Monday, July 04, 2011

How China Conquers The World

Many things have been said about how China is going to dominate the global economy for the next 50 years. This in a nutshell, is how they go about laying the groundwork. China already is a player in the commodities side of things, they are laying the groundwork for the rest of the jigsaw puzzle.

The first question to entertain is why are they keeping the yuan low while they keep registering tons of surpluses. This is key to buying up the world. Some may say that although they have surpluses, a lot of that are in US Treasuries. If USD falls, they stand to lose a lot. That is B.S. ... I think even a second year economics student at Beijing University would be able to see through that.

Although China has a lot of Treasuries, their buying has decelerated substantially. Some think that they cannot ever dump the Treasuries - yes they do not dump, they cannot even afford to dump as the derailment of the global economy can have massive ramifications.

Instead, they basically recycle the surpluses by lending or pumping funds into state-controlled firms, buying up anything and everything related to commodities and even ports related entities to ensure the logistics chain are under their control. That being the case, many have been wondering if the Chinese have been over paying, yes they have been and they know it, but they rather have it than to see their surpluses dwindling 20% every 2 years in value.

Next, is to make their big companies become global players. China Development Bank, which is not really a commercial bank but a sovereign entity, issues bonds and lends aggressively to help China companies to frog leap the rest. The prime example had been the phenomenal growth of ZTE and Huawei, ask any telco vendor person, they were also-rans 5 years ago. Now they are the top few in the world.

Back in 2004, CDB provided a $45 billion line of credit to Huawei and ZTE. Yes, $45 billion of vendor financing. This basically meant that if you were Singtel and Huawei tries to sell you their products, if you were mildly interested but may lack the necessary funding/budget this year ... Huawei will say no problem, 100% financing can be provided at attractive rates. These type of export financing schemes are done all the time by the more enterprising governments, but certainly not in the scale of China. Naturally the other global players are crying that these are unfair advantages.

Next, is cementing the global economic and political ties. You cannot be just owing and running businesses, you need to be needed as a major player all corners of the world. China owns Asia already, but they have gone out of their way to go big into Africa and South America, investing big bucks, cementing political ties, granting loads of loans to various governments. Plus increase trade with them, China needs everything anyways .... What a friend.

Unlike the US or EU, China does not (yet) have a political agenda in doing all these, they are not aiming to protect the sanctity of the democratic world or pushing some political ideaology, which makes them easy to befriend the usual enemies of the Americans. China couldn't care less about the atrocities or dictatorships in other countries - you don't criticise my ways, I don't criticise yours ... (unless they get really really bad ... I guess.

Even now, China is making inroads into the troubled Greece, and possibly soon to Portugal and Spain, buy assuring them that China will buy their bonds.

It does not take a smartass to note that gradually China will own probably the top few players in every significant industry in the world. They tried doing that with banking and failed miserably, the timing was off and they made huge losses, but they can afford to make these kind of losses anyway.

So, you can shake your heads, but we all will have to work with them, one way or another, cause soon we all will be working for them, one way or another


Clearwater said...

You wanna to work for them ? well, I think u need to learn your mother tongue well in order for u to dream of that !

man without knowing his mother tongue is like human without soul !

u got it ?

Andrew said...

Great insight and well put in a very uncomplicated way. I guess this really goes against what many detractors (especially the Western sort)say about China and how it will fail miserably and how it will be hit hard this time round.

At the end of the day, it all really boils down to one thing as you mentioned in your article - they can afford to lose. It's just like a casino. If you're the house and you can afford to lose no matter what, you'll eventually win. So in this context, I see China as the house :-)

BTW, it's getting harder to concentrate on your writing with my eyes always zeroing in on Vivian Hsu's assets. Now, the balance sheet is getting asset heavy :-)

Andrew said...


Working for them doesn't mean you literally volunteer to work for them. In this case I believe Dali means they 'own' you.

I agree that one should know one's mother tongue but sometimes we (me and other bananas) are 'victims' of our parents' decisions. We cannot fault them of course, as they made the best choice at that time. However we can better ourselves if we want to. I am trying to learn what I missed out and I send my daughter to a Chinese medium school. The choices I make now I am hoping is the best for her but it may not be. Who is to tell? I also make sure I equip her with English and a critical mind.

I think the correct verse should be, "A man without knowledge and ideas is like a man without a soul."

clearwater said...

Andrew, well rebutted to my alter ego Clearwater. He may not be aware most Americans no longer speak their mother tongue. Are these Americans then men without souls? Accomplished men like Warren Buffet, Barack Obama do not know their mother tongue but instead speak American English with no obvious ill effects to their souls. They are still revered back in their ancestral lands for their accomplishments. Yes, it is more about knowledge and ideas than the medium they are transmitted in.

Clearwater said...

Hi Andrew,

100% agreed with you on one should know one's mother tongue but sometimes we (me and other bananas) are 'victims' of our parents' decisions.

The one I am referring are those who have chance to learn their mother tongue but refuse to do so , why ? you cant blame those american fellows for not learning their mother tongue, the are like Indonesia where they have no chance to learn it, here is Malaysia , you got plenty of opportunity to learn yr mother tongue , the question here is are you really looking down your bahasa ibunda ?

think aboutit dude .

Andrew said...

Am in agreement with you Clearwater. In order not to blabber on and make the clear water muddy (or contaminate this thread with our debate. Also my wife is suspicious as to why I am always in Vivan's page), I think what we should all do is not forget our roots - language, culture, pantang-larang and whatnot.

Like I said I try and expose my daughter to everything and encourage her to read up on Chinese history, etc. Kids these days tend to be very Westernized. Just because we are Malaysians,(1st, 2nd or whatever) doesn't mean we should forget who we are because ultimately we are who we are regardless of which geographical region we call 'home.'

In short, never abandon your roots and pretend to be someone else...

All said, China will dominate and the debunking Westerners are trying to force their theory of a China that swallowed a huge pie and puke to death is I think a hint of fear in them.

green said...

Haha. I still can remember the 'Chiang Hua Yu' campaign in Sgp raised by Mr. Lee Kuan Yew long-long time back.
Now it has become all the more important going down the years.
Mercy me, Vivian Hsu; I be multilin
gual and thy Huckleberry.

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