Sunday, January 18, 2015




"Photo by Michael Maggs, Wikimedia Commons"

Editor's note: 2015 Chinese New Year Day is on February 19, 2015 in China Standard Time. The Chinese New Year Day is the new moon day of the first lunar month. The new moon time of the first lunar month is at 7:48 A.M. of February 19, 2015 in China Standard Time. The Chinese New Year Day is from Chinese Lunar Calendar.

During the first week of the new year in 2013 we posted a Wall Street Journal article lead in and link. When the first quarter of the year ended we  observed that both the Wall Street Journal and our own giant catfish, Namazu were proving correct on their predictions for China.  2013 in China was the YEAR OF THE SNAKE and as we started the final quarter of the Year of the Snake things were certainly slithering along as predicted.

"The Wall Street Journal published a highly interesting article  on January 4, 2013, for those of you who follow our continuing series How Far Will The Dragon Swim. In the article, the writer describes ten trends to watch for in China during 2013.


                                                         Dragon Vector Art 1 by samuraiagency - Free Dragon Tattoo Picture from     Well we watched those trends and we continued to watch through 2014 as more and more international observers began to come to many of the same conclusions as our  analyst the Great Namazu published early in 2012.   But many of you have only been following us recently, so the Wall Street Journal article mentioned will help bring you up to speed in just a couple of pages and nicely summarize some of our earlier maritime concerns and observations about China in a neat listing of ten trends. Number 8 of the Wall Street Journal  feature; "China will continue to be the number one builder of war ships in the world." .  As the Year Of the Sheep  (2015) opens this prediction is holding true. The Journal also recognized that China will take an "even more aggressive stance against its coastal neighbors in its drive to turn the East , South China and Yellow Seas into Chinese lakes."  This prediction held true throughout 2013. By the end of 2014 China had institutionalized the maritime pressure it is applying to its neighbors in the form of the fielding of a large and aggressive "Coast Guard". However  as Japan and the Philippines have not surrendered their territories and are engaged in responsive military build ups the Chinese have downshifted into what might be called a "Salami Slice" strategy cutting out small pieces of their neighbor's territory in small actions that seem less than acts of war. Of course in the end the cumulative effect is that the Dragon eats the whole salami. 

  One prediction appears now to have been a bit too conservative. The Wall Street Journal predicted that during 2013 details of China's proposed aircraft carrier would become known. Indeed the air craft carrier was completed and is in operation with more to follow. The link below will take you to all ten predictions: 

  Below is our summary of the trends that we were watching in 2013-14 and our notes as we progress into 2015.

1. China will continue shifting onto a slower economic growth track. Indeed this was visible in 2013 and continues into 2015. China is in no free fall and won't go the way of Greece any time soon, but growth is slowing down for a variety of reasons. 

2. Rising wages and a shortage of new young workers will continue to reduce China’s global manufacturing competitiveness. But that's not all affecting China's position in manufacturing. 3 D printing combined with "just in time inventory control", robotics, and reductions in transport costs by producing things closer to markets is bringing manufacturing back to Western nations including the United States.

3. China’s demand for new housing will remain weak. The weakness in the Chinese housing market is not so much a real lack of demand so much as prices out of line with typical Chinese family incomes.

4. Corruption  will receive added attention from China’s new leadership. Indeed corruption discovered and prosecuted within the Chinese armed forces led to a number high profile suicides by some high ranking officers recently. 

5. Chinese investors will continue to seek additional assets and opportunities abroad, particularly in North America.. The Chinese are currency manipulators and want to displace the U.S. dollar. But the heavy Chinese investment in the U.S. continues and that continues to cause delay in the Chinese governments plan to ruin the dollar. Whether holding real estate  or dollars, the immediate collapse of the U.S. dollar has not been in China's best interest since 2013. 

6. Chinese investors in Iraq and Afghanistan will be increasingly responsible for providing their own security as the U.S. and NATO continue reducing their military presence in both countries. We have heard nothing about how Chinese nationals in the parts of Iraq over run by ISIS have made out. .

7. Facing growing internal challenges, China’s new leaders may adopt a more nationalistic foreign policy, particularly vis-à-vis regional disputes.. Its been two steps forward and one step back since 2013. But progress has been generally forward on being more aggressive, but its a sort of passive aggression. China does something aggressive bringing things to the brink of military exchanges of fire, then does something seemingly conciliatory. Things calm down a bit and then the Dragon breaths fire again. 
8. China will be the world’s single largest builder of warships. True in the Year of the Snake (2013) and true today (2015) in the Year of the Sheep.

9. Details of China’s next aircraft carriers will emerge. The Chinese are operating one carrier now but their skills are still visibly inadequate. Their plans for 5 carrier tasks forces are published now but there doesn't seem to be a rush due to the need to build the skill set and work force and declining revenues with the economic slowdown.

10. The Y-20 transport aircraft will go into production.   A successful test flight of the Y-20 confirmed that China is now able to fabricate an air frame that could serve as the basis for both a large transport aircraft and a relatively capable aerial-refueling tanker or airborne early-warning platform. Large aerial tankers and transports are important to Chinese plans for force projection beyond their region. 

 The Year of the Sheep is shaping up as a slow speed continuance of 2013-2014. Chinese aggressive plans appear unchanged but the money to fuel them is a bit more scarce than the Dragon would have liked.



No comments:

Post a Comment