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| China-Japan-Koreas |
| Trump's Trade War May Spark a Chinese Debt Crisis |
| 2018-07-20 |
| h/t Gates of Vienna There’s no chance China will cut its trade surplus with the U.S. in response to President Donald Trump’s tariff threats. For starters, Washington has made no specific demand to which Beijing can respond. But its efforts may have an unexpected side effect: a debt crisis in China. The 25 percent additional tariffs on exports of machinery and electronics looked, at first blush, like a stealth tax on offshoring. The focus on categories like semiconductors and nuclear components, in which U.S.-owned manufacturers in China are strong, recalled Trump’s 2016 promise to tax "any business that leaves our country." It seems, though, that offshoring wasn’t the target after all. Now, with the imposition of new tariffs on low-value exports that mostly involve Asian value chains, the simple fact of selling cheap products that the U.S. buys has become the problem. Either way, the administration appears set on shrinking its current-account deficit (which, at a moderate 2.4 percent of GDP, is far lower than the 6 percent clocked in 2006-7) just as the Federal Reserve raises interest rates. Distress has already been registered in China. On July 13, the yuan (also known as the renminbi) hit 6.725 to the dollar, the weakest in a year and 5 percent lower than at the end of May. Such a move is nothing earth-shaking for less controlled currencies. But a stable renminbi is a key plank in the leadership’s promise to its people, and the exchange rate is tightly managed by the central bank. ...The Ponzi economy has been sustained by cheap dollars coming in through legitimate or illegitimate channels, and the problem now is that structural surpluses are disappearing and there is less "hot" money from the U.S. seeking yield. When dollars enter, the central bank buys them and issues renminbi. If it has to issue more than is justified by the amount of inflows, it creates inflation, and inflation, which has toppled or almost toppled governments from the Ming dynasty to Tiananmen, is the third rail of Chinese politics. ...Until now, China has managed to keep its huge raft of nonperforming debt afloat thanks to capital inflows, as successive waves of quantitative easing pushed dollars into the world. A tighter dollar would seem to make the bursting of China’s credit bubble an inevitability. When that happens, the renminbi will have to depreciate sharply. This will have a deflationary impact on the world. It will also lead to a decline in China’s share of global GDP, dramatically reduce the nation’s demand for commodities, and diminish its role on the international political stage. ... |
| Posted by:g(r)omgoru |
| #6 The only way China can conquer Taiwan is to destroy the island and occupy the rubble. In response Taiwan can be expected to blast that big damn. Mutually assured destruction. That's hardly going to help their economy. |
| Posted by: ruprecht 2018-07-20 11:19 |
| #5 China can't invade Taiwan. No amphibious capability. There's a reason they call it the "million man swim". If they start any crap in the South China Sea, the US Navy closes the Strait of Malacca. All of China's oil comes from the Middle East through there. Who sits at the choke point of the strait? Why, Singapore, a staunch US ally that doesn't shirk its duty to carry its fair share of the load like most of NATO does. Why do you think China is so big on the whole "belt & road" strategy? To bypass the Strait of Malacca. Of course, road transport costs 13x that of sea transport, but money isn't the issue here. |
| Posted by: Herb McCoy 2018-07-20 11:02 |
| #4 seizes the south sea trade routes At which time all trade with China ends, except with the sh**holes of the world, which will do little to alleviate their debt. |
| Posted by: Procopius2k 2018-07-20 09:23 |
| #3 China has had a debt crisis for years. They have also had enough foreign money to paper over the cracks. They blew through a trillion of their reserves last year and only have an estimated 3 trillion left and are having to spend more at a faster rate to keep their property bubble from popping. Trump knows this and he knows he has them in a real twist now. The challenge is to keep this from turning into an actual war where China raids the Taiwan piggy bank and seizes the south sea trade routes and demands money to let nations trade through it. |
| Posted by: DarthVader 2018-07-20 09:01 |
| #2 Ref #1: A Henry Kissinger notion that permitted him to construct Kissinger Associates, Inc., a New York City-based international geopolitical consulting firm, founded and run by Henry Kissinger in 1982. The firm assists its clients in identifying strategic partners and investment opportunities and advising them on government relations. China is very good for business. Link |
| Posted by: Besoeker 2018-07-20 06:44 |
| #1 In other words, China loses, America wins. I love my president so much. Why wasn't this done decades ago? Oh, right, because the globalists in charge despised American citizens and wanted hostile countries who hate us to become wealthy, on the preposterously stupid notion that somehow they'd start liking us. |
| Posted by: Herb McCoy 2018-07-20 04:59 |