Deflation leaves China on the brink of financial crisis

[george]

Deflation leaves China on the brink of financial crisis

Despite picking up slightly in December, China’s rate of inflation remained well below official targets, signaling trouble for the world’s second largest economy.
Economists have said that it is ‘highly probable’ that a credit crunch will occur in China in 2015...

Full story: http://www.streetwisejournal.com/deflation-leaves-china-brink-financial-crisis/4245/

[Anthony5]

I'm not a complete noob in financial matters, but after all those years I still don't understand why a low inflation is so bad.

[JOC]

The house of cards are coming tumbling down!!

And we are all going to be affected!!

[JOC]

I'm not a complete noob in financial matters, but after all those years I still don't understand why a low inflation is so bad.

Low inflation=No money in the market to drive up prices!! (very simplified)

[Briggsy]

I'm not a complete noob in financial matters, but after all those years I still don't understand why a low inflation is so bad.

If prices are viewed as going down, domestic consumption dries up as people stop buying stuff as it will be cheaper in the future. As domestic consumption dries up, growth stagnates. Without growth in the economy and with lower domestic consumption, businesses cannot expand and sales decrease forcing businesses to lower prices so fuelling deflation. It becomes a cycle that is difficult to escape from.

[petedk]

Maybe time to sell the shares and buy gold.

[Scott]

Off-topic post removed.

[Briggsy]

Maybe time to sell the shares and buy gold.

That may be sage advice. I, for one, am not holding Chinese financials any more.

[Anthony5]

I'm not a complete noob in financial matters, but after all those years I still don't understand why a low inflation is so bad.

If prices are viewed as going down, domestic consumption dries up as people stop buying stuff as it will be cheaper in the future. As domestic consumption dries up, growth stagnates. Without growth in the economy and with lower domestic consumption, businesses cannot expand and sales decrease forcing businesses to lower prices so fuelling deflation. It becomes a cycle that is difficult to escape from.

Inflation is calculated using the CPI, which contains mostly prices of necessary items, like food, clothes, utilities and alike.

Keep in mind that pay rises always come later than price rises. Prices are adjusted upwards monthly, while pay rises are adjusted may be once a year.

So if prices don't rise so fast people are left with more money to spend, and they will spend. I don't believe that people will say, oh this month we don't buy food because probably next month the food will be cheaper.

I do believe that if they have some money left at the end of the month they will spend it on something they would not be able to in months where they have no money left.

My understanding is that the big companies will not be able to grow as fast as usual, read increase their profits as fast as usual, but more small companies will be be able to grow because people now buy their product which they normally wouldn't have bought.

So no, I still don't get it why low inflation is bad.

[Anthony5]

I asked Mr Google why low inflation is bad, and he showed me an article that said this for instance.

When prices don’t rise very much, neither do company sales or salaries. That is, workers won’t receive higher pay if their employers’ profits aren’t expanding.

Well the part in red says it all, don't you think. Why do their profits always have to expand?

Answer because they are not satisfied with 3 Ferrari's anymore, they need 5.

[samran]

I'm not a complete noob in financial matters, but after all those years I still don't understand why a low inflation is so bad.

If prices are viewed as going down, domestic consumption dries up as people stop buying stuff as it will be cheaper in the future. As domestic consumption dries up, growth stagnates. Without growth in the economy and with lower domestic consumption, businesses cannot expand and sales decrease forcing businesses to lower prices so fuelling deflation. It becomes a cycle that is difficult to escape from.

Indeed, low inflation isn't just not bad, it is good. Low inflation allows people to have predictability in the price of things for one year to the next.

Low inflation however isn't deflation, which is where the price of things actually falls. And as Briggsy sums up quite well, why buy something today when I can get it cheaper tomorrow means that that people shun the goods and services we all sell into the economy, including our own labour.

[Briggsy]

Anthony 5

The deflationary cycle (always linked with low or zero growth) may be even worse in China as they are inveterate savers. Your comment about people spending up to the earnings is broadly true in the West but is definitely not the case in China where salary rises lead to more saving, more investing but often no increase in consumption.

Also deflationary cycles tend are linked to higher unemployment, be it in the form of less overtime, less hiring, a switch to temporary positions.

It is easier to understand if you think of low growth and high unemployment as the problem and deflation as a secondary condition that locks in the low growth and high unemployment.

[Mosha]

What did the PM just do with the Baht in china?

[Anthony5]

I'm not a complete noob in financial matters, but after all those years I still don't understand why a low inflation is so bad.

If prices are viewed as going down, domestic consumption dries up as people stop buying stuff as it will be cheaper in the future. As domestic consumption dries up, growth stagnates. Without growth in the economy and with lower domestic consumption, businesses cannot expand and sales decrease forcing businesses to lower prices so fuelling deflation. It becomes a cycle that is difficult to escape from.

Indeed, low inflation isn't just not bad, it is good. Low inflation allows people to have predictability in the price of things for one year to the next.

Low inflation however isn't deflation, which is where the price of things actually falls. And as Briggsy sums up quite well, why buy something today when I can get it cheaper tomorrow means that that people shun the goods and services we all sell into the economy, including our own labour.

But if you look it up you will see that China's target, as well as that from the US and probably other countries, is to keep inflation above 2%.

I would think that deflation is a negative figure.

[Publicus]

August marked the turning point of no return for the CCP's China economy.

The PRChina is going down, as expected for several years now. It is anticipated the China economy and financial system will crash completely during H2, 2016. The crash during 2016 has been expected and anticipated by Western investors, Wall Street especially and in particular, since the effects of the 2008 bursting of the US housing bubble became fully analyzed.

The CCP's development model provided by Deng Xiao Peng has however always been known to be unsustainable. By the time of the US crash of 2008 the trend line had become more definable to the West.

The complete drying up of bank liquidity for both the official state banking system and the off the books shadow banking system caused the Boyz in Beijing in August to throw $700 billion into the official state banking system. The shadow banking system, which is off the books and not included in GDP, remains an additional wild card that is on its own, making it the free radical of the financial system.

The $700 billion is a drop of water in a desert.

Bank of America Merrill Lynch is quoted in the OP and is accurate, but I like the similar account as follows that is provided by BNP Paribas, which couches its analysis but all the same pulls no punches.....

China’s deflationary chickens continue to come home to roost. The biggest investment bubble in history, financed by one of the biggest credit bubbles in history1

is producing serial overcapacity across swathes of the economy, especially basic industries and real estate. The logic of China’s wildly unbalanced growth is steadily intensifying deflationary pressure, a fading ability to generate cashflow and a slow, grinding march towards unsustainable debt dynamics.

With system-wide leverage already well over 2x the size of the economy and the average interest rate paid by corporates around 7%, nominal GDP growth needs to run well in double-digit territory for debt to be sustainable. Q3 GDP data could show nominal growth slowing to 6-7% with the deflator close to zero or even negative in y/y terms (China: Stumbling & mumbling).

These pressures are, of course, not new and China’s state-controlled financial system ensures that its capacity to sustain the Ponzi finance dynamics that artificially elongate the credit cycle remains considerable. The asset-management companies (AMCs), aka China’s ‘bad banks’, have increasingly emerged as credit-risk absorbers and liquidity providers of last resort. Clear evidence of growing deflationary pressure on an economy-wide basis, however, is accruing as growth fades and the diminishing return from stimulus worsens.

Developments in the housing market are even more disturbing, with over-supply already producing house-price declines at an annualised pace of 10-12%.

http://rss-globalmarkets.bnpparibas.com/r/20141017_China.pdf?t=AiKoAjNfPl5-V9v0TO887&stream=true

[Scott]

With China and Russia cooperating closely, what affect will China's economic problems have on Russia?

What affect will it have on S.E.Asia, particularly Thailand?

[F430murci]

With China and Russia cooperating closely, what affect will China's economic problems have on Russia?

What affect will it have on S.E.Asia, particularly Thailand?

Maybe none on Russia. Russia just needs $$$. And lots of it to prop up its currency, bail out its bank and deal with a little real estate bubble of its own caused by depreciation of the Ruble.

[Bakeman]

Ah the fluctuation of life. One day the USA will recover.

[F430murci]

I think the issue with deflation is that it is symptomatic of other underlying problems. The biggest obstacle China faces is shifting its economy to a consumption from an export reliance model.

Dropping prices may be indicative of low domestic demand and that measures to become a consumption based economy are failing. There are just too many factors at play and all of this is an oversimplification.

The largest problem China faces is the impact of artificially propping up its GDP by building cities and high rise residential buildings that were never needed and remain empty. This creates a lot of bad debt and puts a lot of developers and investors into default.

China's shadow bankers and private investors currently hold trillions in bad debt. The total of these bad debt pools is something like 2.5 times China's GDP. Deflation and the upcoming credit crunch will make it harder to restructure or pay off that debt.

[NeverSure]

August marked the turning point of no return for the CCP's China economy.

The PRChina is going down, as expected for several years now. It is anticipated the China economy and financial system will crash completely during H2, 2016. The crash during 2016 has been expected and anticipated by Western investors, Wall Street especially and in particular, since the effects of the 2008 bursting of the US housing bubble became fully analyzed.

The CCP's development model provided by Deng Xiao Peng has however always been known to be unsustainable. By the time of the US crash of 2008 the trend line had become more definable to the West.

The complete drying up of bank liquidity for both the official state banking system and the off the books shadow banking system caused the Boyz in Beijing in August to throw $700 billion into the official state banking system. The shadow banking system, which is off the books and not included in GDP, remains an additional wild card that is on its own, making it the free radical of the financial system.

The $700 billion is a drop of water in a desert.

Bank of America Merrill Lynch is quoted in the OP and is accurate, but I like the similar account as follows that is provided by BNP Paribas, which couches its analysis but all the same pulls no punches.....

My friend, we've been in agreement on this for some time now while the lemmings have thought that China is The Next Big Deal. That includes not only many posters here, but Thailand's leader.

What will Thailand's leader, who doesn't even know how to run a business, say when he finds out that The Emperor Has No Clothes after he's rushed out to switch alliances to China?

When it happens I will for the first time start a thread in all caps. It will say, "I TOLD YOU SO."

Edited January 10, 2015 by NeverSure

[NeverSure]

With China and Russia cooperating closely, what affect will China's economic problems have on Russia?

What affect will it have on S.E.Asia, particularly Thailand?

A lot.

Both Russia and Thailand have seen China as an economic powerhouse and have aligned themselves with China's future.

Look how Thai leadership is getting into bed with China, almost appearing to shun the West due to criticism and sanctions. It's been agreeing on currency swaps, signing rail deals, concentrating on tourism and exports... If China goes down now, Thailand is in a mess.

Putin has known the West won't play ball with him including imposing sanctions and has increasingly turned to China. Putin and China have believed that together they can be a world unto themselves but both are failing in front of our eyes.

I have no clue why so many have believed that China is a rising star when in fact it is a communist dictatorship with a hidden banking system (Shadow banking) and debt up the ying yang. Pundits say that China's real debt is about 250% of GDP while the UK's is 100% and the US has about 90%.

The EU and the US actually invent and produce things. China either makes cheap copies or manufactures for the West where Western companies make the big bucks and the Chinese pick up the scraps with cheap labor. Think of what Nike shoes sell for in the West after having been made in China for peanuts.

I will feel vindicated after the Chinese collapse after soooo many people have predicted that it will rise above the West. It can't rise above capitalism which spurs innovation for profit by individuals while its leaders try to fake it.

[samran]

I'm not a complete noob in financial matters, but after all those years I still don't understand why a low inflation is so bad.

If prices are viewed as going down, domestic consumption dries up as people stop buying stuff as it will be cheaper in the future. As domestic consumption dries up, growth stagnates. Without growth in the economy and with lower domestic consumption, businesses cannot expand and sales decrease forcing businesses to lower prices so fuelling deflation. It becomes a cycle that is difficult to escape from.

Indeed, low inflation isn't just not bad, it is good. Low inflation allows people to have predictability in the price of things for one year to the next.

Low inflation however isn't deflation, which is where the price of things actually falls. And as Briggsy sums up quite well, why buy something today when I can get it cheaper tomorrow means that that people shun the goods and services we all sell into the economy, including our own labour.

But if you look it up you will see that China's target, as well as that from the US and probably other countries, is to keep inflation above 2%.

I would think that deflation is a negative figure.

What you are referring to sounds like the pretty common central bank practice of setting a band for inflation, generally an average 2 to 3%, often with the caveat of over a defined economic cycle.

That is not necessarily what is achieved but where in most places in the west governments run idependent monetary policy it is achieved through the setting of official interest rates by the central bank. It allows at least for interest rate policy not to be used as a political football.

I'm less familiar with China but I doubt the concept of an independent public institution would sit well in the politburo.

Edited January 10, 2015 by samran

[F430murci]

With China and Russia cooperating closely, what affect will China's economic problems have on Russia?

What affect will it have on S.E.Asia, particularly Thailand?

A lot.

Both Russia and Thailand have seen China as an economic powerhouse and have aligned themselves with China's future.

Look how Thai leadership is getting into bed with China, almost appearing to shun the West due to criticism and sanctions. It's been agreeing on currency swaps, signing rail deals, concentrating on tourism and exports... If China goes down now, Thailand is in a mess.

Putin has known the West won't play ball with him including imposing sanctions and has increasingly turned to China. Putin and China have believed that together they can be a world unto themselves but both are failing in front of our eyes.

I have no clue why so many have believed that China is a rising star when in fact it is a communist dictatorship with a hidden banking system (Shadow banking) and debt up the ying yang. Pundits say that China's real debt is about 250% of GDP while the UK's is 100% and the US has about 90%.

The EU and the US actually invent and produce things. China either makes cheap copies or manufactures for the West where Western companies make the big bucks and the Chinese pick up the scraps with cheap labor. Think of what Nike shoes sell for in the West after having been made in China for peanuts.

I will feel vindicated after the Chinese collapse after soooo many people have predicted that it will rise above the West. It can't rise above capitalism which spurs innovation for profit by individuals while its leaders try to fake it.

You may be right as to Thailand. Thailand also gets in trouble when Yuan appreciates and

Chinese exports are no longer cheap. Thailand is trying to participate in global markets and needs a better hedge due to its exposure and reliance on global markets.

Russian on the other hand is fully capable of going isolationist again and simply maintain ties with China and perhaps India for oil exports. Both systems can go to or remain closed currencies.

Edited January 10, 2015 by F430murci

[Publicus]

Perhaps the starting point for the major difference between the CCP Boyz in Beijing and Putin and Co is that, while the Boyz don't like playing second fiddle to the United States, they remain focused on having "normal" relations with Washington. The Boyz do want good relations with Washington and they make good relations with Washington their top foreign priority.

Putin, conversely, and Russians in general are confrontational with the US. Putin openly defies and challenges the US, The Boyz in Beijing are quietly resentful toward the US, but Putin boldly prioritizes a terrible relationship with Washington. While 2015 looks to be a productive year in Beijing-Washington relations, it hasn't ever looked worse between Washington and Moscow since 1991.

The direct consequence is that US will assist China when the time comes, whereas it will actively entomb Russia. With the economies of each pounding on the gates of hell, the two economies have anyway been dancing around each other.

Russia for instance had already began to feel the 2012 sudden outflow of capital from the PRChina that accelerated throughout 2013 and that turned into investors fleeing during 2014 and now has capital stampeding out. China's demand for Russian oil and mined metals starting falling in 2012, causing Russia to lower the export price of each, and those prices have continued to decline. At this point Beijing can't help Russia in this respect.

Nor does Beijing seem too anxious to help out the Kremlin because Beijing insists on buying its oil at current market prices which has Putin in a twist he can't do anything about. Indeed, nobody for thousands of years has ever accused the Chinese of being slouches in a deal involving trade, barter, money.

The $270 billion 25 year oil deal won't come online for another couple of years but Russians are increasingly nervous about how much the Chinese will actually pay per barrel as events unfold and how much the Chinese will be able to actually buy....Beijing is equally unsure at this point.

Russia is already impacted by the increase in wages of PRChinese manufacturing workers because it recently has had to pay more for the large volume of goods it imports from the PRC. There's been no relief from this either.

Beijing and Moscow will continue to try to work out currency exchange deals to circumvent the USD but that will be pro forma cooperation because it will have little impact with each economy looking into the abyss. The capital flight from the PRC and Russia are forcing capital outflows from emerging markets such as Brazil and India to name two prominent ones, which forces the same in other emerging markets, leaving no interest in either the rubble or the yuan.

The US Treasury Department has for the past six years had a newly organized financial unit specializing in what some call economic warfare which can track USDs in the hands of people such as Putin, his oligarch cronies and others under US sanctions to include in Iran and elsewhere, such as just recently imposed in Venezuela that directly impact Pres Nicholas Maduro and most of his cronies.

This makes the CCP Boyz very nervous about doing their business as usual both at home and abroad.

Edited January 10, 2015 by Publicus

[F430murci]

Perhaps the starting point for the major difference between the CCP Boyz in Beijing and Putin and Co is that, while the Boyz don't like playing second fiddle to the United States, they remain focused on having "normal" relations with Washington. The Boyz do want good relations with Washington and they make good relations with Washington their top foreign priority.

Putin, conversely, and Russians in general are confrontational with the US. Putin openly defies and challenges the US, The Boyz in Beijing are quietly resentful toward the US, but Putin boldly prioritizes a terrible relationship with Washington. While 2015 looks to be a productive year in Beijing-Washington relations, it hasn't ever looked worse between Washington and Moscow since 1991.

The direct consequence is that US will assist China when the time comes, whereas it will actively entomb Russia. With the economies of each pounding on the gates of hell, the two economies have anyway been dancing around each other.

Russia for instance had already began to feel the 2012 sudden outflow of capital from the PRChina that accelerated throughout 2013 and that turned into investors fleeing during 2014 and now has capital stampeding out. China's demand for Russian oil and mined metals starting falling in 2012, causing Russia to lower the export price of each, and those prices have continued to decline. At this point Beijing can't help Russia in this respect.

Nor does Beijing seem too anxious to help out the Kremlin because Beijing insists on buying its oil at current market prices which has Putin in a twist he can't do anything about. Indeed, nobody for thousands of years has ever accused the Chinese of being slouches in a deal involving trade, barter, money.

The $270 billion 25 year oil deal won't come online for another couple of years but Russians are increasingly nervous about how much the Chinese will actually pay per barrel as events unfold and how much the Chinese will be able to actually buy....Beijing is equally unsure at this point.

Russia is already impacted by the increase in wages of PRChinese manufacturing workers because it recently has had to pay more for the large volume of goods it imports from the PRC. There's been no relief from this either.

Beijing and Moscow will continue to try to work out currency exchange deals to circumvent the USD but that will be pro forma cooperation because it will have little impact with each economy looking into the abyss. The capital flight from the PRC and Russia are forcing capital outflows from emerging markets such as Brazil and India to name two prominent ones, which forces the same in other emerging markets, leaving no interest in either the rubble or the yuan.

The US Treasury Department has for the past six years had a newly organized financial unit specializing in what some call economic warfare which can track USDs in the hands of people such as Putin, his oligarch cronies and others under US sanctions to include in Iran and elsewhere, such as just recently imposed in Venezuela that directly impact Pres Nicholas Maduro and most of his cronies.

This makes the CCP Boyz very nervous about doing their business as usual both at home and abroad.

Can be summed much quicker than that. What % of Chinese imports go to US, GB and other countries with whom we have an alliance. Moreover, China needs US as long as Yuan remains a closed currency and until China can switch to a consumption based economy.

[spidermike007]

Any country with dozens of ghost cities is in serious trouble. Here is an except front Business Insider.

Business Insider: How has Ordos changed now from when it first started making headlines a few years ago?

Rob Schmitz: I first visited Ordos in October 2010, the same year many other Western journalists had reported on the city. When I returned this year, there were a lot of interesting differences. Back in 2010, the few people who lived there seemed defensive about the Western media labeling the place a ghost city. This time, everyone I spoke to had come to an acceptance that Kangbashi (the proposed new city of Ordos) was most likely going to remain mostly vacant, and many seemed OK with that. I spoke to one of the largest developers while I was there and he told me that Kangbashi had a population density similar more to a city in Canada or the U.S. than of a city in China, and he thought this was a draw for the city. But my conversations with folks didn't confirm this. I've never seen a city of similar physical size in Canada nor in the U.S. as empty as Kangbashi is today, and most of the people I spoke to during my latest visit didn't seem very happy to be living in a place where most of the buildings were empty.

I met dozens of migrant workers who were renting vacant office spaces as apartments for as low as $65 a month.

Another big difference between this time and last was that the Ordos government has moved its headquarters to Kangbashi, so there are more people there during the day around the city's civic center. That said, the government of Ordos has actually increased the size of the city since 2010 by building more skyscrapers and infrastructure including a park with a large lake, three sports stadiums, and a skyscraper office park on the banks of the lake which are under construction.

I walked through a development of more than a dozen 20-story high-rises built adjacent to this office park, and there were no signs of life. The same developer I mentioned above also expressed concern over the fate of three gigantic sports stadiums built specifically for China's 'Ethnic Minority Traditional Sports Games' of 2015 outside of Kangbashi. It was surprising that after being admonished by China's own state-run press, Ordos' government has continued to build at the same rate as it had done before.

The last difference from last time is that real estate prices in Kangbashi have plummeted since my visit in 2010, and I met dozens of migrant workers who were renting vacant office spaces as apartments for as low as $65 a month. These spaces weren't built to house people, but one office building I visited was full of migrant workers at night, living in windowless office spaces and using an office bathroom down the hall to bathe.

I also visited a government office in charge of mediating disputes between shadow bankers and those who couldn't afford to repay their loans. This is a very big problem in Ordos, as most businesses there would never qualify for a loan from a state bank, and now that the local economy is doing so poorly, many businesses have gone bankrupt. The office was in charge of repossessing whatever assets they could get from those who owed money. Their storage room was full of refrigerators, flat-screen TVs, and shelves full of dozens of bottles of high-priced Baijiu (Rice Wine) which they had seized.

BI: Do the people that you meet in these ghost cities have any plans of returning to their hometowns or are they optimistic?

RS: Many have already returned home. Those who are left are looking to make a little money and then leave when the economy finally fizzles out for good. Keep in mind that nearly twenty miles away from Kangbashi (the largely empty city) is Dongsheng, which is known as the old city, and actually has a functioning economy and population, so many people are watching this unfold from there.

Read more: http://www.businessinsider.com/chinas-ghost-cities-in-2014-2014-6#ixzz3ORW16APt

[Thai at Heart]

I asked Mr Google why low inflation is bad, and he showed me an article that said this for instance.

When prices dont rise very much, neither do company sales or salaries. That is, workers wont receive higher pay if their employers profits arent expanding.

Well the part in red says it all, don't you think. Why do their profits always have to expand?

Answer because they are not satisfied with 3 Ferrari's anymore, they need 5.

Because at a bare mininum populations are growing. If they can't even get profit to grow in line with population it means GDP per head is falling.

I.e per head everyone is getting poorer.

[Publicus]

Perhaps the starting point for the major difference between the CCP Boyz in Beijing and Putin and Co is that, while the Boyz don't like playing second fiddle to the United States, they remain focused on having "normal" relations with Washington. The Boyz do want good relations with Washington and they make good relations with Washington their top foreign priority.

Putin, conversely, and Russians in general are confrontational with the US. Putin openly defies and challenges the US, The Boyz in Beijing are quietly resentful toward the US, but Putin boldly prioritizes a terrible relationship with Washington. While 2015 looks to be a productive year in Beijing-Washington relations, it hasn't ever looked worse between Washington and Moscow since 1991.

The direct consequence is that US will assist China when the time comes, whereas it will actively entomb Russia. With the economies of each pounding on the gates of hell, the two economies have anyway been dancing around each other.

Russia for instance had already began to feel the 2012 sudden outflow of capital from the PRChina that accelerated throughout 2013 and that turned into investors fleeing during 2014 and now has capital stampeding out. China's demand for Russian oil and mined metals starting falling in 2012, causing Russia to lower the export price of each, and those prices have continued to decline. At this point Beijing can't help Russia in this respect.

Nor does Beijing seem too anxious to help out the Kremlin because Beijing insists on buying its oil at current market prices which has Putin in a twist he can't do anything about. Indeed, nobody for thousands of years has ever accused the Chinese of being slouches in a deal involving trade, barter, money.

The $270 billion 25 year oil deal won't come online for another couple of years but Russians are increasingly nervous about how much the Chinese will actually pay per barrel as events unfold and how much the Chinese will be able to actually buy....Beijing is equally unsure at this point.

Russia is already impacted by the increase in wages of PRChinese manufacturing workers because it recently has had to pay more for the large volume of goods it imports from the PRC. There's been no relief from this either.

Beijing and Moscow will continue to try to work out currency exchange deals to circumvent the USD but that will be pro forma cooperation because it will have little impact with each economy looking into the abyss. The capital flight from the PRC and Russia are forcing capital outflows from emerging markets such as Brazil and India to name two prominent ones, which forces the same in other emerging markets, leaving no interest in either the rubble or the yuan.

The US Treasury Department has for the past six years had a newly organized financial unit specializing in what some call economic warfare which can track USDs in the hands of people such as Putin, his oligarch cronies and others under US sanctions to include in Iran and elsewhere, such as just recently imposed in Venezuela that directly impact Pres Nicholas Maduro and most of his cronies.

This makes the CCP Boyz very nervous about doing their business as usual both at home and abroad.

Can be summed much quicker than that. What % of Chinese imports go to US, GB and other countries with whom we have an alliance. Moreover, China needs US as long as Yuan remains a closed currency and until China can switch to a consumption based economy.

I think you might mean exports, but the point is well taken as the matter of the US having an alliance does in fact involve alliances, to include of course Thailand with which Washington has a mutual defense formal treaty. The CCP Boyz btw needed additionally to open their capital market to foreign investors but with capital now stampeding out of the PRC the matter has become moot....capital has been stampeding since August last year whereas it had previously been fleeing.

First however, the alliances. Nato is one. Each Japan, S Korea, Philippines, Australia, NZ are mutual defense formal treaty allies. That amounts to most of Beijing's trade, imports, exports. Beijing in fact has always had a current account deficit with the Asean countries it trades with, and most recently, Australia.

Singapore is not a formal US ally but that's only because Singapore does not want to sign a treaty......Singapore several years ago, at its own expense, dredged a channel and built a complete new docking facility for visiting US aircraft carriers that until then had had to drop anchor in the harbor....Singapore's air force is an extension of the USAF etc.

While the Boyz to want civil and good relations with Washington, the matter of US alliances throughout the region is a raw bone.

Thailand has been looking on at the new US approach to economic warfare as the former LOS watches Russia be decimated and, unless the Thai elites are blind, see the CCP-PRChina crumbling.

Washington has no problem with Thailand connecting to the Boyz for further economic development, just as long as Thailand recognizes the risk involved. The world knows China will always be there no matter what and Thailand knows this too, so the question for Thailand is whether it recognizes present trends and whether it knows the CCP regime is a considerably less than eternal one.

Thailand cannot try to sever the military defense alliance and I'd think Thailand under its present rulers well know that.

[NeverSure]

With China and Russia cooperating closely, what affect will China's economic problems have on Russia?

What affect will it have on S.E.Asia, particularly Thailand?

A lot.

Both Russia and Thailand have seen China as an economic powerhouse and have aligned themselves with China's future.

Look how Thai leadership is getting into bed with China, almost appearing to shun the West due to criticism and sanctions. It's been agreeing on currency swaps, signing rail deals, concentrating on tourism and exports... If China goes down now, Thailand is in a mess.

Putin has known the West won't play ball with him including imposing sanctions and has increasingly turned to China. Putin and China have believed that together they can be a world unto themselves but both are failing in front of our eyes.

I have no clue why so many have believed that China is a rising star when in fact it is a communist dictatorship with a hidden banking system (Shadow banking) and debt up the ying yang. Pundits say that China's real debt is about 250% of GDP while the UK's is 100% and the US has about 90%.

The EU and the US actually invent and produce things. China either makes cheap copies or manufactures for the West where Western companies make the big bucks and the Chinese pick up the scraps with cheap labor. Think of what Nike shoes sell for in the West after having been made in China for peanuts.

I will feel vindicated after the Chinese collapse after soooo many people have predicted that it will rise above the West. It can't rise above capitalism which spurs innovation for profit by individuals while its leaders try to fake it.

You may be right as to Thailand. Thailand also gets in trouble when Yuan appreciates and

Chinese exports are no longer cheap. Thailand is trying to participate in global markets and needs a better hedge due to its exposure and reliance on global markets.

Russian on the other hand is fully capable of going isolationist again and simply maintain ties with China and perhaps India for oil exports. Both systems can go to or remain closed currencies.

Russia doesn't have the climate or the right type of land to feed its people. It's a net importer of food. This is much what the sanctions have been about.

China has the climate but a population that's far too large. It is a net importer of food.

Neither isolationism nor a quasi partnership would provide food for the people. They both need to be part of global trade.

And, they need not only the relationships but the money to do so.

[F430murci]

With China and Russia cooperating closely, what affect will China's economic problems have on Russia?

What affect will it have on S.E.Asia, particularly Thailand?

A lot.

Both Russia and Thailand have seen China as an economic powerhouse and have aligned themselves with China's future.

Look how Thai leadership is getting into bed with China, almost appearing to shun the West due to criticism and sanctions. It's been agreeing on currency swaps, signing rail deals, concentrating on tourism and exports... If China goes down now, Thailand is in a mess.

Putin has known the West won't play ball with him including imposing sanctions and has increasingly turned to China. Putin and China have believed that together they can be a world unto themselves but both are failing in front of our eyes.

I have no clue why so many have believed that China is a rising star when in fact it is a communist dictatorship with a hidden banking system (Shadow banking) and debt up the ying yang. Pundits say that China's real debt is about 250% of GDP while the UK's is 100% and the US has about 90%.

The EU and the US actually invent and produce things. China either makes cheap copies or manufactures for the West where Western companies make the big bucks and the Chinese pick up the scraps with cheap labor. Think of what Nike shoes sell for in the West after having been made in China for peanuts.

I will feel vindicated after the Chinese collapse after soooo many people have predicted that it will rise above the West. It can't rise above capitalism which spurs innovation for profit by individuals while its leaders try to fake it.

You may be right as to Thailand. Thailand also gets in trouble when Yuan appreciates and

Chinese exports are no longer cheap. Thailand is trying to participate in global markets and needs a better hedge due to its exposure and reliance on global markets.

Russian on the other hand is fully capable of going isolationist again and simply maintain ties with China and perhaps India for oil exports. Both systems can go to or remain closed currencies.

Russia doesn't have the climate or the right type of land to feed its people. It's a net importer of food. This is much what the sanctions have been about.

China has the climate but a population that's far too large. It is a net importer of food.

Neither isolationism nor a quasi partnership would provide food for the people. They both need to be part of global trade.

And, they need not only the relationships but the money to do so.

Russia survived for ho many years in isolation? You don't know Russian pride. They eat some crazy arse s@@t. I make fun of my wife all the time. Nevertheless, they are going back into isolation as long as Putin is at the helm, but they will retains contacts with China, maybe India and a few other loser countries.