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China, the US and the Thucydides Trap

Comments on Peter Van Ness, ANU: “Are China and the US falling into the Thucydides Trap?” 20/08/2017

While the author of the post has presented some good points, it appears that either the critics or the author have probably misrepresented a basic fact. That fact is, among the known nuclear powers, there are both qualitative and quantitative differences to many orders. The US and Russia are the only two nuclear super powers and all others are minuscule by comparison and are no match to those two.

The second point presented by the author of the post states the likelihood of readiness of the US, Russia and China for launching a nuclear attack, that point confused a fact that China is the only country among those three that will not use nuclear weapons first. That is an extremely important point of difference between China and most of other nuclear powers.

Do those two facts make any differences to the risks of war among the known nuclear powers? I bet they do, because it means imbalance of powers among them and that imbalance implies the nuclear super powers can bully others while the opposite is unthinkable.

We have all observed that President Trump has treated Russia and China very differently. That imbalance between the among the US, Russia and China in terms of their nuclear capacities may be a factor in explaining President Trump’s attitudes.

If one incorporates that fact into analysis, one may add an additional point to the risks of potential conflicts between the US and China.


US–China cooperation on North Korea remains critical?

Comments on Brendan Taylor, ANU “US–China cooperation on North Korea remains critical”, 26/07/2017
This is a useful and interesting post. I have some comments on it.

Firstly, the statement that the "Australian Prime Minister Malcolm Turnbull is in lockstep with Washington, asserting at last month’s Shangri-La Dialogue in Singapore that ‘China has the capacity and responsibility to bring North Korea to its senses’", describes the PM's either lack of or superficial understanding of the real situation in terms of China's influence on NK, or his simply grandiose political standing to show to both his domestic audience and his US ally how 'strong' and 'principled' he is. It is likely to be political hypocrisy to the extreme but preformed very poorly.

The PM way think it is so simple, logical and elegant to blame China for having not exerted enough pressure on NK, but is it really like that? Is it that impressive or effective? I am not sure how impressed Chinese leaders are by that performance.

Secondly, the use of the phrase "the so-called middle and hermit kingdoms" in the paragraph, "Yet ties between the so-called middle and hermit kingdoms have drifted over the past quarter century, deteriorating sharply under the reign of the current North Korean leader, the young and reckless dictator Kim Jong-un", is unfortunate and misleading. China is by no means a kingdom, far from it! The use reflects some sort of unwarranted stereotype of China in the west.

Thirdly, in addition to the few reasons (I don't necessarily share or agree with all of them, because there is no mention of any humanitarian concerns or motivations at all but only self-interests) that the author uses to explain why "Beijing’s unwillingness to exert greater economic pressure against Pyongyang ", is another one. That is, the US and Korea have frequently or regularly been conducting military exercises, of which some of them obviously very intimidating not only to the NK, but seriously affecting regional peace and stability.

It is no use and no good to just only mention one side of the NK nuclear and missile issues while ignoring the other contributing side. Aren't people saying that what occurred to the former Libyan leader Gaddafi and Iraqi leader Saddam Hussein provided some examples that partially motivated NK's leader for NK's programs?
Fourthly, “the recent chill in US–China relations does not auger well” in terms of successful resolving the issues, as the author puts it. In addition to those factors the author mentioned as contributing factors, it should not be to anyone’s surprise that it would not be easy to work with the current US president, whether it is for people from within the US or outside the US. He wants to do things his own way, let him do it. The ball is in his court and let’s see how best he can play with it.


Growth potential out of regional disparity in income?

Comments on Yang Yao and Mengqi Wang, Peking University, “Maximising China’s growth potential”, 21/07/2017

While I agree with the general point of this post, it should be pointed out that the statement that "Analysis shows that a region should grow more slowly at high levels of GDP per capita and more quickly at low levels" should be properly interpreted as a possibility to present a potential rather than inevitability or definite. Otherwise the world would not have the developed and developing regions/countries.

To realise that potential, there is a lot of hard and intelligent work involved. Such as those proposed by the authors, to be adopted and implemented by those involved and work hard for many years to come.

What assumptions are required for the follow statement: "the lower GDP per capita — but higher growth rate — of the inland provinces could actually increase China’s growth rate of GDP per capita by 11.7 per cent in the next 15 years." Alternatively, what would be the base case scenario?

The numbers presented in the following statements are or appear to be quite large: "Specifically, the central and western regions would respectively grow 4.7 and 4.8 per cent faster on average in the coming 15 years, leading to an average of 2.6 per cent increase in the national growth rate forecasted for 2016–30." Undoubtedly, technological will need to play a key role to realise those numbers as the author argued.

The Chinese exchange rate regime

Comments on Yu Yongding, CASS “Backpedalling or a step forward in renminbi reform?” 20-22/07/2017

There are a few interesting points arose from this post. Firstly, it is a case of whether one views that as "half bottle empty" or "half bottle full" as far as the case of the equal weights being given to both previous day's close and the ‘theoretical RMB exchange rate’ in setting the renminbi central parity rate against the US dollar, although the author appears to be taking on the side of half bottle empty and possibly more negative than that. Yes, there might be a question of whether it is worthy to do such the way may be a little fiddling, but any negatives could also be viewed as positively through the lens of half empty to half full analogue.

Secondly, while free exchange may be viewed as a market way to sort out the exchange rate and may be a preferred way, it is by no means free of problems and often big and significant problems. For example, there can be big swings in the exchange rate that are exacerbated by speculative traders. Just as assets bubbles can arise and cause or have the potential to cause huge damages to the economy, bubbles can also arise in the foreign exchange markets. That is not to mention the so called overshooting phenomemon.

Maybe a simple question should be asked: why should a nation or nations suffer/incur the costs because of exchange bubbles caused by currency speculators?

It seems there is a point to have a stable exchange rate regime, given the role exchange rate plays as the relative prices of one country's goods and services as well as capital against another country, and particularly the tendency of instability of the foreign exchange market in light of speculative trading (as opposed to the real needs to buy foreign currency).

Governments would have greater difficulty in management/regulate asset prices even they would like to (some governments may not want to). On the other hand, it may be a little easier for governments to manage/regulate foreign exchange rate.

I think there is a case for economists to revisit the case of free versus fixed exchange rate regimes, or a combination of the two, even though the author appears to be in favour of a free exchange rate regime.
Any fixed exchange rate regime also needs some appropriate adjustment mechanisms to achieve longer term balance.


Elegant wording and stuff!

Comments on Gary Hawke, VUW, "Is the TPP a sleeping beauty or an organ donor?" 26/06/2017

The use of sleeping beauty and organ donor aiming to best characterise the real situation and to provide a very vivid description is itself beautiful!
I appreciate the analysis and share its logic conclusion.
The last two paragraphs sum up them so elegantly!