China Got 100 Years of Development by the West for Free

Financial analyst and writer Bert Dohmen recently published a book, The Coming China Crisis, predicting a significant economic downturn in the middle kingdom.

At the link below, he is interviewed by Clif Droke, where he makes some important points about China's recent prolonged boom which are rarely made in the financial press.

...They were able to get all this wonderful Western technology free of charge. The Western multinationals all signed over the details of their patents to their Chinese partners. That's gone now. China got about 100 years of development in the West for free.

Now there's a point in the lifecycle of any country where entrepreneurs would be taking over and helping develop, but in China they don't have freedom. In China you see it every step of the way; everything is controlled by the government. Unless China finds someone like Gorbachev to dismantle the Communist regime, China will languish and its growth will decelerate. The private sector is over there is already in recession. The GDP numbers which they advertise at 7 percent is totally phony. The government says people shouldn't use it as being accurate, but as a 'guideline' [laughs]. It's being overstated and the numbers are unreliable. To measure what's really happening we use private sector numbers like electrical consumption, which has declined for 1 ½ years. How can this be if China's economy is growing?

The head of the Communist Party Congress will manipulate a bounce with statistics, as we said last month in our Wellington Letter. When you compile the numbers you can make the economy do whatever you want. The real economy doesn't respond to that, however. In March 2013 China will have a new 5-year plan. Until then things will look rosier, then reality will hit. You just have to look at free market numbers like freight indices. The Baltic Dry Freight Index is a good one to look at. That is now scraping at the bottom of 2008 crisis. In 2008 that index collapsed 93 percent. Freight rates dropped by that much. You could rent a large 1,000 foot carrier at that time for the same cost of a 35-foot boat on Lake Tahoe in 2008! When goods aren't being shipped they're not being used. Freight rates are a much better indicator than GDP numbers.

...This will be like a tsunami going through the economies of the globe. China has been the big locomotive for the world economy. China's stimulus was four times the size per GDP than that of the U.S. They were four times as aggressive as the U.S. Fed in stimulating their economy. This caused a commodities rebound, stock market rebound, etc. Australia was also affected by China's demand for commodities.

Looking forward, I can't understand where any good news is going to come from. We have our analysis and scenarios we go through and every day we review everything and ask if anything has changed that would make us wrong in our predictions or confirm our analysis. Today we found out that China has cancelled a 300 ton soybeans order from the U.S. What does it mean? Does China have too many soybeans? Are the Chinese people not hungry? Are prices too high?

Another factor is that we have some proverbial 'canaries in the mine' in that China is trying to conserve foreign currency outflows. When China buys goods from West they pay in foreign currency, not renminbi. Are they starting to conserve foreign currencies because they're being depleted of all that's leaving the country? We're seeing cancellations and reductions in China left and right. One of our clients sells high grade seafood to China. He told us recently that a big order from a major client from China was cancelled because they couldn't get dollars, foreign currency, from their bank.

So when demand from China goes down it effects the global economy. You don't see this in the daily newspapers or on TV. You don't get this information from a visit to China, either. The China bulls are always touting the fact that China has 1.3 billon people and those numbers will supposedly translate into obscene riches. But the number of people doesn't necessarily mean the country in question will have a beautiful economy. _China's Coming Economic Crisis

Of course, China received a huge amount of foreign investment at the same time it received gifts of large amounts of high technology from foreign partners and investors. Such a huge hand up in productive capacity is not given to just anyone -- because not just anyone would have been able to make good use of it, and given such a good return on investment.

China not only accepts open gifts of patents and technology, it also actively steals technology from friend and foe alike. Such technology theft takes place via unauthorised copying of technology, via on the ground industrial espionage, as well as via advanced cyber-espionage.

This information is mainly of interest when considering what China is likely to do now.

World Bank and US National Intelligence Council Agree: This Will Be the Chinese Century

When the bureaucrats and analysts of the World Bank and the US NIC agree that the US is on the way down, and China is on the way up, then it must be true, nicht wahr?

On Monday, the National Intelligence Council released its fifth “Global Trends” report. Among its conclusions, the study predicted that the Chinese economy would surpass the American one to become the world’s largest “a few years before 2030.” 

The report, a blend of analysis from the American intel community and experts in almost 20 other countries, is consistent with most assessments of the subject. The World Bank, for instance, made the same prediction (pdf) this year.

_World Affairs Journal

Predictions about the ultimate decline of the US -- and the end of a global Pax Americana -- ring true, as long as the nation follows its current political, cultural, immigration, and economic policies. But what about China's ascendancy?

... a growing number of China watchers have been raising the alarm that all is not well in the world’s second-largest economy. Indeed, any discussion of China these days would be far more foresighted to focus on the growing challenges and potential dangers that the new leadership is facing.

Leadership divisions and scandals...

Slowing economic growth...

Irresolvable territorial disputes...

Environmental disasters in the making...

No New ideas...

...Should China’s new leadership merely muddle along for the next decade, then the next turnover of power in 2022 may take place under much more unsettled and less promising conditions. How will the PLA respond to a China that is growing weaker on the world stage or one whose goals are being frustrated by other nations? Will the leadership stick together if growth continues to slow or debt loads increase such that financial crises plague the nation in the coming years? These are questions to which Western and Asian governments should be paying close attention, and they should be figuring out which metrics are most important for understanding China’s current trajectory. _TheDiplomat

It doesn't look as if the authors of the reports from the World Bank or the NIC took all of the listed factors into account when they made their predictions.

An interesting critique of the NIC report

One of the most disturbing aspect of modern scholarly reports such as those from the World Bank and the NIC, is the lack of intellectual depth and diversity that goes into them. Groupthink has wormed its way into all levels and functions of governments, intergovernments, and NGOs -- just as groupthink is in control of most academic and media institutions. And ideological groupthink is merely an excuse for not thinking.

Meanwhile, back in China, the new leadership appears to be doubling down on the mistakes of its most recent predecessors.

...the three principal reasons for China’s growth over the last three decades—continuous reform, benign international environment, and favorable demography—no longer exist. And Chinese leaders cannot just wave a wand and create new conditions for growth. In fact, the anti-reformist bent of the newly unveiled Politburo Standing Committee, the apex of Chinese political power, makes positive change look unlikely.

The triumph of the hard-liners means that, when China needs economic reform the most, the political system will be least able to deliver it. China has progressed about as far as it can within its existing political framework. Today, there is a growing recognition that fundamental economic restructuring cannot occur unless there is far-reaching political reform, reform certainly more ambitious than the “inner-party democracy” that leaders like to talk about. Yet meaningful political reform is completely off the table, as the disappointing lineup of the new Standing Committee makes clear.

China is now trapped in self-reinforcing—and self-defeating—feedback loops. In one of these loops, a slumping economy is creating a crisis of legitimacy. The legitimacy crisis, in turn, is causing a wide-ranging political crackdown. The crackdown makes reform impossible. The lack of reform prevents long-term economic growth. _ World Affairs

China's government is beginning to act as if it believes that the dragon is the new global hegemon. It is clear that China's leaders wish to throw the country's weight around on the global stage. The new leadership should be watched closely for signs of belligerent intent, as China continues a rapid build-up of its military infrastructure.

One of the elementary rules of foreign policy is when you are in a hole, stop digging. But judging by their recent behavior, Beijing’s foreign policy mandarins and national security establishment are clearly in violation of this rule...

At around the same time as the diplomatic uproar over the new Chinese passport design, the People’s Liberation Army Navy (PLAN) conducted its first successful landing and take-off operations from its retrofitted aircraft carrier. The televised test might have boosted the Chinese military’s image and self-confidence, but the message this event sent around the region, given China’s hardline position on territorial disputes and its neighbors’ fears of the PLA’s growing military capabilities, cannot be very reassuring.

But that is not the end of the actions taken by China recently that are likely to cost Beijing’s new government dearly. A few days before Japan’s Diet elections on December 16, which are expected to produce a right-wing government with deep antipathy toward Beijing, the Chinese government escalated its challenge to Japan’s territorial claims to the Senkaku/Diaoyu islands by flying an official, albeit unarmed, maritime surveillance plane over the airspace of the disputed islands. As expected, the move incensed Tokyo and can only be expected to bolster the Liberal Democratic Party’s (LDP) chances and lend more credence to their call for a tougher policy toward China. _TheDiplomat

The future is one of the most difficult things to predict. We know this, because predictions of the future are almost invariably wrong in many or most aspects.

Large bureaucracies in governmental, academic, inter-governmental, commercial, etc. institutions must continue to attempt to chart their paths ahead. To do this, they must continue to make future predictions -- even if they are invariably wrong in most meaningful ways.

What can you as a single individual do? Hope for the best, but prepare for the worst.

Naked Businessmen and Businesswomen Flee China, Russia

Large numbers of China's wealthy businesspersons and government officials have already moved their families and much of their assets overseas. Such persons are known as "naked officials" and "naked businessmen" in the parlance of rumours and off the record conversations about China trends.

Now more and more of these naked men and women are angling to join their families overseas, and renouncing their Chinese citizenship.

According to the 2011 Private Wealth Report, 27% of Chinese entrepreneurs worth more than 100 million RMB ($15.9 million) have already emigrated, while another 47% say they are considering doing so. The number of these so-called “naked businessmen” is massive. The main reasons for businessmen emigrating are: their children’s education, protecting assets, and preparing for retirement.

Increasingly, the general Chinese public has grown aware of this dramatic trend. Last year, out of 5,000 investment immigration visas issued by the U.S., Chinese people accounted for two-thirds of them.

Undoubtedly, the most dazzling fact in all of this is that over 70% of China’s privileged have either emigrated or are on the way to emigrate. It is definitely not normal for 70% of a country’s wealthy class to want to leave the place where they were born and made their fortune. When we connect this piece of news to another study conducted a few years back in which it was said 80% of China’s wealth is in 20% of people’s hands, then it is easy to imagine the scale of the loss of China’s national wealth. _BI

The same phenomenon has been taking place in Russia, since the coming of the Putin power grab and persecution of perceived competitors over the past several years. London has been a particular destination for these naked Russians -- and Putin is not happy about it.

A failing Russian economy is fuelling a brain drain in favour of the British capital, while the City of London’s reputation for light-touch regulation is proving another draw.

...The relative ease of London life means that many Russian businessmen with interests in their home country prefer their families to live here while they make the four-hour commute to Moscow by executive jet. They are also keen to send their children to British schools such as Eton – half a dozen sons of oligarchs started there this year.

“The Russians come to London because it is pleasant and safe,” says Andrew Wordsworth, partner in the Mayfair-based private investigators GPW, whose clients include British-based Russians.

... In the eyes of Vladimir Putin, president of the Russian Federation, Britain’s willingness to provide sanctuary for that group of disaffected Russians known as the London Circle, headed by his friend-turned-mortal-enemy Boris Berezovsky, makes it a hostile power. _Telegraph

These trends are not particularly auspicious omens regarding the futures of China and Russia. But if one is well connected to the corrupt power centres of either country, it is still possible to milk their tattered carcasses.

China Times reported that according to a recent study conducted jointly by the Hurun Research Institute and Bank of China, 60% of China’s richest, (i.e. with assets worth of more than 10 million RMB - $1.6 million) are either applying to emigrate or have already done so.

“Only half a million dollars is enough to obtain a Green Card through the EB-5 Immigrant Investor Program. That’s the price of a Beijing apartment. It’s worth it!” confided a man called Zhang.

Giving their children a better educational environment, safeguarding their wealth, and preparing for their retirement are the three major reasons given by these naked businessmen, according to South Weekly.

...According Austar, one of China’s biggest emigration agencies and also one of China’s most prosperous businesses in recent years, the six most popular destinations for China’s naked businessmen were Canada, United States, Australia, New Zealand, Singapore and the U.K.

In 2009, of all the investment visas in the U.S., 53% came from China. While in 2008, Canada approved more than 10,000 investment visas, of which 70% came from China. _WorldCrunch

More: Why is China suddenly starting to unravel?

Towers, Intermittent Power, and Africa: China Doubles Down

Ground-breaking for a new "world's tallest sky-scraper" is expected to take place in Changsha, Hunan Province, China -- sometime before Christmas of this year. China is going ahead with this building despite the "skyscraper of doom" economic curse that has often befallen the builders of the "world's tallest skyscraper."

Despite a significant economic slowdown and ongoing banking crisis, China continues to invest in an overbuild of real estate construction, green intermittent energy production, and an expansive land-grab of third world resources -- particularly in Africa.

Broad Group Sky City Tower

Foundation work is to begin at the end of the month once the Chinese authorities give the final go ahead to the project.

According to the construction company BROAD Sustainable Building (BSB), the skyscraper will be erected at the rate of five floors per day thanks to a prefabricated modular technology. _World's Tallest Building in 90 Days

The building is to be 220 stories tall, topping out at 838 metres.

Bad loan investments in overcapacity over multiple sectors typify the current phase of Chinese development. The installment of a new generation of corrupt princeling leaders is not likely to change current trends -- despite imminent warnings of economic weakness in the middle kingdom.

"You sometimes have to wonder why a certain loan was made," said Stanley Li, head of China bank research at Mirae Asset Management. "One problem with many Chinese banks is that we do not have much insight into their lending practices."

...A Reuters News analysis on 40 of China's most indebted companies - most of them from sectors already reeling with overcapacity such as wind-turbine maker Xinjiang Goldwind Science & Technology Co Ltd (002202.SZ) and COSCO Shipping Co Ltd (600428.SS) - showed debt levels rising as profits decline across industries that Beijing has said it wants to promote.

On average, operating profit at these companies dropped 15 percent in 2011 as their debt piles grew by the same percentage, according to company and Thomson Reuters data. _China Banks Questionable

Over-investment in real estate and in companies that produce intermittent unreliable sources of energy, is likely to come back to haunt Chinese banks and local governments that took part in the unwise debt practises.

China has even exported this tendency to overbuild in unprofitable sectors to Africa, where Chinese built "luxury ghost cities" have already started to pop up -- priced well outside the incomes of locals.

Many African nations look at the new influx of Chinese capital and infrastructure projects as a type of salvation from themselves, as it were. Unfortunately, the future of Africa will not be redeemed by outsiders -- particularly not the Chinese.

...in less than three generations, 41% of the world's youth will be African; by 2035, Africa's labour force will be larger than China's, by 2050, over 1/4 of the world's labour force will be African. _Africa's Youth

China has a good relationship with virtually all African dictators, including Mugabe of Zimbabwe and the bloody-handed Omar al-Bashir of Sudan. China makes no pretense of its true purpose in China -- to do whatever it takes to extract the resources, and no more. When China takes what it wants, then walks away, all of Africa's problems will still be in place. And getting worse.

Unfortunately for China, its investments in commodities are not always based upon a realistic assessment of real trends in global markets and needs. The same type of misallocation and malinvestment that is so common inside of China, is also common in China's outside investments.

Enemies of China might want to encourage the dragon to over-invest and over-build, doubling down on popular but increasingly unprofitable sectors. More ghost cities, ghost towers, green ghost energy infrastructure, and ghost overseas empires in the jungles and the sand. And all of that without reforming its corrupt governments, banks, and state-owned enterprises.

Watch and see.

"To get ahead here you have to be corrupt or have connections"

Chinese professionals are growing wary of what may come in the future. They are beginning to pick up and leave the country in unprecedented numbers. Unsure of their fates in new and strange lands, they only know that China cannot offer them what they need.

“We don’t feel that China is suitable for people like us,” Ms. Wang said... “To get ahead here you have to be corrupt or have connections; we prefer a stable life.”

...At 30, Chen Kuo had what many Chinese dream of: her own apartment and a well-paying job at a multinational corporation. But in mid-October, Ms. Chen boarded a midnight flight for Australia to begin a new life with no sure prospects...

...Like hundreds of thousands of Chinese who leave each year, she was driven by an overriding sense that she could do better outside China. Despite China’s tremendous economic successes in recent years, she was lured by Australia’s healthier environment, robust social services and the freedom to start a family in a country that guarantees religious freedoms.

...Few emigrants from China cite politics, but it underlies many of their concerns. They talk about a development-at-all-costs strategy that has ruined the environment, as well as a deteriorating social and moral fabric that makes China feel like a chillier place than when they were growing up. Over all, there is a sense that despite all the gains in recent decades, China’s political and social trajectory is still highly uncertain.

“People who are middle class in China don’t feel secure for their future and especially for their children’s future,” said Cao Cong, an associate professor at the University of Nottingham who has studied Chinese migration. “They don’t think the political situation is stable.”

Most migrants seem to see a foreign passport as insurance against the worst-case scenario rather than as a complete abandonment of China. _NYT

They are leaving China in record numbers, off to live in Canada, Australia, Europe, the US, New Zealand, Singapore, . . . . somewhere with opportunity, freedom, and perhaps a bit less corruption. Note that none of the migrants interviewed by the NYT listed Russia as their destination.

China's leaders, their families, and friends, have gotten very wealthy under the current CCP regime. But they are few, and the Chinese are almost a billion and half people. Instability and popular unrest could crop up very quickly and "unexpectedly."

The [man] tipped to be anointed China’s new president when the unelected and self-replicating Communist Party leadership meets on Nov. 8 is a shadowy geezer by the name of Xi Jinping. His family has amassed about $400 million in a wealth trajectory that by the oddest coincidence mirrors Comrade Xi’s rise through party ranks. But that’s nothing. By the meticulous reckoning of a Pulitzer-worthy New York Times investigation published last week, the family of outgoing Chinese Prime Minister Wen Jiabao has accrued to itself a net worth of nearly $3 billion. _TC

China's CCP leaders understand that they must make an effort to control the public image of corruption in the top party ranks. The perception of corruption has led to the toppling of Chinese governments in the past.

The Communist Party knows its history: one of the many compelling reasons it originally came to power over the Kuomintang was the latter's wide spread corruption, a burden born by rural Chinese in particular. Today's leaders in China know that they can ill afford to turn a blind eye forever on corruption; it took down their predecessors, and it could also curtail their leadership. Income inequality remains a major source of insecurity. The Pew report notes "... there is a general consensus in China that the economic gains of recent years have not benefited everyone equally." In what is coming to be a common refrain not only in China, but in the United States as well, Pew found "81% [of Chinese] agree with the statement the 'rich just get richer while the poor get poorer,' and 45% completely agree." (emphasis original) This has obvious implications to the future of economic reform in China.

If the next group of China's leadership is not able to illustrate how additional capitalist reforms empower the individual and set in motion greater economic equality, it will be difficult for the trajectory of China's anticipated reform to match what the West has long hoped to see. _AT

You see the fix China's leaders are in? Hint: Bad loans, shoddy construction, failing state owned enterprises, poisoned air, water, soil, food, etc etc.

Without economic reforms, the China gravy train may well go off the rails and crash. Economic growth would slow or stop. If that happens, the people of China in their unemployed poverty will be very unhappy with their corrupt and wealthy leaders.

But if economic reforms are enacted, saving the Chinese boom, hundreds of leaders and their cronies -- who have gotten very rich from the way things are -- will speed up the rate of capital flight out of the country, leaving many reasonable facsimiles of rusted, crumbling, polluted, ghost infrastructures in their wake. And all that corruption will be very difficult to cover up.

China's leaders must quietly keep the corrupt kleptocrats and their cronies happy, while at the same time gainfully employing enough of China's people to keep them from rebelling.

Meanwhile, the trickle of middle class professionals leaving China is growing to a significant stream. And the stream of the wealthy classes along with the corrupt classes who were already leaving China, could easily grow into a river -- taking their wealth and gold with them as much as possible.

Could anyone have predicted all this? Good question. More on that later.

More:

Stealth power grab at the top of China's government

More on China corruption and resulting popular unrest

500 riots and demonstrations every day in China There are chaotic forces at play. Be careful.

Could It Happen? China hastens its planned invasion of Siberia to access newly discovered oil and gold fields

The title of this posting is taken from the Wikipedia article describing the Tom Clancy thriller: The Bear and the Dragon. Novelists are known for taking liberties with the facts, but that is all in the nature of fiction writing. In reality, could China be planning an invasion of Siberia in order to take over the massive resources there?

Certainly the Russians have been considering the possibility for several years:

Russian assessments from 1997 suggested that China, not the United States, posed the greatest threat to Russia’s interests and allies. Indeed, leading Russian scholars of international relations such as Alexei Arbatov predicted that over the next five to 20 years, Russia should carefully watch China’s expansionism toward Siberia and the Russian Far East, as well as Central Asia ... _thediplomat

“[Russians are] still worried that China will invade Siberia one day because of the resources,” Dmitry Gorenburg, a senior analyst at military and public sector think tank CNA, said in an interview last month.

“Because from the Russian point of view it’s a very sparsely populated area, hard to defend, very remote from the center of Russia,” he said. _Taipei Times

They have good reason to be concerned. The ethnic Russian population of Siberia is disappearing at the same time that the Chinese population in Siberia -- legal and illegal -- is growing. Russia's population is increasingly crowded to the west of the Urals, making it more difficult for the Russian Bear to keep an eye on its vast and immeasurably wealthy land areas to the west.

And on another level, Russia needs to be concerned about the demographic pressures influencing China's top leaders. Like most of East Asia, China is rapidly ageing -- losing its young workforce at the same time it is gaining large populations of the old and infirm.

Whatever China's leaders are going to do to guarantee China's rightful place in the top rank of world powers, it will need to do before its people turn gray and shrunken.

Russia is struggling with an economy built upon an over-reliance on oil & gas exports -- and very little else. Corrupt -- like most oil dictatorships -- Russia also struggles with a collapsing public health infrastructure, an ongoing brain drain of the best and brightest of its young, and a level of stealth capital flight that officials cannot tally, much less control.

Russia is a nation that shows the world a pretty face, but inside it is rotting from tuberculosis, HIV, alcoholism, and a deep despair that too often results in suicide. And the numbers of ethnic Russians continues to drop -- while the numbers of immigrants from the third world grows, blurring the underlying population trends.

Will China invade Siberia? It has been doing so for over a hundred years. But the pace of invasion does seem to have picked up recently.

It is more than likely that China's leaders are biding their time, scouting the terrain, looking for the best opportunity. In the end, Tom Clancy may have gotten off a lucky shot.

"The China Economic Boom Will Cease . . . . . "

A Turning Point for China

After a long run of good luck, modern China is experiencing multiple crises, each of which threatens to topple China from its important role as one of the world's main economic drivers.

China appears to be facing multiple crises, each exacerbating the other. China could have its turn at instigating global recession. The rest of the globe should expect turbulence and uncertainty.

There is a political crisis arising from the fact that the leadership transition is clearly not going as smoothly as planned: The party appears riddled with acute factionalism, heads are falling, but opacity remains. The dramatic fall of the powerful princeling Bo Xilai and his wife and their sordid scandal eroded the party’s legitimacy. The unexplained disappearance of the presumed incumbent to the presidency before his sudden reappearance two weeks later raised serious questions about the secretive party’s mode of operation.

The most profound crisis, one that lies at the heart of all the other crises, is the social crisis. In discussions with Chinese intellectuals in recent weeks, the word that keeps emerging is “anger.” People are angry at inequality, injustice, corruption, pollution, flagrant abuse of privilege, exorbitant prices of real estate driven by speculation. Social unrest is expressed through increasing number of demonstrations over quality-of-life issues, for example recently in Dalian, over a toxic chemical plant, and by a hyperactive blogosphere.

China’s environmental crisis, with the world’s highest levels of pollution and permanent urban smog, fuels the social crisis. The economic crisis arises not so much because of a 2 percent, or more, fall in the growth rate, but in a surprisingly widespread pessimism in respect to the future. The state is too bullying, the financial system is byzantine, the education system fails to provide needed quality, and the goals of innovation and higher value-added set out in the 12th Five Year Plan appear unattainable because of the party’s refusal or incapacity to carry out reforms.

The social and economic crises are rendered more acute by China’s looming demographic crisis as the population rapidly ages and the proportion remaining active in the labor market diminishes.

In some respects perhaps the most dangerous of all the crises is the geopolitical. Needless to say, it’s exacerbated by the simultaneous economic, social and political crises. China is currently in a state of territorial conflict with at least three neighbors – Japan, Vietnam and the Philippines – while relations with a number of major powers, notably India, Russia and the US, are tense. These are further fueled by increasingly strident rising nationalism, now being ramped up with anti-Japanese demonstrations and display of military might. Though war still seems a reasonably remote possibility, by no means can it be ruled out totally.

The world should take notice.... The China economic boom will cease; developing countries should anticipate a possibly steep decline in demand for commodities.

China will likely become more protectionist, reflecting the paralytic state of the global trade agenda and retaliation for likely protectionist measures from others, notably the US. _Asia Sentinel

These are all topics which have been discussed here routinely over the past few years, but are just now making their way into mainstream discussions at think tanks, among academics, and by government analysts.

For example:

... corruption and unreliable economic data is causing growing financial problems in China. There has been massive overbuilding, which has been impossible to hide. All those unoccupied residences and commercial buildings are very obvious. These were all built with loans from state-owned Chinese banks. The government refuses to reveal how badly the banking system has been hurt by all the obvious (and less obvious) bad loans.

There is a lot of corruption in China and several provinces and one major city (Dongguan) are talking about bankruptcy because they cannot borrow enough money to keep their unprofitable operations going. Sort of like what happened in Greece, but on a much larger scale. A major financial crisis could limit the loans needed to keep economic growth going. But it's become clear that much of the economic growth in the last decade was created by building stuff that was not needed and is non-productive. Manufacturing and exports are declining and, despite the absence of government data, there is growing unemployment. The Chinese stock market has declined 20 percent in the last year and the holdings of the richest Chinese have gone down by a third in the same period. _StrategyPage

No one can predict the exact sequence and timing of the coming changes in China, and the resulting consequences for China's trading partners and the global economy. It is safe to say that wise planners and investors will build a good deal of flexibility into their future plans.

Can Affordable Sex Robots Save China?

China is facing an existential crisis. Due to government policy and societal preferences, China has a large excess of unmarried young men -- all juiced up but no women in sight. In fact, China is in extreme danger of a fatal society-wide testosterone poisoning.

It's a tough, competitive life for men in China these days, in part due to the aftershocks of the one-child policy, which has left the country with a gaping gender imbalance of 120 boys for every 100 girls. Author Mara Hvistendahl reports in her book, Unnatural Selection: Choosing Boys Over Girls, and the Consequences of a World Full of Men, that by late 2020, 15 percent (or roughly one in six) Chinese men of marriageable age will be unable to find a bride. She predicts that China will see an increase in what's already happening in Taiwan and South Korea, where men doomed to bachelorhood as a result of gender imbalance are boarding planes to Vietnam. Roughly $10,000 covers their flight, room and board, and the price of a Vietnamese wife, according to Hvistendahl, and this practice has become so common that the imported wives "get a booklet translated into Vietnamese explaining their rights when they get married at the Taiwanese Consulate."

Although instances of bride-buying and bride-napping are often reported in China, men are also turning to the web in the face of increasingly heavy competition to attract a mate.... the most disadvantaged are the country's poor male farmers, who now live at society's rock bottom in rural villages devoid of women their age (as females tend to leave in search of better jobs and marriage prospects)... _FP

None of the conventional approaches to getting a wife are likely to help China's poor and lowly farmers, living in womanless villages, at the bottom of the society's hierarchy. China needs for its farmers to produce food for a vast and still growing population, but the women have all moved to the cities in search of factory jobs. So what's a poor farmer to do, when he can't afford a mail order bride, and is not up to the job of stealing another man's daughter by force, to take as his wife?

Image Source

Perhaps the answer for China's future, is the development of an affordable sex robot. A sex robot capable not only of satisfying a poor farmer's male urges, but also willing and able to help do the chores around the farm.

Many scholars of sex who have studied the topic now believe that realistic sex robots are inevitable. Most experts assume that sex robots will be used as private sex toys for the financially well off, or as a substitute for prostitutes in the sex trade.

They don't spread disease and they can't be sold into sex slavery.

Those are just two of the advantages of [sex robots], which will be edging out their human competition in the sex tourism market by the year 2050, according to an article published in the journal Futures. _HP

Robots will be taking on quite a wide range of roles in the near future. Robots are spreading from industrial applications to home applications -- cleaning the house, mowing the lawn, serving as robo-nannies and private tutors for youngsters, and yes, serving as intimate companions for lonely hearts.

But such robots are likely to be too expensive for China's poverty-stricken farmers, stuck in China's female-free back country. They need an affordable sex robot, that can also help around the farm.

Humanoid robots may also be able to assist China in dealing with its rapidly developing pensions catastrophe. New robotic workers of all types could help support China's productivity, and boost revenues into China's flagging pensions systems.

Perhaps instead of building new stealth bombers, nuclear submarines, and giant aircraft carriers, China needs to develop and build affordable helpmates for its lonely and long-suffering farmers, and pension-friendly worker robots -- before the entire nation collapses and starves to death.

Cross-posted to Al Fin, You Sexy Thing!!!

Deep Structural Problems Threaten China, Russia

Both China and Russia suffer from deep, structural problems which threaten the long-term viability of their respective governmental organisations. Many of China's problems can be symbolised by the ongoing spate of collapsing buildings, bridges, tunnels, power lines, railways, and other types of hasty construction and engineering.

Business Week

Nearly every month brings news of an infrastructure failure, dramatic or mundane. In August a new $300 million eight-lane suspension bridge in Harbin collapsed, sending four trucks tumbling and leaving three dead. In 2009 a nearly completed building in Shanghai toppled like a domino because its foundation was inadequate. The U.K.’s Telegraph reported that within months of opening last year, the $210 million Guangzhou Opera House began to shed its glass window panels and developed large cracks in its ceiling. Last year writer Evan Osnos chronicled on his New Yorker blog the premature decline of his courtyard house: “When the rainy season hit Beijing, our house began to show its age. About four years old, to be precise.”

All of this is at odds with the image overseas of China winning the “infrastructure race,” as the headline of an Aug. 24 online story from Foreign Policy put it. China’s structural woes stem in part from the government’s focus on quantity of growth over quality.

...Poor materials can cause problems: The collapse of school buildings in the wake of the 2008 Wenchuan earthquake was due in part to the use of low-quality cement, resulting in so-called tofu buildings. “When cement is mixed inadequately or when other materials are mixed in, it’s not very strong, so any major storm or stress on a building could make it fall down,” says Francis Cheung, author of brokerage firm CLSA’s 2012 report, China’s Infrastructure Bubble. _BW

China's problems go much deeper than corrupt and sloppy engineering, of course. China's banking system is choking on bad loans to state-owned and state-connected enterprises. Every part of China's government is tied up in the massive corruption -- from the military to civil security forces to local governments to top and mid-level political officials.

Built on such a shaky foundation, China's future as a going concern should be open to question -- at least in its present iterative form.

Putin's Russia -- a neo-fascist enterprise corrupt from top to bottom -- is beginning to suffer for its over-dependence on energy prices and profits:

Gazprom, the natural gas company controlled by the Russian state, is in crisis. It is likely to fall victim to the shale gas revolution that is under way across the US. The shale gas revolution will probably have telling consequences for Russian state capitalism and President Vladimir Putin’s power....

...Gazprom’s demise looks likely. With its demise, Russia’s revenues would dwindle. Mr Putin‘s model of state capitalism would suffer a devastating blow from Gazprom’s fall. If not even Gazprom is viable, which Russian state company is?...

...Curiously, in 2011 Gazprom was formally the most profitable company in the world with purported net profits of $46bn, but these profits were hardly real. Investment analysts opined that no less than $40bn disappeared through inefficiency or corruption. Gazprom’s cash flow was barely positive.

In their 2010 booklet Putin and Gazprom , Boris Nemtsov and Vladimir Milov, the opposition politicians, detailed how assets were being stripped from Gazprom through large kickbacks on pipeline construction and cheap sales of financial and media subsidiaries to Putin cronies. Since shareholders have realised that only their dividend yield is material, Gazprom’s market value has plummeted by two-thirds from $365bn in May 2008 to $120bn today.

For years, many analysts have said that Russia will reform only when the oil price falls because Gazprom seems to be the Kremlin’s main slush fund, which is now being drastically reduced. The Kremlin will have little choice but to forsake its mega-projects. It has already abandoned the mastodon Arctic Shtokman field. The next steps should be to back out of South Stream, the superfluous and exceedingly expensive pipeline project, as well as the planned gigantic sky-rise headquarters in St Petersburg. But that will hardly suffice. This dysfunctional former Soviet gas ministry will have to be cut up into real companies, which need to be privatised.

_FT

h/t The GWPF

Both China and Russia are nations of great ambition. But no matter how ambitious a government's goals, if the foundations of its very existence are cracked and crumbling, the Potemkin Village is unlikely to remain standing long enough to bluster its way to the final goal.

Massive Pre-Fabricated Towers a Metaphor for China

Wired magazine features an article on Chinese visionary engineer and architect, Zhang Yue. Zhang is the human force behind Broad Sustainable Building, a company that speed-builds prefabricated skyscrapers inside giant factories in Hunan.

Wired

In late 2011, Broad built a 30-story building in 15 days; now it intends to use similar methods to erect the world’s tallest building in just seven months. Perhaps you’re already familiar with Zhang’s handiwork: On New Year’s Day 2012, Broad released a time-lapse video of its 30-story achievement that quickly went viral: construction workers buzzing around like gnats while a clock in the corner of the screen marks the time. In just 360 hours, a 328-foot-tall tower called the T30 rises from an empty site to overlook Hunan’s Xiang River.

....The pace of Broad Sustainable Building’s development is driven entirely by this one man. Broad Town, the sprawling headquarters, is completely Zhang’s creation. Employees call him not “the chairman” or “our chairman” but “my chairman.” To become an employee of Broad, you must recite a life manual penned by Zhang, guidelines that include tips on saving energy, brushing your teeth, and having children. All prospective employees must be able, over a two-day period, to run 7.5 miles. You can eat for free at Broad Town cafeterias unless someone catches you wasting food, at which point you’re not merely fined but publicly shamed. _Wired

Wired

So far, Broad has built 16 structures in China, plus another in Cancun. They are fabricated in sections at two factories in Hunan, roughly an hour’s drive from Broad Town. From there the modules—complete with preinstalled ducts and plumbing for electricity, water, and other infrastructure—are shipped to the site and assembled like Legos. The company is in the process of franchising this technology to partners in India, Brazil, and Russia. What it’s selling is the world’s first standardized skyscraper, and with it, Zhang aims to turn Broad into the McDonald’s of the sustainable building industry.

...modular and prefabricated buildings in the West are, for the most part, low-rise. Broad is alone—perhaps forebodingly alone—in applying these methods to skyscrapers. For Zhang, the environmental savings alone justify the effort. According to Broad’s numbers, a traditional high-rise will produce about 3,000 tons of construction waste, while a Broad building will produce only 25 tons. Traditional buildings also require 5,000 tons of water onsite to build, while Broad buildings use none.

...Broad’s method offers a rare sort of consistency. Its materials are uniform and dependable. There’s little opportunity for the construction workers to cut corners, since doing so would leave stray pieces, like when you bungle your Ikea desk. And with Broad’s approach, consistency can be had on the cheap: The T30 cost just $1,000 per square meter to build, compared with around $1,400 for traditional commercial high-rise construction in China.

The building process is also safer. Jiang tells me that during the construction of the first 20 Broad buildings, “not even one fingernail was hurt.” Elevator systems—the base, rails, and machine room—can be installed at the factory, eliminating the risk of a technician falling down a 30-story elevator shaft. And instead of shipping an elevator car to the site in pieces, Broad orders a finished car and drops it into the shaft by crane. In the future, elevator manufacturers are hoping to preinstall the doors, completely eliminating any chance that a worker might fall.

While Jiang focuses on bringing Broad buildings to the world, her boss is fixated on the company’s most outlandish plan—the J220, a factory-built 220-floor behemoth that would just happen to be the tallest building in the world. It’s hard to say for sure that the 16-million-square-foot plan isn’t entirely a publicity stunt. But Zhang has hired some of the engineers who worked on the current height-record holder, Dubai’s Burj Khalifa, and Broad has created two large models of “Sky City” (as the J220 has been nicknamed). The foundation is scheduled to be laid in November at a site in Hunan; if everything goes well, the building will be complete in March 2013. All in all, including factory time and onsite time, construction is expected to take just seven months. Again, that’s assuming it really happens: When my guide at the T30 plugs in one of the models and the lights flicker on, he tells me, “My chairman says we have to attract eyes. We have to shock the world.”

But if all Broad ever does is build 30-story skyscrapers—in 15 days, at $1,000 per square foot, with little waste and low worker risk, and where the end result can withstand a 9.0 quake—it will have shocked the world quite enough. _Wired

If these buildings are as safe and economical as is claimed, the technology is likely to catch on in the emerging world -- where populations are still growing, and urban living and office space can come at a premium.

China is still in the process of urbanising its massive rural populations, and requires safe building methods to replace its current infrastructure -- which tends to collapse almost as soon as it is built.

These buildings are monotonous, and living in them is likely to be mind-numbing in many ways. But increasingly wealthy Chinese leaders and princelings are unlikely to spare much concern about these things, where the masses are concerned.

The inevitable problems which follow any massive program of social engineering, are unlikely to be widely publicised anytime soon, inside China or any other of the emerging or submerging nations with growing populations.

The visionary technologies embodied in Zhang's approach should be celebrated. We can only hope that these breakthroughs will not be used by China's corrupt leadership to further confine and regiment an already long-suffering people.

China: Last Seen Being Buried Underneath Giant Mounds of Unsold Steel, Automobiles, and Solar Panels

The glut of everything from steel and household appliances to cars and apartments is hampering China’s efforts to emerge from a sharp economic slowdown. It has also produced a series of price wars and has led manufacturers to redouble efforts to export what they cannot sell at home.

The severity of China’s inventory overhang has been carefully masked by the blocking or adjusting of economic data by the Chinese government — all part of an effort to prop up confidence in the economy among business managers and investors _NYT

China seems unable to switch gears from the mode of capital production which worked so well back in the 1990s and early 2000s. Despite the prolonged economic slowdowns bedeviling the US and Europe, China continues to pretend that it can produce and export its way out of any economic difficulty.

Officially, though, most of the inventory problems are a nonissue for the government.

The Public Security Bureau, for example, has halted the release of data about slumping car registrations. Data on the steel sector has been repeatedly revised this year after a new method showed a steeper downturn than the government had acknowledged. And while rows of empty apartment buildings line highways outside major cities all over China, the government has not released information about the number of empty apartments since 2008.

Yet businesspeople in a wide range of industries have little doubt that the Chinese economy is in trouble _NYT

More underlying problems in China's economy

A problem that becomes ever more difficult to conceal

China's government cannot allow employment to fall too low, or it will have massive popular unrest on its hands. And yet there is a limit to how far China can coast on its capital reserves built up during the great bubble years.

China's leaders are lost at sea, just at a time when they are planning a crucial "change of watch" in top leadership. The new generation of leaders and princelings will be even less prepared to deal with China's mounting economic and social problems.

The pressure is building within the middle kingdom. The only certain thing is that most pundits' predictions for China are likely to be wrong.

China: The Biggest Loser in Green Energy?

This article is cross-posted to Al Fin Energy blog

China is losing a lot of money on solar -- even more than Obama lost betting on the intermittent unreliable form of energy!

China’s top ten photovoltaic makers have accumulated a combined debt of 17.5 billion U.S. dollars so far, leading the whole industry to the brink of bankruptcy, data from U.S. investment agency Maxim Group showed.

Goodness. That’s 35 Solyndras!

LDK Solar, the world’s second-largest maker of solar wafers, and Suntech Power, the world’s largest solar panels producer, are the mostly likely to be headed for bankruptcy, Maxim noted. LDK reported a net profit loss of 1.08 billion yuan in the first half of this year, with a total liability of 26.7 billion yuan, about 88 percent of its total assets. 2.42 billion yuan of debts will come due in 2013, compared with a cash pile of only 830 million yuan. With its debt-to-equity ratio at 7.4, the Jiangxi-based LDK has already been in insolvency based on corporate accounting standards in the Europe and the United States, according to Maxim. A bankruptcy filing or restructuring could be needed for LDK, it added. _Reason

Unfortunately for the Chinese people, solar companies in China are devastating the landscape with toxic waste on a monumental scale.

And more than half of China's installed wind power lies fallow -- disconnected from the power grid! Imagine all the wasted resources, just to be able to claim a large installed wind power base.

But knowledge of the grand green charade of China's wind and solar industries has not reduced the fervour of US green political activists such as Barack Obama or Senator Harry Reid of Nevada. In fact, Senator Reid is indulging in a grand corrupt and nepotistic scheme in his home state of Nevada, involving a public lands give-away to a Chinese solar company and an associated US company involving his own son!

Of course this type of insider political deal is not unusual for either Nevada - style or Chicago - style political operators.

Energy Producer Land Requirements

China's grand scheme of infrastructure buildup -- including green infrastructure -- is proving to be something of a big bomb. China has been spending money hand over fist, stalling for time in hope that its big export customers -- Europe and North America -- would pull out of their economic doldrums, and start to buy Chinese products on a grand scale, once again.

China is getting a bit desperate, and cannot help but be relieved every time a foreign sucker -- in Germany, the US, Australia ect. -- gets sucked into another green energy scam.

Yes, China is poisoning itself to build and sell intermittent unreliable products such as big wind and big solar energy generation equipment. But if foreign devils like Harry Reid, Barack Obama, Angela Merkel, etc. are stupid enough to buy this junk at high prices, why not? It's not as if China's people can do anything about it.

The League of Immortal Billionaires

PopSci

Earlier this year, a Russian media mogul named Dmitry Itskov formally announced his intention to disembody our conscious minds and upload them to a hologram--an avatar--by 2045. In other words he outlined a plan to achieve immortality, removing the human mind from the physical constraints presented by the biological human body. He was serious. And now, in a letter to the members of the Forbes World’s Billionaire’s List, he’s offering up that immortality to the world’s 1,266 richest people.

“Many of you who have accumulated great wealth by making success of your businesses are supporting science, the arts and charities. I urge you to take note of the vital importance of funding scientific development in the field of cybernetic immortality and the artificial body,” Itskov wrote in the letter. “Such research has the potential to free you, as well as the majority of all people on our planet, from disease, old age and even death.” _PopSci

If this idea pans out, it will provide the Earth's billionaires with more time to accumulate wealth and influence than they could have previously dreamed. Such billionaire avatars would have the time to play high stakes games of poker stretching over centuries, rather than mere hours or days.

Over such time periods, the Earth's economies are likely to experience any number of boom and bust cycles -- each cycle presenting huge opportunities for capital acquisition. The power to manipulate markets, economies, and governments would grow accordingly.

We are learning that China's economy is not up to the task of saving the world from another recession.

Peter Misek: We came back from China really depressed, I have to say. It appears that mainland China is correcting significantly. The statistics the government publishes, frankly we think are largely fabricated. So you have to rely on other statistics such as retail sales, electricity usage, mall traffic, etc. And what we saw, and what we heard was pretty grim. We think consumer electronic sales could be falling double-digits year-over-year in June and thus far in July. And we think the catalyst frankly is job losses. The premier of China was on this morning basically saying the labor situation is severe, meaning job losses are accelerating and unemployment is skyrocketing. _Mish

Europe is experiencing rapid capital displacement:

Source
You can see capital moving rapidly away from the marginal European economies toward those which are considered to have a sounder financial basis. What you cannot see in this chart is the capital which is moving out of the EU entirely, to Switzerland and elsewhere.

An immortal billionaire avatar could easily pull the strings to move large blocks of capital from one arena to another, as the situation warrants. Just as long as financial institutions could be sure that the avatar was sending the orders, and not some hacker who had tapped into the avatar's communications network or data base.

Personally, I do not see a great deal of capital flight going into Russia. Likewise, it isn't very probable that many billionaires will be eager to move their "souls" into a Russian controlled data bank complex, if they are not eager to move their capital there.

Russia's core population is slowly collapsing. Will this Russian media tycoon open his data banks to receive the souls of ordinary Russians, to keep the country's "population" from dwindling to virtually nothing? That might be one way to save the country, and would certainly be a nobler gesture than the attempt to trap and control the wispy remnants of Earth's billionaires, inside an electronic purgatory.

Battle for Control of China's Government, Military

The recent downfall of Chongqing boss Bo Xilai is just a bare hint of the underlying conflict over control of China's security and military power apparatus.

AN epic battle for control of the three-million-strong People's Liberation Army has broken out as the power struggle in China enters a new phase.

At its centre is President Hu Jintao, who visited Hong Kong amid tight security over the weekend for the 15th anniversary of the handover from British rule.

Mr Hu is attempting to stay in charge of the military after he steps down later this year as President and as head of the Communist Party, according to Chinese sources in Hong Kong who have been briefed on party affairs.

Talk of his bid came as party insiders leaked the most detailed account yet of the internal strife that led to shots being fired in Beijing in a confrontation between troops and paramilitary police on the night of March 19.

Rumours of an attempted coup swept the capital but were officially denied.

...The dramatic sequence of events - the most destabilising in Beijing since the Tiananmen Square protests of 1989 - has been pieced together by Qianshao, a magazine based in Hong Kong but known for its political connections in China.

Mr Hu genuinely feared a coup by radical supporters of Bo Xilai, the former party boss of Chongqing, according to Qianshao's editor, Liu Dawen, a veteran of 30 years of delving into party secrets.

...The ousted Mr Bo had one powerful supporter at the top - the security supremo Zhou Yongkang. He had 800,000 police under his authority and kept units of the paramilitary People's Armed Police on duty around his offices in the capital. _Australian

Bo Xilai had supporters in both the military and in domestic security, as well as among a number of the shadowy security and paramilitary organisations that confuse the issues of ultimate power from China's periphery to its center.

Zhou Yongkang... was party secretary at the ministry of public security from 2002-07, before becoming the Politburo’s man in charge of domestic security—secret police and all. He was an ally of Bo Xilai, a fellow Politburo member, until Mr Bo was purged earlier this year.

Mr Zhou, who is said to have backed Mr Bo to succeed him, has presided over heady days for the men and women in blue (and plainclothes). China’s domestic-security budget has surged to an astonishing $110 billion a year, larger than declared defence spending.

...The dilemma for the party, as Mr Li sees it, is that the very factors that threaten the party and made Mr Zhou and the security state powerful still exist: “If you reduce the spending on police, on security, then how to deal with the possible protests?” So murky units such as the 610 Office, whose members have surfaced, for example, in Mr Chen’s security cordon, still thrive. Ai Weiwei, a dissident and artist who was detained in irregular fashion last year by police, says security officers can be vague about precisely which branch of the party-state they work for. _Economist

Foreign observers of China find it difficult to understand all the undercurrents of intrigue involved in the ongoing power struggle within China's top levels of government. But one can be reasonably sure that what is happening at the upper levels of power is also happening at all other levels of power in China -- from top to bottom.

The nine Chinese maritime agencies jockeying for power in the South China Sea, are a reflection of the multiple centres of power, and multiple clashes of personal ambition within and between every governmental agency.

China is a bubbling cauldron of intrigue and shadows. Holding such an empire together under the pretense of integrated nationhood, is not as easy as it looks from the outside.

China Playing "Catch-Up" in Space Race

Update 27 June 2012: China Deeply Suspicious of USAF X-37B Spaceplane

China successfully docked its Shenzhou 9 spacecract with an orbiting spacelab, just weeks after private US space company SpaceX delivered cargo to the International Space Station. While China's accomplishment should be celebrated as a milestone in that nation's ability to achieve a human presence in space, we should have no illusions about China's current ranking in the international space race.

China's space activity is an appendage of its military organisation. That will be a drag on its speed of space accomplishments -- not only compared with much smaller and more nimble SpaceX, but even with the US military, significant parts of which have adopted the motto: "smaller, cheaper, faster, better."

...the X-37B seems to be a triumph of spacecraft reusability, the holy grail of latter-day western space flight. In December 2010, the first X-37B (called OTV-1) landed at Vandenberg Air Force Base in California after a 220-day mission, its nose still glowing in infrared footage with the residual heat of its incandescent re-entry. Now that mission time has been more than doubled by the second vehicle which landed on 16 June: OTV-2 managed an astonishing 469 days in orbit. _NewScientist

In geopolitical terms, and at a time of major cost pressures, developing viable reusability like this is key. It is the major technology driver for SpaceX, for example, the first firm to fly a commercial cargo flight to the ISS and which is now converting that technology for crewed missions. Boeing says the X-37B is designed to develop "reusable space vehicle technologies that could become key enablers for future space missions". Its design is scalable, too, so larger versions could be made to carry astronauts.

So while China's achievement today is impressive, it's on the trailing edge of space-flight technology: the US and Russia docked with their own orbital space stations in the early 1970s - and even with each other in Apollo and Soyuz capsules in 1975. Congratulations to the Chinese space agency - but the landing of the X-37B only serves to show them how far they have to go. _NewScientist

USAF X37B Lands AFter 469 Days in Orbit

Innovative Chinese Construction Method Has Global Implications

Chinese construction conglomerate "Broad Group of China" has devised a fast method of building skyscrapers and towers which is spreading beyond the borders of China, poised to move across South and Southeast Asia.

This Chinese construction company completed a 30-storey tower that currrently serves a hotel in Hunan province in 15 days. The video of this project had drawn the attention of millions of Youtube viewers since it was posted.

...“The building had passed the resistance test of a level nine earthquake. It conserves energy of up to five times compared with that of a conventional construction, and provides air that is 20 times purer than the traditional buildings through our innovative air purification system.”

The accomplishment is made possible because <93% of the building materials are manufactured in the factory. The company welcomes global franchisees to adopt this model and build such factories locally. In supporting the company's value to be green, the factory should be located no more than 500km from the construction site.

There are currently six factories in China in different provinces. Besides China, BROAD Group has also set foot in India. These franchisees have made full payment for the transfer of technology which costs US$34mil for a population of 10 million and US$50mil for a population of 50 million. _Star_via_NBF

Planned 220 Storey Sky City in Changsa

The Broad Group's method of quick-building high rise towers of reported high quality, may prove to be a big cost saver for the global construction industry.

But that is only the beginning. The Broad Group is moving ahead to design the world's largest tower -- which sounds very much like an arcology, or a self-contained city.

Broad Sustainable Building (BSB), a construction company based in Hunan, believers they can do the whole $628million construction in 90 days.

The building will also beat China’s current biggest skyscraper poster - the 632-meter Shanghai Tower.

The company has been quite quiet on the use of the building, but earlier plans in 2010 - when the building was going to be 'just' 666m, would be used to home 70,000 to 110,000 residents.

There is a track record for BSB, a previous 15-storey construction was put up in six days in June 2010 - and a 30-storey building in just 360 hours.

The key to their speed is prefabricating large portions of the buildings in factories - so technically most of the tower will be built before the first digger hits the site. _DailyMail

Brian Wang has been covering Broad Group for some time and has more at his site

Over the past few millenia, the Chinese people have been noted for their inventiveness, industry, and engineering accomplishments.

While much of contemporary China's industry and infrastructure buildup may constitute an economic bubble of resource misallocation, it appears as if China's Broad Group has created a safe and very useful and economical way of building high rises and towers.

The ability to prefab large conventional buildings in factories may eventually be adapted to the prefab building of floating colonies, colonies in isolated areas such as polar regions, undersea habitat colonies, and even space colonies.

Once you learn to build self-sustaining arcologies, the basic logic of logistical planning and design remains essentially the same, regardless of the outer shape and configuration of the structure.

BRICs: Can the Tail Wag the Dog?

Ever since the 2008 collapse of the great global economic bubble, the hopes of the chattering economic classes have ridden on the BRICs -- the emerging economies of Brazil, Russia, India, and China. Aside from Russia, the BRICs have population heft and momentum, something most of the more advanced nations cannot claim. There is also a sense in those countries that it is somehow "their turn" to excel.

But what if the BRICs are only the tail to the global dog? If the dog is sick, can we really expect the tail to do everything the dog would normally be able to do?

The BRICs have been exporters to the more developed economies. But the more developed economies are sinking under dysfunctional policies and leaders. Can the BRICs succeed and prosper without developed markets to buy their resources and products?

Champions of the Submerging World
China is economically dependent upon exports to Europe and North America -- markets that have not been doing well over the past few years. Brazil is economically dependent upon not only Europe and North America, but is very much dependent upon Chinese demand as well.

As goes China, so goes Brazil. China's insatiable appetite for oil has benefited Brazil over the past few years. If China's economy continues to lose momentum because of the European crisis, that will impact Brazil ... even if Brazil doesn't have as many direct ties to Europe's consumers and banking system.

"Brazil is a play on China. There are concerns that Brazil is overexposed to China," said Carlos Constantini, head of research at Itaú BBA, an investment bank in São Paulo. That's a big reason why Brazil's benchmark Bovespa stock market index is down more than 6% year-to-date.

India's sharp decline is perhaps the most surprising since that economy was thought to be the least exposed to Europe. Russia, however, could really suffer if the global economy doesn't show some signs of life soon. Crude oil prices have plunged below $100 a barrel to the mid-$80s. Crude prices are now down more than 20% from their highs of the year. And oil could dip further if the Euro-wreck leads to significantly lower demand for crude worldwide.

"Russia was a darling for awhile and there was all this talk about how oil would never fall below $100 a barrel. Their economy is so levered to oil and commodities and they haven't been able to diversify." Mata said. _Thick as a BRIC

Cracking BRICs
It is true that India's economy -- despite minimal exposure to the European crisis -- is starting to slump. India is still desperately poor, after all, and its government is abysmally corrupt. Nothing kills a nascent economic boom so quickly as greedy governments.

One interesting development out of all this economic turmoil, is that Russia's Putin is turning to the Russian far East and to Russia's relationship with China, in an attempt to hedge his global bets.

Much of Putin's far East and China strategy should be seen as wishful thinking: China's population is still on the ascendancy, looking for lebensraum, while the ethnic Russian population is steadily shrinking away and leaving a huge void.

Putin's attempts to engage China in joint industrial and technological enterprise are likewise built on shifting sands. China has always appropriated the intellectual property of its "partners," and proceeded to to make pirated and counterfeited products. Russia is feeling the sting from multiple thefts of designs of planes, ships, submarines . . . If Putin proceeds with his farcical plans (see above article link), Russia will feel that sting yet again . . . and again . . . and again . . .

When Putin attempts to lock China into a long-term gas contract at today's inflated prices, he will be bucking the tide of China's development of its own vast shale gas resources. Somehow, it is unlikely that China's leaders will be amused at Putin's condemnation of the "fracking" process, which China is using to develop its tight gas deposits. Particularly when Russia is using the exact same fracking process to develop its own shale resources in Siberia.

An attempt by BRIC nations to circle the wagons and to feed each others' prosperity -- without outside input from the more developed economic world -- is not likely to succeed at this early stage. But it is possible that the US will eject the anti-free market and anti-energy policies of the Obama administration, in November's election. And it is possible that at least some countries of Europe will turn away from demographic decline and the green dieoff agenda.

If those things should happen, the health of the dog may be restored, and the tail may be set to wagging once again.

Potemkin China: Struggling to Discover Its True Self

When I think about an economic black box China is the economy that comes to mind. This video from Reuters shows a Chinese economist snooping around Chinese ports and commercial areas looking for clues on the ground. What did he find? An economy that looks a lot slower than the one reported by the Chinese government. Some people claim to understand what’s going on in China, but given the many inconsistencies I just don’t see how anyone can claim to be an expert. After all, even Chinese economists feel the need to investigate their own economy…. _PragCap

http://pragcap.com/chinas-inconsistent-data

We already knew that the CCP government had a tendency to shade the truth to fit the approved narrative. But deeper undercurrents of turmoil are taking place inside of China, with more troubling implications. China's government is undergoing an identity crisis, an internal power struggle.

there are political sides in the communist state of China. Here, it's a matter of the right and the left. In China, it's a matter of private enterprise and strong foreign investment versus highly centralized and debt-heavy state enterprise.

According to the geopolitical analysis company Stratfor, the left may be losing ground in China, and Beijing may be headed down an economic path that focuses on private enterprise. _Mauldin

Stratfor is being a bit premature in its prognosis, according to Al Fin Global Analysts Ltd. Chinese security and defense forces are populated by persons with the old collectivist mentality. The struggle has just begun. China's transition to a new government elite may have to be postponed until 2013 as a result.

Interesting times.

More: Michael Pettis predicts collapse in China's investment growth rate

China's huge commodities stockpiles suggest a darker future for national and world economies

No nation can be permanently immunised from the laws of economics.

Even more (20May2012):

China biggest threat to global economy

Heavy hand of CCP on China's economy threatens China's economic future

Predictions are Usually Wrong, Especially About the Future

One of the most popular prediction games among the curious cognoscenti is the "fertility prediction" game. One of the favourite tools of fertility predictors is the "TFR," the total fertility rate (PDF). TFR is only a statistical predictive tool, rather than an actual item of data. As such, it is likely to be wrong -- like most predictions about the future. Too many things about the TFR are subject to change, for it to be relied upon absolutely.

But there are biological limits which are difficult to overcome. Once a woman passes her age of fertility, it is very expensive and laborious to see her through a successful conception and pregnancy. When an entire nation of women "pass the point of no return," in terms of fertility, it becomes almost impossible to reverse the trend.

We know that this is happening in Japan and in some countries of Eastern Europe. But is it possible for such a thing to happen to a nation as populous as China, to a population as talented as the Han?

Today’s most important population trend is falling birthrates. The world’s total fertility rate -- the number of children the average woman will bear over her lifetime -- has dropped to 2.6 today from 4.9 in 1960. Half of the people in the world live in countries where the fertility rate is below what demographers reckon is the replacement level of 2.1, and are thus in shrinking societies. _Bloomberg

The falling birthrate phenomenon is most profoundly affecting populations that are more intelligent and more educated. Within the US, for example, it is highly intelligent and highly educated career women who are least likely to have children, on average.

...one country that worries American military strategists will also face serious demographic challenges. China’s rise over the last generation has been stunning, but straight-line projections of its future power and influence ignore that its birthrate is 30 percent below the replacement rate.

The Census Bureau predicts that China’s population will peak in 2026, just 14 years from now. Its labor force will shrink, and its over-65 population will more than double over the next 20 years, from 115 million to 240 million. It will age very rapidly. Only Japan has aged faster -- and Japan had the great advantage of growing rich before it grew old. By 2030, China will have a slightly higher proportion of the population that is elderly than western Europe does today -- and western Europe, recall, has a higher median age than Florida.

...China, notoriously, has another demographic challenge. The normal sex ratio at birth is about 103 to 105 boys for every 100 girls. In China, as a result of the one-child policy and sex- selective abortion, that ratio has been 120 boys for every 100 girls. From 2000 to 2030, the percentage of men in their late 30s who have never been married is projected to quintuple. Eberstadt doesn’t believe that having an “army of unmarriageable young men” will improve the country’s economy or social cohesion.

He thinks demographic change will pose two problems specific to China. Its society has relied heavily on trust relationships within extended-family networks. In a country where fewer and fewer people will have uncles, those networks will rapidly atrophy. The government, meanwhile, relies for its legitimacy on a level of economic performance that demographic trends imperil.

All in all, Eberstadt concludes, “we might want to have some additional new friends and allies in the world.” America’s growing ties to India, a nation he describes as “aging moderately,” strike him as promising. But he warns that it has not made the most of its population: “India has an appalling education deficit.”

Foreign-policy thinkers can often lose sight of demographic trends, Eberstadt says, because from a policy makers’ view “they tend to look really glacial. If it’s not happening in the next 48 to 72 hours, it’s not in the inbox.” But “population change gradually and very unforgivingly alters the realm of the possible.”_Bloomberg

It never hurts to remind oneself that a huge driving force of global commodities markets over the past several years has been demand from a rapidly growing and building Chinese economy. Should something happen to disrupt -- or interrupt -- Chinese economic growth, one might expect global commodities markets to experience a significant effect. It doesn't hurt to pay attention to these things, if you are at all connected to global markets.