Arglebargle III posted:

So would you say you are "not very familiar" with the Chinese tech industry or would "not at all familiar" be a better way to describe your level of knowledge?

Axe Master posted:

Yeah, apologies for the anecdotal evidence however I imagine it is reflective of the current trend. One of the chemists at my university is on the verge of publishing a revolutionary process (which I will keep intentionally vague, I learned most of this from the bitter students in the lab), and the professor in question just returned from a lengthy trip to China to begin the process of starting a multi-billion dollar company there related to it. Part of this is to eschew the patent policy of the university (which is a whole other can of worms), but one would presume if the IP atmosphere in China is as dire as stated it wouldn't be in his best interest to build a startup there.

Axe Master posted:

Yeah, apologies for the anecdotal evidence however I imagine it is reflective of the current trend. One of the chemists at my university is on the verge of publishing a revolutionary process (which I will keep intentionally vague, I learned most of this from the bitter students in the lab), and the professor in question just returned from a lengthy trip to China to begin the process of starting a multi-billion dollar company there related to it. Part of this is to eschew the patent policy of the university (which is a whole other can of worms), but one would presume if the IP atmosphere in China is as dire as stated it wouldn't be in his best interest to build a startup there.

Axe Master posted:

Yeah, apologies for the anecdotal evidence however I imagine it is reflective of the current trend. One of the chemists at my university is on the verge of publishing a revolutionary process (which I will keep intentionally vague, I learned most of this from the bitter students in the lab), and the professor in question just returned from a lengthy trip to China to begin the process of starting a multi-billion dollar company there related to it. Part of this is to eschew the patent policy of the university (which is a whole other can of worms), but one would presume if the IP atmosphere in China is as dire as stated it wouldn't be in his best interest to build a startup there.

Axe Master posted:

Yeah, apologies for the anecdotal evidence however I imagine it is reflective of the current trend. One of the chemists at my university is on the verge of publishing a revolutionary process (which I will keep intentionally vague, I learned most of this from the bitter students in the lab), and the professor in question just returned from a lengthy trip to China to begin the process of starting a multi-billion dollar company there related to it. Part of this is to eschew the patent policy of the university (which is a whole other can of worms), but one would presume if the IP atmosphere in China is as dire as stated it wouldn't be in his best interest to build a startup there.

Helsing posted:

So this guy used the public resources of the university and now he wants to move operations to another country so that he can claim exclusive benefits from the resulting research?

quote:

Chinese bankers rushed to finance shipbuilding after the 2008 global financial crisis as Beijing pushed easy credit and tax incentives to lift the industry and sustain industrial employment levels in the face of collapsing exports.

Fees generated by offering such guarantees looked like easy money until massive oversupply and falling demand started taking a toll on the yards around 2010. Shipyards fell behind schedule and buyers demanded their money back. But behind or not, the builders, keen to keep orders on the books and prepaid money in their pockets, have submitted injunctions against banks in Chinese courts to prevent them from paying out.

(...)

Clarkson Research data shows that the Chinese shipbuilding industry won $37 billion in new ship orders in 2013, up 92 percent year-on-year.

But this rising tide is not lifting all boats: Chinese state media reported that 80 percent of new ship orders went to just 20 yards. Investors are concerned that the debt-sodden Chinese shipping industry is set for a wave of defaults if Beijing doesn’t bail it out.

China Rongsheng, the country’s largest private shipyard, reported a $1.4 billion loss for 2013 and and some customers are worried about Rongsheng’s $4.6 billion worth outstanding orders.

quote:

China Property Collapse Has Begun
Comment Now Follow Comments
Nothing is going right for Hangzhou at this moment. Walmart will be closing its Zhaohui store in that city on April 23 as a part of its overall plan to dump marginal locations—about 9% of the total—in China.

Thanks to the world’s largest retailer, another large block of space in Hangzhou, the capital of Zhejiang province, will go on the market at a time when there is generally too much supply. The problem is especially pronounced in the city’s premium office market. Hangzhou’s Grade A office buildings at the end of 2013 had, according to Jones Lang LaSalle, an average occupancy rate of 30%.

The real weakness, however, is Hangzhou’s residential sector. The cause is simple: massive overbuilding. Sara Hsu of the State University of New York at New Paltz writes that Hangzhou faces “burgeoning swaths of empty apartment units.”

Hangzhou’s market has not yet collapsed. There are still secondary sales, for instance. Singapore’s Straits Times reports Allen Zhao, a businessman, has been looking to sell his two-bedroom flat in Hangzhou for 2 million yuan. His neighbor just let go a similar unit for 1.7 million. If Zhao also sells for that amount, he will make a profit, but he will be disappointed. “That is not much more than the price I paid in 2012,” Zhao told the paper. “Now I’m regretting not selling earlier—more bad news about the property market keeps coming in every day.”

New homes also face price pressure. Developers in Hangzhou are now offering deep discounts, and investors and owners are noticing. And not just in that city. “It seems that the 30% price cut in Hangzhou really changed the way Chinese people think about real estate,” writes Anne Stevenson-Yang of J Capital Research, “and I doubt there is any turning back from here.”

Not every developer is offering such deep discounts, but as Stevenson-Yang tells us the city has become the symbol of a market in distress. China Central Television on the first of this month devoted a segment to the problems of the “unstoppable price decrease” in Hangzhou property in its Economic 30 Minutes show, and discounts in that city, the Wall Street Journal notes, could be “a signal of broader market weakness ahead.”

The real estate market in Hangzhou looks like it has just passed an inflection point. It is not so much that fundamentals have deteriorated—they have been weak for some time—as that people’s mentality has changed.

As state-run China Central Television explained, the problems in Hangzhou, once the world’s largest city, began on February 18. Then, the North Sea Park development began offering deep discounts. Rumors that the developer had cash problems started a chain reaction across the city. It did not matter that North Sea Park issued denials. Other developers began offering either deep discounts or large incentives, but the tactics did not work. By then, there were almost no buyers.

Now, the problem of no buyers is spreading across the country. Sara Hsu notes China’s residential markets are becoming inelastic. “Once consumers stop buying,” she writes, “deep discounts are ineffective in drawing them back.” People aren’t buying because they believe prices will decline further.

According to the National Bureau of Statistics, new home prices across the country are still going up, but percentage increases have now declined for three consecutive months, signaling a peaking.

Official statistics do not seem consistent with the general trend of reports, but in any event severe problems are evidently ahead. The secondary property market has tumbled, with sales falling by more than half in Q1 2014 from the same quarter in 2013. Speculators have either left the domestic market or have sold off holdings. Rich Chinese, now interested in foreign holdings, are also shunning their home market. Foreigners, who own only an infinitesimal portion of China’s property but who are a bellwether nonetheless, are investing at the slowest pace in at least a decade. Middle class Chinese are also largely out of the market.

And that’s not all. China property trust sales plunged 49.1% in Q1 2014 from the previous quarter, from 99.7 billion yuan in Q4 2013 to 50.7 billion yuan. The precipitous fall was due in part to the failure last month of developer Zhejiang Xingrun Real Estate, which had 3.5 billion yuan of indebtedness.

Moreover, just about everyone expects more developers to close their doors. For one thing, the central bank is not injecting liquidity as fast as it once did. And interest rates are increasing, the reason why a Finance Ministry one-year bond auction failed on Friday. Many private developers had gambled that property prices would rise faster than interest rates, but that now looks like a losing bet. Zhejiang Xingrun, for one, became insolvent after it had borrowed at ultra high rates.

China is at the point where problems are feeding on themselves. Pessimism about property, which accounts for about 15% of China’s gross domestic product, is beginning to affect the broader economy. Declining property values look scary, despite cheery statements from government officials who assure us the property bubble is “not big” or analysts who say that the problems are not “systemic.” But the Chinese don’t look like they are buying either of those views. “If this continues, it will have immense impact on the whole Chinese economy,” says an unidentified Hangzhou real estate salesman on Economic 30 Minutes. “Without question, everyone thinks there is a bubble.”

The People’s Republic in the “reform era” has not suffered a nationwide property crash. Analysts say the problems in Hangzhou are “regional,” but now fundamentals and market sentiment either are or will be pushing markets down across the People’s Republic.

“The banking system and the shadow banking system are becoming concerned about exposure,” says David Cui of Bank of America BAC -2.17%. “Once people refuse to provide credit to developers, their balance sheets will be under pressure, forcing them to cut prices. Once enough of them cut prices, fewer people would buy because most people buy property only when they think the price is going up. If this persists, it will turn into a vicious loop.”

Premier Li Keqiang has a few tools at his disposal, but they look insufficient to stop a general collapse of property prices across the country. The problems, deferred from late 2008 with massive state spending, have simply become too large. And we must remember that he works inside a complex, collective political system that is generally unable to meet challenges swiftly.

But that does not matter. There is little any leader can do. Collapses occur when people lose confidence. That is now happening in China.

Follow me on Twitter @GordonGChang and on Forbes

Paper Mac posted:

Gordon Chang's been writing that article for the last 10 years, I think.

Paper Mac posted:

I just noticed that he says "Hangzhou, once the world's largest city".. what, in the Song dynasty? Never change, Gordon.

quote:

China’s smaller cities are now the scene of a housing glut, which could undermine China’s growth. What are the possible consequences? How are developers reacting? Is the government doing anything about it?

Below WSJ reporters Esther Fung and Bob Davis answer those and other questions.  

Why are the recent price cuts so bad? Isn’t this just the market at work—less demand, ergo lower prices?

The same could have been said for the U.S. in 2007. Falling prices in Las Vegas, Bakersfield, Miami were just the market at work.  The problem is that if prices fall too far, they don’t invite more people to invest in property. Just the opposite. Would-be buyers keep their wallets closed, fearing that the value of a home will go down in value.

That’s particularly a problem in China, where people have thought for 20 years that real estate prices can only go up in value. If that psychology switches, it’s a huge problem.

There was concern that the property bubble had burst in 2011. What’s different now?  

In 2011, the big worry was  escalating prices in China’s major cities putting apartments out of the reach of all but the rich. The central government implemented property curbs, such as limits on multiple home purchases, to rein in speculation and frothy prices. After two tough years for developers, prices started heading up again smartly last year.

What makes the current problem different is that a) the problem is more widespread, hitting lots of small and medium-sized cities, b) the issue is a glut rather than rising prices, and c) China’s finances are tied ever more tightly to real estate.

Since 2008, debt in China has grown at a pace similar to the U.S, Europe, Japan and South Korea before they fell into deep recessions. One big reason for the run-up in debt is lending to real estate developers. If developers can’t afford to make payments on their loans because they can’t sell enough apartments, China has a big problem.

Speaking of which, how are developers paying their bills?

Many construction companies are getting paid in apartments as developers become more and more cash-strapped, according to Zhou Liping, a property consultant at Jiangsu Lianmeng Property Consultancy. “It’s quite common,” he said, adding that some of these construction companies then use the apartments as collateral when they take on bank loans.

Are there signs of construction workers losing their jobs?

Certainly it’s a danger. Unfortunately, unemployment data is unreliable in China and it isn’t counted by occupation. So far, there is no sign of widespread job loss. There are still  more jobs than workers seeking jobs, largely as a result of demographic changes that are reducing the size of the Chinese workforce.

What are some signs that the growing glut is having economic ripples?

Copper prices have been falling since 2010, with analysts blaming slack demand in China as one reason. Copper is used in roofs, gutters and building expansion joints. Meanwhile, ArcelorMittal, the world’s largest steelmaker, has forecast slower growth in Chinese steel demand this year due to more muted construction demand growth.

Retail sales growth has also slowed recently, due in part to falling growth in sales of appliances and furniture, both linked tightly to apartment purchases.

What is the government doing about it?

The central government has indicated that it would allow local governments to adopt their own market regulations rather than implement a one-size-fits-all policy.

In some areas, local governments are trying help out. In Fenghua, government officials are trying to stave off a default by a local developer. In Changzhou, the government has been trying to keep discounts to a minimum to prop up the housing market.  In Yingkou, the government has reduced fees and taxes for new purchases and made it easy for new buyers to get the residence permits necessary to obtain social welfare benefits, including public education for their children. So far, these measures have had only a limited impact on boosting sales.

Does this mean developers will finally start to cut back on their headlong, hell-for-leather building?

Some of China’s largest developers are now trying to focus again on China’s biggest cities, where demand is stronger. But why do developers keep building in problem cities despite obvious lack of demand? Why did U.S. developers do the same thing? Developers are optimists and salesmen by nature. Each thinks that its project will thrive even as others don’t.

According to Nomura, profits for a group of 142 listed property developers in China rose 581% between 2006 and 2012 and never fell during any of those years. Other non-financial companies saw profits rise 64% during that same period and profits sometimes fell year-to-year for that group.

“China’s real estate developers are behaving like internet start-ups,” says Mark Williams, a China economist at the Capital Economics in London. “They’re focusing on grabbing market share in a growing market, but the smaller and medium-sized cities they are in aren’t growing rapidly.”

quote:

A spate of suicides among officials in China has caught the country’s attention. Beijing’s censors have quickly moved to end speculation about the deaths, indicating the Communist Party’s sensitivity, but everyday people remain suspicious.

The body of Xu Yean, 58, of the State Bureau for Letters and Calls, was discovered on April 8th in his Beijing office. He was the fourth high-ranking official to take his own life in recent months.

The week before, Zhou Yu, a police official in Chongqing, was found hanged, in a hotel. Said to be suffering from depression, he was involved in the high-profile investigation of the now-imprisoned Bo Xilai, the former boss of that metropolis. In January, Bai Zhongren, a former president of the heavily indebted China Railway Group, killed himself. State Council Information Officer Deputy Director Li Wufeng, considered China’s top internet cop, jumped to his death from the sixth floor of an office building on March 24th.

Minor officials have also been taking their lives. All told, there have been at least 54 “unnatural deaths” of Chinese officials since January of last year. Of these, 23 are listed as suicides. Drinking and accidents contributed another nine deaths.

It is not clear whether the 23 acknowledged suicides exceed the average for the Chinese population as a whole, but it is apparent that Beijing is concerned about the high-profile deaths. The Central Propaganda Department issued media instructions to not report without authorization the “accidental death” of Li Wufeng, and news of Xu Yean’s demise was scrubbed.

Beijing’s strategy is to deny such deaths are suicides, suppress news, or when all else fails blame “depression.” Most Chinese, it appears, are not buying the official explanations. As one poster on Sina Weibo, the microblogging service, explained, “A new rule for officials who have committed suicide: Every single one must be depressed, every single one must be unhealthy.”

What is unhealthy is the Communist Party’s increasingly corrupt political system. Take Xu Yean, for instance. His bureau, according to Yu Jianrong of the Chinese Academy of Social Sciences, is one of the most venal in Beijing, extorting bribes from officials across China. The office is supposed to give ordinary citizens a means to complain about local tyrants, but it has become a moneymaking machine for central officials, who bury complaints in return for large payments. One of Xu’s senior colleagues, Xu Jie, was relieved of responsibilities last November and placed under investigation for “serious violations” of party discipline, code for corruption.

Most reports state Xu Yean was not publicly named as the subject of a probe, but the South China Morning Post cites a source “close to the CCDI”—the party’s Central Commission for Discipline Investigation—indicating he was a target nonetheless. “Everybody is in the same boat,” said thesource. “Someone in Xu’s position is not immune.”

Chinese leader Xi Jinping in fact says no one is immune from his corruption probes and that he is going after both “tigers” and “flies,” party lingo for officials high and low. Few in China actually believe that Xi is trying to rid China of that evil, however. After all, the Communist Party has become completely infested, and the president appears to be targeting only political adversaries, such as the infamous Zhou Yongkang, the former security czar, using “corruption” as an excuse.

Yet Xi’s purges are wide-ranging, touching hundreds of officials, and they have gone so far that former leaders Jiang Zemin and Hu Jintao are now asking him to slow the effort, in part because he is threatening their extensive patronage networks and also because his investigations could shake the foundations of the party itself.

At this moment, it looks like fear pervades Chinese officialdom, and that some officials are choosing the easy way out by taking their own lives. As the purges continue, we can expect more unnatural deaths—and perhaps even political instability.

quote:

In a steel and coal-mining region of 5m people in the Chinese heartland, signs of economic slowdown are everywhere.
Forests of newly built but nearly abandoned apartment complexes with names such as Fortune Plaza and Golden Riverside ring central Yuncheng while, on the outskirts of town, the district’s largest steel mill has gone bust, leaving mountains of unpaid debt and nearly 10,000 idle workers.
More

“I used to bring lots of investors and steel people out here to visit the plant,” says Zhang Pu, a taxi driver waiting outside an empty hotel next to the headquarters of Highsee Group, the troubled steelmaker. “These days the only people who want to come here are local peasant farmers or debt collectors.”
China’s economy expanded 7.4 per cent in the first quarter of the year from the same period a year earlier, a sharp slowdown from 7.7 per cent growth in the fourth quarter of 2013.
That is still an enviable rate by the standard of most countries but in Yuncheng and other cities across China, the headline figure masks a multitude of growing problems.
The main reason for the slowdown is a slump in fixed asset investment, the biggest driver of the Chinese economy.
In the first three months of the year, investment grew 17.6 per cent from the same period a year earlier, the slowest pace since late 2002.
The slide was largely owing to declining real estate investment, which also experienced its weakest growth in more than a decade. The situation is certain to get worse in the coming months as new housing floor space under construction contracted 27.2 per cent in the first quarter.
That was largely a reaction to declining sales, which fell 5.7 per cent in terms of floor space in the first quarter from a year earlier, with the fall especially pronounced in smaller inland cities such as Yuncheng.
“Our surveys show clear divergence in price trends with first-tier major cities experiencing mildly rising housing prices,” Sheng Laiyun, spokesman for China’s National Bureau of Statistics, said on Wednesday at a press conference to announce first-quarter GDP. “In some second-tier cities prices are shaky and in third and fourth-tier cities, especially those with ample supply, prices have come down.”
The fate of China’s overheated real estate market is absolutely critical to the health of the overall economy.
Real estate construction directly accounted for 16 per cent of GDP in 2013, according to estimates from Nomura.
At that level China is approaching a dependence on property last seen in Ireland and Spain before the bursting of their bubbles.
Many of the industries already suffering from severe overcapacity in China, such as steel, cement and glass, are heavily indebted and reliant on continued rapid growth in property construction for their survival.
Land sales and property-related taxes accounted for 38 per cent of total government revenue in 2013 and heavily indebted local governments have used highly priced land as collateral for the vast majority of their loans.
A property crash would not only lead to collapsing growth in the world’s second-largest economy and largest commodity consumer but would also have a huge impact on Chinese households, which have an estimated two-thirds of their assets tied up in real estate.
In numerous places such as Yuncheng, the crash has already begun.
“Prices are falling and sales are really terrible because too many apartments have been built and so many of them are empty,” said a sales manager at a property development on the outskirts of Yuncheng who would only give his surname, Guo. “Even in a situation like this they are still building new housing complexes, it’s completely crazy!”
Mr Guo said that in the district where the Highsee steel mill has gone out of business, the local government approved 800,000 square meters of new construction last year even though the district’s total population is only 300,000.
As night falls in the neighbourhoods of Yuncheng, the dilemma facing the Chinese government is dramatically illustrated by the very few lights blinking on in newly constructed apartment towers.
In the past, and particularly after the 2008 global financial crisis, Beijing has turned to credit-fuelled property construction as the quickest and easiest way to boost flagging growth.
But with so many freshly built apartment towers already standing empty across the country, another round of manic, state-sanctioned real estate construction would amount to “yin zhen zhi ke” – “drinking poison to quench one’s thirst”.
“It is the lack of final demand, existence of excess capacities and barriers to private investment that have curbed China’s corporate investment and overall growth,” said Wang Tao, an economist at UBS. “Against this background, stronger credit growth will not lead to sustained stronger corporate investment growth, but would likely lead to a continued build-up of unsustainable leverage levels in China’s problematic local government debt and property sectors.”

Cultural Imperial posted:

Cultural Imperial posted:

http://www.worldaffairsjournal.org/blog/gordon-g-chang/mysterious-suicides-chinas-leadership


If only politicians in the West were as penitent.

Jagchosis posted:

I make all of these observations to ask; if there really is widespread overvaluations of firms in China, what potential effects could that have on the broader Chinese economy and does that fit into the broader bear view of China that many posters in this thread take?

Al-Saqr posted:

There's been some noise That China is just about to overtake the United states as the largest economy in the world by Purchasing Power Parity I dont know if this really means anything because it's not really as decisive as GDP per capita is in terms of true economic power but I guess the wind is blowing in that direction, doesnt mean that china is ACTUALLY a more developed country than the US by a long shot.

Al-Saqr posted:

There's been some noise That China is just about to overtake the United states as the largest economy in the world by Purchasing Power Parity I dont know if this really means anything because it's not really as decisive as GDP per capita is in terms of true economic power but I guess the wind is blowing in that direction, doesnt mean that china is ACTUALLY a more developed country than the US by a long shot.

Cultural Imperial posted:

Well, if you account for all those empty cities that China built, I can totally believe that their GDP exceeds that of the US.

Anosmoman posted:

To be fair the US built a lot of stuff nobody wants either.

hitension posted:

Keep in mind that China has over 4x as many people as America. So China's almost 1/4 as good as America now? K, cool

quote:

BEIJING—With credit tight in China, companies in industries beset by overcapacity are turning to an unconventional source for cash—other companies—in a new rising risk for the country’s financial system.

These company-to-company loans, known as entrusted lending, have emerged as the fastest-growing part of China’s shadow-banking system, which provides credit outside of formal banking channels. Net outstanding entrusted loans increased by 715.3 billion yuan ($115.4 billion) in the first three months of 2014 from a year earlier, according to the most recent data from China’s central bank.

The increase in entrusted loans last year was equivalent to nearly 30% of local-currency loans issued by banks—almost double the portion in 2012. The jump is all the more pronounced since China’s total social financing, a broad measure of overall new credit, shrank 561.2 billion yuan over the same period, largely because other forms of shadow credit declined as Beijing sought to rein in runaway debt growth.



The growing popularity of such company-to-company lending offers a fresh—and to regulators, troubling—look at the rapid buildup of debt in China. In its latest report on the country’s financial stability, issued Tuesday, the central bank singled out entrusted lending as a problem, saying it is being used by banks to evade regulatory restrictions on lending. Banks, while generally not risking their own capital directly, act as middlemen in these transactions.

China’s debt levels have climbed in recent years at a pace similar to increases in the U.S., euro zone and South Korea before those economies fell into their most recent recessions. The concern among some economists and analysts is that debt will continue to balloon in China, exposing the country to greater financial risks as its economy slows down.

Officials at the People’s Bank of China, the central bank, have warned that much of the intercompany lending is flowing to sectors where the regulators have urged banks to reduce lending: the property market, infrastructure and other areas burdened by excess capacity. In central Shanxi province, 56% of entrusted loans in the past few years have gone to power producers, coking companies and steelmakers, among others, according to a recent paper byYan Jingwen, an economist at the PBOC.

Access to entrusted loans allows struggling companies to hang on longer than they otherwise could, delaying the consolidation that the government and some economists say is needed in a swath of industries.

Big publicly traded companies with access to credit—such as the shipbuilder Sainty Marine Corp., China Shipbuilder and specialty-chemicals producer Zhejiang Longsheng Group —are among the most active providers of entrusted loans. These companies, instead of investing in their core businesses, lend funds at hand to cash-strapped businesses at several times the official interest rate.

Companies provide funds to make the entrusted loans. To get around an official ban on direct lending to other companies, they need to use an intermediary—typically a bank—to lend the money out.

Banks, which in theory shouldn’t use any of their own funds in the process, make money by charging fees to both the lending company and the borrower, and they don’t have to record the loans on their balance sheets. However, in practice, some banks have disguised loans made with their own capital as entrusted loans, thereby helping them skirt regulatory limits on lending, according to officials at China’s central bank. That has helped banks hide “credit risks,” the PBOC said in the Tuesday report……

quote:

 Apparently every property market leading indicator at the national level turned down in Q1, and for most monthly indicators the rate of decline accelerated through the quarter. That, says Nomura, means the question is no longer “if” or “when”, but rather “how much” China’s structurally oversupplied property market will correct.

The problem at root is monetary policy tightening since mid-2013 which has severely limited the supply of hot money available to property developers from the banking system.

quote:

China's Vessels Ram Vietnamese Craft In South China Sea
Comment Now Follow Comments
On Wednesday, Vietnamese officials announced that one of China’s ships intentionally rammed two of their Sea Guard vessels. The incidents took place on Sunday, the 4th. Six were injured, according to Hanoi.

“Chinese ships, with air support, sought to intimidate Vietnamese vessels,” said Tran Duy Hai of the Foreign Ministry at a news conference. Other officials said six other Vietnamese craft were hit.

The incidents occurred after China National Offshore Oil Corp., better known as CNOOC , had on May 2 towed a deep-water rig, the size of several football fields, to an area that Hanoi claims is within its exclusive economic zone, near the Paracel Islands. Beijing, with its infamous nine-dashed line on its maps, claims about 90% of the international waters of the South China Sea as an internal Chinese lake. The expansive—and largely indefensible—claim overlaps the coastal waters of Taiwan, the Philippines, Malaysia, Brunei, and Indonesia as well as Vietnam.

Beijing brought a fleet of about 80 vessels to keep the Vietnamese from stopping the oil rig, designated HD-981. CNOOC called HD-981 a “strategic weapon” at its launch in 2012.

And it is clear that the company was using the rig at Beijing’s behest. “This reflected the will of the central government and is also related to the U.S. strategy on Asia,” said a Chinese oil official, speaking anonymously to Reuters, about drilling in Vietnam’s waters. “It is not commercially driven. It is also not like CNOOC has set a big exploration blueprint for the region.”

It did not take long for Chinese leaders to test President Obama’s general commitment to maintain regional security after his eight-day, four-nation “reassurance” visit there at the end of last month. With this expedition against Vietnam, Beijing crossed two important lines. This is the first time China has drilled in Vietnamese waters. Moreover, this is the first time Beijing openly used its “gray hulls”—navy ships—in close support of “white hulls”—civilian maritime craft—while enforcing a territorial claim, according to the Nelson Report, the Washington insider newsletter. There are seven Chinese naval ships in the vicinity of the rig.

Beijing could be trying to take advantage of a distracted Washington’s involvement in the Ukrainian crisis, showing its disrespect for Obama, or just lashing out against another small nation. Yet whatever China is doing, it is extraordinarily dangerous.

The Vietnamese do not have a history of backing down, even in the face of provocative behavior from big neighbor China. The two countries have tangled with each other over the course of decades. Sometimes the Chinese win and sometimes the Vietnamese prevail, but it’s clear Hanoi is not afraid of its neighbor. It is unlikely proud Vietnam will let Beijing drill in waters close to its shore unimpeded this time.

The Chinese want the territory and waters of surrounding countries. They will not stop until they are stopped. And it may just be the Vietnamese who stop them.

After all, in their last major encounter—in 1979—Hanoi humiliated the Chinese army.

Cultural Imperial posted:

What the gently caress is going on

Cultural Imperial posted:

What the gently caress is going on

Lead out in cuffs posted:

Between that and Ukraine, the final nail in the coffin of all that 90s "hyperpower" rhetoric and the ascendance of a multi-polar world, the likes of which we haven't seen since the First World War (which multi-polarisation of power arguably caused).