Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘china’

Red Hot China Mailbag

Posted by hkarner - 15. Oktober 2018

October 12, 2018

Last week’s trade deficit letter lit some fireworks. The response was immediate and, in many cases, quite passionate in both directions. I got emails from old friends and longtime readers saying it was my best letter in years. Others said I had lost my marbles or gone over to the dark side. In fact, my whole China series has generated a lot of response. Evidently, I kicked the anthill.

I always appreciate feedback, even when it’s negative. Our staff collects feedback from social media, the comment threads on our website, email, and probably other ways unknown to me. They dutifully assemble it into one document and distribute it to the team. When that email hits my inbox, it gets top priority and I read them all. I always learn a great deal. An amazing number of intelligent, articulate people read these letters. So today, I’ll feature some reader comments from recent weeks and explain further where my point perhaps wasn’t clear. Den Rest des Beitrags lesen »

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The Trump administration is right to redefine relations with China

Posted by hkarner - 13. Oktober 2018

Date: 11-10-2018
Source: The Economist: Lexington

It is also very bad at managing them

THE National Security Strategy released by President Donald Trump’s administration last year augured a major change in China-US relations. Where its predecessors lauded the merits of co-operation with the emerging superpower, Mr Trump’s document promised competition and resistance to Chinese trade and other abuses. The tirade Mike Pence launched against China last week doubled down on that commitment. In a speech delivered at the Hudson Institute, a short walk from Congress and the ongoing Kavanaugh brouhaha, the vice-president castigated the Chinese for bullying investors, buying allies with cheap loans, “tearing down crosses” and much else. This may turn out to be Mr Trump’s most significant mark on the world. America’s new adversarial posture towards China is overdue, popular and probably irreversible.

That is notwithstanding the fact that the vice-president’s speech was in some ways cynical and reckless. Much of it seemed to have more of an eye on the mid-terms than the world. “To put it bluntly, President Trump’s leadership is working,” he purred. Mr Pence then parroted his boss’s recent, probably bogus, claim that Chinese “covert actors, front groups and propaganda” were spreading more disinformation in America than the Russian spies to whom Mr Trump may owe his job. He gave no sense of which Chinese affronts he considered most grievous. He therefore offered only a glint of a counter-strategy. It was disorientating to witness such tawdry politics at such a potentially momentous moment. Conversely, it was a useful reminder, in Trump-drunk Washington, DC, that some things are bigger than Mr Trump. Den Rest des Beitrags lesen »

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Why protests are so common in China

Posted by hkarner - 7. Oktober 2018

Date: 04-10-2018
Source: The Economist

They are rarely about politics, but they are evidence of social stress

THE last tweet sent by Lu Yuyu before his arrest two years ago was typically terse. “Monday June 13th 2016, 94 incidents” it read. Appended was a link to a page on his Blogspot website (newsworthknowingcn) listing details of those cases. They included a protest by more than 100 parents complaining about a local-government decision to make their children attend a distant school instead of a nearby one; another by dozens of farmers enraged by the seizure of their land by village officials; and a demonstration in Beijing by around 2,100 ex-servicemen demanding better benefits.

For his painstaking efforts to catalogue unrest in China—Mr Lu and his girlfriend had recorded more than 70,000 outbreaks in the three years before he was seized—the activist was found guilty last year by a court in Yunnan province of “picking quarrels and causing trouble”. He was given a four-year jail sentence. Den Rest des Beitrags lesen »

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China has designs on Europe. Here is how Europe should respond

Posted by hkarner - 6. Oktober 2018

Date: 04-10-2018
Source: The Economist

As Chinese investment pours into the European Union, the Europeans are beginning to worry

EUROPE has caught China’s eye. Chinese investments there have soared, to nearly €36bn ($40bn) in 2016—almost double the previous years’ total. Chinese FDI fell in 2017, but the share spent in Europe rose from a fifth to a quarter. For the most part, this money is welcome. Europe’s trading relationship with China has made both sides richer.

However, China is also using its financial muscle to buy political influence. The Czech president, Milos Zeman, wants his country to be China’s “unsinkable aircraft-carrier” in Europe. Last year Greece stopped the European Union from criticising China’s human-rights record at a UN forum. Hungary and Greece prevented the EU from backing a court ruling against China’s expansive territorial claims in the South China Sea. Faced with such behaviour, it is only prudent for Europeans to be nervous.

And not only Europeans. The terms on which the emerging undemocratic superpower invests in the outside world are of interest to all countries—particularly if other things, such as foreign policy, may be affected. Americans, increasingly consumed by fears that China poses a commercial and military threat, should be mindful of competition for the loyalties of its oldest ally. For everyone’s sake, it matters that Europeans gauge their welcome to China wisely. Just now, they do not. Den Rest des Beitrags lesen »

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The EU HAS to shift from unanimity to qualified-majority voting

Posted by hkarner - 6. Oktober 2018

(the fastest way to kick out the Eastern Europeans) 😒

Date: 04-10-2018
Source: The Economist
Subject: Gaining wisdom, marching forward

Chinese investment, and influence, in Europe is growing
The EU is, at last, beginning to take notice

UNDER the Renaissance ceiling of the Ball Games Hall in Prague Castle, Zhang Jianmin, the newly arrived Chinese ambassador to the Czech Republic, is quoting Xi Jinping, his president. “History always gives people the opportunity to gain wisdom and the power to march forward in some special years,” he says, declaring 2018 “just such a year”. It is four decades since China started its economic reforms, five years since it launched its Belt and Road Initiative (BRI) to knit together Eurasian economies, and thus a fine moment to accelerate the co-operation between his home and host countries.

The conference—billed as an educational event for Chinese investors—was co-hosted by the New Silk Road Institute Prague, a think-tank that describes its “fundamental mission” as “spreading the awareness about the concepts of New Silk Road in the Czech Republic and other European countries”. It is run by Jan Kohout, a former Czech foreign minister and an adviser to the Czech president, who used the event to extol the assets available for sale in his country. The mostly Chinese audience included influential Czechs, a former prime minister and a former industry minister among them. The tableau captured the essence of the blending of politics and commerce that marks China’s growing presence in the Czech Republic. Den Rest des Beitrags lesen »

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In the struggle for AI supremacy, China will prevail

Posted by hkarner - 30. September 2018

Date: 27-09-2018
Source: The Economist

Or so reckons Kai-Fu Lee, a tech insider, in “AI Superpowers”

AI Superpowers: China, Silicon Valley and the New World Order. By Kai-Fu Lee. Houghton Mifflin Harcourt; 272 pages; $28.

CHINA’S “Sputnik moment” came on May 27th 2017. On that day an algorithm thrashed Ke Jie, the world’s best player of Go, an ancient and demanding Chinese board game. Mr Ke’s defeat by AlphaGo, an artificial intelligence (AI) system developed by DeepMind, a British firm that had been bought by Google, was as much a blow to China’s psyche as the Soviet satellite was to America’s self-esteem in 1957. Within months, China announced ambitious plans to dominate AI by 2030.

Kai-Fu Lee thinks it will succeed. He is well placed to judge. He moved from Taiwan to America at 11, earned a PhD in AI in the 1980s and has been a senior manager at America’s mightiest tech firms, including Apple, Microsoft and Google. Now he runs a Chinese venture-capital fund, which gives him a ringside seat for the contest between what he calls the two “AI superpowers”, China and America.

He thinks China will win because it has the edge in the four determinants of AI success: brains, capital, regulation and data. His verdict on the last three criteria is largely persuasive. For example, China’s internet economy generates vastly more data than any other, particularly in the area of payments—many Chinese merchants eschew coins and currency in favour of digital money. Meanwhile, whereas American cities are restricting self-driving cars, the district of Xiong’an, 60 miles south of Beijing, is being built from scratch to accommodate them (along with 2.5m people). The mayors of Chinese cities are splashing cash on AI startups. Den Rest des Beitrags lesen »

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U.S. Reliance on Obscure Imports From China Points to Strategic Vulnerability

Posted by hkarner - 25. September 2018

Date: 24-09-2018
Source: The Wall Street Journal

Corporations gained tariff waivers for raw materials and parts by arguing that China had become an indispensable supplier

The U.S. quietly exempted China’s rare earth minerals from their original inclusion in the tariff hit-list.

Forget Apple Inc.’s smartwatch. When it comes to goods the Trump administration exempted from its latest blitz of tariffs on Chinese imports, the cases of fluorine salts and carbonate esters say more about where the U.S. is vulnerable in its reliance on Chinese supply.

The chemicals, used to make electrolytes for electric-car batteries, are among 297 dispensations sparing importers the new 10% levy. The mineral barite, which helps energy companies drill for oil and gas, and the painkiller ibuprofen—90% of which comes from China—were also beneficiaries, along with Apple’s far-better-known products, including its smartwatches and AirPods. Den Rest des Beitrags lesen »

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How China is fighting back in the trade war

Posted by hkarner - 25. September 2018

Date: 24-09-2018
Source: BBC

From Monday, US tariffs of 10% on $200bn (£152.9bn) worth of Chinese goods come into effect on almost 6,000 products, ranging from handbags to textiles.

That means almost half of what China sells to the US is now subject to tariffs.

But China is fighting back.

It will retaliate by placing tariffs of 5% to 10% on $60bn worth of American goods.

I saw that steely resolve on display when I visited a pipe factory on the outskirts of Beijing.

Hebei Huayang Steel Pipe (HHSP) is one of the largest steel pipe producers in the province.

As I walked into the sprawling factory, the first thing that hit me was an overwhelming stench of burned steel. Den Rest des Beitrags lesen »

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The US Will Lose Its Trade War with China

Posted by hkarner - 23. September 2018

Anatole Kaletsky is Chief Economist and Co-Chairman of Gavekal Dragonomics. A former columnist at the Times of London, the International New York Times and the Financial Times, he is the author of Capitalism 4.0, The Birth of a New Economy, which anticipated many of the post-crisis transformations of the global economy. His 1985 book, Costs of Default, became an influential primer for Latin American and Asian governments negotiating debt defaults and restructurings with banks and the IMF.

In handicapping the US-China conflict, Keynesian demand management is a better guide than comparative advantage. In principle, China can avoid any damage at all from US tariffs simply by responding with a full-scale Keynesian stimulus.

LONDON – The United States cannot win its tariff war with China, regardless of what President Donald Trump says or does in the coming months. Trump believes that he has the upper hand in this conflict because the US economy is so strong, and also because politicians of both parties support the strategic objective of thwarting China’s rise and preserving US global dominance.

But, ironically, this apparent strength is Trump’s fatal weakness. By applying the martial arts principle of turning an opponent’s strength against him, China should easily win the tariff contest, or at least fight Trump to a draw.2

Economists since David Ricardo have argued that restricting imports reduces consumer welfare and impedes productivity growth. But that is not the main reason why Trump will be forced to back down in the trade war. In handicapping the US-China conflict, another economic principle – rarely used to explain the futility of Trump’s tariff threats – is much more important than Ricardo’s concept of comparative advantage: Keynesian demand management.

Comparative advantage certainly influences long-term economic welfare, but demand conditions will determine whether China or America feels more pressure to sue for trade peace in the next few months. And a focus on demand management clearly reveals that the US will suffer from Trump’s tariffs, while China can avoid any adverse effects.

From a Keynesian perspective, the outcome of a trade war depends mainly on whether the combatants are experiencing recession or excess demand. In a recession, tariffs can boost economic activity and employment, albeit at the cost of long-term efficiency. But when an economy is operating at or near its maximum capacity, tariffs will merely raise prices and add to the upward pressure on US interest rates. This clearly applies to the US economy today.

US businesses could not, in aggregate, find extra low-wage workers to replace Chinese imports, and even the few US businesses motivated by tariffs to undercut Chinese imports would need to raise wages and build new factories, adding to the upward pressure on inflation and interest rates. With little spare capacity available, the new investment and hiring required to replace Chinese goods would be at the cost of other business decisions that were more profitable before the tariff war with China. So, unless US businesses are sure the tariffs will continue for many years, they will neither invest nor hire new workers to compete with China.

Assuming that well-informed Chinese businesses know this, they will not cut their export prices to absorb the cost of US tariffs. That will leave US importers to pay the tariffs and pass on the cost to US consumers (further fueling inflation) or to US shareholders through lower profits. Thus, the tariffs will not be “punitive” for China, as Trump seems to believe. Instead, the main effect will be to hurt US consumers and businesses, just like an increase in sales tax.

But let us concede that the tariffs may price some Chinese goods out of the US market. Where will the competitively priced imports that undercut China come from?

In most cases, the answer will be other emerging economies. Some low-end goods such as shoes and toys will be sourced from Vietnam or India. Final assembly of some electronic and industrial machinery may relocate to South Korea or Mexico. A few Japanese and European suppliers may displace high-end Chinese suppliers. Thus, to the very limited extent that tariffs do prove “punitive” for China, the effect on other emerging markets and the global economy will not be damaging “contagion” but a modest boost to demand that results from displacing Chinese exports to the US.

True, Chinese exporters may experience modest losses as other producers take advantage of the US tariffs to undercut them. But this should have no effect on Chinese growth, employment, or corporate profits if demand management is used to offset the loss of exports. The Chinese government has already started to boost domestic consumption and investment by easing monetary policy and cutting taxes.

But China’s stimulus measures have so far been cautious, as they should be considering the negligible impact that US tariffs have had on Chinese exports. If, however, evidence starts to emerge of export weakness, China can and should compensate with additional steps to boost domestic demand. In principle, China can avoid any damage at all from US tariffs simply by responding with a full-scale Keynesian stimulus. But would the Chinese government be willing do this?

This is where bipartisan US support for a “containment policy” toward China paradoxically works against Trump. China’s rulers have so far been reluctant to use overt demand stimulus as a weapon in the trade war because of strong commitments made by President Xi Jinping to limit the growth of China’s debt and to reform the banking sector.

But such financial policy arguments against Keynesian policy are surely irrelevant now that the US has presented the battle over Trump’s tariffs as the opening skirmish in a geopolitical Cold War. It is simply inconceivable that Xi would attach higher priority to credit management than to winning the tariff war and thereby demonstrating the futility of a US containment strategy against China.

This raises the question of how Trump will react when his tariffs start to hurt US businesses and voters, while China and the rest of the world shrug them off. The probable answer is that Trump will follow the precedent of his conflicts with North Korea, the European Union, and Mexico. He will “make a deal” that fails to achieve his stated objectives but allows him to boast of a “win” and justify the verbal belligerence that inspires his supporters.

Trump’s surprisingly successful rhetorical technique of “shout loudly and carry a white flag” helps to explain the consistent inconsistency of his foreign policy. The US-China trade war is likely to provide the next example.

 

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