A step forward

Always impossible to know what’s going on behind the scenes, and results matter more than gestures, but this seems like a good thing. As the saying goes, jaw, jaw is better than war, war. And it’s not all theatrics; grand symbolic gestures can create political space for outcomes that would otherwise be hard to imagine.

I also view it as a positive sign that Mr. “Troika of Tyranny” was off in Mongolia during this event.

Bridge supremacy?

Staggering. Are they building a bridge, or a bunch of skyscrapers?

Another video.

Spectacular drone footage captures the world’s highest concrete bridge under construction. The main tower of the Pingtang Bridge in Southwest China’s Guizhou Province stands 332 meters, as tall as a 110-story building. It is scheduled for completion by the end of 2019.

But wait! It looks like France keeps the crown for world’s tallest bridge:

However, France’s Millau Viaduct, arguably the most photogenic bridge of recent times, has its tallest tower listed at 1,125 ft (343 m), which would put the Pingtang Bridge in second place should all things stay the same by the time the Pingtang Bridge is completed. And while “world’s tallest” may be in dispute, there is no dispute about who leads in the total number of tall bridges. Of the 101 tallest bridges listed on Wikipedia, China has a whopping 66!

More Chinese engineering marvels:

Project 501

Photo by Amos Chapple

Photo by Amos Chapple

No matter how bad I think the Soviet Union was, it always turns out to have been worse:

These haunting photographs reveal the rotting carcasses of Soviet gulags and a partially built railway where up to 300,000 prisoners died, with their remains still buried in the soil.

The horrific camps were strewn across the Siberian wilderness, just below and above the Arctic Circle, and the prisoners in them were forced to work on a train line dreamt up by Joseph Stalin – the Salekhard-Igarka Railway. His aides knew it was a pointless scheme mapped out in terrain that was impossible to work with, but dared not tell him.

More background on Project 501, aka Death Road:

Stalin conceived of an 806-mile-long rail line to run between the Siberian cities Igarka and Salekhard. Between the years 1947 to 1953, political prisoners were tasked with turning two separate projects into one massive bad idea. Working from the banks on the River Ob prisoners constructing the 501 Railroad’s struggled to unite their project with that of a separate team of prisoners who were actively dying as they laid ties and rails on their 503 Railroad. On either side of the tracks, wooden barracks (also built by the very prisoners they once housed) can still be seen crumbling into the low brush of the tundra. As the years wore on, progress was made with ever increased sluggishness. Supervisors also started to realize that demand waiting on the other side for the completed railroad verged on nonexistent.

When word reached the camps of Stalin’s death in 1953, all work on the tyrant’s insane pet project was put to an end, leaving the railway a simple straight line through the sparsely populated Arctic.

Depends on your definition of “lie”

Hwang Kyo-ahn

How do you do, fellow underachievers?

Dunno, I think this qualifies:

Hwang Kyo-ahn, chairman of the main opposition Liberty Korea Party, on Monday argued that he had not lied about his son’s qualifications after his remarks on the matter during a lecture sparked controversy.

“If I had said a score that was higher than the actual score — that would have been a lie. But I am not sure if the other way round is (a lie),” Hwang told reporters after a meeting at the National Assembly.

Last week, Hwang spoke about his son, who landed a job at a conglomerate despite having a GPA of below 3.0 and a TOEIC score of about 800. He said that “conglomerates focus on specialized qualifications rather than spec.” […]

His comments drew flak, as college graduates often have difficulty finding employment upon graduation. […]

To ease backlash, Hwang issued a statement on social media saying, “My son’s GPA was 3.29, TOEIC 925 points.”

However, the post sparked further controversy that Hwang had lied about his son’s qualifications.

The other B&R

Proposed Long Thanh International Airport in Vietnam

Proposed Long Thanh International Airport in Vietnam

China’s Belt and Road infrastructure drive is still in high gear, but when the pedal hits the metal, Japan appears to be kicking China to the curb in Southeast Asia:

(Bloomberg) — Japan is still winning the Southeast Asia infrastructure race against China, with pending projects worth almost one and a half times its rival, according to the latest data from Fitch Solutions.

Japanese-backed projects in the region’s six biggest economies — Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam — are valued at $367 billion, the figures show. China’s tally is $255 billion. […]

The latest Fitch figures, provided in an emailed response to Bloomberg, count only pending projects — those at the stages of planning, feasibility study, tender and currently under construction. Fitch data in February 2018 put Japan’s investment at $230 billion and China’s at $155 billion.

Vietnam is by far the biggest focus for Japan’s infrastructure involvement, with pending projects worth $209 billion — more than half of Japan’s total. That includes a $58.7 billion high-speed railway between Hanoi and Ho Chi Minh City in Vietnam.

Those are pending projects, mind you – they may not actually happen. Like China’s nuclear ambitions along the B&R:

China could build as many as 30 overseas nuclear reactors through its involvement in the “Belt and Road” initiative over the next decade, a senior industry official told a meeting of China’s political advisory body this week.

Wang Shoujun, a standing committee member of the China People’s Political Consultative Conference (CPPCC), told delegates on Wednesday that China needed to take full advantage of the opportunities provided by “Belt and Road” and give more financial and policy support to its nuclear sector.

Stay tuned…

The status quo wins in Hong Kong

Good take from Bloomberg:

Hong Kong protesters have won a stunning victory. Saturday’s suspension of an extradition bill that would allow criminal suspects to be sent to mainland China followed a day of violent clashes on Wednesday that saw the police use tear gas, pepper spray and baton charges. In 2014, the police also used tear gas against demonstrators, prompting an occupation that paralyzed the central business district for more than two months. Yet the government refused to budge, and the protest was eventually cleared by force. It’s worth asking what was different this time.

The most obvious answer is the role of business. Occupy Central had limited support from companies, and what sympathy there was clearly waned as the weeks wore on and the costs to business mounted. By contrast, opposition to the extradition bill has united various strands of Hong Kong society, from civic and trade groups to religious organizations and the legal profession. That’s even more evident after Sunday’s monumental protest, which organizers said drew almost 2 million people.

Even HSBC and Standard Chartered supported the protests by allowing flexible working hours for their staff.

There’s a message here for the protesters – and for Beijing. It’s easier to preserve the status quo than it is to enact change. The common link between 2014 and 2019 is that the status quo has won in both cases. It was also the result in 2003 – probably the closest direct parallel with today – when a proposed security law was shelved after an estimated 500,000 marched in opposition. This means protesters have a better chance of success when fighting to preserve freedoms that already exist than when agitating for change.

Francesco Sisci, characteristically, finds Hong Kong’s lack of faith disturbing:

The core issue is that Hong Kongers don’t trust Beijing’s promises, and this kind of mistrust could take years to rebuild.

Beijing also clearly doesn’t trust Hong Kong. The bill aimed to prevent the territory from becoming a Trojan horse to smuggle revolution and subversion into China. Beijing apparently realized it was not the way and the time to do it. But the mistrust lingers on – and it is mutual.

Why, pray tell, might Hong Kongers fail to trust Beijing? A clue is offered in the second paragraph:

The Hong Kong authorities have already suspended the controversial extradition bill that could have put anybody in the territory in danger of being forcibly brought under the clutches of the Beijing’s opaque judicial system, according to Western lawyers.

I see what you did there. Note the careful choice of words: the worst Sisci can say about China’s judicial system, typified by things like arbitrary, secret detention and torture, is that it is “opaque.” And the suggestion that only “Western lawyers” have concerns about this bill is highly misleading. After all, there is a reason Hong Kong has refused to sign an extradition agreement with mainland China in the 22 years since the territory’s return to the motherland.

Just ask these guys:

Hong Kong lawyers protest

Source: Fox News

Thousands of Hong Kong’s legal professionals, including top lawyers, took to the streets on Thursday in a silent protest against the government’s controversial extradition bill, ramping up pressure on officials to avoid rushing it through the legislature.

The march, which organisers claimed hit a record high of 3,000 people, was the fifth by the legal sector since Hong Kong’s return to Chinese rule in 1997. It was also the first time lawyers had spoken out against a government proposal not directly involving judicial proceedings or a constitutional interpretation from Beijing.

A giant, flaming pile of fraud

Reading the blogger Deep Throat IPO’s commentary on the matter, one gets the impression that Alibaba is the dark heart of the dysfunctional global economy. Bear in mind that the Chinese e-commerce firm is listed on the New York Stock Exchange and that the author is commenting on the company’s own SEC filing and earnings call, i.e. all of this information is out in the open:

Alibaba management (Joe, Daniel, Maggie and Robert) and their “analysts” spent much of the hour collectively congratulating themselves on the greatness of their fake 51% revenue growth and their unverifiable, fake, GMV [gross merchandise volume], which has now ballooned to US$853 Billion. This “ecosystem” GMV, due to these phenomenal, dubious growth rates, is now roughly the same size as the Global GMV of both Amazon ($277 Billion) and Walmart ($625 Billion including estimated Third Party GMV) combined. Alibaba GMV has increased roughly ten fold since 2012. They are on pace to Reach $1 Trillion by next year. Alibaba’s GMV sold, according to management, has quickly grown to roughly the same as Switzerland’s GDP, with about the same level of opacity. Miraculous…..perhaps even unbelievable, to say the least. […]

2.) Speaking of “earnings” there was not one question, comment or slide in the deck that mentioned earnings. NOT ONE….an entire hour of fluff….. and “earnings” wasn’t discussed, described, commented on or mentioned. This is odd for an “earnings” call….don’t you think? When we look at the press release, we can understand why. On page 40 there is a $2.974 Billion accounting “Gain on the revaluation of assets” which was roughly equal to net income for the quarter. i.e.) If we exclude this gain, the business had no earnings from operations. […]

They’ve gained 36,000 employees since last year, a 55% growth rate. Perhaps they are getting away from that “asset/people light” business model.

To put this in perspective, Alibaba’s e-commerce rival, JD.com, announced in March it would hire 10,000 people for its JD Logistics arm “as couriers, warehouse staff, and entry-level managers.” Alibaba claims to have hired 4 times that amount of people in a year. STO Express, the logistics giant in which Alibaba proposed to take a 14% stake in March, has over 14,000 employees, so Alibaba’s employee growth in one year would be roughly 2.5 times the entire headcount of STO Express. Does this make any sense?

[Ed: I would also note that Lazada, the Singapore-based e-commerce firm in which Alibaba bought a controlling stake in 2016, has an estimated 8,000 employees according to Wikipedia.]

The other ratio I find fascinating is GMV per employee. Walmart’s GMV per employee is $284,000. Amazon’s is $428,000. Alibaba’s is $8,366,000 per employee. They are truly masters at doing more with less.

The author doesn’t mince words in his conclusion:

My crystal clear message to the analysts who were on the call is, when this eventually blows up, and there’s no question that it will, you have to understand that the “Sorry I’m just a dumb-ass” defense won’t work anymore. The times, they are a changin’.

You analysts (yes I’m speaking directly to you now) are all highly educated, smart, professional people. You are experts, or at least you are supposed to be, and you, and your respective employers are held to a much higher standard than the rest of the investing world and blogosphere. It’s assumed by naive American Investors that you know exactly what you are doing. Your endorsement means everything. Unfortunately, in this particular case, and many others, it looks like you are accepting a nice paycheck to do exactly what you are told by the Chinese Communist Party. You are also committing, aiding and abetting securities fraud. When you see the accounting travesties and inconsistencies described above, your job is to investigate them, ask tough questions, and if you find the explanations provided by management to be unsatisfactory, you must resign from the account. Your inaction, congratulatory “we” tone and your tacit endorsement of this charade makes you an accessory, not an unwitting pawn. You and your employers have significant legal and political liability for what’s about to happen. There will be no escaping it this time.

A reckoning is coming. Where is the American business press on this? You’d think this would be a top story.

Japan’s Belt and Road

Abe and Modi in 2016

In light of a certain state visit ongoing in Tokyo, I nominate this as the fact of the day (emphasis mine):

While Japan’s “lost decades” and China’s rise have led most observers to overlook Japan’s role in Southeast and South Asia, the country has remained an important source of development assistance, public lending, and private investment across the region, particularly as Japanese companies have extended their supply chains deeper into Asia. At the end of 2016, Japan’s stock of foreign direct investment in major Asian economies (excluding China and Hong Kong) was nearly $260 billion, exceeding China’s $58.3 billion. It is undeniable that Japan has increasingly had to jockey with China for high-profile projects as China’s footprint across Southeast and South Asia has grown. But Japan’s longstanding relationships and its long record of private and public investment across the region make it a worthy competitor with China.

Japan’s Belt and Road, particularly with US backing, could give China’s massive trade and infrastructure strategy a serious run for its money. And Japan is still the world’s third-largest economy…

That was close

Didn’t think it would end like this

I’m certainly no fan of media scare-mongering, but I feel like this should have been a bigger story than it was – after all, the Smithsonian Astrophysical Observatory’s Minor Planet Center classified the asteroid as a “potentially hazardous object”:

Asteroid 1999 KW4, measuring more than a mile in diameter and boasting its own moon, will fly by Earth on Saturday. Thankfully, the massive space rock will make its pass at a safe distance.

“The asteroid will approach from the south, and the first day of visibility also coincides with the closest approach,” NASA reported.

The asteroid will be visible through June 7.

While the near-Earth object is classified as a potentially hazardous asteroid, there will be a cushy 3.2 million miles between Earth and the walnut-shaped space rock during its closest approach.

That distance, I would note, is roughly 1/29 of the sun’s distance from the earth.

Wouldn’t want the sheeple to panic! In any case, it’s Sunday so I guess the asteroid has safely completed its fly-by?

Good news: Rare earths ain’t so rare

Well, this is an actual relief. Rare earths may not, in fact, be America’s Achilles heel (as China appears to think and as I previously thought):

Experts in the field, though, are much less concerned about such a chilling scenario. They say that while a restriction on rare earth exports would have some immediate adverse effects, the US and the rest of the world would adapt in the long run. “If China really cuts off supply entirely then there are short term problems,” Tim Worstall, a former rare earth trader and commodities blogger tells The Verge. “But they’re solvable.”

Far from being an ace in the hole, it turns out rare earths are more of a busted flush.

The reasons for this are numerous, and span geography, chemistry, and history. But the most important factor is also the simplest to explain: rare earths just aren’t that rare.

They can be mined in other places, like Australia, India, Brazil, Canada, and the U.S. China only mines about 80% of the global supply (not the 95% we often hear about). The Mountain Pass mine in California is apparently up and running again. And all is right in the world.