in ,

HK Bill passed, Beijing does & can do Nothing

Days after Congress passed the Hong Kong Human Rights and Democracy Act last week [with a score of almost communist party discipline], Beijing vowed to take countermeasures if president Trump signed the document. Beijing left out specifics, fueling concerns that China would pull out of trade negotiations with the US. But after Trump signed the bill on Wednesday, Beijing only released a strong verbal protest. They would have been better off saying nothing. It would have made Western analysts raise their eyebrows and maybe shudder a little…

To save face, Chinese officials are gambling that Trump won’t de facto implement the HK bill’s measures. More to the point, Beijing emphasized the [president’s] “constitutional authorities with respect to foreign relations” line in the bill. I don’t see how this type of logic is convincing, given the fact Congress is nearly unanimous in its support of the HK bill.

Commentators have stressed that both sides have incentives to keep the Hong Kong issue and the US-China trade talks separate, and that both are interested to sign a deal. The fact that Beijing did not escalate is evidence that the US has more leverage over China than vice-versa. I explained this on former occasions. For decades, China has been a net exporter of physical wealth. During this time, it has accumulated net US reserve balances, which it has used to purchase strategic materials and technology according to her goals, but China also moved its dollars from its checking account at the US central bank, to its saving account at the same bank [buying US treasuries with US reserves]. In the world of financial analysts who are still stuck in the pre-industrial age and have yet to enter the epoch of fiat and endogenous money, these analysts called referred to China as America’s creditor. Not only is this utterly untrue, mechanics-wise, it was US consumers who financed China, ensuring demand for Chinese exports [profits for Chinese export firms and wages for Chinese workers in these export enterprises].

If I buy an interest-bearing bond with USD from the US Federal Government that spends and taxes in USD currency, in no way am I “crediting” that Government or providing it with funds to spend. I’m simply parking my liquidity for a specific time window, and after that time has passed, I’m getting paid my original sum plus a little interest. A sovereign selling bonds is a liquidity drain operation. While a sovereign making bond payments is a liquidity fill operation. The creditor narrative would only be accurate, if I were to buy that state bond with a foreign currency, and the bond would mature in foreign currency – in other words, the narrative is accurate only when a Government is raising money and spending money in foreign currency [not its own].

If US-China relations were to reach abysmal levels, Washington would order the US central bank to freeze China’s saving and checking accounts [or it could only freeze the latter, while allowing the former to acquire interest, just like it did with Iran’s account]. In effect, rendering China’s past toil of exporting net [physical] wealth to the USA in exchange for net US dollars useless. True, without affordable Chinese consumer and input goods present on the US market, that will definitely cause prices to rise for US firms and households, but as new exporters to the US would move in to fill the gap, price levels would stabilize. The bigger concern for the Americans in my view is its export enterprises. In this scenario, with the Chinese market gone for them, they’ve no choice but to try and enter some other markets to try and sell their wares. But they’d have a tough time doing it on their own. They’d have it far easier if the US Federal Government greenlighted US dollar loans to partner countries, with the rule that this money can only be used to buy US goods from specific US sectors.

Conclusion

The situation in Hong Kong will shrink in heat only after a trade deal is signed between Washington and Beijing. Until then, the West is going to keep the protesters going. China has very little room to maneuver on this issue. They’ll have to cooperate with the Western neoliberal establishment, which, ironically, gave them huge boons. The strong ties between US trans-national capital and the CCP should not be praised, instead, they should be viewed with the utmost circumspection. And I don’t like the route Xi Jinping has taken with regard to abolishing term limits, the reeducation camps, and the social credit score system. If anyone thinks they can win a free trade game in laissez-faire circumstance, while competing with state-sponsored enterprises, built on time-tested schemes to work, please be my guest. It won’t be long until you file Chapter 11 or receive a nice buyout offer from the competition. The New Silk Road project can only work well if SOVEREIGN states take part in it. But if it’s composed of vassal states, it’s going to be a huge flop.

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The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.

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padre
padre
November 30, 2019

How mighty the West seems to be!As far as Chine is concerned,you don’t know a shit!

Yuri Bezmenov
Yuri Bezmenov
Reply to  padre
November 30, 2019

China and the West prior to Trump have been aligned. Where do you think Apple and all the rest manufacture their shit? That’s right. In China. Western capitalists love the billionaire communist party members.

peter mcloughlin
November 30, 2019

Events have clearly not reached that terminal red line for Beijing, beyond which the specter of existential threat rises from the gloom. Once China has no means to maneuver there will be world war – unwelcome but unavoidable.
https://www.ghostsofhistory.wordpress.com/

ManintheMoon
ManintheMoon
Reply to  peter mcloughlin
November 30, 2019

I think there will be a civil war in the US before any world war. Even more likely the states which still have a large majority of European descendants, will break away from the rest who – unlike happened in the nineteenth century – ‘ll be in no position to stop them.

Walsh Matthews
Walsh Matthews
Reply to  ManintheMoon
November 30, 2019

What are you smoking @maninthemoon?
If a civil war hits, it’s going to be an internal war within states. Have you looked at Texas recently? Loads of leftists there. The blue states won’t have to fight. That’s what federal troops and spies are for. That’s why the civil war was fought to begin with. It wasn’t about abolishing slavery, it was about imposing a singular political and economic system, a single power position from which the elites could rule.

Craig Watson
Reply to  ManintheMoon
December 1, 2019

Yes, civil war is coming soon to the USA. Read all about it: how / why it starts, proceeds, and concludes as suggested by maninthemoon with its dissolution into several sovereign nations, thereby permanently gutting this genocidal evil empire: “Twilight’s Last Gleaming” by John Michael Greer, pub. 2015 and current with actors / situations / weapons. This is a reasonable, realistic, likely and understandable account of how the USA is finally wiped out by the only means possible: civil war.

Joe
Joe
November 30, 2019

Rubbish!

Craig Watson
Reply to  Joe
December 1, 2019

Exactly. This Anglo-Saxon author is typical of the white people: in a big hurry to get their way. China could care. It’s been around 5000 years. It has time to react, and will react in their own time and way. This author needs to take a lude and slow down to understand China’s behavior and consciousness, and how different it is from his.

Mike
Mike
Reply to  Craig Watson
December 2, 2019

lol, if you had any clues about economy, you would understand but you clearly dont.

Pierre Vaillant
Pierre Vaillant
Reply to  Craig Watson
December 2, 2019

The author is Romanian. The article is about financial reality, not about Eastern vs Western culture.

ManintheMoon
ManintheMoon
November 30, 2019

“If I buy an interest-bearing bond with USD from the US Federal Government that spends and taxes in USD currency, in no way am I “crediting” that Government or providing it with funds to spend.” I am afraid it’s you “Serban Enache” who don’t either understand economics or China rather than the commentators you criticise. The US Federal Reserve is nothing but a money printing ponzi scheme to finance a Treasury that spends way beyond its means , This only continue because China and others are willing to buy these bonds, It suits China at the moment to continue the… Read more »

Smoking Eagle
Smoking Eagle
Reply to  ManintheMoon
November 30, 2019

Serban Enache’s bio: “Born on March 25, 1989, Bucharest/Romania. Single parent child. I blame my mother for the long-ass name. Licensed in journalism. Creator of the Of Hate And Laughter series. This universe is one of infernal majesty; it’s my heart and soul. If it matters to anyone, my sun sign is Aries, moon sign is Scorpio, mars sign is Gemini. I don’t believe in astrology, by the way ^_^. My interests are: MMT (modern monetary theory), politics, history, literature, tv-shows, movies, games, music (from epic soundtracks to gothic metal), and I enjoy walking the green and concrete. I’m a… Read more »

Bobby
Bobby
Reply to  Smoking Eagle
November 30, 2019

I’m a fan of Darkplace myself. Garth Marenghi is indeed a fictional character, and if he said “look him up” the author obviously knows this. It’s a jest.

M4A MMT
M4A MMT
Reply to  Smoking Eagle
November 30, 2019

So because you hate MMT, because you deliberately look at it in a warped way, you want the Duran to stop posting an MMT perspective articles? LoL. Go join the SJW echo chamber websites then, because you’re an obvious fan of censorship and enemy of pluralism.

Ellis
Ellis
Reply to  Smoking Eagle
November 30, 2019

Here’s the description I got from Amazon: “Born on March 25, 1989, Bucharest/Romania. Single parent child. Licensed in journalism. Creator of the Of Hate And Laughter series. This universe of mine is one of infernal majesty; it’s my heart and soul. My interests are: Heterodox economics [Georgism & Chartalism in particular], politics, history, literature, music (from epic soundtracks to gothic metal), and I enjoy walking the green and concrete. I’m an atheist who’s not against organized religion. I am against Globalism and support the Westphalian Sisterhood of Nations. My favorite author is Garth Marenghi (look him up). My favorite actor… Read more »

M4A MMT
M4A MMT
Reply to  ManintheMoon
November 30, 2019

US state debt takes 3 forms: cash, reserves, and bonds. If the Chinese don’t want to hold any, they’ll have to sell ownership to someone who will or they’ll have to spend the money on services and goods offered for sale in USD. The reason the Chinese and others bought US treasuries to begin with is that they want to postpone consumption into the future and want their money protected from inflation. The US doesn’t put a gun to people’s heads, buy treasuries or else. US bonds have maturity dates and cannot be turned to liquidity until then. You have… Read more »

M4A MMT
M4A MMT
Reply to  ManintheMoon
November 30, 2019

What does spending “beyond its means” mean? The US still has a lot of unemployment, if you look at the real numbers, plus excess idle capacity. How exactly is the Treasury spending beyond its means? When the rest of the world and the US private sector wish to net save in dollars, and there is unemployment in the US private sector, the US economy is obviously running BELOW its means. I’ve heard this hyperinflation and dollar collapse narrative for 50 years, and it hasn’t happened. And whenever it doesn’t happen, the same fear merchant gits like you say, oh, it’s… Read more »

Post-Keynesian
Post-Keynesian
Reply to  ManintheMoon
November 30, 2019

So let me get this straight. You say the whole US money architecture is a hoax, and that the Chinese are very wise and are just biding their time. Well then, if it’s all a house of cards, why are the Chinese working their people to death and destroying their environment in order to sell goods to US consumers? If US dollars are a con, why are the Chinese so desperate to earn fake money? Hope I’m not the only one who noticed this huge absence of logic from your post.

Vladimir
Vladimir
Reply to  Post-Keynesian
December 3, 2019

your comments make no sense. Most of the products that you buy are not real Chinese but they are American companies or from other countries. So, when trump imposes tariff, the companies and you end up paying those fines. Responding to your US dollar is a con?- yes it is. I tell you why. US Federal Reserve can print money at its needs appear without creating any major economical problems to USA’s economy. The reason is the dollar currently is the main monetary currency used around the world. However, as the dollar will cease to be the one, then many… Read more »

pogohere
pogohere
December 1, 2019

But after Trump signed the bill on Wednesday, Beijing only released a strong verbal protest. They would have been better off saying nothing. It would have made Western analysts raise their eyebrows and maybe shudder a little…”The situation in Hong Kong will shrink in heat only after a trade deal is signed between Washington and Beijing. Until then, the West is going to keep the protesters going. China has very little room to maneuver on this issue. Another “analyst” who proves once again that the western mind can’t begin to conceive how inaccessible the best Asian thinking is to such… Read more »

Olivia Kroth
Reply to  pogohere
December 1, 2019

i agree. The Chinese have their own ways and methods to deal with difficult situations. As we can see, China is very successful economically and has kept out of wars for a very long time. This is what I call true success.

Pierre Vaillant
Pierre Vaillant
Reply to  pogohere
December 2, 2019

The author is not a Westerner. He’s from the Balkans. The Chinese did nothing on this one. They refused to purchase food from the US, and Trump still didn’t budge and he signed the bill. The Chinese have a habit of boycotting opinions they don’t like, they do this with companies in the West, with entertainers, politicians, financial analysts and others. People’s xenophobic or xenophilic beliefs don’t invalidate the realities.

Rafael
Rafael
December 1, 2019

dear ladies and gentlemen commentators, i agree with you that the author and most western analysts have not capacity to understand asian thinking and in particular chinese thinking and ways. They even get wrong russian thinking, which in any case share lots of common convoluted history with the west and eastern europe, so they are definitely going to get wrong China’s ways, which might seem illogical and weak for us at times, but you can be sure it is not so; but it is still fine for me that western or even eastern europe analysts who think they have the… Read more »

Regula
Regula
December 2, 2019

This article seems to miss the real intentions underlying Xi’s government. As to the vocational training centers in Xinjiang: Xi pulled about 20m people out of poverty since the beginning of his presidency. The way he goes about it is to create jobs for people via micro factories in outlying provinces with small population centers. Or by constructing water lines in a village so people have running water inside their houses; and by installing solar panels to create localized electricity that can run a workshop also brought by the government in which guitars are crafted. That brings work and income… Read more »

Mike
Mike
Reply to  Regula
December 2, 2019

Propaganda at its best Mr Wong! You should take a drive to China if you can and visit these schools as you call them… Pathetic!

Tanuk Brook
Tanuk Brook
Reply to  Regula
December 2, 2019

Does he have to eliminate his rivals and impose the tyrannical social credit score system to build jobs? Of course not.

Hoyeru
Hoyeru
December 2, 2019

what a silly little anti China propaganda. Shame Duran is giving it space. But then Duran has always been a 3rd tier when it coems to getting my news from. They are hardly worth visiting and this article once again proves it. I hadn’t been on duran for months and now I see I missed nothing.

Tanuk Brook
Tanuk Brook
Reply to  Hoyeru
December 2, 2019

Oh, another SJW from the Eastern camp who seeks to censor opinions through shaming tactics. Go practice on the Liberal sites, you’ll get broader appeal there.

Tanuk Brook
Tanuk Brook
December 2, 2019

The Chicoms have need of those dollar accounts to buy political and corporate favors from the USA. It’s what Charles de Gaulle referred to as the Americanization of Europe, referring to the growing influence of US finance present in Europe. How ironic. The Chinese are doing it now to America. And all the pro-totalitarist commie lovers in the comments are moaning like a bunch of sissy liberals.

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