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Chinese Military,Political and Social Superthread

Putin managed to upstage Xi Jinping at APEC by being a gentleman.Vlad wrapped a shawl around Xi's wife.Chinese sensors pulled the images from the internet.

http://news.yahoo.com/putins-gallantry-upstages-chinese-host-apec-082636139.html
 
The Russians are also experts in PSYOPS and related disciplines. Putin "upstaging" the Chinese at the APEC summit was almost certainly a calculated act (even if Vlad really is a gentleman, his "team" would be there to rapidly exploit the actions and imagery in almost real time).

It will be very interesting to see how Russia and China deal with each other, given they are both grounded and masters of the various disciplines we group under IA and IO...
 
A new toy for the PLA-N submarine arm:

Defense News

China Shows Off New Sub-Launched Missile at Zhuhai
Nov. 11, 2014 - 08:55AM  |  By WENDELL MINNICK 

ZHUHAI, CHINA — The new CM-708UNA submarine-launched cruise missile made its debut at Airshow China in Zhuhai, in the southern province of Guangdong near Hong Kong, on Tuesday.

The 128-kilometer range missile is the product of the China Aerospace Science and Industry Corporation (CASIC), which also makes unmanned aerial vehicles and land-attack/anti-ship cruise missiles. A CASIC official at the display said the missile is in production.

The CM-708UNA is launched by torpedo tube and is applicable for various submarines for targeting medium-to-large ships and inshore targets. The missile uses a strap-down inertial navigation system plus satellite navigation, a high-precision radar seeker and digital control. The missile is powered by a turbo engine and solid rocket booster.

(...SNIPPED)
 
A PLAAF female aerobatic team?

Cue theme song: Guess which "Top Gun" song this came from?  ;D

Defense News

China's First Female Aerobatic Fighter Pilots Take Flight
Nov. 11, 2014 - 03:13PM  |  By AGENCE FRANCE-PRESSE

ZHUHAI, CHINA — The first women fighter pilots to join China’s famed aerobatic team showed off their skills in J-10 jets Tuesday as Beijing put on a display of its growing military might.

The pair strode to their fighter planes in lock-step with male pilots, all wearing identical green jumpsuits and sunglasses, as part of a performance by the Chinese air force’s “August 1st” aerobatic group at the country’s premier airshow.

The two are part of a group of five female fighter pilots, who have not been identified by name, flying for the team named for the date of the founding of the army.

State media has reported the women are the first to join the group.

(...SNIPPED)

FOREIGN201411121050000212463641624.jpg

photo source: http://english.peopledaily.com.cn
 
China's new stealth fighter.Time will tell how stealthy it really is.)

http://news.yahoo.com/china-shows-off-stealth-fighter-101940905.html

 
tomahawk6 said:
China's new stealth fighter.Time will tell how stealthy it really is.)

http://news.yahoo.com/china-shows-off-stealth-fighter-101940905.html

Already posted on the previous page.

In other news, beware of Chinese diplomats bearing gifts...especially ones meant to convince neighbours to drop their South China Sea claims...

Reuters

China offers ASEAN friendship, loans as South China Sea tension bubbles

By Simon Webb and Paul Mooney

NAYPYITAW (Reuters) - China's Prime Minister Li Keqiang proposed a friendship treaty with Southeast Asian countries and offered $20 billion in loans on Thursday but held firm on the line that Beijing will only settle South China Sea disputes directly with other claimants.

China, Taiwan and four members of the Association of Southeast Asian Nations (ASEAN) have competing claims in the sea where concern is growing of an escalation in disputes.

"China ... stands ready to become the first dialogue partner to sign with ASEAN a treaty of friendship and cooperation," Li told leaders at an East Asian summit in Myanmar.

The treaty is seen as an attempt by China to
dispel any notion it is a threat and Li said China was willing to make pacts with more countries on good-neighborliness and friendship.

(...SNIPPED)

The Philippines, one of the ASEAN claimants, has irked China by seeking international arbitration over China's claims to about 90 percent of the South China Sea.

Philippine diplomatic sources were cool to China's treaty offer, saying it lacked substance and was similar to a 2012 Philippine proposal that China ignored.

(...SNIPPED)
 
I'm not sure what the New York Times expected other than Xi Jinping being "a very confident and strong leader, and has a quite focused policy agenda,” as portrayed in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from that newspaper:

http://www.nytimes.com/2014/11/13/world/asia/china-us-xi-jinping-obama-apec.html?_r=2
NewYorkTimesLogo.gif

Fruitful Visit by Obama Ends With a Lecture From Xi

By MARK LANDLER

NOV 12, 2014

BEIJING — The White House pushed very hard for President Xi Jinping to take questions during his news conference with President Obama at the end of their two days of meetings Wednesday. It did not want a repeat of the stilted, scripted encounter Mr. Obama had with Mr. Xi’s predecessor, Hu Jintao, in 2009 on his first trip to China as president.

What the White House got was Xi Jinping, Unplugged, and that may have been more than it bargained for.

Discarding his standard bromides about the importance of new “major-country” relations between the United States and China, the Chinese leader delivered an old-fashioned lecture. He warned foreign governments not to meddle in the pro-democracy movement in Hong Kong and foreign journalists to obey the law in China.

Mr. Xi’s thinly concealed anger turned a news conference that should have been a victory lap for two leaders who had just had a productive meeting into a riveting example of why the relationship between the United States and China remains one of the most complicated in the world. The determination to work together belies deep-rooted historical grievances; the happy talk of win-win solutions masks a ferocious rivalry.

The cooperation that Mr. Obama and Mr. Xi announced this week is real. Their joint plan to confront climate change could transform negotiations for a new global climate treaty. Their pledge to warn each other’s militaries about exercises could avert a calamitous clash in the treacherous waters of the South and East China Seas.

And yet Mr. Obama and Mr. Xi found themselves standing before the news media in the Great Hall of the People, wrestling with the same issues that could have divided Nixon and Mao, or Bill Clinton and Jiang Zemin, who jousted with each other in a 1998 news conference, which Mr. Jiang had broadcast live across the country.

Wednesday’s session lacked the personal warmth of that exchange. For all their walks and private dinners, here and at the Sunnylands estate in California last year, Mr. Obama and Mr. Xi have fashioned a relationship that is based, above all, on pragmatism.

Mr. Obama said his meetings with Mr. Xi had given him the chance to debunk the notion that “our pivot to Asia is about containing China.” Mr. Xi said: “It’s natural that we don’t see eye to eye on every issue. But there have always been more common interests between China and the United States than the differences between us.”

There is plenty of evidence that Mr. Xi is right, from concerns about Iran and North Korea to climate change and counterterrorism. But there are countervailing tensions when a rising power flexes its muscles against an established one, and as a Communist empire bristles at the judgments of a powerful democracy. All of this was on vivid display Wednesday.

The tensions surfaced after the two leaders finished their opening statements and Mr. Xi seemed to ignore two questions from a reporter for The New York Times — about whether China feared that the Obama administration’s pivot to Asia represented a threat to China, and whether China would ease its refusal to issue visas to foreign correspondents in light of a broader visa agreement with the United States.

White House officials said Mr. Obama had called on The Times reporter to make a point. Several of the newspaper’s China correspondents had their visas applications denied by the government, an issue Mr. Obama raised with Mr. Xi in one of their meetings.

After first taking an unrelated, clearly scripted, question from a state-owned Chinese paper — which drew a quizzical facial expression from Mr. Obama — Mr. Xi circled back, declaring that the visa problems of the news organizations, including The Times, were of their own making.

Mr. Xi insisted that China protected the rights of news media organizations but that they needed to abide by the rules of the country. “When a certain issue is raised as a problem, there must a reason,” he said, evincing no patience for the news media’s concerns about being penalized for unfavorable news coverage of Chinese leaders and their families.

The Chinese leader reached for an unexpected metaphor to describe the predicament of The Times and other foreign news organizations, saying they were suffering the equivalent of car trouble. “When a car breaks down on the road,” he said through an interpreter, “perhaps we need to get off the car and see where the problem lies.”

“The Chinese say, ‘let he who tied the bell on the tiger take it off,’ ” Mr. Xi added, in a somewhat enigmatic phrase that was not immediately translated into English. It is normally interpreted as “the party which has created the problem should be the one to help resolve it.”

Mr. Xi was also dismissive of concerns about a surge of anti-American sentiment in the Chinese news media. One state-owned publication described Mr. Obama’s leadership style as insipid. “I don’t think it’s worth fussing over these different views,” Mr. Xi said.

He bluntly warned the United States and other foreign countries not to get involved in the pro-democracy movement in Hong Kong, responding to an earlier question to Mr. Obama about recurring rumors in the Chinese press that the United States was stirring up the unrest there. The Occupy Central movement, he said, is illegal.

“Hong Kong affairs are exclusively China’s internal affairs, and foreign countries should not interfere in those affairs in any form or fashion,” Mr. Xi said, reading from notes he had scribbled.

Taken together, the statements offered an unvarnished glimpse at China’s president, two years into his term and after his extraordinary consolidation of power. He is neither a garrulous operator like Mr. Jiang nor a colorless party bureaucrat like Mr. Hu.

“Xi is in the early years of his term, is a very confident and strong leader, and has a quite focused policy agenda,” said David Shambaugh, the director of the China policy program at George Washington University.

Orville Schell, a longtime China observer at the Asia Society in New York, said Mr. Xi’s statements on the foreign news media, the first time he had publicly addressed the issue, were a “dash of cold water.”

“We had thought that China might be slowly evolving away from this retrograde notion of the media,” Mr. Schell added. But he noted that in a speech last month, Mr. Xi had echoed Mao’s view that the news media should function as a “necessary handmaiden of the party.”

Mr. Obama seemed content to play the straight man to Mr. Xi. He insisted that the United States had nothing to do with the Hong Kong protests, though he voiced support for free expression. And his references to human rights were carefully calibrated — reaffirming, for example, that the United States does not recognize a separate Taiwan or Tibet.

As Mr. Obama enters the twilight of his presidency, he appears determined not to let passions get in the way of cooperation with China. Asked about the negative portrayal of him in the Chinese press, he said it came with being a public official, in China or the United States. “I’m a big believer in actions and not words,” he said.

Jane Perlez contributed reporting from Beijing, and Keith Bradsher from Hong Kong.


I'm not sure the APEC meeting was as "fruitful as the Times wants to believe.

Here, also from the New York Times are some graphics illustrating what the current situation is and what was promised: http://www.nytimes.com/interactive/2014/11/12/world/asia/climate-goals-pledged-by-us-and-china-2.html

China has a HUGE pollution problem and coal is the main reason.  Only nuclear power offers any sensible alternative. There is some scope for hydroelectric power on some big rivers in Russia, but there's not room for much more in China, proper. Yes, I do expect to se the world's largest solar plants in both the Gobi and Taklamakan Deserts, but I don't expect them, or wind power, to produce much of China's energy needs. But Xi Jinping is not promising very much and Mr Obama is.

The "messages" about visas and Hong Kong are just that: messages ... delivered clearly, I think. Chinese leaders are not in the habit of sending such messages just because they like talking; Xi Jinping meant them to be heard and understood.
 
An intersting longer term look at the future of China. The most telling observation is how areas right next to Hong Kong, with unfiltered access to reporting from Hong Kong (including personal contacts and observation) have not taken up the torch for Democracy:

http://pjmedia.com/spengler/2014/11/13/why-china-wont-fall-apart/?print=1

Why China Won’t Fall Apart
Posted By David P. Goldman On November 13, 2014 @ 6:38 am In Uncategorized | 13 Comments

The default Western strategy towards China’s rise as an economic and military superpower appears to be to sit back and wait for it to fall apart. That isn’t going to happen, as the dean of Beijing’s foreign press corps, Francesco Sisci, observes in this short essay entitled, “The Great Resilience of the Communist State:”

As a modest chronicler of events in China for over a quarter of a century, I witnessed at least four events that might have caused the government to crumble, and yet nothing of the sort happened. These include the protest in Tiananmen in 1989, the demonstrations of the Falun Gong in 1999, the SARS epidemic in 2003, and the political attempt of Bo Xilai in 2012. Except for SARS, the other three were caused by deep rifts in the top leadership and efforts of one faction to eliminate another. They were violent internal power struggles causing more damage to Chinese politics than any foreign interference, and yet nothing happened to society.

The deep-seated reasons for this can be found in an essay I wrote a decade ago. True to that analysis, ten years later, and despite many predictions to the contrary, there still has been no revolution in China. The fact remains that while democratic protests have been raging for a month in Hong Kong, adjacent Shenzhen, whose people receive uncensored news from the territory, has shown no sign of contagion.

In a nutshell, now is no time for revolution for the Chinese people, who are experiencing a golden age in their history and have had no past experience with democracy to pine for.

China will need to reform at some point, Sisci argues:

This does not mean that revolutions or democratic demands are impossible in China. A mix of internal forces and international constraints could change the situation in the next decade. There are two elements which could drive change. The Chinese economy will be roughly as large as that of the US, and this will draw increased attention and fear from other countries because China does not share the political framework of the countries that have dominated the world over the past two centuries – the UK and US. Additionally, a large portion of the Chinese population will enjoy Western middle-class purchasing power, and private enterprises will be required to pay a larger portion of taxes as they will represent a large share of the GDP but as a whole they mighthave limited control over how their tax money is spent.

Dr. Sisci, the first foreigner to complete a Chinese-language doctorate at China’s Academy of Social Science, has been my colleague at Asia Times Online almost since its founding. He was right about China ten years ago and he’s right now.

For background on China’s economic resilience, see the presentation “China’s Two Economies” prepared by my colleagues and me at Reorient Group.

A word of advice to my conservative friends: don’t hold your breath. China’s economy and political system aren’t going to collapse. China will continue to gain power. We need to worry about our own sorry state of affairs: we couldn’t replicate the 1968 moon shot today. Investment in R&D and basic science is a shadow of what it used to be, and our shrunken military budget is biased towards white elephants like the F-35.  Our “Common Core” curriculum stops with algebra, while 90% of Chinese have a high school degree including at least one course in calculus.

There is a myth in the West that the Chinese only copy but don’t create. The past generation, to be sure, found it more cost-effective to adopt than to reinvent the wheel. That was then. A new generation of young Chinese with first-rate scientific qualifications is entering the market with ambitions to found the next Alibaba.

This is real competition, and we can’t make it go away by closing our eyes and wishing for revolution. We should be having a Sputnik moment right about now–I refer to the national mobilization after Russia beat us into space in 1957. Instead, we crank up the volume and listen to the theme from “Rocky.”
--------------------------------------------------------------------------------

Article printed from Spengler: http://pjmedia.com/spengler

URL to article: http://pjmedia.com/spengler/2014/11/13/why-china-wont-fall-apart/
 
Thucydides said:
The most telling observation is how areas right next to Hong Kong, with unfiltered access to reporting from Hong Kong (including personal contacts and observation) have not taken up the torch for Democracy:

http://pjmedia.com/spengler/2014/11/13/why-china-wont-fall-apart/?print=1

Trust that the Chinese central govt. is keeping tabs on the booming economic and industrial cities of Guangzhou, Shenzhen and Zhuhai which are all in driving, rail or ferry range of Hong Kong.

However, you overlooked the fact that people in the other special administrative territory in Macau have experienced a similar political awakening to their Hong Kong neighbours:

Macau's political awakening (BBC)
 
As expected. How far did they realistically expect to go?  :facepalm:

Reuters

Hong Kong student leaders blocked from taking democracy fight to Beijing
Sat Nov 15, 2014 4:46am EST

HONG KONG (Reuters) - Three Hong Kong student leaders were stopped from boarding a flight to Beijing on Saturday to take their fight for greater democracy directly to the Chinese government after airline authorities said their travel permits were invalid.

The students, led by Hong Kong Federation of Students' leader Alex Chow, had planned to go to Beijing with the intention of meeting Chinese Premier Li Keqiang as efforts to reach agreement with officials in Hong Kong had failed.

A Cathay Pacific spokesman told local media that Chinese authorities had told the airline the students' travel permits were invalid. He did not elaborate, though the representative of a student body did comment.

(...SNIPPED)
 
For those wondering about China's F35 knockoff called the J31, here's its crucial weakness:

J-31 Stealth Jet Still Needs Fifth Generation Engine To Compete With Rivals

Without a Fifth Generational Aero-Engine, the J-31, China's second fifth-generation fighter designed by Shenyang Aircraft Corporation, is unable to compete against Lockheed Martin's F-35, according to the Guancha Syndicate based in Shanghai.

The J-31 is currently equipped with two RD-93 engines imported from Russia. However, the Russian engine was designed for fourth-generation fighters such as the MiG-29. The thrust of two RD-93 combined cannot match a single F-135 engine on an F-35 fighter, according to the report. When compared with the two F-119 engines of F-22 Raptors, the gap is even wider. In addition, the Russian-built engines also shortened the range of the J-31.

Pointing out that the J-31 was unable to fly directly from Shenyang in northeastern China to Guangdong province in the south for the Zhuhai Airshow, the Guancha Syndicate said that the range of the aircraft is estimated at no more than 2,000km.

Asian-Defense
 
In time they will steal the plans for the engine or buy a Russian engine. :camo:
 
tomahawk6 said:
In time they will steal the plans for the engine or buy a Russian engine. :camo:

Retrofitting is neither cheap nor without peril.  Any change in engine will require massive amounts of re-engineering: everything from intakes to simple things like cable lengths and fittings.  Even after an engine is selected and tested it will be years before the aircraft can be considered as useable.
 
More unrest in Hong Kong:

Reuters

Hong Kong protesters break into legislature as tensions rise again
Tue Nov 18, 2014 1:42pm EST

HONG KONG (Reuters) - A small group of Hong Kong pro-democracy protesters broke into the city's legislature early on Wednesday before police intervened to prevent others storming the building in a sudden escalation of tensions after a period of calm.

(...SNIPPED)
 
One view that is skeptical of China's rise in this century, though probably not as pessimistic as Gordon Chang in his book The Coming Collapse of China.

Several factors, such as the income/poverty gap between the rich western, coastal/industrialized regions and the poor rural heartlands, as well as the endemic government corruption that plagues government agencies, despite Pres. Xi's anti-corruption drives, would impede China's progress to becoming a true regional power.

CNBC

Why China won't be Asia's dominant power
By Nyshka Chandran | CNBC – 12 hours ago

The argument that China is already Asia's pre-eminent power based on its growing economic and military capacities is weak, the authors say. They expect the limitations of China's economic might, a lack of close bilateral relationships and weak military capability to keep the country from becoming an advanced political-economy that wields influence in the region anytime soon.

"China is a dominant power, but it's not the dominant power in the region or the world. It's got the economic hardware in place... as a collective country, there's no denying that it's an economic and military power," said Vishnu Varathan, senior economist at Mizuho Bank.

An unproductive economy

China's gross domestic product growth rate of 7 percent may be a five-year low, but it's still the envy of most countries. However, experts say declining productivity is one of biggest tell-tale signs that China cannot maintain its current pace of growth.

(...SNIPPED)

Exaggerated military power

The defense sector receives the lion's share of government finances, nearly 15 percent of the 2014 budget, but Dibb and Lee believe China will not become a military superpower until it's capable of taking decisive action on a global scale.

"Although China has developed potent military capabilities to make it hazardous for U.S. forces to operate in the approaches to China, the fact remains that Beijing could not enforce a full military blockade of Taiwan or attempt a full-scale amphibious invasion of that island," they wrote.

(...SNIPPED)
 
There are, in the Conservative Party, the CPC caucus in parliament and even within the current cabinet, deep divisions about China. There is a small faction that believes that the best way to promote change in China is to engage it, to bring it deeper and deeper into the big, wide world, largely through trade. There is another, even smaller faction, that is, essentially both timid and even racist. The PM, it appears to me, does not belong to either; he, I think, belongs to a larger faction that is overly cautious and actually content with our current reliance upon the USA as our only significant trading partner.

This report, reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail suggests to me that the large faction, the one to which the PM belongs, is selling us short:

http://www.theglobeandmail.com/report-on-business/international-business/free-trade-deal-with-china-is-australias-gain-canadas-pain/article21662976/#dashboard/follows/
gam-masthead.png

Free-trade deal with China is Australia’s gain, Canada’s pain

NATHAN VANDERKLIPPE
BEIJING — The Globe and Mail

Published Wednesday, Nov. 19 2014

Monday was “a very good day for Australia,” Prime Minister Tony Abbott declared after reaching agreement on a free-trade deal with Beijing that, he said, “opens the doors to China” for his country’s corporate sector.

Australia’s gain may be Canada’s pain, as Mr. Abbott’s triumph tilts the field against Canadian companies already struggling to gain a foothold in the world’s second-largest economy.

The Australian deal is now prompting calls in Canada for the Harper government to kick-start its own free-trade talks with China, which stands to find cheaper alternatives to its south than from across the Pacific once the agreement is finalized.

Among the key Australian industries that stand to benefit are metallurgical coal, education, financial services and insurance, important areas for Canada as well.

Australia will also gain an instant edge in other sectors, such as beef, dairy, lobster, wine, processed foods, pharmaceuticals, diamonds and aluminum. Each of those products expects to see the complete removal of Chinese tariffs in coming years.

The Australian department of foreign affairs and trade specifically names Canada as one of the competitors over which it will gain an advantage with the deal, which is expected to be in place in a year.

Its full implementation will bring to zero the tariffs on 95 per cent of Australia’s exports to China.

“Across the board, we’re probably seeing a 10-per-cent increase in competitiveness for Australian products on a like-for-like basis,” said Bryan Clark, director of international affairs and trade at the Australian Chamber of Commerce and Industry, the country’s biggest business group.

Australia stands to gain a long head start, given that it took Beijing and Canberra nine years of negotiations to reach the agreement – and Ottawa has yet to start.

“It will give us a very strong competitive advantage over a period of time,” said Tracy Colgan, the Beijing-based president of Kamsky Associates Inc., a cross-border mergers and acquisitions consultant.

“We anticipate it’s going to kick off a surge in Australia’s China trade.”

For Canada, one of the single most important changes will be the deletion for Australia of a recently imposed 3-per-cent tariff on metallurgical coal, a major Canadian export to China.

Companies such as Teck Resources Ltd. will continue to face that pricing obstacle, while rival BHP Billiton Ltd. will not. Teck, which last year saw nearly $2.5-billion in revenue from China, declined comment.

(One of the beneficiaries of the Australian deal, ironically, is Montreal-based Saputo Inc., which last year bought Warrnambool Cheese & Butter Factory Co., an Australian company that will now have better access to the Chinese market.)

To date, the Canadian business community has not called loudly for free-trade talks with China, a matter that has proved politically difficult for a Conservative government whose Cabinet is deeply divided on closer ties with Beijing.

But with the Australian agreement now made, some say it’s time Canada seek the same. China has for years held out an invitation to free-trade talks, and a precursor Sino-Canadian economic complementarities study was completed in 2012. It found “there is room for much growth” in trade and highlighted a number of sectors – agriculture, natural resources, manufacturing and services – included in the Australian deal.

“We need to be moving forward on economic agreements,” said Sarah Kutulakos, executive director of the Canada China Business Council. The Australia deal can both serve as a template and an incentive, since “there’s a bunch of sectors in there that strike right at Canada.”

She added: “We’re always losing ground in China, and this is why it’s so important that we keep moving forward, and try to keep the pace up – because the rest of the world is really aggressively pursuing China.”

The Canadian share of Chinese trade has remained largely unmoved for years; Canada, with a population 50 per cent larger than Australia, does half its trade with China.

Even if Canada does open free-trade talks with Beijing, Ottawa may want to consider other side deals first, given the time it takes to conclude comprehensive agreements.

Sectoral agreements on aerospace and transportation, clean technology, agri-food, mining and natural resources “are the ones everyone agrees would be logical to start with,” Ms. Kutulakos said.

“Every advantage we can give ourselves, we should,” she said.


Don't get me wrong: the American market remains the biggest and best in the world and we want, need to protect our access to it ... but not at the expense of other markets: trade is not a zero sum game. America is not in real decline, but China is rising.
 
The counter argument to this is that China and Australia trade has been heavy for a long while, but Canada is the new guy on the block because of lack of effort on our part.
 
Perhaps the other counter argument is Canada wants to use the TPP to "get their toes wet" before going all in. As well, a larger regional free trade block like the TPP makes Canada less vulnerable to machinations by a *partner* in a bilateral trade agreement.
 
From both the Austrian perspective and simple common sense, this can only end badly as "stimulus" drives one or more malinvestment bubbles. This was discovered in the "South Sea Bubble" back in the 1700's, and reinforced most recently in 2008....

http://www.charlotteobserver.com/2014/11/21/5331553/china-state-media-says-central.html#.VG-88WfAv9o

China, Europe chase growth amid global slowdown



By JOE McDONALD
AP Business Writer



Posted: Friday, Nov. 21, 2014










BEIJING China's central bank unexpectedly slashed interest rates on Friday to re-energize the world's No. 2 economy, joining a growing list of major economies that are trying to encourage growth in the face of a global slowdown.

The president of the European Central Bank said Friday he was ready to step up stimulus for the 18-country eurozone economy, where growth is meager and unemployment is soaring. And Japan's government this week delayed a tax increase after the country slipped back into recession. Japan's central bank late last month increased its purchases of government bonds and other assets to try to revive growth.

News of China's actions and the ECB's hints of further stimulus triggered a surge in stock markets, particularly in Europe. Germany's DAX rose 2.6 percent, while the Dow Jones industrial average rose 0.5 percent to close at a record high. Asian stocks had closed before the Chinese announcements.

Friday's moves highlighted an increasing divide in the global economy. The United States is showing signs of steady growth, prompting the Federal Reserve to rein in its stimulus efforts.

So far, the U.S. has escaped any drag from the slowdown overseas. Fed policymakers said at a meeting last month that the impact on the U.S. would be "quite limited."

Jay Bryson, a global economist at Wells Fargo Securities, said the U.S. is "relatively insulated" from overseas developments. Exports are a smaller source of growth than in other developed nations and many major employers, such as health care and education providers, are largely unaffected by overseas activity.

The slowdown in global growth is becoming an increasing concern for policymakers. Japan confirmed this week that it has fallen back into recession and will delay a tax increase to help consumer spending.

In Europe, it is not only weak growth but also the low inflation rate that is worrying the ECB. Low inflation or an outright drop in prices can weaken an economy further by encouraging delays in spending and investment. The economy of the 18-country eurozone grew by a scant 0.2 percent in the third quarter compared with the previous three months.

As indicators for the eurozone and global economy disappoint, ECB President Mario Draghi was firm in his message: ""We will do what we must to raise inflation and inflation expectations as fast as possible," he said in a speech in Frankfurt.

Of major economies, only the U.S. is considering raising interest rates. The Federal Reserve only recently ended a massive bond-buying program that helped reduce market interest rates because the economy is strengthening.

But the prospect of higher rates in the U.S. is exposing the country to a potentially painful rise in the dollar — currencies tend to strengthen with higher rates. The dollar hit a seven-year high against the yen, and jumped almost 1 percent against the euro on Friday. A stronger dollar makes it tougher for U.S. exporters to sell their goods internationally.

The People's Bank of China said it is trying to address "financing difficulties" caused by a shortage of credit. It also said the move was not a change in monetary policy and economic conditions are within an "appropriate range."

China's economic growth fell to a five-year low of 7.3 percent in the latest quarter and manufacturing and other indicators are declining. That has prompted suggestions Beijing might intervene to prop up growth.

The rate charged by banks for loans to each other rose this week to its highest level since early October, reflecting reduced availability of credit, a concern for Chinese economic planners.

"If necessary, the central bank will provide timely liquidity support," or extra credit to markets, it said in a separate statement.

The bank cut the rate on a one-year loan by commercial banks by 0.4 percentage points to 5.6 percent. The rate paid on a one-year savings was lowered by 0.25 point to 2.75 percent.

It was the first rate cut since July 2012, and comes after the Cabinet called this week for steps to reduce financing costs for industry to make the economy more efficient.

Bryson of Wells Fargo Securities said the bank's move would have only a limited impact on China's economy. But it does signal that Chinese officials' concerns about growth are rising, he said, a sign they may take further steps in the coming months.

In China, changes in interest rates have a limited direct effect on the government-dominated economy but are seen as a signal to banks to lend more and to state companies that they are allowed to step up borrowing.

"The reduction in the benchmark lending rate will mainly benefit the larger, typically state-owned firms that borrow from banks," said Mark Williams of Capital Economics in a report. Most of China's private companies cannot get loans from the state-owned banking industry and rely on an underground credit market.

"This does not necessarily signal that policymakers are going back on efforts to support smaller companies, or giving up on 'targeted easing,' but they apparently feel larger firms are now in need of support too."



AP Economics Writer Christopher S. Rugaber contributed to this report.

Read more here: http://www.charlotteobserver.com/2014/11/21/5331553/china-state-media-says-central.html#.VG-88WfAv9o#storylink=cpy

Since much of the root problem is the debt overhang, preventing deleveraging and offering more incentives to the market to expand debt rather than to deleverage private accounts simply makes the problem shamble on like a grade "Z" zombie movie.
 
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