Tag Archives: Hong Kong

Chinese stocks lost 30% this year, has China’s lost decade begun?

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I predicted dire times for China six years ago, when Xi Jinping amended the constitution to make himself leader for life, in charge of the government, the party, the military, and the banks. Emperor, I called him, here. It now seems the collapse has begun, or at least stagnation. Chinese history is cyclic. Good times of peace and plenty give rise to a supreme emperor whose excesses bring war and famine, or at least stagnation. The cycle repeats every 50 to 100 years. Since Nixon opened China in 1973, the country has seen 50 years of prosperity and spectacular growth, but the growth has stopped and may be in decline. The stock market (Shanghai Shenzen 300) peaked in 2021 and has declined 50% from there. It’s down 30% for the last 12 months to levels seen in December 2010. US growth seemed slower than China’s but it’s been more steady. The main US stock market, the S+P 500, has more than tripled since 2010, up 24.5% this year.

Five years of the Shanghai 300 index with hardly any change. There has hardly been change in 15 years. One could argue that the lost decade is here and on-going. .

Each year Chairman Xi’s behaves more dictatorial. Last year he arrested his predecessor, Hu Jintao in front of the Communist party. He now tracks all his citizens actions by way of face recognition and phone software, and gives demerits for wrong thinking and wrong behaviors. You lose merits by buying western cars or visiting western internet sites. Taking money abroad is generally illegal. Needless to say, such behavior causes people to want to take money abroad, just in case. Last week, Xi proposed a limit on video game playing and clamped down on banks, demanding low interest rates. This is bad for the gaming corporations and teenagers, and banks, but so far there are no protests as there is no war.

Kissinger said that war was likely, though. Xi is building the navy at a fast pace, adding fast surface ships, nuclear submarines, aircraft carriers, and new attack airplanes. They’ve added hypersonic missiles too, and added listening stations and bases. There’s now a naval base in Djibouti, at the entrance to the Red Sea, where they oversee (or promote?) Iran’s attacks on Western shipping. Then there are the new Chinese Islands that were built to take oil and fishing rights, and to provide yet more military bases on key trade routes. These could easily be a trigger for war, but so far just one military interaction in the region. Last month, the Chinese and Philippines navy clashed over fishing!

In the Gulf of Finland last Month, a Chinese ship, New New Polarbear, destroyed the offshore cables and gas pipes between Finland and Estonia, in protest of Finland’s entry into NATO. It’s belligerent but not war. Undersea cables are not covered by the UN charter, law of the sea. Then there is the evidence that COVID-19 was the result of Chinese bioweapon development, and the Chinese spy ballon that was sent over the US. We maintain at peace, but an unsettled sort of peace — is it a preface to war? Wars don’t have to be big war against the west or Taiwan, more likely is Vietnam, IMHO.

China’s negative population growth means that property values will drop along with product consumption. Kids buy stuff; old folks don’t.

News from China is increasingly unreliable so it’s hard to tell what’s going on. There were claims of a coupe, but perhaps it was fake news. Reporters and spies have been arrested or shot so there is no window on anyone who knows. There are claims of high unemployment, and COVID deaths, and claims of a movement to “lie flat” and stop working. Perhaps that was behind the ban on excessive gaming. Who knows? Xi claims that China is self sufficient in food production, but record food shipments from the US to China suggest otherwise.

Major businesspeople have disappeared, often to reappear as changed men or women. Most recently, Jimmy Lai, the Hong Kong clothing magnate, was indicted for sedition by tweets. Perhaps he just wanted to fire workers, or pay down debt, or move abroad (his daughter is). Many businesses exist just to make jobs, it seems. Not all of these businesses are efficient, or profitable. Some exist to violate US patents or steal technology, particularly military technology. I suspect that China’s hot new car company, BYD, is a money-losing, job factory, behind Tesla in every open market. Some 91 public firms have delisted over the last two years, effectively vanishing from oversight. Are they gone, or still operating as employment zombies. Will BYD join them? If China manages to avoid war, I have to expect stagnation, a “lost decade” or two, as in Japan saw from 1990 to 2010, as they unwound their unprofitable businesses.

A sign suggesting that a Chinese lost decade has begun is that China’s is seeing deflation, a negative inflation rate of -0.2%/year according to the world bank. It seems people want to hold money, and don’t want Chinese products, services, or investment. Japan saw this and tried a mix of regulation and negative interest rates to revive the interest, basically paying people to borrow in hopes they spend.

In Japan, the main cause of their deflation seems to have been an excess of borrowing against overvalued and unoccupied real estate. The borrowed money was used to support unprofitable businesses to buy more real estate. This seems to be happening in China too. As in Japan, China originally needed new lots of new apartments when they opened up and people started moving to the cities. The first apartments increased in value greatly so people built more. But now they have about 100% oversupply: one unoccupied or half-built apartment for every one occupied, with many mortgaged to the hilt against other overvalued apartments and flailing businesses.

Chinese Dept, personal and corporate match Japan’s at the start of the lost decade(s). Personal debt is at 150% of GDP, corporate debt is at65% of GDP, all propped up by real estate.

As in Japan 30 years ago, China’s corporate + personal debt is now about two times their GDP. Japan tried to stop the deflation and collapse by increased lending, and wasteful infrastructure projects. People in the know sent the borrowed money abroad confident that they would repay less when they repaid. We are already seeing this; low interest loans, money flowing abroad and a profusion of fast trains, unused roads, and unused bridges. I suspect most fast trains don’t pay off, as planes are faster and cheaper. These investments are just postponing the collapse. China is also seeing a birth dearth, 1.1 children per woman. This means that within a generation there will be half as many new workers and families to use the trains, or occupy the apartments. As the country ages, retirees will need more services with fewer people to provide them. China’s culture promotes abortion. China’s working population will decline for the next 30 years at least.

Japan came through all this without war, somewhat poorer, but unified and modern. It helped that Japan was a democracy, unified in culture, with an open press and good leaders (Abe). There was no collapse, as such, but 20 years of stagnation. China is a dictatorship, with a disunited culture, and a closed press. I think it will get through this, but it will have a much rougher time.

Robert Buxbaum January 9, 2024. China isn’t alone in facing collapse and/or lost decades. Germany is in a similar state, especially since the start of the Ukraine war. It’s a democracy like Japan, and pacifist for now.

COVID E. Asian death rate is 1/100th the Western rate.

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COVID-19 has a decided racial preference for Western blood, killing Americans and Europeans at more than ten times the rate of people in Japan, China, Hong Kong, Taiwan, Korea, or Vietnam. The chart below shows the COVID-19 death rate per million population in several significant countries countries. The US and Belgium is seen to be more than 100 times worse than China or Hong Kong, etc., based on data from http://www.worldometers.info. IN the figure, the death-rate rank of each country is shown on the left, next to the country name.

For clarity, I didn’t include all the countries of Europe, but note that European countries are the majority of the top ten in terms of deaths per million. Belgium is number one with over 1,400. That is somewhat over 0.14% of the population has died of COVID-19 so far.

Peru has the highest COVID-19 death rate in South America at over 1000 per million, 0.1%. The US rate is similar, 0.082%. These are shockingly high numbers despite our best efforts to stop the disease by mandating masks, closing schools, and generally closing our economies. Meanwhile, in China and Japan, the economies are open and the total death rate is only about 1/100 that of Europe or the Americas. Any health numbers from China are suspect, but here I tend to believe it. Their rates are very similar to those in Hong Kong and Taiwan. At 3 per million, China’s death rate is 1/400 th the rate of the US, and Taiwan’s is lower.

This is not for lack of good healthcare systems in Europe, or lack of preparation. As of December 1-10, Germany, a country of 80 million, is seeing a COVID death rate of 388 per day. Japan, a country of 120 million, sees about 20. These are modern countries with good record keeping; Germany is locked down and Japan is open.

The question is why, and the answer seems to be genetics. A British study of the genetics of people who got the disease particularly severely found a few genes responsible, among these, TYK2. “It is part of the system that makes your immune cells more angry, and more inflammatory,” explained Dr Kenneth Baillie, a consultant in medicine at the Royal Infirmary in Edinburgh, who led the Genomicc project. He’s theory is that versions of this gene can allow the virus to put your immune response “into overdrive, putting patients at risk of damaging lung inflammation.” If his explanation is right, a class of anti-inflammatory drugs could work. (I’d already mentioned data suggesting that a baby aspirin or two seems helpful).

As reported in Nature this week, another gene that causes problems is IFNAR2. IFNAR2 is linked to release of interferon, which helps to kick-start the immune system as soon as an infection is detected.

It could be accidental that Asians are just lucky interns of not having the gene variations that make this disease deadly. Alternately, it could be that the disease is was engineered (in China?) and released either as a bio-attack, or by accident. Or it could be a combination. Whatever the cause of the disease, that east Asians should be spared this way is really weird.

Suggesting that this is not biowarfare is the observation that, in San Francisco, the Asian, per case fatality rate is as high as for white people or higher. One problem with this argument is that there is a difference between death rate per confirmed case and death rate per million population. It is possible that, for one reason or another Chinese people in San Francisco do not seek to be tested until they are at death’s door. Such things were seen in Iran and North Korea, for example. It pushed up the per-case death rate to 100%. Another possibility is that the high death rates in the west reflect disease mutation, or perhaps eastern exposure to a non-deadly variant of COVID that never made it west. If this is the case, it would be just as odd as any other explanation of a100x difference in death rates. Maybe I’m being paranoid here, but as the saying goes, even paranoids have enemies.

I think it’s worth noting this strange statistical pattern, even if I have no clear explanation. My advice: take vitamin D and a baby aspirin; and get a pneumonia shot,. I plan to take the vaccine when it’s offered. If a home test becomes available, I’d use that too. Stay safe folks. Whatever the source, this disease is a killer.

Robert Buxbaum, December 16, 2020.

Hong Kong and Palestine; what makes a country?

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As I write this, Hong Kong protesters are battling for a degree of independence from China — something China seemed to have agreed to when taking over the province in 1997. While there is some sympathy for the protesters, not one country so far supports them. Meanwhile, by a vote of 138 to 9, the United Nations has accepted Palestine as an independent, observer state, the same status as the Vatican and Switzerland. A majority of nations have further stated that it is illegal for Israel to erect a wall between itself and Palestine as the wall implies a de-facto border. Why the differences, and what’s wrong with borders?

Distinctive dress, traditions, or physiology can justify a country's independence, as can a military tradition.

Britain has been shaved of many of its possessions since WWII, The possessions have demanded independent nation status based on their distinctive dress, language, history, traditions, or physiology.

Perhaps a good place to start is with British ownership of Hong Kong and Israel/Palestine. Britain acquired both by war, and both were possessions during World War II. Hong Kong island was ceded to Great Britain by the Treaty of Nanking ending the first Opium War. British control of Israel/ Palestine was achieved by invasion in World War I and confirmed by the League of Nations. Following WWII, British Palestine was split into several nations: Egypt, Israel, Jordan, Saudi Arabia … Israel declared independence in 1948 — and was accepted to the United Nations in 1949 following its war of independence. Hong Kong did not fight any war, but was handed to China in 1997 in return for guarantees of autonomy. If Hong Kong had not been handed over, it would probably be independent today, like Ireland, Canada, Jamaica, Belize, Micronesia, Malaysia, Bali, Indonesia, etc.

Clearly part of the reason no one accepts Hong Kong as a country, while a majority of the UN accepts Palestine (and Israel?) as countries, is that both Arab Palestine and Israel have fought wars for independence, while Hong Kong has been a peaceful go-along. Another difference is related to how the world perceives China and Arab Palestine. China may be a semi-autocratic, one party oppressor of Inner Mongolia and Tibet, but its economic and military power helps insure that China is considered the respected, socialist owner of semi-democratic HK. Israel is much weaker, and much less-well regarded. It is viewed as a dispensable, European annoyance stuck improbably into the Middle east, and thus its claim on existence is weakened. The UN resolved in 1975 that Zionism is racism, and world leaders routinely called Israel a racist or apartheid occupier, as a state religion is considered anathema to freedom — they don’t have this problem with the state religions of the Vatican or Saudi Arabia. Ex-president Jimmy Carter calls Israel an occupier state, suggesting that Israel has no right to exist, and many western religious and academic groups agree or have voted to treat it as such. In 2013 alone, the UN passed 21 resolutions of protest against Israel, and only 3 against all other nations combined (A historical list is presented here). But disdained or not Israel goes on, in part by military might, in part by meeting the Montevideo requirements of 1933.

Comparison Hong Kong and Gaza

A map used to support Hong Kong Independence showing that Hong Kong is roughly 4 times the size of Gaza; and about twice the population. The government is more stable, and less divided too.

The UN’s grudging acceptance of Israel rests in part, on its meeting the four Montevideo conference (1933) requirements. A country must have: 1. a fixed population (more-or-less met) 2. fixed borders (war gains are an issue here, as is Palestine’s claim to all of Israel). 3. an internal government with internal control (here Israel exceeds Arab Palestine having a stable government. While Palestine manages to keep some law on a local level there are no unified elections, and only minimal education and healthcare. The two halves would likely shoot each other if they could shoot over Israel). The final Montevideo requirement, 4 is that a country must have the ability to make binding foreign treaties. This something Israel has, while neither Hong Kong nor Arab Palestine does. Both Palestine and Hong Kong are prevented from making treaties– with Israel and with China. Some in The United Nations have seen fit to waive this requirement for Palestine, but not Hong Kong.

While neither the Montevideo protocols nor the UN requires that a country must be democratic in any sense (most every country signing was a monarchy or dictatorship, and many still are (Jordan, Syria, Cuba, China….), there is a growing consensus that the age of kings is over, or ending. That a united Palestine would likely be a dictatorship, or kleptocracy thus runs afoul of another, uniquely American approach to state-hood — natural law, and the Rights of Man.

The United States, at its inception, appealed to the self-evident, Rights of Man, as a justification for its independence. That is to Justice, and to “Nature and Nature’s God.” We never claimed to have clear borders, or a fixed population, or any other Montevideo requirement. Instead we claimed nation-status by “the powers of the earth.” It was never clear what the legal limits of these powers were, not what Nature’s God demanded, but the idea is not mere poetry, but shows up throughout the policy speeches of Lincoln, Wilson, and Kennedy and Reagan. I’ve speculated that the poor reviews Lincoln got for his Gettysburg Address were due to the foreign-ness of these claims back in 1863, but 150 years later many thinkers seem to accept, at least as an ideal, that the legitimacy of a county rests on the will of its people, freely exercised. It’s a standard that hardly any country of the 19th century met, but that Israel meets, while Arab Palestine does not.

And that brings us back to the first and oldest basis of statehood: force of arms; self-preservation as a raison d’estat. If the people see death around them and are willing fight hard enough to keep out an enemy, they become a country. Even if they can not keep fixed borders, and even if they disband their army later, the fight for independence makes them so. (Micronesia has no army, but presumably would fight if they had to, and while Costa Rica had army once, the president disbanded it after he took over by military coup — it’s a threat to his life-long leadership). This view is the grim side of Nature’s law, that country is any organized horde who manage, by any means, to keep from being killed or disbanded. So long as the group survives, anywhere, it’s a nation. The Confederate States are not any sort of country, largely because the union has had such a stronger military that their army could operate against us, nor could the paramilitary remnant (the KKK) remain as an operational horde within our borders. China so over-matches Hong Kong that there can be no independent Hong Kong without China’s approval. Israel’s army, similarly, is strong enough to defeat any likely invasion or civil insurrection, though it might lose land, or gain it. It’s the dark version of natural law: the strong and vigorous survive at the expense of the weak and willing.

My observation is that neither Hong Kong nor Palestine is ready for independent statehood, via any of the justifications above, while Israel is a country by all of them. As for when to step in to create a state, my answer is only rarely; see my essay, when to enter a neighbor’s war.

Robert Buxbaum, December 4, 2014.