Japan, China: the sun also sets

"Red sky at morning, sailors take warning"

Pic source: Wikipedia

I've just read Michael Crichton's "Rising Sun." A warning (hotly resented by some) about the hollowing-out of America's economy by Japan, it was published in 1992 just as the latter began its long stall.

And then the same happened all over again with China, which is seemingly following the same trajectory.

Underneath both is the unchanging process in the USA (and UK): loss of manufacturing capacity, trading away its intellectual property rights, ballooning debt, frozen real hourly wage rates, bright youngsters looking to get rich quick in law and finance rather than actually making anything.

Cui bono? And where is this tending for the West?


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A hundred flowers

From ChinaSMACK:

We Must Sternly Repress Counter-Revolutionaries (1951)

前三十年毛把中国弄成了人间地狱，后三十年拔乱返正，逐步走上正轨和理性！
The first 30 years turned China into hell on earth, the later 30 years has brought order to disorder, and now we are gradually getting on the right track with reason/rationality!

这里让评论吗，好害怕
Is commenting allowed here, I’m so scared.

查水表
"Here to check your water meter." ("Often used in responses to posts or comments that may be considered subversive or “inharmonious” by the government, suggesting that the police or authorities will be coming to the original poster’s home to arrest them under the guise of “checking their water meter”.)"

Ha, ha. And yet...




"Careers for linguists at GCHQ"

 

From The Guardian, 21 October 2014

 

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China heading for a bust, the rich are running

"Over half the nation's monied Elites have either left the nation or plan to leave and transfer their financial wealth overseas."
Another fascinating post from Charles Hugh Smith.


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China: Scaring away the Nian

 

It didn't start off like in the brochure. A few minutes into the lesson, the teacher left Mark alone with nearly 40 Chinese children, some of them with special needs and all of them unable to understand what he was saying. And so:

 

 

From Mark's end of year report:

 

"English is being heavily driven in Beijing at the moment [2001-2]. As China is entering the World Trade Organisation, and also has the Olympics in 2008, it is seen as an advantage to the people of China to be able to communicate in English. Therefore the government has introduced measures to encourage this, from Chinese/English signs on streets, English language development programs on T.V. and radio, and Chinese/English publications. English is compulsory at [the] School from grade one through to senior two.

 

"However with China having a low percentage of non-Chinese people living or working in China and Chinese people generally not travelling outside of China, often communication with even English teachers in English can be difficult. The standard of written English is of a much higher calibre than spoken English, and English speakers' vocabulary is at a disproportionate level to the fluency with which they can use it."

 

The Chinese teachers at the school "followed a textbook and expanded on this where they felt it necessary," but allowed the four foreign Oral English teachers complete freedom to use their own methods.

 

Mark saw that there was a wide range of ability within the class, and no particular strategy for meeting the needs of the special needs children within it. Also, art was not a highly valued part of the curriculum. So his plan was English through Art: flags, maps, weather, animals, masks, cars - and doors and walls, as seen down the hutongs:

 

 

"When you stray off the main streets anywhere in the sprawling city of Beijing you can find yourself on the back streets where the humanity of Beijing reside. These alleyways, streets and back ways are affectionately referred to as 'Hu tong', they hustle and bustle with life. Whole families can be seen dodging in and out among bicycles incredibly overloaded with a three-seat sofa or cases of cabbages, open air hairdressers comprising a woman, a kitchen chair and her scissors. Life goes on past ornate and fascinating doorways, walls and architecture. What lies behind these doorways? What further dramas go on behind closed doors? Events probably not dissimilar to the family life of any household in Britain.. Often they open onto clutter, ever present bicycles, or occasionally a serene and peaceful scene, where a lonely cherry blossom tree stands central within a sunlight dappled and always dusty haven from the hustle on our side of the door."

 

Many of these ancient living areas were even then being cleared for modern urban projects, the former inhabitants moved far away from their jobs, local markets and lifelong neighbours.

 

The classroom learning continued with quizzes and games, and magic: Hallowe'en and Harry Potter, Hangman, the Hokey Cokey and Quidditch:

 

And celebrations, including Christmas and the New Year:

 

"January is a magical time in China. The Spring Festival begins with a bang for the Chinese New Year, with fireworks and lights filling the sky, almost overwhelming the eyes and ears. Chinese spring festival is a traditional holiday when people attempt to scare away mythical beasts, dragons and Nian. Nian is a mythical wild beast that preys on humans. So people light fireworks and hang lanterns to ward off Nian and keep it away from their homes.

 

"At this time of year homes and buildings are decorated with beautiful lanterns. The light builds to a zenith for the Lantern festival held on the fifteenth of January in two thousand and two (dependent on the Chinese lunar calendar). Lanterns come in many different colours and designs, producing a magnificant spectacle when evening falls and the lanterns bring the darkness to life."

 

The teaching style at the school was formal and could even be quite physically tough sometimes, but the staff felt they had something to learn from this more creative and playful approach. And so did the children:

 

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China: Death of a master

 

Leading Chinese blogger De Day reported the death of Master Nan Huai-Chin in September. Until now, I had never heard of Nan, though he has a following among Western Budhhists.

 

De Day's post (oddly, his last) lists Nan's many writings, most of which have never been translated into English. Yet Nan's school, founded in 2006 when Nan was 89 years old, is influential in both academic and business circles.

 

His scholarship is a fusion of traditions (Buddhism, Taoism, Confucianism) and offers a balance of spiritual and practical, which is why he is revered in China, a country that is struggling to develop materially without losing its soul. 

 

The blogger comments:

 

大师认为人生的最高境界是佛为心，道为骨，儒为表，大度看世界。技在手，能在身，思在脑，从容过生活。

 

- which Google Translate renders as: *

 

"Gurus believe that the highest state of life to Buddhism for the heart, said as bone, Confucianism for the table, and generosity to see the world. Technology in hand, in the body, thinking brain, calm lived."

 

The English is a little fractured but it is wonderful that we can read Chinese at all, thanks to this program. When the peoples of the world can talk to each other directly, we may find peace easier to achieve.

 

By the way, the billion-plus figure at the bottom left of the picture above is the number of hits on De's blog.

 

UPDATE

 

* I am deeply obliged to commenter Qingyun for the following elegant translation:

 

"Buddha's teachings as one's heart,

Taoist teachings as one's bones,
Confucius' teachings as one's countenance,
Gives one a broad worldview.

Skills in one's hands,
Ability in one's body,
Thoughtfulness in one's mind,
Allows one to live at one's pace."

China: Inside an iPad factory

Photo: Daily Telegraph

 

The New Yorker's Evan Osnos interviews Li Liao, an artist who got himself hired by Foxconn in Shenzhen so he could make a gallery exhibit of the experience. Not quite as bad as blood diamonds, of course, but.

And according to Liao, they'll take just about anybody.

Sex, war and conquest

Peter Hitchens writes about a cloud no bigger than a man's hand on the horizon, namely the gender imbalance in China. By 2020, there will be 30 million more men than women in the breeding-age section of the population. Hitchens observes:

But men without women are altogether more troublesome than women without men, especially when they are young.

All kinds of speculation is now seething about what might happen; a war to cull the surplus males, a rise in crime, a huge expansion in the prostitution that is already a major industry in every Chinese city, a rise in homosexuality.

I've put in a comment but who knows if it'll get through:

"All kinds of speculation is now seething about what might happen; a war to cull the surplus males..."

Yes, but not Chinese males, I think.

Meantime, I recall that Chinese who settle in Tibet are permitted more than one child. I would also think there's a lot of grabbing Tibetan girls as wives, while Tibetan males are pushed off to wander around their country looking for casual employment by a growing class of Chinese entrepreneurs, the latter enabled and abetted by the Party and funneled money.

Next stop for this treatment, Arunachal Pradesh, I'd guess.

Jerking the chain: China preparing a proxy US bond dump?

A few days ago on the Broad Oak Blog, I referred to Brad Setser's theory that China has been using the UK to make purchases of US Treasury securities, and that this may offer a different view of what has been happening recently (the apparent reduction in Chinese support for US debt).

In response to a comment, I suggested that the reason for this supposed system of proxy purchases was to allay the fears of the American public.

It occurs to me now, belatedly, that the recent reduction in direct Chinese holdings, coupled with the increase in holding by the UK, may be a preparation for a self-protective (or even punitive) dump of Treasuries using the same intermediaries. If their direct holdings remained relatively unchanged, the Chinese could (if their nominees stayed quiet) deny responsibility and forestall a backlash from American public opinion.

China extending secret support for USA

Reportedly, China has radically reduced its holdings of US Treasury securities; actually, the truth may be exactly the opposite - see my post on the Broad Oak Blog.

China, Tibet, Arunachal Pradesh: the giant stirs

I don't know how I can have missed it, but Peter Hitchens reminds us today: Britain has given Tibet to China, thanks to Foreign Secretary David Miliband. Hitchens suggests it's something to do with the credit crunch and the price of China's support for the IMF.

China is struggling to provide for its people, and needs (among other things) wood, water and minerals. Tibet is a valuable source of such resources; but after floods caused by deforestation, and ice melts because of industrial activity, China has begun to consider sustainability and is working to undo some of the damage. The Chinese don't need finger-wagging from pseudo-religious green zealots: this is a matter of survival, and the undemocratic nature of their political structure may allow them to make longer-term, and therefore more successful plans.

Nevertheless, one suspects that unlike here in the Mrs-Jellyby-like UK, but like in most other sanely-led countries, China operates on the principle "look after our nation first, and worry about the rest of the world after that". So despite the protests of Free Tibet and others, that, sadly, is that.

But diplomacy to foster better treatment of ethnic Tibetans might have had more success if we hadn't given away such a powerful bargaining point, all in one go. There is a Japanese saying I read in one of James Clavell's novels: "give fish soup, but never the fish". I think we are represented by a boyish amateur.

You may say, if I'm so in favour of our minding our own business, why bother with Tibet? My answer is that we should be trying to encourage our future master to be kinder to his servants.

Besides, giving way on the Tibet question implicitly undermines our position on the 1913/1914 Simla Accord, which also established the border between India and China, which leads us to the next item on the land acquisition list: the province of Arunachal Pradesh, on which I commented in April 2008. The Dalai Lama clearly understands the implications as His Holiness visited the province last November - much to China's annoyance (here, also). Interestingly, it now seems difficult to access the Dalai Lama's own newspage on this story - another Chinese cyber-attack, or a diplomatic self-censorship?

Anyhow, these are more straws in the wind.

China takes the long view

From Pension Pulse:

Keith thinks that all this talk of excess capacity in China is missing the bigger picture. He told me that China is planning and preparing for the future so they have every reason to over-invest now and build up their infrastructure aand stockpile the resources. It makes sense when you think about it; they saw all the mistakes the Western world made and decided its best to be better prepared for the future.

There are still problems in China, most notably the disparities between the rural and urban population, but they're making leaps and bounds in almost every area, including clean energy where China is securing first mover advantage in the market for renewable energy.

US economic weakness to be exploited by China

Padders alerts me to this succinct WSJ article by Zakary Karabell, warning that just as the US leapfrogged a bankrupt Britain in 1945, China looks likely to do the same to the US.

Okay, what's going to keep us up so high?

Where to turn, for financial security?

Richard Bookstaber (whom we've met before, here) looks at asset allocation and makes a point he's made before: in a crisis, everyone wants out, and the relative merits of different assets are ignored in the dash for cash. Provided cash (at bank) hasn't itself become risky - and after last year, that's not a given. Even outside the bank, there's inflation, devaluation and also, potentially, the fate of the Confederate dollar.

Leo Kolivakis comments, "I happen to believe that diversification is still important, but loses its power as huge inflows are going into all sorts of public and alternative asset classes."

That's the problem: we no longer know where to turn. As Kunstler comments, "the most perplexing part is that there hardly seems any safe place to preserve one's savings."

How about the smart, nimble operators? Investment guru Marc Faber spends his time looking at liquidity flows, trying to predict the next sudden tide and get in beforehand - not a game for the type of clients I have usually advised. And even he appears to be readying himself for the worst, "a total disaster, with a collapse of our capitalistic system as we know it today."

Recently, I seem to have been reading more commentators tending to the view that we are heading for that Mises "crack-up boom" - outlined here nine years ago, for example. And worse:

"And 'mid this tumult Kubla heard from far
Ancestral voices prophesying war!"

The great pleasure gardens of China's Emperor took some 40 years to build, in the first half of the eighteenth century. Vast, complex and exquisite, they were testimony to the wealth and power of the Middle Kingdom, only to be methodically destroyed in an act of punitive vandalism by the French and English in 1860. Premier Zhou Enlai decreed that the ruins should remain unaltered, a monumental lesson for the Chinese about the Western powers.

Of all the curses on humankind, long and vengeful memory may be the worst.

Squaring the circle, packing your bags

In Britain, there are 28.89 million employed - 72.5% of the "people of working age"; median earnings approach £25,000.

In China, the average urban wage in 2006 was 1750 yuan per month, or (at today's exchange rate) slightly less than £2,000 per year.

_______

In Britain, there are 3 million homes where no-one works, with an average household benefit payment level of over £4,000 p.a. This doesn't factor in the cost of other benefits provided by the State, such as health and education. For example, State schooling costs something like £6,000 yearly per child.

In China, the official urban unemployment rate at the end of 2008 was 4.2%, or nearly 9 million people. This statistic does not include unemployed not eligible for benefits, or migrant workers - about 20 million out of 130 million migrants have no job. In industrialized Guangdong Province, for those who qualify, unemployment benefit for the first 24 months is 688 yuan per month, or £757 per year.

_____________

In Britain, the 27.5% of the "people of working age" that might be employed but are not, number approximately 10.96 million.

In China, estimates Eric Janszen of iTulip, there are 20 million officially unemployed and the real tally should be 40 - 50 million.

_______________

China has over 1 billion people and is desperate for land, and natural resources such as wood, water and arable soil. Despite restrictions on family size, her population continues to increase, largely because her people are getting to live longer (and will one day incur the high additional costs of growing old). She has industrialized at high speed and has built a massive skill base. She is continuing to acquire technological and scientific know-how, and is sucking in the world's steel and a panoply of key African and Australian minerals and rare earths. She sits on vast reserves of coal. The ruling Communist elite have not spent a long lifetime climbing the exceptionally dangerous slippery pole in their country, to see their beloved nation sink into chaos and their equalitarian beliefs defeated.

You are a British (or American) politician. You know all the above - or your handlers will tell you just before you go on "Question Time" or some other grill-the-pol show. (1) What will you say to your voters? (2) What private plans will you make for yourself, your family and your friends?

Hi-yo Silver, away!

Jesse alerts us to the fact that the Chinese government is not only investing in precious metals, but actively encouraging its citizens to do the same. Funny that our governments aren't doing this.

And gold briefly cracked the $1,000 ceiling today. Naturally, there'll be a reversal at some point, but I have a hunch that much money and effort have been expended trying to put off this psychologically important event. Once you've made the first crack in the eggshell, it gets a lot easier.

A heavy golden straw in the wind?

Many deride "gold bugs" and their increasing insistence that for safety's sake one should have the tangible stuff and not trust third parties; but the Chinese have now called in their gold from London and parked it in Hong Kong.

(htp: Max Keiser)

Water wars

James Quinn raises another critical resource issue, namely, water.

Taking his list "Total Renewable Freshwater Supply, by Country" (which excludes Australia, though the situation there could easily become much more challenging), I divided the figures by population size to obtain a per capita water supply, as follows:

From this we note that Canada may have something to offer the USA (Al Capone would be into mineral water now, I guess), and that India may face an even more desperate shortage than China, unless and until desalination plants take off. And parts of South America may have their attractions.

But the Congo: no. I once taught a lad whose family trekked 1,000 miles to the coast to get away from the civil war, and he very nearly didn't make it, because of a blood-thirsty armed patrol. His father nominated him for the chop rather than the favourite son, but they eventually relented.

Any views from survivalists as to where to move the family for a long-term future?

Splat

A couple of days ago I said that US debt default would splat the US far worse than its trading partners; of course, I missed the point. The real danger is rejection of US debt and the US dollar by its foreign purchasers, and both Karl Denninger and Jesse see that as an outcome of the Japanese election result.

Step by step - how the dollar is recycled via China

A propos China and monetary inflation, please see two very useful and enlightening articles by The Contrarian Investor - this explaining why the money supply is growing there, and this detailing the steps by which money from the US goes on a round trip to China and back.