Belt & Road Initiative - a ponzi scheme?

Source: ConsumerAffairs.com

Further to my earlier post on One DEBT, One Road – The Silk Road to Debt Trap, I would here be explaining what is in store for Chinese in the coming months.
Am actually tired of explaining a simple fact that the Chinese economy is unsustainable in long term. Let me try it once more on this.

Some investment gurus and those planning domestic economy at a macro level are still believing in Chinese magic! No worse joke than this! Would like to both pity at them and also give them a tight slap (not literal one!) to wake them up. And make them smell coffee! That 'magic' train has already left. Even some are writing about it these days. Boldly. Been shouting about it for years now. Even my last two blog posts were about that.

I am not going to go into minute details & bore you with numbers. I let you google about it. Let me make this a bit interesting. Let me take you a few centuries back on & off.

Imagine that you are right now in 18th Century. Around the same time, when imperials started to conquer territories. China & India had been dominating majority of world's market with its goods. Silk Roads existed then too. There was neither one belt nor one road. More so, no debt.

What happened now? Why people are against the ponzi scheme?

Because, people are simply realizing this as unsustainable. How? Unqualified / unaffordable loans.

The age old civilization has survived for thousands of years, by living along with the nature and not thereby exploiting it. Today, what is happening is exploiting the resources in a fast pace. But with lots of money! Something people can't even afford. More than money, criminal waste of resources.

It is like this: A countryside town needs a basic bridge that can transport people from one shore of a river to another. But what if Chinese build a tunnel.

Now, a few points:
(a) Though a tunnel serves the purpose, was there a cheaper alternative? Yes, a bridge.
(b) Will the countryside town be ever be able to pay that amount? Highly doubt that.
(c) Is it not like an intern given a credit card by a ponzi bank scheme where in he / she has a credit limit of say, 100K? What will the kids do with it? Investment? Come on!
(d) This much money HAS to be recovered. So, the ponzi bank uses tactics to recover it from you. Suppose you had a family wealth, you would be forced to sell it to the bank at dirt cheap rates.

You think, I am kidding? You know Hambantota? You know what is happening with Railway that Chinese built in Africa? You read about Ghost cities in Nigeria & other places? Well, of late things are beginning to get better. Malaysia, Kenya have been talking about cruel Chinese investments. In Sri Lanka, Chinese investments are seen as a liability clearly.

Malaysia even went & cancelled a few projects officially. Read report here.

Vietnam is in full throttle to go against Chinese in South China Sea. Look at recent interactions of Vietnamese officials / Government with India, Sri Lanka, Bangladesh, Burma & Thailand? The process started few years ago. Last year, this interesting piece spoke of it in detail.

You can't forget how Philippines President Duterte shunned China in South China Sea. He is making right moves & showing signs that will have deep impact for us to see during his tenure. Most importantly, he is linking with Israel to chase jihadis in Southern City of Marawi. But, that is not all! This piece has some more details.

Kenya & Nepal would soon fall prey to Chinese debt. While former for railways (Read here & here)

So, at the the end of the day, what we thought as a debt trap for countries is actually turning to become one of the notorious loan sharks of the world which is funding rogue nations - including Pakistan!

All the money is circling back to China, after making you bankrupt. For them, it is just cash - which they can print anyways. For rest of the world, it is natural resources & wealth. Something that they have lived with & sustained for thousands of years. This should be stopped. It is unviable & unsustainable.

Hope loan shark is isolated sooner than later. Glad that India stayed away & is unmaksing Chinese without even being part of the project to deplete world resources.

China is walking on glass. One that is already beginning to crack. A glass once broken can't be fixed that easily. Am sure, that glass will break fully soon. How?

(i) In due course, when countries start defaulting loans, few companies in China would also go bankrupt.
(ii) Lot of common people who deposited money in these banks would soon realize that their savings was irresponsibly used to fund these projects.
(iii) China would soon realize that it can't reach Indian Ocean easily as it has to cross several Nations before reaching here.
(iv) Clock is ticking. Time is not far, when China's bluff will be called out. Not by any major nations. But, by people & governments of smaller nations.
(v) With Tariff war with US only to get worse for China, around end of the year, things can't be better soon as China may be up for default around January 2019.
(vi) That's not all. The capital flight issue is still not tackled. If not taken seriously, it would be turn to be much worse issue than declining economy itself.
(vii) It only matters until China receives first major default. Thereafter, it is pack of cards. Brace for it. It will be a brutal correction for China.

What worst insult to the nation that aspires to be a super power? You are cheating small nations.

So, in a nutshell, China is undoubtedly a Loan shark running a ponzi credit card scheme of a dubious bank called PRC! That's some dubious reputation. Not sure, if China wants to live with that.


Suggested reads:
(i) China’s Debtbook Diplomacy: How China is Turning Bad Loans into Strategic Investments
(ii) China's debt-trap diplomacy reaches the Philippines, which is likely to accept Chinese loans 1,100% more expensive than other options

Fault lines of China - A Great Leap Backward

(Pic courtesy: Bharat Rakshak Forum)

Fault lines. Few days ago, China pulled of a majestic stunt. Celebrated PLA's 90th Raising day. This, in itself a fault line of sorts. Let me explain why.

Faultine PLA:

Back in time, before proclamation of freedom, this was just a nomad / noman's Army. It was nothing more than a militia that evolved as group of militias. That means, proclaiming freedom with sheer muscle power & at the barrel of gun. Before we proceed further, let's first understand who were these militias and why it is a fault line.

"Late in 2014 President Xi Jinping went to Gutian, a small town in the south where, 85 years before, Mao had first laid down the doctrine that the People’s Liberation Army (PLA) is the armed force not of the government or the country but of the Communist Party." - Source: The Economist

After World War I, the advent of Soviet Union like totalitarian Communist State sent a few young farmers of Communist Party of China to take brute force to gain sympathy & support of people to proclaim Independence & form a copycat Soviet Union adapted by Manchurian ways.

Fast forward to today, these very same Communists have little support these days. Communist party leaders who came to power in 1949, without any experience in leadership. Even if we ignore that, these people are barbarians with too much man & muscle power. Leave alone planned development. The "Build, build & build" strategy is clearly failing. Pushing the country into debt trap by it's own deeds. This won't last long. The much celebrated "development" & "GDP growth" has clearly failed to empower it's people. Many of whom are still living sub-standard lives.

Okay, so when was the last time PLA saw action? 5yrs ago? 10yrs ago? 20yrs ago? 30yrs ago? World doesn't think, you're good enough to fight. Soon, PLA's worthiness would be tested.

The mighty army is nothing better than a terracotta army of their emperor few centuries ago.

Inner-Mongolia:

The Inner Mongolian region has more Mongols than Mongolia itself. Of late, there's been demand for redrawing boundaries & merging itself with parent Mongolian Nation. This idea has fallen silent for a couple of decades now. But, with a anti-Chinese President in Mongolia, things are expected to heat up. Two pointers here: 1) Mongolia wasn't part of Qing Dynasty (as they parted ways). 2) Inner Mongolia is first successfuly population jihad project by China. With making Inner Mongolia a 79% Han population. Change demographics, claim land & resources. An inch a day.

Not without a reason PM Modi visited Mongolia recently. During that trip, a strong & balanced effort has been forged with Mongolia - including defense cooperation.

Xinjiang: 

This province, bordering Inner Mongolia is China's root of all troubles in it's West. The province with significant Muslim population is subjected to inhuman methods of governance. Needless to say, daily abuse of even the basic human rights. I would leave you to read up on this yourself. This report (among several others) on The Diplomat shares more insight in this issue.

Hong Kong SAR:

Hong Kong SAR is corner stone of sorts, of China's "One Country, Two Systems" & "One China" policies. Needless to say, the Asian Powerhouse, thanks to British Democratic values, want to be democratic. And, independent. Something that Chinese would oppose big time. Any pro-democracy Government / person is harassed. Recently, there were street protests when the Chinese President was there. 

Taiwan:

Historically, it won't be wrong to say that Taiwan is first nail in China's coffin. Till date, an ally of West, Taiwan has stood up to the Chinese leadership & dictatorship. Taiwan is an Independent Nation. Though with very little diplomatic support against the giant neighborhood, the thin numbers Taiwan has are powerful enough to stand up to Chinese. Of late, Taiwan Cultural Center in India is seeing heightened activity.

South China Sea:

It's like a giant nation's giant mistake. To make enemies out of 7 neighboring Nations in one go & over a single issue. Claiming & stealing almost entire South China Sea from neighboring nations is not going to end in a good way. Problem is, China, as of today has moved away from "peaceful rise" & "peaceful co-existence". Seems like it. 

(Pic courtesy: IBTimes.co.uk) 

Far East:

So, if we turn to believe that China enjoys a good relationship with it's bigger neighbor, Russia, we're in for a shock. It is NOT! China is doing what it did to Inner Mongolia, in Russia's far east. Part of Russian Far East is being claimed by China. Historically, Chinese say, it belonged to Manchuria - including oil rich Sakhalin region.

OBOR initiative:

As mentioned in my earlier post, the project would push more nations into debt trap. The cash surplus would move away nations. The project is funny. It's similar to swiping credit card, get cash & spend it on luxury projects that can't be built over a century, at least. You see what the implications are? You can afford a lot, if one's credit card limit provides cash limit of say 10x of your salary. It may make you look rich with say, buying a few luxury car. But, would you be able to repay? NOT! That's what is happening with OBOR. 

Devil is in the detail. Wherever GDP growth hasn't uplifted / reached common man, it has fallen flat. Even Greeks & Spaniards are facing it. US too will. GDP growth should also be of some quality. If not, not worth it.

Debt bubble: Chinese Debt trap is linked to the OBOR / BRI project. The more they push others into debt trap, the Chinese themselves are pushing them into one. Slowly, yet consistently. Their real estate market is going in for a burst - within months, if not weeks. Matter of time. Many experts are predicting it. One such published report today.

Cultural hegemony: 

So, taking into all the above pointers, people of China need a safety valve. In India, similar discontent resulted in the massive defeat for Congress party. In China, in the absence of any such safety valve of Democracy, would need at least cultural well being. THAT TOO is neutralized by the Chinese. Recently, there was a plan to destroy an ancient Buddhist site for mining copper. This is no different from what Taliban did in Bamiyan. (Note: Months after Bamiyan was destroyed, Taliban fell!)

Hans Vs other ethnic minorities:

Hans are as common ppl like anyone. They too have this tendency to push more people & earn a decent living. In pursuit of that, they push into new territories & antagonize natives of that place. Something like what they did in Inner Mongolia, Xinjiang & Tibet.

Party Vs PLA:

The rift between the PLA & the Party is going in for a big time showdown. Expect it sometime around Chinese Party Congress (in October 2017). The anti-corruption in military has deprived Chinese of experienced commanders. I highly doubt that there are any top Generals who have seen combat battle / action in their long service. (If any, let me know!). The ill-advised PLA is depending on the terror state of Pakistan to help it on India. It is all alone when it comes to other nations - when put together. None would come to save Communist Party. They'll not even have their own people, who are facing high turbulent & suppressed life under communists.

Vietnam:

Vietnam holds the distinction of fighting a perfect war in the 1970s. Was patient for years together when the Peace Talks were held in Paris. Until after SEVEN long years, Paris Agreement was signed. It defeated the mighty US militarily. Soon after it gave a tough fight to Chinese, who were stopped by Vietnamese Armed Forces from it's excursion. A land grab, averted.

Tibet:

Tibet. Independent weak neighbor of China (before it was forcefully occupied), was the first Nation to fall for China's 'peaceful rise'. Dalai Lama stays in INdia running a Government in Exile. I don't expect an armed uprising against the Chinese. But, I do see the Lamas of Tibet rising peacefully against Han PLA & Communists.

India:

India. The name that gives China nightmares. Growing & emerging India - a Democratic, Culturally diverse, Strong Nation is a definite threat to China. China occupies part of India's Jammu & Kashmir province in two parts - in Aksai Chin & partly in Pakistan Occupied Jammu & Kashmir.

The long standing border dispute & the war of 1962 has given bad taste among Asian super powers. The problem is, only in 1962, in 5000yrs of existence China has ever won a war. With anyone! India didn't lag behind much. In 1967 & 1987, Chinese got a bloody nose. Even in 1962, Rezang La is a place that Chinese would have dreaded dreams even today.

Unlike it's bullying with smaller neighbors, it can't do the same with India. China can't occupy India for a long time. Nor it can keep it's own flock while it is doing it. More so, India's close relations with Japan, Russia, US & ASEAN would complicate the issue. Global pressure would bring them down.

Conclusion:

Though only time would tell what would China be doing 5years down the line. For now, I can safely conclude that China has opened itself too many fronts. Within & outside. 

If China thinks, by posturing big against it's neighbors - all at once, they're in for a shock & are broadly mistaken. Money can buy you friends. For time being. Not for long & good ones. You reap what you sow. Stop this land grab to make good friends. Until China does that, it is a problem for their very existence.

If they are doing so much land grab citing so many of their old books that are written few centuries ago, India has the right to claim entire China. The word "China" itself was first used in Indian Epic, Mahabharata.

"Cīna was first used in early Hindu scripture, including the Mahābhārata (5th century BCE) and the Laws of Manu (2nd century BCE)."
(Source: The Polity of Yelang (夜郎)and the Origins of the Name ‘China’)

So, it is a matter of time, that all of China's problems implodes - one at a time, leading to a huge firework show. Let's watch the show "Fault lines of China - A Great Leap Backward" from pavilion.

Zhù nǐ hǎo yùn!