The Widdershins

Posts Tagged ‘Xi Jinping

Trump’s hair making a break for it…

These days it seems as if the world is one large cyclonic toilet. Issues circle, disappear, others surface, circle, disappear, just to be replaced by others. It’s too much for even the media to say grace over.

So I’m not even going to try.

There’s a big picture issue coming up this week and it is instructive on a larger level. Chinese President Xi Jinping and the ambulatory orange bath mat are scheduled for a tete-a-tete at Mar-a-Lago this week. Column A on the menu is North Korea and Column B looks like trade.

Since the North Korean issue is a crazy town convention, I’ll stick to Column B. It is far more manageable.

First and foremost, Dolt 45’s life is transactional. Marriage is a prenuptial contract. Child rearing is a child support agreement. Business is one deal after another. He sees everything as transactional. Many commentators have mislabeled him as an authoritarian, but to be an authoritarian you must first have beliefs.

Umber Dolt has no guiding principles beyond winning. As we’ve discussed before, his competition means he measures everything – from the size of his paws to the number of floors in his buildings.  His whole concept of self-worth is a ledger entry. Numbers serve one purpose – as a mirror of his self-esteem.

This is not lost on the Chinese. Dolt 45’s Chinese trademarks were miraculously approved after years of being blocked. Jared and Ivanka were courted by making them guests of honor at the Chinese New Year celebration in February. There are even new applications to market Ivanka’s jewelry in China.

The big leverage, the Chinese Anbang Insurance multi-billion dollar sweetheart real estate deal for the Kushner family, collapsed after much deserved Congressional and press criticism.

It’s against this backdrop President Xi matches wits with 70-year old Orange Herbert. And I forgot to mention, Xi is being prepped by the Chinese ambassador, a U.S. educated, professional diplomat with U.N. experience. The Orangeloupe is being prepped by the administration’s Swiss Army Knife that always dreamed of being a real boy, Jared Kushner.

Drumpf’s kin caught sunbathing at Mar-a-Lago…

Trade is complex. It is the consummate push-me-pull-you animal that bites. It’s much more complicated than declaring, “My trade surplus is bigger than yours.”

A story would be helpful.

Let’s say there’s a school PTA holding a bake sale to raise money. The parents are divided into two groups because competition, like greed, is good. One team is led by Ivan Rottencrotch and the other is led by Holly Woodstar.

Ivan’s group goes the traditional route and bakes, bakes, bakes. They have lots of cupcakes to sell. They sell them for market price considering the cost of all the ingredients.

On the other hand, Holly’s group gets most of the ingredients donated. Holly is really just an aggregator, but since the ingredients cost her nothing, she can sell her cupcakes for much less and produce many more.

Holly’s group wins the competition. When her great victory is written up in the PTA newsletter, they only mention the overall sales figures between Ivan and Holly’s groups. They fail to mention the breakdown of just how Holly won – by having cheaper ingredients and bringing cheaper cupcakes to lots more rotund ‘Muricans.

That is trade in a nutshell. America is Holly Woodstar’s team. Since the good old ‘Murican dollar is the world’s reserve currency, foreign businesses and countries like to invest in ‘Murica. It allows domestic manufacturing to spread its supply chain globally and take advantage of cheaper components. That’s one of the reasons you can get a 55-inch television for $329. It’s why Walmart is Walmart. It’s why FedEx and UPS are not delivery companies, they are global supply chains.

These complexities are understood by the Chinese. As Sun Tzu said, “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” President Xi need not fear Dolt 45. We, on the other, should.

The carotene cone head is a transactionalist. If the Chinese offer to buy a few more jets from Boeing or Alibaba makes more meaningless promises, that’s all it is going to take for someone who is tweet-happy. What’s more, that’s all it takes to assuage a base always ready to blame the others.

Look for some grand trade announcements this week. It will be face-saving. While Dolt 45 is looking for his next tweet, Xi is looking ten-years into the future. Don’t for a minute think Xi doesn’t realize there is a tiny brained creature roaming the Mar-a-Lago grounds. By the end of the visit, he will have tamed and trained the tyrannical tranny.

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Apologies to Carly Simon, but…Carly Simon

We’re so vain, we probably think this economy is about us,
We’re so vain, we bet future swaps this economy is about us,
Don’t we? Don’t we?

A few years ago, when the Chinese economy was booming, politicians said it was an orchestrated plot to take America down.  Now that the Chinese economy is struggling desperately, those same politicians are just as convinced it is – wait for it – a plot to take America down.

The political discourse around this issue is genuinely unhelpful.  Just like Seinfeld’s Soup Nazi, Scott Walker snapped, “No state dinner for Xi,” the Chinese President Xi Jinping scheduled for a formal state visit.  I guess the closest Benihana will have to do.  Given the impetuous inanity passing for policy, here’s what you need to know about the China Syndrome of the Chinese economy in less than 800 words.

Chinese Stock MarketChina’s stock market is relatively small.  It’s mostly mom and pop investors who have borrowed the money to buy stocks – a majority of them don’t have a high school education.  After gaining 140% last year, this year the Shanghai Composite Index has fallen 40% in the face of a tremendous amount of active intervention by the Chinese central government.  It seems as though the Politburo can’t stop the crash.

The reason all these unsophisticated investors got into the stock market was the implicit support of the Chinese Communist Party.  It appears to have been an overly optimistic act of faith in the Chinese Politburo’s economic stewardship.

With an abundance of labor, China bet the farm on being the world’s low-cost manufacturer and assembly line.  Such an economic model is not sustainable for an economy needing to grow at a double-digit multiple to service a burgeoning middle class.  The Chinese government has been notoriously optimistic in its economic forecasts (some say notoriously deceiving).  There are more than a few economists who believe the Chinese economy is on the verge of recession, if not already there.

This is how it happened:  When global demand went kaput in 2008, China decided to focus on massive domestic Empty cityconstruction projects.  There has been a massive, and I do mean massive, overbuild in China with unused stadiums, skyscrapers, and even whole cities.  They sit empty.

Add to this the relocation of 250 million Chinese from rural settings to cities in just twelve years as official state policy.  In essence, this top down policy from the Politburo turns China into a majority urban country in a dozen years.  Put another way, it would be the equivalent of relocating 5 of every 6 Americans in the span of three presidential terms.

Chinese leadership is terrified of political unrest reminiscent of Tiananmen Square.  Without sustained growth at a level sufficient to service a growing middle class, the leadership of China is at a crossroads.  At once they are both risk-willing to try just about anything to thwart economic upheaval and at the same time, risk-averse against any potential calamities resulting from their actions.

Chinese Stone SoldiersThere is a group of millennial Chinese numbering about 300 million – about the size of the total U.S. population.  This group is better educated and likes its taste of the middle class lifestyle.  The Communist Party worries most about this group.  Quelling political unrest in this group would be difficult, almost impossible, because of the nomadic nature of these 300 million workers and their widespread geographic dispersion.

In its simplest terms, the problem is transforming a manufacturing, rural economy into an urban, consumption-based economy in less than a generation.  For perspective, it took Great Britain 200 years, the U.S. 100 years, and Japan 50 years to do the same thing.

As with all instances of massive historical change, there are naysayers within the Chinese system.  China’s top-down, hierarchical structure ensures elites have control over policy and decision-making.  These traditionalists are wary of many of the enacted economic reforms.  This current economic tsunami strengthens traditionalists at the expense of reformers like President Xi Jinping.

How does this affect us?  Throughout history, when absolute control is threatened in China, it retreats back in on itself.  Hibernation of the world’s second largest economy would be the equivalent of a worldwide recession and catastrophic to our economic well-being and the world economy in general.Chinese Stone Soldiers

Even more sobering is this:  Political instability in a country with a standing army of 200 million soldiers and perhaps 3,000 nuclear warheads is indeed a worrisome thing.  This is especially true in a region where China is surrounded by emerging economies – the “if you can’t make it, take it philosophy” would indeed present existential threats.

Again, my apologies to Ms. Simon:  “Instead of clouds in my coffee, clouds in my coffee,” there are clouds on the horizon, clouds on the horizon.

Take the conversation in any direction you might like.

 

 

Good afternoon Widdershins. Fall, the bestest of seasons, is upon us. This past weekend my hometown had its forty-third annual arts and crafts festival built around the making of sorghum molasses. It was all the fun you can imagine when you throw out the welcome mat for 40,000 humans and the town’s tornado ravaged infrastructure was built for fifteen hundred. I hope your weekend was a good one as well.

Today I thought we would play a short game of Wudja — would you rather have the life of person X over the life of person Y? For purposes of today’s little thought experiment, person X is President Obama and person Y is China’s President Xi Jinping.

So would you like to be Barack where he is “relicking the calf” on Iraq and Syria? A president elected by touting a Obama Coffee Salutefortuitous, opportunistic anti-Iraq War speech on a Chicago sidewalk where he was the last-minute substitute is faced with again spilling blood and treasure on the sands of the Middle East. He’s making decisions as would a make-up artist playing the part of a dermatologist — any decision is merely covering up a long-festering pustule that could erupt at any juncture.

You could be the Obama who is faced with finishing his presidency with the bookends of John Boehner and Mitch McConnell actively leading a Congress in rabid inactivity. Given that this Congress has been the least productive in the history of the Republic, the obvious next step is going for the world record in placing 535 people in simultaneous cryogenic stasis.

Or you could be the U.S. President who is protected by an agency that seems to recruit from the Barney Fife school of protective services. In any event the Secret Service has given Hollywood the premise for the next incarnation of the Home Alone franchise. Allowing a fence jumper to breach the North Portico into the White House, get through the East Room, almost to the Green Room and then issuing a misleading statement about the matter is a better film treatment than 95% of what the studios have turned out this year.

And just for good measure, there remains Sarah Palin and her ilk lumbering about the country like Brontosauruses  proving that 140 million years just isn’t enough evolution for some walnut-sized brains.

Xi JinpingOr would you like to be China’s Xi Jinping? The leader of a country of 1.3 Billion where between 150-170,000,000 still live in poverty. While a startling number, China has reduced its poverty by a staggering 71% in just three decades.

Xi has the privilege of running a government where corruption is almost as plentiful as the smog choking the skies. He also enjoys the burden of leading an economy that is slowing down where every decision is a Gordian knot of increasing wages for a growing middle class or making it less advantageous for Chinese manufacturing thus slowing the economy further.

Perhaps the newest Damoclesian issue began unfolding last Friday and escalated over the weekend. Succinctly put the issue is: Whether or not the central Beijing government will make good on the right of Hong Kong to democratically elect its leader — a confrontation building for almost 20 years.

The riots and demonstrations of the weekend were met with a violent response obviously sanctioned by Beijing authorities. What is most disconcerting to Beijing and Xi has to be, this is Hong Kong! The very same Hong Kong that is an affluent and orderly Eden bordering on obsessive compulsive adherence to civility and graciousness. Hong Kongers have somewhat of a superiority complex — seeing themselves well above and beyond the authoritarianism and disorder of mainland China.

Hong Kong Riot 2

Hong Kong two days ago…

When the British turned over Hong Kong in 1997, one of the central tent poles of the deal was allowing Hong Kong’s citizens to democratically elect their top leader for the first time ever in 2017. Chinese leaders reaffirmed the promise in 2007, but last July the government began to “crawfish” on the deal. The “newly reformed” deal is that Beijing must “approve” all the candidates from which the voters may choose. That doesn’t sit well with the wealthy, independent, and socially entitled Hong Kongers, especially the youth.

This whole episode is reminiscent of Tiananmen Square. For those living in Hong Kong, they believe they have a special obligation to maintain the memory of 2,600 peaceful protesters being mowed down. The obligation is a solemn one since all semblance of Tiananmen has been erased from the history of mainland China and the current generation knows nothing of the massacre.

Xi’s choice is literally an existential one for China. Can he allow democracy to gain a foothold? How can he differentiate between a two-system dichotomy ruling over a billion citizens? The greatest question is whether China has opened the door too wide and for too long to ever hope to close it to the infection of free enterprise capitalism? The inevitable loss of control terrifies Beijing. The eyes of the world would be well-advised to keenly watch China’s reaction to that fear since it will be a defining milestone for the next decade.

So wudja be Barack or Xi? There are no neithers in Wudja.

Unlike the Chinese intertubz, this is an open thread.


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