China Taps the Brakes on Its Global Push for Influence

I wish Trump would tap the brakes on his trade programs. He's killing our economy.

This effort is little different than what the US has been engaging in for decades. Except the chosen projects appear to be even more dubious when it comes to ROI. Take the the Khorgos Gateway. A freight transit point in the middle of nowhere, near nothing of importance, including the ocean. Doubtful that will amount to much anything other than a gigantic hole the ground sucking up massive amounts of money.

The primary intent of BRI is to keep China's export machinery, the reason for its wealth, humming far into the future. Some are feasible; such as manufacturing in Xinjiang can be routed through CPEC to Gwadar port for export into the Middle East, Europe and eventually, India. Others are not. Expended rail lines into Europe may speed up delivery but is costly. It would seem that the benefits are such construction are short term; to keep up the use of cement, steel and construction jobs. BRI Is a stab in the dark.

I spent a week in Colombo about three weeks ago. The amount of building by the Chinese, particularly along the waterfront, is astonishing. The Lotus Tower, nearly finished, looks nice, if you like this sort of thing. The airport highway is very convenient. The deal is that China collects tolls for the first five years, and Sri Lanka keeps the tolls after that. When my public bus stopped at a construction site, a dozen tired Chinese workers climbed on. The Sri Lankan in the seat ahead of me slid over a bit to try to occupy both seats, but the Chinese worker sat down anyway. I got the impression they weren't welcomed. When I stopped in Guangzhou on my way back to the US I asked how China was paying for all this. Taxes, I was told, and people are not particularly pleased. Of course, in China, it's the rich who carry much of the tax burden (vs. the US).

The only way the NYC transit system will get properly rebuilt is to get the Chinese to do it as part of Belt and Road. The article suggests that we'd better hurry.

Brake tapping or not, seafaring is part of Chinese (note: not China) DNA. Perhaps, migration is human nature.

The fear among Washington policy makers that Xi Jinping’s Belt and Road Initiative would mount a Beijing capture of worldwide influence and power must be easing as China itself falls back from efforts to please Xi’s dive under the guidance of financial leaders domestically and foreign evaluations internationally as to ‘worthiness’ for one or the other. The Silk Road is still out there somewhere but more costly to pave than believed. Likewise, nations wish their own labor forces upgraded to Chinese standards replacing ‘foreign’ workers. No indication yet that the initial concept and drive has disappeared but Xi himself must be seeing it through a broader lenses; good new for all.

We drove on the impressive elevated tollway that the Chinese built in Sri Lanka from Colombo to Galle in the south. It soars above pepper plantations and villages for two hours and the toll is $4, which the tourists see as a modest price for cutting the trip time by hours and avoiding the nerve wracking chaos of the typical Sri Lankan road, jammed with trucks, buses, motorcycles, cows, goats, pedestrians, cyclists and anything else, where the idea of lanes has no meaning. But the locals avoid the tollway and it was totally deserted during our trip, as were the modern plazas along the way. And it dumps you into the maze of streets in Colombo, requiring another hour or two to cross the city. The toll business model that underpinned the project almost certainly is failing. Ecuador has also hocked its oil revenues into perpetuity for Chinese infrastructure, though their freeways are well used and they relieve what would otherwise be huge congestion in Quito and elsewhere. Clearly, the rapidly expanding cities of the world need infrastructure and the Chinese can provide the most cost and time effective solutions, having transformed their own country. There will be loan defaults, expanding Chinese military facilities and vast farm land ownership to hedge against the risks of climate change. They are playing a long game.

Tap the brakes sounds very very temporary.

China is running a version of the con game that the EU ran on Greece.

One Belt One Road has been working on building economic pathways to China since 2013. By offering loans that cannot be repaid, the countries are indentured to sell products to China. What is amazing is when they bring in the construction labor not one buck is spent in the country by the workers. They are very disciplined.

So they offer to loan a developing nation a huge chunk of money, then they ask that developing nation to spend that money to hire thousands of foreign (Chinese) workers instead of paying their own taxpayers to do the work. So the tax base doesn't grow while construction bills are taking their foreign exchange money. Why wouldn't everyone jump for that?

The law of supply, demand, and the repayment of debt applies to everyone. Even China.

As evidenced by the included picture, these projects are all implemented by importing Chinese materials and labor - including huge number of non-technical ones - for which local labor could have been easily tapped. Local population are merely spectators while they and their children are saddled with debt negotiated with current governments in a not-so-open manner. Many of these loans are at above market rates that are justified by high risk Chinese companies are taking by investing in weak economies. Last but not the least, China demands repayment of interest and principal in Yuan to protect itself from fall in the value of local currencies when the huge payments become due. The CPEC in Pakistan is a good example. It was negotiated by Sharif who is now facing very tough times. But China has all the signatures it needs.

The deals in Malaysia are especially smelly, with contracts overpriced and payments made well in advance of work done. They smell of kickbacks - a Beijing specialty. . Beijing, with its Sri Lanka deal, which was clearly not viable economically from the start, has essentially forced Sri Lanka into handing over sovereignty over a large port that will now likely be used by the PLA. . They are loan sharks, a Beijing specialty, and the collateral is national sovereignty. The citizens of these countries are being sold out by their corrupt leaders. It's simple and it's ugly.

We need the next stock market crash to happen sooner rather than later. It will squash Chinas rise, burst the bubble of asset hyperinflation, and reduce the power of Central Banks who have spent all their capital prolonging this free money led boom. This bubble is kept up by tax cuts and Fed complacency. Bring it on. Better now than later because the longer we wait the worse it will be.

The end game? Why go to war with a country when you can just buy it?

China is discovering that economic reality bites.

Xi Jinping likes to show off that China is a rich and powerful country but in reality China needs help for herself. China should stop to act as a rich man. China should help her own poor and needy citizens.

The purpose of the Belt and Road investment was to absorb the excess capacity that China had after two decades of malinvestment in construction and infrastructure. the sole purpose of this project was to absorb the overcapacity in labor, steel, cement, copper, glass and other construction material China is saddled with. All these projects are ill thought out and most of them are not commercially viable. When these loans go bad, it leaves behind a toxic mess and China is painted as a bully for trying to recover its money. China does not have control of international institutions like IMF and World Bank it can use to mitigate the bad loans and bail out its banks like the US does. It is a lose-lose situation for China that it will regret for decades.

Here is the perfect opportunity for the US to come along and help those countries that are strapped to pay back the Chinese loans, thereby earning their support & perhaps loyalty. Unfortunately, the Trump mantra of “ America First” precludes this obvious type of help. The transactional basis of Trump’s assistance to foreign countries assures that the Chinese will win “The Great Game” while we become poorer andfall further and further behind.

Frankly, it's time to bring China down one or two notches. There are folks who dislike Trump and I get it, but what Trump is doing in this regard is absolutely right. Status-quo as it relates to China was hurtful to us. Full disclaimer: I am of Indian origin and that bias also plays into my opinion of China.