A controversy

Remember that time a Chinese investment proposal toppled a Western government? Neither do I.

It really happened though — in 2013:

Talks to bring in Chinese capital to a large iron ore project weren’t even ripe for a deal when the outcry over a law facilitating the use of foreign labour led to fresh elections and a new cabinet that promises to revise that legislation.

Introduced by then PM Kuupik Kleist’s Siumut party and passed last December by the Greenlandic parliament, the so-called ‘large scale law’ (storskalalov) allows for foreign workers to be paid less than the local minimum wage of $14 per hour during the construction phase of large scale projects. Greenland’s untapped mineral resources, proponents argued, could help the country achieve economic self-sufficiency and eventually independence from Denmark, but cannot be developed without a workforce not to be found among the 58 thousand local inhabitants.

A large-scale fiasco

The law raised opposition both at home and in Denmark. Kleist’s government was accused of laying the ground for an invasion of thousands of Chinese workers that would amount to “social dumping”. Such large mining projects, some argued, would bring less benefits to the local population than traditional industries like fishing, which now accounts for 90% of the country’s exports. MP Nikku Olsen called the government’s policy towards foreign investment “very shallow and not thought through”, and led a breakaway faction of the ruling Inuit Ataqatigiit party to call for a referendum on the law. This triggered fresh elections that brought back to power the social democrats from Siumut, the dominant party since the first parlamentary elections in 1979, in a coalition with Olsen’s Parti Inuit and the centre-right Atassut. New PM Aleqa Hammond’s cabinet has stressed support for developing mining into the country’s main industry, vowing at the same time to revise the ‘large-scale law’ before next year.

Greenland (population 56,186) increasingly seems like a place to watch.

Paying for all that belt and road

Is China tying its financial stability to stuff like this?

An important article by economist Christopher Balding from back in May discusses the problems with China paying for its wildly ambitious (over-hyped?) One Belt, One Road infrastructure project:

Such doubts might seem spurious, given the numbers being tossed around. China claims nearly $900 billion worth of deals are already underway, with estimates of future spending ranging from $4 trillion to $8 trillion, depending on which Chinese government agency is doing the talking. At the conference itself, Chinese President Xi Jinping pledged another $78 billion for the effort, which envisions building infrastructure to link China to Europe through Asia, the Middle East and Africa.

From no other country in the world would such pledges be remotely plausible. Yet even for China, they’ll be difficult to fulfill without clashing with the country’s other objectives.

Comrade Balding, as he styles himself, crunches the number in a bit more detail on his blog:

  1. Let’s use the $5 trillion over 5 years number reported by Nataxis (which I would highly recommend reading their research report on financing OBOR which is a link in the BV piece) but also note that other outlets like The Economist have reported similar numbers (theirs was $4 trillion). Use simple numbers for our purposes and assume it is all equally divided into equal blocks so every year sees $800b-$1t per year in overseas lending by China. That is an enormous, enormous, enormous jump in overseas lending. For thought experiment purposes, we have even extend this to 10 years. To put this in perspective, ODI from China to the ROW in 2016 after an enormous surge was $170 billion. Then ODI is down 49% YTD from 2016.
  2. Assume that all OBOR lending is done in USD, this means that either a) China is going to tap PBOC USD or b) they are going to do tap the USD bond market to fund these lendings. If China taps PBOC FX reserves to pay for this, with the numbers reported, they will have no USD left in the reserves. None. Zero. Zilch. In fact, not only will they have nothing left, they will have to begin borrowing on international USD to fund investments in such credit worthy places as Uzbekistan. For simplicity sake, assume they plan to invest $5 trillion, they use up all $3t in PBOC FX reserves and then they have to go borrow $2t on international markets. Frankly, this is a crazy financial risk by China.
  3. However, it isn’t fundamentally any better if China opts for option B to raise all the funding on international USD bond markets. If China raises the entire amount, as Nataxis noted, this raises Chinese external debt levels by about 40% of GDP and more importantly makes China exceedingly risky to any type of devaluation. Even small devaluations of the RMB would then become important. All of a sudden China becomes a very risky borrower with high levels of external debt and an increasingly risky tie to the USD. What is so crazy about this situation is that China has tied itself and its stability to the USD to Pakistani bridge repayment. Stop and wrap your mind around that for one second.

More at the link.

Balding’s conclusion in the Bloomberg article seems exactly right: “But it’s almost certain that the amount of money that makes its way into Belt-and-Road projects will be significantly lower than advertised. Grand in ambition but short on details, Xi’s sweeping initiative may be better thought of as a “philosophy” or “party line,” rather than a fixed commitment.”

China will almost certainly spend/loan a LOT of money to build the B&R, but it won’t be $5 trillion over five years (I mean, seriously). But over the long term, it will still be a lot.

Notably, the B&R doesn’t have a timeframe, which could mean either that the project is more of a marketing gimmick than a reality — or that China is simply in this for the long haul:

The only internal instructions that have come so far, have been from Zhongnanhai [China’s top leadership], and are about banning words like “project” (because the word connotes a goal and timeline, Beijing prefers the looser term “initiative”) as well as banning the publication of official maps purporting to show the scope of OBOR [One Belt, One Road].

Getting around town

Winter in Shenyang (taken in 2011):

Choose your ride

I see what you did there

A pretty astonishing story. When Beijing Normal University set up a research base in the capital of Greenland, it forgot to mention to its local partners that the facility would double as a satellite ground station with possible military uses. Just an oversight, I’m sure:

China has ‘officially’ launched a project to set up a satellite ground station in Nuuk, although Greenland’s public and elected representatives were kept in the dark about it for months, in an attempt to avoid concerns about its likely dual-use capabilities. Last May, a ‘launching ceremony’ was held in Greenland, where speakers included the well-known polar scientist in charge of the project and a military pioneer of the Beidou system, China’s alternative to GPS. The event was attended by a public of a hundred ‘élite’ businesspeople, including, in all likelihood, a senior Navy officer, as part of a group holiday; only two Greenlandic representatives were present. While reports were immediately available in Chinese media, the project’s launch went unnoticed in Greenland until I first ‘revealed‘ it last October.

It would be a shame if something happened to that facility. What if chronic power outages or some mysterious, unfixable technical glitch put it out of commission, perhaps indefinitely? That would really be terrible. Just saying.

On a related note (report from last December):

China’s first overseas land satellite receiving ground station was put into trial operation on Thursday.

The China Remote Sensing Satellite North Polar Ground Station is above the Arctic circle, half an hour’s drive from Kiruna, a major mining town in Sweden.

 

They found his lack of faith disturbing

There is some irony in the fact that China’s ruling party has outlived the Forbes career of Gordan “Collapse” Chang:

When a Chinese company buys a major American magazine, does the publication censor its coverage of China? There is only one example so far, and the results are discouraging. In 2014, a Hong Kong-based investment group called Integrated Whale Media purchased a majority stake in Forbes Media, one of the United States’ best-known media companies. It’s hard to demonstrate causality in such cases. But since that purchase, there have been several instances of editorial meddling on stories involving China that raise questions about Forbes magazine’s commitment to editorial independence.

On Oct. 9, longtime China commentator and Communist Party critic Gordon Chang received an email from Avik S.A. Roy, the opinion editor at Forbes. “Due to a wide-ranging reorganization of Forbes’ content,” Roy wrote, “we are going to be concluding our official relationship with you.” Roy added, “As a result of the organization, the articles you’ve written for us will no longer be stored on the Forbes server nor appear at Forbes.com,” according to the email Chang forwarded to me at my request.

Avik Roy, instrument of Gordan Chang’s collapse

I, for one, am amused to learn that a company called Integrated Whale Media exists. Regardless, this is a creepy case that may need to be added to our growing “Thought Policing by Remote Control” file (see also here, here and here).

Note the lack of an explanation for why Chang was cut loose and his articles erased (“Due to a wide-ranging reorganization of Forbes’ content” is not an explanation), combined with strong denials that any sort of censorship occurred.

Billionaires in one country

Lots of new billionaires are cropping up in China – with a catch:

The Chinese mainland added an average of two new billionaires to its super-rich list every week last year, according to new report, helping Asia replace the U.S. as the world’s most fertile cradle for individual wealth.

The report released Thursday by the investment firm UBS AG and consultancy PricewaterhouseCoopers (PwC) said 101 of the 162 Asians whose personal wealth passed the $1 billion threshold for the first time in 2016 were Chinese citizens.

China’s new billionaires helped boost Asian membership of the ultrawealthy club to 637 last year, compared to 563 in the U.S., according to the firms’ annual Billionaires Insight Report. It marked the first time that Asia could be called home to more billionaires than the U.S.

The report covered 1,542 billionaires residing in 14 markets worldwide. They account for about 80% of all individual wealth held by the world’s super-rich.

The catch is pointed out by economist Christopher Balding:

Comrade Balding‏
This omits one key issue: if you are a billionaire in China, you are only a billionaire in China. You are not a global billionaire

Woke Charles Bingley‏
why is that?

Comrade Balding‏
Officially, you are allowed to move $50k per year out of China. Unofficially you can move a little more but definitely not enough

Woke Charles Bingley‏
Wow I did not know that!

Comrade Balding‏
If you really wanted to you could find ways to move more than that but no where near tens or hundreds of millions

Ian‏
Some seem to be able to buy English Football Clubs and American film studios though.

Comrade Balding‏
Those deals haven’t happened for a while

Ian‏
They have tightened up a lot recently. It’s like Greece & Russia the smart or connected ones have already got their money out

Comrade Balding‏
assets are still on the Mainland. Just because its owned by a Cayman holding corp doesn’t mean the asset is out of the country

Ian‏
Like Wolverhampton Wanderers or Birmingham City or Aston Villa all owned by Chinese “businessmen”

Graham White‏
It’s only $50k of personal wealth. If you are a Chinese billionaire your company can buy overseas assets, eg London property, and sell on.

Comrade Balding‏
2017 has really cracked down on any movement and definitely not enough to move significant portion of wealth if desired

Robert Wishart 魏罗斌‏
Because you cannot move your money abroad?

Comrade Balding‏
Exactly. Not any material amount

“Captive billionaires” might be a better term for people who are billionaires within the borders of China, but millionaires everywhere else.

Coming right up

What do you do if you’re working a crane in Bangkok and your dinner is on the ground, 13 stories below? The question answers itself:

Crime in Hong Kong

This is about as bad as it gets in the Big Lychee:

A suspected Hong Kong triad member accused of making an elderly man drink a can of Coke at knifepoint was arrested in a police raid on Monday.

The 44-year-old man with a pigtail was picked up at a Portland Street guest house in Mong Kok at about 10.30pm and arrested for possessing an offensive weapon.

In the early hours of Tuesday, officers escorted the hooded and handcuffed suspect to his public housing flat in Wong Tai Sin for a house search.

The Hongkonger – believed to be from the Sun Yee On triad – is a part-time bouncer at a Tsim Sha Tsui entertainment venue controlled by a gang leader nicknamed “Sai B”, according to a police source. […]

Police are still looking for the elderly victim who was allegedly stopped on the street by the suspect and ordered at knifepoint to drink a can of Coke at the junction of Arran Street and Canton Road in Mong Kok at about 5pm on Friday.

Ok, I’m being a little facetious. Sometimes the other kind of coke is involved, as in this recent drug bust:

Hong Kong police have broken up a crack cocaine factory at a luxury flat in Yuen Long, seizing the largest haul of raw drug materials in 10 years and arresting four men, one of them Peruvian.

The ingredients – thought to have been flown into the city from Peru – could have made batches of the drug worth HK$59 million, officers said on Sunday. […]

Police said they believed it was the first time a luxury flat had been used as a base for making drugs.

“One of the reasons the syndicate chose to rent rather luxurious premises was that it provided a front to make it less suspicious and more difficult for us to detect [the factory],” Chief Superintendent Ma Ping-yiu, of the Narcotics Bureau, said.

Still, it’s a pretty safe city overall, even when you account for the risk – which, let’s face it, is present in any large metropolis anywhere in the world – that you may occasionally be forced to consume a refreshing but very high-calorie beverage at knifepoint.

Preemptive cross-border censorship

A particularly disturbing milestone:

LINDA MOTTRAM: Allen & Unwin’s decision to abandon publication of Clive Hamilton’s book is possibly a first. It seems no other Western publisher has previously, pre-emptively halted publication of a book in a Western market, because of pressure from China’s Communist Party.

Allen & Unwin say that threats of retaliation from China forced it to cancel plans to print “Silent Invasion: How China is Turning Australia into a Puppet State”.

So what is China’s motivation?

I spoke earlier to Professor Rory Medcalf, who’s head of the National Security College at the Australian National University in Canberra.

RORY MEDCALF: Well I think the Chinese Communist Party, the Chinese leadership, is determined to reduce and supress criticism of its policies and of its authoritarian rule in other countries, particularly in other countries that are either allies of the United States, as Australia is; in other words, a country that can potentially band together with other countries to resist Chinese influence on the region.

But also, more importantly, countries like Australia where there is a large, diverse, dynamic Chinese population. China – or the Chinese Communist Party, I should say – is seeking to suppress criticism and dissent among those populations. […]

LINDA MOTTRAM: And so, you mentioned earlier this seems to have been a pre-emptive move.

There’s a suggestion of a legal threat of some sort over this book that Clive Hamilton has written, but there doesn’t seem to be anything specific.

Are they wanting to tie publishers up in court? […]

RORY MEDCALF: […] But if the details that we read today are true and that Allen & Unwin has taken this pre-emptive decision, it’s possibly the first time a Western publisher has pre-emptively chosen to stall or edit or censor what it’s doing in a Western democracy because of perceived Chinese Communist Party pressure.

And that would be a very worrying precedent for civil liberties and also for national security.

Just a couple of weeks ago we had the outcry over the Springer censorship in China, but this appears to go a lot further.

What’s happening with Allen & Unwin actually seems to be more along the lines of this case from last year, but without the mitigating circumstance that the publisher in question is simultaneously trying to run an NGO in China.

LinkedIn chronicles

This made me chuckle:

I wake up every morning at 4 AM and go for a 10 mile run followed by an hour lifting weights.

I try my best to read the local newspaper and at least 1/4 of a book before I leave for work at 8.

I have completely cut out meats, veggies, and fruits from my diet because I don’t want to damage anything on earth. I eat 100% Soylent.

During my lunch break I build houses for the homeless and then hire them at my job as a public service.

I answer no less than 300 emails an hour… all personalized.

Before I leave work I remind my friends that LinkedIn isn’t a dating site in case they forget.

After work I instruct hot/cold yoga in a room-temperature room… right before I head off to provide my spiritual advice to local religious leaders.

I am currently writing my 10th book.

I also created the Fidget Spinner.

I am the most interesting person on LinkedIn.

The good life. In fact, the best life that one can aspire to. Right?