China is likely to be the biggest risk to Aus property

[truong]

Not here to defend Japan or whoever. But regarding China's past and present I can only suggest you do a bit more research and balance your views with a bit of non-Chinese perspective.

Find out the tiny area where the Hans started out and what happened over the centuries to the hundreds of nations that used to populate the current Chinese territory. Learn about non stop war waging against all the "barbarians" at the borders - was it for self defence or otherwise? Ask yourself why China calls herself The Country At The Centre. Look for the motivations behind the calls for China to wrestle back her lost grandeur, wipe out past humiliations and claim her rightful Living Space - a chilling choice of words. Then travel extensively throughout Asia and ask people at random which country they fear the most.

By the way China did invade Vietnam not long ago with a massive attack of half a million men. What gain was there apart from showing off their muscles (the official reason for the war being to "teach Vietnam a lesson")? A costly lesson it was: tens of thousands casualties on each side.

But on the other hand China is also smart enough (and much smarter than the US in this instance) to win a war without starting one. A vast military take over of the South China Sea down to the Philippines, Malaysia, Brunei and Vietnam is currently in progress with little protest from anyone.

All I can say about this, Deltaberry, is that with the Chinese government you should never take appearances as the truth. Simplistic reasoning will fall short, always.

Sorry for the spiel. No offence intended.

 

[Freckle]

is that with the Chinese government you should never take appearances as the truth. Simplistic reasoning will fall short, always.

There's an attempt at rebalancing global power from US hegemony to a more asian centric (China) hegemony. Russia, India, Indonesia, Australia, Iran etc are all regional powers looking to carve out some sort of power and influence in the region amongst the clash of the big guys.

Africa is the other major battleground between the US and China.

The Chinese are far better strategists than the US and Europeans. They will adopt Go like strategies while the US and Europeans will go with Chess type strategies. I tend to think Go is superior in this instance.

I'm enjoying your discourse Truong. Very informative.

 

[truong]

Thanks Freckle. Not a bad analogy. On the world's go board it looks like the US pieces are all scattered around making little impact while the Chinese ones keep gaining ground.

Africa is interesting, but have a look at Laos to get a better idea of what could happen. In this sparsely populated country, large tracts of farmland, villages and whole townships are being transformed into de facto Chinese territory with huge numbers of Chinese farmers, businessmen, labourers, shopkeepers, settlers... pouring freely across the border, monopolising the local economy and changing the country's ethnic composition. A case of silent invasion by sheer numbers. No war but an invasion all the same.

This is happening in Burma too. One (little talked about) reason why Burma suddenly decided to open up to the West by making democratic reforms was precisely to counter this silent invasion threat.

By becoming too aggressive out of excessive confidence, China lost an ally in Burma and could well turn most of South East Asia against it. As in go, seized territory can be lost again. If this happens it could be China's turn to be on the back foot, with a string a countries now encircling it from India to South Korea.

Yeah, not bad an analogy Freckle.

 

[Freckle]

By becoming too aggressive out of excessive confidence, China lost an ally in Burma and could well turn most of South East Asia against it.

I hadn't paid much attention to these smaller asian countries and their Chinese connection.

These smaller relationships may be a low priority for China though. She is building (forced to by US hegemony) a strategic alliance (through energy) with Russia. Russia has been building a counter to NATO (proxy US encirclement) since the early 00's; the Shanghai Cooperation Organization (SCO). That mainly consists of the SE border states (the 'stans), China and Russia.

India, Pakistan and Iran are seen as future members, however, current friction between India/Pakistan and India/China preclude this for the time being.

China and Russia are coming together and both are playing the long game. As Putin has noted though, if the west continues to push with sanctions there will be a lot of unnecessary pain on boths sides. The west especially the US has alienated many of these countries who are finally starting to congeal into a cohesive and viable opposition both financially and militarily.

The next decade will be interesting. If you're a small country keeping out of the way of these behemoths butting heads might be problematic.

 

[Deltaberry]

Sorry for the spiel. No offence intended.

None taken.

Your point about China being formed by historical conquests of many smaller countries doesn't really indicate much about its modern day predispositions.

Most countries (Japan, Germany/Prussia, Russia, France and, yes, even USA) are only the landmasses they are today through the conquest of many smaller nations.

 

[truong]

She is building (forced to by US hegemony) a strategic alliance (through energy) with Russia. Russia has been building a counter to NATO (proxy US encirclement) since the early 00's; the Shanghai Cooperation Organization (SCO). That mainly consists of the SE border states (the 'stans), China and Russia.

India, Pakistan and Iran are seen as future members, however, current friction between India/Pakistan and India/China preclude this for the time being.

China and Russia are coming together and both are playing the long game.

I don't think China can have anything long term with the current Russia. For China Putin is a one-man band and too erratic at that. When he goes the whole Russian edifice will have to be rebuilt again.

China is looking at her western borders with glee: a string of failed states too weak to defend themselves that gives her free rein to deprive the Uyghurs of their land. Their turn will come.

 

[truong]

Your point about China being formed by historical conquests of many smaller countries doesn't really indicate much about its modern day predispositions.

That part of my post was in reply to this comment

But historically China has never caused problems.

and I did give you examples of modern day China's behaviour.

Anyway I knew this was going to embark us on a lengthy debate that has little to do with the original thread so maybe I should stop now.

 

[Freckle]

I don't think China can have anything long term with the current Russia.

No choice. Russia is China's fuel tank. It needed(s) alternative fuel supply routes other than the South China Sea. China is looking to build its military capabilities over the next 2 decades. Russia will play a significant role in that. China doesn't have the expertise or technology to build jet engines. It's airforce is highly depended on engines supplied from Russian factories. They're brothers-in-arms whether they like it or not.

For China Putin is a one-man band and too erratic at that. When he goes the whole Russian edifice will have to be rebuilt again.

Sanctions are only cementing Putin's leadership position. He's never been more popular. He's going nowhere for a very long time. My bet is he'll outlast the current Chinese leadership.

China is looking at her western borders with glee: a string of failed states too weak to defend themselves that gives her free rein to deprive the Uyghurs of their land. Their turn will come.

A centuries old grudge. Her western borders are strategic corridors for energy pipelines. Islamist tribes/groups are the biggest threat.

 

[hobo-jo]

For anyone who thinks China is an important driver of Australian wealth and growth, this video is worth a watch:

https://www.youtube.com/watch?v=C2SStFt-k_A

I put some screenshots from the presentation on Twitter:

Housing over capacity https://twitter.com/BullionBaron/status/570158328497643520/photo/1
China to go out with a bang or whimper https://twitter.com/BullionBaron/status/570163144577847296/photo/1

& some cliff notes from the first 30 minutes (Anne Stevenson-Yang, Co-founder and Research Director, J Capital Research):

Spectrum of discussion on China is currently financial crisis soon or 2 years muddling through with China turning out like Japan.

Debt in China is enormous, range of estimates put debt to GDP at 200-300% (banks, shadow banks & other debt).

With average interest rate on debt around 6-7% they need around 18-20% real GDP growth just to cover the interest repayment on debt. Otherwise have to write off debt or do something else about it.

Servicing debt consuming all the credit resources, makes it difficult for others to get credit.

Zombie economy, all credit rolling over old debt, very low credit uptake in the rest of the economy. Excess of production, commodities and low demand.

Growth in the economy, a little below zero. Domestic steel demand -5%. Cement demand -1-2%. Electricity down. All industrial tipped negative around May last year.

Low depressed economy, with lots of overcapacity (30% and more), will take years/decades for the economy to grow into the capacity.

GDP number out of China, not a calculation of growth, rather production target for state owned enterprise.

Consumer sector tracking close to zero.

Property around 20% of the economy, tracking negative for some time, sales & prices. Construction completions were up last year, amount of property in chain went up (pipeline effect), new starts now declining sharply. Construction (growth) will likely be negative this year.

Chinese overcapacity of housing... 70 million units in the pipeline. US built & sold 1.2 million new homes at the height of it's bubble.

Situation similar to 2011, but maximum debt level now reached. No longer have free lunch of QE3, interest free money circulating into China, don't have same inflow of money.

There's a misunderstanding of urbanisation, rural people moving to urban areas? No, local government that owns rural land that had incentives to urbanise land was doing so. Urbanising rural areas that aren't being utilised. Model cities, shopping centres, logistics parks, built and sitting unused.

Building to a crisis now, simple reason, we've gotten to a point where so much credit will be needed just to keep everything rolling over. No one has grip of who owns all the debt, anyone going belly up may create a chain circumstances they aren't able to deal with. 1.2trn/RMB into system every day just to keep banks liquid. Central government facing capital flight ($150bn in second half of last year & accelerating).

What's in 2015?

Interbank defaults
Dramatic devaluation (to at least 7:1)
Further corruption attacks on banks, brokerages, casinos & other channels for exiting money
Closing of the country to foreign influences, while opening it to incoming foreign capital

 

[Aaron Sice]

Govt experiencing capital flght - 6th last line - guess where it's going? USA, Canada, UK, Singapore, Australia.

 

[hobo-jo]

Govt experiencing capital flght - 6th last line - guess where it's going? USA, Canada, UK, Singapore, Australia.

I thought your official line was that it's not having a significant impact here

We're seeing inflow of investment capital, but what happens when the music stops (e.g. China plugs leaky boat & their economy tanks)? Could be an ugly end to the boom in the assets they are currently buying.

 

[Aaron Sice]

Not at all - it's not having an effect on HOUSE prices as much as we'd all like to think.

OTP sales and Apartment sales though - don't get me started.

when the music stops, people will be trying desperately to get their capital OUT of China and RMB.

 

[hobo-jo]

when the music stops, people will be trying desperately to get their capital OUT of China and RMB.

Own Gold

 

[Aaron Sice]

that too!

capital flights are happening now because people have money.

if china central govt ever looks to "regroup" and "reprioritise", the flood of money out of china will be intense.

you may even see a sell down of gold to get money out of the asset and outta there entirely.

 

[Deltaberry]

Would you believe me if I told you the world is an important driver of houses prices?