China in the Shadows

[ProdigyofZen]

Re: China in the Shadows

Thrifty, it was more recent (as in last two years or so). I believe it was a chart from Trading Economics on the external debt position of China and how it has gone through the roof. I am searching iTulip now for it.

[sandwind]

Re: China in the Shadows

I couldn't even imagine a scenario where US naval forces would directly attack the Chinese mainland short of total war.

US Navy involvement in some sort of blockade a la the Cuban Missile crisis perhaps, but even that would be an incredibly serious escalation.

i don't understand the part about it not being possible for the US to defend South Korea, for two reasons:

1) the U.S. Already maintains considerable forces in South Korea as well as well coordinated plans for rapidly surging more to the Korean peninsula

2) South Korea possesses one of the most powerful and modern military forces in the world even if US forces packed up and left tomorrow. Surpringly that also includes growing South Korean expeditionary naval force.

Ive personally seen South Korean naval forces in a number of places thousands of miles from Korea.

Where Korea aligns in the future?

Who knows?

as its a strange 3 way relationship between China, Japan, and Korea. A lot of long simmering animosity below the surface.

I reckon the US plays a key role in it as a means for Korea and/or Japan to sit on the fence rather than choose a side.

Maybe a bit more like what India has done. Non aligned, semi-aligned, or aligned depending on issue.

I was not writing about attack on China mainland with carriers. It is know that US is not visiting anymore China Sea with its carriers as China could easily destroy them.
First they need to roll out China reconnaissance systems to be able to get closer. If they would be ale to do it they win. For attack on mainland they US is lacking hypersonic rockiets/long range bomber. Targets are really hard. It is doubtfully for me if US would win this scenario.

Other oprions are:
Far blockade is best military option but worst politically acceptable option. Probably won't happen. In this scenario not only South Korea is left but Japan as well. (Blocade on Malacca mainly. Anyway just via mmalacca 185 ships (multinational) per day are going trought including 400 meters ships with oil. So good luck with checking all of them for contraband . However can be done of course. ) US would need Russia support US in this to cut China from resources.

3rd option is perimeter on first chain of Islands.


Generally there are many problems for US example :US has 1.5 Tomahawk rocket per one missile launcher on the ship in storage when usage of modern expensive equipment will be really fast in next war. In post industrial era you don't build war equipment like in II world war. It is taking huge time becasue of electronics,cabling etc.. So if US would loose in first days big amount of equipment 3-4 aircarriers etc... then the war could be finished in few days ;)

[thriftyandboringinohio]

Re: China in the Shadows

Poz I find that searching with Google works better
"+itulip +chart +whatever"

[don]

Re: China in the Shadows

the i-tulip feld marshals speak . . .

but let's get real:

Is this our reality?

These U.S. States Could See Job Losses from China’s Devaluation

Top U.S. State Exporters to China (Graph Courtesy of US-China Business Council)

By Pam Martens and Russ Martens: August 12, 2015

The Standard & Poor’s 500 stock index was down a meager -0.96 percent at the close yesterday on the news of China’s devaluation of its currency, the Yuan, but some noteworthy individual stocks took a more dramatic pounding. Apple lost 5.20 percent; Micron Technology was in the red by 4.99 percent; Yum! Brands closed down 4.87 percent while General Motors lost 3.48 percent. All of these companies rely on China as a major export market.

According to a March report from FactSet, “companies in the S&P 500 in aggregate generate about 10 percent of sales from the Asia Pacific region, most of which comes from China and Japan.” Some U.S. companies, however, derive a far greater percentage of their sales from China. According to Sue Chang, a MarketWatch reporter using data from FactSet, 52 percent of Yum! Brands sales come from China while 40 percent of Micron Technology’s are derived from China.

A slowdown in economic growth in China could also see individual U.S. states licking their wounds as well. The following statistics come from the US-China Business Council:

• Forty-two states experienced at least triple-digit export growth to China since 2005, and five states saw export growth of more than 500 percent over the same period.
• China was among the top three export markets for 39 states in 2014. That includes states that are not usually associated with strong China trade ties, including Minnesota, Michigan, New York, Alabama, Ohio, and South Carolina.
• In 2014, thirty-one states exported more than $1 billion to China.

The chart above shows the U.S. states that could be most dramatically impacted should China’s economic slump worsen. Washington state saw its exports to China grow from $3.3 billion in 2005 to a whopping $15.3 billion in 2014. Washington state’s major exports to China include transportation equipment, forestry products, computers and electronics, primary metal manufacturing, mineral and ores. In the span of one decade, the state’s exports to China grew by 365 percent versus its export growth rate to the rest of the globe of 148 percent.

South Carolina is another state that has experienced an outsized boost from exporting to China. From 2005 through 2014, its exports to China skyrocketed from $590 million to $4.2 billion. One of the popular exports to China is BMW cars and SUVs made at its Greer, South Carolina plant. BMW, a German automaker, last year announced that it would be investing another $1 billion in the Greer plant and add 800 additional workers, boosting total employment at the plant to 8,800 workers. South Carolina is also home to a sprawling Boeing campus in North Charleston where the 787 Dreamliner is made. In 2014, $2.8 billion of South Carolina’s exports to China were in the category of transportation equipment.

As foreign currencies decline in value to the U.S. Dollar, the ability of U.S. exporters to compete against foreign domestic goods priced in the cheaper currency becomes more difficult. An additional and serious risk to the U.S. economy is that these currency wars, which are actually trade wars to sustain or grab market share (think Saudi Arabia and oil) lead to a pricing war race to the bottom with the inevitable outcome of the U.S. importing deflation.

As we reported in January:

“Plunging yields on U.S. Treasury notes and bonds, record low yields on the sovereign debt of countries in the European Union, together with plunging industrial commodity prices, are sending a crystal clear message to stock markets: there is a glut of supply and too little demand from consumers.

“Such a supply-demand imbalance brings about price wars. Thus we have Saudia Arabia slashing prices on oil to its customers in an attempt to grab market share, triggering a global price war in oil; supermarket pricing wars in Britain; gas station pricing wars in the U.S.; mutual fund fee pricing wars; magazine price wars. There is even a chicken nuggets pricing war.”

And we further explained:

“There is a delicate equilibrium of income distribution that sustains growing economies. When income distribution becomes insanely skewed to the top 10 percent, deflation is the inevitable outcome. To express it another way, when workers are stripped of an adequate share of the profits of their productive labors on behalf of the corporation, they can’t consume an adequate amount of the corporate output. Supply gluts develop and deflation follows.”

But don’t expect most members of Congress, whose campaigns are financed by the 1 percent, to open their eyes to the reality of this dangerous and growing problem. Even after the worst economic crash since the Great Depression in 2008, they’re still wearing their blinders.

The US middle class has been taking it up the ass with ZIRP for 7 years. Over 50% of the S&P "gains" are due to low interest debt stock buybacks. We're in a hall of cheap f**king mirrors.

China's devaluation after infinite QE?

Puleese .......

[ProdigyofZen]

Re: China in the Shadows

Poz I find that searching with Google works better
"+itulip +chart +whatever"

Not if behind paywall which is where it is.

[GRG55]

Re: China in the Shadows

"...China’s move is a signal to the Fed that monetary tightening is a bad idea in a very weak economy. What’s broke in the US economy is investment and risk-taking, and monetary policy can’t fix that. If the Fed gets the message and puts off an adjustment in interest rates until the US economy gets out of its rut, markets should rally..."


Seriously?

What's broke is China's model of allocating capital (since 2009 mostly massive amounts of credit) on the basis of influence and corruption. Not much risk taking there. There is no way that even China can indefinitely support the frenzied level of capital misallocation that has been allowed. Those economies most dependent on China (the USA isn't one of them, but some of BRI*S and their affiliates are) will be, um, challenged.

[vt]

Re: China in the Shadows

http://www.telegraph.co.uk/finance/e...valuation.html

[touchring]

Re: China in the Shadows

I look at IBM and the only way I see them surviving is suckling at the government teat by becoming a big-time government contractor. In the private sector, IBM has done far too much damage to itself over the past few decades thanks to poor management and it cannot compete with better-run companies that are now behemoths flush with cash.

Personally, I think Buffett made a very bad investment buying all those shares of IBM. It's strange how he has stated in the past that he does not invest in technology companies and yet he now has a huge stake in IBM.

It'll be interesting to see what, if anything, IBM has up its sleeve that would convince Buffett to make such a large investment on what I see as a company with a very bleak future.

Is the future of IBM really that bleak? I see that they are still earning good profits even though revenue has fallen slightly.

IBM may not be a star performer, but their valuation is reasonable and their core business (government contracts) is extremely stable.

If the price falls by another 20%-30%, it maybe very attractive.

[don]

Re: China in the Shadows

China’s comparative devaluation dabble: The emerging markets impact

BY GARY KLEIMAN on AUGUST 13, 2015

China’s recent 2% renimbi reset against the dollar, while the first formal devaluation in two decades, was nonetheless negligible against emerging market currencies’ 20% drop this year turning benchmark local debt and equity indices negative, in part due to waning Chinese commodities and funding appetite. The uniform depreciation has been the most severe since the Asian financial crisis, and units in Indonesia, Malaysia, Thailand, Korea and the Philippines have again suffered, and even traditional safe havens like the Singapore dollar have retreated while India’s rupee has softened after its post-Modi surge. Frontier markets like Pakistan, Sri Lanka and Vietnam, with more restricted trading, have also felt a combination of greenback strength and weaker growth and reform prospects and debt and political instability pressuring exchange rates. However the region has not been battered as badly as Latin America where China’s pre-devaluation footprint and competitive and fiscal policy missteps wreaked havoc.

China’s foreign reserves have fallen for consecutive quarters, but two dozen other developing economies have stopped accumulating as well due to current and capital account stagnation. In dollar terms the number was flat to negative for most countries in the second quarter, with portfolio investment outflows as tracked by EPFR international fund data. According to the Washington-based Institute for International Finance, all cross-border capital flow components — stocks, bonds, commercial loans and FDI — will be down this year for a $1 trillion total, reversing improvement from the immediate post-2008 financial crisis through 2014’s initial Federal Reserve rate scare. Over $20 billion fled emerging market equities through July, while dollar and euro-denominated sovereign debt was a positive draw for that asset class offsetting local currency aversion. Reflecting meager trade growth, export credit volume was also off 25% compared with 2014, at $75 billion in the latest quarter, according to Reuters statistics. Asian banks have been big in the space, but standards have tightened in the latest surveys as they grapple with souring corporate and consumer exposure more generally.

Brazil’s real has been the biggest loser with a 30% plunge, and is on track to retest its 2002 low of 4/dollar. One-fifth of exports, especially iron ore, go to China and state oil monopoly Petrobras had to borrow from the Chinese Development Bank when it no longer could tap global bond markets after a downgrade and lingering scandal. President Rousseff’s approval rating is below 10% and recession will last into next year as 9.5% inflation exceeds the central bank target. Another interest rate hike to 14% has not steadied the currency, and a dollar swap program was pared as a drain on reserves also reeling from a chronic current account deficit and decreased foreign direct investment. Moody’s just lowered the sovereign ratings a notch to near junk, which could lead to billions of dollars in forced selling from debt fund managers, including in Japan with its cultural ties where retail products for the country have long been popular.

China’s sovereign wealth fund reportedly holds Mexican paper, as the peso crashed through 16 to the dollar compelling the central bank to launch a 2-month $50 billion intervention facility. Beijing’s oil companies may be interested in Pemex’s first exploration block auctions, but for now bilateral petroleum deals concentrate on Colombia and Venezuela whose currencies have also plummeted. The latter has amassed $50 billion in Chinese infrastructure project for natural resource debt over the years it can no longer service, as default on sovereign and government petroleum company obligations is widely anticipated in bond and derivative spreads. The bolivar is in free fall at 600 to the dollar in the parallel market, one hundred times the controlled rate, as hyperinflation rages before end-year elections.

Outside the region South Africa and Turkey have also reached exchange rate bottoms amid Asian commodity, construction, and banking linkages exacerbating direction. Negative commercial and monetary relations between major emerging economies are mutually-reinforcing, and with rumors that yuan internationalization was a factor in the 2% shift as it mirrors previous market openings, the prevailing pattern suggests repeated rather than one-off depreciation.

Gary N. Kleiman is an emerging markets specialist who runs Kleiman International in Washington, D.C.

[thriftyandboringinohio]

Re: China in the Shadows

Not if behind paywall which is where it is.

I'm still hunting around PoZ.
Are you thinking of this chart



from this thread
http://www.itulip.com/forums/showthr...xternal%20debt

[Southernguy]

Re: China in the Shadows

Maybe this graph does the trick?China External Debt 1985-2015


External Debt in China increased to 8955 USD Hundred Million in 2014 from 8631.67 USD Hundred Million in 2013. External Debt in China averaged 2561.97 USD Hundred Million from 1985 until 2014, reaching an all time high of 8955 USD Hundred Million in 2014 and a record low of 158.28 USD Hundred Million in 1985. External Debt in China is reported by the State Administration of Foreign Exchange, China.

[ProdigyofZen]

Re: China in the Shadows

Thank you Southern, it was this graph or the short term external debt graph from trading economics. I do have this graph but I was looking more for what was written concerning China in the post.

No worries!

[thriftyandboringinohio]

Re: China in the Shadows

Here is an EJ post from this thread

http://www.itulip.com/forums/showthr...ctober-24-2012

that has a similar chart and the words "sudden stop"

It'd be easy except for everything else that's going on in the world.

For example, China's externaldebt position is deteriorating rapidly, with short-term debt as a percent of total externaldebt rising from 36% in 2002 to 75% as of June 2012, as externaldebt increased at a 17% annual rate.

China is headed for a sudden stop.

[ProdigyofZen]

Re: China in the Shadows

Thrifty, that would be it! Thank you.

[thriftyandboringinohio]

Re: China in the Shadows

Thrifty, that would be it! Thank you.

Any time PoZ.

After scanning through that iTulip thread from 2012 I turned up this article at another site from 2013 that explores the same issues and draws similar conclusions.

http://qz.com/223991/the-chinese-gov...think-it-does/

That article also points to rising external debt in China and explains why that would happen in a country with huge currency reserves.
It also discusses the risk of a Chinese sudden stop, and draws this conclusion:

...Could China experience a sudden stop if foreign lenders started refusing to let Chinese companies roll-over loans, or if they cut back on lending altogether? Not likely, says Silvercrest’s Chovanec.
China’s $3.95-trillion foreign exchange reserve gives it plenty of money to pay foreign debts and maintain the yuan’s value, he says, making it different from most countries that have watched their economies implode due to sudden stops. Plus, foreign loans aren’t even one of China’s primary sources of funding; they’re just one channel flowing into China’s $5-trillion shadow banking system.

“I’m not saying [external debt is] not an issue, but it’s really more of domestic issue. The problem is fundamentally the reliance on runaway credit expansion of all kinds of channels, rather than a particular reliance on foreign funding like Southeast Asian countries in the 1990s,” says Chovanec. “Like all those forms of credit expansion, if [foreign-currency loans] were reined in at any point, it could create big problems.”...