Category Archives: US-China

US-China military chiefs openly clash; U.S. blamed for troubles in South & East China Seas

dempsey-fangPLA Gen. Fang Fenghui (l); U.S. Gen. Martin Dempsey (r)

Richard Sisk reports for Military.com, May 15, 2014:

A top Chinese general Thursday strongly defended Beijing’s territorial claims over disputed islands in the South and East China Seas and charged that the U.S. rebalance of forces to the Pacific was encouraging unrest in the region.

Gen. Fang Fenghui, chief of the general staff of the People’s Liberation Army, said “the rebalancing strategy of the U.S. has stirred up some of the problems which make the South China Sea and the East China Sea not so calm as before.”

Fang warned that China would respond to any attempts by Vietnam, Japan or other neighbors to assert their own claims over the disputed islands and reefs.

“We do not create trouble but we are not afraid of trouble,” Fang said at a Pentagon news conference after meetings with Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff.

Dempsey appeared to be slightly irritated as he waited to comment while listening to a long-winded response by Fang on the current dispute with Vietnam over offshore oil drilling rights.

“Thank you for giving me the time to formulate my answer,” Dempsey told Fang.

When his turn finally came, Dempsey dismissed Fang’s objections to the so-called “Pacific pivot” and said the U.S. was committed to the policy.

“We’ll go because we can and should, and we’ll go because we have to,” Dempsey said of the rebalance. Dempsey also told Fang “We will respond to threats.”

However, Dempsey mostly stuck to his long-held position that the U.S. must build better military-to-military relations with China to avoid miscalculations that could lead to conflict in the region. 

Fang came to the Pentagon after meeting at Naval Base San Diego with Adm. Samuel Locklear, head of the Pacific Command. Dempsey met with Fang, China’s No. 3 military leader, last year in China and was returning the favor by inviting him to Washington.

At the opening of the news conference, Dempsey noted that China’s claims in the South China Sea could be seen as “provocative,” the same term used in recent days by the State Department.

Fang responded at length, blaming Vietnam for the current dispute over China’s movement of a $1 billion oil rig into territorial waters claimed by Hanoi. The action by China triggered widespread protests in Vietnam in which foreign factories were set ablaze and a Chinese national allegedly was killed. 

Fang charged that other nations he did not name had drilled for oil in the same region but complaints only surfaced when China sought to do the same.

“We believe the ones provoking those issues in the South China Sea are not China,” Fang said in an apparent rebuff to Dempsey. “When China does drill, we instantly become a threat.”

Vietnam officials have charged that Chinese ships have rammed Vietnamese Coast Guard vessels attempting to patrol near the oil rig, but Fang said the Vietnamese ships were attempting to interrupt the drilling.

“That is something that we cannot accept,” Fang said. “We will make sure that this well will be successfully drilled,” he said.

Fang also made China’s case in a separate dispute over disputed reefs and shoals with the Philippines, and accused Japan of reverting to World War II militarism in asserting its claims to disputed uninhabited islands called the Senkaku by Japan and the Diaoyu by China.

Fang said the Japanese claims were also encouraged by the U.S. rebalance of forces. “This is something that we can never agree (upon),” Fang said.

Despite their disagreements, both Dempsey and Fang noted that China next month for the first time will send ships to participate in the annual Rim of the Pacific (RIMPAC) exercises off Hawaii.

See also:

~StMA

Fighting words: China disses U.S. soldiers as worthless

Miles Yu reports for The Washington Times, April 17, 2014:

A casual remark by a U.S. general during a breakfast has made China mad, really mad, and Beijing’s response is far less than civil and humble.

On April 11, Marine Corps Lt. Gen. John Wissler, commander of the 18,000 Marines in Okinawa, Japan, told reporters at a Washington breakfast meeting that the Marines in the Pacific would quickly retake the Senkaku island group and return it to Japan if China were to invade it.

Note: China and Japan both claim ownership of the islands, called Senkaku by Japanese and Diaoyu by Chinese.

U.S. Marines Lt. Gen. John Wissler

U.S. Marines Lt. Gen. John Wissler

The statement was nothing new, as U.S. officials from the president on down repeatedly have told the Chinese that the United States would fulfill its defense treaty obligations to help Japan militarily in any conflict with China over the islands.

What apparently incensed the Chinese was what Gen. Wissler said next: “You wouldn’t maybe even necessarily have to put somebody on that island until you had eliminated the threat, so to speak.”

The Chinese military is supremely confident of its invincibility in the Pacific and is taking Gen. Wissler’s remark as a great insult.

The first return salvos were fired by the Communist Party-owned and operated newspaper Global Times.

“These U.S. warships roaming around here [in the East China Sea] are slowly being considered by us Chinese as our moving targets right in front of our eyes, and the [U.S.] bases in Okinawa as a whole are also no longer a big deal [to us],” said the newspaper in an April 15 editorial.

When facing China, these U.S. soldiers are really not worth anything,” the Global Times said. “If China and the U.S. were to start an all-out fight, these American Marines would be more like a marching band, charging with others, but with their musical instruments in hands. Wissler seems still living in the 20th century. In the new century, he and his comrades in arms should see their own reflections in the water with which they use to wash their own feet.”

Beijing recently issued its broadest definition of “national security” — including virtually all aspects of the communist state’s daily routine and giving new meaning to China as a “national security state.”

Obama bows to China's president Xi Jinping

Obama bows to China’s president Xi Jinping

Billed as the “National Security Path with Chinese Characteristics,” the new definition was announced by Supreme Leader Xi Jinping on April 15 at the first plenary meeting of the newly created, all-powerful National Security Commission.

It is significantly different from other conventional definitions of “national security” around the world in its comprehensive coverage and its dual emphasis on external and internal security.

To begin with, Mr. Xi listed 11 “security” areas in which China’s new national organization will operate and oversee — politics, territories, military, economy, culture, community, science and technology, information, ecology, natural resources and nuclear.

At the top of this security behemoth sits Mr. Xi as chairman of the National Security Commission — a position renders him the world leader with the most institutionalized and centralized powers.

In addition to being China’s national security czar, Mr. Xi is chief of the only real political party in China, president of the world’s most-populous nation, and commander-in-chief of the world’s largest military, while holding additional positions in charge of China’s foreign affairs and economic reforms.

See also:

~StMA

“Richest man in Asia” Li Ka-Shing dumps all his Chinese property holdings

Li Ka-Shing

Li Ka-shing, 85, is a Hong Kong business magnate, investor, and philanthropist. According to the Bloomberg Billionaires Index, as of October 7, 2013, Li is the richest person in Asia, with a net worth of $30 billion, much of it from shrewd property investment.

Born in southern China in 1928, due to his father’s death, Li was forced to leave school before the age of 15 and found a job in a plastics trading company where he labored 16 hours a day. By 1950 he started his own plastics manufacturing company, Cheung Kong, which developed into a leading real estate investment company in Hong Kong that was listed on the Hong Kong Stock Exchange in 1972.

Given Li’s business acumen, it is noteworthy that according to Simon Black of Sovereign Man, April 16, 2014, Li Ka-Shing is dumping all his property investments in China.

Li had been investing in mainland China back in the early 1990s, before it became the trendy thing to do. Since August of last year, however, he’s divested billions of dollars worth of his Chinese holdings.

The latest is the $928 million sale of the Pacific Place shopping center in Beijing, which was inked just days ago. With this sale, Li will no longer have any major property investments in mainland China.

This isn’t a person who became wealthy by being flippant and scared. So what does he see that nobody else seems to be paying much attention to?

Answer: China’s credit crunch.

After years of unprecedented monetary expansion that has put the economy in a precarious state, the Chinese government has been desperately trying to rein in credit growth.

China’s shadow banking system alone is now worth 84% of GDP according to an estimate by JP Morgan. The IMF pegs total private credit at 230% of GDP, jumping by 100% in the last few years.

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Note: Former U.S. Federal Reserve chair Ben Bernanke defines “shadow banking system” as “a diverse set of institutions and markets that, collectively, carry out traditional banking functions–but do so outside, or in ways only loosely linked to, the traditional system of regulated depository institutions.” In other words, shadow banking system refers to UNREGULATED banking institutions. Shadow banking was a primary factor in the U.S. subprime mortgage crisis of 2007-2008 and global recession that followed.

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Historically, credit growth rates of China’s proportions have nearly always been followed by severe financial crises. So Chinese leaders are doing their best to engineer a soft landing. If they fail, the spillover could become pandemic, with implications for the entire world.

China could put the entire global financial system on its back just by dumping a portion of its U.S. Treasuries in order to defend the yuan.

Now, you’d think that a major credit crunch with far-reaching consequences in the world’s second largest economy, its largest manufacturer, and its largest holder of US dollar reserves, would be constant front-page news.

But it’s not.

Go figure.

~StMA

Average:

Chinese J-20 stealth fighter incorporates F-35 secrets stolen from U.S.

F-35 J-20

Bill Gertz reports for The Washington Free Beacon, March 13, 2014:

A cyber espionage operation by China seven years ago produced sensitive technology and aircraft secrets that were incorporated into the latest version of China’s new J-20 stealth fighter jet, according to U.S. officials and private defense analysts.

The Chinese cyber spying against the Lockheed Martin F-35 Lightning II took place in 2007 under what U.S. intelligence agencies codenamed Operation Byzantine Hades, a large-scale, multi-year cyber program that targeted governments and industry.

Defense officials said the stolen data was obtained by a Chinese military unit called a Technical Reconnaissance Bureau in the Chengdu province. The data was then passed to the state-run Aviation Industry Corp. of China (AVIC).

An AVIC subsidiary, the Chengdu Aircraft Industry Group, used the stolen data in building the J-20, said defense and intelligence officials familiar with reports of the illicit tech transfer.

Newly unveiled J-20 / Chinese website

Pentagon technology security officials in 2011 opposed a joint venture between General Electric and AVIC over concerns that U.S. fighter jet technology would be diverted to AVIC’s military aircraft programs. The Obama administration ignored the concerns and instead has since promoted the systematic loosening of technology controls on transfers to China.

The Office of Director of National Intelligence is known to have details of AVIC’s past involvement in illicit arms transfers and its role in obtaining sensitive F-35 technology through cyber espionage, the officials said.

The F-35 data theft was confirmed after recent photographs were published on Chinese websites showing a newer version of the J-20. The new version of the radar-evading aircraft had incorporated several design upgrades since the first demonstrator aircraft was revealed in 2011.

According to the officials, the J-20 has progressed from prototype to demonstrator. One of its most significant weapons enhancements is a new electro-optical targeting system under its nose.

Additionally, protruding engine nozzles seen in the earlier version have been hidden, an attempt to further reduce the jet’s radar signature. The newest J-20 also appeared with a different radar-absorbing coating.

Photos of the newer J-20 were first posted online on Chinese military forums on Jan. 17.

The Pentagon’s Defense Science Board revealed earlier this year that system design information on the F-35 was obtained from cyber attacks.

The new Terminal High Altitude Area Defense missile systems and Patriot Advanced Capability-3 (PAC-3) missile defenses, along with many other systems, were compromised through cyber espionage, the board said in a report.

Most details of the Chinese cyber espionage campaign to obtain F-35 technology remain secret.

However, the Chinese probably obtained the F-35 secrets from Lockheed Martin, its subcontractors, or U.S. allies involved in the development program. Allies that took part in the F-35 program include the United Kingdom, Israel, Italy, Australia, Canada, Norway, Denmark, the Netherlands, and Turkey.

A Chinese Academy of Military Sciences official, Du Wenlong, told Chinese state television on Feb. 20 that the new J-20’s shortened exhaust nozzles, along with tail and vertical fin modifications, are designed to reduce radar detection.

Du also said that a “revolutionary” breakthrough allowed the twin engines to increase both power and reliability.

China’s inability to manufacture quality jet engines has been a weakness of its aircraft manufacturing programs.

Du also said that the electro-optical targeting system provides better surveillance and strike capabilities against both land and sea targets.

The J-20 also has a larger weapons bay than the U.S. F-22, which allows it to carry more powerful missiles that can be used against “aircraft carrier and foreign AEGIS ships,” Du said.

U.S. officials said the new J-20 had undergone ground tests, but it had not been flight tested as of early March.

Richard Fisher, a specialist on Chinese weapon systems, said the new J-20 was flight tested on March 1 and demonstrated the enhanced fifth generation jet fighter features.

Fisher, with the International Assessment and Strategy Center, said it is “very curious” that the new J-20 featured its new electronic targeting system under its nose. That location increased its field of view and is similar to the targeting system on the F-35.

“This targeting system and a set of distributed high-power infrared sensors give the F-35 a previously unrivaled ‘situational awareness,’ but the now it is clear that the J-20 will have a similar targeting system and its own set of distributed sensors,” Fisher said.

“If as part of their espionage, China had also gained engineering insights into the F-35′s very advanced sensor systems, that could prove disastrous to its combat potential barring a rapid redesign and improvements before entering service,” Fisher added.

Advanced sensors on the F-35 were intended as insurance for the jet not having the best capabilities for maneuvering in flight, he said.

“But if the Chinese, via cyberespionage, have gained insights into its sensor system, then it is to be expected that China is also working on ways to jam or otherwise degrade its advantage,” Fisher said.

The J-20 targeting system indicates that the Chinese plan to use the jet for ground attack and air superiority missions like the F-35, he said, adding that it now appears the J-20 will be comparable to the more capable F-22.

“We can be assured that J-20 production will significantly exceed that of the 187 F-22 fighters cut off by the Obama Administration in 2010,” he said.

China’s Communist Party-affiliated Global Times reported Jan. 20 that China obtained key technologies from the F-35 and incorporated them into the J-20.

The newspaper did not admit stealing the technology, but stated that China “completely obtained the six key technologies” from the F-35.

Those features include the electro-optical targeting system and a diverterless supersonic inlet, a thrust-vectoring jet nozzle, and a fire-control array radar system.

The Global Times disclosures about F-35 technology acquisition were first reported in the Washington Times.

U.S. Navy intelligence chief: China training for a quick war against Japan

The United States Naval Institute (USNI) reports, Feb. 18, 2014, that the chief of intelligence of the U.S. Pacific Fleet (PACFLEET) says China’s People’s Liberation Army is training for an attack on Japanese holdings in the East China Sea.

Chinese marines assault a beach during the Mission Action 2013 exercise. Xinhua Photo

Chinese marines assault a beach during the Mission Action 2013 exercise. Xinhua Photo

At the West 2014 conference on Feb. 13 in San Diego, California, Capt. James Fannell, deputy chief of staff intelligence and information operations for PACFLEET, said the PLA is training to take the Senkaku Islands, as part of China’s Mission Action 2013 exercise — a massive exercise between all branches of the PLA:

“We witnessed the massive amphibious and cross military region enterprise — Mission Action 2013. [We] concluded that the PLA has been given the new task to be able to conduct a short sharp war to destroy Japanese forces in the East China Sea following with what can only be expected a seizure of the Senkakus or even a southern Ryukyu [islands] — as some of their academics say.”

In the last year, China has increased its provocative military actions in the South China Sea around the so-called Nine Dash Line — China’s expansive claim into the region in conflict with several other international claims.

PLAN training planPLA Navy’s training plan

“As a senior U.S. government official recently stated, there is growing concern that China’s pattern of behavior in the South China Sea reflects an incremental effort by China to assert control of the area contained in the so-called 9-dash line despite the objections of its neighbors, and despite the lack of any explanation or apparent basis under international law.” Fannell said.

He then detailed a series of what he called aggressive actions taken by China against its neighbors over the past year. Some of those actions, including combat drills in the south Philippine Sea were described as China’s “protection of maritime rights.”

Fannell explained that “protection of maritime rights is a Chinese euphemism for coercive seizure of coastal rights of China’s neighbors.” “The next week (the week after the combat drill in the south Philippine Sea) in the East China Sea, Japan said that a Chinese warship locked its fire-controlled radar onto a Japanese warship. China denied it for a month, but then admitted that it occurred, but said that it was not in danger since the range between the two ships was too close for a weapons system,” he said. “Seriously, you just can’t make this stuff up.”

Fannell also called out quasi-military actions by the newly created Chinese Coast Guard which unified five mostly civil maritime services.

Chinese Coast Guard vessel

Chinese Coast Guard vessel

Tensions in the South and East China Seas have deteriorated with the Chinese Coast Guard playing the role of antagonist, harassing China’s neighbors while PLA Navy ships, their protectors, (make) port calls throughout the region promising friendship and cooperation.”

Fannell points out China has allocated $1.6 million on improvements to disputed South China Sea outposts, developing ports, air fields, water purification and surveillance systems. “Meanwhile, China describes efforts by other nations to improve the navigability of their outposts as egregious provocations and responded with threats.”

But Fannell’s assessment of China’s provocation is in contrast to the Obama administration’s efforts to forge closer military-to-military ties with the PLA.

As an example, on the same panel at the West 2014 conference, the U.S. Navy’s head of operations, plans and strategy, Rear Adm. James Foggo described a successful meeting between U.S. Navy officials and the head of the PLA Navy (PLAN), Adm. Wu Shengli. The U.S. delegation toured PLAN ships and submarines. Shortly after, the Chinese declared the controversial Air Defense Identification Zone (ADIZ) over a large swath over the East China Sea in November.

The Obama administraton is also continuing to work out plans for the Chinese navy to participate in the Rim of the Pacific 2014 (RIMPAC) exercise later this year.

See also:

~StMA

Obama admin gets tougher on China over South China Sea claims

South China SeaAfter sending China mixed signals, if not outright acquiescence, about its declaration of an Air Defense Identification Zone (ADIZ) in the East China Sea last December, the Obama administration, stung by criticisms from U.S. allies in the Asia-Pacific region, is talking tougher against China declaring an ADIZ over the South China Sea.

Geoff Dyer reports for FT.com, Feb. 9, 2014, that the Obama administration has significantly sharpened its rhetoric about China’s territorial claims in the South China Sea over the last week amid growing pressure from allies in the region for Washington to take a firmer line.

In public statements in recent days, senior US officials placed the blame for tensions in the region solely on China and warned that the US could move more forces to the western Pacific if Beijing were to declare an ADIZ in the South China Sea.

Reportedly several Asia governments have complained privately to Washington that China is taking advantage of the U.S. preoccupation with the Middle East, to pursue its territorial claims in Asia with greater confidence.

Bonnie Glaser, a China expert at the Center for Strategic and International Studies in Washington DC, said the Obama administration is “definitely trying to turn up the volume about China. This is as close as the Obama administration has come to saying that the nine-dash line is illegal. It is quite significant because they previously danced around the issue.” The nine-dash line is a map produced by China which appears to claim that the bulk of the South China Sea is under Chinese control.

China is involved in a series of increasingly tense territorial disputes in the East China Sea with Japan and in the South China Sea with Vietnam and the Philippines. The US, along with several other governments in the region, believes that China is pushing these claims as part of a broader strategy to exert greater control over large areas of the western Pacific.

In a statement, Evan Medeiros, the Asia director at the White House National Security Council, warned China against declaring an ADIZ for the South China Sea. “We have been very clear with the Chinese that we would see that [the establishment of a new air zone] as a provocative and destabilizing development that would result in changes in our presence and military posture in the region.”

Last week at a Congressional hearing, Assistant Secretary of State for East Asia Danny Russel testified that “There are growing concerns that this pattern of behavior in the South China Sea reflects incremental effort by China to assert control over the area” and that China had “created uncertainty, insecurity and instability in the region.” Russel urged China to “clarify or adjust its nine-dash line claim to bring it in accordance with the international law of the sea.”

Russel said that any claims to the seas must be based on genuine land features, rather than just rocks that can be covered at high tide. Under the UN convention on the law of the sea, a country can claim a 200km economic zone around islands. Russel also endorsed the effort by the Philippines to take its territorial dispute with China to an international court, part of its efforts to find a “peaceful, non-coercive” solution.

The problem, however, is that although the Obama administration bases some of its arguments on the UN convention on the law of the sea, the US Senate has refused to ratify the same treaty.

See also:

UPDATE (Feb. 11, 2014):

Predictably, China is bristling, characterizing the above comments by various U.S. officials as “irresponsible.”

At a press briefing on Feb. 10, 2014, China’s Foreign Ministry spokeswoman Hua Chunying said foreign officials should reflect carefully on their stances regarding China’s legitimate rights before making such comments. ‘We hope that relevant countries and officials can stop making irresponsible comments,’ the spokeswoman said.

~StMA

Pop Go the Weasels

http://www.thenewamerican.com/economy/markets/item/17526-is-china-s-23-trillion-credit-bubble-ready-to-pop

Friday, 31 January 2014 15:50

Is China’s $23 Trillion Credit Bubble Ready to Pop?

Written by  William F. Jasper

Is the “mother of all bubbles” about to implode? Many analysts have been predicting that China could have its “Lehman Brothers moment” today, on January 31, 2014. Its colossal $23 trillion ($24 trillion by some accounts) in private domestic debt is, say some economists, but a pin-prick away from a devastating banking collapse that would send shock waves across Asian (and then global) financial markets.

Why was/is January 31, which marks the start of the Chinese New Year (the “Year of the Horse”), considered D-Day for the Chinese economy? As Gordon G. Chang explained in a January 19 op-ed for Forbes (“Mega Default in China Scheduled for January 31”) that is the maturity date of a massively oversold, risky investment product called “Credit Equals Gold #1.” Packaged by China Credit Trust, it promised investors a 10-percent annual rate of return — almost three times the market rate. Credit Equals Gold turned out not to be as good as gold, and China Credit Trust turned out to be (surprise!) not trustworthy. China Credit Trust reportedly had dumped most of the funds from its Credit Equals Gold sales into a coal mining operation, Shanxi Zhenfu Energy Group, which has since gone bankrupt. On January 17, Chinese state media reported that China Credit Trust (CCT) may not repay investors when the January 31 maturity date arrives. Making matters worse, the Industrial and Commercial Bank of China (ICBC), by assets the world’s largest bank, had also marketed the Credit Equals Gold bonds and was also refusing to compensate investors.

On January 28, the CCT/ICBC default on Credit Equals Gold appeared to have been averted. The financial pages of news services were reporting that some type of arrangement had been reached by CCT and ICBC to indemnify investors, though the details remain murky. International Business Times reported on January 28:

China Credit Trust has reached a last-minute deal to repay investors in the 3bn yuan ($500m, £296.2m, €361.1m) high-yield product, avoiding the first high-profile default in the country’s trust industry….

In a statement, the trust asked the investors to contact their wealth managers at Industrial and Commercial Bank of China (ICBC), which marketed the product, to arrange for payment….

Previously ICBC had said it was not responsible for investors in the scheme.

So, does that mean that the global financial apocalypse is called off for today? Maybe. But if it doesn’t happen today and if it isn’t Credit Equals Gold-CCT/ICBC, there are plenty of other Lehman Brothers and Bear Sterns tipping points waiting to implode/explode in the world’s second largest economy. It’s a matter of when, not if; the precise “when” is always iffy, but the “if” is certain. China’s so-called “economic miracle” that has so dazzled onlookers and investors for the past two decades, is a central-planning monstrosity that has mega-debacle-waiting-to-happen written all over it. Beneath the gleaming, instantly-created Potemkin super-cities such as Shenzhen, and the planet-sized mega-malls, are crumbling infrastructure, vast corruption, and oceans of red ink. So, again, if January 31 passes without a resounding, world-shaking bubble puncture, it simply means a deferment of the day of reckoning.

“The truth is,” wrote Michael Snyder, on The Economic Collapse blog on January 20, “that what has been going on in the global financial system is completely and totally unsustainable, and it is inevitable that it is all going to come horribly crashing down at some point during the next few years. It is just a matter of time.”

“Since Lehman Brothers collapsed in 2008,” noted Snyder, “the level of private domestic credit in China has risen from $9 trillion to an astounding $23 trillion. That is an increase of $14 trillion in just a little bit more than 5 years. Much of that ‘hot money’ has flowed into stocks, bonds and real estate in the United States. So what do you think is going to happen when that bubble collapses?” He continued:

The bubble of private debt that we have seen inflate in China since the Lehman crisis is unlike anything that the world has ever seen. Never before has so much private debt been accumulated in such a short period of time. All of this debt has helped fuel tremendous economic growth in China, but now a whole bunch of Chinese companies are realizing that they have gotten in way, way over their heads. In fact, it is being projected that Chinese companies will pay out the equivalent of approximately a trillion dollars in interest payments this year alone. That is more than twice the amount that the U.S. government will pay in interest in 2014.

“Over the past several years,” Snyder noted, “the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England have all been criticized for creating too much money. But the truth is that what has been happening in China surpasses all of their efforts combined.”

Tyler Durdin at ZeroHedge.com has produced a bar graph that  dramatically illustrates the immensity of the increase in Chinese bank assets over the past five years, completely dwarfing the combined QE (quantitative easing) money creation of the Federal Reserve, Bank of England, European Central Bank, and Bank of Japan combined. ZeroHedge has been in the forefront of exposing this danger of China’s “shadow banking system” for years (see herehere, and here) while most of the financial commentariat in the MSM choir have continued to praise China’s economic model of “capitalism”: central planning by the Communist Party and the dominance of giant SOEs (State-owned Enterprises). Even many of the so-called private Chinese corporations are little different from SOEs in that they are run by party members and “princelings” and their actual balance sheets, ownership, and other financial information are not publicly available.

And, as we have reported, the Communist Party, recognizing the out-of-hand corruption that is endemic in their faux “capitalist” system, have embarked on an anti-corruption drive that has resulted in many former billionaire princeling peacocks being turned into featherdusters; many are in prison, some have been executed (officially or otherwise). The MSM choir see this as a hopeful sign; the same commentators would, undoubtedly, greet an “anti-corruption” campaign within the Mafia with equal credulity and enthusiasm. As with the Mafia or any other organized criminal cartel, the Beijing Mafia (Chinese Communist Party, CCP) that runs China cannot tolerate lower-level criminals cheating on the bosses. But a minor cleanup among thieves should not be mistaken for real systemic reform. The Beijing bosses are continuing on the same unsustainable path, which means the day of reckoning will come and that, as Snyder put it, “it is all going to come horribly crashing down at some point.”

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