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“It’s Not A Game When It’s Real-Life” – China’s Social Credit System

“It’s Not A Game When It’s Real-Life” – China’s Social Credit System

In an attempt to imbue trust, China has announced a plan to implement a national ranking system for its citizens and companies. Currently in pilot mode, the new system will be rolled out in 2020, and go through numerous iterations before becoming official.

While the system may be a useful tool for China to manage its growing 1.4 billion population, Visual Capitalist’s Katie Jones notes that it has triggered global concerns around the ethics of big data, and whether the system is a breach of fundamental human rights.

Today’s infographic looks at how China’s proposed social credit system could work, and what the implications might be.

 …click on the above link to read the rest of the article…

Did China Just Announce the End of U.S. Primacy in the Pacific?

Did China Just Announce the End of U.S. Primacy in the Pacific?

Last week’s military parade previewed a series of game-changing weapons that could neutralize American seapower.

Military vehicles carrying DF-17 ballistic missiles march during a parade to celebrate the 70th anniversary of the founding of the People’s Republic of China at Tiananmen Square on October 1, 2019 in Beijing, China. (Photo by Sheng Jiapeng/China News Service/VCG via Getty Images) 

For decades, the United States has taken China’s ballistic missile capability for granted, assessing it as a low-capability force with limited regional impact and virtually no strategic value. But on October 1, during a massive military parade celebrating the 70th anniversary of the founding of the People’s Republic of China (PRC), Beijing put the U.S., and the world, on notice that this assessment was no longer valid. 

In one fell swoop, China may have nullified America’s strategic nuclear deterrent, the U.S. Pacific Fleet, and U.S. missile defense capability. Through its impressive display of new weapons systems, China has underscored the reality that while the United States has spent the last two decades squandering trillions of dollars fighting insurgents in the Middle East, Beijing was singularly focused on overcoming American military superiority in the Pacific. If the capabilities of these new weapons are taken at face value, China will have succeeded on this front. 

In the West, it is called RMA, short for “Revolution in Military Affairs.” The term was first coined by Marshal Nikolai Ogarkov in the early 1980s. Ogarkov, who was at the time serving as the chief of the Soviet general staff, spoke of “developments in nonnuclear means of destruction [which] promise to make it possible to sharply increase (by at least an order of magnitude) the destructive potential of conventional weapons, bringing them closer, so to speak, to weapons of mass destruction in terms of effectiveness.” 

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Chinese Army Ready To Step In Against Rioters – HK’s Carrie Lam Warns For First Time

Chinese Army Ready To Step In Against Rioters – HK’s Carrie Lam Warns For First Time

Following a renewed surge in protest unrest and violence in the wake of the controversial mask ban which went into effect on Saturday, Hong Kong leader Carrie Lam has for the first time issued public warning that the Chinese military could step insaying this drastic step would only happen if it “becomes so bad”.

Expressing hope it won’t come to that, and that the situation will resolve itself under local authorities, she noted that the four month-long raging protests were no longer “a peaceful movement for democracy” and urged outside critics to understand this. 

Demonstrators in Hong Kong, via Axios/Getty Image

“I still strongly feel that we should find the solutions ourselves. That is also the position of the central government, that Hong Kong should tackle the problem on her own, but if the situation becomes so bad, then no options could be ruled out if we want Hong Kong to at least have another chance,” Lam said at a news conference on Tuesday.

Over the past month especially, demonstrations have increasingly involved a smaller but more hardline crowd of mostly face-masked youth relying on extreme tactics such as hurling molotov cocktails at police, and setting stores and infrastructure on fire, along with increased vandalism.

The anti-Beijingers have attempted to bring the city to a complete halt, using various tactics such as erecting barriers on busy roadways, occupying the international airport, and vandalizing train stations including attempting to disable trains. The protests seem to have entered a new, more dangerous phase, which further suggests the Chinese military could be inching closer to direct intervention

 …click on the above link to read the rest of the article…

China De-Dollarization Pushes Into Hyperdrive, Adds 100 Tons Of Gold Amid Trade War Chaos

China De-Dollarization Pushes Into Hyperdrive, Adds 100 Tons Of Gold Amid Trade War Chaos

As the trade war continues to escalate, China’s rapid move towards de-dollarization continues. China added more than 100 tons of gold to its reserves since December 2018 and has also been divesting US Treasuries. 

Bloomberg reported the People’s Bank of China acquired 188,800 ounces, or about 5.9 tons of gold in Sept., raising total holdings to 62.64 million ounces in September from 62.45 million in August. Over the last nine months, China added a whopping 100 tons of gold to its reserves as a hedge to a deepening trade war. 

Gold jumped to a six-year high in September as economic turmoil across the world is pointing to a global trade recession in 2020. Central banks have been leading buyers of the precious metal, especially ones based in emerging markets. Gold purchases by China and central banks will continue through 2020, Bloomberg notes, as protectionist policies spurred by the Trump administration have blown up global supply chains and will continue to produce volatility in global equity markets for the foreseeable future. 

“Given strained relations with the US, China needs a hedge against its large holdings of the dollar, and gold serves that function,” said Howie Lee, an economist at Singapore-based Oversea-Chinese Banking Corp. 

“As China becomes a superpower in its own right, I expect more gold-buying.”

Last month’s purchases boosted the People’s Bank of China’s gold reserves to 62.64 million ounces. As shown below, Comex Gold futures tend to rise when China is adding. 

The Chinese continue to add gold to their reserves to reduce their exposure to the dollar. As one analyst told Bloomberg in August, “It is important for the country to diversify away from the US dollar. Over the long run, even relatively small-scale gold purchases add up and help to meet this objective.”

 …click on the above link to read the rest of the article…

China’s Renewable Boom Hits The Wall

China’s Renewable Boom Hits The Wall

Renewable Boom

When earlier this year China announced subsidies for 22.79 GW of new solar power capacity, those following the country’s renewable energy story must have started to worry. The capacity subsidized is half the amount approved in 2017, at 53 GW. And chances are that solar and wind additions will continue to fall.

Subsidies are one reason. In January, Beijing said it will only approve solar power projects if they are cost-competitive with coal. Judging by the size of subsidies announced in July, more than 22 GW in projects can boast cost-competitiveness with coal.

Yet there is another reason: curtailment. China-based journalist Michael Standaert wrote in a recent story for Yale Environment 360 that China’s solar and wind farms continue to produce electricity that is wasted because there is not enough transmission capacity.

Renewable energy is a top priority for China as it fights one of the worst air pollution levels in the world while subject to an uncomfortably high degree of reliance on energy imports, namely oil and gas. At the same time, it is one of the biggest—if not the single biggest—driver of global energy demand as its middle class grows fast and with it, energy demand. Now, it seems, energy demand is taking the upper hand.

China has substantially increased subsidies for shale gas exploration and methane separation from coal, Standaert writes. He also quotes a former IEA official as saying, “Though China is the largest clean energy market in the world, wind and solar only accounted for 5.2 percent and 2.5 percent of China’s national power generation in 2018.”

What’s more, Kevin Tu, now a fellow at the Center on Global Energy Policy at Columbia University, tells Standaert that “Against the backdrop of an ongoing U.S.-China trade war and a slowing Chinese economy, political priority of climate change in China is unlikely to become very high in the near future, indicating great difficulties for Beijing to further upgrade its climate ambitions.”

 …click on the above link to read the rest of the article…

Peak oil in Asia: where will the oil come from for the Asian Century?

Peak oil in Asia: where will the oil come from for the Asian Century?

Asian oil production peaked above 8 mb/d for the period between 2008 and 2016 (with spikes in 2010 and 2015). The 2015 peak was mainly caused by peak oil in China. Since then Asia’s decline  was almost 800 kb/d or 9%.

Asia-Pacific-oil-production_BP-1965_2018
Fig 1: The Asian oil peak lasted 8 years

The rest of Asia peaked already in 2000 (the year Australia peaked) followed by a very modest decline of 1.1% pa. Let’s go through the countries one by one.

In the following, net oil imports are defined as the difference between oil consumption and production. Please see the note at the end of this post.

Indonesia_oil_production_vs_consumption_1965-2018
Fig 2: Indonesia is in terminal production decline since the 1990s
Australia_oil_production_vs_consumption_1965-2018
Fig 3: Australia’s net oil imports
Malaysia_oil_production_vs_consumption_1965-2018
Fig 4: Malaysia is a net importer since 2010
Vietnam_oil_production_vs_consumption_1965-2018
Fig 5: Vietnam’s net imports are increasing fast
Thailand_oil_production_vs_consumption_1965-2018
Fig 6: Thailand was always a net importer

Thailand’s consumption increases faster than production.

India_oil_production_vs_consumption_1965-2018
Fig 7: India’s consumption exceeded 5 mb/d in 2018

 …click on the above link to read the rest of the article…

Marines “Remind China Of America’s Military Edge” During 11-Day Exercise In The Pacific

Marines “Remind China Of America’s Military Edge” During 11-Day Exercise In The Pacific 

The US is escalating the intensity of its military drills in the waters around mainland China. According to the South China Morning Post, US marines recently held airfield and island-seizure drills in the East and South China seas in order to remind Beijing of “US military supremacy” the Pacific – and of a treaty that the US has with Taiwan, the ‘wayward’ province that President Xi Jinping has vowed to ‘re-unify’ with the rest of the country, by force, if necessary.

The 11-day-long naval drills were carried out around the Philippines and the Japanese island of Okinawa (not far from Taiwan) by the Okinawa-based US marine expeditionary units.

The 31st Marine Expeditionary Unit said the exercises were intended as a ‘warning’ to Beijing: That Washington could carry out amphibious campaigns far from home if Washington ever needed to, say, intervene in “territorial disputes between China and America’s allies in the region.” Most of the activity took place in the Philippines and East China Seas, and around an American naval base in Japan.

The drills were also intended “to remind Beijing of America’s military edge” at a time when the Communist Party is dramatically increasing its military budget in an arms race with the US.

The team performed “reconnaissance” and “surveillance” missions, but they also practiced landing a team of troops to “establish a refueling point” from a massive troop-carrying aircraft.

The unit’s Amphibious Reconnaissance Platoon also performed a reconnaissance and surveillance mission through a high-altitude, low-opening parachute jump onto Okinawa.

A tilt-rotor aircraft, which hovers like a helicopter but flies like an aeroplane, afterward sent a landing team from a Wasp ship more than 400km (250 miles) away to establish the arming and refuelling point. The team achieved its objective in just over one hour, the statement said.

 …click on the above link to read the rest of the article…

London Is Only The 6th Most-Surveilled City In The World

London Is Only The 6th Most-Surveilled City In The World

According to a study by research website Comparitecheight out of the ten most surveilled cities in the world are in China, and as Statista’s Katharina Buchholz notes, the country that has been making headlines for its generous use of surveillance technology is featured heavily throughout the whole ranking that features 120 cities globally.

Central Chinese city Chongqing tops the list with 168 public CCTV cameras per 1,000 inhabitants.

Infographic: The Most Surveilled Cities in the World | Statista

You will find more infographics at Statista

The highest-ranked non-Chinese city is London, also notorious for its strict surveillance of public spaces, but at 68 cameras per 1,000 Londoners, the city is featuring far less CCTV cameras than its Chinese counterparts.

Atlanta is the highest-ranked U.S. city and comes in tenth with 15.6 cameras per 1,000 people.

CCTV technology is controversial in many places around the world, with proponents touting its benefits for fighting crime and opponents cautious about surveillance’s potential to be used as a tool of public control and to violate privacy rights. The makers of the survey said that they found no connection between lower crime rates or a heightened feeling of security and surveillance in the cities surveyed.

The Ugly Truth About The Trade War

The Ugly Truth About The Trade War

This past week was an interesting exercise in false expectations and assumptions. Once again, trade war theatrics were used to stall a stock market plunge as insinuations of a possible “deal” were made by Donald Trump, followed by China’s claim that maybe, just maybe, they would not immediately issue a new round of tariffs right now, but possibly tomorrow, or in a month…

Then, all hell broke loose again when only a few days later both sides jumped into a new round of tariffs leaving markets confused and algo trading computers bewildered, so much so that sometimes they even buy on bad news thinking it’s good news. This is the problem with the Pavlovian response mechanism – You train a dog to salivate at the sound of a bell because he thinks he’s going to get a treat, but then what if you change the bell, or the treat, or the entire dynamic of the process? The dog’s whole world is turned upside down and he curls up in a ball in the corner of the room to make the mental anguish stop.

This is exactly the kind of reaction the globalists are looking for, hence the stop/start insanity of trade discussions, not to mention the dove/hawk behavior of the Federal Reserve. Everything people once thought predictable is being deliberately discombobulated.

Ultimately the circus and the confusion are only products of peoples biases. They want to believe they will get a treat if they act a certain way when certain indicators signal. They want to believe the trade war can be won, or at least that Trump is trying to win. They want to believe that the Fed will save them with a surge of QE.

 …click on the above link to read the rest of the article…

Navy, Marine Corps Begin Arctic War Exercise To Counter Russia and China

Navy, Marine Corps Begin Arctic War Exercise To Counter Russia and China

The US Navy and Marine Corps are conducting a month-long war exercise in Alaska against the rising threats of Russia and China in the Arctic region

A massive threat to the US is that Russia and China are trying to establish the Belt and Road Initiative in the Arctic, by developing new shipping lanes that are now more accessible thanks to global warming.

The US must continue to show force in the Arctic and not allow Russia and China from establishing the “Polar Silk Road.” 

More than 3,000 Navy and Marine Corps personnel will participate in the exercise, along with dozens of vessels, helicopters, planes, and land-based vehicles. 

AECE will allow both services to jointly participate in the “logistical transfer capabilities in the Arctic environment, including wet logistics over the shore, expeditionary mine countermeasures, mobile diving and salvage, and an offshore petroleum discharge system,” said a press release from the US 3rd Fleet Public Affairs.


#USNavy, @USMC to conduct Arctic Expeditionary Capabilities Exercise in Alaska this month: go.usa.gov/xVkfC

View image on Twitter

Navy and Marine Corps participants will conduct Littoral Operations in a Contested Environment (LOCE) to stimulate an emerging threat near the Aleutian Islands and Southern California. The exercise places emphasis on fighting for and gaining sea control around a heavily contested area in the Arctic. 

The exercise will include surveillance, mine-clearing, and support for landing operations.

According to the press release, participating units include “U.S. Pacific Fleet, Marine Corps Forces Pacific, U.S. 3rd Fleet, Expeditionary Strike Group Three (ESG-3), and I Marine Expeditionary Force. Afloat units include USS Somerset (LPD 25) and USS Comstock (LSD 45). Ashore units include Explosive Ordnance Disposal Group One, Explosive Ordnance Disposal Expeditionary Support Unit One, Explosive Ordnance Disposal Mobile Unit One, Explosive Ordnance Disposal Mobile Unit Three, and Mobile Diving and Salvage Unit One.” 

Navy and Marine Corps participants will conduct Littoral Operations in a Contested Environment (LOCE) to stimulate an emerging threat near the Aleutian Islands and Southern California. The exercise places emphasis on fighting for and gaining sea control around a heavily contested area in the Arctic. 

The exercise will include surveillance, mine-clearing, and support for landing operations.

According to the press release, participating units include “U.S. Pacific Fleet, Marine Corps Forces Pacific, U.S. 3rd Fleet, Expeditionary Strike Group Three (ESG-3), and I Marine Expeditionary Force. Afloat units include USS Somerset (LPD 25) and USS Comstock (LSD 45). Ashore units include Explosive Ordnance Disposal Group One, Explosive Ordnance Disposal Expeditionary Support Unit One, Explosive Ordnance Disposal Mobile Unit One, Explosive Ordnance Disposal Mobile Unit Three, and Mobile Diving and Salvage Unit One.” 

At the moment, the Arctic will not become a platform for cooperation between the US and Russia and China, but rather a region of hostility and militarization.

Weekly Commentary: Dudley Sticks His Neck Out

Weekly Commentary: Dudley Sticks His Neck Out

What a fascinating environment; each week bringing something extraordinary. Yet there is this dreadful feeling that things are advancing toward some type of cataclysm.

“U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or refuse to play along? If the ultimate goal is a healthy economy, the Fed should seriously consider the latter approach… There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.” Bill Dudley, Bloomberg op-ed, August 27, 2019

The former president of the Federal Reserve Bank of New York’s piece galvanized an overwhelmingly negative response. Virtually everyone agrees it would be an outrage for the Fed to take such a plunge into the political maelstrom.  

A Federal Reserve spokeswoman responded: “The Federal Reserve’s policy decisions are guided solely by its congressional mandate to maintain price stability and maximum employment. Political considerations play absolutely no role.”

Former Treasury official Larry Summers weighed in (from CNBC interview): “The Fed’s job is to stay out of politics. The Fed’s job is to respond to the best assessment they can make of economic conditions and adjust the economy – interest rates – appropriately…

 …click on the above link to read the rest of the article…

Focus Is Increasingly On How Similar Conditions Are To The Lead Up To WW2: Rabobank

Focus Is Increasingly On How Similar Conditions Are To The Lead Up To WW2: Rabobank

Back with a bang

As mentioned on Friday, welcome to both La Grande rentrée and weltschmerz: and combining the two, this week we are ‘back with a bang’. That seems appropriate given yesterday marked 80 years since the start of WW2, which one would have thought would have received far more media coverage than it did: instead, far more focus was on how similar some conditions are to the lead up to WW2.

For just one market example, yesterday saw new US and Chinese tariffs kick in, taking a further step down the trade war path – if that is what one still insists on calling it. I underline that more holistic view of the US-China standoff as the Wall Street Journal reports that “SEC Revives Fight Over Inability to Inspect Chinese Auditors of Alibaba, Baidu”. The SEC could yet “impose more oversight on US-listed companies that rely upon those [Chinese] auditors. The measures could include forcing the firms to disclose more about their business or accounting and restricting their ability to sell new shares.” Given the Chinese firms are unlikely to comply, that is a potential step towards an eventual US delisting; and don’t forget there is also a push in the US Congress to stop US capital flows into China via bill S. 1731, which will get a further bipartisan tailwind when Congress returns on 4 September. In short, this is a whole other new front in the US-China struggle (capital flows, following tech limits and tariffs), not a ‘trade war’.

Markets May Focus on Dissenters in FOMC Minutes: Rabobank’s Foley

Let’s see just how weak CNY fixing, and CNY itself, are today. Indeed, after the Chinese manufacturing PMI stayed well below 50 over the weekend, will we take out the low of 7.1926 on the back of this news-flow? If not today, then soon, surely. And then where?

 …click on the above link to read the rest of the article…

US Slaps New Tariffs On China; One Minute Later China Retaliates

US Slaps New Tariffs On China; One Minute Later China Retaliates

The biggest reason for last week’s torrid stock market rally was rekindled “optimism” that the escalating trade war between the US and China may be on the verge of another ceasefire following phone conversations, fake as they may have been, between the US and Chinese side. This translated into speculation that a new round of tariffs increases slated for this weekend may not take place or be delayed.

However, that did not happen, and with no trade deal in sight, at 12:00am on Sunday, the Trump administration slapped tariffs on $112 billion in Chinese imports, the latest escalation in a trade war that’s ground the global economy to a halt, sent Germany into a recession, and given the market an alibi to keep rising because, wait for it, “a trade deal is imminent.”

Only, it isn’t, and 1 minute later, at 12:01am EDT, China retaliated with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. The target list strikes at the heart of Trump’s political support – factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down.

The 15% U.S. duty hit consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160 billion in Chinese goods – including laptops and cellphones – will be hit with 15% tariffs on Dec. 15.  China, meanwhile, began applying tariffs of 5 to 10% on U.S. goods ranging from frozen sweet corn and pork liver to bicycle tires on Sunday.

 …click on the above link to read the rest of the article…

The end of the dollar as we know it

The end of the dollar as we know it 

The end of the dollar as we know it
© Getty Images

Current uncertainty and worries are clearly reflected in the financial markets. Investors are fleeing into assets that are deemed safe, such as gold, U.S. Treasuries and the dollar. They still flock to the U.S. on a massive scale, whereas a lot of the current insecurity derives directly from the White House. At the same time, we are seeing more and more commentaries around the question of whether a shift is taking place, slowly but surely, from the dollar toward other currencies.

JPMorgan recently wrote, “We believe the dollar could lose its status as the world’s dominant currency (which could see it depreciate over the medium term) due to structural reasons as well as cyclical impediments.” And this month, Bank of England Gov. Mark Carney claimed that the dollar’s status as a hegemon is putting the global economy under increasing strain and needs to end. 

That the dominance of the dollar is being questioned is not surprising at the present juncture.

Current and future U.S. policies look vague or nonexistent. Allies as well as enemies feel out of control as they have to wait and see what storms are brewing in the U.S. president’s Twitter feed, about to be unleashed.

Countries such as China and Russia are taking an increasingly assertive stance.

The relative supremacy of the U.S. has been waning, and there are mounting doubts about whether the country will continue to support and shore up the international system that it has largely built up and shaped itself.

The power of the United States may be lessening in a relative sense, but the country has its tentacles in projects and countries virtually all over the world.

 …click on the above link to read the rest of the article…

The Real “Helicopter Money”: Since 2009, China Has Created $21 Trillion Of New Money, More Than Double The US

The Real “Helicopter Money”: Since 2009, China Has Created $21 Trillion Of New Money, More Than Double The US 

Back in the days of the Fed’s QE, much of thinking analyst world (the non-thinking segment would merely accept everything that the Fed did without question, after all their livelihood depended on it), was focused on how massive, and shocking, the Fed’s direct intervention in capital markets had become. And while that was certainly true, what we showed back in November 2013 in “Chart Of The Day: How China’s Stunning $15 Trillion In New Liquidity Blew Bernanke’s QE Out Of The Water” is that whereas the Fed had injected some $2.5 trillion in liquidity in the US banking system, China had blown the US central bank out of the water, with no less than $15 trillion in increases to Chinese bank assets, all at the behest of a juggernaut of new credit creation – be it new yuan loans, shadow debt, corporate bonds, or any other form of debt that makes up China’s broad Total Social Financing aggregate.

Now, almost six years later, others are starting to figure out what we meant, and in an Op-Ed in the FT, Arthur Budaghyan, chief EM strategist at BCA Research writes about this all important topic of China’s “helicopter” money – which far more than the Fed, ECB and BOJ – has kept the world from sliding into a depression, and yet is blowing the world’s biggest asset bubble. 

Budaghyan picks up where we left off, and notes that over the past decade, Chinese banks have been on a credit and money creation binge, and have created RMB144Tn ($21Tn) of new money since 2009, more than twice the amount of money supply created in the US, the eurozone and Japan combined over the same period. In total, China’s money supply stands at Rmb192tn, equivalent to $28 TRILLION. Why does this matter?

 …click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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