Posts Tagged ‘China’

Is GM American or Chinese?

February 4, 2009

There are all sorts of extenuating circumstances, from different seasons to CNY to yes, the extraordinary fireball that is the US auto-market right now, but still, this has some significance, from the NYT:

“For the first time, more vehicles were sold in China last month than in the United States, according to figures from General Motors.”

Later today what I want to check is whether GM produces more cars in the US or China. Now if those two numbers crossed it’d mean the US were bailing out a Chinese company …

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UPDATE : whoops, GM was comparing total vehicle sales in China to passenger sales in the US. Guess they were just trying to make a splashy point. Still doesn’t say much for their market analysis team though.

The US and North Korea’s shifting challenge

February 2, 2009

NKeconwatch has a great summary of how observers – in particular the markets – are shrugging off the latest sabre rattling, which, together with recent reports of military malnutrition (anecdotally confirmed by myself as an eyewitness in NK) means a diminishing conflict threat.  At the same time, I side with those who see the recent erratic posturing of NK as evidence of severe tension in Pyongyang (coupled with Kim’s known illness).

The CFR has now also rung the alarm bell, though one hopes that the US is far, far more prepared than this report would imply, i.e., its recommendations really should be moot. I mean, if the US has not talked to China about what to do in the event of failed succession, then God help us all.

It should go much further though; the report says that if the NK govt fails, “rapid absorption by South Korea is widely viewed as the inevitable next step”. Anyone who believes the Chinese would let this happen is living in a fantasy world. A US ally, with US troops on its soil, with a border that close to Beijing? Seriously now.

My American friends often tell me that there are institutional contexts which mean we shouldn’t read too much into something like this CFR report. I don’t know, but I sure hope they’re right.

Still no NK envoy from Obama. At least he gave Hu Jintao a courtesy call though. That was nice.

China’s debt holdings sized up

February 1, 2009

A new working paper by the CFR cobbles together a bunch of sources to estimate China’s true holdings of US debt. Two things stand out for me: one, China was doing most of the buying of US debt last year, and that’s out of newly accumulated reserves. Reports of US dependence on China are somewhat overblown, as Brad Setser shows elsewhere, but still, as the head of the CIC said, “be nice[r] to the people who lend you money”.

Next, given the massive drops in yield lately, and that I don’t know how active China is going to be in the secondary market, but SAFE may be sitting on some enormous paper profits from its bond holdings over the last couple of years (then again, there are currency movements). I wonder if anyone has crunched the numbers? Would be interesting to see how it compares to the CIC’s well-publicised losses (given the disparities in the size of the equity and debt holdings, my money’s on it well over-compensating)

A last side-point: China has been shifting out of agency debt aggressively. If that continues, it could mean a disconnect in T-bills and agency notes, which would imply mortgage rates in the US remained high, and might motivate more direct Treasury action in housing

Final word on the White Paper

January 29, 2009

Having now read through the whole thing, three things strike me:

– The professional vs ideological fissure is alive and well in the PLA

– However they may be easier bedfellows than we might think. Certainly professionalism – particularly in the small things that count – is growing in leaps and bounds

-The combination means the PLA is probably much less likely today than in 1989 to stand aside and not fire (recall in 1989 Deng had to call in special divisions after the usual rank and file were hesitant to fire)

On the one hand, there’s an impressive and growing degree of professionalism: they’re putting in place the basic things and getting them right.  On the other hand there’s still all the ideological baggage and the old modes of thought, replete with empty slogans and vague strategy.  We’ve long known about this professional vs old school tension, but in the White Paper they seem to coexist quite nicely. (more…)

China’s stimulus and the military

January 28, 2009

There could be an interesting dynamic here. On the one hand, with government spending going up in all departments, I doubt the military will be left out. So look for another near or above 20% boost in military spending in the next budget.

At the same time, one surprising element of the recent White Paper is how enmeshed the military still is in the economy. In particular, how it gets involved in infrastructure construction: “In the past two years they have put over 14 million workdays and one million vehicles (or machines)/time into [national construction]”.

Now, the point about a stimulus is that you want to spend money. So using free military labour is not very desirable, and you’d expect the local govts to avoid using them. Which means a whole bunch more free time for military personnel. Either the stimulus gets slightly diluted – but onl slightly, you’re still buying all the materials – or the PLA has to find a whole bunch of new training modules, double quick.

Fragmented command of the PLA

January 26, 2009

This can’t be classified as new, but from another part of the White Paper we learn that the Army has no unified command, but is split into four headquarters and seven regional commands. Of course the CMC serves a type of unified-command function, but there doesn’t seem to be a general staff-type organization.

The political benefits are clear (general staffs do not exactly have a reputation for trust-worthiness), but this could be a weakness in the event of conflict.

Nukes with “Chinese characteristics”

January 25, 2009

The nuclear weapons division (“the Second Artillery Force”) has the goal of “a lean and effective strategic missile force with Chinese characteristics.” WTF? I’m going to write more later on the sloganeering all over the White Paper. But this one is so good it needs its own entry.

What on earth could it mean? A Chinese soldier strapped to the warhead? Which would make Dr Strangelove’s final shot “nuclear war with Texan characteristics …”

The possibilities for humour are endless

Give me your young …

January 24, 2009

Another little nugget from the White Paper. The PLA is taking education quite seriously and they are starting early. “At present, there are 117 colleges and universities with defense students. The PLA has selected nearly 1,000 key middle schools in the various provinces and municipalities as the main sources of defense students.”

I don’t know at what stage the US military starts recruiting. I’ve always heard about campus recruiting centres, and there’s a cadet-type programme I believe. Maybe there’s an interesting contrast here that parallels the two countries’ approaches to sports training – China’s top-down forced selection, vs a freer, bottom-up US system. These are important long-run determinants of military styles and capabilities.

China’s democratic military

January 24, 2009

I’m going to pull out little nuggets from the White Paper over the next couple of days, before returning to a broad view. The first one: in April last year “instituionalized” – I don’t know if they existed before – servicemen’s committees in every unit of the PLA. These have no decision making power, but get to make recommendations on things like NCO selection. Most surprisingly – they are chosen by soldiers by secret ballot.

Now, we shouldn’t be naive about this. These committees are composed of soldiers, so I doubt they’d raise too much fuss, or they’d get disciplined. In fact, they work “under the leadership of the unit Party branch (or grass-roots Party committee) and the guidance of the unit commanders”. And I wonder how “secret” those ballots are.

Still. This is very interesting – one wonders why they felt the need to do it. Ground-level pressure? A general principle of creating co-opted structures before they can come into being on their own? My guess is a combination of both.

China’s Military White Paper

January 21, 2009

Haven’t got hold of it yet, hope to do so soon. One thing’s for sure : the timing was no accident (there were no ‘coincidences’ of political timing on Jan 20 this year). What I don’t know, is whether the intent was to release the report to counter the transparency critics, but bury it below the inaugaration coverage, or whether to get the attention of the new President ‘on day one’. My money’s on the latter, but with China’s military there may even be a third option : they’re just playing games.