China's Economy Spirals With No End In Sight, Says Kyle Bass

   I could not agree more with the analysis of Kyle Bass and then disagree more with the consequences.

  What killed Japan when the country faced a similar predicament was its 100% reliance on the US, especially financially.

  This is conversely what could save China. There has been from a Chinese perspective huge advantages in relying on a USD dominated financial system as the cost, economically and socially of running the world currency are huge.

  But should the arrangement falter as it unavoidably will in the near future, Taiwan related or not, China would then be in a position to relaunch and reflate its monetary system as Japan could not 40 years ago. (In other words, there will be no Plaza Agreements with China!)

  So what exactly could China do? Well, it depends on how much gold and resources they can control (gold alone would probably not be enough.) But should they have enough, they could relaunch a cheaper Yuan for international trade, while re-floating their Zombie companies (Country gardens and the likes) to later liquidate them and start anew on more solid grounds. This is painful, economically and politically so it cannot happen in a vacuum but with strong enough pressure and war looming, the possibility then probability would rise fast.

  The alternative? As Kyle Bass explains below, a Japan-like scenario of economic and population crash.     

Authored by Frank Fang and Jan Jekielek via The Epoch Times,

Communist China is grappling with the most severe economic crisis in its history, a downturn that the regime will not recover from, according to Kyle Bass, founder and chief investment officer of Hayman Capital Management.

“There is nothing that is going to bail China out of their economic spiral. They’re having a real estate crisis, a banking crisis, a youth unemployment crisis, and now they need to be worried about their current account,” Bass said in an interview on EpochTV’s “American Thought Leaders” that aired on June 26.

Bass said U.S. tariffs and declining trade threaten China’s economic advantage, which is its trade surplus with the United States.

China’s exports to the United States plunged by 35 percent in May compared to a year earlier, according to Chinese customs data.

“China’s once bright spot is now in question,” Bass said. “I actually am surprised it’s not down more.”

China has also been hit hard by capital flight.

In 2024, Bass said, China experienced a massive outflow of both foreign direct investment (FDI) and portfolio investment totaling about $500 billion, pointing to the gap between its trade surplus of about $980 billion and its current account surplus of about $420 billion.

China is also facing unsustainable debts. When combining China’s sovereign debt and local government financing debt, Bass estimated that the country’s debt-to-GDP ratio should be roughly 350 percent, which he said is difficult to manage considering the various economic challenges.

Another indicator of China’s financial crisis is the performance of China’s bond market, Bass said. As of June 27, the yield on China’s 10-year sovereign bond is approximately 1.64 percent, compared to 4.26 percent for the U.S. 10-year Treasury.

“So the Chinese government is pretty good at lying about whatever they want to lie about, but the bond market kind of tells the truth, and the bond markets telling you that China is in an economic winter,” Bass said.

China’s economic troubles have persisted for several years, highlighted by the collapse of major real estate developers Evergrande and Country Garden, which marked the onset of the current property crisis in 2021.

In February, the national unemployment rate reached 5.7 percent, the highest in two years, while the youth jobless rate topped 16.9 percent.

Adding to the concerns, consumer prices fell for a fourth consecutive month in May, while industrial profits decreased by 9.1 percent compared to a year earlier, underscoring deepening deflatory pressures in the world’s second-largest economy.

Taiwan

Despite China’s economic struggles, the United States continues to rely on China for certain imports, particularly rare earths and pharmaceutical ingredients.

According to data from the U.S. Geological Survey, the United States imported 70 percent of its rare earths from China between 2020 and 2023.

In the face of China’s leverage over these items, Bass said that the United States retains the ultimate “trump card” through its control of the global dollar system.

“They don’t have the ability to purchase things around the world in yuan or RMB because no one accepts a currency they don’t trust or that doesn’t trade,” Bass said.

Bass stated that the United States should signal to Beijing its intention to sever China’s access to the dollar system, the very moment the regime initiates military action against Taiwan.

“Deterrence is something that we should all be engaging in to try to stop China from being militaristically belligerent with Taiwan,” Bass said.

“That is a better first move on our part than sending carrier strike groups of our brave men and women into the Taiwan Strait in a kinetic conflict with China ... tens of thousands of our men and women will die if that happens.”

The Chinese Communist Party (CCP) claims Taiwan as a renegade province, intent on annexing the island, though the regime has never exercised authority there. Taiwan is a de facto independent nation with its own democratically elected government, military, constitution, and currency.

In May, during a speech at the Shangri-La Dialogue in Singapore, U.S. Defense Secretary Pete Hegseth warned about CCP leader Xi Jinping’s timetable for making a move against Taiwan.

“It’s public that Xi has ordered his military to be capable of invading Taiwan by 2027,” Hegeseth said at the time.

“Any attempt by communist China to conquer Taiwan by force would result in devastating consequences for the Indo-Pacific and the world.”

President Donald Trump’s recent decision to bomb three Iranian nuclear facilities “got China’s attention,” Bass said.

“I bet it unmoored China’s views of warfare,” he added

Bass said he believed the situation in Iran “is going to make the Chinese think twice about being more belligerent on the military side with Taiwan.”

Ultimately, the Chinese regime aims to break the first and second island chains and “project power all the way to San Francisco,” Bass said.

Taiwan sits at the heart of the first island chain that stretches from the southern Japanese island of Kyushu, the Philippines, to the Malay Peninsula. The second island chain extends from Japan through Guam to Micronesia.

Bass warned that “allowing China to simply take over Taiwan is something that is an existential national security crisis for the U.S.”

Russian Military Instructs China How To Beat US & NATO Weapons

  This article completes the earlier one, about the war in Iran where the East learned to not rely on Western systems. Here, it is the lessons on the war in Ukraine which are being shared with other countries.

  This will accelerate the leveling of the playing field between East and West,

Russian Military Instructs China How To Beat US & NATO Weapons

One key trend to have emerged over the course of the Russia-Ukraine war is that China, Iran, and Russia are increasingly and very openly cooperating militarily and technologically, including Moscow sharing experience gained in the course of its Ukraine ground operations.

Newsweek reports that "Russia plans to train hundreds of Chinese military personnel this year on lessons learned from its ongoing invasion of Ukraine," based on regional sources. Some of what has been 'learned' is how to defend against US-made and NATO-supplied weaponry - something which Beijing is surely interested in amid the long-running Taiwan standoff with Washington.

Kremlin file image

"Instructors will cover methods for countering weapons systems used by Ukrainian forces that were produced by the United States and its NATO allies, a source in Ukraine's top intelligence agency told the outlet," the Newsweek report continues.

Specifically 'lessons for a Taiwan conflict' would be gleaned:

This training would further strengthen security ties between Russia and its "no limits" ally China, which in recent years has stepped up joint military exercises. Battlefield insights into U.S. weaponry could offer an advantage as China seeks to surpass the U.S. as the leading military power in the Indo-Pacific.

And Ukraine's Defense Intelligence Directorate has told local media, the Kyiv Post, that "The Kremlin has decided to allow Chinese military personnel to study and adopt the combat experience Russia has gained in its war against Ukraine."

Not only have Russian forces destroyed and disabled possibly dozens of Western-supplied main battle tanks, including M1 Abrams, UK Challengers, and French Leopard 2's - but F16s have also been shot down.

American troop carriers have additionally been destroyed, and in some places Western armored vehicles have been put on display in the capital of Moscow, as trophies recovered from the battlefield.

Meanwhile, China this week hosted defense ministers from Iran and Russia for a meeting in its eastern seaside city of Qingdao.

The meeting happened Thursday, and importantly Qingdao is home to a major Chinese naval base, with the country's defense minister Dong Jun calling the PLA Navy and its bases a counterweight to a world in "chaos and instability."

"As momentous changes of the century accelerate, unilateralism and protectionism are on the rise," Dong said. Alongside defense chiefs from Russia and Iran, the military leaders of Pakistan and Belarus were also present.

He was further quoted in news agency Xinhua as decrying "Hegemonic, domineering and bullying acts" which "severely undermine the international order." The comments were clearly aimed at the Western alliance, and Washington in particular.

China over the course of this month's Israeli and US bombings of Iran has condemned what it sees as blatant aggression against a non-nuclear power which was engaged in good faith negotiations. Beijing has also in the past issued statements calling out NATO for its constant expansion, and activity which has even been lately introduced in the Pacific region, and growing ties to Japan.

Iran Disables GPS, Joins China’s Beidou — The End of U.S. Satellite Dominance? (Video - 19mn)

   This is probably THE most important outcome of the Israel-Iran war to this day: Baidu is replacing GPS in global positioning systems. 

   What did Iran (and indirectly the rest of the world) learned from the war? The IAEA was "leaking" (in fact providing) Israel with confidential data, Meta and WhatsApp were likewise providing location data to the US and Israeli governments. 

   The message was clear and loud: Separate as soon as possible from Western dominated systems as soon as possible. 

   If the BRICS were an early effort in that direction, the Israel-Iran war will have given the transition a huge boost. The incentive was already there but the motivation less so. This period is finished. We are now entering a full fledged transition period where countries will from now on balance East and West to protect themselves from unintended foreign leverage and control.

   An so in one short 12 days relatively small war, Globalism was slayed and the advantages of multi-polarity exposed to everyone.   

https://www.youtube.com/watch?v=BQb_hQalexY

You can Pass the Turing Test (Joke)

   Remember the Turing Test? When Alan Turing in 1950 explained that when people could not be able to make the difference between conversing with a machine and another person, it would mark to arrival of true AI?

   Well, we are "there" although thankfully we have since discarded the idea, otherwise most AI today would qualify as intelligent. And they are. Amazingly so. often far beyond human capabilities. And so we moved the goalpost. We now talk of AGI. (Artificial General Intelligence) which sounds legitimate until you look at the details and realize that Artificial Intelligence is very different to human intelligence and that consequently the measurements have little meaning. 

  The reality is that we are right at the point where AI is over-passing human intelligence. We expected this to happen in 2030. It came 5 years early. We expected it to be an event, it is a process. But make no mistake, by 2026, AI will be beyond, then far beyond our capabilities. It will look like magic. Almost everyday by then, there will be an announcement, a discovery or a new engineering marvel. Most people will see nothing. The revolution will be silent. Until it is not, as it has always been the case in history. We're good at understanding events but miserable at grasping the depth of processes unfolding over longer periods.