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Some Confucian Calm, Please!


The United States and China look like two punch-drunk prizefighters squaring off for a major championship fight. They have no good reason to fight and every reason to cooperate now that both their stock markets have been in turmoil.

Six hundred point market swings down and then up look like symptoms of economic nervous breakdown.

Factions in both nations are beating the war drums, putting presidents Donald Trump and Xi Jinping under growing pressure to be more aggressive.

Trump shoulders much of the blame for having started this unnecessary confrontation by imposing heavy duties on Chinese goods. The US president has turned the old maxim on its head that nations that trade heavily don’t go to war. The US and China, both huge trading partners, appear headed to military clashes, or even full scale war, if their governments don’t come to their senses soon.

Trump was clearly trying to bully China into major trade concessions and better commercial behavior. He is right about this. I’ve done business in China for over 15 years and seen every kind of chicanery, fakery and double-dealing imaginable. China learned from the French that the First Commandment is ‘Thou Shalt Not Import.’

The Japanese are no better. I recall Japanese health authorities telling my pharma firm that all our tablets had to be triangular shaped to make them nearly impossible to swallow.

Theft of technology is indeed rampant, as Trump asserts. But has he looked into CIA and NSA’s techno spying recently? They ransacked the Soviet Union during its last dying days. Much of our postwar missile technology was developed by German scientists spirited off to the USA. After the Sputnik launch in 1957, I recall seeing a German cartoon showing a Soviet and US satellite in orbit next to one another. One whispers to the other, ‘Now that we’re alone, let’s speak German!’

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As Trade Talks Begin, US Infuriates Beijing With Latest Navy Operation In South China Sea

As a US delegation led by senior trade officials arrived in Beijing on Monday to begin the first round of in-person talks to resolve the burgeoning US-China trade war, the US has reportedly carried out its latest ‘Freedom of Navigation’ operation in the South China Sea – though at least this time there wasn’t a near-collision with a Chinese ship.

Since President Trump’s inauguration, the US has stepped up its ‘Freeops’ as the US Navy seeks to contain China’s growing military ambitions in the Pacific. But since the trade war began, the US has demonstrated a keen sense of timing, contributing to China’s decisions to cancel security conferences and reconsider coming to the table to talk on trade.

Nine Dash

But this time, the controversial maneuver seemingly doesn’t bode well for the fate of a lasting US-China trade compromise. According to the Wall Street Journal, the US-guided-missile destroyer the USS McCampbell patrolled within 12 miles of the Paracel Islands in the South China Sea on Monday. In particular, it came within a few miles of three islands: Tree, Lincoln and Woody.

China sent its own ship to try and deter the McCampbell, but ultimately decided to file an official complaint. According to Bloomberg, China urged the US to halt “provocative actions” in the South China Sea. “The actions by the U.S. fleet have violated Chinese law and related international laws, and undermined the peace, security and good order in the relevant waters,” Chinese Foreign Ministry spokesman Lu Kang told a briefing Monday in Beijing. “China strongly opposes the actions.”


The Paracels are claimed by Vietnam and Taiwan but have been controlled by China since the Communist Nation seized them from Vietnamese forces in 1974. Further alarming the US, Beijing has upgraded several military outposts in the Paracels and deployed jet fighters to at least one, according to satellite images and US officials.

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President Xi Orders Chinese Army To “Prepare For War”

In just a few short days, China has proved that investors who have been underestimating the geopolitical risks stemming from the simmering tensions between the US and China over the latter’s territorial claims in the South China Sea and paranoia over the fate of Taiwan – a de facto independent state that President Xi Jinping is aggressively seeking to bring under the heel of Beijing – have done so at their own peril.

Earlier this week Xi Jinping, the Chinese emperor for life president provoked an angry rebuke from the island’s pro-independence president when he demanded during a landmark speech earlier this week that Taiwan submit to “reunification” with Beijing.


And as if tensions between China and the international community weren’t already high enough amid a worsening economic slowdown that’s threatening global economic growth and a tenuous trade “truce” with the US,  in another speech delivered on Friday during a meeting of top officials from China’s Central Military Commission which he leads, Xi took his belligerent rhetoric one step further by issuing his first military command of 2019: that “all military units must correctly understand major national security and development trends, and strengthen their sense of unexpected hardship, crisis and battle.”

China’s armed forces must “prepare for a comprehensive military struggle from a new starting point,” Xi said adding that “preparation for war and combat must be deepened to ensure an efficient response in times of emergency.”

Xi’s order prioritizes training with a focus on combat readiness, drills, troop inspections and resistance exercises.

It applies to all units of the PLA, including troops, academies and armed police, and is designed to “ensure new challenges are met and battles are won,” according to a copy of the guidelines seen during the television report.

In other words, Xi just ordered the Chinese military to prepare for war.

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Will the ‘Taiwan question’ give rise to a World War III scenario?

Will the ‘Taiwan question’ give rise to a World War III scenario?

The United States and China are set to go head-to-head over disputes in relation to Taiwan and the South China Sea, with deadly consequences on the immediate horizon.

You wouldn’t know it with all the media hype over the US mid-term elections, but the US and China are on a deadly collision path in the South China Sea and Taiwan Strait. In the last two months, the US military has flown B-52 bombers and carried out its so-called “freedom of navigation” operations in the South China Sea. There have also been instances of US warships sailing through the Taiwan Strait in support of Taiwan, an island which China considers to be a rogue part of Chinese territory.

On a side note, it is amazing to say the least that the US believes it should have the “freedom to navigate” in the South China Sea, yet seems to get up in arms when Iranian ships expect the same kind of freedom in the Persian Gulf.

Near-collisions in the South China Sea

Last September, US and Chinese warships almost collided when sailing near an islet claimed by Beijing in the Spratly Islands. Reportedly, the Chinese warship threatened the US Destroyer that it would “suffer consequences” if it did not move, as it sailed within 45 yards of the American vessel.

In a last-ditch effort to avert this collision course, US Secretary of State Mike Pompeo and Secretary of Defence James Mattis will hosttheir Chinese counterparts Yang Jiechi and China’s Defence Minister Wei Fenghe this Friday for talks on reducing tensions. However, I think we can say with some confidence that these talks will be absolutely meaningless. Firstly, China already canceled the first round of talks set for September due to their frustration over US-enforced sanctions. Secondly, Chief of US Naval Operations Adm.

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China’s President Orders Military To “Prepare For War”

China’s President Xi Jinping ordered the military region responsible for monitoring the South China Sea and Taiwan to “assess the situation it is facing and boost its capabilities so it can handle any emergency” as tensions continue to mount over the future of the South China Sea and Taiwan, while diplomatic relations between Washington and Beijing hit rock bottom.

The Southern Theatre Command has had to bear a “heavy military responsibility” in recent years, state broadcaster CCTV quoted Xi as saying during an inspection tour made on Thursday as part of his visit to Guangdong province.

“It’s necessary to strengthen the mission … and concentrate preparations for fighting a war,” Xi said. “We need to take all complex situations into consideration and make emergency plans accordingly. “We have to step up combat readiness exercises, joint exercises and confrontational exercises to enhance servicemen’s capabilities and preparation for war” the president-for-life added.

According to the South China Morning Post, Xi’s visit to the military command was one of several he made during a four-day trip to the south China province aimed at bolstering confidence amid an economic slowdown, and growing trade and strategic disputes with the United States.

Xinhua reports President Xi “stressed the need to focus on combat research and commanding, to advance work in all areas and accelerate developing strong and efficient joint-operation commanding institutions for theatre commands to comprehensively boost the military’s battle-winning ability.”

The president instructed the military to ramp-up opposition to ‘freedom of navigation’ exercises being undertaken by the US, Australia, France, the UK, Japan and others through the waterway through which arterial shipping lanes have grown since the end of World War II.

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“Prospect Of U.S.-China War Rising” After US Warships Sail Through Taiwan Strait

Just after U.S. warships again made a provocative passage through the Taiwan Strait on Monday, further making already strained tensions between the Washington and Beijing — currently in the midst of a trade war even hotter, Steve LeVine at Axios poses the question long on the Western public’s mind: what are the chances of a US-China war?

LeVine recently crossed paths with Graham Allison, who published his explosive “Destined For War: Can America And China Escape Thucydides Trap?” a year ago which detailed the reasons for a coming major war being all but inevitable, sparking a global debate about the Harvard professor’s controversial thesis. LeVine followed up with Allison in relation to the recent uptick in tensions in the region of the South China Sea:

He said, if history holds, the U.S. and China appeared headed toward war.

Over the weekend, I asked him for an update — specifically whether the danger of the two going to war seems to have risen.

“Yes,” he responded. The chance of war is still less than 50%, but “is real — and much more likely than is generally recognized.”

LeVine comments of Graham Allison’s central thesis, “Glued to a 2,400-year-old script, the U.S. and China seem to be on the same war-bound path that great powers have taken since Sparta fought upstart Athens.”

LA Times: On Monday the ships sailed from the south to the north through the Taiwan Strait and were shadowed by multiple Chinese navy vessels. (U.S. Navy)

The reference is to the History of the Peloponnesian War, in which ancient Greek historian Thucydides told us the tale of a dominant regional power (Sparta) that felt threatened by the rise of a competing power (Athens).

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Not All Quiet on South China Sea

Not All Quiet on South China Sea

Photo Source Official U.S. Navy Page | CC BY 2.0

The near collision last week between a US warship and a Chinese destroyer in the Spratlys was more than two naval powers playing cat and mouse on the high sea. The incident came hot on the heels of Trump and Pence accusing China of meddling in US midterm elections, America slapping sanctions on China’s defence procurement unit and its head for buying S-400 air defense system from Russia, wild allegations that China interned more than one million Uighur Muslims in Xinjiang, and the intensifying Sino-American trade war.

Such vitriol coming thick and fast from Washington perturbs and angers Beijing, even though China was the preferred scapegoat and whipping boy in past American hustings. What is different this time round is the total and full-frontal assault on the People’s Republic since the National Security Strategy report in December last year named Beijing, along with Moscow, as the foremost threats and adversaries to Washington. Already, the venom and viciousness spouted by Washington against China in recent weeks have far surpassed that directed at Russia.

America’s Unipolar Moment was well and truly over when Russia regained Crimea after the US-orchestrated coup against the democratically-elected Ukrainian President Viktor Yanukovych in 2014. Cold War 2.0 began in earnest when Moscow sent troops to Syria in September 2015 at the request of President Assad to help Damascus fight against ISIS terrorists sponsored, trained and armed by the US. The new Cold War expanded to include China late last year after the National Security Strategy report.

It’s against such backdrop and in such geopolitical context that the recent incident in the Spratlys should be viewed. China’s patience and tolerance with almost monthly freedom of navigation patrols or FONP by the American Navy has been tested to the limit.

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

Macquarie: “There Is A Growing Possibility That The Plot Might Go Terribly Wrong”

EMs in the crosshairs: Between war games, fake news and bonds

From military exercises to trade wars, the fury is intensifying. At the same time, global liquidity is compressing while rates are rising. Growing uncertainty, contracting liquidity & rising cost of capital will continue to place non-US assets (and in particular EMs) in the crosshairs.

“Wag the Dog” showed the power of ‘fake news’ but…

In the 1997 movie ‘Wag the Dog’, a spin doctor was hired to help distract people from sex scandals by staging a televised ‘fake war’ in the lead-up to the Presidential elections. It was the first time that Hollywood described what has recently become known as meddling or convincing people that ‘white is black’. These days there are far more efficient and potent ways of targeting voters & disseminating fake news than Brean (spin doctor) could ever have imagined.

Ever since then the life has been imitating art. From John Kerry’s swift-boat controversies in ’04 to data dumps and fake accounts in ’16, the avalanche of bots and news (fake or otherwise) has become so overwhelming that people have no chance to process it, and separate the wheat from the chaff. As societies no longer agree on what truth is, there is no need for verifiable facts.

…it could all go badly wrong while liquidity continues to tighten

This brings us to the latest news that the US Seventh fleet might conduct military exercises in the South China Sea. Although there are real issues at stake (freedom of navigation), there is clearly considerable room for accidents and unexpected turns. 

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Step Aside Russia: Pence Accuses China Of “Meddling In American Democracy”

Update: Highlights from Pence’s speech (via Bloomberg):


So that confirms it – China is the new enemy number 1. Xi is the new Putin!

*  *  *

The White House is about to ratchet up tensions possibly far beyond what they already are amidst the ongoing US trade war with China.

At 11 a.m. eastern time Vice President Mike Pence will deliver at address at the neoconservative Hudson Institute where he’s expected to call China out on a number of explosive issues around the globe where Beijing’s increasingly aggressive actions are seen as a threat to the US, but will especially focus on the Sunday incident involving the USS Decatur which was dangerously intercepted by a Chinese naval vessel in the South China Sea. 

The Chinese ship reportedly came within a mere 45 yards of the American warship in international waters; however, it’s but the latest in a string of such threatening incidents intended by Beijing to lay claim to vast swathes of the South China Sea on the basis of its man-made island chains.

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US Navy Proposes A “Global Show Of Military Force” As A Warning To China

The trade war between the US and China is turning into a hot war with every passing day.

As we reported on Monday, Chinese ships came to actively confronting the USS Decatur while the US ship was carrying out yet another in a series of “freedom of navigation” operations – or “freeops” – in the South China Sea. The Navy destroyer had to maneuver to avoid colliding with the Chinese destroyer Luyang that came within 45 yards of its bow while the Decatur was sailing through the Spratley Islands on Sunday in what was the closest direct confrontation between US and Chinese ships since Trump’s inauguration (after which the Navy began conducting these freeops with increasing frequency).

On Tuesday, China accused the US of violating its “indisputable sovereignty” over the Spratley islands, saying in a statement “We strongly urge the U.S. side to immediately correct its mistake and stop such provocative actions to avoid undermining China-U.S. relations and regional peace and stability.”

Now it’s the US turn to respond, and according to CNN, the US Navy’s Pacific Fleet has drawn up a classified proposal to carry out a global show of force as a warning to China and demonstrate the US is prepared to deter and counter their military actions. The draft proposal from the Navy is initially recommending the US Pacific fleet conduct a series of operations during a single week in November.

The navy’s goal – whether with or without the White House’s prodding – is to carry out a highly focused and concentrated set of exercises involving US warships, combat aircraft and troops to demonstrate that the US can counter potential adversaries quickly on several fronts.

Even without knowing the details, one can easily see how this can go horribly wrong. It only gets worse from there.

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Chinese Air Force Holds Live-Fire War Drill In South China Sea Days After US Exercise

China Central Television, as per the Twitter account of the official People’s Daily newspaper, reported Saturday that the Chinese military deployed fighter jets and bombers to conduct live-fire war drills in the disputed South China Sea, just days after the Japan Air Self-Defense Force and nuclear-capable US B-52 strategic bombers held exercises over the East China Sea and the Sea of Japan on September 27.

The report said dozens of jet fighters from the People’s Liberation Army Naval Air Force from the Southern Theater Command on early Saturday conducted “live-fire drills to tests pilots’ assault, penetration and precision-strike capabilities at sea,” said The Japan Times.

Beijing on Thursday blasted the US and Japan exercise over the East China Sea, calling them a “provocation.”

“China’s principle and standpoint on the South China Sea are always clear,” Defense Ministry spokesman Ren Guoqiang said, according to Chinese state-run media. “China firmly opposes U.S. military aircraft’s provocation in the South China Sea, and will take all necessary measures.”

Japan’s Mainichi Shimbun News said the joint drills between the US and Japan were highly “unusual,” as what we pointed out last week, a China-Japan maritime crisis is inevitable over the disputed Senkaku Islands.

It seems that Thursday’s move was aimed at keeping China in check amid increasing tensions between Beijing and Washington, including an intensifying trade war.

But in a tit-for-tat effort, China hit back with war drills of their own on Saturday.

Chinese Foreign Ministry spokesman Geng Shuang criticized unnamed countries (US, United Kingdom, and France) for using freedom of navigation and overflight as excuses to disrupt other countries’ sovereignty and security, disturbing regional peace and stability.

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China Slams Another “Provocative” US B-52 Flyover Above Disputed Seas

Another incident involving US military operations over disputed waters near China has resulted in Beijing issuing a scathing condemnation of Washington amidst already soaring trade war tensions.

China’s defense ministry on Tuesday denounced recent US-B52 bomber flyovers of the South China Sea and East China Sea, calling the military maneuvers “provocative”. Though Pentagon officials are downplaying this and prior such incidents, it demonstrates just how fast the currently escalating trade war could easily translate into a potential military “mishap” between the two countries.

“Regarding the provocative actions of US military aircraft in the South China Sea, we are always resolutely opposed to them, and will continue to take necessary measures in order to strongly handle (this issue),” Chinese defense ministry spokesman Ren Guoqiang said before reporters, according to the AFP.

A Pentagon spokesman quickly shot back, rejecting Chinese territorial claims which interpret its expanding man-made island chains as a natural extension of its sovereign space. The flights were part of “regularly scheduled operations,” said Pentagon spokesman Lieutenant Colonel Dave Eastburn.

The Pentagon further confirmed that its heavy bombers are operating in the area as part of combined exercises with Japan over the East and South China seas, and that flights were being conducted over recognized international airspace. US officials have over the past year repeatedly confirmed that the Air Force and Navy will “continue to fly, sail and operate wherever international law allows at times and places of our choosing.”

Under international law, a country’s airspace is considered to be 12 nautical miles distant from the coastline of the nation, but China has used its man-made islands  on which it’s frequently stationed military assets to lay claim to vast swathes of the South China Sea as falling under its definition of what constitutes sovereign Chinese space.

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China Responds To US Sabre-Rattling With Anti-Aircraft “Drill” Over South China Sea

The People’s Liberation Army Navy (PLAN) has carried out an alarming anti-aircraft drill with missiles fired at dummy drones over the South China Sea to simulate an aerial attack, after Washington challenged Beijing by flying Boeing B-52 Stratofortress bombers near its highly disputed militarized islands, said the South China Morning Post.

The military exercise, which involved “three target drones making flyovers of a ship formation at varying heights and directions,” is part of a much larger effort by Beijing to increase its military readiness for future combat with the U.S.

The report said the drones served to “precisely verify the feasibility and effectiveness to ensure a close stimulation of an aerial attack target,” according to the report.

In other words, Beijing is preparing for an attack on its islands — most likely led by the U.S. and backed by its regional allies.

Details were limited about the overall military exercise — including the exact date and which militarized island the drill was conducted on.

The report came out shortly after U.S. Secretary of State Mike Pompeo expressed great concern over China’s rapid militarization of the South China Sea during a briefing in Beijing with Chinese leadership on last week’s summit between President Trump and North Korean leader Kim Jong-un.

Pompeo’s remarks came after the recent U.S. Navy warships and U.S. Air Force Boeing B-52 Stratofortress bombers traveled dangerously close (separate but related incidents) to the militarized islands, which drew sharp criticism from Beijing.

During Pompeo’s visit to China in April, he “reaffirmed our deep concerns about the building and militarizing of outposts in the South China Sea, as those actions increase tensions, complicate and escalate disputes, endanger the free flow of trade, and undermine regional stability”, the U.S. State Department released in a statement.

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US Plans “Significantly More” South China Sea War-Drills To Counter China’s “New Reality”

After an exciting weekend of comments from U.S. Defense Secretary James Mattis and Chinese People’s Liberation Army Lieutenant General He Lei at the IISS Shangri-La Dialogue, a civilian and military defense summit in Singapore, it appears the United States had to have the last word.

On Sunday, two U.S. officials told Reuters that the Pentagon is considering increased naval war drills in the South China Sea near China’s heavily disputed militarized islands. The officials, who are working jointly with Asian diplomats — declined to comment about the Pentagon’s progress in finalizing the plan for the new drills.

Such a move could further increase geopolitical tensions in one of the world’s most volatile regions.

Officials explained to Reuters that the naval drills could involve more extensive patrols, ones involving a large number of warships or operations including closer surveillance of the Chinese military bases on the islands, which now includes anti-ship cruise missiles, radar-jamming equipment, and strategic bombers.

U.S. officials said they are not doing this alone. They are aligning international allies and strategic partners to increase “naval deployments through the vital trade route as China strengthens its military capabilities on both the Paracel and Spratly islands.”

“What we have seen in the last few weeks is just the start, significantly more is being planned,” said one Western diplomat, referring to a freedom of navigation patrol late last month that used two U.S. ships for the first time.

“There is a real sense more needs to be done.”

While the Pentagon does not directly comment on future classified operations, there is a reason to believe that more naval drills are set to intensify in the second half of 2018.

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“Unacceptable”: China Blasts Mattis For “Irresponsible Comments” About South China Sea Islands

A Chinese general on Saturday defended Beijing’s military build-up in the South China Sea, blasting the “irresponsible comments” made by U.S. Defense Secretary James Mattis, who on Saturday accused  Beijing of threatening its neighbors in the heavily disputed waters and warned China of “consequences” if it continues weaponizing the South China Sea.

“Any irresponsible comments from other countries cannot be accepted,” Lieutenant General He Lei told  reporters at the IISS Shangri-La Dialogue, a civilian and military defense summit in Singapore, after Mattis warned that “there are consequences that will continue to come home to roost if China does not find a way to work more collaboratively with nations that have interests in the disputed region.” He then clarified that “as long as it is on your own territory you can deploy the army and you can deploy weapons”, indicating that to China the “contested” islands are anything but.

Lieutenant General He Lei speaking to reporters on Saturday at the IISS Shangri-La Dialogue. (Source: CCTV+)

“We see any other country that tries to make noise about this as interfering in our internal affairs,” General He said, referring to the Pentagon chief’s comments.

Beijing’s recent deployment of anti-ship cruise missiles, radar-jamming equipment, and strategic bombers to the disputed islands have dramatically increased geopolitical tensions around the region. In an attempt to counter rising territorial tensions, the Chinese general said Beijing’s militarization of the islands were for “national defense” purposes.

“They are for the purpose of avoiding being invaded by others … As long as it is on your own territory you can deploy the army and you can deploy weapons,” he said.

For years Washington has agitated Beijing by claiming “freedom of navigation”, sailing its military vessels and flying its warplanes around the heavily disputed islands in the South China Sea.

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Olduvai IV: Courage
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Olduvai II: Exodus
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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