Free Markets, Free People

China

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How to increase China’s influence and enable China’s global energy policy in two words

And those two words are “Barack Obama”.

I don’t know about you but I’ve gotten real tired of seeing the US play the dope on the world stage these last 6 years.  I’ve touched on this before, but it doesn’t get much coverage and is indicative of how much foreign policy damage this administration is doing.  I touched on this earlier, but I’m fascinated by how totally tone-deaf and inept this administration appears to be.

The story, as the administration wants it to unfold:

The US government has stepped up pressure on the World Bank not to fund coal-fired power plants in developing countries. In a letter sent to the World Bank United States Executive Director Whitney Debevoise said, “The Obama Administration believes that the Multilateral Development Banks (MDBs) have a potentially critical role to play in the future international framework for climate finance, and, in particular, to assist developing countries in mitigating greenhouse gas emissions and strengthening their economies’ resilience to climate risks.” Following Debevoise’s controversial guidelines, the axe has already fallen on Pakistan’s Thar Coal and Energy Project on the grounds that “the limited financing available from the Bank should be directed toward investments that address energy supply shortfalls in an environmentally sustainable manner’’.

So there Pakistan?  No coal fired plants for you! We have spoken!

Oh, wait:

Chinese President Xi Jinping is set to unveil a $46 billion infrastructure spending plan in Pakistan that is a centerpiece of Beijing’s ambitions to open new trade and transport routes across Asia and challenge the U.S. as the dominant regional power. The largest part of the project would provide electricity to energy-starved Pakistan, based mostly on building new coal-fired power plants.

It’s just blatant now … total disrespect for the US.  Even our ally in the region, Australia, has had enough.  Japan is tired of the posturing and pushing of ideology in support of something science doesn’t support much less prove.  More importantly, they’re not going to play ball anymore and aren’t making any bones about it.

Who do you suppose Pakistan is looking too for leadership in the energy sector now? Who do you suppose they might see as a champion of their economic growth?

The Geological survey of Pakistan reveals that 175 billion ton of coal is buried under the Thar Desert. These coal reserves alone are equivalent to total combined oil reserves (375 Billion Barrels) of Saudi Arabia and Iran. The coal deposits in Thar can change the fate of the country if utilised in a proper way. The coal reserves at Thar Desert are estimated around 850 trillion cubic feet (TCF) of gas, and are worth USD 25 trillion.  According to experts, if this single resource is used properly, we not only can cater to the electricity requirements of the country for next 300 years but also save almost four billion dollars in staggering oil import bills.

And if Pakistan feels that way, what about India?

India is hoping a new China-backed multilateral lender will fund coal-based energy projects, an official said, putting it in direct conflict with the World Bank, whose chief has maintained that it would stick to its restrictions on such lending. A senior Indian official told Reuters the Asian Infrastructure Investment Bank (AIIB), sponsored by China, is expected to allow funding of coal-fired power plants that the World Bank has almost totally blocked. “When you have 1.3 billion people starved of electricity access and the rest of the world has created a carbon space, at this point denying funding is denying access to cheap energy,” said the official, who spoke on condition of anonymity.

So now “rich America” is trying to force developing countries to forgo cheap energy in the name of  … ideology.  Hey, wasn’t Obama the guy always apologizing for the way he felt America bullied other countries?

Well, at least he only bullies allies.

~McQ

How disastrous is our foreign policy?

There are so many places to point to that illustrate the answer to the question (Libya, Iran, Egypt, Iraq, Syria, China, Russia … ad infinitum, ad nauseum), but there’s one that’s been going on sort of behind the scenes that illustrates it perfectly.

As we all know, our President has an ideological agenda item labeled “global warming” “climate change” that he is hell bent on forcing on not only us, but the world to his agenda.

Here’s the interesting part – much of the world is sympathetic with his agenda.  Just look at the UN and those who adhere to the UN line about climate change.  A smart guy – at least the guy who supporters claim is always the “smartest guy in the room” – would use that fact to try to fashion some sort of coalition and agreement that would advance his agenda.

Not our prez.  He’s an “all-or-nothing” sort of guy when it comes to things like this – science be damned.  And he likes to bully and shame people and countries into doing his bidding.

Except that never seems to work.  What am I talking about?

The Infrastructure Investment Bank – A China led initiative that not only extends China’s influence but will extend loans to developing countries to help develop their energy infrastructure – to include coal.

Well, Obama’s well known for his war on coal and his inflexibility about including it in future.  But if you’re actually trying to be a  diplomat – you know, foreign policy – you might end up understanding that you are at the extreme with the “no coal” position and see if you can’t influence the agenda via compromise.  Oh, and if you’re against China’s initiative, you gather allies to work against their goal and toward yours.  That’s if you have any savvy at all concerning diplomacy and foreign policy.

So, you have to ask, how did this happen?

Australia’s decision to join the Asian Infrastructure Investment Bank follows a reversal of policy, revealed in The Australian this month, based on strategic ­arguments about China. The change followed a reassessment within government and intense talks within the G7 group of ­finance ministers and central bank governors.

Australia had been one of our allies, along with Japan, in resisting this effort by China.  What happened?

While Australia, Japan, South Korea and Britain have been cautious and aware of the US criticism, all are moving towards joining. Japanese industrialists keen to sell “ultra-super-critical coal-fired” electricity generators to India for more efficient use of brown coal are pushing for Tokyo to sign up.

Mr Obama’s administration has been tightening internat­ional funding for coal-fired ­generation but the Asia Infrastructure Investment Bank is likely to be more sympathetic to the pleas of developing nations.

The expansion of coal-fired power generation is a boon to Australia’s coal exporters and represents a boost to the flagging Japanese economy.

So, knowing that, what did the bully-in-chief do? Well, if you know anything about him, you’re unlikely to be surprised.  Just think – “ally” and it will come to you:

Australia has joined forces with Japan in international ­forums to resist the US campaign of limiting lending to developing nations seeking more efficient coal-fired generation. The technology offers the promise of cheaper power. The moves follow Mr Obama’s climate change speech at the G20 summit in Brisbane last November. The US President’s remarks, which embarrassed Mr Abbott and angered his ministers, were seen as an ­attempt to push the administration’s climate change policies in Mr Obama’s final year in office.

Yup, condescension and embarrassment have a tendency to move things in a direction you don’t want – especially when you do it in the country of your ally.

Result?  Another in a long, very long line of foreign policy failures.  Australia joins with China in rebuffing Obama’s agenda.

On the whole, I’m quite pleased with that.  However, it does indeed demonstrate how badly this circus is being run by the clown-in-chief.  I’m sure, even now, that James Taylor is tuning up for a trip down under.

~McQ

Climate change “deal” with China just an excuse for executive action

Given this “deal”, Obama seems to be a used car salesman’s dream, but I’ve come to believe there is a method to this madness.  And it is madness:

President Barack Obama announced Wednesday that the U.S. has set a new goal to reduce emissions of greenhouse gases by between 26 percent and 28 percent over the next 11 years as part of a climate change agreement with China. 

The new target is a drastic increase from earlier in Obama’s presidency, when he pledged to cut emissions by 17 percent by 2020. By contrast, Obama’s counterpart, Xi Jinping, did not pledge any reductions by a specific date, but rather set a target for China’s emissions to peak by 2030, or earlier if possible. Xi also pledged to increase the share of energy that China will derive from sources other than fossil fuels. China’s emissions have grown in recent years due to the building of new coal plants.

“This is a major milestone in the U.S.-China relationship,” Obama told a news conference in Beijing, with Xi at his side. “It shows what’s possible when we work together on an urgent global challenge.”

No.  No it’s not anywhere near a “milestone” at all.  If that’s the “deal”, he was owned by the Chinese premier.  Instead it is another bad deal used to push an ideological desire.  This certainly won’t be ratified as a treaty with a GOP Congress (if it is even submitted as a treaty).  And anyone who thinks China won’t ignore, or unilaterally extend its 2030 peak use simply knows nothing about how China works.

So the “King” will, apparently, do further damage to the economy by using this bit of nonsense as his catalyst for umpteen executive orders because, you know he has a pen, a phone and an ideology.

Thank goodness that only lasts for 2 more years with a GOP Congress (assuming the GOP Congress has any fiscal balls when it comes to defunding the stupidity he commits to his “executive actions”).  If you loved ObamaCare you’re going to rave about this bit of economic stupidity.

In the meantime, grab your wallets and bend over, here it comes again.

~ McQ

 

Obama plans to carpet the West in solar projects

But open the same amount of federal land to fossil fuel exploration and exploitation? 

Nope.

Instead, we get this:

The Obama administration will open public lands in six Western states to more solar projects as part of a solar energy road map it publicized Tuesday.

The Interior Department set aside 285,000 acres in Arizona, California, Colorado, Nevada, New Mexico and Utah for the initiative. Firms can apply for waivers to develop projects on an additional 19 million acres.

Imagine 19 million acres covered in solar installations.  That won’t have any environmental impact on eco-systems, will it?

And if it does, well, they’ll just “waiver” them, because, you know, this is a favored industry.  Regulation?  Yeah, most likely not at all as stringent as those applied to those old “dirty” fuels. 

Which brings us to an ironic point.  Remember in years past when we fought against the dumping of government subsidized products from other countries on our shores.

Guess what?  We’re now the target for much the same argument:

China’s Commerce Ministry said Friday that it is investigating possible solar equipment subsidies by the U.S. and South Korea and their impact on Chinese manufacturers, widening a trade spat at a time of oversupply and weakening demand for solar power equipment.

The ministry has launched an anti-dumping and anti-subsidy probe into polysilicon imports from the U.S., as well as an anti-dumping probe into imports from South Korea, it said in separate statements on its website.

Yes I know, China is as hypocritical as they come, but, apparently, so are we.

It’s called crony capitalism (or as mentioned previously, venture socialism).  Again government, using your money, is subsidizing an industry that can’t make it alone because in reality there’s no market demand for their product. By subsidizing them, government is socializing their losses.  This administration has heavily subsidized the domestic solar industry (and even then we see industry business failures right and left) and is forcing a product on the market to satisfy a political agenda even when alternate and more viable (but unfavored) products are available much more cheaply.

The administration has since approved 17 major solar projects on public lands producing about 6,000 megawatts of power, Salazar said.

“We have made huge strides in the last three-and-a-half years, but we realize we are only at the beginning of this effort and that there’s a lot more to do,” Salazar said. “I have no doubt that the United States will lead the world in solar energy development.”

My guess is those 17 solar projects will end up on more acreage than has been approved by the administration for oil exploration.

“Huge strides”?  Not in any market sense.  What he’s talking about is the administration making “huge strides” in forcing a product into a market that is not in demand by that market, ignoring the environmental impact of such projects (even while being more restrictive on fossil fuel development) and generally playing the “central planning” game.  Government knows better than you and the markets about what we need, or didn’t you know that?

Sort of reminds me of those new light bulbs they forced on us which are now being found to cause skin damage due to UV light leakage.

But hey, I’m just a prole, what do I know?

Oh, and here’s where you have to read between the lines.  Note the spin involved in this sentence:

The areas selected in the plan minimize “resource conflict,” Salazar noted, meaning they avoid regions where solar development would edge out exploration for other natural resources.

What that also means is the administration has successfully exempted up to 19 million acres of federal land from fossil fuel exploration.

And:

The plan released Tuesday would expedite solar project approval while cutting some up-front costs for developers, Steve Black, counsel to the Interior Department, said Tuesday.

Translation: The favored industry will get favored treatment all paid for by your dollars (or borrowed ones, most likely).

Environmental groups?  Forget about it.  You haven’t a chance on this one.  You’’ll be steamrolled just like the rest of the country.  Save your money and effort for something you can tie up and delay – anything to do with fossil fuels.  You know, the life blood of our commerce?

Yeah, concentrate there.  The administration will be glad to help.

Forward.

~McQ

Twitter: @McQandO

Around the economic world in a few minutes

A post to update you on what is happening, economically around the world.

In Asia, some not so good signs.  In China, housing prices fell in 100 Chinese cities for the 5th straight month.  Chinese manufacturing has also cooled significantly:

Manufacturing activity in China and across a wide swath of Asia slowed in May, heightening fears that the turmoil in Western economies is dragging down one of the few remaining engines of global growth.

Two purchasing managers indexes for China fell in May, briefly rattling investors Friday and stoking speculation Beijing may have to respond aggressively to support growth. Indonesia posted its first trade deficit in nearly two years, and South Korea’s exports, considered a bellwether for Asia, unexpectedly fell for a third straight month.

"The green shoots of recovery that we were seeing a month or so back are wilting away," said Rob Subbaraman, chief Asia economist at Nomura Securities. "The crisis in Europe is one reason; the other one is the China slowdown. But I think less appreciated is that the height of uncertainty about the outlook has caused Asian firms and multinationals in Asia to pause in their investments, and I think that’s the bigger factor right now."

China’s official PMI, based on government data, showed manufacturing continuing to grow but by the barest of margins, falling to 50.4 in May from 53.3 in April. A figure above 50 indicates expansion. An index produced by HSBC and Markit showed Chinese manufacturing was worse, falling to 48.4 in May from 49.3 a month earlier.

"We feel that in China a very powerful stimulus"—combining fiscal outlays and cuts to banks’ reserve requirement ratio—"is required to arrest the slowdown in growth," said Frederic Neumann, co-head of Asian economic research for HSBC. "These numbers today suggest this is coming sooner rather than later. If that stimulus is not delivered, then China is indeed looking at a hard landing."

Both the US’s non-recovery recovery and the Eurozone crisis are being blamed for this slowdown.

The economies of Asia, both the emerging markets and the more developed countries, are being hit by a double whammy of slowing domestic growth and the impact of the European debt crisis on Asian exports and finance.

Signs of distress are proliferating.

In India, the government reported Thursday growth in the first three months of the year at the slowest pace in the past nine years—up 5.3% from the year-earlier quarter, well below the 8% pace of recent years. "A gasping elephant," said Leif Lybecker Eskesen, HSBC’s chief India economist, in a note to investors.

In China Friday, an official gauge of manufacturing activity fell to a lower than expected level, which is likely to add to market concerns about China’s slowdown. China’s official Purchasing Managers Index fell to 50.4 in May, compared with 53.3 in April and lower than the median forecast of 51.5. A reading below 50 indicates contraction. The Ministry of Commerce, meanwhile, is blaming "worse-than-expected" economic performance in Europe for disappointing export data.

Early Friday, South Korea said its exports unexpectedly contracted for a third consecutive month in May compared with a year earlier. South Korea is the first country in Asia to release trade data for the month and is often a harbinger of regional trends.

Meanwhile in Europe, the UK’s manufacturing is reported as slumping with activity dropping to its lowest level in three years.  The Eurozone jobless rate stands at 11%.  Additionally the Eurozone crisis is now beginning to effect countries with close proximity and ties which are not a part of the Euro:

The euro zone’s deepening fiscal crisis continued to take its toll on some of the neighboring economies of central and eastern Europe in May, as surveys released Friday indicated manufacturing activity contracted again in May.

The countries in Europe’s center and east have close trade and financial ties with the euro zone, and some have seen demand for their exports weaken as the currency area’s economy has stalled, while western Europe banks have cut their lending to the region.

A double whammy.  And, finally, within the Eurozone itself, companies are trying to prepare for the Greek withdrawal from the zone (and possibly Spain’s as well):

As European officials race to quell fears that Greece may exit the euro, many companies doing business in the troubled country are preparing for the worst.

Most executives, analysts and others agree on one thing: the impact of a Greek withdrawal from the euro zone is impossible to predict. That’s why multinational companies are rehearsing for any number of contingencies. They range from a paralysis in cross-border payments to a civil breakdown in Greece to a broader breakup of Europe’s common currency.

Retrieving their cash is among the companies’ gravest concerns. If Greece were to revert to its former currency, many companies fear that any euros left there would be converted into less-valuable drachmas. Should that happen, Greece is widely expected to impose capital controls to keep the remaining cash in the country.

Can you say “completely mess?”

Meanwhile, here, the business climate remains unsettled, hiring still isn’t showing any real turnaround and the economy continues to bang along the bottom (one assumes, it could drop again if the Euro crisis explodes) with no real trend upward.

~McQ

Twitter: @McQandO

So how is the global economy faring?

Not so hot.  Europe:

Activity at European businesses hit a near three-year low in May, according to a survey by Markit.

Its index, based on a survey of purchasing managers in the manufacturing and service sector, fell to 45.9 in May, a 35-month low.

In response, the euro fell to $1.2515 against the dollar, a 22-month low.

[…]

"The flash PMI figures for May look horrible and provide a clear warning that eurozone GDP will almost certainly show a contraction in the second quarter after stagnating in the first quarter," said Martin Van Vliet, from the bank ING.

"It’s not good," said Peter Dixon from Commerzbank.

"The German ones were particularly disappointing, as we had been expecting some more buoyancy.

"It clearly indicates that the evaporating sentiment that we have seen in recent weeks, as the Greece crisis has intensified, is having a big impact on the economy."

A separate report from Germany’s Ifo showed that business confidence fell sharply in Germany in May.

And China?

China’s manufacturing activity contracted at a faster pace in May as conditions for exporters worsened during the month, the preliminary findings of a survey by HSBC showed Thursday. The "flash" reading of the manufacturing Purchasing Managers’ Index dropped to 48.7 in May from a final print of 49.3 in April, HSBC said. A measure below 50 in the survey indicates deterioration, whereas one above that figure shows an improvement. The flash reading is typically based on 85% to 90% of the total responses in the monthly survey.

The big red kangaroo is almost to the car.

Meanwhile, in the US, we’re focused on … politics.  Silly politics

*sigh*

~McQ

Twitter: @McQandO

Observations: The QandO Podcast for 04 Dec 11

This week, Bruce Michael, and Dale record talk about China, illegal immigration, and Egypt.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.

China launches first aircraft carrier

While all the drama of the debt ceiling negotiations and downgrade were happening, China quietly launched their first aircraft carrier.

So what does that mean in the big scheme of things?  Well IBD lays out the big point as clearly as anyone can:

It is not yet a full-fledged fighting ship. Its mission is to gain experience in carrier operations, particularly for pilots unaccustomed to taking off from and landing on a carrier’s moving deck.

Yet it represents a sea change in potential capability and something that Congress’ bipartisan fiscal supercommittee should ponder as draconian defense cuts remain on the table.

The first is no mean trick.  Learning carrier operations and training carrier pilots takes a while.  But the second point – about the supercommittee and defense cuts – should be lost on no one.  One of the critical points about cuts to spending is the differentiation between good cuts, that is cuts that trim away fat and waste, and bad cuts, cuts that remove muscle and bone.

But back to the carrier and China’s intentions.  First a few facts:

A few weeks ago Chinese Su-27 fighters intercepted a U-2 reconnaissance aircraft that had taken off from Kadena Air Base in Okinawa as part of a routine surveillance program of China. And Beijing issued a warning that such surveillance near its shores will not long be tolerated.

China’s capabilities have taken a quantum leap since a Chinese J-8 jet collided with a U.S. EP-3 surveillance jet in April 2001 off Hainan, the island that now has a base for Chinese ballistic missile and attack submarines.

China in recent years has laid claims to Japan’s Senkaku Islands, the Spratly Islands in the South China Sea, and has conducted at least nine incursions into Philippines-claimed territory.

China is flexing.   No question in anyone’s mind that it is feeling its oats and will be challenging the status quo in the South China Sea.  It consider that to be China’s “blue soil”.   Add to the facts above that China has been reported to have developed an aircraft carrier killer missile and is in the beginning phases of developing a 5th generation fighter, and you have to begin to wonder if all of that points to benign intent.

Beijing’s goal is to secure the waters from Japan’s home islands, along the Ryukyu chain, through Taiwan and to the Strait of Malacca, encompassing the South China Sea.

Chinese government writings refer to the waters surrounding China as blue soil. Where governments used to draw a line in the sand, Beijing is preparing to draw a line in what other governments view as international waters.

Last week, the state newspaper People’s Daily warned of "dire consequences" if Beijing is challenged in the South China Sea.

The People’s Daily is, of course, an organ of the ruling Communist Party in China and nothing hits its pages unless approved at the highest level.

Aircraft carriers are offensive weapons, not defensive weapons.  Their purpose for existence is to project power.  The carrier China just launched will not be their last or only carrier.   The question is, what does China intend to do with it? 

IBD concludes with the current situation and the future worry:

We will be hard-pressed to meet the emerging Chinese threat when our Navy has only 286 ships (down 45% from 1991, when it had 529) and continues to shrink.

We’ve closed the F-22 Raptor production lines, and even some in the Tea Party are insisting on defense cuts to make up for our spending follies.

Defense is a constitutional imperative, not an optional budget item. We’d better pay attention to that Chinese carrier.

~McQ

Twitter: @McQandO

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