doin' over there? [2]
> they happily pollute the earth as if tomorrow isn't a concern.
China is ranking 48 in Co2 emissions per capita, the US in ranking 14 (2021) [3]
Also they are investing more into renewable energy than every other country, by far [4]
> They are scraping the ocean clean to feed their people.
China fished 11.7 million metric tons in 2020, the US fished 4.23 million metric tons, China fishes approx. three times as much as the US. [5]
But China has 1.4 billion citizens, while the US has 331 million citizens, so China has over 4 times the citizens.
Also the average Chinese eats 40.3kg of fish every year, while average American eats 22.2kg of fish every year. [6]
So to sum up: China fishes three times as much as the US, while having 4 times the population that eats nearly twice as much fish as a US citizen does.
[1] https://en.wikipedia.org/wiki/Chimerica
[2] https://en.wikipedia.org/wiki/Oil-for-Food_Programme
[3] https://www.dw.com/en/fact-check-is-china-the-main-climate-c...
[4] https://www.scientificamerican.com/article/china-invests-546...
[5] https://www.statista.com/statistics/240225/leading-fishing-n...
[6] https://ourworldindata.org/grapher/fish-and-seafood-consumpt...
Then this shall be taken as a counterpoint to the narratives you pointed to :)
the world is tired of the US finding applying double standards to whoever they want to make their enemy.
I think you missed a crisis in Africa.
Those loans can hardly be paid off, the interest rates are too high and the borrowed loans Kuch for infrastructure projects aren't leading to any improvements / revenue.
If so, show me which have a net benefit for the country where loans are used to pay off mostly Chinese workers.
Every project by China in Africa seems to have failed and putting those countries in debt ( fyi, those projects which China introduced with big fanfare when announced have literally gone mute, business as usual it seems)
Not arguing against China, nor infrastructure projects, but B&R initiative is very China-centric, with a lot caveats that are often overlooked by short-sighted politicians.
The West has tried and failed with countless “solutions” for more than six decades now, in many places making the situation worse compared to the start of the decolonization process.
Also, road taxes is a measure that it is also heavily promoted by the European Commission in the Eastern European countries where “its” money is now helping build bridges and highways (I live on such an Eastern European country).
So don't complain that they are fed up and seek help elsewhere, what west has to offer has been tried many times and results are down there. If they end up indebted to Chinese or US or some EU country like France means little difference to them, all else being equal.
Economics does.
Nigeria, Egypt, and South Africa have decent economies, and they've followed the same path as many other developed countries.
Moving away from agriculture and raw resource extraction, building industry, and then identifying, incubating, scaling, and exporting services.
The fact that other countries in the region haven't done the same, specifically the largest Ethiopia and DRC, has more to do with internal civil wars.
Hopefully recent stability in Ethiopia and engaging additional generation capacity at the Grand Ethiopian Renaissance Dam will kickstart the Ethiopian economy.
(And no, civil wars aren't all started by 3 letter agencies)
So not only are none of the locals profiting from these projects, but more importantly no one is learning and developing the skills to construct and maintain the new infrastructure and services in the region.
This play by China (even if unintentional) is extremely predatory as it only makes the country more dependant on China.
In an ideal circumstance China would manage these projects while training and developing local talent to help develop the local industries. Only then do I believe would these deals be beneficial for Africa in the long run.
So you might believe these project are improving the local regions at the present, but I would be really interested to hear if you still believe so in 10 years.
Fitting such casual “Africa dumb” and “China evil” sentiments in one nonchalant comment seems like such a weird specialty of this brainwashing and propaganda that we have going on in the West.
This is just usury and loan sharking on a global scale.
Substitute Southeast Asia for Africa.
China is pretty much providing payday loans and debt trap diplomacy to poorer countries (149+) in order to consolidate power.
This has nothing to do with sophistication but everything to do with greed.
They’re not stupid, they’re corrupt. The elites get a slice of the pie. It’s how development finance has been done for centuries. “Stakeholders” are bought off. The country is left with the bill.
CGPGrey has a great video called ‘Rules for Rulers’ that explains this in depth: https://youtu.be/rStL7niR7gs
To quantify the statement,
https://en.m.wikipedia.org/wiki/Corruption_Perceptions_Index
Fitting such casual “Africa dumb” and “China evil”
None of this happened, you are hallucinating what other people said.
i can comment on the road projects in Nigeria and Zambia which i have personally seen
over 3-5 years after completion many fell into disrepair and now arent much better than unpaved tracks that they replace ,while the nations gained no road building expertise and are stuck with large loans
The fact that China could or would do the exact same thing in Africa is a no-brainer because of course they are.
Building roads to nowhere, airports that are almost not used, ports and trains that aren't used aren't beneficial. It could be usefull if a minimal of due diligence was done though, but there hasn't as far as I'm aware.
Additionally, when the local people are not hired as workers, but Chinese people are. The value of infrastructure projects and funneling back money to the local workers is greatly deminished.
Instead, infrastructure money goes straight back to the Chinese ( instead of the locals), while the country itselve has to pay the money back to the Chinese.
So China passes by the cash register 2 times.
You'll find that I specifically mentioned Setser's treatments of of African refinancing attempts. Either way, Chinese loans to Africa make up a very small portion of Chinese activity. If you're talking about debt trap diplomacy, well... Chinese loans to Africa also make up a small portion of African debt. Eric Olander and Cobus van Staden discuss this a lot.
Genuinely curious, do you happen to have a link about that? When did it happen? The ‘70s, the ‘80s? I’m on my (small-screen) phone and I’m also a little lazy to try and search for it right now.
More generally, I feel that the outside investments that bring in lots of money for those involved is not a topic that has been given too much attention, all the focus is on stuff such as trade deficits and the like.
The British Empire managed to partially thrive on that kind of investment philosophy for much of the 19th century, the French, too, from a certain point on (even though 1917 and the Bolsheviks getting to power did them a good one).
I suspect the same thing has been happening to the US for a long time now (from just after WW2? I couldn’t tell), they’re not balancing their trade deficits based on “money printing” alone.
There was a recent Odd Lots podcast on the genesis of the Eurodollar market.
https://www.bloomberg.com/news/articles/2023-06-19/josh-youn...
Or, if you prefer video or don't pay for Bloomberg:
The US by comparison has been quite dedicated to free trade. They abandoned there own production base, imported more culture then they exported and overall been quite friendly an empire.
[[Citation Needed]]
On the other hand the 1st Gulf War was unavoidable, and overall with the exception of the 2nd Gulf War over the last 40 years they've more or less tried to do the right thing. Today it's widely recognised across parties in the US that 2GW was a mistake. Still, since WW2 they've sunk vast resources into guaranteeing Western European security, and spent Trillions guaranteeing global freedom of navigation that's benefited everybody.
They've been aggressive economically, true, but that's a whole massive deal better than being aggressive militarily and overall global trade in the last 70 years has had incredible benefits. Global poverty has collapsed to a tiny fraction of what it was, the middle class has risen from about 5% to about 60% of the world population, life expectancy rates have soared. Death rates from war have collapsed. The stats on that are up on the last decade it's still historically low. The majority of this happened after the collapse of the Soviet Union.
What Russia and China want to do is take the world back to a cold war situation of vying spheres of geographic influence. What the US wants to do is get out of the world police business while maintaining a peaceful global order conducive to business. So we have Russia and China flexing their territorial military muscles, while the US builds networks of alliances such as an expanded NATO, AUKUS, the Quad and such to better share the load.
I say alliances, but for the latter US strategy to succeed it eventually needs to include nations that are not traditional US allies. India, Brazil, Indonesia, South Africa, even places like Vietnam. These will or may never align with the US and Europe the way the US and Europe do, so such relationships will have to be transactional in nature. Partnerships rather than true alliances, based on common interests around eliminating the scope for military expansionism that favours big regional military hegemons.
So sure, a lot of past mistakes for sure, but the question for us now is where does the world go from here?
This is the ruse. The US is a global empire. Except, as history has shown, imperialism is somewhat unpopular to local populations. The US modern imperialism playbook is designed so the population really believes they are self governing themselves. The US doesn’t care who runs the day to day domestic government, so long as they have military bases, are the primary trading partner, and effectively direct this countries foreign and economic policies unilaterally. The fact you think the American empire is limited to a few vestigial takings from the pacific theater of wwii shows how effective this modern and silent hegemony really is.
This is more or less also how the Roman Empire operated.
I have family in the British military at a moderately high level. A friend was a researcher for an MP, and another a government adviser. Sure politics is messy, it's the art of the possible and expedient. Of course it's not ideal, but as the saying goes Democracy is the worst system of government except for all the others. You're never going to get perfect, the best you can get is consensus and the consent of the governed. We have that.
I revile Trump, but he did do one thing for us. He proved that US democracy is real. All the Washington consensus clubbyness was pushed aside, corporate capture and bought influence were bulldozed over. None of the establishment wanted him, but he's what we got through a massive grass roots movement. He was an utter disaster, but it was a genuine demonstration of democracy in action.
In other words the people elect politicians that align with their desires and intentions. And that's a bad thing because.... help me out here.
But there is no coercion here, they are the largest trading partner because they make a lot of great stuff. "Empire" comes with implied negative connotations, but it's a win-win for everyone within this particular "empire".
1. Become a global economic superpower (US 1910s, 20s)
2. ??? (US 1930s, 40s)
3. Military-industrial complex emerges and captures politicians (US 1950s)
4. Political leaders then begin looking at military capabilities and questioning why it isn't being used for military interventionalism (US 1960s)
5. Military interventionalism shows its flaws through failed post-intervention nation-building, and decreases appetite for intervention (US 1970s, 80s, 90s)
6. Reaction to historical interventions triggers occasional knee-jerk interventions (US 00s, 10s)
In the US case, step 2 was WWII, which was somewhat unavoidable.
In the Chinese case, I think it remains to be seen how steps 2-4 go.
Absent an external war they're forced to become involved in, I could see step 2 being a popular consequence of whipping up nationalistic fervor to boost government support... and then that populist tail wagging the CCP dog and compelling military action when a crisis breaks out (e.g. Taiwanese independence declaration or naval incident in the South China sea).
So far China has completely avoided this. The military is very firmly under Party control.
>Military interventionalism shows its flaws through failed post-intervention nation-building
Germany, Japan and South Korea have been fantastic successes in nation building. Sure there have been failures too, most recently in Afghanistan.
For China, their annexation of Tibet is going fine as is their ethnic hegemonisation there and in other regions. North Korea is an embarrassment, but eh.
Dictatorships must continuously work to maintain their legitimacy. This means they need to justify denying freedoms and opportunities to their own population enjoyed in other nations. They can do that by painting foreign nations as being horrible failures but with international travel and many citizens having friends or family living in those nations, that's not viable long term.
You're quite right. That leaves external threats which require such measures, with the added bonus of painting internal dissatisfaction with the government as disloyalty and betrayal. So for Russia, utter nowheres like Ukraine and Georgia have to be dire threats to Russia's security, so intervention can stop them succeeding where Russia failed. The Taiwan situation has to be escalated, and territorial claims in the South China Sea pushed in order to manufacture tensions that justify internal repression.
The point about the military-industrial complex capturing politicians isn't about control, but rather excess procurement.
On the one hand, China has a long way to reach parity with the US. On the other hand, they're building extremely quickly, and that means lots of government money going to corporations.
Subsequent restrictions to that funding flow tend to be when the system pushes back.
> Germany, Japan and South Korea have been fantastic successes in nation building.
These are all nation re-building efforts: they existed as economically and politically strong entities before the respective wars.
> The Taiwan situation has to be escalated, and territorial claims in the South China Sea pushed in order to manufacture tensions that justify internal repression.
I don't pretend to understand China's calculus with either.
With enough shore-based facilities, they can counter the US Navy.
But as soon as there's a shooting war over either, China is the aggressor to international order (Taiwan's sovereignity and maritime law), Chinese international trade evaporates (in terms of both exports and raw material imports), and their economy crashes.
So the only Chinese winning move, to me, looks like saber rattling right up to the brink, but making sure it never boils over.
Which was always the China-in-the-WTO argument -- addict them to the benefits of international trade, such that offending the global order would mean slitting their own economic throat.
The uncertainty bands would seem to be wide, in both more- and less-competent directions, in gazing into the navels of autocratic regimes.
Countries freely choosing to allow allies to put military bases on their territory, generally with wide public support such as in Germany, Japan, and many others, is hardly colonialism.
Every country that has joined NATO did so with public support, even massive public enthusiasm. Public support is actually a requirement to join.
Do Indians and Chinese somehow not count? Both have benefited staggeringly from the global trade system built and secured by the US and it's allies.
On building alliances "and which 2 countries is pushing to bring about that change ?"
Russia and China have a tiny number of genuine military allies at most. NK and Myanmar for China, a few 'stans and Belarus for Russia. All of them horrific brutal dictatorships in their own right. Everybody else anywhere near them loathes their guts, even Vietnam in the case of China, but are sometimes so dependent or weak there's not much they can do about it.
>You cannot just wash away mistakes made in the past, there will always be blow back.
Agreed. America's mistakes will continue to haunt it for decades to come.
Just a few million in civilian casualties here and there. Because remember, Saddam has WMDs.
When was the last time China went to war with another country on a false pretense and massacred millions?
Remember the whole Native American massacre thing that America has convniently forgotten about.
Glass houses and stones and all that.
Point is, in the living memory of most people on the earth, i.e. people below 30, the only wars waged against non-neighbors have been Americans invading Iraq and Afghanistan. So from the place most non-Americans stand, America is a belligerent and irresponsible power.
What someone did in 1960 is important and can't be glazed over, but as a 30 year old, it's hard to understand and even harder to contextualize. But Iraq and Afghanistan is fresh enough in everyone's memory, to the point that I remember the headlines about the fake WMDs and the numbers about civilian deaths.
That’s not the same as Tiananmen square but it’s far more visceral lived experience for anyone under 45.
The US is not the center of the universe and lots of influence sphere pushing goes down in lots of backyards.
This seems to be what's happening today. China has moved on and is now on track to become the world's first economy (at least by size) and the US is still the war mongerer it always was.
As long as the others did what they want.
See multiple countries in South America and the Middle East.
Even China's lack of human rights weren't a problem until they became a real competitor.
Yes they friendly helped install military dictatorships in Latin American countries. They friendly invaded Iraq under false pretenses. They friendly waged wars and used economic sanctions against countries that for on reason or another didn't conform to their dominant position.
Don't misunderstand me. The US has the power to oppress, and is an opressor. It is business as usual. Just cut the crap of calling it "friendly".
None of the actions China resembles European colonialism.
Also that abandoning it own production base was not action of some goodwill, rather just greedy cost optimization which is now deeply regretted and as much as possible reverted back.
I do get this is US forum so opinions are strongly biased towards one side, and I personally am very happy with current US hegemony, but lets be a bit honest here. Vietnam, Iraq, Afghanistan, Latin america coups, African coups. CIA starting arab springs and ie war in Syria. The blood trail of innocents is more like amazon river during height of monsoon, all around the world. Now look at China. Not really comparable, is it.
If the opposite happened everyone would be freaking out about how bad China is playing with fire that will hurt the global economy by holding too much debt. And if they held the account books even everyone would complain how they are either not leveraging debts to invest in the economy or complaining how they are unprepared for an economic downturn. To me it just reads "China bad because China."
In other words: it’s easier to think of untoward reasons for hiding foreign reserves than honest ones. That’s why there’s a story here, not “China bad.”
Why not? Dependency makes peace more probable.
For one: failing to disclose foreign reserves makes a relationship more adversarial, not less adversarial.
For another: why are we assuming that China's foreign reserves are in banks that the US controls, or can otherwise curtail access to? The situation with Russia is instructive: CBR claimed to have around 50% of its reserves in US or EU institutions, but only a tiny fraction of that has actually been found[1]. It's much more likely that China, like Russia, is keeping the majority of its reserves in home (or friendly nation) banks.
[1]: https://www.intellinews.com/the-eu-can-t-find-most-of-russia...
Yes - that's the point. It shows intentions against US interests.
That hidden money is overly leveraged, ie debt, and you'll never know if tomorrow you'll get your original value back. China is the most indebted country in history.
How do you know that for each $1 hiding in accounting magic is not being resold twice? We don't, because of what the article says.
Last time I checked China was ~23T in debt vs USA’s ~32T. They also have a population almost 5 times larger.
Private credit is what brought the 2008 crisis in the USA. The public debt wasn't the problem before, but it was after: using public debt to pay private debt from banks.
And that's what the article is also talking about: China keeps the USD in their own banks and prints CNY to spend, but how many USD for how many CNY is not clear.
It's pretty much a Ponzi. As long as people don't ask their USD back from their CNY it's all good. Good luck when people starts asking USD from China.
China TOTAL private credit in CNY is available here:
https://zeihan.com/wp-content/uploads/2022/05/total-private-...
You can also see how much money they printed here:
https://zeihan.com/wp-content/uploads/2022/04/global-money-s...
Which doesn't mean he's wrong, but I do think it is important to consider incentives whenever someone is attempting to convince you of something.
Do you have any data to back up any counter argument?
Is the data the whole story? Are there mitigating factors? Does it need mitigating factors to begin with? I don't know. I even explicitly mentioned he could be totally right on this specific point.
I'm simply stating that there is a caveat around the source of those graphs that interested parties should take note of, for the same reasons we ask scientists, journalists, etc., to disclaim any potential conflicts of interest they have.
Argentina's public debt has been pretty stable and on GDP terms it was quite low. But even then, on low public debt, a country can totally wreck the whole economy.
Because we print pesos, ARS, like there's no tomorrow and then people get surprised when we get inflation and a total wreched economy. Then populists start blaming the usual suspects: IMF, USA, EU, the f weather.
People confuse public debt with private credit. The general idea in Argentina, including Ministers of Finance and Central Bank officials, say that ARS credit is not real debt.
Move forward 20 years and you get Argentina.
Edit In Argentina, private credit ARS bonds are called LEBAC and LELIQ for those who are interested.
Per the graphs, you're falling for unsubstantiated (borderline retarded) Zeihan visualization/narrative, this time by scaling to 2000 baseline and annotating Zeihan TM wild claims. PRC debt is ~2900% of 2000 baseline, GDP (and per capita) is ~1500% of 2000 baseline. All the graph is reflecting is PRC has built 2-3x debt in 20 years during it's most explosive and condensed development phase where urbanization (and home ownership) increased from 30-65%, i.e no country has been abel to modernize this fast. EVER. For reference, 2020 PRC national debt was ~55% (+20% in 10 years) of GDP vs US was ~140% (+40% in 10 years), total aggregate debt (the #s Zeihan is meming about) PRC ~270% vs US ~800% in 2020.
I don't know what the money "printed" graph data comes from, but PRC covid stimulus/money printing so far retraint vs US 13T. There's reason global economists was hoping PRC would spam the money printing brrrt button to uplift global economy. Meanwhile PRC Q1 inflation rate was ~1%, lowest amoung major economies. Again, that's not remotely reflective of actual Argentina ponzi economy, to the point of being diametrically opposite.
Also this is USD used for reserve, it's USD PRC hoovered up from massive trade surpluses in the first place. PRC exports has increased so spectacularly in the past few years (export value grew from 2.5T in 2019 to 3.6T in 2022). PRC exports grew as much in last 4 years (~1T) as it did in decade between 2008-2018 (1.4T-2.4T). So she's holding a lot of dollars, even if she wants to hold less. Hence trying to increase rmb settlement. In the meantime globe is still shovelling money at PRC, the problem isn't getting it, it's getting rid of it.
Rivers in mountains and low quality soil, not connected to any productive land. Look up any map on agriculture land and you'll see their soil quality. It's bad. Compare that with the USA and Argentina. We have both the best in the world.
Then look up how much fertilizer is used in their agriculture, per hectares of arable land. It's bad.
https://data.worldbank.org/indicator/AG.CON.FERT.ZS
There's more advanced graphs here to see the relationship between fertilizer and crop yields:
https://ourworldindata.org/crop-yields
All your numbers may be okay. But the main Zeihan argument is two fold: first, the same from the book "Why Nations Fail". China is not great in their political institutions. It's bad. For example a HN from YESTERDAY:
https://news.ycombinator.com/item?id=36554818
The second Zeihan argument is demographics. After the One Child Policy, China is the country where population is getting older faster in history, and faster than any other country today. It's bad.
Look up the data:
https://ourworldindata.org/grapher/median-age
There's a direct relationship between median age and inflation. Because older people consume more than produce, lowers productivity, and that increases prices. From the IMF:
https://www.imf.org/external/pubs/ft/fandd/2016/03/juselius....
You may keep inflation down when population ages. But that just destroys growth, for example Japan. And China economy depends on growth.
On soil/ag, yes per capita PRC land/water resources limited, but reality is PRC is increasing absolute food security, per capita staples production went from 350kg to 400kg over 20 years with 200M extra people. That's absolute food security in terms of calories. Which BTW since population are net declining, resource stress will only reduce over time. Fertlizer consumption also digression, it's mainly due to PRC choosing to (successfully) spam fertlizer while taking time to figure out GMO agri policy and agriculture being makework jobs or 200m famers when really GMO+automated large scale agri can optimize. It's a politcs issue being addressed, but it's not the wanking material PRC collapsists want it to be. Yes it's more constrained than US agri powerhouse, unless full blown maritime war (queue Zeihan blockade meme), in which case everyone, including US will starve because reality is, PRC conventional missiles can take out 150 US refineries to stop most energy/agri inputs (including fertilizer). Because once again, POLITICS, in this case technology, can trump geography. I surmise Zeihan will still laud US shale/energy autakry when reality points to US losing actual energy security because gunpower can now pierce his "fortress America".
On PRC political instutions, they're fine/great. His entire argument over cliques and wealth transfer between provinces (which US does between states), is more PRC collapse talk for his audience who laps it up. Like PRC didn't become first competitor US seriously worries about threatening US primacy since WW2 (i.e. more so than USSR) for doing a "bad" job. For reference most of PRC defense modernization, moving up value chain, leading innovation/R&D indexes happened in last 10 years, after Why Nations Fail. To throw Zeihan bone, his assessment on PRC military might have been closer to truth in the 2010s based on info from 2000s, but this isn't 2000s anymore. There's a reason Zeihan doesn't get invited to any credible think tanks to talk - he doesn't actually know much of the politics.
On demographics, this is where popularizing of simplistic Zeihan analysis from naive population pyramids readings generates the most basic collapists narrative. Especially when talking about geopolitics / strategic competition. It's not just the general demographic trend that determines outcomes - it's not subsistence farmers driving up productivity and building national power but skilled labour coordinated at scale. Most of East Asian tigers with shit TFR grew massively and are leading various strategic tech industries because they simply had more aggregate talent than previous generations. Now consider PRC is generating more STEM than OECD combined (~5m), because even with bad TFR and 20% youth unemployment, PRC massive population baseline is producing the greatest high skill demographic divident in recorded history. Without exaggeration, literally never in human history will so many educated / skilled bodies been produced and coordinated within one country, multiple times more than US an absorb via immigration. Sure, PRC net demographic decline might be a factor starting in 2050s (not a death spiral because PRC high savings/ownership insulates), but for next 30 years, and especially within frame of Zeihans geopolitical competition, PRC has the greatest demographic potential in the world, , and it's not even close. Consider 2000 PRC GDP was ~1T @ ~2M STEM grads, 2022 GDP ~18T @ ~17M STEM. All recent news of PRC leading in various S&T, R&D, industries etc? Lag effect from 2010s when PRC had less than 17M STEM. Now project to 2030 with STEM @ ~50M, likely topout ~80-100M @ 2050. This simply reflects PRC demographics moving from 25% skilled work force to 60-80% like developed countries, i.e. it's not going to stagnate like JP who simply can't produce enough skilled talent at parity. PRC for next 30+ years is going to gain significantly more productive people even if there's less people. And when they stagnate/decline from when net population loss actually effects that cohort, they'll be doing so from a much higher baseline than now. Also less net people = less import dependency which Zeihan likes to wank about. TLDR is PRC relative to geopolitical constraints, currently has probably the the most FAVOURABLE demographic trends for geopolitical competition.
No.
Despite its domestic production, China has been a net importer [DOC] of agricultural products since 2004. Today, it imports more of these products—including soybeans, corn, wheat, rice, and dairy products—than any other country. Between 2000 and 2020, the country’s food self-sufficiency ratio decreased from 93.6 percent to 65.8 percent.
https://www.cfr.org/article/china-increasingly-relies-import...
> On PRC political instutions, they're fine/great.
No.
China’s economic freedom score is 48.3, making its economy the 154th freest in the 2023 Index.
https://www.heritage.org/index/country/china
China’s authoritarian regime has become increasingly repressive in recent years. The ruling Chinese Communist Party (CCP) is tightening its control over the state bureaucracy, the media, online speech, religious groups, universities, businesses, and civil society associations, and it has undermined its own already modest rule-of-law reforms.
Score: 9/100.
Quoting freedom index, from heritage and freedhomhouse no less as proxy for state capacity is more asinine than using Zeihan stats and deserves even less of an effort response.
The US has about 4T of foreign exchange reserves (despite having the reserve currency) and presumably private entities have a large amount too (sovereign debt), surely more than China's private entities.
(This is my interpretation; not an endorsement in any particular direction.)
It would make foreigners' companies have a harder time because the public info is wrong... But this also makes Chinese companies have a harder time as well.
Not to mention, it erodes trusts for every entity that depends or trades with China...
Speculating baselessly: a country might choose to hold excess foreign reserves without publicly disclaiming them when it lacks confidence in its own currency or economy, or if it foresees global market upsets (e.g. wars) that would make their local currency less desirable for international trade.
I agree with your point about eroding trust: it’s hard to think of a reason to do this that would be worth it.
It makes the many exaggerated claims of Chinese economic demise that much more exaggerated and likely false, it leaves the rest of the world (read: their enemies) more complacent and more vulnerable to Chinese ambitions.
If the claim being presented here is true, it doesn't really surprise me: I've been hearing for the better part of the past three decades that China's economy (and consequently the country) was on the verge of imploding. It is now the year 2023 and China still hasn't imploded and is seemingly on track to win the new cold war against the west.
Does China have $3 trillion dollars of secret "fuck you" money? At this point I would be more surprised if they didn't.
I don’t think that’s a useful way to think of foreign reserves.
Source? Wikipedia puts it at $250bn. The US has liquidated most of its reserves in recent years.
https://tradingeconomics.com/united-states/foreign-exchange-...
Is countries actually having money a problem now?
USA looking at central and south America: Yes.
It is also not quite right to treat the Chinese government as a single minded monolith in determining their own policies. There is tons of internal factions and divisions within their own political system. Yeah sure certainly Xi has a lot of power, but only so long as he doesn't try to buck off the opinions and ideals over the rest of their political class, a political class who holds many of the same opinions and ideas as the US political class. The political sphere in China today is nothing near what it was 50 years ago.
The US has two and it's hard for other countries to discern any difference between them.
otherwise, they are seemingly the same in terms of outcomes for average workers.
Developing nations will take the support they can get - just ask the predatory lenders who've been dicking them over for hundreds of years. Values don't really come into it, unfortunately.
https://www.rferl.org/a/montenegro-chinese-highway-debt-cont...
Then it sounds like the problem isn't 'who has money', it sounds like we need to scrap the economic system. What do you propose we replace it with?
It's rather, which would you rather the developing world be exploited by, US or China?
We have pretty extensive track record of developing countries being exploited by western economies. And it aint pretty. So the best case you can make for the US is thay familiar devil is better because it's familiar.
The lack of realpolitik in this thread is astounding. We don’t live in a perfect world, where economies of real people in countries that need roads and telecom get to say “No thank you, your country’s history is gross.”
Belt and Road is a massive soft power grab by an autocratic dictatorship. That has enormous implications in geopolitics. China is about to collapse because it’s in a demographic tailspin. What happens to these initiatives — and those countries that depend on them - is a huge open question and risk.
Realpolitik arguments have the other problem, where they rely on hope that whatever's good for the elites that call the shots will eventually trickle down to the rest of us.
There is certainly truth to it (A lot more truth than to trickle-down nonsense in domestic economics), but the track record for it is still... Mixed.
Also, if China collapsing over demographics is a real concern, what about democracy in the US collapsing? Is that not a real concern in this decade? Is it normal for democratic countries to have a loser who pulls every stop to try to prevent a peaceful transfer of power, or for an eleventh hour beer gut putsch to invade its capitol, causing its government to shelter in closets? Or for one of it's two ruling parties focus more on waging culture war on the other, than on governing? Or for the frankly insane effort going into winner-wins-more systems of gerrymandering, voter suppression at polling stations, etc..?
I'm sure Chinese citizen could have said exactly the same.
> My stable, democratic country.
And follow it by his own set of nice sounding (to him) words. Everybody is a good person with good intentions in their own judgement.
Besides, US is not really a democratic country. You don't get a democracy if you just split one party system into two halves that play cooperative hot potato game with who's the current face of the power. What laws US lives by are dictated solely by the wealthy and both halves serve them equally efficiently at the tremendous cost to society and environment. China does pretty much the same only it didn't come up yet with the idea of having mock fights every few years to improve the stability of power.
> China is about to collapse because it’s in a demographic tailspin. What happens to these initiatives — and those countries that depend on them - is a huge open question and risk.
When a lender collapses it's usually very good news for the debtor.
It would stand to reason that this is statistically likely, but I don’t think anyone has any real understanding of how much the people in China believe in / support their current government and its positions. Information is extremely restricted.
> When a lender collapses it's usually very good news for the debtor.
I could see why someone would think this if they’re considering the collateral is something like a house, or a car, or a plot of land — something that is useful in and of itself because it is surrounded by other stable infrastructure. However, in the case we’re talking about here, China is the lender for large scale infrastructure that will stop getting built and eventually decay because the borrowers have no means of finishing or maintaining what was being built. That makes them vulnerable in other ways.
Keep in mind, too, that those places where the infrastructure will stop being maintained are also places that make or mine or otherwise export components that are part of a global supply chain.
You don’t have to love America’s values like I do to be biased towards the US being the driving influence in these nations.
This is naturally pretty scary to other competing entities that historically are used to being the ones doing the controlling.
China’s foreign reserves is a result of the artificial peg introduced decades ago and loosened recently. It kept Chinese labor devalued. And to counter local inflation because of issuing too many Yuan, they kept interest rates high. So they accumulated surplus from years of high export to import ratio. This was a problem because they had a significant amount of our money. But they were also buying our debt. And so economists argued this was ok.
The doomsday scenario is this accumulation of reserve puts them in power to flood the market and cause significant devaluation. Or it causes them to make excessive loans and cause devaluation. Or it has leverage to threaten to do this and influence policy. Either way, this is a growing concern. It’s fine if a country knows and understands that concern. But it’s worse if that concern is underestimated.
And that is the problem here: excessive reserves is a concern, and even bigger concern if you are unsure of what the excess reserves are.