Jul 262010

The United States-South Korea response to the recent sinking of the South Korean warship Cheonan – supposedly by North Korea – includes the arrival of US Navy (USN) aircraft carrier USS George Washington along with other US warships at the South Korean port of Busan, much to China’s chagrin.

“Invincible Spirit”, a joint US-South Korea exercise that is about to get underway, will be sending North Korea a strong message – “Don’t try this again.”

Beijing is very irritable and nervous as a result.

“The moment is truly delicate,” said Zhu Feng, a professor of International Studies and deputy director of international strategy center at Peking University in Beijing. "Beijing is also worried about the possibility of the situation to spill into a military collision with North Korea. That’s why there is opposition from China. The joint exercise is rocking the boat.” [1]

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Apr 272010

Let’s get tough with China

A U.S.-CHINA TRADE WAR IS RAPIDLY brewing, as President Barack Obama pushes China to adopt a “market-oriented exchange-rate policy” and Premier Wen Jiabao sharply retorts that the yuan isn’t undervalued. Meanwhile, 130 members of the U.S. House of Representatives are pressing the Treasury Department to brand China a "currency manipulator" and to impose countervailing duties, while China promises swift retaliation.

China’s fixed exchange-rate policy isn’t harming just the U.S. It is also threatening the global economic recovery, even as an artificially weak yuan has given rise to what Premier Wen has branded Public Enemy No. 1 in China -- rapidly rising inflation.

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Mar 102010

Even while employing sanctions against Iran, the U.S. government is confirming that sanctions do not work.

The Chinese government has threatened to impose sanctions on the United States if the U.S. government persists in its decision to sell weapons, including F-16s, to Taiwan. According to the New York Times, the threat was issued by a top Chinese military official, who did not specify what the sanctions would be. However, a possibility would be the wholesale dumping of U.S. government securities onto the international financial markets. Those instruments represent the enormous amounts of money that China has loaned the U.S. government to fund its enterprises in Iraq and Afghanistan.

Notwithstanding the U.S. government’s steadfast insistence that its sanctions will induce Iranian government officials to submit to U.S. demands regarding its nuclear program, the U.S. government is steadfastly refusing to succumb to China’s threat to impose sanctions on the United States.

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Mar 012010

The markets were atwitter this morning over Greece. But chances are you already know that. It’s China we have on the brain.

And so does Joe Six-pack. ABC News and The Washington Post just polled 1,000 Americans and found…

  • 41% say the 21st century will be the “Chinese Century”
  • 40% say it will still be an “American Century”
  • A slim majority says the US will play a smaller role in the world economy this century
  • But a majority also says that will be either a good thing or, at worst, neutral.

We’re trying to be optimistic and take that last point as a sign that the protectionist monster among the masses is at bay.

In the meantime, there are other concerns…

China has just postponed several military “exchanges” between Beijing and Washington – visits by high-level officials and such. It’s the first real, tangible retaliation for the US sale of $6.4 billion of military gear to Taiwan.

Rumor has it China will buy all 191.3 tons of gold the International Monetary Fund said last week it would put on the open market. So far, only Russian news agencies are reporting this; it’s yet to be confirmed by Western sources.

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Jan 182010

Lawrence Summers, the president’s chief economic strategist and aide, has been declaring for more than a month that the recession is “over” and that our recovery has begun. He also seems to think that Americans are generally in agreement about these “facts.” Many economists have talked about the “jobless recovery” we will see in 2010, but when one considers the real numbers the concept of a jobless recovery seems impossible.

Leo Hindery, writing for The Huffington Post, discussed the extent of American joblessness in an article published on January 12.

According to the Bureau of Labor Statistics, the United States currently has about 15 million unemployed workers, and a national unemployment rate of 10.0 percent. However, if you account for the “underemployed” – those working part-time instead of full-time, those who live outside of the economy, or those who have given up the job search – those figures roughly double.

America doesn’t have 15 million people in need of work; it has almost 30 million in need of work. The national unemployment rate isn’t 10.0 percent; it is closer to 19 percent or 20 percent. The so-called “real” unemployment rate in the United States is more representative of the Great Depression than it is of a simple recession similar to those of the 70s and 80s.

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Jan 032010

I’m still swamped with grading papers and with preparations for our annual New Year’s Eve potluck (about which more in a day or two), but I hope everyone takes a look at the Times piece on China’s commercial activities in Afghanistan. While we’ve been running around playing whack-a-mole with the Taliban and “investing” billions each year in the corrupt Karzai government,” China has been investing in things that might actually be of some value, like a big copper mine.

As the article suggest, it’s not like U.S. troops are “guarding” China’s investments. Rather, there’s a tacit division of labor going on, where “American troops have helped make Afghanistan safe for Chinese investment.”

The rest of the article makes depressing reading, however. Here’s what one Afghan contractor had to say:

“The Chinese are much wiser. When we went to talk to the local people, they wore civilian clothing, and they were very friendly,” he said recently during a long chat in his Kabul apartment. “The Americans – not as good. When they come there, they have their uniforms, their rifles and such, and they are not as friendly.”

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Dec 222009

Around the world, China is investing in oil and gas resources to fuel its booming manufacturing industries and transportation sector to continue its sky-rocketing economic growth. China is not endowed with very much oil and gas resources of its own. Thus, it needs to partner with countries around the world to ensure availability of future supplies of oil and natural gas that it will need to keep up its current pace of economic growth.

The U.S., which does have oil and gas resources, is not following China’s lead in investing in these resources. Instead, the U.S. is looking toward wind and solar technologies to fuel its economy. However, wind and solar power are generating technologies and will not help where oil is needed in the transportation and industrial sectors.

Further, wind and solar power have capacity factors that cannot compete with those of fossil fuel generating technologies, and they can create instability issues with the electrical grid. They are also more expensive technologies and must have government support through tax credits to compete at all with fossil-fuel generating technologies.

China’s Investment in Oil and Gas

China has seized on the global recession to gain access to oil and gas resources and supplies. The atmosphere is ripe for Chinese firms to invest in these resources because:[i]

* Acquisitions are now more favorable than they were in early 2008, due to lower oil prices and, hence, lower asset prices.
* China is less constrained than many of its international counterparts in terms of where they can invest (e.g. Iran).
* Financing is not a problem, because Chinese banks are willing and able to provide needed funds.
* Competition for these assets in some areas has lessened.

Not only is China investing in places like Iran, Iraq, Kazakhstan, Nigeria, Venezuela, and Argentina, but it is in the U.S.’s backyard, looking towards usurping the U.S. supply of Canadian oil sands. China is a good customer for Canada, as Canada fears that the U.S. may introduce a low carbon fuel standard[ii] or other legislation that would restrict our purchases of oil sands from Canada[iii]. China is also looking at a possible purchase of leases in the Gulf of Mexico where Devon Energy is looking to sell its U.S. leases.[iv] The sale of these offshore leases requires the approval of the Mineral Management Service in the U.S. Department of Interior. China is willing and able to be at the forefront of any misstep other countries make to gain a foothold and secure oil and gas supplies, and the U.S. seems to be giving it elbow room.

China is also investing in oil and natural gas pipelines to ensure access to its investments and to divert some of its oil imports from the Middle East away from the Straits of Malacca. Oil pipelines are being built from Russia, Kazakhstan, and the coast of Myanmar. [v] A natural gas pipeline from Turkmenistan should be operating in the near future, and several liquefied natural gas terminals are either operating or are expected to be operating shortly.[vi]

While the total amount of “investment” loans made by China to oil and gas producing countries for guaranteed future supplies of oil and gas are unknown, China has clearly invested billions of dollars in their ‘loans for energy’ program. [vii] The main provider of the loans is the China Development Bank, and thus they are essentially Government loans. Just on Tuesday, December 8th, for example, Nigeria’s presidential advisor for energy announced that Chinese companies have proposed investing $50 billion to buy 6 billion barrels of oil reserves in Nigeria.[viii]

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Jul 162009

Chinese executes Tibetans.


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