ITS GLOBAL MUSCLES
In the last several years, the world has witnessed
the arrival of China to the world stage.
They have insisted on respect and have received
respect. A new empire is being built with numerous
platforms but in stages. They have the resources,
desire, and savvy to establish trade pacts that
pave the way. They need foreign technology, having
benefited from Japanese in the last decade. They
will benefit from German technology in this decade,
as part of more important multi-lateral deals.
They need to find a constructive usage for their
mass of USTreasury Bonds and USAgency Mortgage
Bonds. They are using the USTBonds carefully to
forge new hidden treaties in Europe that assure
global expansion, if not US
isolation. They will convert as much to Gold and
hard assets as possible, spending the USGovt debt
paper even as the USFed continues to monetize
it in reckless fashion. Numerous deals have been
struck, and more will come. The transition from
a US-led globe to a shared power structure will
not be smooth.
◄$$$ THE CHINESE SWAP WINDOW STRATEGY IS
CUNNING, ISOLATING THE UNITED STATES. COORDINATION
WITH THE NEW NORDIC EURO IN GERMANY IS LIKELY NEXT. RUSSIA AS HIDDEN PLAYER
HAS AN IMPORTANT ROLE AS MAJOR CONDUITS TO CHINA HAVE BEEN CONSTRUCTED. A SECRET AGENDA PROCEEDS
ON COURSE. A MASSIVE USTREASURY BOND DUMP IS SOON
TO FIND BRISK TRADE, IN SUPPORT OF THE EURO CURRENCY,
WITH MOTIVE. CHINA IS EXECUTING A GLOBAL
PLAN, AKIN TO COLONIALIZATION. $$$
A brilliant geopolitical strategy is unfolding
by the Chinese, explained in the last couple reports.
The Chinese have developed a tactical offensive
to dump USTreasurys. They have been buying discounted
PIIGS nation sovereign debt by the truckload.
They have essentially joined the European Union
in the process, as a cousin state. They have undercut
and intercepted any potential for Europe to join
the United States
in an anti-China campaign for trade war initiatives,
thus isolating the US. The volume of EU sovereign
debt purchase will be less than the massive flow
of USTBonds sold through the Dollar Swap Windows
of various national labels atop the windows.
A backside flow has also been revealed, as some
private Chinese banks (if there is such a thing)
are selling some EuroBonds when the Euro rises
like from a back door. Scattered banks in China
have far more Euros in FX reserves than are wanted.
They are diversifying into USTBonds, as is their
prerogative. When the Jackass suggested that
five times as much dumping of USTreasurys was
taking place as Euros converted to USDollars in
return, a sage German banker contact agreed without
altering my loose ratio estimate. The Chinese
have embarked on a global colonialization plan
that began long ago with Canada, extended to Iran,
then to Brazil,
even as relations developed with Russia.
The distinction in recent months is the financial
sector aspect with both the European Union and
with bond purchases across the continent and currency
swaps in Moscow, which complements the commodity and finished product trade.
Witness the Paradigm Shift with China building its core center
INTENDS TO CONVERT A SIGNIFICANT PORTION OF THE
PURCHASED EUROBONDS INTO GOLD BULLION, AS WELL
AS OTHER HARD ASSETS. THEY WILL FORCE THE DEAL
WITH I.M.F. FACILITATION OF THE EUROPEAN MEMBER
NATIONS. THEIR GLOBAL EXPANSION IS CENTERED ON
TRADE, WITH A RECENT GRAND FINANCE LEVER. $$$
Notice that China
has chosen Europe as its fertile colony, not the
States. They have been betrayed
by the USGovt. They are loaded to the gills with
USTBonds and USAgency Bonds. Trade friction is
growing worse by the month. Cooperation with business
investment from early last decade has turned ugly
with constant charges of currency manipulation.
The last straw might be Quantitative Easing #2
conducted by the USFed, which assures vast FX
reserves losses for the outsized Chinese account.
Other major friction exists over US outposts in
Asia, such as Korea, Japan,
the Persian Gulf, and even the Malaccan
Straits. The open door
opportunity lies in Europe
for Chinese penetration. The Chinese have a plan.
They do not wish to hold EuroBonds to full maturity.
They wish to use them wisely to execute a strategy.
To be sure, some losses will be suffered if the
EuroBonds rise in yields and lose principal value.
Some will die on the vine as the European Union
crumbles and PIGS debt dissolves in a sea of acidic
paper. But China appears to pursue hard
assets, such as property (farms, beachfronts,
tenement houses, commercial buildings), industrial
plants, port facilities, infrastructure cogs,
equity stakes in the icon giant corporations,
and lastly, the financial cornerstone, Gold &
Silver. Expect the details to come out later,
that the back end of the PIGS debt purchase involved
specific contract agreements to convert USTBonds
to gold bullion with full assistance provided
by the Intl Monetary Fund. China
has promised to keep funding the IMF aid account
for emerging nations, which will enable it to
control the G-20 Meetings. The deals are interwoven.
China will most assuredly
promised foreign aid to the Southern European
nations, to cover some of the deficits. The Chinese
are using USTBonds to unseat the United States from its geopolitical
throne, and to bring an end to the American Empire.
A connected German banker made comment on the
entire completed triangle on the Chinese EuroBond
gambit, a highly intelligent, deeply crafty, hidden
maneuver, which assures gradual global domination.
The German banker said, "The Chinese will
convert USTreasurys into hard assets on the ground
in Europe, then dictate trade
and foreign policy. Later they will send millions
of Chinese to vacation in the hotels they will
own, and most importantly push the US to the point that they are squeezed out of Europe. Trade is the way to go, not depleted uranium bombs, flying military
drones, or McDonalds fast food centers."
See the Max Keiser video clip (CLICK HERE).
HAS BUILT ITS PORTUGUESE DOLLAR SWAP WINDOW. NEXT
IS THE WINDOW FROM SPAIN, EACH A MAJOR PIECE
IN AN ARRAY OF WINDOWS. A MASSIVE USTREASURY BOND
DUMP IS SOON TO FIND BRISK TRADE, IN SUPPORT OF
THE EURO CURRENCY, WITH MOTIVE. $$$
has made a deal with Lisbon leaders. China
has been given the final green light to purchase
$5.3 billion of Portugal
debt. More pressure will be relieved in the
EU sovereign debt market, according to the Jornal
de Negocios in Lisbon.
will buy Portuguese Govt debt in auctions or in
the secondary markets during the first quarter
of 2011. Portugal
has moved onto the global stage, under the spotlight
of crisis, as its borrowing costs have spiked.
Investors have been rejecting their debt, whose
stability has broken down. Rates have risen sharply.
Portuguese Finance Minister Fernando Teixeira
dos Santos two weeks ago met
Chinese Finance Minister Xie Xuren and the head
of the Peoples Bank of China during a visit to Asia.
The debtor visited the creditor. Chinese President
Hu Jintao pledged during a visit to Lisbon
last month that his country will help Portugal confront the financial
crisis, but stopped short of vowing to buy Portuguese
debt. That pledge has now been made solid. Portugal
is a small nation two thirds the economic size
as Greece. But it is the back door to Spain, the Big Enchalada.
HAS MADE INITIAL FOUNDATION SETUP TO EXPAND ITS
DOLLAR SWAP WINDOW TO SPAIN
AND PORTUGAL). THEY WILL FREELY
DUMP USTBONDS IN FAVOR OF DISCOUNTED SOVEREIGN
DEBT FROM SOUTHERN EUROPE. THE VOLUME OF SPANISH DEBT DOUBLES THE ADOPTED DEBT
TO DATE IN COVERAGE. ITALY IS NEXT, TO COMPLETE THE P.I.G.S. QUARTET.
swallowed the IMF poison pill, but the PIGS nations
are all aligned to create direct ties to China, the new European credit benefactor with
has recently backed Spain
in EuroZone support, a correct Jackass forecast
made over the last few months. During a visit,
like a links in a great chain, the Chinese Vice
Premier Li Keqiang confirmed his country will
buy Spanish Govt bonds, in an effort to allay
fear and quiet the storm of lost market confidence
over EuroZone debt. During a three day visit to
the country, the vice premier signed $7.5 billion
in official trade deals. The centerpiece deal
was ratification of a grand Brazilian oil sale
from Repsol (Spanish oil giant) to Sinopec of
China. Other deals include exports of Spanish
speciality products, such as cured ham and olive
oil. The Chinese population is gradually adopting
elements of a Western diet, expanding from the
is locking in trade deals, just like with Germany. This marks a serious rampup in debt acquisition,
surely at heavy discount. The Spanish Govt
debt doubles the targeted sovereign bonds for
purchase to date after Greece
and Portugal. The Xinhua news
agency and German Sueddeutsche Zeitung reported
Mr Li as saying, "We will buy more [Spanish
Govt bonds] depending on market conditions. China's
support of the EU's financial stabilization measures
and its help to certain countries in coping with
the sovereign debt crisis are all conducive to
promoting full economic recovery and steady growth."
What a slippery piece of political speak!! Recovery
and growth are empty zipwords on billboards. China
is dumping USTreasurys en masse, blocking a trade
war coalition, locking in export markets and imports
and more, in a brilliant geopolitical stroke.
On a combined basis, Spain's
central and regional governments and its banks
need to raise about 290 billion Euros to cover
debt in 2011, a sum that includes rollover of
existing bonds that expire. Any nasty fever that
displays lost confidence would force interest
rates upward, and raise the risk that Spain could need a bailout. The EU Stability Fund
could not manage such a bailout. Any EU or
IMF bailout for Spanish Govt debt would be far
bigger than anything seen to date in Europe, its
economy being twice that of Greece, Ireland,
has taken up the extreme slack from EU bond demand,
while making more firm and solid its relationship
The four corners to the Eastern Alliance are
and the Persian Gulf. The
discounted bond purchases are glue during a time
of falling appetite for the deeply damaged bonds,
not quite toxic, but close. Even the IMF has
blessed the Chinese participation, not surprising,
since it relieves pressure from the IMF in bailouts.
The IMF is a mere facilitator anyway of EU nations,
without funds of its own. While the EU debt crisis
simmers and spills over, the most immediate impact
is the rise in the borrowing costs from financial
markets. Portugal completed a 500 million
Euro bond issuance of short-term debts at the
beginning of the new year at a 3.7% interest rate,
double what it paid in September. The Spanish
government has promised to lower the public deficit
from 11.1% of annual output in 2009 to the European
Union limit of 3% by 2013. That would require
a grand miracle. See the British Broadcast Corp
article (CLICK HERE).
◄$$$ THE WORLD BANK ISSUED BONDS DENOMINATED
IN CHINESE YUAN, A SIGN OF THE TIMES. THE YUAN
IS GOING GLOBAL, WITH GRADUAL CONVERTIBILITY,
EXPANDING IN DIVERSE POCKETS. THE CHINESE PARTICIPATION
IN EUROZONE BOND PURCHASES HAS ASSURED FULL I.M.F.
COOPERATION. CHINA HAS BEEN ACCEPTED
AS AN I.M.F. PLAYER. THE I.M.F. AND WORLD BANK
ARE NO LONGER AMERICAN WEAPONS. $$$
The World Bank issued the first bonds denominated
in Chinese Yuan, a sign of acceptance and fraternity
status. The Yuan Bond was issued to promote
the use of the Chinese currency in international
markets, improve liquidity, and work toward broader
convertibility. That is a longstanding Chinese
Govt goal. The World Bank raised 500 million Yuan
(=US$76m). Other entities, including the Asian
Development Bank, and US firms such as McDonalds
and Caterpillar, have issued Yuan Bonds in the
past. In 2010, a total of $36 billion in these
so-called Dim-Sum Bonds were issued and sold.
In return, the Chinese stake in the World Bank
is due to increase, thus providing financial and
technical assistance to developing countries.
The Chinese position could develop into the
third largest stakeholder in the bank after the
and Japan. Doris Herrera-Pol
is the global head of capital markets at the World
Bank. She said, "This is a landmark transaction
for the World Bank as it is the first World Bank
issuance in RMB (yuan), and signals the strong
interest of the World Bank in supporting the development
of the RMB market." The main location
for Yuan-based bond issuance and trading is in
the Hong Kong market, which
began over three years ago. Last September, the
Chinese Govt started issuing bonds in its currency,
selling them in Hong Kong.
The former British colony is part of China,
boasts a developed and more open financial market,
and serves as a conduit between China
and the developed world. See the British Broadcast
Corp article (CLICK HERE).
◄$$$ THE ULTIMATE IN DOLLAR SWAP WINDOW,
A CHINESE BANK ACCOUNT, COMES TO A NEIGHBORHOOD
NEAR YOU. THE BANK OF CHINA INVADES THE UNITED STATES IN RETAIL BANKING.
STEP BY STEP, THE CHINESE YUAN (REMNINBI) IS MAKING
IMPORTANT STRIDES IN BECOMING A GLOBAL CURRENCY.
THE ULTIMATE WILL BE USTREASURY BONDS ISSUED IN
YUAN, AND GLOBAL WIRE TRANSFERS PASSING THROUGH
In its latest step to make the Chinese Yuan (Renminbi
= people's money) a competing global reserve currency,
the Bank of China
will permit individuals to open Yuan savings accounts
in the United States. The Bank of China is predominantly
state owned. US individual accounts have a $500 minimum balance
requirement. Certificates of Deposit are also
offered, in 6-month and 1-year terms with a minimum
of $1000 invested. A simple procedure involves
an application form, a W-9 tax form, and a signature
card. Standard identification is required. Businesses
can open Yuan accounts with a $5000 minimum and
requisite entity paperwork like Articles of Organization.
In addition, currency exchange services between
USDollars and Yuan are offered, but so far only
at its Chinatown branch in New York City. Ambition is clear. The Chinese Govt wants the Yuan to
become a fully-convertible competing global reserve
currency, and to make Shanghai the world's leading
Several sovereign nations hold Yuan funds in
reserve accounts alongside USDollars. Settlement
of cross border trade is increasingly being conducted
in Yuan, like with Russia
and Brazil. New clearing
and settlement platforms have been created in
Hong Kong, where new Yuan-based
gold contracts will trade. Rice contracts
are next. These Yuan-based futures contracts are
certain to spread beyong Hong
Kong to other exchanges. Note also the World Bank
recently issued a Yuan-based bond. Look for a
expansion into Europe and England soon, beginning with Singapore, whose SGX exchange
already operates global depository equity share
(stock) trading of mainland Chinese companies.
The distribution for financial exchange participation
will naturally follow into Australia
Strong economic ties exist with both nations.
The ultimate future development will be two distinct
events, according to the Simon Black. As he says,
"Several years from now, the entire world
will know that the baton has been passed on
the day that the USTreasury Department holds a
bond auction denominated in renminbi, or the
day when a bank wire transfer from Bangkok to Boston passes through a corresponding
bank in Shanghai."
See the Sovereign Man article (CLICK HERE).
◄$$$ SOME DEEP THOUGHTS ON CHINA
AND HONG KONG. A HOLIDAY
EMAIL EXCHANGE TOOK PLACE WITH A GREAT SOURCE
OF INFORMATION. HE HAS NUMEROUS CONTACTS WITH
BOTH MAINLAND CHINA
AND HONG KONG IN GLOBAL CONSULTING.
MY CURIOSITY PROMPTED THE CONTACT, CONCERNING
AN UPDATE ON THE HKDOLLAR AND YUAN INTEGRATION.
"With respect to Hong Kong, it is more
determination to break the US-British backbone.
China has become a de-facto member of
the EU. They first bought up Greek debt and are
about to buy up debt from Spain and Portugal,
as well as Italy
sooner or later. French debt will be the last
lot they will swallow. This all happening with
Berlin's and Moscow's consent since France will
be taken out of the equation by the Chinese, thus
Berlin does not have to do it. Sakozy is a terrible
disturbance source. The Chinese need the European
markets and European technology, and so does Russia. Germany will be providing it to both to Russia and China,
and will serve as the mediator between Russia
at the same time. The HK bankers are totally
irrelevant in the bigger picture. Most of the
key guys have solid connections with British Intelligence
does not need HK to be there for them as a transformer
to the West any longer. They have acquired enough
expertise and what they lack they can buy dirt
cheap with thousands of jobless bankers. It is
interesting to note that nearly all clearing &
correspondence bank for African bank operations
used to be through the likes of Standard Chartered
Bank in Europe. Suddenly
all the SWIFT clearing codes have moved under
the Standard Chartered Bank umbrella in Asia.
This is a significant hint of a major shift.
There is no doubt in my mind that the implosion
of the banking system is going to be engineered
like a controlled demolition of an old hotel or
stadium, or for that matter the WTC on 9/11.
What these people totally under-estimate is the
staying power and perseverance of the developing
world. People from emerging economies know how
to deal with adversity and know how to survive.
The entitlement jockeys in the West are totally
incapable to cope once their local supermarket
shelves are empty. China has frantically tried
with reasonable success, to replace and displace
the old colonial powers. They use trade as a weapon.
The destruction of the US
is a perfect example. The upcoming economic stumbles
by mainland China, both in the economy and political system,
might present Hong Kong with
a short comeback. When China
comes back after their version of meltdown, the
world will be faced with a superpower whose strength
is perhaps much greater than the United States during its prime time. But the timeframe
is around 10 to 15 years."
HAS TIGHTENED MONETARY POLICY, STEP BY STEP. WHILE
REDUCING FUTURE RISK OF ADDITIONAL ASSET BUBBLE
EXPANSION, THEY ARE FORCING THE ISSUE WITH EXISTING
BUBBLES. A RATCHET EFFECT IS AT WORK IN THE PROCESS,
UNLIKE THE UNITED STATES WHICH KEEPS THE FLOODGATES
On Christmas day, the Peoples Bank of China hiked their benchmark
lending rate by 25 basis points to 5.81%, the
second hike in two months. The PBOC has instituted
firm measures to quell inflation. As China
looks to cool its economic recovery, the United States looks to continue extreme stimulus
measures that reek of desperation. The Chinese
admit their price inflation, while the US
conceals it vigorously. The Chinese even permit
their ghost towns and ghost malls to be photographed.
The US Quantitative Easing #2 program is at direct
odds with China.
The QE2 executed by the USFed is designed to create
money, to buy USTreasurys, to lower interest rates,
to devalue the USDollar, and to make US goods
more attractive overseas, in places like China,
which has a rapidly growing middle class, rising
incomes, and eagerness to improve the standard
of living. However, PBOC acts to curtail Chinese
demand with tighter monetary policy, tethered
by a loose currency peg, which connects the two
economies. The US in turn must expand its QE2 operations in an
effort to counter the Chinese tightening measures.
In a sense, the Chinese are forcing the USFed
and USGovt to ramp up QE2, even to plan for QE3,
and thus concede a form of defeat. The US is being isolated as the great debt monetization
engine, a curse to central banking generally,
and a serious blemish on the USDollar, for leadership
The list of events for Chinese monetary tightening
is long. The list of bank reserve increases and
actual rate hikes is long. On January 12th they
hiked reserve ratios 50 basis points. On February
12th, reserve rates rose by 50 bpts. On May 2nd
by 50 bpts. On October 12th by 50 bpts. On November
10th by 50 bpts. On November 19th by 50 bpts.
On December 10th by 50 bpts. As for payouts to
investors, they hiked deposit rates on October
19th by 25 bpts. They hiked deposit rates again
on December 25th by 25 bpts. They finally hiked
bank lending rates on December 25th by 25 bpts.
Such moves in the United States would collapse
the banking system, the housing market, and the
bond market, if not the stock market in a swift
topple of dominos.
The Chinese bank decisions come amidst a chorus
of commentary by government officials. China's
Commerce Minister Chen claims there are no quick
fixes in Europe. He showed
wisdom (unlike the deceptive commentary in the
US) by saying the European
debt problems cannot be solved by selling more
government bonds. He noted that the $1 trillion
EU Stability rescue fund must be rapaid at steep
interest rates at a later date. Minister's Chen
cites a basic principle lost on the US.
A nation cannot extricate itself from a debt crisis
by going deeper into debt. A bigger hole is dug,
buying time, but assuring a worse crisis later.
This is the Rubin Doctrine of Destruction that
sent the nation toward the abyss. The stress and
strain on USTreasurys comes and goes, seemingly
unaffected by bond issuance and bond auctions.
The USFed purchases $billions worth of USTreasurys
every day, never to worry about a complete absence
of demand. The Printing Pre$$ is the primary buyer,
having gobbled up 75% of the USTreasury sales
in the entire 2010 year.
SUFFERED A FAILED DEBT AUCTION. FAILURES ACROSS
THE WORLD ARE HAPPENING, EXCEPT IN THE UNITED
STATES, WHERE THE USDOLLAR PRINTING PRESS WORKS
FAST & FURIOUS TO CONCEAL THE ABSENT DEMAND.
THE USFED & USGOVT TEMPT MOTHER NATURE AND
HER WRATH, WHILE THE CHINESE CONTEND WITH MARKET
Over the Christmas holiday, little shock waves
hit China, a direct response to gradual monetary tightening
decisions. The 7-day Repo rate in China recently hit the highest
level since the historical crisis events in September
2008, the so-called Lehman crisis point. After
a string of reserve rate requirement hikes, each
of which accomplished little if anything, the
Peoples Bank of China
had no choice but to do meaningful tightening
measures. Certain market realities enter the
picture when a monetary Printing Press is not
available. It is only an American device for use
on American soil to aid the American debt distress
and to conceal the American situation. The Chinese
Ministry of Finance failed to attract sufficient
interest in its 3-month 20 billion Yuan auction.
The result was a quick 1.2% plunge in the Shanghai
Composite stock index. The news hit a wet US
wall, since the USFed is immune to bond shocks,
supposedly, practically, but eventually not so
in a real world. The USFed believes it can manipulate
markets to infinity without fear of consequence
from repeated free market violations. The last
contended with a failed bond auction was in mid-April,
when their stock market hit 2010 highs. What followed
by a decline down to the yearly lows quickly.
As Tyler Durden atply stated, "As the
rest of the world celebrates Christmas, blissfully
pretending all is good, and the Fed can manipulate
markets to infinity without at least one of the
numerous violated laws of physics being reasserted
in the process, things in China are once again
reminding those who care that just as liquidity
giveth, so does liquidity taketh away."
See the Zero Hedge article (CLICK HERE).
HAS RESUMED ITS CUTBACK ON RARE EARTH METAL EXPORTS.
THE TRADE WAR WIDENS AGAIN. BEIJING USES IT AS
A STICK AFTER ANNOYING CHARGES OF CURRENCY MANIPULATION.
WISHES TO PROTECTS ITS OWN INDUSTRY, AND TO STEER
THE RARE EARTH METAL PRICES HIGHER. $$$
Rare Earth metals are back on the war room table.
China cut its export quotas for rare earths by
35% in the first round of permits for 2011, threatening
to extend a global shortage of the mineral
ingredients needed for smartphones, hybrid car
magnets, and guided missile components. The
government allotted 14,446 metric tons of rare
earth exports split among 31 domestic and foreign
companies, according to the Ministry of Commerce
in a late December statement. Compare to the first
round of 22,282 tons and the second round of 7976
tons. The Chinese Govt usually issues two rounds
of such quotas per year. They are negotiating
full-year rare earth quotas for 2011. Relevant
factors include domestic output and demand, global
requirements, sustainability of the industry,
supply of its own electronics industry, as well
as foreign mega-deals. China wishes to bolster prices while it exerts
greater control over the sector. The claims of
protecting the environment as as lunatic as the
USGovt claiming to aid the homeowners. The USGovt
shot back its intention to file a World Trade
Organization complaint over restraints on supplies
of the minerals, as tensions rose. China accounts for more than 90% of world supplies
in the rare earth metals. They slashed export
quotas by 72% in the second half of last year,
sparking a surge in prices and a storm of protest,
even from Japan.
China will also raise export taxes for some
rare earth elements to 25% next year, claims the
Ministry of Finance.
As the world's biggest consumer, Japan
has pursued alternate supply sources. Hitachi
Metals Ltd and Toyota Motor Corp have sought cooperative
ventures at home and abroad to secure the minerals.
Molycorp owns the world's largest non-Chinese
rare earth metals deposit. They agreed in December
to form joint ventures with Hitachi Metals to
produce alloys and magnets in the United
States, used in electric
car production. Hitachi Metals is Japan's largest maker of rare earths magnets,
and consumes 600 tons of these special metals
each year. The price of neodymium oxide, essential
in magnets for BlackBerry devices, has surged
more than four-fold to $88.5 per kilogram, from
a base price of $19.12 in 2009. Australian-based
Lynas Corp is building a A$550 million (=US$542m)
rare earths mine in Western
Australia. Demand for neodymium and dysprosium
is expected to grow by 15% to 20% per year. Neodymium
is also used in tiny hard drives for laptop computers
and Apple iPod headphones. Rare earths are 17
chemically similar elements including neodymium,
cerium, and lanthanum that are key to the production
of electronics. See the Bloomberg article (CLICK
HAS AMBITION TO PRODUCE COMMERCIAL AIRCRAFT ON
A COMPETITIVE BASIS. COMAC HAS BEEN LAUNCHED.
PREPARE FOR THE RUIN OF BOEING, WHICH HAS FUMBLED
BADLY ITS NEW PRODUCT LINE. THE RUIN OF ALMOST
ALL US-BASED TRANSPORTATION INDUSTRY HAS STRONG
MOMENTUM. TRUCKING REMAINS VIBRANT. CARS, PLANES,
AND TRAINS ARE ON DEATH'S DOOR FOR UNITED STATES
INDUSTRY. THE QUIET STORY BEHIND THE CURTAINS
IS THAT BOEING MIGHT BE A FAILED FIRM IN THE NEXT
China made clear its ambition to surpass Airbus
and Boeing in the aircraft industry. Commercial
Aircraft Corp of China (COMAC) is a state-owned
jet manufacturer of C919 aircraft, a 150-seat
commercial plane launched two years ago. It announced
their first one hundred orders of aircraft at
the Zhuhai Airshow in southern China,
the orders coming from the Chinese airlines, Air
Southern, and China Eastern, together with GE
Capital Aviation Services of the United States, an airplane
leasing company. Prices paid by their customers
has not been revealed. COMAC plans to complete
the aircraft production in two years, then conduct
a test flight by 2014, with delivery date due
in 2016. The Chinese firm COMAC forecasts the
capacity to sell over 2000 units of C919 worldwide
in the next 20 years, sufficient to compete against
Airbus and Boeing. Big challenges lie ahead
for the firm, as fuel efficiency and production
costs must be developed, even final product price.
A similar deal to buy 100 jet aircraft would be
worth around $7 billion at its list prices. Some
analysts expect an initial 20% discount for the
completed deals. China wishes to
reduce its dependence on Airbus and Boeing companies
in the future. In the process, the tech transfer
might have military implications. The Pentagon
has a worried eye on the F-22 jet fighter aircraft
equivalent made in China. Weapons sales are a big piece of the USGovt
geopolitical strategy. Chalk up one more weakening
link in the US Imperial chain. The USGovt cannot
interfere in the string of deals with China, since the deeply indebted United States needs to preserve
its creditor position. Not only is sovereign independence
sacrificed with huge debt export, as in decisions
for the national interests, but technology advantage.
See the Seedol article (CLICK HERE).
BobO from Kansas
is a former Boeing engineer. He pitched in some
valuable comments on the deal, and its impact
on Boeing. He is not impressed with the geo-chess
moves made by Boeing, nor its new product development
quality. The 787 project is three years behind
schedule. Some big dropped balls and stumbles
have come. He wrote, "The Chinese have
now sold their first 100 airplanes. Boeing thought
they were so smart in promoting US business with
China, giving them their old technology.
Now Boeing management has screwed up bigtime on
the 787, which was to replace the main product.
That old technology is looking better all the
time. At best, Boeing has massive cost overruns,
late delivery charges on the 787, and a big hit
to their reputation. Profitability of the
787 program is greatly delayed. Future sales of
all models are adversely affected. Boeing stock
took a sizeable hit. Worse case, the 787 is a
total failure, the $billions invested maybe a
complete loss. The Boeing reputation is taking
a death blow. They are left with nothing to
sell but their old models, with which they now
have to compete against China
[since technology was handed to them]. Boeing
management will have to spin off assets, to raise
cash. There will be large permanent job cuts in
employment. Either way, Boeing's stock will eventually
fall to a point where the ailing corporation is
ripe for takeover. But who, other than the Chinese,
has the money? They know the US
government is not desperate enough yet, to approve
the sale. Besides, if the 787 is a failure,
Boeing has little else to offer in a merger acquisition
Boeing comes out of this a shadow of its former
self, sort of a General Motors of the air!
I smell another government bailout in the near
◄$$$ GENERAL ELECTRIC HAS TEAMED UP WITH
A MAJOR CHINESE AIRCRAFT MAKER TO PROVIDE AVIONICS.
IN THE PROCESS CEO IMMELT MADE A HUGE SURPRISING
CONCESSION THAT WILL GROW THE CHINESE MARKET SHARE.
THE TECHNOLOGY TRANSFER INVOLVED IS HUGE. THE
DEAL MIRRORS THE GENERAL MOTORS CAR DEAL MADE
LAST YEAR. $$$
One must scratch the head in bewilderment. An
important technology transfer from General Electric
to China will enable direct competition
against Boeing and Airbus. A joint venture
deal between GE and a Chinese military jet maker
will strike at the very heart of the existing
Boeing-Airbus duopoly in control of the global
large commercial jet market. Foreign companies
have been teaming up with Chinese firms for years
to gain access to the giant Chinese market, making
concessions, sharing technology. The natural next
step is to merge portions of their worldwide operations
into partnerships with Chinese companies. General
Electric is finalizing plans for a 50-50 joint
venture with Aviation Industry Corp of China, a Chinese military jet manufacturer. The
GE role is to share the aircraft electronics called
avionics. The deal with would give GE access
to an official Chinese project aimed at challenging
Boeing and Airbus in the huge lucrative civilian
aircraft market. In a different transportation
partnership, General Motors signed a joint venture
with SAIC Motors, its longtime partner in China. They will produce and
sell their basic product line of Wuling microvans
in India, and later in Southeast
Asia and other emerging markets. The two deals
demonstrate vividly China's
growing international ambitions, even its growing
leverage over foreign partners. To wit, in
order to facilitate the GE deal, CEO Jeffrey Immelt
made a highly questionable concession. He agreed
to merge into the venture the entire GE existing
worldwide business in non-military avionics.
Similarly in its corresponding deal, GM contributed
technology, its carmaking plants in India,
and use of its Chevrolet brand name in that market.