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Chinese Fund Managers Sentenced to Death after Cheating Investors out of 1 Billion USD

HANGZHOU – Two brothers and their father were sentenced to death on Monday for cheating 15,000 investors out of over $1.1 billion in east China’s Zhejiang province. Ji Wenhua, president of the Yintai Real Estate and Investment Group, was sentenced to death for the crime

Gold at $7,000 article goes viral in Chinese media

Dan Collins CMR “Gold going to $7,000”, an article today in the Chinese media is going viral and one of the most viewed articles in the financial press. The article references American Jim Rickards and his concept of comparing inflation-adjusted gold prices. Most Chinese economists

Western paper markets manipulate gold prices lower as China takes the real stuff off the market.

It’s not uncommon for the large Wall Street banks to combine in shorting an entire years supply of minded silver in a single day.The same goes for all commodities. Endless paper printing getting funneled to Wall Street has destroyed all real price discovery. Capitalism fails

“American Collapse Theory” Gaining Ground in China

Dan Collins CMR When I moved to China back in 1998 I was surprised to learn how highly the Chinese thought of America. Of course China was a much poorer place back then but coming from the Detroit area I couldn’t fathom where was all

Chanos is back….This is getting sad

Chanos is back! His short China thesis is very long in the tooth but as it goes with most ego maniacs he cannot accept failure or that fact that he might be wrong. Being wrong on an entire country where you have never visited and

China Car Sales Up 22.6% -The Chinese economy is collapsing?

You have to laugh at the whole “China will collapse crowd” on CNBC and even respected sites like Zero Hedge. Personally, I love the Zerohedge stuff. They understand the ponzi-financial fraud-money printing-welfare state economy that now envelops the West. But China is a real economy,

Cloud Computing in China booming as American giants are pushed out

D.Collins CMR China’s cloud computing market is expected to be worth 37.2 billion yuan (US$6 billion) in 2017 as demand for the service grows, the Chinese-language China Securities Journal reported on Friday. Some American tech companies are watching the largest and fastest I.T. market in

Oil rig dispute could see repeat of Sino-Vietnamese War: report

Breaking News today that a Chinese vessel as rammed and sunk a Vietnamese fishing boat. All countries in the South China Sea and East China Sea are using fishing boats in a game of cat-and-mouse to challenge each other on their respective areas. This time

China now runs 4 of the world’s 5 biggest banks

Stockswatch China has become a banking powerhouse. Four of the five largest banks in the world are Chinese, according to SNL Financial’s latest global bank rankings. It’s a big change from the past few years when only two Chinese banks made the top five. Beijing-based

France relents to China, Chinese police to help patrol Paris streets

Scared of losing the Chinese tourist dollar, France has relented to China and will allow Chinese police on the streets of Paris. More signs of the benefits of third-world immigration into the West to the point where cultural breakdown has occurred and law and order

People’s Bank of China will take down global gold price manipulation

Gold has been flowing East for a decade. When the West wakes up to the fact that their gold is gone, they will no longer have sound money with which to back a currency. The world has only been off a gold standard since 1971

China to lower reserve requirement ratio

From the China Daily… BEIJING – China will lower banks’ reserve requirement ratio (RRR) by 0.5 percentage points starting May 18, the country’s central bank announced Saturday. The cut, the second of its kind this year, will drop the RRR for the country’s large financial

Chinese Officials Falsify Data To Mask Slowdown, NYT Says

Is China tweaking its numbers on GDP? Probably. For twenty years Chinese GDP roughy came in right on the governments target. This would be an almost magical performance record considering economists in the West can predict absolutely nothing. For years, China most likely lowered GDP

Japan Learning the Hard Way, Destroying your Currency is Not an Economic Strategy

Japan will learn the hard way that destroying your currency is not an viable economic strategy. Shanghai Daily JAPAN posted a record 1.63 trillion yen (US$17.4 billion) trade deficit in January as rising exports trailed surging imports of crude oil and gas due to rising

Renminbi-yen trade growing strongly a year after launch

One year after the launch of direct trading between the renminbi and Japanese yen, the daily trading volume between the two currencies has reached 50-100 billion Japanese yen on the Shanghai market and 15 billion yen on the Tokyo market, a combined volume double that

China PBOC counter-attacks Hedge fund speculators by normalizing reserve requirements for foreign banks

China has been the subject of intense scrutiny in the Western Press brought
down upon it by the paper aristocracy of New York and London. A group of
hedge funds are desperate to see the Chinese currency drop after they gotten
together to short the Chinese currency. The bet was simple, while all emerging
currencies were taken to the wood shed last year and nearly beaten to death,
the Chinese Yuan was up nearly 20% against the Japanese Yen and Euro and more
than 30% against the other BRIC countries. The idea was to short it, and use
your resources in the financial media to talk a “collapsing China” every chance
you got. Unfortunately, the Chinese economy has not gone along with the plan.
Still growing at 5% plus. The economy has recorded 40% gains in ecommerce and
saw the box office receipts last year grow over 40% to surpass the U.S.

Capital is leaving China, but mostly to buy up assets in the West. Last week
the GE appliance division was bought by Haier. The M&A activity of China has
been intense.Trophy assets all over the world are being gobbled up by Chinese
firms. Despite these facts, the Western press has been intense of their doomsday
predictions for China and reporting every drop in Chinese stocks. (There was
hardly a mention previously when the market went up over 100% in slightly over
a year and a half)

Now , in the latest defense against speculators, China’s central bank has decided
to normalize the reserve requirements on deposits placed by overseas financial
institutions at their branches in the country starting from Jan. 25, according
to a statement released by the People’s Bank of China (PBOC) on Monday.

Overseas financial institutions do not include central banks and other similar
agencies such as official reserve managers, international financial organizations
and sovereign wealth funds. The PBOC set the reserve requirement ratio (RRR) for
such institutions at zero in December 2014, but the ratio will now be “normalized.”

The move will not affect domestic yuan liquidity, the PBOC said in the statement.

Setting a normal RRR for overseas financial institutions will “help subdue cyclical
movement of cross-border yuan funds and guide overseas financial institutions in
strengthening their management of yuan liquidity,” the statement said.

The policy will increase the cost of short-selling offshore yuan and depress arbitrage
based on the spreads of offshore and onshore yuan, according to China International
Capital Corporation, a Chinese investment bank.

Offshore yuan has weakened sharply in past few days. In early January, it dipped below
6.7 against the US dollar. Offshore yuan rose moderately in early morning trading on

The move effectively reduced Yuan liquidity and increases cost of borrowing in Yuan.
This will place a stronger supportive force beneath the Yuan and increases the risk of
shorting the Yuan. This is a signal to the market speculators — China has many tools
in her toolbox still.

China’s Yuan will not be a pushover like the british pound back in the 1990s.

SHOCK: D.C. Insiders Party at the State of the Union Address while Iran seizes U.S. Navy personal


iran 2_0

iran 3_0

iran 4_0

Capital to wipe out coal use by 2020

The national environmental watchdog has declared that boosting efforts to cut
air pollution in northern China, especially winter smog from the burning of
coal, is a mission for this year.

Among the efforts, Beijing has declared that it will wipe out coal use
in its most rural areas by 2020.

As much as “60 percent of smog content is caused by coal burning in the
starting phase of each smog”, said Fang Li, an official with Beijing’s
Environmental Protection Bureau.

To start with, Beijing will replace coal-fired heating stoves with those
powered by electricity or gas in 400 villages this year, before taking
the campaign to the districts of Chaoyang, Haidian, Fengtai and Shijingshan
by 2017, said Guo Zihua, a municipal rural development official.

Beijing’s downtown districts of Dongcheng and Xicheng eliminated coal
burning last year, officials said.

coal use

Forex reserves should remain above $3t, says economist


China should keep its foreign exchange reserves from slipping below $3 trillion, said Li Daokui, an economist at Tsinghua University, reported Xinhua, after it fell to the lowest level in more than three years.

The fall in the forex reserves was mainly caused by short-term investments or even speculative capital flow, said Li at a forum in Beijing on Saturday. He added that renminbi’s depreciation could accelerate once the value of the country’s forex reserves drop below the psychologically significant $3 trillion.
China’s forex reserves posted the sharpest monthly fall on record in December to $3.33 trillion, according to official data. Last year’s decline was more than $512 billion.

The reason behind the fall included offshore speculation on the yuan and market expectation that US dollar will appreciate, said the economist.

If the reserve level could stabilize at $3 trillion this year and renminbi exchange rate could stabilize, it will play a significant factor to the soundness of China’s real economy and its stock market, said Li.
The central bank should maintain renminbi’s exchange stability to a basket of currencies, said the economist, adding that regulators should also manage capital account in a more meticulous manner, banning Chinese firms extracting foreign reserves under the name of bogus investment.

Dan Collins with Max Keiser

Life Lesson from Hundred Eyes

North Korean government now following the China Money Report?

Disclosure: Since our reporting on North Korea we have received bizarre emails
and texts that look to be translated via google translate or something. These
emails and texts take a strong defense of North Korea.

Let me know if anyone has ideas on this?

Some examples of the texts are here…

For the unwary imbued with Judgement/”Aggression”/”Activity”/Relativism, ALL
human/materialistic activity rely on relativism. That is fine should “Robbing
Peter To Pay Paul” ends up with Unity but the reality is exactly the opposite.
As such, the comparison of “The Destitution of “North Korea” and “The Newfound
China” is ONLY possible after The Monied Few had moved their Accumulation/
”Insurance” to “China”.

As the wary ought to realise by now/the-advent-of-The-Internet, North Korea got
to where It is because of the machinations of “The West”, said “West” being The
Liar par excellence due to The West owning The Oral Gymnasium which is The
Who*e Sister of Choseness, Propaganda. To be exact, said Who*e literally owns
“The Westernised”.

As such, one should not despise The Destitute like North Korea. More so when North
Korea’s destitution is actually caused by one’s “Other Face of The Same Coin”. One’s
“Multi-Facetedness”. Regardless of how The Other got to where they are, Reality is
Unconditionality. This is why Malevolence is always being offered a Loving Hand even
when The Stone Dead cannot be anything but.

U.S. and Chinese wages have converged. Welcome to the $12,000 annual pay packet.

Editor -CMR

When final U.S. jobs numbers come out for 2015, the mainstream financial
press will cheer the creation of more jobs. The U.S. will show numbers that
the country has created over 8 million new jobs since 2011. This job creation
number is not enough to cover to entrants coming into the workforce hence the
lack of wage increase pressure in the economy. The country will also have
imported 12 million workers in that time frame and greatly expanded disability
and handouts for the native population to offset employment pressures.

In the same time frame, a “collapsing China” created 64 million jobs and has
seen wages double over that time frame. In low tax, manufacturing friendly China
finding workers has become extremely difficult. Meanwhile, in the U.S. , no one is
setting up a physical factory and get stuck in 40% tax rates. The companies here
already have been leaving in record numbers through inversion and escaping to
Europe for lower taxes.

What will not be reported in the mainstream press is that wage packets in the
U.S. and China have now converged. The average new job created in the United
States is categorized as “low wage” averaging between $9.48-$13.33 an hour.
That would make the monthly salary in the U.S. working at $10/hour and 30 hours
a week at $1,200 per month. Minus social security and taxes this would make the
average new job created in the United States roughly $12,000 per annum. This is
very similar to current Chinese wage structures when factoring in overtime and
annual Chinese New Year bonuses.

Americans of the future will have to adapt to a Chinese style pay packet but with
50% tax rates and medical and educational costs that are ten times the rate of
anywhere else.

The long slow decline has set it.


The North Korean Crisis: My personal experience in the land of Bat-Shit Crazy.

Dan Collins

Things looks set to boil over on the Korean Peninsula.

I was first introduced to North Korea as an exchange student at China’s prestigious
Tsinghua University in Beijing. On Sundays we would play pick-up games of soccer
against North Korean exchange students who absolutely refused to talk to any of the
few Western foreign exchange students that were there. In fact, I got the feeling
that they were surprised that we didn’t have paws or snouts.

I have often thought about these North Korean exchange students as a possible 6th
column loyal to China and being set up by China to eventually replace the North
Korean regime. These students have lived in China, they have seen the abundance of
wealth created by capitalism and it must be difficult upon returning to North Korea.
Despite obviously being elite members of the ruling party apparatus in North Korea,
it does not do one much good to be “King of a Swamp”.

I had not thought of North Korea for a few years until I took a business trip
to the city of Dandong, China on the border with North Korea. Famine was ravaging
North Korea, and their were rumors of refuges flooding into China. These were
people desperate enough to flood into a late 90’s China. I thought, my God, how
desperate do you need to be to flood into this country? I soon received the answer
in the form of a taxi driver who had struck up a conversation with me. The driver
asked me, “Do you have a maid where you live in Shanghai?….You should get a North
Korean maid” he said. I asked …why are they cheap or something? He went on to tell
me….”Yes, so cheap! Only 800 RMB,” he exclaimed. I explained to the taxi driver
that 800 RMB a month for an “aiyi” or maid was not that cheap. The going price in
Shanghai at the time was also about 800 RMB. The driver quickly responded…

“You don’t understand!” You pay 800 RMB and she is yours!”.
Apparently I had stumbled into an entrepreneurial taxi driver who dabbled in
arranging the sale of North Korean slaves into the Chinese market.

The shock did not stop there with being offered to purchase another human being.
The city of Dandong, opposite North Korea sits on the famed Ya Lu river. The
same river that Patton was contemplating dumping uranium into to stop the Chinese
military from crossing the border to fight in the Korean War. Dandong with its
embrace of capitalism was developing shops, restaurant, high rise buildings.
Meanwhile, opposite the river on the North Korean side one witnessed a desolate

I had lunch with the mayor of the city that day and they treated us to a boat ride
on the Ya Lu river. Our boat went so close to the North Korean shore you could have
hopped out of the boat onto the North Korean beach. The river itself separated China
and NorthKorea. The countries are so close you could swim the river if they didn’t
have snipers in place to shoot you.

On the North Korean side, I witnessed a few dis-shelved people in work gangs moving
at a zombie’s pace. They looked dead with sunken eyes but kept moving. We saw some
children playing along the river. Their eyes still bright with optimism , filled
with a spirit that communism had yet to crush.

The North Korean people today are living in a real world matrix created by their
leaders. The country cannot produce enough food or material goods to sustain
themselves. Life has become cheap. Before we examine potential military and economic
fall-out from the North Korean crisis I will leave you with one more story.

I have a Chinese friend who sells rice into North Korea. They will drive 3-4 large
commercial trucks into north Korea monthly to trade bags of rice for minerals or
cash. One of his drivers accidentally ran over a North Korean villager on accident
while delivering rice. The villager was killed, and the truck was quickly surrounded
by angry villagers. The villagers demanded compensation and in the end the truck driver
was able to compensate them with one 80lb bag of rice. That was the cost of one life,
an 80lb bag of rice.

Welcome to the workers paradise where we are all equal. Equally destitute and worth

NK 2

North Korea: “America is a like a month, heading to the flames of Thermonuclear Justice. “

North Korea claimed it detonated a hydrogen bomb in a test Wednesday, a move that was condemned by the U.S., Britain, Japan and even China. It was the politically isolated country’s first nuclear weapons test explosion in three years.

Experts said the claim that the test involved a hydrogen bomb, which is more powerful than an atomic bomb, could not be confirmed.


First African Country has switched to Chinese RMB as Reserve Currency

Your country is an economic basket case. You need to stabilize your macroeconomy
with a stable currency. Where do you look? Naturally, you look to the world’s
largest creditor and world’s largest trading nation. A country that has a solid
foundation of a real production economy including massive trade surpluses.

You look to the China and the Chinese RMB. While emerging market currencies
have collapsed over the last couple of years the RMB has been up significantly
against other BRIC currencies. Over the last year, the Chinese currency is up
over 40% against the Russian and Brazilian currencies. The data is telling you
China is no longer an emerging market. The country has gone middle income.

Today its Zimbabwe…tomorrow Angola. The day after Nigeria, then Argentina,
Brazil, South Korea, and mabey one day even Americans themselves will be
grasping for RMB.

Or…you can just print U.S. Dollars endlessly and nothing bad will ever happen.
Who knows? With 5,000 years of history on fiat currencies being destroyed by
printing. I’m sure this time is different.


Zimbabwe Switches to Yuan as Reserve Currency

Zimbabwe announced last week that it would shift to the Chinese yuan as its
reserve currency. A reserve currency is a foreign currency held in large
quantities by governments and financial institutions to pay international

“Reserve currency is held in order to support the value of national
currencies,” writes Justin Kuepper, international investing expert, on the
website International Invest.

Patrick Chinamasa is Zimbabwe’s Minister of Finance and Economic Development.
He said China agreed to cancel about $40 million of Zimbabwe’s debts this year.

He also said the move was a sign of the friendship between China and Zimbabwe,
a poor country in southern Africa.

It is also a sign of the growing economic ties between China and Zimbabwe.
China is Zimbabwe’s largest foreign investor, with interests ranging from
construction and energy to telecommunications.


China injects liquidity into market via MLF, SLF

BEIJING, Jan. 4 (Xinhua) — The People’s Bank of China (PBOC), the central bank, said Monday that it injected 100 billion yuan (15.4 billion U.S. dollars) into the market in December through medium-term lending facility (MLF).

A total of 13 financial institutions received money from the central bank for six months at an interest rate of 3.25 percent.

“The move was aimed at keeping liquidity reasonably abundant,” said the PBOC.

Last month, small institutions got a total of 135 million yuan in over-night loans from the PBOC’s local branches via standing lending facility (SLF) at 2.75 percent.

MLF and SLF are liquidity tools designed for cash-strapped commercial and policy banks to borrow from the central bank using securities as collateral, at rates set by the PBOC.

China’s stock markets suspended as shares tumble 7 percent

BEIJING, Jan. 4 (Xinhua) — Trading on China’s stock markets was ended at 1:33 p.m. Monday after shares tumbled 7 percent, triggering the new “circuit breaker” mechanism on the first trading day of 2016.

The early end to trading on Shanghai and Shenzhen bourses, the first in the history of China’s stock markets, coincided with the launch of the automatic circuit breaker, designed to contain wild swings in the markets.

The mechanism follows the Hushen 300 Index, which reflects the performance of both Shanghai and Shenzhen traded stocks.

When the Hushen 300 rises or falls by 5 percent, the circuit breaker imposes a 15-minute suspension of trading. If fluctuations hit the 7-percent mark, trading is terminated for the day.

At 1:12 p.m., trading was suspended for 15 minutes and, immediately on reopening at 1:33 p.m., the index fell a further 2 percent whereupon trading ceased. When trading closed, the Shanghai Composite Index was down 6.85 percent, the smaller Shenzhen index down 8.16 percent, and the ChiNext Index, China’s NASDAQ-style board of growth enterprises, down 8.21 percent. The sub-index for financial heavyweights, which tracks 51 banks and insurers, dropped 8.3 percent, with 16 financial firms falling by the daily limit of 10 percent.

CITIC Securities, China’s largest brokerage firm, lost 9.82 percent to 17.45 yuan per share. Bank of China fell 3.49 percent to 3.87 yuan. China Construction Bank lost 3.11 percent to 5.6 yuan. China Life, one of the world’s biggest life insurers by market value, lost 7.21 percent.

Energy firms also lost. Sinopec, China’s top refiner, tumbled 3.63 percent to close at 4.78 yuan per share. PetroChina, the largest oil and gas producer, lost 2.63 percent to 8.13 yuan.

The decline is generally being attributed to downbeat market sentiment stemming from weaker than expected manufacturing activity in December and a steep fall in the yuan exchange rate on the day.

The Caixin General China Manufacturing Purchasing Managers’ Index (PMI),released today, edged down to 48.2 in December from 48.6 in November.

The reading is the 10th month in a row below the 50-point level which demarcates contraction and expansion.

December’s PMI pointed to deteriorating operating conditions faced by Chinese goods producers, according to financial information service provider Markit and Caixin Media Co. Ltd. who publish the figures.

Adding to the woes, the central parity rate of China’s currency, the yuan, weakened by 96 basis points to 6.5032 against the U.S. dollar on Monday, the lowest level since May 2011.

The decline may have triggered fears of a capital flight, said Deng Haiqing, economist at JZ Securities.

The market is also worried about the forthcoming anullment of a rule which restricts shareholders with holdings of more than five percent in a company in selling shares. The rule came into force in July to prevent free falls in the markets and expires on Friday, raising the possibility of a substantial sell-off.

In addition, about 9.27 billion lock-up shares in 34 companies, worth around 95 billion yuan, will become tradable this week.


Migrants Brawl, Rape, Sexually Assault German women turning Cologne train station into War Zone


Just five arrests have been made by German police after central Cologne was transformed into a war-zone on New Year’s Eve, as an estimated 1,000 migrants celebrated by launching fireworks into crowds and sexually assaulting German women caught up in the chaos.

The sordid details of the horrifying sexual assaults and attacks made against ordinary Germans by large gangs of migrants in Cologne in the early hours of Friday morning are just now emerging.

Far from a small number of sex assaults reported to have been made by German speaking men in initial reports on New Year’s Day, dozens of women are now reported to have been molested and “raped”, while dozens more men have been assaulted and robbed.

One victim, 28 year old ‘Katja L’ spoke of her ordeal as she tried to make her way to the waiting room of Cologne railway station with two other girls and a boyfriend in the early hours of new year’s day. She told Der Express – one of the largest regional newspapers: “When we came out of the station, we were very surprised by the group that met us there”. She said the group was “exclusively young foreign men”. Keeping close to her friends, they pressed on:

“We then walked through this group of men. There was an alley through [the men] which we walked through. Suddenly I felt a hand on my buttocks, then on my breasts, in the end, I was groped everywhere. It was a nightmare. Although we shouted and beat them, the guys did not stop. I was desperate and think I was touched around 100 times in the 200 meters.

“Fortunately I wore a jacket and trousers. a skirt would probably have been torn away from me”.

As Katja L and other witnesses who have since come forward said, as they were molested by the gang the men were laughing and pulling their hair, and there were shouts of “ficki, ficki” (fucky fucky) hurled at them as they were called “sluts”. Treating her as “fair game”, there had been so many men groping at her Katja L said she would be unable to positively identify any of the perpetrators to the police.

Others were less lucky. One woman had her tights and underwear torn off by the crowd, and a police source quoted said there had been “rapes” at the station that night.

So far, police have identified 80 victims of the gangs, 35 of which were subjected to sex attacks. Others were assaulted or robbed. Officers suspect there are many more as of yet unreported cases from the night, and are appealing for victims to come forward after their ordeals.

A press conference hosted by Cologne’s chief of police Wolfgang Albers this afternoon confirmed the attacks had been perpetrated by migrants, all of whom were found to be carrying official immigration paperwork by police officers at the time. Mr. Albers said “the crimes have been committed by a group of people who mostly come from her in appearance from the North African and Arab countries”, and that he found the situation “intolerable”.

In addition to the sex attacks, there were several brawls between migrant gangs at the railway station, and large numbers of fireworks were fired into the crowds and at the hapless police. A witness said: “There were thousands of men. Simply firing into the crowd, and as my girlfriend and I wanted to get us to safety, but they blocked our way. We were so scared! We fled from the station”.

Despite dozens of men and women having been attacked, the area being comprehensively monitored by CCTV, and having thousands of potential suspects, Cologne police have arrested just five men so far in relation to the new year’s eve attacks.

The police chief may yet have serious questions to answer on the attacks, which follow a year of record breaking migration, after it emerged that just ten officers were dispatched to the station after the report of a gang sex assault in the early hours of the morning, and unverified accusations started to circulate on-line of officers even ridiculing a victim for not having been vigilant enough to avoid being attacked. Breitbart London has approached Cologne police for comment.

The police union said of the incidents: “This is a completely new dimension of violence. This is something we have not known”.


China inaugurates PLA Rocket Force as military reform deepens

BEIJING, Jan. 1 (Xinhua) — Chinese President Xi Jinping conferred military flags on the general command for the Army of the People’s Liberation Army (PLA), the PLA Rocket Force and the PLA Strategic Support Force at their inauguration ceremony held Thursday in Beijing.

Xi said the move to form the PLA Army general command, the PLA Rocket Force and the PLA Strategic Support Force is a major decision by the Communist Party of China (CPC) Central Committee and the Central Military Commission (CMC) to realize the Chinese dream of a strong military, and a strategic step to establish a modern military system with Chinese characteristics.

It will be a milestone in the modernization of the Chinese military and will be recorded in the history of the people’s armed forces, according to Xi, also general secretary of the CPC Central Committee and chairman of the CMC.

Noting that the PLA Army is the oldest force led and founded by the CPC, Xi praised its long history, tremendous military exploits and immortal deeds. “The PLA Army has played an irreplaceable role in defending national sovereignty, security and development interests,” said Xi.

He called on army soldiers to embrace the honorable traditions, adapt to changing situations in the digital age and explore new patterns in land battles. The army needs to optimize its structure and composition, expedite its transformation from regional defense to universal fighting and build itself into a powerful modern land force.

A new force in safeguarding national security, the PLA Strategic Support Force represents “an important growth point” of the Chinese military in modern war, Xi said.

Xi urged the soldiers of the force to achieve leapfrogging development in key fields, set a high bar and strive to build a strong modern strategic support force.


The American Economic Recovery in 9 Simple Charts


Japan’s Master Plan to Destroy the Chinese Navy in Battle

It seems that Japan is developing plans to craft its own Anti-Access/Area-Denial (A2/AD) strategy—or what one former Japanese official describes as “maritime supremacy and air superiority”—against the Chinese Navy.

The plan itself, detailed by Reuters, makes a tremendous amount of good sense:

“Tokyo is responding by stringing a line of anti-ship, anti-aircraft missile batteries along 200 islands in the East China Sea stretching 1,400 km (870 miles) from the country’s mainland toward Taiwan. . .

“While the installations are not secret, it is the first time such officials have spelled out that the deployment will help keep China at bay in the Western Pacific and amounts to a Japanese version of the “anti-access/area denial” doctrine, known as “A2/AD” in military jargon, that China is using to try to push the United States and its allies out of the region.

“Chinese ships sailing from their eastern seaboard must pass through this seamless barrier of Japanese missile batteries to reach the Western Pacific, access to which is vital to Beijing both as a supply line to the rest of the world’s oceans and for the projection of its naval power.”
The piece also spells out an overall larger Japanese military presence in the East China Sea, which will certainly not please China:

“Over the next five years, Japan will increase its Self-Defense Forces on islands in the East China Sea by about a fifth to almost 10,000 personnel.

“Those troops, manning missile batteries and radar stations, will be backed up by marine units on the mainland, stealthy submarines, F-35 warplanes, amphibious fighting vehicles, aircraft carriers as big as World War Two flat-tops and ultimately the U.S. Seventh Fleet headquartered at Yokosuka, south of Tokyo.”

Does this plan sound familiar? It should if you have been following the topic. Such ideas have been floated in the U.S. national security community for a few years now. Toshi Yoshihara, a past National Interest contributor and professor at the U.S. Naval War College, who is also quoted in the Reuters piece, presented a similar idea as part of a much larger Japanese A2/AD strategy in a Center for New American Security (CNAS) report back in 2014:

“the Ryukyu Islands themselves could support Japanese anti-access forces. For example, truck-mounted anti-ship and anti-air missile units dispersed across the archipelago would erect a formidable barrier. In wartime, effective blocking operations would tempt PLA commanders to nullify these gatekeepers. Such exertions, however, would tie down significant portions of China’s warfighting capacity while depleting manpower and materiel. Because the islands hold little innate value to Beijing the Chinese leadership might decide that escalation was not worth the effort.”

He also explains that China could not easily destroy the missiles:

“Any attempt to eliminate the Japanese ASCM threat would require the PLA to open a geographic front about 600 miles wide. A Chinese suppression campaign involving air power and ballistic- and cruise-missile strikes would accelerate the rate at which the PLA consumed finite stocks of munitions, airframes and airmen. The result would likely prove disappointing, similar to coalition forces’ fruitless ‘Scud hunt’ during the 1990-91 war against Iraq. Amphibious assault, the surest way to dislodge the island defenders, would also represent the riskiest way, with Japanese and U.S. forces playing havoc with landing forces.”

Yoshihara continues, spelling out the clear benefits to Japan:

“Abundant, survivable, inexpensive weaponry such as the Type 88, the Type 12 and other mobile air-defense units could coax China into exhausting more costly and scarce offensive weapons for meager territorial gain and uncertain prospects of a breakthrough into Pacific waters. Relatively modest investments in such forces could spread Chinese forces thin—furnishing Japan much needed breathing space.

“Beyond the tactical benefits, strategic dividends would accrue to Japan. Possessing the option to surge anti-ship and anti-air missile units onto the Ryukyus at short notice would demonstrate Japanese resolve while substantially bolstering Tokyo’s capacity to act effectively in times of crisis. Japan’s blocking forces would presumably limit their lethal ranges to PLA units operating in the commons and over Japanese territory. Such geospatial restraint would reduce the likelihood of escalation and dovetails with Tokyo’s defensively oriented posture, bolstering its diplomatic narrative on the world stage.”



China in 2016: Fewer Jobs, Lower Consumer Confidence

Gordon Orr
Board Member- Lenovo

China in 2016: Fewer Jobs, Lower Consumer Confidence

China in 2016 – an $11 trillion dollar economy, increasingly diverse, increasingly volatile, increasingly hard to slot into a single box to describe its performance.

Absolute size should not be overlooked – whatever rate China grows in 2016, its absolute share of the global economy and of many specific sectors will be larger than ever. Too often we lose sight of the absolute scale of China’s economy in debates over a point up or down of growth. And we also overlook the reality that this $11 trillion economy is made up of multiple sub-economies, each over a trillion dollars in size, some booming, some declining, some globally competitive and some fit for the scrap heap.

How you feel about China depends more than ever on the parts of the economy you engage in. Selling kit to movie theaters has been great business in 2015, selling kit to steel mills less so. In your China, are you dealing with a tiger or a tortoise? Your performance in 2016 will depend on knowing the answer to this and shaping plans accordingly.

Many well established secular trends in China will continue in 2016, the expansion of the service economy perhaps most prominent among them.

In the following series of posts, I will highlight what I believe will become more important and more visible in 2016, either as trends now accelerating to scale, or where a discontinuity may become a tipping point. I hope you find it of interest.

13th Five-Year Plan – Few Surprises
Much of the 13th Five Year Plan will seem pretty familiar. So much has been well flagged in advance at the 5th Plenum and elsewhere. There will be lots of continuity of priorities, lots of business as usual both in the 5-year plan and in surrounding policies on anti-corruption and the like. Perhaps the only challenge with the plan will be to interpret its intent clearly through the new “Party speak” that is coming to dominate government pronouncements.

There will still be a GDP growth target of 6% plus. This will be softened a bit by parallel goals on quality of life – environment, health, income and the like – but not eliminated.

Fiscal and monetary policies will still have achieving the growth target as their core objective. So expect lower interest rates in 2016 and pressure on the exchange rate versus the dollar as a result.

Financial reforms will continue, aimed at moving more of the economy towards a market based allocation of capital. The aftermath of the stock market volatility is proving to be a significant positive in accelerating the pace of reform, an example of taking advantage of a moment of crisis to move forward faster than would otherwise have been possible.

There will be more progress on interest rate deregulation, on the IPO process – registration rather than approval, on permitting new entrants into financial services, especially from the tech sector and from abroad and on re-implementing laws that were suspended in the summer of 2015.

Decentralization will be promoted in the plan, but the reality will likely be more centralization, as I describe later.

More infrastructure will be built, mainly to enhance intra-regional development, for example around Greater Beijing.

A continued push for greater innovation will be supported by a major push to better deliver on IP protection laws and by subsidizing R&D, with priority given to Industry 4.0 and “Internet Plus” projects. Chinese companies, within the “Go Out” strategy, will be encouraged to acquire companies with IP to be leveraged in China. It is quite possible that by 2020, multiple industries will have IP protection in China comparable to many developed economies.

The plan will seek to grow China out of excess industrial capacity rather than simply shut it down. I don’t think this will be successful and shutting down capacity will eventually have to happen. Consolidation of national level state-owned enterprises will be a cornerstone of SOE reform (the Minmetals-MCC merger in December 2015 being one example), but being larger will not in most cases lead to better operating performance (if monopolies are recreated the outcome will be different), although it could lead to lower capital expenditures, which would generally be a plus for the overall economy.

Green initiatives will take center stage, reinforced by commitments made in December 2015 in Paris and the “red alert” in Beijing in the same month. Central government will make such big and visible commitments to its citizens that local governments will have little choice but to seek to deliver. There will be a boom in advising local government on what to do. However there will be bottlenecks where the needed solutions cross local government geographic boundaries.

There will be tougher emissions standards, more spending to support non-fossil fuel energy development, and green finance made available. Both private and state owned companies will rebrand ongoing initiatives as green. China will explicitly build new export engines out of emerging global leadership in green products (for example expect to see lots of Chinese made air filtration products appearing in Delhi and the rest of India in 2016).

Beyond green initiatives, going global will remain a key theme as detailed in the One Belt One Road program.

Finally, the plan will recognize China’s success in raising labor productivity over the last decade and prioritize accelerating productivity growth in 2016-20, for both capital and labor. Financial and technological innovation have already been highlighted as drivers to enable this. Implications of higher productivity for workers – the disappearance of many traditional and well-paying jobs, the need for increased labor mobility, for life time skill renewal and development will be raised in the plan.

But I am concerned that implementation will be left to local administrators and that the regions that need the help the most will have the least money to invest in reskilling their workforce and the least skills to deliver. Weak regions could enter a long term downward spiral. I expect significant changes to this initiative over the course of the plan to address the scale and cost of the challenge it presents.

China will host the G20 in Hangzhou in September 2016. Expect lots of polishing of the country’s economic plans and performance over the summer together with actions to minimize the risk of any economic volatility into the autumn.

Fewer Jobs, Flatter Incomes and Potentially Less Confidence
The workplace in China is already changing dramatically, changing in ways that will create many individual losers. For example these could be working in an industry sector in secular decline (e.g. steel or textiles) or in industry where technology is creating a rapid displacement of workers even as output grows (e.g. financial services or retail), or tied by their hukou to a geography without growth. The government must help these workers to reskill if it is to deliver on its commitment to help all parts of society benefit from economic growth and to keep these workers actively engaged in the economy. It will not be enough for government officials to visit their major local employers and “ask” them as they did during the global financial crisis to retain all their current workers.

More specifically, official government figures (which on jobs are likely to skew to the positive) show 15 million jobs lost in construction over the last year. Mining, a much smaller employer, has lost millions more. Workers from these sectors have few skills relevant for the modern services economy, yet many are in their peak working years. Reskilling needs to happen at scale. Not everyone can work in delivering ecommerce packages and the wages from doing so are not likely to be at a level to bring one into the urban middle class.

So far, official employment in the manufacturing sector has declined only slightly from a peak of 140 million in 2013 to 136 million today. However pressure on jobs is building fast. Broad based investment in factory automation created a decade of 16% annual labor productivity growth in manufacturing in China. Touring modern Chinese factories showd that this trend may be reaching an end point; there are few workers left in many factories. And remaining people intensive sectors (such as apparel, which still employs 19 million) have limited ability to respond to lower cost production in Bangladesh and Vietnam and will continue to leak jobs as a result.

Early numbers on 2015 indicate that manufacturing productivity growth in China may be close to zero this year, certainly down in the low single digits and a massive decline from trend. Consequently, manufacturers are for the first time addressing their white collar bloat. When Haier, a role model to many, boasts about having eliminated 10,000 middle management roles, this is clearly a trend many will follow.

Multinationals have been frustrated by low white collar productivity for years, sharing anecdotes of how staff in Taipei are less costly and more productive than those in Shanghai, and of how many hours a day staff in Beijing spend shopping online. White collar wage levels have reached a point where they are taking action. Fewer companies are “staffing for growth” anymore; instead, overhead cost structures are being made fit for purpose today.

Pressure on the white collar worker is about to reach a tipping point in the service sector as well. How many of the millions of Chinese insurance sales agents will still have jobs in a couple of years, in a society where consumers embrace online solutions more enthusiastically than anywhere in the world?

In the first half of 2015, already more than 40% of mutual funds were sold online. Banks’ own mobile apps are cannibalizing their branches and their millions of staff based there. As many of the largest companies in these sectors are state-owned, job losses may be delayed, but there is enough private sector, attacker competition that eventually incumbents will have to act.

Even students, who ought to be in a privileged position in the new economy, are struggling. There aren’t enough of the high-paying white collar jobs needed to soak up 7 million new graduates every year. Up to half take jobs that would not require a degree, with stagnant compensation to match.

Even those graduating in subjects where there is high demand are not automatically taking the jobs on offer in their field. For example, analysis by Cai Jiangnan at CEIBS showed that of almost 3 million medical school graduates between 2008 and 2013, only 20% became doctors. These state sector jobs are seen to be unattractive for their low pay, inflexibility, and location outside first tier cities. Students’ life expectations would not be met in these roles and they would rather discard their expensive training to take a lower skill job with lower pay but greater flexibility in a more attractive city.

Government needs to be seen to be giving people at all stages in their career the skills they need to be relevant in the workforce. This applies to everyone from migrant workers to university graduates. The state education system is not delivering.

Add on top of that the need to reskill redundant construction workers, redundant factory assembly line workers, and the coming wave of redundant white collar workers. For China to become the “moderately well off” society that its leaders aspire to, they will need to roll out education, training and apprenticeship solutions at scale and fast. This will be both complex and expensive.

Pressure for higher productivity and on jobs overall will lead to lower growth in household income and potentially an erosion in consumer confidence in 2016. Consumer spending has been responsible for well over 50% of GDP so far this year, and less confident consumers will need to be handled exceptionally carefully by the government if we are to avoid the kind of behavior we saw in the stock market last summer reprising itself in the broader economy.

China Telecom shares fall amid probe into boss

Shares in China Telecom dropped as much as three percent Monday after news its head was under investigation, the latest high-profile target in a corruption crackdown.

The firm, one of China’s big-three telcos, saw its shares trade as low as HK$3.62 ($0.47) on Hong Kong’s bourse, compared to the previous closing of HK$3.73.

The probe into Chang Xiaobing for “severe disciplinary violations” was announced by the Central Commission for Discipline Inspection, the watchdog of the ruling Communist Party.

The term is normally a euphemism for graft.

Chang had been “taken away”, according to an article in the respected business magazine Caijing, adding that he disappeared just days before a meeting of the state-owned company planned for December 28.

Chang’s phone was switched off and he had not responded to multiple calls, it added.

“Since last year, when the authorities were probing oil companies, we knew they would be doing this for other sectors. Now it’s telecoms,” financial analyst Jackson Wong from the brokerage firm Simsen Financial group told AFP.

The drop had narrowed to 1.07 percent by the lunch break, with shares trading at HK$3.69.

Wong said investors are moving cautiously pending further details of the probe.

Authorities have been pursuing a hard-hitting campaign against allegedly crooked officials since President Xi Jinping took office in 2013, a crusade that some experts have called a political purge.

After a stock market rout this summer, the nation’s financial sector was under the spotlight with several high-level executives reportedly being hauled in.

Billionaire Guo Guangchang, dubbed China’s Warren Buffett, disappeared from public view earlier this month amid reports he had been detained by police in Shanghai.

He briefly resurfaced afterwards but his conglomerate flagship, Fosun, confirmed the 48-year-old was “assisting in certain investigations” by Chinese authorities.

This is not the first wave of investigations to hit the telecoms industry.

The country also probed the top three operators in 2010 and 2011, forcing mid-level executives and above to surrender their passports.


China Is Buying Giant Attack Hovercraft From Russia

Popular Mechanics

China has received its second Zubr (“Bison”) class hovercraft from Russia. Fast, armed and capable of carrying an invasion force, thesed hovercraft give China the ability to land troops on nearby islands and islets, including those in the East China Sea, South China Sea, and even Taiwan.

The Soviet Union developed the Zubr class of hovercraft in the late 1970s as a way of quickly landing troops over relatively short distances. Zubrs have a range of 300 miles and top speeds of up to 55 knots. Each one can carry three tanks, 12 armored fighting vehicles, and up to 500 marine infantry. And they don’t stop at the beach: As hovercraft, Zubrs can cross a beachhead and carry their cargo well inland. On land, a Zubr can cross a five-degree gradient and traverse up to a four-foot vertical wall.

Here’s a Russian Zubr involved in an amphibious exercise, disgorging Russian marines and BTR-82 infantry fighting vehicles on the beachhead.
Each of these vessels has two AK-630 30-millimeter gatling guns for self-defense against anti-ship missiles. Zubrs can also provide their own fire support in an invasion, as each one has two 140-millimeter Ogon multiple rocket launchers with 22 barrels.

China originally signed a contract with Ukraine for four Zubrs—two to be built in Ukraine, and two in China at the Huangpu shipyards. The Ukrainian shipyard that built the Zubrs is now apparently in Russian territory but it seems they were still able to complete the order. In addition to the Russian/Ukrainian Zubrs, China also purchased Greece’s entire fleet of four Zubr hovercraft. This will bring China’s fleet to a total of eight hovercraft.

Why such an interest in these watercraft? China has territorial disputes with several neighboring countries in the nearby seas, mostly over small, uninhabited islets and reefs. In the event of a crisis, Zubrs could quickly land a small ground force on these islets, either to claim them for China or take them from someone else.

Zubrs would also be useful if China ever decided to invade Taiwan. Taiwan is only 120 miles from the Chinese mainland, well within the Zubr’s 300-mile range. The trip would last less than two hours, meaning an efficient invasion force could make two round trips per day.