Tag Archives: Chinese government

forcing the brave to stand alone, by el gato malo

The truth cannot be ignored. The government of China is a totalitarian dictatorship. From el gato malo at boriquagato.substack.com:

western silence (or worse, praise) for china’s government is shameful

as this is a PG-13 publication, i will slightly water down the classic axiom and state that

“china is not a place where you want to “screw around and find out.”

china is nasty as hell to dissidents and has been setting up for absolute savagery for years now.

and the west sits silent.

and at a certain point, that silence becomes complicity.

and past a certain point, active plaudits and praise for “the chinese system” becomes morally intolerable.

and i would argue that we’re well over the rubicon.

china has become a dystopian movie.

the chinese government is a brutal dictatorship whose leader just basically appointed himself strongman for life.

and the west does not care.

they have been rounding up ethnic minorities by the millions for a decade and putting them in “re-education camps” and forcing them into what amounts to slave labor.

and the west managed a couple tepid news stories about uyghurs then forgot.

and then they started building massive internment camps all over the country where anyone can be sent at the push of a button that turns your covid QR code red and where you can be held indefinitely (and at your own expense) until they decide to let you go.

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China Restricts Movement Across iPhone City, by Tyler Durden

Maybe the Chinese aren’t as docilely accepting of state authority as many of those touting China’s “development model” claim. The twitter videos speak for themselves. From Tyler Durden at zerohedge.com:

Update (1100ET):

China’s Zhongzhou, home to Foxconn’s massive iPhone factory, will begin to enforce mobility restrictions across eight districts in main urban areas on Friday. The reason, well, authorities blame it on ‘rising Covid infections,’ though we should note that the new restrictions come as massive unrest has erupted at the factory of more than 200,000 workers.

Zhongzhou authorities posted a statement on its WeChat page on Wednesday about mobility restrictions from Friday through Sunday.

“At present, the epidemic situation in our city is still severe and complicated,” the statement said. Health officials will conduct daily mass PCR tests and request that residents in high-risk areas stay within their homes.

You can find more about the chaos unfolding at the iPhone factory below…

* * *

On Wednesday, unrest broke out at Foxconn’s massive iPhone factory in Zhengzhou, central China, reported Bloomberg. Videos on social media showed hundreds of workers, if not more, clashing with security personnel after a month of strict Covid restrictions.

Manufacturer Foxconn confirmed the outbreak of “violence” and said it would work with local authorities to quell further violence. It released a statement that said workers were furious about pay and living conditions.

“Regarding any violence, the company will continue to communicate with employees and the government to prevent similar incidents from happening again,” the world’s largest producer of iPhones wrote in a statement. 

As Covid infections increased across Zhengzhou and iPhone factory, Foxconn adopted a “closed loop” system for employees in October. Workers were forced to live on campus and were prohibited from physical contact with the outside world – including family members.

Then by late October, strict Covid restrictions for workers sparked minor unrest at the facilities of about 200,000 workers — all were banned from eating in public and forced to eat meals back at their dorms.

By early November, while Beijing ramped up its zero Covid policy by locking down the surrounding metro area — workers began to flee the factory.

Now in videos posted on Weibo and Twitter that AFP and Reuters have verified, all hell appears to have broken out as hundreds of workers clash with security guards and people in hazmat suits.

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China’s Housing Market Slump Becomes A Real Issue, by Daniel Lacalle

You can’t “central plan” your way out of a devastating housing market slump. From Daniel Lacalle at zerohedge.com:

A few months ago, I wrote that the Chinese slowdown was much more than COVID-19 related and pointed to the challenges coming from the excessive weight of the real estate sector in the economy.

A research paper by Kenneth Rogoff and Yuanchen Yang (pdf) estimated that the real estate sector constitutes 29 percent of China’s GDP.

The problems coming from the slow-motion deterioration of the property sector have extended to the financial challenges of China’s local governments and may create a relevant fiscal problem for the nation’s public accounts.

“Sales at China’s largest housing developers fell 43 percent in June from a year earlier, according to China Real Estate Information Corp,” Bloomberg reported, creating an alarming funding gap for local governments, where finances are heavily dependent on land sale revenues, and a significant problem for the financial sector and the government. China’s central bank has promised to mobilize a $148 billion bailout to complete unfinished real estate projects as anger rises among property buyers that haven’t received their homes after advancing significant payments.

The size of the real estate sector in the economy is enormous, and the impact on gross domestic product (GDP) of a slump in sales may be impossible to offset with other sectors. According to S&P Global, China’s property sales will probably drop by about 30 percent this year due to the increasing number of homebuyers’ mortgage payment suspensions. This could be worse than in 2008 when sales fell by roughly 20 percent, Esther Liu at S&P Global Ratings told CNBC. There’s no sector in China that can mitigate the impact of such a drop in tax revenues and output.

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President Xi Faces An Impossible Dilemma In Shanghai As COVID Outbreak Worsens Despite Lockdown, by Tyler Durden

The dilemma is not impossible, it’s just that the solution requires the Chinese government to admit it was wrong. That’s something governments rarely do. From Tyler Durden at zerohedge.com:

In the span of just over a week, CCP authorities have gone from denying plans for a citywide lockdown of Shanghai to announcing what was supposed to be a two-part staggered lockdown – to simply locking down the entire city and sending in the military and a contingent of medical workers as locals accuse the government of violating its social compact to put the people’s interests first.

Now, as the entire city of roughly 26 million faces what’s already shaping up to be the most punishing lockdown in China since the original three-month Wuhan lockdown nightmare, Nikkei reports that Beijing has found itself in an incredibly difficult position.

On Sunday, Shanghai counted 9,006 mainly asymptomatic infections, more than two-thirds of the national tally.

The reason the situation in Shanghai presents such a difficult conundrum is that backing down from its lockdown in Shanghai would mean admitting that the “Zero COVID” approach has been an abject failure.

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Elon Musk and the Chinese Temptation, by Peter Schweizer

The Chinese market and China’s government pose huge dilemmas for Elon Musk and other U.S. entrepreneurs. From Peter Schweizer at gatestoneinstitute.com:

  • “Other American CEOs have close relationships to the [Chinese Communist] Party. But [Elon] Musk is the only one who loudly praises Beijing while running a space company with incredibly sensitive and powerful defense applications.” — Isaac Stone Fish, Barron’s, November 13, 2020.
  • Musk’s dilemma is not unique. The close technology-sharing relationship between Tesla and SpaceX poses national security risks to his adopted home country, but so do Google’s and Microsoft’s work with China on artificial intelligence. U.S. government policy is predictably slow in catching up to the speed of hard-charging, globe-spanning enterprises like Musk’s, and the Chinese are only too happy to increase that gap.
  • At some point, however, companies such as SpaceX, Google and Microsoft, and the individual Americans who own, direct, or invest in them, will face a similar choice between their obligation to America and their pursuit of more profits abroad.

“Other American CEOs have close relationships to the [Chinese Communist] Party. But [Elon] Musk is the only one who loudly praises Beijing while running a space company with incredibly sensitive and powerful defense applications.” — Isaac Stone Fish, author of America Second: How America’s Elites Are Making China Stronger. Pictured: Musk meets with China’s Premier Li Keqiang in Beijing on January 9, 2019. (Photo by Mark Schiefelbein/AFP via Getty Images)

Elon Musk has fans all over the ideological spectrum. People on the Left love him for popularizing electric cars with his Tesla company, or maybe for openly smoking pot on podcaster Joe Rogan’s show. Conservatives love him for his entrepreneurial dash and penchant for standing up to politicians and Big Tech censorship of the internet. And everyone loves Musk for responding to Russia’s invasion of Ukraine and severing of its communications links by making his Starlink satellite broadband internet service available in Ukraine and donating Starlink terminals to Ukrainians. The Starlink connectivity, according to one report, may even be helping armed Ukrainian drones target Russian military vehicles.

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Doug Casey on the Rise of China… And What it Means for the World

Is China topping out? From Doug Casey at internationalman.com:

Rise of China

International Man: Lee Kuan Yew, the former leader of Singapore, once said:

“The size of China’s displacement of the world balance is such that the world must find a new balance.

It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world.”

What is your take?

Doug Casey: China has united 1.4 billion people into a single political entity, so of course they have a lot of weight. But simply having masses of people under your political control doesn’t mean as much as it used to.

China would still be a poverty-stricken non-entity if it hadn’t been for the reforms that Deng Xiaoping made starting in 1980. Masses of uneducated, desperately poor peasants are more of a liability than an asset in the modern world. Deng transformed China’s economy into something that functions pretty much like those in the West. But now, Xi Jinping seems to be returning to the philosophy of Chairman Mao, with much more centralized control. That’s very negative for the country.

Secondly, China’s demographics are horrible. The average woman today only has 1.4 children. Low reproduction rates are to be expected when a society urbanizes. But China also had a draconian one-child policy starting in 1980 that only ended in 2015. That, and the fact the Chinese prefer males for cultural reasons, compounded the phenomenon.

Few people in the West realize that as a result of these things, the Chinese population is in steep decline. UN projections—which aren’t worth much but are still interesting—find that by the end of this century, their population could collapse to 600 or 700 million. And they’ll mostly be old people, so it’s not going to bounce back quickly.

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Will China Pop the Global Everything Bubble? Yes, by Charles Hugh Smith

China will pop the global everything bubble because to China’s leaders, the only worse alternative would be to allow it to persist and grow ever-larger. From Charles Hugh Smith at oftwominds.com:

The line of dominoes that is already toppling extends around the entire global economy and financial system. Plan accordingly.

That China faces structural problems is well-recognized. The list of articles in the August issue of Foreign Affairs dedicated to China reflects this:

Xi’s Gamble: the Race to Consolidate Power and Stave Off Disaster

China’s Economic Reckoning: The Price of Failed Reforms

The Robber Barons of Beijing: Can China Survive its Gilded Age?

Life of the Party: How Secure Is the CCP? (Chinese Communist Party)

These are thorny, difficult issues: a demographic cliff resulting from the one-child policy, soaring wealth-income inequality, pervasive corruption, public health issues (diabesity, etc.), environmental damage and a slowing economy.

What the conventional analysts do not fully grasp, in my view, are 1) the existential threat to the CCP and China’s economy posed by its unprecedented, metastasizing credit-asset bubble and 2) its incipient energy crisis.

As I explained in a recent blog post, What’s Really Going On in China?, the CCP and the government informally institutionalized moral hazard (the disconnection of risk and consequence) as a core economic policy.

Every financial loss, no matter how risky or debt-ridden, was covered by the state (via bail-out, refinancing debt, new loans, etc.) as a “cost of rapid development,” a reflection of the view that some inefficiency and waste was inevitable in the rapid development of industry, housing, infrastructure and a consumer economy.

What China’s leaders did not fully understand was this implicit guarantee of bail-outs–the equivalent of “The Fed has our backs”–incentivized debt-funded speculation as the lowest-risk, highest-return “investment,” especially when compared to low-profit, risky investments in low-margin export industries. (Recall the average profit margins of Chinese exporting enterprises is 1% to 3%.)

This is the hidden driver of China’s sagging productivity and economy: debt in all sectors is skyrocketing to fund speculation, not productivity.

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How China’s Model of Dictated Economic Growth Blew Up, by Wolf Richter

The Chinese government steered prodigious amounts of debt towards real estate, and now China is paying the price. Perhaps a planned economy isn’t such a great idea after all. From Wolf Richter at wolfstreet.com:

The debt-fueled property & construction bubble that drove its growth turned into a huge explosive mess with an enormous amount of debt.

It’s mind-boggling just how important the residential property sector is to the Chinese economy, to what extent government-dictated economic growth was achieved by building more apartment towers, and it’s even more mind-boggling how much debt residential property developers have racked up, and how much household wealth is tied up in the property sector at multiple levels.

Then there are the demographic headwinds the property sector has been facing for years, that are coming to the forefront.

So now there is a property crisis in China that is making the US mortgage crisis of 2008 look like child’s play in terms of magnitude.

The central government has been trying to deal with rampant real estate speculation and prevent it from going even more haywire and take down the financial system and the economy.

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Jim Chanos: China’s “Leveraged Prosperity” Model is Doomed. And That’s Not the Worst. By Lynn Parramore

Like virtually the entire global economy, China’s economy rests on a rock-solid foundation of debt. From Lynn Parramore at ineteconomics.org:


Famed short-seller is even more concerned with political fallout from Evergrande than economic/financial woes.

Renowned short-seller Jim Chanos, founder of Kynikos Associates, is what you might call the “ever-bear” of China. For more than a decade, he has warned that the country was building a real estate-driven economy on a feeble house of cards. He spoke to the Institute for New Economic Thinking’s Lynn Parramore about how he views the chickens coming home to roost as the property giant Evergrande – now the world’s most indebted property developer — teeters on the verge of collapse.

Lynn Parramore: Back in ’09, when you started looking at China, your real estate analysts alerted you to the mind-boggling amount of real estate overdevelopment there. You warned that this overdevelopment would end badly. After Xi Jinping became president in 2013, you expressed the then-minority view that a different kind of leader had arrived on the scene. What’s your take on what has happened since then?

Jim Chanos: In 2013, we put a slide in our presentation for investors and talks that was very controversial – especially for Chinese nationals. It showed President Xi Jinping in emperor’s garb. People thought we should take it out, that it was offensive. At the time, Xi was widely seen as just the latest in a series of technocrats who had risen through the ranks — one who would follow along with Deng Xiaoping’s reforms. It’s “capitalism with Chinese characteristics.” It’s okay to get rich as long as the country prospers.

But a few things made us think, no, this guy is different. His first speech in China after becoming president was critical of the Soviet Union for being soft on perestroika. They should have crushed it when they had the chance, he said. Xi then set up an institute to study the Soviet Union’s collapse. That was a red flag to us that he was going to be more hardline than people thought. He went on to do an anti-corruption drive, which people dismissed as a typical settling of scores that Chinese leaders do. But it actually extended beyond that. A couple of years later, he began talking in Puritanical terms about social issues. Again, that was different. Nobody had cared about that stuff for 20 years. Do what you want as long as you don’t question the party. Next, we had the book collecting his speeches and writings, which people could be seen carrying around. He started showing up in military events dressed in Mao jackets. This symbolism isn’t lost in China.

We noticed all this, but the real switch occurred in 2019 when he started going after celebrities like Jack Ma [co-founder of Alibaba]. At that point, it was clear that this president was not stepping down at the end of 10 years. He was taking a much harder line on the “flowers of capitalism,” if you will, than past presidents. In 2021, all of this exploded into the open. There’s been initiative after initiative. Redistributing wealth to the masses. Going after other leaders. Overlaid on top of this is the Evergrande saga.

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Contagion! By James Rickards

In a massively over-indebted and interconnected world, financial collapse can spread like wildfire. The Chinese property sector may be the beginning of the conflagration. From James Rickard at dailyreckoning.com:

There has been a litany of bad news recently, including the U.S. August humiliation in Afghanistan, China’s aggressive actions against Taiwan and increased tensions with Iran, North Korea and Russia.

It will take the U.S. years, possibly decades, to recover from the debacle of August 2021 and the collapse of American prestige. All of these geopolitical events combine to undermine confidence in U.S. power.

When that happens, a loss of confidence in the U.S. dollar is not far behind.

And, perhaps most importantly of all recent bad news, is a market meltdown and slowing growth in China.

Greatest Ponzi Ever

I’ve long advised my readers that the Chinese wealth management product (WMP) system is the greatest Ponzi in the history of the world. Retail investors are led to believe that WMPs are like bank deposits and are backed by the bank that sells them. They’re not.

They’re actually unsecured units in blind pools that can be invested in anything the pool manager wants.

Most WMP funds have been invested in the real estate sector. This has led to asset bubbles in real estate (at best) and wasted developments that cannot cover their costs (at worst). When investors wanted their money back, the sponsor would simply sell more WMPs and use the money to pay back the redeeming investors.

That’s what gave the product its Ponzi characteristic.

The total amount invested in WMPs is now in the trillions of dollars used to finance thousands of projects sponsored by hundreds of major developers. Chinese investors are all-in with WMPs.

Now the entire edifice is collapsing as I predicted it would.

The largest property developer in China, Evergrande, is quickly headed for bankruptcy. That’s a multibillion-dollar fiasco on its own. Evergrande losses will arise in WMPs, corporate debt, unpaid contractor bills, equity markets and unfinished housing projects.

China’s entire property and financial system is on the verge of a world-historic crack-up. And it won’t remain limited to China.

It comes back to contagion.

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