The articles below, reproduced from the Australian
Financial Review and the London Financial Times, show why the “weaponization”
of the Han Chinese diaspora on the part of the Chinese Dictatorship will most
certainly end up with a Holocaust of Han Chinese around the world that will
make the Nazi experience look like breakfast at Tiffany’s. The reason is that
the Dictatorship is co-opting its unfortunate subjects in its global
kleptocratic practices that – just as they did with the Jews – will draw the
genocidal ire of other peoples, from Europeans to Africans to Arabs and even
South-East Asians, whose hatred of Han Chinese grows more virulent and violent
and uncontrollable by the minute!
The fact is that this unfortunate race of worms is
hell-bent on devouring the rest of the world – and the rest of the world will
not stand there looking while these racist genocidal rats seek to enslave the
planet! Contrary to what the IMF argues (see the second article from the FT) it
is an utter and baseless lie to say that the Han Chinese rats have given up on
their mercantilist practices and stopped exploiting their own people to
accumulate personal wealth the world over. On the contrary, the apparent
balancing of the current account is due precisely to the fact that Han Chinese
Rats are investing more of their ill-gotten gains overseas! These are “investments”,
not purchases of goods and services!! – Which is why we ought to be
forgiven for saying that the IMF staff are a band of idiotic rotten dogs at
best! Cheers.
At a fund
manager’s conference in Boston I was surprised to hear one of the other
speakers put a positive spin on the vexed topic of China’s current account
surplus. He argued it was being eliminated because excess saving in prosperous
provinces was now funding net investment in high-return developing regions.
This would be good for China – profitable investment opportunities at home –
and for the world with reduced deflation pressure.
There are critical investment issues
here. The saving glut is an aspect of China’s excess
capacity. China doesn’t consume enough of its own GDP and pushes cheap exports
into other country’s markets, pushing down inflation – making life difficult
for central banks. Excess saving forces down global real interest rates,
distorting investment decisions and undermining pension fund returns. On the
capital account side China stands accused of hoovering up assets that focus on
sensitive technology – joint military and domestic applications – and forcing
technology transfers from companies that are permitted to invest in China.
China’s
merchandise trade remains in strong surplus. Bloomberg
So, the argument made by my
colleague sounded like something quite momentous. China could come to depend on
net Western investment to fund a current account deficit in the future. Market
disciplines and profitable returns might follow, and trade and investment
negotiations might better favour the global collective interest.
Furthermore, wouldn’t the current
account switching towards a deficit mean that trade in goods and services is
finally "evening up"? Wouldn’t these trends pull the rug from under
Donald Trump’s trade wars, which would be seen to be damaging global relations
unnecessarily? The president and his advisors would find themselves on the
wrong side of history.
Not so fast. All is not gold that
glitters.
Let’s clear
one thing up right away. China’s current account may be falling, as measured,
but its merchandise trade remains in strong surplus. This rose to record levels
as growth and imports collapsed following the equity market crisis in 2015.
This merchandise surplus declined once the stimulus package in 2016 sucked in
imports and made all those mining stocks rally. Most recently, China has slowed
once more: the trade surplus stopped falling.
So, what are we to make of the
declining current account with a large merchandise trade surplus? Well the
thing is, when economic numbers become political, there is an incentive for the
way things are measured to somehow adjust.
Two things stand out in the chart.
First, the current account decline comes about because the large services
deficit offsets the merchandise surplus. If you are hoping this means the West
has finally broken through and is penetrating the Chinese domestic market with
its banking and other services, you will be disappointed if you read any further.
Second, travel is an important part
of services trade for China. Statistics show the Chinese travel surplus of
exports (what the rest of the world spends travelling in China) minus imports
(what the Chinese spend travelling in overseas countries). These variables
began to diverge from 2011 as travel imports rose rapidly, while exports
remained flat. The widening travel gap explains virtually all the divergence
between the trade balance and current account.
What are we to make of this? Well,
one OECD-country statistical agency carried out a study and found a puzzling
anomaly. It turns out China’s measurement of payments to them was more than 15
times larger than their own measurement of receipts from Chinese visitors. They
are supposed to be the same: just measuring the consumption of goods and
services by business, tourist and education travellers.
Chinese travellers are known to buy
assets, including houses for students to live in and investment-related
products. These things should be counted as investment, not imports. When
credit card data and international remittances data from banks (used in the
measurement process) include such investments, they are supposed to be
reallocated to the capital account. The Ministry of Commerce (MOFCOM) would be
responsible for doing this. But the issue is political and checking the
information is difficult, particularly since China changed the way they measure
travel in 2016 and backdated the data.
If things get classified as
bilateral services imports (consumption), when in fact they are really
investments, then large anomalies between receipts measured by an OECD country
might differ significantly from the expenditure on travel recorded by China. If
this is systematic, it will add up to a distorted services deficit.
The huge step up of Chinese travel
imports from 2011-2015 corresponds with China’s relaxation of controls on
capital outflows. This made it easier to get money out for investment purposes
– and corresponds with the great acceleration of Australian and Canadian house
prices. Stricter controls on outflows have been implemented since 2016, which
slows down such investments. But the avoidance of capital controls to get money
out has since stepped up (such as over-invoicing imports from Hong Kong and
taking cash out from there).
So, I don’t agree with my colleague
in Boston. If investment is wrongly classified as imports the underlying
economics of China’s saving glut remains unchanged.
More generally, there is too much
emphasis on the current account numbers. These are relatively small numbers
compared to the large export and import numbers of which they are composed, and
measurement problems on the service side abound. Nor does picking up on the current
account improvement as "good news" stack up with the facts we observe
around the world: on-going deflation pressures and low real interest rates.
The real problem is China doesn’t
consume enough of its own GDP (53 per cent compared to 83 per cent in the
United States). It’s very clear as to which country is causing imbalance in
supply and demand in the world economy. You can’t be the second biggest economy
in the world and hope no one will notice that this investment-to-export growth
strategy is having negative implications for everyone. It may be that Trump’s
"colere" isn’t misplaced in this area. It’s time for China to stop
talking about more openness and just do it for the sake of the collective
interest – but it’s unlikely they will any time soon.
Adrian Blundell-Wignall is a former
director of the OECD, an adjunct professor at Sydney University and author
of Globalisation and Finance at the Crossroads.
James Politi in Washington YESTERDAY Print this page53 China’s economic
relationship with the rest of the world is roughly in balance, according to the
IMF — a significant change after years of criticism from other countries that
China posed a risk to the global economy. The country’s current account
surplus has dropped to close to zero, the IMF reported on Wednesday; for the
first time since 2012, when the IMF began reporting on the imbalances that
afflict the world’s major economies. At just 0.4 per cent of GDP in 2018,
China’s current account surplus declined by 1 percentage point year on year,
according to the IMF. China’s “external position” is “broadly in line” with
“medium-term fundamentals and desirable policies”, the IMF said. For years
China’s current account had showed it to be a big net lender to the world,
running a surplus as high as 10 per cent of GDP in 2007. But in recent years
its economy has become increasingly reliant on domestic demand — as opposed to
exports and foreign investments — and that has helped rebalance its trade
position. “There’s obviously a lot more still to be done, but it’s important to
recognise some of the things that have been done, including increased currency
flexibility and reduced reliance on external demand,” Gita Gopinath, the IMF’s
chief economist, told the Financial Times. “We want China to pivot towards more
consumption-driven growth, while at the same time being careful about a further
build-up in financial risks,” she added. Zhang Jun, head of the school of
economics at Fudan University in Shanghai, said the trend was likely to
continue. “Policy has been very clear that China will speed up opening the
domestic market and increase imports,” he said, adding that current account
deficits were possible in future due to the rapid growth in imports of
services, of which tourist spending is the largest component. “The merchandise
trade has not been able to create a surplus to offset the deficit from service
trade,” he said. However, some economists believe that China’s current account
surplus could rise again, because some of the factors driving the decline, like
the recent fiscal stimulus, could wear off. The virtual elimination of China’s
current account surplus means that trade imbalances are now mostly concentrated
in advanced economies, the IMF said. Overall current account surpluses
and deficits accounted for about 3 per cent of global GDP in 2018, half of
their 6 per cent level in 2007 but only slightly lower than their 3.5 per cent
share in 2013. The eurozone posted a current account surplus of 2.9 per cent of
GDP in 2018, slightly narrower than 2017, as Germany’s surplus fell to 7.3 per
cent from 8 per cent. Despite the improvement, the IMF still judged Germany’s
external position to be “substantially stronger” than fundamentals, and called
for more “growth-oriented fiscal policy” from Berlin. The US current account
deficit was unchanged at 2.3 per cent of GDP, which translated into a
“moderately weaker” external position, the IMF said. It suggested the US needed
fiscal consolidation, structural reforms and the removal of recently imposed
tariffs. The fund also said the UK current account deficit had deteriorated
last year from 3.3 per cent to 3.9 per cent, and was expected to worsen further
to 4.2 per cent of output this year. The IMF has warned that countries
should not be tempted to use protectionist trade measures to reduce current
account balances, as such policies could backfire. “Our position is, and has
been, that tariffs won’t solve imbalances, but will come at the expense of
domestic and global growth,” Ms Gopinath said. “This does not mean that there
are not legitimate concerns about the multilateral trading system, which will
need to be addressed for a durable resolution of trade tensions.” “If we want
to close these imbalances they rest much more on macroeconomic policies and
structural reforms,” she said. Next week, the IMF will update its
forecast for global growth, which currently predicts an expansion of 3.3 per
cent this year, accelerating to 3.6 per cent in 2020. In the report released on
Tuesday, the IMF said that the world could expect a hit to growth amounting to
0.3 per cent of GDP next year because of recently announced and threatened US
tariffs on Chinese products. That would come on top of the 0.2 per cent hit to
global GDP caused by last year’s levies. Additional reporting by Tom Hancock in
Shanghai