China in the Shadows

[Chris Coles]

Re: China in the Shadows

I posted because I was concerned with the attempt to spin improper firefighting techniques as the cause of the explosion. That narrative requires that these methods turned something comparatively inert into something that was explosive.

Thanks for putting the record straight.

[touchring]

Re: China in the Shadows

In the US, any place storing Calcium Carbide would have to hang this shield where firefighters would see it:[ATTACH=CONFIG]5685[/ATTACH] a 4 in the upper (red) section would have indicated extremely explosive materials, a W with a line through it in the bottom section would have warned not to use water.

If proper regulations are in place and enforced, the firefighter wouldn't NEED to be a chemist to know what to do, and what not to. They'd look at the sign, and it would tell them: No water here, use a different technique.

I know people like to gripe about regulations strangling growth. But explosions like this one are the perfect example of why we need them, even if it does slightly increase business friction. Disasters like these are 100% preventable, but only with appropriate regulations.

Yes, interesting to know this, but I doubt it would have been any use in this case because the chemicals were illegally stored in the warehouse and the contents may not even be known to government officials at the time of the fire.

[Chris Coles]

Re: China in the Shadows

It's a dramatic story, but it implies that if the fire had reached the chemical stockpile, but no water had previously been added, an explosion might have been avoided. My point was that this was not the case, since the flashpoints of acetylene and calcium carbide are both around 300 C.

One last question regarding that flashpoint. Am I correct to assume that the flashpoint does not apply to the original creation of the material, (at a temperature of some 2000C), because there is no oxygen available when originally formed in the crucible?

[touchring]

Re: China in the Shadows

At some point there has to be a deleveraging. Having skillfully engineered bubbles in virtually everything, the question is whether Chinese officials can engineer what Ray Dalios describes as a "beautiful deleveraging". Or will it be something else?

It think it will be a real estate bubble burst, followed by Yuan devaluation and then followed by a surge in startups, Internet companies, tourism, natural sciences, r&d services and hi-tech manufacturing.

Not quite unlike what happened to Dubai.

[thriftyandboringinohio]

Re: China in the Shadows

It think it will be a real estate bubble burst, followed by Yuan devaluation and then followed by a surge in startups, Internet companies, tourism, natural sciences, r&d services and hi-tech manufacturing.

Not quite unlike what happened to Dubai.

I hope you are right touchring; that outcome would not be so bad at all.
But once something like real estate or stocks break in China, the whole system is so rotten and fragile that it will be hard to contain the carnage.
I doubt China can have a quick single market trauma followed by a quick blossoming of recovery.

China's big banks are engaged in endless roll-over refinancing of bad loans, and rising foreign borrowing is one important source of this money.
But the underlying loans are, in fact, bad loans, and the game can't go on forever.

China's export trade runs on letter-of-credit collateral for short term credit, and those LCs are notoriously false.
Same with lending backed by basic commodity collateral in bonded warehouses.
That collateral gets pledged fraudulently many times over, as in the famous case of the missing $50 MM of alumina in Quindao.

China is intervening in their stock market more often lately to prevent a crash.
They are managing the yuan downward, apparently to keep exports at a high level.

All the crazy measures seem directed at achieving the commanded 7%+ economic growth rate in China.
But the world does not need that much more Chinese stuff every year; the goal is not achievable.
The longer and more desperately they try to keep up appearances, the worse it all gets.

Maybe China goes as did Japan, into a slow descent of stagnation and decline.
Japan used to talk about the lost decade from 1990 to 2000, but that has now become 20+ years.

[astonas]

Re: China in the Shadows

Yes, interesting to know this, but I doubt it would have been any use in this case because the chemicals were illegally stored in the warehouse and the contents may not even be known to government officials at the time of the fire.

You're right. I suppose I was not speaking just to regulations per se, but really the whole regulatory oversight system, which requires inspections and enforcement as much as the codes themselves.

To me, the issue is not so much about whether the government knew about this particular stockpile, but whether the regulatory environment that existed gave confidence to warehouse managers that a code violation would be noticed, and unavoidably result in prohibitively large negative consequences. Hence my emphasis on systemic problems.

I'm sure China does have parallel safety rules that are probably pretty sensible, but without dense and uniform oversight and enforcement, it really doesn't mean very much. If a mere bribe or family connection can keep inspectors quiet (or away entirely) there really isn't going to be much motivation for companies to follow guidelines for safe handling of chemicals, and set up separated areas for highly combustible materials, let alone separate ventilation. All of that costs money, and probably more than a bribe.

[astonas]

Re: China in the Shadows

One last question regarding that flashpoint. Am I correct to assume that the flashpoint does not apply to the original creation of the material, (at a temperature of some 2000C), because there is no oxygen available when originally formed in the crucible?

Exactly right.

Even if the vessel isn't sealed (older furnaces apparently weren't) the reaction's production of carbon monoxide (which "wants" to react onward to carbon dioxide at that temperature) leaves an environment that is depleted of excess oxygen immediately above the molten calcium carbide. Subsequent cooling, crushing, and screening operations are also performed in an inert atmosphere, or one where air is swept forward from the water- and oxygen-depleted hot zone.

It's one of those places where you really don't wish for "a breath of fresh air" to enter the room.

[touchring]

Re: China in the Shadows

I hope you are right touchring; that outcome would not be so bad at all.
But once something like real estate or stocks break in China, the whole system is so rotten and fragile that it will be hard to contain the carnage.

It's true that China's system is rotten, but the situation in other countries are not that good either.

Regionally, Japan is facing nuclear fallout problems. Thailand has issues with violence. Malaysia is plagued with rising corruption - they now don't even have to hide it - bribes are now officially known as "donations".

Indonesia is overly dependent on natural resources. India is doing better but has serious red tape and cultural problems that impede business growth. On the global arena, Europe is at the mercy of the Americans - Russia/Ukraine sabotage. The US itself is still stuck in the war business, fighting wars or fueling new conflict.

The difference in China is that they recognize their system is rotten and are taking steps to rectify it. They also have the benefit of a large emerging middle class. Of course, other countries are also trying to solve their internal problems but an autocratic regime does have certain benefits when it comes to implementing policies.

To sum it up, what I'm saying is that China has a lot of problems, but at least there is progress.

Do note that I'm talking about economic system, not political system. It's possible to be an economic/financial superpower with an autocratic government as exemplified by the case of Singapore, a regional financial superpower.

[dcarrigg]

Re: China in the Shadows

It's true that China's system is rotten, but the situation in other countries are not that good either.

Regionally, Japan is facing nuclear fallout problems. Thailand has issues with violence. Malaysia is plagued with rising corruption - they now don't even have to hide it - bribes are now officially known as "donations".

Indonesia is overly dependent on natural resources. India is doing better but has serious red tape and cultural problems that impede business growth. On the global arena, Europe is at the mercy of the Americans - Russia/Ukraine sabotage. The US itself is still stuck in the war business, fighting wars or fueling new conflict.

The difference in China is that they recognize their system is rotten and are taking steps to rectify it. They also have the benefit of a large emerging middle class. Of course, other countries are also trying to solve their internal problems but an autocratic regime does have certain benefits when it comes to implementing policies.

To sum it up, what I'm saying is that China has a lot of problems, but at least there is progress.

Do note that I'm talking about economic system, not political system. It's possible to be an economic/financial superpower with an autocratic government as exemplified by the case of Singapore, a regional financial superpower.

+1

[thriftyandboringinohio]

Re: China in the Shadows

All good points, touchring.
The most power is this one:

... The US itself is still stuck in the war business, fighting wars or fueling new conflict...

[ProdigyofZen]

Re: China in the Shadows

The US itself is still stuck in the war business, fighting wars or fueling new conflict.

China is engaged in the same business of fighting wars, it's just that no one notices it because there aren't boots on the ground.

China is in serious trouble. They have created 21 trillion in debt since the AFC and least everyone forgets they only have 3.6T in US $ reserves.

They cannot defend the yuan, the stock market and continuously create credit in their private banking sector.

China does not have a history of overcoming calamity. If crisis does in fact occur in China they will stay 'within the central country" and shut down like they always have.

A more important question, where is EJ......

[jk]

Re: China in the Shadows

They cannot defend the yuan, the stock market and continuously create credit in their private banking sector.
....

A more important question, where is EJ......

1. is there reason to believe china really wants to defend the yuan, as opposed to managing an orderly descent?
2. my impression is that ej is off managing virzoom. also he said some time ago that current markets are un-analyzable because they are all managed, and he was waiting for things to spin out of the managers' control.

[GRG55]

Re: China in the Shadows

It's true that China's system is rotten, but the situation in other countries are not that good either.

Regionally, Japan is facing nuclear fallout problems. Thailand has issues with violence. Malaysia is plagued with rising corruption - they now don't even have to hide it - bribes are now officially known as "donations".

Indonesia is overly dependent on natural resources. India is doing better but has serious red tape and cultural problems that impede business growth. On the global arena, Europe is at the mercy of the Americans - Russia/Ukraine sabotage. The US itself is still stuck in the war business, fighting wars or fueling new conflict.

The difference in China is that they recognize their system is rotten and are taking steps to rectify it. They also have the benefit of a large emerging middle class. Of course, other countries are also trying to solve their internal problems but an autocratic regime does have certain benefits when it comes to implementing policies.

To sum it up, what I'm saying is that China has a lot of problems, but at least there is progress.

Do note that I'm talking about economic system, not political system. It's possible to be an economic/financial superpower with an autocratic government as exemplified by the case of Singapore, a regional financial superpower.

1. Armaments manufacturing and sales have become of greatly increasing importance to Russia and China as well. And that trend isn't about to change. In Europe, it could soon be that France and Britain (and perhaps even Germany) become increasingly dependent on their defense armaments industries as the rest of their economies struggle to maintain some semblance of growth. In a low inflation world the strategy of promoting conflict to goose the local economy is by no means uniquely American (recall how urgently the French wanted to start a dust up in Libya) - they are just better at it than anyone else, so far.

2. China may recognize their system is rotten, but it is far, far from certain the can rectify it. Let's remember that those at the top of the heap who are the only ones who have the power to bring about such changes are also the greatest beneficiaries of the status quo.

3. As for Singapore, this is exactly the model that China has been trying to copy...albeit with uniquely "Chinese characteristics". China is now an exporter of capital, in addition to its long historic role of being an exporter of people. The significant change is that during the boom the people being exported were unskilled labour to build and operate Chinese funded infractructure and raw material projects all over the world (no small number of them being the unrecognized, unofficial "second children" during the one child policy period). Now the people leaving China are the wealthy and the educated.

China may well successfully navigate its way through the increasing turbulence, but I have had my doubts about that outcome for some years as their successive bubbles were blown and then burst. In this century China has been playing a global economic role similar to the USA in the early years of the 20th century. And the USA, with its dominant military, consumer economy and reserve currency status, has been playing a role similar to Great Britain at the beginning of the last century.

In the years immediately prior to the bursting of the spectacular (for its time) 1920s USA credit and stock market bubbles there was much turmoil in global currencies and trade patterns. We might wish to keep in mind Mark Twain's "history rhymes" quip.

However, I have my doubts that the Chinese economy is anywhere near as resilient today as the USA economy was in the 1930s.

[jk]

Re: China in the Shadows

In this century China has been playing a global economic role similar to the USA in the early years of the 20th century. And the USA, with its dominant military, consumer economy and reserve currency status, has been playing a role similar to Great Britain at the beginning of the last century.

and we all know how well that worked out.

if we want to carry that analogy forward, who do we nominate to play germany's early 20th century role? russia?

and europe can play the ottoman empire.

[touchring]

Re: China in the Shadows

This is true, the bubble has burst, businesses will collapse, but this isn't the first time that this happened. We heard the same story back then in 2009.


As for economic calamity, I don't know how it will turn out in China as China has been communist for more than 3 generations, but Hong Kong has suffered bubble bursts worst than Dubai almost every decade. Each time it bursts, real estate will drop 50%. If you're a 40 year old, you'd probably witness this at least twice in your work life. It is part of life.


Autocratic capitalism is brutal, it's the survival of the fittest, there's no social security or job insurance, if you're out of job, you have to do anything to earn a living, become a cabby, or whatever. This goes to extreme in Singapore where there is no minimum wage, work visas are given out freely as long as you have a college degree, no pension, no job insurance, preferential treatment for foreign work visa holders and where labor strikes are not allowed, yes, you can be jailed for refusing to turn up for work, it's that hardcore, even strikes are tolerated in Hong Kong and China. There's even a term for it, they call it the "open leg policy".


As you can see, China still has a long way to go before it runs out of options if it is trying to copy the Singapore model as GRG55 has pointed out.