China flexes its muscles

President Xi Orders Chinese Army To "Prepare For War"

Zero Hedge,

5 January, 2019

In just a few short days, China has proved that investors who have been underestimating the geopolitical risks stemming from the simmering tensions between the US and China over the latter's territorial claims in the South China Sea and paranoia over the fate of Taiwan - a de facto independent state that President Xi Jinping is aggressively seeking to bring under the heel of Beijing - have done so at their own peril.

Earlier this week Xi Jinping, the Chinese emperor for life president provoked an angry rebuke from Taiwan's pro-independence president when he demanded during a landmark speech earlier this week that Taiwan submit to "reunification" with Beijing.

And as if tensions between China and the international community weren't already high enough amid a worsening economic slowdown that's hurting global economic growth and a tenuous trade "truce" with the US,  in another speech delivered on Friday during a meeting of top officials from China's Central Military Commission which he leads, Xi took his belligerent rhetoric one step further by issuing his first military command of 2019: that "all military units must correctly understand major national security and development trends, and strengthen their sense of unexpected hardship, crisis and battle."

"The world is facing a period of major changes never seen in a century, and China is still in an important period of strategic opportunity for development,” Xi said and added that China’s armed forces must "prepare for a comprehensive military struggle from a new starting point," Xi said adding that "preparation for war and combat must be deepened to ensure an efficient response in times of emergency."

Xi's order prioritizes training with a focus on combat readiness, drills, troop inspections and resistance exercises.

It applies to all units of the PLA, including troops, academies and armed police, and is designed to "ensure new challenges are met and battles are won," according to a copy of the guidelines seen during the television report.

In other words, Xi just ordered the Chinese military to prepare for war.

According to the South China Morning Post, the order "will kick-start a year of enhanced military training and exercises." Which, of course, will build on the expansive military exercises carried out in 2018, where China flexed its military muscle in the South China Sea and Strait of Taiwan to show foreign powers that might support Taiwanese independence (i.e. the US) that China still takes the "One China" policy very, very seriously.

In addition to prioritizing training for military readiness, the CMC issued a separate set of guidelines intended to boost morale, affirming that military personnel would be promoted on the basis of merit while promising greater leniency and understanding for mistakes made during training.

As one Chinese "military expert" quoted by the SCMP pointed out, the order was probably intended as a warning to foreign powers who might try to interfere in its affairs.

Shanghai-based military expert Ni Lexiong said the recent "high-profile gestures" were probably intended as a warning to those who sought to obstruct the mainland’s plans for the reunification of Taiwan.

"[They] show how seriously Xi is taking China’s military training and its preparations for war, while also flexing its strength," he said.

A former PLA officer was more explicit: a retired PLA colonel Yue Gang said that as well as the rising tensions between Beijing and Taipei, Xi’s rallying call to the military was a response to the growing uncertainty over the geopolitical struggle between China and the United States.

"China is increasing its military training so that it has the best solutions for the worst outcomes, either related to the US or across the [Taiwan] strait," he said.

"Over the coming year, the US might use Taiwan and the South China Sea as bargaining chips to get what it wants from China with regards to the trade war," he said.

"And there is always the possibility of increased independence calls from Taiwan."

Meanwhile, China’s People’s Daily, the official publication of the Communist Party, reported Thursday that the PLA has begun an extensive "realistic training exercise" with live fire in Shandong, eastern China. The publication did not specify what the objective of this live-fire exercise was, nor did Chinese agencies report whether Xi mentioned any particular acts to improve combat readiness that the PLA either has already begun to take or will do so in the future.

That same day, the nationalistic Chinese state-run Global Times highlighted comments by acting Pentagon chief Patrick Shanahan, who told reporters that his top priorities were “China, China, China.” The publication warned American officials against anti-Chinese “paranoia” while also threatening to make America “pay an unbearable price if the U.S. infringes on China.”

“When Shanahan shouts ‘China, China, China,’ Beijing must respond by accelerating construction of a deterrent against the U.S. China must make good use of deterrence, learning to make others feel fearful without being furious."

Despite these explicit warnings and military ambitions, we are confident that in the eyes of the market and general population, the prospects for a prolonged "trade war" with China will remain completely distinct from speculation about the possibility of a hot war - that is, until it's too late to heed the warnings from US military personnel in the Pacific, who have been outspoken about the threat posed by the Chinese and their growing military ambitions.

How China Colonized An Entire Continent Without Firing A Single Shot

Zero Hedge,

5 January, 2019

Back in 1885, to much fanfare, the General Act of the Berlin Conference launched the Scramble for Africa which saw the partition of the continent, formerly a loose aggregation of various tribes, into the countries that currently make up the southern continent, by the dominant superpowers (all of them European) of the day. Subsequently Africa was pillaged, plundered, and in most places, left for dead. The fact that a credit system reliant on petrodollars never managed to take hold only precipitated the "developed world" disappointment with Africa, no matter what various enlightened, humanitarian singer/writer/poet/visionaries claimed otherwise.

And so the continent languished....  until 2012 when what we then dubbed as the "Beijing Conference" quietly took place, and to which only Goldman Sachs, which too has been quietly but very aggressively expanding in Africa, was invited.

As the map below, which we first showed in 2012, in just two years after 2010 China had pledged over $100 billion to develop commercial projects in Africa, a period in which the continent had effectively become de facto Chinese province, unchallenged by any developed nation which in the aftermath of the financial crisis had enough chaos at home to bother with what China may be doing in Africa.

Since then China's financial colonization of Africa has only accelerated, and according to a study by the China-Africa Research Initiative at the Johns Hopkins School of Advanced International Studies, China had lent a total of $143 billion to 56 African nations facilitated principally by the Export-Import Bank of China and the China Development Bank. By sector, close to a third of loans were directed toward financing transport projects, a quarter toward power and 15% earmarked for resource mining including hydrocarbon extraction. Just 1.6% of Chinese loans were dedicated to the education, healthcare, environment, food and humanitarian sectors combined, confirming that all China interested in was building a giant commodity/trade/military hub.

Just seven countries – the strategically important Angola, Cameroon, Ethiopia, Kenya, Republic of the Congo, Sudan and Zambia – accounted for two thirds of total cumulative borrowing in 2017 from China, with oil-rich Angola alone representing a 30% share, or $43 billion (35% of Angolan 2017 GDP). Ultimately, Angola reached a loans-for-oil settlement, with Beijing tying the country's future oil production to shipments to China in order to service the country's burgeoning infrastructure debt. According to an April 2018 IMF study, as of the end of 2017, about 40% of low-income Sub-Saharan African countries are now in debt distress or assessed as being at high risk of debt distress including Ethiopia, the Republic of the Congo and Zambia.

Amusingly, in a September 2018 speech to the triennial Forum on China-Africa Cooperation in Beijing, President Xi Jinping said Chinese investment came “with no strings attached” and pledged a further $ 60 billion of loans for African infrastructure development over the next three years. As it turns out, Xi was only joking because as we reported last month, China was set to take over Kenya's lucrative Mombassa port if Kenya Railways Corporation defaults on its loan from the Exim Bank of China. The China-built, China-funded standard gauge railway, also known as the Madaraka Express, was plagued by cost overruns, and outside observers questioned its economic viability, but China was not worried: after all, if the 80%-China funded project failed, Beijing would have full recourse. Call it a "debt-for-sovereignty" exchange.

It's not just Kenya and Angola: other notable examples of China's debt-funded colonization endgame include Sri Lanka, where difficulties servicing $8 billion of infrastructure-related borrowing from China led to the handing over of a controlling equity stake and a 99-year operating lease for the country's second-largest port at Hambantota to a subsidiary of a Chinese state-owned
enterprise in December 2017. For Pakistan, more than 90% of revenues generated at the newly developed Gwadar Port at the mouth of the strategically significant Gulf of Oman are collected by the Chinese operator.

And so, as more developing, peripheral countries default on Chinese loans and are forced to hand over the keys to key sovereign projects to Beijing, China will slowly but surely "colonize" not just Africa but many of the Asian nations in the "Belt and Road Initiative" following a popular playbook developed by none other than the original "economic hitmen"...