It appears that the Russians are concerned that the Chinese will buy a few, and then reverse engineer them and manufacture them without permission, because they have already done this with the baseline Su-27.
Category: China
Economics Update
Not unexpected, but the budget deficit jumped 10% because taxes have fallen to a 14 year low.
Like I said, the solution here is inflation to wipe out bad debts, and the deficits are going to do that sooner rather than later, because we’re not going to see a this resolve itself in the US, or overseas in the near future, as evidence by the cratering confidence numbers globally.
With Chinese exports falling sharply, 25.7% year over year, and the rest of the world seeing similar numbers, they are in no position to drive a recovery either.
Consumers are vanishing worldwide, and there is no sign of a recovery in the US, particularly in real estate, where S&P is warning of downgrades of, “9,430 classes from 1,077 U.S. first-lien Alt-A RMBS transactions issued in 2005, 2006, and 2007”, and builder loans threatening to take down banks that weren’t playing with funky financial instruments.
On the brighter side, it looks like the SEC might reinstitute the ‘Uptick Rule’ on short selling.
I’d like to see aggressive prosecution of market manipulation techniques like “naked” short selling too, but I am not holding my breath.
If Wall Street were investigated by Patrick Fitzgerald, I’m pretty sure that you would see tens of thousands of prosecutions.
In energy, the week economy has driven oil down.
Also, it appears that there are more stupid people than I thought, because the dollar fell as people left its safe haven, it appears that this was largely a result of Pandit’s delusional memo saying that Citi is going to rake in the bucks this quarter.
Naked Aggression
The USNS Impeccable was conducting an “ocean mapping mission” in the South China Sea when she was confronted by Chinese ships, who maneuvered close to her and attempted to snag her towed sonar array:
The exposure came as the American vessel USNS Impeccable was attempting to defend itself against what the Pentagon claimed was co-ordinated harassment and aggression from five Chinese ships. Being unarmed, the Impeccable turned its fire water hoses against two of the Chinese vessels that had come within 50 feet in a threatening posture.
Then, the Pentagon records in the admirably restrained language of international diplomacy, “the Chinese crew members disrobed to their underwear and continued closing to within 25 feet.”
(emphasis mine)
OK, it’s not naked aggression, it’s semi-naked aggression, but still…..
It should be noted that the ship was actually on an intelligence gathering mission:
The U.S. Navy’s description of the incident states that “a civilian crew mans the ship, which operates under the auspices of the Military Sealift Command.” Yet as one of five ocean surveillance ships, the USNS Impeccable (T-AGOS 23) has the important military mission of using its array of both passive and active low frequency sonar arrays to detect and track submarines. The USNS Impeccable works directly with the Navy’s fleets, and in 2007 operated with the three-carrier strike battle group in Valiant Shield 07 exercise in the Western Pacific.
USNS Impeccable is equipped with the Surveillance Towed Array Sensor System (SURTASS), a passive linear underwater surveillance array attached to a tow cable. SURTASS was developed as a floating submarine detection system for deep waters, and the Navy wants to add an active Low Frequency Array (LFA) to improve long-range detection of submarines in shallow waters.
Note that the ship was only about 75 miles from the Yulin naval base, where the Chinese have based their most advanced SSN, the Shang-class (Type-093), and that the Impeccable does carry the Surveillance Towed Array Sensor System (SURTASS).
I’m not sure if they recording acoustic signatures, or recording operations, or both, but this was not just an ocean mapping expedition.
The US government is claiming illegal harassment in international waters, and the Chinese government is claiming a violation of their sovereignty.
It’s probably a bit of both.
Economics Update
Scary Pic of the Day: Upcoming Mortgage Resets Courtesy of Dr. Housingbubble
ADP employment services has released its monthly report, and job cuts are way up with 697,000 jobs lost in February as compared to 614,000 jobs lost in January.
Note that the initial January figure was only 522,000, the the final February figures may very look even worse.
We also have the Institute for Supply Management February non-manufacturing numbers, and they are down from January’s already anemic figures, and the Federal Reserve’s business survey reporting “weaker conditions or declines” in 10 of the 12 regions.
In China, however, the purchasing managers’ index rose in February, to 49, which still shows contraction, but only barely, as 50 is neutral.
In real estate, we have mortgage demand falling last week, largely because borrowers are waiting to see what the Obama mortgage rescue plan is.
In commercial real estate, we have a secondary indicator, with office furniture sales falling sharply.
It’s no wonder that FDIC Chair Sheila Bair is warning that its insurance fund could be insolvent by years end.
Bank failures, ignoring the biggest ones, is on a pace to close 100 banks this year, as compared to the 27 in 2008 or the 3 in 2007.
We are seeing a spike in consumer bankruptcy filings, up 29% year over year in February.
The Chinese economic news drove oil higher, and bad economic news in Japan drove the dollar up.
Classier Than George W. Bush
Chinese Premier Wen Jiabao, who after having a shoe thrown at him by Martin Jahnke, has, “requested British authorities dismiss charges against Jahnke and pardon him for his act of protest.”
Yes, the Chinese have the moral high ground over George W. Bush, who appears to think that the arrest, continued detention, torture, and threat of a long prison sentence against his shoe thrower, Muntazer al-Zaidi does not merit comment.
Economics Update
I’m not going to be writing about Geithner’s bank bailout plan here, it needs it’s own post, but I have some graph pr0n, a little update from last night’s Pelosi scary employment graph courtesy of Justin Fox (top) and William Polley.
The first goes back 6 recessions, and the 2nd covers all of the recessions since WWII, which makes a bit busy, but they are at least as scary as last night’s graph.
On to the update:
It appears that the Asian economies are melt down down, with Japan’s economy is deteriorating in a way that has not been seen in 50 years, China’s exports falling by double digits, the Taiwan dollar and Malaysian Ringgit falling, and the IMF predicting a 4% contraction in the South Korean economy in 2009.
Meanwhile, there is a report that Russia is attempting to restructure its debts, which is a polite way of saying that they are threatening to default.
Meanwhile, Geithner’s plan, and the Senate’s approval of a stimulus, does appear to be having an effect on the markets, with oil falling, which indicates that the oil traders do not expect to see a rapid economic turn around, and the dollar rising, on the same information.
In this case it appears to be cross purposes, but I think that the reason that the dollar is up is because people realize that the bailout makes US investments more attractive, albeit at taxpayer expense, but that is another post.
Economics Update
To no one’s surprise, the Federal Reserve has extended its multi-trillion dollar so called liquidity facilities another 6 months, better known as the sh$tpile for cash program:
In addition to prolonging the currency swap lines that were due to expire on April 30, the U.S. central bank said it would extend through October 30 a host of other programs providing liquidity to the U.S. commercial paper and money markets, and to large Wall Street firms.
They’ve already spent in excess of 8 trillion dollars bailing out insolvent banks, but they think that more of the same will help.
The Federal Reserve is broken as an institution. It is run by and for the banks.
We also have aggressive stimulus programs ramping up in Australia and Japan.
Meanwhile, real estate and construction continues to be a disaster with US construction falling 1.4% in December and 5.1% for 2008, the largest drop since records began being kept in 1993, and the Homeownership rate has fallen to the 2000 level, so much for Bush’s “Ownership Society….In stead of owning, we got pwn3d.* With current equity losses of US home owner pegged at $3.3 trillion, a new record on vacant homes 19 million.
Even alleged good news in real estate, that the Pending Home Sales Index rose in December is pretty hollow, because, money quote from CR, “The biggest gains were in areas with the biggest improvements in affordability.”
So, if your house prices have dropped by 40+%, as they have in parts of California and Florida then homes might be moving…Otherwise, not so much.
Still real estate is not as bad off as the auto industry, with GM and Chrysler offering buyouts to all of their hourly workers, Ford posting 40.2% drop in January U.S. sales, and GM dropping 49%, Chrysler down 55% LLC, with the Japanese car makers seeing their sales dropping about 30% each
BTW, it appears that China may be headed for a period of economically induced social unrest, because more than one in seven rural migrant workers, more than 20 million, are unemployed.
In a nation that has systematically eliminated its safety net, 20 million pissed off unemployed people can make a lot of trouble.
In energy, I’m not sure if $40/bbl is the bottom, or if OPEC cuts are working, but oil was up today, and it appears that we have found a bottom there.
In currency, there dollar was down as there was less “flight to safety.”
*Leet speak for “owned”.
China Releases 2008 Defense White Paper
Not surprisingly it shows an increase in spending, and far more focus on the application of the military in non warfare situations than the US military.
The Chinese see the use of their military in peacekeeping and aid situations as a necessary adjunct to their diplomacy, while the US military does its level best to stay within the bounds of “kinetic” warfare.
Certainly, China sees its military as a way to increase its diplomatic status and prestige.
Still, it’s an interesting picture of what really is the only near term meaningful military rival.
Economics Update
The weekly new claims for unemployment jumped last week by 62,000 last week, to 589,000, the highest level since 1982, and more than predictions.
The 4 week average was flat, and continuing claims were worse than predictions too, at 4.607 million.
If that weren’t enough housing starts fell by 15.5% to 550,000, which, according to Calculated Risk,is, “by far the lowest level since the Census Bureau began tracking housing starts in 1959.”
Mortgage applications fell by 9.8% last week, because interest rates bumped by 0.37%, and most of the action right now is ReFi.
Over in Asia, the Bank of Japan is buying corporate bonds, because the credits markets have frozen there, and China’s economic growth fell to a 7 year low for the 4th quarter.
Meanwhile, it looks like the humongous loss phenomenon is moving from the banking giants to the regional banks, which may have a larger effect on business output, since they do a lot less of the high finance and a lot more lending to mom and pop businesses.
In commodities, steel production fell 1.2% in 2008, the first annual drop in a decade, while oil was up a few pennies today.
In currencies the dollar was down vs. the Euro and Yen, but up against the Pound…but then again, everything is up against the pound.
More Evidence of Chinese Carrier Aspirations
We have reports that the China are in negotiations to buy Su-33 carrier based fighters.
I think that we will see moderately sized (about 50,000 ton) carriers joining the Chinese fleet in the next decade, but the real indicator of their naval aspirations will be their submarine and amphibious warefare ship fleets.
The carriers are primarily a national pride undertaking, not a military endeavor.
Obama Getting Rolled by Pentagon and NASA?
It now appears that people in the Pentagon and in NASA are feedinb Obama and his transition team scare stories about a Chinese manned program to the moon:
President-elect Barack Obama will probably tear down long-standing barriers between the U.S.’s civilian and military space programs to speed up a mission to the moon amid the prospect of a new space race with China.
The argument is that the Chinese will be able to put a man back on the moon before the US’s goal of 2020.
It should be noted that planting a flag on the moon means nothing.
That China is making strides in space development is true, and the military implications are a legitimate concern, and the idea of replacing NASA’s Ares vehicles with existing vehicles, which means military launchers because NASA has meticulously destroyed the opposition on their end, is a good thing.
But this whole “race to the moon” thing is 6 pounds of sh%$ in a 5 pound bag.
If Obama and his team believe this, I have some ballots in Florida for them to count.
Like This is a Surprise
Well, defence ministry spokesman Huang Xueping has announced that China is considering building an aircraft carrier.
This is really no surprise. There have been indications that China was considering building a carrier for some time, as I have noted.
It will be news when China actually starts formally drawing up requirements, and again when it starts cutting metal or negotiating a purchase, but this is no surprise.
Chinese Say it’s THEIR Turn to Torture Their Uighurs
Remember the Uighurs who were detainees at Guantanamo?
Our military has already tortured them at Chinese request, but it appears that the state security apparatus of the Peoples Republic of China wants in on some of the fun, because they are demanding that they be repatriated to China if they are ever released.
That sound you hear is Kafka rotating at 9700 RPM.
Another Indication of Just How Long the Damage Will Last
Because this was unthinkable just 5 or 6 years ago:
Latin American and Caribbean leaders gathering in Brazil tomorrow will mark a historic occasion: a region-wide summit that excludes the United States.
Almost two centuries after President James Monroe declared Latin America a U.S. sphere of influence, the region is breaking away. From socialist-leaning Venezuela to market-friendly Brazil, governments are expanding military, economic and diplomatic ties with potential U.S. adversaries such as China, Russia and Iran.
and in addition to China and Russia, guess who’s coming to dinner?
The two-day gathering, called by Brazil at a beach resort in Bahia state, is also a diplomatic triumph for Cuban President Raul Castro, making his first trip abroad since taking over from his brother Fidel two years ago. The communist island was suspended from the hemisphere-wide Organization of American States in 1962 over its ties with the former Soviet Union.
We will be suffering major ill effect is Bush and His Evil Minions™ well after I am dead.
Chinese Carrier Ambitions
Last week, I noted that the Chinese showed a carrier in drydock in a mockup of a new port facility, and this week, we have a senior official in the Chinese Defense Ministry, Major General Quan Lihua, suggesting that China is looking at acquiring a carrier, though not to, “use it to pursue global deployment or global reach.”
Yeah, right.
Airshow China Missile Pr0n
It looks like advances in Chinese guided missile technology were prominently on display at Airshow China. (paid subscription required)
The China Aerospace Science and Industry Corp. (Casic) showed off new missles, including new versions of its C704 cruise missiles with IIR and TV guidance, both intended for air launch, and the smaller C705 (look at the wheels and display easels on both pictures for scale).
I think that it has a 9 or 10 inch body diamerter, as vs the 12-14 inch for the C704.
C704
C705
China Looking to Operating a Carrier?
If the rumor of China negotiating the purchase of Su-33 fighters of the type used on the Russian STOBAR carrier are true, it would appear to be the case.
Why China’s Military May Be a Paper Tiger
I’m not sure how I found it, but there is a blog out there, 傻冒儿 Stupid Hat aka ShaMao’er that I check out regularly.
He has some very good insights into China, being of Chinese ancestry, having gone to PRC in the in the 1990s, and now working on issues of US/Chinese trade.
Truth be told, that there is a lot that Chinese and Americans don’t understand about each other, and his posts, roughly biweekly or so, tend to provide a lot of insight through the little things that reflect on culture.
Case in point: a few days ago, he was mused in a post titled Demographic defeat on the capabilities of the Chinese army to manage a protracted struggle.
He wondered whether the long standing one child per family policy may be making the PLA a hollow force:
Basically, my friend’s argument boils down to the fact that in Chinese culture, both traditional and modern, the family name is sacrosanct. It is intolerable for a family to be left without sons to carry on the name and lineage. While there is some semblance of this sentiment in the West as well, I came to appreciate that it is a far more important matter to Chinese than it is to Westerners. That is why people know the story of Marshall Peng. [The possibly apocryphal tale of Chinese army in Korea during the war being mobilized to “Save Private Ryan”] That is why people know some poems that deal with this subject. It is apparently a recurrent tragic theme in Chinese art and culture and is simply intolerable.
So, according to this theory, given the one-child policy that has been in place since the mid-1970’s, a good portion of the Red Army’s rank and file are currently single children. Given the exemptions for some rural people and for ethnic minorities and others some maybe in 2 child families but in any case the fact remains that a very large portion of the Army will be the single male child. In the event of a serious military conflict, this fact would render China unable to wage a protracted and costly struggle. The tearing of the social fabric that the loss of so many male family heirs would entail would break Chinese society and public outrage would end the conflict. Although Nationalism is a very potent force in China that would propel conflict, the decimation of family lines would easily trump it.
Obviously the death of a child in wartime is always a personal tragedy, but he makes an interesting point, which I would like to discuss with my neighbor, who works with Army Intel with a specialization in China and the Chinese language.
If Chinese Space Plans Interest You
This is a good place to start, and the rather extensive footnotes are useful too.
Chinese J-10 Fighter Pr0n
The China Air and Naval Power has some photos of the Chinese J-10 multirole canard fighter.
It has interesting lines….The tail clearly resembles the Lavi/F-16, but the intake and canard are closer to the Eurofighter Typhoon, particularly the Canard, which is not close coupled like the Lavi/Rafale/Gripen, but is further forward as in the Typhoon.
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