Chinese Cooperative and Basic Income

Finally, all Huaidi citizens have had a basic income of 1500 yuan [US $221] per year since 1995, which is directly transferred to their bank accounts in shares of 125 yuan [US $18.5] per month. For children under 18, this money is kept in parents’ accounts. This amount money was significant in 1995 (Chinese cities’ nominal per capita annual income was about 5000 yuan [US $738] in 1995), but not as much now, due to the rapid rise of GDP in the last 20 years (in 2015, the nominal per capita annual income in Chinese cities was about 50,000 yuan [US $7,379]).
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China’s J-20 Stealth Fighter

The J-20 was developed as a foil to advanced U.S. fighters, including fourth generation F-16 Fighting Falcons and F/A-18 Hornets and, more directly, fifth-generation F-22 Raptors and F-35 Lightning fighters.

In 2009, a breach of F-35 project resulted in the theft of several terabytes of data. Though the attack was never publicly attributed to China by the U.S. government, visual similarities in the chassis of the J-20 to the F-35 have led commentators to speculate that the stolen F-35 intellectual property helped state-owned Chengdu Aerospace Corporation develop their fighter.
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China’s Debt Burden

We typically think of the economy as consisting of four sectors: the external sector, households, businesses, and the government. In China however it is more practical to subdivide these further into the following:

  • Creditors. Creditors are forced to absorb the losses associated with writing down the debt when the borrower defaults on its debt and restructures it with a principle or interest reduction. Much of China’s debt burden has been extended through the banking sector, however, and because the debt that must be written down exceeds the banking industry’s capital base, ultimately the cost will be passed on to some other economic sector – for example Chinese households ultimately absorbed the cost of the banking sector losses generated in the late 1990s.
  • The external sector. To pass on costs to foreigners requires that they have significantly larger exposure to China than they actually do, and would also probably require defaulting on external debt, a path Beijing is unlikely to choose to follow.
  • Ordinary households. Most banking crises, like the recent US and European crises and the Chinese banking crisis at the end of the 1990s, are resolved by hidden transfer mechanisms that pass the cost of writing down debt to households. China today however must increase household wealth, not reduce it, if consumption is to rise fast enough to allow investment to decelerate, which means ordinary households cannot be allowed to absorb the cost.
  • Wealthy households. Given high levels of income inequality, and the low propensity to consume of the wealthy, forcing them to absorb the costs of writing down debt – in the form of highly progressive income taxes, for example – is likely to be among the less costly ways economically for Beijing to pass on the costs of paying down debt. As their income or wealth is reduced, the wealthy are likely to convert most of that reduction into lower savings and very little of it into lower consumption, thus minimizing its adverse impact on domestic demand.
  • Small and medium enterprises. Chinese SMEs are among the most efficient economic entities in China and are likely to be the main source of innovation and value creation in the future. Their long-term success is vital to China’s long-term growth. Like ordinary households they should be protected from absorbing the costs of Beijing’s debt-management policies.
  • Local and provincial governments. These have amassed a considerable amount of assets whose liquidation would most efficiently absorb debt write-down costs and would entail the lowest medium and long-term economic costs, although not perhaps the lowest political costs. As their assets are liquidated, total Chinese savings will decline and Chinese consumption will remain largely unchanged, thus minimizing the adverse impact on domestic demand.
  • The central government. Beijing too could pay for the cost of writing down debt by liquidating central government assets, although this may conflict with other economic policy objectives, including overcoming vested-interest opposition to the reforms.

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The Surprisingly Swift Decline of US Manufacturing Employment

So why did American trade policy make such a big difference, even though tariffs didn’t fall? Pierce and Schott can’t say for sure, but they speculate that it has to do with patterns of investment.

Giving Chinese companies confidence that tariffs would stay low encouraged them to invest in production capacity aimed at supplying the American market. And giving American companies confidence that tariffs would stay low encouraged them to build supply chains around Chinese manufacturers.

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Anti-China TPP rhetoric is wrong

“As we speak, China is negotiating a trade deal that would carve up some of the fastest-growing markets in the world at our expense, putting American jobs, businesses and goods at risk.”

Actually this is not the way the economy works. If China reduces trade barriers with other countries in Asia, allowing the region to grow more rapidly, then it should also make the United States more prosperous. The region would be a bigger source of demand for U.S. exports and a more efficient provider of goods and services to the United States. That was exactly the logic of the Marshall Plan that helped to rebuild West Europe after World War II. Greater economic integration in the region, even if engineered in part by China, is something that the United States should applaud, not fear. Continue reading

China: Who is militarising the South China Sea

China’s view.

It is the U.S. that has been enhancing military deployment in neighboring regions of theSouth China Sea.

The U.S. not only acquired access to eight military bases in the Philippines, thesuperpower has also continued increasing its military presence in Singapore and sentwarships and aircraft to the South China Sea.

What’s more, it has repeatedly pressured its allies and partners to conduct targetedmilitary drills and patrols to play up regional tension.

Besides selling weaponry to the Philippines, Vietnam and other Southeast Asian countries,the U.S. also repeatedly sent missile destroyers, strategic bombers and anti-submarinepatrol aircraft to approach or even enter relevant reefs and islands, as well as the adjacentwaters and air space of China’s Nansha and Xisha Islands. Such acts betray ambition toprovoke China.

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SIPRI: International arms trade on the rise

The majority went to Asia and to the crisis region of the Middle East. Between the Persian Gulf and the Bosphorus, imports of heavy weapons – the SIPRI report is concerned only with these – rose by 61 percent. Between 2011 and 2015, India was the only country to import more weapons that Saudi Arabia – a land with just 30 million inhabitants. Compared with 2006–2010, the oil sheikhdom’s arms purchases have almost trebled. Number four in the list of the biggest importers of arms is the United Arab Emirates, with a population of barely five million. Turkey is number six.


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