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China’s military expansion

Published by Anonymous (not verified) on Thu, 31/03/2022 - 4:53am in



China’s military expansion is modest .It was recently reported that there are now four Chinese military installations outside of China’s borders and Wikipedia was used to support the claim. Wikipedia is a great source of general information but can’t be trusted as a source of facts. Academics will not cite the website as a source Continue reading »

The Chinese regime’s defeat in Ukraine

Published by Anonymous (not verified) on Wed, 30/03/2022 - 12:47pm in

A Russian tank, with its distinctive anti-missile cages, burns in Ukraine. Image by Illia Ponomarenko (@IAPonomarenko on Twitter).

A Russian tank, with its distinctive anti-missile cage, burns somewhere on the plains of Ukraine. Yes, it’s a metaphor. Photo by the terrific Illia Ponomarenko (@IAPonomarenko on Twitter).

The international reaction to Russia’s invasion of Ukraine is delivering China a message: its current approach to the world won’t keep working much longer.

Does that title above seem odd? Surely it’s Russia that’s losing in Ukraine – in May of 2022, anyway. China hasn’t been defeated; it’s just an onlooker, right?

No. I suspect China is anything but an onlooker. China’s political future is at stake on the plains of Ukraine.

Let me explain. Russia is a relatively small country these days, by most measures apart from raw land area, and Vladimir Putin has destroyed its remaining military significance in just a few weeks in February and March 2022.

But China is one of the world’s two most significant nations. And even if Russia finds some way to recover and eke out a victory in Ukraine … well, as far as I can see, China’s autocrats have already lost there. Badly.

The reasons for that loss are much more to do with values than with military power.

The Chinese regime’s problem is this. Russia’s Ukraine invasion is nudging the world’s democracies towards a new awareness that relationships with autocracies carry great risks. Liberal democracy matters.

And such an awareness is a poison-tipped umbrella for China’s autocrats.

Four points – predictions, maybe – in support of this idea:

I: A change in moral leadership

Outside the boundaries of Ukraine and Russia, the war’s biggest effect of the war has been to reinvigorate the moral leadership of the US and Europe. NATO suddenly looks strong. Germany, France and Poland all look like leaders. More distant nations like Japan, South Korea and Taiwan (to which we’ll return) all stand a little taller in their neighbourhoods. The Biden administration has quietly made the military-first George W. Bush approach look expensive, outdated and impotent. Meanwhile the Chinese leadership has seemed pretty much frozen in shock.

The line between democracies and autocracies has been lit up so brightly that all sorts of people will have to stop ignoring it. More people in Africa and Central Asia (and Brunswick and Paddington too) will be starting to think that liberal democracy might, after all, work best.

II: A new wariness about industrial supply

Until late February 2022, democracies had long avoided thinking about the repercussions of deep economic links with persistent, long-lived autocracies. But that has now changed. Europe is suddenly looking to cut its reliance on Russian gas, of course. But hydrocarbons aside, the autocracy that matters is China. The democracies are spending anew on industrial capacity that may blunt China’s edge. Most notably, democracies are planning for semiconductor plants – and building them in places where they don’t look vulnerable to invasion, which means outside China.

How far this goes is a big open question. Some experts doubt it will go very far at all, because China and the rest of the world are too enmeshed. But the Financial Times reports that “[t]he US and Europe are … planning tens of billions in support for chip manufacturing, in an attempt to reduce their reliance on Asian manufacturers.” The process will take years.

As the FT points out, a shortage of capital equipment will delay this process; even to make more chip-making machinery, for instance, you first need to build more lens-making factories, and lord knows what supply-constrained equipment those factories in turn need. But analysts are already talking about a future chip supply glut caused by new non-Chinese supply.

The wariness about relying on Chinese components is probably affecting investments in less high-profile industries too. And that wariness will probably not quickly abate.

III: Taiwan slipping out of reach

The Russian failure in the Ukraine will be sapping Chinese enthusiasm for retaking Taiwan. Since the Sino-Vietnamese War ended in the late 1980s, China has been a relatively peaceful member of the international community (more so than Australia, really). But retaking Taiwan still appears to be the Chinese leadership’s number one foreign policy ambition. And it’s slipping away:

From Beijing, that little island across the Taiwan Strait suddenly looks far less reachable.

IV: Sanctions concern

China is a trading nation, to a far greater extent than the US, Australia, or the EU taken as a bloc. Chinese leaders will be calculating what sanctions could do to the Chinese economy, especially if the democracies fill the current holes in their non-Chinese  supply chains.

The answers will not fill them with joy: severe sanctions were imposed on Russia in less than a fortnight and are proving at least somewhat damaging to the Russian economy. Notably, Russian banks have been turfed out of SWIFT, the main global payments system, and Russia’s central bank has been denied access to a large slice of the country’s foreign reserves.

And while we often talk as if China manufactures everything these days, in fact Chinese industries like electronics and aviation are almost irretrievably globalised; they import components before exporting finished products. The Chinese must treat sanctions as a profound economic threat.

And from the leadership’s Beijing offices, the likely club of prosperous Chinese allies in a future trade war looks worryingly small (see the diagram below). China is closing on the US economy in overall size – but the US has strong allies, while China has only weak ones. Nations like India, South Africa and Brazil have notably failed to rush to China’s side. After Russia, its next biggest ally is probably Iran, whose economy produces just one per cent of world GDP.

Maybe it would be better to just concentrate on fixing internal problems for a while longer?

The rules-based order re-ascendant

If most of the above is true, that does not mean that China’s integration with the global economy is going to be unpicked. It does not mean China’s economy or government will be left a smoking wreck, like those Russian tanks.

Rather, it means that the China leadership will slowly begin to see more clearly that it has put itself into a particular type of cage – a very prosperous cage from the average Chinese citizen’s point of view, but a cage that imposes more constraints than the Chinese leadership previously realised. Being part of the global economy means playing by the global rules, and those rules are becoming clearer, more explicit, and more expensive to break. The price of looking untrustworthy to your global neighbours is going up.

Note that this would apply to other countries too, perhaps most importantly the US. As Sam Roggeveen suggests in the comments below, in Afghanistan and Libya and the Second Iraq War, the US has gotten away with a great deal in the past two decades since 9/11. It’s usually done it with Australia’s help. And both countries have usually followed it with a lame defence of their motivations after everything goes arse-up. Now the US, too, will need to pay more lip service, and probably more actual attention, to international standards of behaviour. (Unless, of course, Donald Trump or some acolyte wins the 2024 US election, in which case anything could happen.) Australia will have to hold itself to a higher standard too.

But China is potentially pretty much alone as a major opponent of the liberal democracies. Russia is its largest potential autocratic ally, and Russia, though it loomed large in the 20th century, is now economically no bigger than Australia. China’s second-biggest autocratic ally is Iran, populous and yet not exactly a power in the world. Individually, the nations arrayed against are a great deal more secure; collectively, they have a great deal more clout.

The democratic and the autocratic

Global GDP by nation and level of political rights and liberties

Graph illustrating the sizes of the democratic and autocratic economies

Source: Freedom House; IMF; Bloomberg

As a result of all this, I suggest, the pendulum may be swinging back towards a rules-based international order, of the type we were moving towards before 9/11. I do think that order is becoming more orderly over the decades, even if that is happening very slowly and with many setbacks. Its strength has surprised some in the democratic nations who had forgotten it. It has certainly surprised Putin. I think it may have surprised the Chinese leadership as well. 

A values challenge

It may be that in a year’s time, none of this matters, the Ukraine slaughter is over, and we are back to worrying about pandemic disease and other constants of peacetime life. But that seems by no means certain.

The Chinese leadership certainly seems worried that its values will be questioned in the wake of the Russian attack on Ukraine. And no wonder. China’s regime looks a lot like Russia’s. And the Chinese leadership has to worry not just about the outside world, but about China’s own people.

I joked earlier about people in Brunswick starting to think liberal democracy is winning the values battle. But in fact the Chinese leadership seems worried about a related issue – people in Beijing starting to think that liberal democracy might be winning the values battle. An essay along these lines by prominent Chinese policy thinker Hu Wei appeared and then quickly disappeared from Chinese media in March. I recommend you read the whole thing at the link. When I read it, I found that Hu Wei had made a lot of the same points as this little essay, but earlier.

Writes Wei: “After the Russo-Ukrainian War, no matter how Russia achieves its political transformation, it will greatly weaken the anti-Western forces in the world … China will not only be militarily encircled by the U.S., NATO, the QUAD, and AUKUS, but also be challenged by Western values and systems.” (The emphasis is mine.)

From Beijing, these points probably seem worryingly clear.

Appendix: Views from professional analysts

Initially similar views from international relations experts seemed thin on the ground apart from Hu Wei’s effort. In late April, they’re more common:

  • European studies expert Alexander Clarkson of King’s College London agrees that the Ukraine War shows small states need not be pushovers for greater powers: “The current trajectory of the Russo-Ukrainian war should act as a wake-up call when it comes to these entrenched assumptions about the ability of great powers to militarily overwhelm smaller states.” Tufts’ Dan Drezner agrees.
  • The Economist looks at how the war challenges the EU to take a less accommodating, economy-first view of China. Conclusion: “Mr Putin has shown Europe that it needs a new China policy.”
  • At Bloomberg, John Micklethwait and Adrian Wooldridge agree that the Ukraine War has sharpened the division between liberal democracies and autocracies, but worry that it will further shrink international trade, separate the world into two blocs and close down the global order:

“CEOs who used to build empires based on just-in-time production are now looking at just-in-case: adding inefficient production closer to home in case their foreign plants are cut off. The head of one of the world’s most powerful investment firms, with shares in almost every significant Western company, talked privately about ‘a tsunami of recalculations’ on the weekend after Putin invaded Ukraine. The CEO of one of America’s most iconic multinationals admits that he is reexamining production across China.”

  • Former Stratfor analyst Peter Zeihan also sees China as a big loser from the Ukraine war. Summary: China will lose flows of hydrocarbons; it will lose important access to the globalised liberal democracies; and its leadership now knows that a sanctions regime could cut its flows of hydrocarbons and food, vital commodities that it imports in huge quantities.
  • At Hedgehog Review, University of Virginia political scientist John M. Owen reckons: “The war has exposed Russia as a conventional also-ran bristling with 4,500 nuclear warheads, but not a great power.”

Update: I’ve tweaked various bits of this since first posting it.

Update 2: Thanks to Lowy’s Sam Roggeveen for pushing me to clarify both my thinking and my expression. A new section now looks at the rules-based international order.

Australia-China relations: will “face” trump trade?

Published by Anonymous (not verified) on Tue, 29/03/2022 - 4:58am in



China’s refusal to deal with Australia at Ministerial level is likely to frustrate its effort to join an important Pacific trade agreement. In a statement issued on his arrival in Australia in January the new Chinese Ambassador to Australia, H.E.Mr Xiao Qian, set himself a big task. He noted that China-Australia relations were at “a Continue reading »

China’s Flirtation with “Let ‘Er Rip” Goes Hard Into Reverse with Shanghai Two-Phase Lockdown

Published by Anonymous (not verified) on Mon, 28/03/2022 - 9:54pm in

What to make of Shanghai's sudden reversal of its plan to forego a Covid lockdown?

Global Britain is missing..

Published by Anonymous (not verified) on Sat, 26/03/2022 - 7:03am in

I point this out not actually for its wry humour – or even maybe for its correct approach: But simply to point out that Global Britain is somehow missing. How quite extraordinary – or indeed remarkable… Who would ever have suspected?... Read more

Welcome to the New Global Arms Race

Published by Anonymous (not verified) on Fri, 25/03/2022 - 11:03pm in

CJ Werleman assesses the West's response to Russia and China's aggression and what this means for future global security


Russia’s invasion of Ukraine has been called “Europe’s 9/11”, an unthinkable and catastrophic jolt that has upturned the geopolitical order and created a new era of global insecurity. 

“Security is like oxygen”, famed US international relations scholar Joseph Nye once said. “You tend not to notice it until you begin to lose it, but once that occurs, there’s nothing else that you will think about.”

Russia has brought war back to Europe, as China threatens to bring it back to the Western Pacific. The new global arms race is here.

Germany announced a near-doubling of its military budget, which represents a major policy shift, and is now debating the reintroduction of compulsory military service for all young people, after they finish school.

Sweden, Romania, the Netherlands, and Latvia have announced similar plans to allocate more spending to defence; while Finland has suggested raising its military budget is now inevitable.

Now the European Union is more united than ever, there’s even talk of an EU army to compliment NATO and address Russian military aggression, with EU military chair General Claudio Graziano observing in a recent interview that “we have to do it now because later will be too late”.

The plan is to develop a 'EU Rapid Deployment Capacity' – a modular and multi-domain force of up to 5,000 troops that can “intervene in non-permissive [hostile] environments”, Graziano said.

This capacity would compliment “strategic enablers” that have normally been provided by the US, including command and control structures, strategic airlift, strategic transport, intelligence surveillance and reconnaissance capabilities, cyber defence, unmanned air vehicles, space communication assets, electronic warfare systems, anti-missile defence. “And, I hope in the near future, battle tanks and next-generation fighter jets,” Graziano added.

The advent of new military technology – including Russia’s use of its manoeuvrable Kinzhal (dagger) hypersonic missile, which moves at 10 times the speed of sound – gives further impetus to the start of a new global arms race. Although military analysts argued two years ago the arrival of the hypersonic missile pushed the US, Russia, and China into a news arms race, after the Donald Trump rump administration 'industrialised' the production of this frightening new weapon.

Moving at speeds exceeding 1,150 miles per hour, hypersonic missiles “dangerously compress the time during which military officials and their political leaders – in any country – can figure out the nature of an attack and make reasoned decisions about the wisdom and scope of defensive steps or retaliation,” observed R. Jeffrey Smith, managing editor for national security at the Center for Public Integrity.

The US military is currently spending $2.5 billion a year on developing hypersonic missiles, but expects to double this by the middle of the next decade, according to The New York Times. They can be used to take out an adversary’s nuclear-armed ballistic missiles, target aircraft bases, land or sea-based radars, military quarters, and aircraft carriers, or for waging a decapitation strike. A former Obama administration official called them “instant leader-killers”.

More worryingly, US and NATO refusal to attack invading Russian forces directly, or put in place a no-fly zone over Ukrainian airspace, has proven the theory that an attacker armed with nuclear weapons remains fundamentally safe.

“One of the most dangerous and far-reaching repercussions of Russia’s invasion of Ukraine is the subversion of the Nuclear Non-Proliferation Treaty – perhaps the most critical multilateral agreement for the survival of humanity,” observe analysts at the Swedish Institute of International Affairs. “Since its first attack on Ukraine in 2014, Russia’s actions have put the logic of the treaty to prevent the spread of atomic weapons on its head.”

In other words, Russia’s actions and the West’s response to them, have not only undermined faith in the plausibility of nuclear non-proliferations, but also increased the motivation for other nation states, and even non-state actors, to develop or acquire them.


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When India launched its atomic/nuclear weapons programme in the 1960s, then Pakistani Prime Minister Zulfikar Ali Bhutto summed up the folly of the nuclear deterrent theory by saying: “Pakistan will eat grass, even go hungry but we will get one of our own... we have no choice.” 

Nuclear weapons aside, China’s expansionist polices and militarised threats ushered in a new regional arms race in Indo Pacific long before Russia invaded Ukraine.

Beijing’s has made illegal and baseless claims to territorial waters and islands hundreds and thousands of miles from its shores during the past two years, ramping up military spending in Australia, Singapore, Indonesia, Vietnam, South Korea, Japan, Taiwan and India.

From insecurity, national security policies are formed. But arms races create more of the very thing you’re trying to resolve – insecurity. The First World War, for instance, was the unwanted bastard child of a naval arms race between Britain and Germany. This is what security scholars have dubbed the 'security dilemma'.

“Both sides in the arms race are confronted by the dilemma of steadily increasing military power and steadily decreasing national security,” remarked renowned international relations scholar Jerome Wiesner, a former Kennedy White House official, and Herb York, a physicist who worked on the Manhattan Project. “It is our considered professional judgment that this dilemma has no technical solution. If the great powers continue to look for solutions in areas of science and technology only, the result will be to worsen the situation”.

While it is unlikely that Vladimir Putin’s invasion of Ukraine will end up triggering a third world war, it is probable that the global arms race his actions have invoked may do exactly that at some later point down the road – if history is any guide. 




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How Fossil Fuel Governments Control the IPCC

Published by Anonymous (not verified) on Fri, 25/03/2022 - 7:32pm in

The work of the IPCC is necessary. That’s why it’s important that the UN not be the owners of the go-to reports it issues.

Houston, We Have a Credit Problem

by Neil Tracey

In 2021, China had around 30 million homes sitting vacant for extended periods. There’s enough unused housing in China to house around 80 million people, roughly the population of Germany. This isn’t “slack” in the market; there is little hope that these homes will someday find an occupant. These homes are bound to remain empty.

Pile of credit cards

Our growth-obsessed economy requires credit to “succeed,” leaving millions in debt in a bloated economy. (CC BY 2.0, Sean MacEntee)

Indeed, most of these homes are simply held as financial assets; people who already own one home buy another and hang on to it, expecting it to appreciate. Even more peculiarly, Chinese property developers continue to build more homes. The absurdity of this market made headlines late last year with the story of Evergrande, a Chinese property developer that had accumulated over $350 billion in debt, then defaulted on large sums. Now, months after Evergrande first threatened to default, it has slipped from the headlines. However, it’s worth revisiting the story of Evergrande to understand just how it came to be. Why was a developer building more homes in a country that already had available housing for another 80 million people?

The answer lies in credit. Credit is driven by, and in turn reinforces, expectations for the future. By driving expectations for the future, credit steals democratic control over the future from citizens and gives it to market forces. We’ll explore this issue by looking at Houston, Texas and how the credit market drove its growth. Then we will address what credit may look like in a steady state economy and how steady-state economics may return control of their futures to citizens.

Extreme Growth and Houston: The “Limitless City”

Visiting Houston, one thing stands out: it’s a BIG city. With a population of over 5 million and a metropolitan area of over 9,000 square miles, Houston is the only American city without formal zoning restrictions. In his book, Ages of American Capitalism, Jonathan Levy explains that Houston is culturally, economically, and geographically defined by its cycle of credit-driven growth.

In Houston, there was an expectation that the city would expand. This expectation was the result of fomenting hysteria over oil, housing expansion, and pop culture. In their 1981 song Houston is Hot Tonight,  Iggy Pop sings, “Bright lights, Houston is hot tonight / Arabian sheiks and money, up in the sky / Now I don’t mind, a bloodbath / When I’ve got oil on my breath.” Combining exotifying imagery, money, and oil, Iggy Pop captures the overwhelming expectation of growth that seized Houston. This expectation of growth led to the expansion of cheap credit that let Houston expand so rapidly that its edges became undefinable. Urban geographers, trying to understand the limits of Houston, had to come up with a whole new set of terminology. Houston was a “multi-node city,” an “edge city,” an “edgeless city,” and a “boundless city.” Indeed, the only thing that seemed certain was that Houston was growing, and wouldn’t stop.

NASA satellite image of Houston, Texas lit up at night

Houston is certainly “hot tonight,” and getting hotter. (CC BY-NC 2.0, NASA’s Marshall Space Flight Center)

Houston’s role as a “limitless city” was due to credit. Credit is money or goods extended by a creditor to a recipient based on the understanding that the recipient will pay it back in the future, plus interest. Therefore, credit is a bet on the future ability of the recipient to pay back the money they borrow, and then some.

For this article, we’ll limit our discussion of credit to credit extended by a private creditor; in practice, that may be an individual, bank, or company seeking to make a profit (as opposed to a government agency advancing a social objective). Given this definition of credit, we can see how it may create a cycle of growth. Creditors decide to whom they should give credit based on who is likeliest to repay in the future. Creditors look to companies and individuals with historically high growth rates as a determining factor. In turn, having access to credit enables recipients to grow. A cyclical relationship between credit and growth ensues, whereby credit leads to growth, which leads to more credit, which leads to more growth, and so on.

This model of credit-driven growth can be seen in Houston, where growth expectations attracted the market for credit, since the promise of growth suggested that future property prices would increase. Thus, the expectation of growth meant that Houston applicants were perceived as “good bets” for repayment. This enabled the credit-fueled expansion of Houston as a business. At the same time, Houston’s expansion fueled the expectation that it would continue to expand. This expectation, then, fueled its expansion. Thus, the self-reinforcing mechanism of credit and growth expectations persisted.

At some point, this cycle of growth confronts the physical constraints of the natural world. After Hurricane Harvey dumped 51 inches of rain on Houston in 2017, the New York Times published: “A Storm Forces Houston, the Limitless City, to Consider Its Limits.” Since the flood, Houston has made little progress in considering those limits. Houston appointed a “flood czar” who wants to increase Houston’s green spaces to help absorb flood waters, but there’s no movement to limit the city’s growth. Only two years after Hurricane Harvey, the Houston City Council recklessly approved the development of a 100-year floodplain into condominiums.

Possibilities for Credit in a Steady State Economy

Due to this self-reinforcing cycle, the credit market is incompatible with a steady state economy. Ideas for how to reform this cycle come from a rather surprising source: John Maynard Keynes. Far from a steady stater, Keynes was famous for pitching the “propensity to consume” as well as government policies designed for growth. However, towards the end of his General Theory of Employment, Interest, and Money, Keynes presents some rather unique thoughts on the role of credit.

One idea for reform comes from the price regulation of credit. The price of credit (that is, the real interest rate) could be regulated to avoid unsustainable growth. The Federal Reserve already uses its power to set interest rates, and has long prioritized low rates to stimulate growth. However, the Fed could use a more nuanced approach to setting particular interest rates for loans in specific markets. There are certain areas of the economy that need credit to launch, such as the renewable energy sector. The Fed, with a little urging from Congress and the president, could set low interest rates for these sectors, essentially subsidizing them via differential interest rate. Outside of these sectors, the Fed would set higher interest rates to lessen the rate of growth in other sectors, and of GDP at large.

As a macroeconomic actor, the Fed wouldn’t be keen on dabbling with sectoral distinctions. If necessary, Congress could pass a bill to establish differential interest rates, if not directly via the Fed, then indirectly via fiscal policy such as credit supplements or taxes. Presumably such a law would have a sunset clause or be revisited and readjusted annually, as with an appropriations bill.

A related option is for credit to be socialized and overseen by a government agency. (While the quasi-governmental Fed exerts control over interest rates, most actual credit is extended through private banks.) Credit would be fully controlled, in other words, by democratic institutions.

Socializing credit would enable the government to marry its fiscal and monetary policies, extending credit to essential industries and limiting credit for increasingly outdated or harmful ones. However, for this proposal to work, the federal government would have to concurrently abolish the private credit system and limit access to foreign credit.

Portrait of Neil Tracey, CASSE's economic policy intern Spring 2022Neil Tracey is a junior at Georgetown University and an economic policy intern at CASSE.

The post Houston, We Have a Credit Problem appeared first on Center for the Advancement of the Steady State Economy.

Michael Hudson Discusses Russia Sanctions Blowback on the Renegade

Published by Anonymous (not verified) on Wed, 23/03/2022 - 8:57pm in

Michael Hudson revisits how US sanctions will ultimately hurt its economy more than Russisa's, as crippling the dollar hegemony.

Did Putin Dupe Xi?

Published by Anonymous (not verified) on Tue, 22/03/2022 - 1:56am in

Illustration: pantid123 / This week, President Joe Biden and his Chinese counterpart Xi Jinping spoke about the Russian invasion...

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