Tuesday, May 26, 2015

China Warns that War Is Inevitable Unless They Are Allowed Control of South China Sea

From The Telegraph:
Global Times, a tabloid newspaper run by the Communist Party, said that China might have to “accept” there would be conflict with the United States. 
“If the United States’ bottom line is that China has to halt its activities, then a US-China war is inevitable in the South China Sea”, said the paper, which is often seen as a mouth-piece of hardline nationalists in the government in Beijing.
Various pundits have suggested that China's belligerence may be the result of trying to focus public attention outside China once the Chinese economy nosedives. I'm sure that readers of this blog are tired of hearing about the inevitable decline of the Chinese economy when it doesn't seem like it, but financial emergencies rarely happen overnight. Besides, the numbers have increasingly been looking bad. From another article at The Telegraph discussing the global economic slowdown, the article notes in regard to China:
Much now depends on China, where the economy is starting to look "Japanese". Dario Perkins from Lombard Street Research says the Chinese economy is in a much deeper downturn than admitted so far by the authorities. It probably contracted outright in the first quarter. 
Electricity use has turned negative. Rail freight has been falling at near double-digit rates. What began as a deliberate move by Beijing to choke off a credit bubble has taken on a life of its own, evolving into a primordial balance-sheet purge.

It was inevitable that China's investment bubble would lead to vast inventory of unsold property. The country produced more cement between 2011 and 2013 than the US in the 20th Century -
 
Mr Perkins said China is now in a “classic debt deflation spiral” as excess capacity holds down prices. Factory gate inflation is now minus 4.6pc. This in turn is tightening the noose further by pushing up real borrowing costs. 
The Chinese authorities have so far resisted the temptation to flood the system with fresh stimulus, fearing that this would store up even greater trouble.

They have taken steps to offset a clampdown on local government spending and avert a “fiscal cliff” that might otherwise have occurred. They have loosened policy for banks just enough to offset the contractionary effects of capital flight. But they have not yet come to the rescue.
 
This matters enormously. Andrew Roberts from RBS says China accounted for 85pc of all global growth in 2012, 54pc in 2013, and 30pc in 2014. This is likely to fall to 24pc this year. “If there is only one statistic that you need to know in the world right now, this is it,” he said.

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