Chinese Military,Political and Social Superthread

[CougarKing]

More on China's proxy navy: their fishing fleet.

East China Sea: Dress Rehearsal for Invasion?

Real Clear Defense

August 30, 2016

The various scenarios for war in the East China Sea, and possibly in the South China Sea, usually fall into two main categories. There is the “accidental” fight scenario. A Chinese destroyer’s radar locks onto a Japanese warship. The Japanese captain fires back in self-defense and the incident spirals out of control.

That is one scenario. Another, possibly more realistic, is the “swarm” scenario: Several hundred “fishing boats” sail from ports in Zhejiang province for the Senkaku, where they overwhelm the Japanese Coast Guard by their sheer numbers.

This time, the fishing boats land some 200 or so commandoes disguised as fishermen or “settlers.” The Senkakus are not garrisoned by Japanese troops, so no shots are fired. The Chinese side says it is not using force, merely taking possession of what it claims to be its sovereign territory.

 

[CougarKing]

The PLA's J-20 stealth fighters are reportedly preparing for exercises over Tibet (called Xizang in Chinese):

(photo originally from Defence-blog.com)

air.DFNS.net

China’s J-20 stealth fighter to take part in military drills in Tibet

by DFNS · September 2, 2016

China’s newest Chengdu J-20 heavy stealth fighter taking part in military drills in Tibet.

The new J-20 fifth-generation fighter was spotted on the runway of the airfield in Tibet. That was reported by Mike Yeo.

The Chengdu J-20 is a stealth, twinjet, fifth-generation fighter aircraft developed by China’s Chengdu Aerospace Corporation.
(...SNIPPED)

 

[CougarKing]

More vaporware?

Air Recognition - 02 September 2016

China started new long range bomber development

Ma gave no other details about the aircraft or when it would be introduced, saying only that "you will see it in the future.''

PLAAF's long range strike capabilities mainly rely on its fleet of 120 Xian H-6 strategic bombers, a license-built version of the Soviet-era's Tupolev Tu-16. The last variant, the H-6K, is designed for long-range attacks and stand-off attacks. In 2015, about 15 H-6Ks were in service.

China last year revealed its new generation H-6K strategic bomber equipped with the DH-20 land-attack cruise missile, giving it the ability to hit targets as far away as Australia. Only Russia and the U.S. are currently able to launch cruise missiles from the air.

 

[Kirkhill]

Sino-Britannic relations:

http://www.telegraph.co.uk/news/2016/09/03/g20-honey-trap-warning-fears-prime-ministers-officials-will-be-s/

G20 'honey trap' warning: Fears Prime Minister's officials will be seduced by Chinese spies and have hotel rooms bugged

http://www.telegraph.co.uk/news/2016/09/02/theresa-may-risks-row-with-chinese-hosts-by-refusing-to-commit-t/

Theresa May risks row with Chinese hosts by refusing to commit to Hinkley Point during G20 summit

http://www.telegraph.co.uk/news/2016/08/09/chinas-relationship-with-uk-at-risk-over-hinkley-point-delay-war/

China has warned Britain that the relationship between the two countries is at a "critical juncture" and will be at risk unless it goes ahead with the Hinkley Point nuclear power station.

Theresa May, the Prime Minister, delayed a final decision on plans for Britain's first new nuclear power station for a decade last month amid concerns about Chinese investment.

Nick Timothy, her joint chief of staff, previously said MI5 believed Chinese intelligence services "continue to work against UK interests at home and abroad".

Writing in the Financial Times, Liu Xiaoming, the Chinese ambassador, said the delay to approving the plant could put "mutual trust" between the two countries in jeopardy.

 

[tomahawk6]

Obama's trip to China got off to a rocky start when he was forced to deplane from the rear door,due to a problem with the forward ladder.It was a clear sign of Chinese displeasure.

 

[CougarKing]

Other sources say the exercises below are amphibious and include warships, aircraft and amphibious armor from both nations, obviously sending a message about the PRC stance on the South China Sea, though not necessarily that of Putin...

Reuters

China, Russia naval drill in South China Sea to begin Monday

By: Reuters

September 11, 2016 5:40 PM

BEIJING
- China and Russia will hold eight days of naval drills in the South
China Sea off southern China's Guangdong province starting from Monday,
China's navy said.The exercises come at a time of heightened
tension in the contested waters after an arbitration court in The Hague
ruled in July that China did not have historic rights to the South China
Sea and criticized its environmental destruction there. China rejected the ruling and refused to participate in the case.

(...SNIPPED)

 

[a_majoor]

China's economy is probably more of a long term threat to everyone than the PLAN:

https://pjmedia.com/vodkapundit/2016/05/26/the-next-devolution-in-china/?singlepage=true

The Next Devolution in China
BY STEPHEN GREEN MAY 26, 2016 CHAT 58 COMMENTS

If you think this is a followup to Monday's "The Next Revolution in China" piece -- you're right.

And what a followup we have, thanks to the Observer's Jonathan Russo, who says that China's "land mine of debt is about to explode."

Read:

Even the ratings agencies, like Moody’s, are negative. The Wall Street Journal, both the NY (Times) and Financial Times, Bloomberg and Forbes are all covering the story. Private hedge fund reports (see Kyle Bass), predicting China’s economic collapse, circulate among the investing classes by email, the way Russian Samizdat reports in the 1970s circulated hand to hand. The coup de grace however might be the Economist Magazine’s May 7 issue with its 13-page special report on China’s land mine of debt and what happens when it blows up. It is must-reading for anyone with skin in the economy.

When you understand Xi’s dilemma, you understand everything Xi does. He knows more about China’s problems than you.

The explosion Xi prepares is already felt. According to a top commodity producer quoted in the Financial Times about Chinese trade policy, “This is war. This is not trade.”

American politicians, starting with Donald Trump, but quickly followed by Bernie Sanders and belatedly Hillary Clinton, are preparing their counter-attack strategies. China’s number one export is not steel, electronics, textiles or toys… It is deflation. China is dumping everything from finished steel to appliances. Just walk into Best Buy and you’ll see a wall of Chinese-made air conditioners priced so low it is clear no one is making money. In fact, a good friend of mine, who is in the commodity business and visits China at least 12 times a year, said the air conditioner factories cannot pay their suppliers or truckers in cash. They’re paid with air conditioners.

30-some-odd years ago, Saturday Night Live did a John DeLorean sketch where the beleaguered automobile entrepreneur (Brad Hall) was in so much debt that he was trying to pay Dave the dry cleaner delivery guy (Eddie Murphy) with DeLorean cars instead of cash. It wasn't a great sketch by any means (it was from SNL's Dark Days when Dick Ebersol ran the show in Lorne Michael's absence), but it did reveal an essential economic truth about desperate times:

John DeLorean: "Dave, how would you like the keys to a brand new silver DeLorean? How about that?"
Dave the Dry Cleaner: "You gave me a silver one last week."

DeLorean: "How about electric blue?"

Dave: "I got electric blue two weeks ago... I got five of your cars, man. They don't work and nobody gonna buy them. I'd rather have the $13.50."

[Dave takes the clean clothes back and leaves.]

But in Communist China, Dave can't just walk away with the goods.

China exported its way to semi-prosperity by providing cheap goods to debt-happy consumers in the West. But for a huge country like China, that path is a dead end because there are only so many consumer goods that the rest of the world, even debt-happy Americans, can absorb.

A smaller country like Israel or South Korea can probably export their way to ever-increasing wealth for just about ever. But China had over a billion people -- almost one-fifth of the entire human population -- to lift up out of dirt-scratching poverty. The Export Gravy Train can carry only so many people, only so far.

Beijing has been trying to convert from an export-driven economy to a consumer-driven economy like our own, but it hasn't worked as planned. Corruption, thrift, and a lack of consumer confidence have kept Chinese saving instead of spending. So China keeps cutting export prices -- "exporting deflation," as Russo and others have put it -- in an attempt to do three things:

1. Keep the factories humming.

2. Keep the jobs machine creating jobs.

3. Keep the Chinese Communist Party in power.

Back to Russo for a moment:

This exporting of heavily subsidized commodities and manufactured goods buys Xi and China time. Time to inject trillions of renminbi into China’s rust belt as he has just promised to do. No pesky fiscal conservatives in his congress to oppose an industry bailout. Xi is determined to ward off the social unrest that will follow the debt blow up.

That's how a real-world Chinese air conditioner factory finds itself doing a tragic imitation of Brad Hall's unfunny imitation of John DeLorean's cocaine-fueled imitation of a profitable carmaker.

And if you're a supplier to the air conditioner factory, what can you do? Like Dave the Dry Cleaner, you'd really rather have the $13.50. And in a free economy, you'd tell the air conditioner factory owner to go get stuffed -- he's not getting any more of your condenser units until he ponies up the cash. But Xi can't allow that kind of disruption, and so you, the condenser manufacturer, agree to take payment in air conditioners instead of in cash. As does the guy who makes the logic board for the control panel, and the other guy who makes the power supply.

Pretty soon there are air conditioners everywhere, but nobody anywhere has the damn $13.50 they're owed.

When you're up to your ass in air conditioners, it's difficult to remember your initial objective was to heat up the economy.
Repeat this same situation across hundreds (thousands?) of businesses across China's newly wealthy coastal regions, and you're looking at the potential for an economic clusterfudge that could make 2007-08 feel like the Reagan years.

So it might be warm weather now, with plenty of demand for air conditioners. But in China, as elsewhere, winter is coming.

and:

https://pjmedia.com/instapundit/243817

BUBBLES GOTTA POP: US Think Tank Warns That Australia Is About 6 Weeks Away From Housing Collapse.

Real estate prices in Australia’s largest housing markets have soared over the past couple of years fueled, in no small part, by demand from Chinese buyers looking for offshore locations to park cash. The Sydney and Melbourne markets have been the largest beneficiaries of foreign capital with real estate prices up 53% and 51%, respectively, since 2012. That said, based on data from the Australian Bureau of Statistics it looks like home prices in Australia have already started their descent.

Looks like China may have found yet another way to export its economic mismanagement.

Vancouver's housing bubble is also this inflated, and could suffer the same fate.

 

[Kirkhill]

Chinese farmers grow tobacco in Zimbabwe on faltering land seized from white farmers

Peta Thornycroft, The Telegraph | September 20, 2016 11:22 AM ET


Chinese farmers have taken over formerly white-owned farms for the first time, investing millions of pounds into tobacco production.

Farms that were badly managed for nearly 20 years, after Robert Mugabe’s mass seizure of white-owned land, are now being worked again in the hope of reaping a potentially huge reward.

At least five farms have attracted Chinese investment in Mashonaland Central, a region to the north-west of Harare, that was traditionally one of the country’s best tobacco-producing areas.

Safe in the knowledge that Mugabe’s policy of strengthening ties with China will offer a degree of protection, they have poured money into machinery and are taking advice from international experts.

China has become the largest investor in Zimbabwe, whose economy, still reeling from the land seizures of 2000 and hyperinflation, has taken a nosedive once again. Unemployment is running at about 90 per cent and the regime is so short of money that it cannot pay teachers or civil servants.

The dire economic conditions have prompted rare protests against Mugabe’s regime by a coalition of opposition parties.

On Saturday, a heavy police presence in Zimbabwe’s capital Harare stopped a planned mass demonstration, as activists claimed police used live ammunition to disperse small protests.

While Zimbabwe’s land reform process has has empowered around 60,000 small-scale black tobacco farmers, who grow lower grades of tobacco, many of the bigger farms distributed among Mugabe’s cronies have not fared so well.

Related

Zimbabwe plans to dehorn 800 rhinos after five per cent of South Africa’s were killed last year
Rioters in Zimbabwe’s capital block roads, clash with police during protests over economic conditions
Farms just north of Harare lie fallow amid broken fences, fields scorched by fires and scarce livestock. There are few surviving indigenous trees as many were felled by new farmers who could not afford coal to cure their tobacco.

A generation of evicted white farmers have moved abroad or live hand-to-mouth, waiting for promised compensation.

One farm worker in Mvurwi, about 60 miles north of Harare, said there were now plenty of jobs in the district after years of difficulties following the departure of the white landowners. “The Chinese are spending money,” he said.

An insider in the tobacco industry said the Chinese company would be paying a hefty rental for the land they are now using to the “political” men who now own the farms.

“The Chinese will pay a percentage of the income from the tobacco as rent,” he said. “Some of that rental should be shared with the white farmers who left their homes with nothing and received no compensation from the government, but they probably don’t know their old farms are now about to start making money again.”

China has owned Zimbabwe since Mugabe's Shona tribe based ZANU subjugated Nkomo's Ndebele based ZAPU.  China backed ZANU against Ian Smith while Russia backed ZAPU.

This one could just have easily gone under any of the following:

Anti-Colonialism
Neo-Colonialism
Triumphs of Socialism
Brexit.

 

[CougarKing]

A milestone that Mao would never have dreamed of happening to the PRC; Deng had other ideas which set the country on a different course than his CCP predecessors wanted.

Reuters

China's yuan joins elite club of IMF reserve currencies
By: Reuters
October 2, 2016 12:46 AM


MANILA - China's yuan joins the International Monetary Fund's basket of reserve currencies on Saturday in a milestone for the government's campaign for recognition as a global economic power.

The yuan joins the US dollar, the euro, the yen and British pound in the IMF's special drawing rights (SDR) basket, which determines currencies that countries can receive as part of IMF loans. It marks the first time a new currency has been added since the euro was launched in 1999.The IMF is adding the yuan, also known as the renminbi, or "people's money", on the same day that the Communist Party celebrates the founding of the People's Republic of China in 1949.

(...SNIPPED)

 

[tomahawk6]

The new splinter camo pattern on the J-20.You get a glimpse of it on one of SMA's photos.The link has several taken while in flight.


http://www.popularmechanics.com/military/weapons/a23435/new-pictures-of-chinas-stealth-fighter/

 

[Colin Parkinson]

Looks like the Chinese are buying up Malaysia as well as the Philippines.

https://dinmerican.wordpress.com/2016/07/26/najib-razaks-secret-deal-with-china/

Marked “For Internal Use Only” an Appendix to a Term Sheet due to be approved by the Malaysian Cabinet tomorrow (27th July) lays out in detailed figures how  Najib plans for over US$7 billion in accumulated 1MDB/Jho Low company debts to be wiped out by taxpayers in a secret deal between his Ministry of Finance and the Chinese state company CCCC (China Communications Construction Company).  more at link

 

[a_majoor]

FP on the Philippines "flip" to China. One can only wonder how well that will turn out for the islands, particularly since it seems to be driven from the top down, rather than a "bottom up" movement based on economics, social and cultural preferences:

Duterte’s Flip-Flop Into Bed With China Is a Disaster for the United States
With the Philippine president ditching Washington for Beijing, the contest to control the South China Sea just got a lot more complicated.
BY MAX BOOTOCTOBER 20, 2016

International relations theorists of a “realist” persuasion like to claim that states are rational actors pursuing their strategic interests in an anarchic world where power alone matters. Ideology and domestic politics do not much concern these thinkers; they believe that a nation’s foreign policy is much more likely to be shaped by factors such as geography, demography, and economics.

This was the viewpoint of Richard Nixon and Henry Kissinger, who famously tried to realign China from being a foe of the United States to a friend — never mind that the Chinese leader they had to deal with was Mao Zedong, one of the worst mass murderers in history. “Nixinger” believed, correctly, that China’s interest in countering Soviet power would lead it to draw closer with the United States.

But even in the case of China the applicability of realist insights was limited. China did not begin the transformation that would make it a leading economic force and trade partner of the United States until Mao had died, replaced by the reformist Deng Xiaoping. Even today China is more foe than friend of America.

Today, the Philippines is Exhibit A in illustrating the limits of the realist conceit that some unvarying strategic logic governs foreign policy.Today, the Philippines is Exhibit A in illustrating the limits of the realist conceit that some unvarying strategic logic governs foreign policy. The Philippines has seen a vertigo-inducing change in its foreign-policy orientation since Rodrigo Duterte became president this summer. This crude populist is now transforming the Philippines’ relationship with the United States in a fundamental and worrying manner.

The Philippines is America’s oldest ally in Asia, and until recently one of the closest. The United States ruled the Philippines as a colonial power from 1899 to 1942 and implanted its culture in the archipelago. In World War II, U.S. and Filipino troops fought side by side against the Japanese occupiers. In 1951, Washington and Manila signed a mutual defense treaty. For decades afterward, the Philippines hosted two of the largest U.S. military installations overseas at Clark Air Force Base and Subic Bay Naval Base. Those bases were closed in 1991 amid a wave of anti-Americanism, but the U.S. military presence has been ramping up again as the Philippines felt increasingly threatened by Chinese military expansionism. In 2014, President Barack Obama signed an agreement with then-President Benigno Aquino III that would allow U.S. forces more regular access to bases in the Philippines and increase the tempo of training exercises and military cooperation between the two countries.

Now that achievement looks increasingly like a dead letter. Duterte journeyed to Beijing this week to announce his “separation from the United States” in military and economic terms. “America has lost,” Duterte said. He claimed that a new alliance of the Philippines, China, and Russia would emerge — “there are three of us against the world.” His trade secretary said the Philippines and China were inking $13 billion in trade deals; that’s a pretty hefty signing bonus for switching sides. Duterte said he will soon end military cooperation with the United States, despite the opposition of his armed forces.

What could account for this head-snapping transformation? Manila’s strategic and economic interests have not changed. While China is the Philippines’ second-largest trade partner, its largest is Japan, a close American ally and a foe of Chinese expansionism. The third-largest trade partner is the United States. The fourth-largest is Singapore, another U.S. ally that is concerned about China’s vast territorial ambitions and aggressive behavior. Taken together, the Philippines sends 42.7 percent of its exports to Japan, the United States, and Singapore, compared with only 10.5 percent to China and 11.9 percent to Hong Kong. The Philippines gets 16.1 percent of its imports from China; almost all of the rest comes from the United States and its allies, including Japan, Taiwan, Singapore, and South Korea. So it’s not as if there is an especially pressing economic case for the Philippines to realign from the United States to China.

There is a pressing strategic case, however, not to do so. China continues to assert sovereignty in the South China Sea in violation of Philippine claims, as an international court ruled in July in a case brought by Duterte’s predecessor. China wants to grab for itself what could be billions of dollars’ worth of natural resources, from fish to oil, in the South China Sea.

Moreover, the Philippine people remain largely pro-American. English is the lingua franca of the Philippines. The Armed Forces of the Philippines have many decades of cooperation with the United States and have been built in the image of the U.S. military; they have no experience working with China’s People’s Liberation Army. Moreover, and despite Duterte’s nasty rhetoric and ad hominems, the United States continues to express its desire to protect the Philippines.

This massive geopolitical shift is entirely Duterte’s doing. It cannot be explained any other way. It is a product of his peculiar psychology.This massive geopolitical shift is entirely Duterte’s doing. It cannot be explained any other way. It is a product of his peculiar psychology.

He has long been ideologically hostile to the United States — he has called Obama a “son of a whore” — and he feels an ideological affinity with China’s authoritarian rulers. Although elected democratically, Duterte is a strongman in the making. He has already violated the rule of law to unleash death squads that are said to have killed at least 1,900 people, including a 5-year-old boy, in the name of fighting drugs. He has cited Hitler as his role model: “Hitler massacred 3 million Jews. Now, there is 3 million drug addicts. I’d be happy to slaughter them.” He has also said “I don’t give a shit” about human rights. China’s rulers don’t put their worldview quite so crassly, but they, too, don’t care much for human rights. The Duterte-Xi Jinping marriage thus seems like a natural match.

From the American viewpoint, Duterte’s flip-flop — assuming it leads to a lasting strategic shift — is a potential disaster. Aligned with the United States and its regional allies, the Philippines can provide a vital platform to oppose Chinese aggression in the South China and East China seas.

If the Philippines becomes a Chinese satrapy, by contrast, Washington will find itself hard-pressed to hold the “first island chain” in the Western Pacific that encompasses “the Japanese archipelago, the Ryukyus, Taiwan, and the Philippine archipelago.” Defending that line of island barriers has been a linchpin of U.S. strategy since the Cold War. It now could be undone because of the whims of one unhinged leader.

China could either neutralize this vital American ally or even potentially turn the Philippines into a PLA Navy base for menacing U.S. allies such as Taiwan, Japan, and Australia. At the very least, the U.S. Navy will find it much harder to protect the most important sea lanes in the world; each year $5.3 trillion in goods passes through the South China Sea, including $1.2 trillion in U.S. trade.

The opposition is already making hay over Duterte’s China trip. A Supreme Court justice in Manila has warned the president that, were he to give up sovereignty over the Scarborough Shoal, it could result in his impeachment. The only good news from the American standpoint is that what Duterte is doing could be undone by a more rational successor, assuming that democracy in the Philippines survives this time of testing.

Max Boot is a senior fellow at the Council on Foreign Relations.

 

[ModlrMike]

If Duterte pushes much more, he may find himself on the sad end of a coup d'etat.

 

[tomahawk6]

J-20 stealth fighter is now an open secret.

 

[tomahawk6]

China lost their first female pilot in a J-10 crash,Captain Yu Xu. Her co-pilot survived.

http://www.cnn.com/2016/11/14/asia/china-woman-fighter-pilot-killed/index.html

(CNN)One of China's first female fighter pilots and a member of the country's air force aerobatics team was killed in a training accident over the weekend, according to Chinese state-run media.

Capt. Yu Xu, 30, died Saturday during a routine training flight with the aerobatics team, according to the reports.

 

[jollyjacktar]

Canadian Forces Recruiting website hacked, directing users to Chinese State run website.  First the BC teachers union, now this.  The Commies are out to get us.

http://www.cbc.ca/news/politics/canadian-forces-website-hacked-1.3855719

 

[tomahawk6]

The Chinese have developed a long range AA missile with a range of over 300 km. Its probably a knock off of the Russian R37 missile.

https://www.yahoo.com/news/m/8a32061b-dbf7-3e35-8e16-c8a213acbad9/ss_china-successfully-fires.html

The missile is about 28 percent of the length of the J-16, which measures 22 meters (about 72 feet). The puts the missile at about 19 feet, and roughly 13 inches in diameter. The missile appears to have four tailfins. Reports are that the size would put into the category of a very long range air to air missile (VLRAAM) with ranges exceeding 300 km (roughly 186 miles), likely max out between 250 and 310 miles. (As a point of comparison, the smaller 13.8-foot, 15-inch-diameter Russian R-37 missile has a 249-mile range). This missile would easily outrange any American (or other NATO) air-to-air missile.

 

[a_majoor]

More on China's economy. Trying to find clear metrics to make sense out of things makes for a much different picture than most people paint:

http://www.realclearworld.com/articles/2016/11/29/the_surest_measure_of_how_chinas_economy_is_losing_112131.html#disqus_thread

The Surest Measure of How China's Economy Is Losing
By Derek Scissors
November 29, 2016

American presidential elections are a patchy time for the use of facts. It turns out presidential transitions are, too. Donald Trump as president-elect has triggered a slew of comments and articles about China’s pending leadership of the world economy. Journalists and pundits may value words over money; economists should not.

There are data, grounded in real-world calculations, that show China’s economic importance falling -- not rising slowly, nor staying stable, but falling. The most important indicator is net private wealth, which is the single best measure of a country’s economic size and of the pool of resources available to its public sector for military or social spending.

In work dating back to 2000 and carried out with no geo-economic agenda, Credit Suisse has estimated private wealth. The new estimates, through the middle of 2016, show American private wealth at $84.8 trillion and Chinese private wealth at $23.4 trillion. Moreover, the gap is widening. With $60 trillion less in private wealth than the United States, China’s global economic leadership is a fable.

Private Wealth

There are of course more facts to bring to the argument at hand than the Credit Suisse data, but the latter are an excellent place to start. The data series is well behaved statistically, which means it has credibility. It is measured globally, so shares can be calculated. The result: the People’s Republic of China’s level of private wealth actually fell from mid-2015, both in amount and in share.

This year’s estimate could obviously be revised. Moreover, the PRC is huge and the margin of error in estimating its private wealth is likely over $1 trillion. But a decline is consistent with reports both of heavy capital outflow and surging debt. Even stability would emphatically not be the large annual gain many implicitly assume when discussing China’s economy.

Since the world economy as a whole is not doing well, the PRC’s performance could be typical. It is not: China’s global share of private wealth fell from 9.5 percent to 9.1 percent. As a more comprehensive global figure rather than national, this is less vulnerable to measurement errors. China is probably underperforming the global average in private wealth.

Margin of error means very little in Sino-American comparisons, because the gap between the two economies is so large. Credit Suisse shows U.S. private wealth adding $1.7 trillion over the previous year, expanding its enormous lead over China. America’s share held at nearly one-third of the global total. (It’s worth noting that Credit Suisse’s raw number is lower than the Federal Reserve’s figure for U.S. household net worth.)

All of this may seem unbelievable to those fed a steady diet of China’s inexorable rise. In fact, a longer view from Credit Suisse does show China’s rise. At the end of 2000, the PRC’s private wealth was only $4.6 trillion and its share was 4 percent. The US numbers were $42.3 trillion and 36.2 percent. The PRC has narrowed the gap significantly since then.

Popular perception begins to go wrong at the beginning of this decade. America’s global wealth share hit a low of 26.9 percent at the end of 2009. It has since outpaced the increase in China’s global share. The key event was when growth in the PRC’s share stalled at the end of 2013. For at least a decade prior to 2010, China outran the United States. For the past six years, the United States has matched China in wealth growth, and for the past three years, the United States has outpaced it.

The Public Sector

By now, the private wealth results should no longer be controversial. China’s economic challenges are becoming clear to everyone. Meanwhile, America’s economic challenges are not about total wealth, but rather are about distribution and economic participation. At the national level, the true controversy comes in the task of assessing public-sector wealth.

At 30,000 feet, it’s easy to be accurate. Both economies now face mountains of public or semi-public debt. Both governments own a great deal of hard-to-evaluate land. China, thanks to its huge state-owned enterprises, has much more in the way of public financial assets. The huge American advantage on the private side narrows when the public sector is included.

What’s tricky is determining the exact figures. The Communist Party suppresses reports of the PRC’s debt problems. The United States does an uneven job of evaluating public-sector assets. Using Federal Reserve data, U.S. net national wealth was $81.1 trillion in the middle of 2016. That net wealth was smaller than seems to make sense in light of federal debt.

The Fed’s figure, however, is based on higher U.S. private wealth than Credit Suisse finds, which obscures the comparison to China. And the Fed may overstate the value of nonfinancial assets versus financial debts. Trying to correct for these issues generates a U.S. net wealth figure of $74.3 trillion to compare to China.

For the PRC, gross public-sector assets seemed consistently measured over time. They are reported to have passed $19 trillion by the middle of 2016. The state owns most land. It is difficult to assign value to large amounts of land, including in the United States, because mass sales would cause prices to plummet. It is made more difficult in the PRC by a highly distorted market. This is a source of error on the asset side.

Debt is also in question, where independent estimates typically measure national debt rather than public. Formal central and local government debt of over $4 trillion is minor and receives far too much attention. There’s more than twice as much debt held by state-owned enterprises, and perhaps much more in addition that is going unreported. This is another source of error.

China’s net wealth figure is therefore harder to figure than that of the United States. The number is above $27 trillion, with $27.4 trillion the best guess. In the middle of 2016, the wealth gap between the United States and China was close to $47 trillion.

What About GDP?

Whether wealth exaggerates the U.S. economic lead is a fair question. For decades, China has reported much faster growth in gross domestic product. By 2015, the difference in the two countries’ GDP measured only $7 trillion. But GDP shows activity, not prosperity. For example, if a building is built and torn down over and over, every senseless iteration adds to GDP.

If this criticism seems like a stretch, it’s less of one in the PRC, as evidenced by what would be a property bubble anywhere else. More generally, it is telling that China can report GDP growth above 6.5 percent, yet independent observers see stagnant private wealth, and even the government admits debt has soared for six years. China has a very active economy, but not a very productive one.

There are other reasons to de-emphasize GDP. GDP per capita has no meaning -- it cannot be spent or saved. What is spent or saved is actual income, the building block of wealth. The Chinese government itself puts 2015 disposable income at an average of $3,400. The equivalent U.S. figure was $42,600. Adjusting for population, this is very much in keeping with the national wealth numbers.

The last refuge of scoundrels on this topic is called purchasing power parity. The basic idea is that the PRC’s $3,400 buys more than America’s $42,500. This is very possibly true, but PPP assumes a very strong form of competitive pressure that creates a single price for the same goods and services globally. Much Chinese economic policy remains aimed at suppressing competition, and Chinese economic size cannot be adjusted using PPP.

The Future

The once-fashionable question of when China will pass the United States in economic size has given way to wondering if it will ever happen. The answer is, not for decades and probably never. The last 16 years considered as a whole have seen China gain ground on the United States in its share of global private wealth, but not in the absolute amount. More recently, as the PRC’s debt jumped, there’s been no catch-up at all.

Even granting a large margin of error in wealth estimates, China is in no condition to close the gap. The reason is that the Party began abandoning market-based reforms no later than the end of 2006 and doubled down on state primacy when the global financial crisis hit. Not coincidentally, Chinese performance began to deteriorate fairly soon thereafter, and it remains sluggish.

A China that re-embraces market-driven reform can return to the 2000’s and again creep up on the United States in economic size (faster, if the United States does not address its own problems). But for now, and for many years to come, the idea that China can be the leading global economy is off by tens of trillions of dollars.

The views expressed are the author's own.

 

[MarkOttawa]

Watch out--note geopolitics "Comment":

Big Dragon “Yikes!”–From 2010 to 2020 “China is set to nearly double its military spending…”

This should sure get the attention of PEOTUS Trump...
https://cgai3ds.wordpress.com/2016/12/15/mark-collins-big-dragon-yikes-from-2010-to-2020-china-is-set-to-nearly-double-its-military-spending/

Meanwhile some tough talk:

South China Sea: Why is USN Admiral Leading on US Policy vs China? Part 2
https://cgai3ds.wordpress.com/2016/12/15/mark-collins-south-china-sea-why-is-usn-admiral-leading-on-us-policy-vs-china-part-2/

Mark
Ottawa

 

[MarkOttawa]

Dragon fesses up:

China Appears to Confirm It Has Militarized Disputed Spratly Islands

The Chinese government appeared to confirm on Thursday [Dec. 15] that it had begun placing antiaircraft guns and other defenses on the disputed Spratly Islands in the South China Sea, despite earlier promises that it would not militarize the islands.

Satellite images released by the Center for Strategic and International Studies in Washington this week showed “large antiaircraft guns and probable close-in weapons systems” on its outposts in the Spratlys.

“As for necessary military facilities, they are primarily for defense and self-protection, and this is proper and legitimate,” the Chinese Defense Ministry said on its website in response to the report, which was made by the group’s Asia Maritime Transparency Initiative. “For instance, if someone was at the door of your home, cocky and swaggering, how could it be that you wouldn’t prepare a slingshot?”

The comments left little doubt that such installations were part of China’s plan to deepen its territorial claim over the islands, which has raised tensions with its neighbors and Washington over freedom of navigation in the South China Sea, one of the world’s busiest commercial waterways...

http://www.nytimes.com/2016/12/15/world/asia/china-spratly-islands.html?smid=tw-share&_r=0

More:

In South China Sea Islands, Anti-Aircraft And Radar Systems Emerge In Full Color

http://www.npr.org/sections/thetwo-way/2016/12/15/505721549/in-south-china-sea-islands-anti-aircraft-and-radar-systems-emerge-in-full-color?utm_source=twitter.com&utm_campaign=npr&utm_medium=social&utm_term=nprnews

Mark
Ottawa