Economic War Breaking Out Between China And Japan

[Toto deVeer]

Sorry, I am losing track of how this helps them.

They are not liked in Asia, their money is owned by the Yanks, they are reliant on exports.

All this posturing is more for the domestic audience. It will blow over soon enough once the Japanese release the fisherman which is likely IMHO

Well, Japan was chastised by the US for trying to unilaterally intervene in the Yen. But it was really China's buying of Samurai Bonds that created this situation. These are the types of covert actions that are going on.

China's growing power economically did not happen by accident. It has been meteoric, by historical standards. This is a part of a larger plan that is headed towards geopolitical dominance, make no mistake about it. To achieve this the US Pacific Fleet and US hegemony, especially over oil lanes, must be pushed back. That's what is in store.

The US position can only be maintained with the co-operation of the ASEAN regional partners. Therefore a logical conclusion is for China to drive wedges wherever possible in this alliance, and weaken the US economy at the same time.

[the primitive]

Japan had been stockpiling these for years, IIRC. It'll take a while for the blockade to have an effect.

China isn't in any position to threaten anyone, militarily or economically.

Both absolutely false statements.

One rare earth is cerium, which goes into catalytic converters for cars. China has been restricting exports of these for a couple of years, to anywhere in the world. This would be seriously bad news for anyone making catalytic converters who happen to buy from Japanese suppliers.

I happen to know that stockpiles are very small, since the export quotas have been inadequate even before this blew up. China want to dominate the world, and large amounts of rare earths - in all sorts of high tech stuff, are in the ground in China. It's very clear which way the wind is blowing.

[Alan B'Stard MP]

I happen to know that stockpiles are very small, since the export quotas have been inadequate even before this blew up. China want to dominate the world, and large amounts of rare earths - in all sorts of high tech stuff, are in the ground in China. It's very clear which way the wind is blowing.

I thought China only had the monopoly on the operational mines - not a monopoly on the deposits?

[Guest_FaFa!_*]

Well, Japan was chastised by the US for trying to unilaterally intervene in the Yen. But it was really China's buying of Samurai Bonds that created this situation. These are the types of covert actions that are going on.

This isn't covert - China has been signalling attempts to move away from US treasuries for a while. The move into the yen is risk management

China's growing power economically did not happen by accident. It has been meteoric, by historical standards. This is a part of a larger plan that is headed towards geopolitical dominance, make no mistake about it. To achieve this the US Pacific Fleet and US hegemony, especially over oil lanes, must be pushed back. That's what is in store.

China is not in any position to push the Pacific Fleet back. They don't have any aircraft carriers. Ok, they could give the Yanks a bloody nose, but they cannot do a Pearl Harbour.

The US position can only be maintained with the co-operation of the ASEAN regional partners. Therefore a logical conclusion is for China to drive wedges wherever possible in this alliance, and weaken the US economy at the same time.

ASEAN is unlikely to cooperate with a country they perceive to be responsible for their rivers running dry and is taking an aggressive stance on the South China Sea. China claims that sea most of the way to Jakarta. That is not going to win them many friends IMHO

Alan B'stard - China has a monopoly on the mines. The problem is bringing replacements on line. A short term problem, certainly. Not a long term one, and pissing off your customers is not a long term strategy.

[Toto deVeer]

This isn't covert - China has been signalling attempts to move away from US treasuries for a while. The move into the yen is risk management

China is not in any position to push the Pacific Fleet back. They don't have any aircraft carriers. Ok, they could give the Yanks a bloody nose, but they cannot do a Pearl Harbour.

ASEAN is unlikely to cooperate with a country they perceive to be responsible for their rivers running dry and is taking an aggressive stance on the South China Sea. China claims that sea most of the way to Jakarta. That is not going to win them many friends IMHO

FaFa: I think we're more or less on the same page. But if you look at the Roman Empire or the British Empire; they didn't collapse by war, they essentially collapsed due to internal economic/political strain and had to withdraw. That is what I'm saying is China's strategy. That they will weaken the US economically whilst covertly creating situations throughout the world and the region that encourage US engagement. I do not for one moment think that China would be foolish enough to go to military War with the US. But they can have an economic war, and limited conflict.

EDIT: I'll just say that China started banning the US's most potent economic weapon, derivatives, back in 2006. The goal is to get the US to withdraw, not to beat them in a direct war.

Edited September 23, 2010 by Toto deVeer

[Guest_FaFa!_*]

Both absolutely false statements.

One rare earth is cerium, which goes into catalytic converters for cars. China has been restricting exports of these for a couple of years, to anywhere in the world. This would be seriously bad news for anyone making catalytic converters who happen to buy from Japanese suppliers.

I happen to know that stockpiles are very small, since the export quotas have been inadequate even before this blew up. China want to dominate the world, and large amounts of rare earths - in all sorts of high tech stuff, are in the ground in China. It's very clear which way the wind is blowing.

I stand corrected on the stockpiling. I remember reading somewhere the Japanese have a lot stockpiled but cannot remember where.

[Guest_FaFa!_*]

FaFa: I think we're more or less on the same page. But if you look at the Roman Empire or the British Empire; they didn't collapse by war, they essentially collapsed due to internal economic/political strain and had to withdraw. That is what I'm saying is China's strategy. That they will weaken the US economically whilst covertly creating situations throughout the world and the region that encourage US engagement. I do not for one moment think that China would be foolish enough to go to military War with the US. But they can have an economic war, and limited conflict.

EDIT: I'll just say that China started banning the US's most potent economic weapon, derivatives, back in 2006. The goal is to get the US to withdraw, not to beat them in a direct war.

I won't agree with your reading of the collapse of the British Empire, but that is by the by. China wants to rise economically, dominating the world is a by product of this. They are pursuing mercantilist policies as they perceive that is in their best interest. It has the effect of irritating the US but that is a price worth paying in their opinion. I believe ultimately that they are mistaken. I don't think the US intended to dominate the world, they just ended up believing they had to do it to maintain their standard of living.

I don't think China necessarily has a coherent strategy for dealing with the US. In my experience they tend to be short termist and whilst they will give an impression of unity to the outside world, vast amounts of horse trading and politiking goes on behind the scenes. They are also hidebound by ideology. Personally I believe that any authoritarian regime will ultimately collapse under the weight of its contradictions.

[okaycuckoo]

I've been reading Michael Pettis' blog the past couple of months - very good insight on China.

These are just the afterthoughts in his latest post, and I thought the point about Summers' resignation points the road ahead:

Before closing, let me suggest a few pieces of news worth noting. First, Martin Wolf at the Financial Times has a piece (“Wen is right to worry about rebalancing”), which purely out of vanity I will recommend.

Second, this week the People’s Daily had two articles, one aimed at the US and one aimed at Europe, warning of the consequences of trade war. It is clear that there is a lot of concern in China, but it is not clear that everyone in Beijing understands what are very legitimate complaints from China’s trading partners. I was at a meeting yesterday between a senior EU trade representative and someone close to Beijing policymakers and I was frankly surprised (even shocked) both at the hectoring tone of the Chinese representative and at his total failure to understand the trade issues, or at least to understand the European view.

China is right to be concerned about protectionist measures abroad, and has some very legitimate complaints, but unless it understand the very equally legitimate complaints over Chinese trade-related policies, it is hard to imagine that we will arrive at any sort of optimal solution. As an aside I wonder what will be the effect of the announcement yesterday that Larry Summers is leaving the White House. My impression is that he has been a real bulwark against rising US protectionism, and his departure may change the tone in Washington substantially.

Third, the Telegraph published a very interesting story about some very strong and angry statements by the former British chancellor. “The euro has been permanently damaged,” they say, “by Germany’s failure to intervene swiftly during the sovereign debt crisis earlier this year, Alistair Darling has said in an unusually frank attack.” As part of the overall deterioration in global trade that I have been writing about for two years, I have always expected that China-bashing was soon going to be rivaled by Germany-bashing. In a world of contracting global demand, the high savings high surplus countries are going to be lambasted for predatory policies. I am not sure there is much that can be done to reverse this process.

http://mpettis.com/2010/09/rumors-on-the-pboc-deregulating-chinese-bank-deposit-rates/

[newbonic]

I thought China only had the monopoly on the operational mines - not a monopoly on the deposits?

There was some talk abour rare earths being present in Greenland a year or so ago. Climate change may increase access to such resources, if they're there (I don't want to derail the thread by getting flamed by the Jeremy Clarkson crew though).

On the broader point of China's rise: I was working in the telecomms industry back in 2005 when BT announced their choice for the vital MSANs and other stuff inside exchanges that carries the UKs comms spine (for their 21 CN program). It was expected to be Japan's Fujitsu and UK's Marconi. It was a big surprise when China's Huawei were chosen instead of Marconi. I've since been in major metropolitan BT exchanges with Fujitsu and Huawei kit carrying voice and IP traffic over copper and fibre. Outside it says BT, inside it's Japanese and Chinese kit.

I wonder what the strategic implications of that are?

[JimDiGritz]

I'm F**KING LIVID about something here, and when I find out what it is, heads will F**KING ROLL

Excellent!

[azogar]

this thread has descended into a morass of ifs, buts and maybes, therefore, we can conclude the future is still very much unknown

[Sonic the Hedge Fund]

It was a big surprise when China's Huawei were chosen instead of Marconi. I've since been in major metropolitan BT exchanges with Fujitsu and Huawei kit carrying voice and IP traffic over copper and fibre. Outside it says BT, inside it's Japanese and Chinese kit.

I wonder what the strategic implications of that are?

Worse than that, optical and access kit is ALL made in China now, even the major US/European brands

Trade war with China would destroy western Telecoms industry

[gus]

They are not in a position to start dicking about. They are reliant on exports - tit for tat will hurt them more. They can (arguably) only control their own nearby waters. Well, so what? They can bugger about in their own backyard all they want - no-one is selling to them, so no-one will care. ASEAN members already dislike them (i) the overseas ethnic Chinese are the Jews of Asia and are widely resented in Thailand, Philippines and Indonesia where they own a lot of the major players (ii) China claims a ludicrous amount of the South China Sea (iii) China has been building dams in the south of the country causing water shortages in their southern neighbours. They could try to do a CIA in Africa, but I think it is a bit of a stretch frankly.

In Indonesia the Chinese run the drugs trade, the timber exports(illegal logging) and the market in export of endangered animals and their parts (they'd happily kill the last rhino just to grind its horn into one of their septic potions).

They are the principal supporters of the military junta in Myanmar and the rigid spine behind North Korea.In Africa they'll happily party with the most corrupt of dictators in their many "Rogue Aid " deals without a second thought.

The old USSR was a benevolent, altruistic , soft-centred big daddy in comparison.

[Toto deVeer]

In Indonesia the Chinese run the drugs trade, the timber exports(illegal logging) and the market in export of endangered animals and their parts (they'd happily kill the last rhino just to grind its horn into one of their septic potions).

They are the principal supporters of the military junta in Myanmar and the rigid spine behind North Korea.In Africa they'll happily party with the most corrupt of dictators in their many "Rogue Aid " deals without a second thought.

The old USSR was a benevolent, altruistic , soft-centred big daddy in comparison.

I'll add that in the middle east a certain Chinese contractor has been caught bringing Chinese prisoners to build their projects.

[Toto deVeer]

I won't agree with your reading of the collapse of the British Empire, but that is by the by. China wants to rise economically, dominating the world is a by product of this. They are pursuing mercantilist policies as they perceive that is in their best interest. It has the effect of irritating the US but that is a price worth paying in their opinion. I believe ultimately that they are mistaken. I don't think the US intended to dominate the world, they just ended up believing they had to do it to maintain their standard of living.

I don't think China necessarily has a coherent strategy for dealing with the US. In my experience they tend to be short termist and whilst they will give an impression of unity to the outside world, vast amounts of horse trading and politiking goes on behind the scenes. They are also hidebound by ideology. Personally I believe that any authoritarian regime will ultimately collapse under the weight of its contradictions.

As long as the country continues to prosper, I cannot see any serious political upheaval. If China were to go through a 1930s US-type depression, then upheaval would be certain, but the leaders might decide to pick a fight first. But, in reality China does not need a master plan, just momentum.

Like the US in the early 20th century didn't really have any plan to be a world power, in fact Pres Wilson did his utmost to keep the US out of WW1, even after the sinking of the Lusitania. He almost lost his re-election over it. But it happened anyway, and quite by chance. The total size of the US Army was only 80,000, and most of those were involved in a conflict with Mexico.

*****

China Holding Four Japanese for Illegally Filming Military Targets: China has informed Japan that it is now questioning four Japanese, apparently over alleged unauthorized entry into a military zone, according to the Japanese Embassy in Beijing. Xinhua News Agency reported Thursday that Chinese authorities are investigating four Japanese nationals for allegedly entering a military zone in Hebei Province without authorization and videotaping military targets.

*****

China-Pakistan reactor deal to open fresh US rift. A new potential dispute between the US and China is opening up as Beijing goes public with its plans to export two more nuclear reactors to Pakistan, in a deal that will raise ­questions about controls on nuclear technology.

Chinese officials have admitted privately since earlier this year that they planned to go ahead with the long-mooted plan to sell Pakistan two more nuclear reactors, in addition to the one reactor it has already built and a second under construction.

However, Beijing has this week publicly acknowledged the plan for the first time. Jiang Yu, a spokeswoman at the Chinese foreign ministry, said that Beijing had already informed the International Atomic Energy Agency of the new agreement with Pakistan.

*****

U.S. walks tightrope in China-Japan dispute. The Obama administration is walking a tightrope over a diplomatic dispute between China and Japan, as it seeks to curb aggressive Chinese behavior on the high seas while not alienating the Asian giant.

The latest controversy over the simmering dispute erupted when Japanese patrol officers arrested the captain and crew of a Chinese fishing boat earlier this month near disputed islands -- known as Diaoyu in China and Senkaku in Japan.

The crew was released. But the Chinese captain remains in custody, accused of ramming two Japanese boats with his vessel.

On Friday, Japan said it will release the captain, but did not offer a time frame.

The economic repercussions have been immediate. The Chinese government cut off high-level talks with Japan on coal and increased commercial flights between the countries.

The dispute also threatens planned talks on a 2008 agreement to jointly develop gas fields located near the disputed islands and in other parts of the East China Sea.

*****

Japan warns China against 'extreme nationalism'. Japan has warned China that both nations must avoid stirring up "extreme nationalism" in their ongoing row over the detention of a Chinese sea captain.

The Japanese government said it wanted to use all possible channels to avoid any further escalation.

China responded by saying it would not meet Japanese leaders on the sidelines of a UN summit in New York this week.

[gus]

I'll add that in the middle east a certain Chinese contractor has been caught bringing Chinese prisoners to build their projects.

A better deal than those others birds who've had organs forcibly removed for the transplant trade !!

[Toto deVeer]

Escalatiing?

From Zerohedge/Reuters

Japan Prime Minister Refuses To Cede To Chinese Demands For Apology As Japanese Protester Throws Smoke Flare At Chinese Consulate

We believe that those who think this incident is now over, are in for a rude awakening. At this point it is sure to only escalate, with brief periods of calm, as the entire world recedes into the hypermodern equivalent of world war: protectionism, trade wars and FX intervention.

A Japanese man was arrested in Nagasaki, western Japan, on Sunday after he threw what appeared to be a smoke flare into the grounds of the Chinese consulate general, Kyodo news agency said.

[spanman]

China is not in any position to push the Pacific Fleet back. They don't have any aircraft carriers. Ok, they could give the Yanks a bloody nose, but they cannot do a Pearl Harbour.

But they are getting there.

Linky

[council dweller]

Oh go on China me old china, buy a load of Yen....you know you want to!

Btw, Jpy/Gbp went a bit haywire just before closing. (up 1.5% on BBC) What happened?

[Saberu]

They hate each other. But they hate foreigners more, so you'd have plenty of meat for the grinder in a war.

Sounds about right, Chinese people screw eachother over for a dime but not as quickly as they screw foreigners. But I find Chinese people on average to be nicer than British so doesn't look good for us

One of my main gripes with China is it's split between the traditional types of people and those obsessed with wealth. So in terms of girls, you get traditional ones who will only have a Chinese boyfriend and the more open ones prefer money so it's lose lose unless you have money.

Right now it's socially acceptable in China for rich men to have dozens of girlfriends which is really destroying the society as many girls values in terms of money is to have a comfortable life like that of a rich man's girlfriend. Even in colleges where students are very poor their girlfriends will expect to be treated for every meal, often have present bought for them and treated to clothes and shoes shopping.

A lot of people say the US could be symbolised by a dollar sign as meaning money obsession, but that could not be more true for China. I know a guy who only earns 300 pounds/ month who bought a car which is probably 5 years salary for him, but it probably makes him look richer- so he sees it as a worthy investment and in China he's not wrong

If I wanted to look attractive here I would buy a nice car, a nice watch and wear smart clothes. But I don't do any of that as I'd rather just leave.

[gus]

Sounds about right, Chinese people screw eachother over for a dime but not as quickly as they screw foreigners. But I find Chinese people on average to be nicer than British so doesn't look good for us

One of my main gripes with China is it's split between the traditional types of people and those obsessed with wealth. So in terms of girls, you get traditional ones who will only have a Chinese boyfriend and the more open ones prefer money so it's lose lose unless you have money.

Right now it's socially acceptable in China for rich men to have dozens of girlfriends which is really destroying the society as many girls values in terms of money is to have a comfortable life like that of a rich man's girlfriend. Even in colleges where students are very poor their girlfriends will expect to be treated for every meal, often have present bought for them and treated to clothes and shoes shopping.

A lot of people say the US could be symbolised by a dollar sign as meaning money obsession, but that could not be more true for China. I know a guy who only earns 300 pounds/ month who bought a car which is probably 5 years salary for him, but it probably makes him look richer- so he sees it as a worthy investment and in China he's not wrong

If I wanted to look attractive here I would buy a nice car, a nice watch and wear smart clothes. But I don't do any of that as I'd rather just leave.

Well, if you find them nicer than the Brits, they must be a very different race to the 12 million Chinese in Indonesia that I've had the misfortune to live and work amongst for the last 10 years! They love it here because they can use their money to bribe their way around the systems , buying anything and anyone they want.

I've found them to be without charm, devoid of conscience, highly manipulative and driven only by greed, pride(face)and the Dollar. Indeed, their unpleasantness has noticeably increased with their awareness of their growing economic might and their resentment at their perceived maltreatment over the last 150 years. (Pushing to the front of the queue whether it be in a bank or supermarket is usual and don't expect them to hold the elevator doors open for you, as you struggle with your bags; they will look you in the eye as they quickly press the "close" button).

They ingratiate themselves with the host nation (arm on the shoulder as they insist," we're just like you" )but the good jobs go the their relatives and friends, whilst the shop floor jobs go the the locals on subsistence wages.They educate their kids in Oz or the US or Europe only for them to return and widen and perpetuate the gulf between them selves and the host (to the everlasting detriment of the latter).

When I arrived in Jakarta I had no pre-conceived ideas about the Chinese; 10 years later I have developed a deep-seated loathing of them. The West would do well to wake up .....soon.

[council dweller]

If I wanted to look attractive here I would buy a nice car, a nice watch and wear smart clothes. But I don't do any of that as I'd rather just leave.

Oh yeah ....where to next?

[Guest_FaFa!_*]

Well, if you find them nicer than the Brits,

Two points in favour of the mainland Chinese

(i) If you are friends with them they do treat you like royalty. A lot of Chinese are happy to pal up with foreigners for the exoticism/free English lessons. However this can feel shallow and you often wonder if they genuinely like you. They go the extra mile (but will expect you to return favours) for friends, but treat anyone they haven't been introduced to like total shit. In fairness, they treat each other in the same manner (ie anyone with something they want gets sucked up to, everyone else gets treated like toss).

(ii) They don't start fights when pissed. I have never felt as safe as I did in the Far East.

I am not sure I'd describe them as nicer than the Brits, but it is fair to say you are a lot less likely to be physically attacked by them.

[Toto deVeer]

A few highlights of recent action:

Earlier this week Chinese officials had essentially told the US not to get involved with the regional territorial disputes. But this is a wedge issue in emerging Asia as China has territorial disputes with several countries and the Japanese dispute is simply the highest profile now. Several other ASEAN countries, including Indonesia for example, have rejected China’s stance and appear to be embracing the US as a counter-weight to the PRC. This dovetails nicely with the effort by the Obama Administration to re-engage ASEAN countries.

Dagong’s claim to fame came with its first international sovereign ratings report released in July of this year. In the report, Dagone stripped the U.S. the AAA rating, while giving emerging economies like Brazil and China higher credit ratings than the US , the UK, and Japan. Those ratings widely contradict the ones assigned by the Big Three – Moody’s, Standard & Poor's, and Fitch.

Dagong, then followed up with some sharp criticism of its western counterparts, and a verbal clash with Harold "Terry" McGraw III, whose company owns Standard & Poor’s credit agency.

So, it is of no surprise that Dagong immediately issued an angry rebuff calling the SEC’s decision discriminatory against China and a barrier specifically set for Dagong. It also takes the matter a few octanes higher –citing China’s sovereignty and financial assets safety are at issue here. From People’s Daily Online:

“….the contention by U.S. authorities… amounts to bias against Chinese credit-rating agencies. Dagong will not accept the NRSRO status at the price of betraying national sovereignty….. Dagong will consider conducting activities at the right time to protect its rights, including seeking legal actions against the SEC."

China Daily also cited Dagong statement that having China's own say in credit rating in the United States is significant to safeguarding the security of China's overseas financial assets. And Dagong aims to enter the U.S. market to protect China's interests as the largest creditor there. As of July, China held $846.7 billion worth of U.S. Treasurys, according to official U.S. data.

I certainly disagree with C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington who says "Forcing China to raise the value of its currency may create 500,000 jobs in the U.S."

I do not think it will create any jobs. In fact, I think it will cost jobs. Manufacturing is not going to return to the US just because we pass tariffs on China. Wage differentials are too great. Instead, imports will simply come from some other country and rising prices will hurt sales.

Of course we could pass tariffs on the whole world, but who then buy our stuff? The most likely thing to happen if we pass massive numbers of tariffs is global trade will collapse.

Prepare for currency/trade wars

Chinese Premier Wen/Entourage going on Billion Dollar Business Shopping Spree in USA

SEC Refuses Dagong Listing

[Toto deVeer]

Just a quick note from memory:

During the late 1990's I purchased a date planner when travelling through the middle east. It was, like most things, manufactured in China,

What shocked me when I started using it was the time zone map printed within the front and rear covers. Instead of GMT/London the centre of world time was based at Beijing. Yet this was an English-based planner for export sale...

These little things are very telling indicators of national ambition...