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China hits with the "ol' one-two"


old man emu
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Unlike the (Nationalsozialistische Deutsche Arbeiterpartei "National Socialist German Workers' Party" in the 1930's, China has chosen a more insidious route to world domination. After the militaristic years of Chairman Mao, China made the change to economic expansionism. In boxing parlance, this was the first part of the "ol' one-two" attack. The "one" is the feint - the swing that misses, but distracts. The "two" is the body blow that debilitates the opponent. 

 

During this phase, the Chinese rapidly built up its manufacturing capability which it offered to the world at cheap rates. Where established companies had previously designed and produced their goods in their own lands, they sent their designs to China where the same products could be produced very much more cheaply. This was also good for raw materials suppliers, like Australia, who found a virtually insatiable market. Deals were made that favoured China to the detriment of the supplying country. Look at Australian LPG. Because the Chinese added value to the raw materials which it then exported back to the countries it had bought them from, the trade balance had to be restored. So China bought what its population actually wanted - food. Initially the foodstuffs imported were for the basic needs of the workers, but with a population of 1.4 billion and even restricting the top earners to 1%, that is 14 million people at the top of the pile. That's a massive market for luxury goods - wines, lobster, beef. Countries like Australia, run by Big Business, flocked to the Chinese market, which welcomed their luxury goods with open arms. Things were sweet for those producers involved.

 

Where a country was unable to supply raw materials to China, either through a complete lack of anything worthwhile, or due to their extraction being underdeveloped, China came in with bags of money, ostensibly giving support to those countries to raise the living standards of the people. It is known as the Belt and Road Initiative , known in Chinese and formerly in English as One Belt One Road or OBOR for short, is a global infrastructure development strategy adopted by the Chinese government in 2013 to invest in nearly 70 countries and international organizations. It is considered a centerpiece of Communist Party of China general secretary and President Xi Jinping's foreign policy. 

 

That's the "one" in the ol' one-two. Now, having tied up a good part of the world in economic knots, here comes the "two" - the body blow. "If you criticise us in any way, we apply economic sanctions and destroy you financially." 

 

But Chinese aggression is not limited to border incursions in the Indian Himalayas or diplomatic spats with Australia. In recent weeks, the Chinese Coast Guard rammed and sank a Vietnamese fishing vessel, swarmed and harassed a Malaysian oil rig, and threatened a Philippine Navy ship, all while the Chinese air force continued to exercise close to Taiwan and the government moved to pass laws that restrict Hong Kong’s autonomy and freedoms.

 

With China’s ditching of soft power, the idea of regional cooperation among its neighbors has begun to pick up momentum. Just last week, Australia and India raised their relationship to a “Comprehensive Strategic Partnership” and issued a joint declaration on a “Shared Vision for Maritime Cooperation in the Indo-Pacific.” While much of the new partnership is focused on economic cooperation, with Australia trying to shift its economic dependence away from China and India wanting greater access to Australian goods and services, the maritime cooperation is a key component to both nations’ efforts to respond to China’s intensified interest in the Indian and Pacific Oceans. 

 

In an uncommon show of international support, Foreign ministers from nine countries including Germany, France and Canada are being urged to issue statements in support of Australia against China's attempts at "bullying and coercion". Members of Parliament and of the global Inter-Parliamentary Alliance on China are sending a joint letter to their foreign ministers on Tuesday, London time. The letter is signed by MPs from Canada, Czech Republic, Denmark, European Parliament, France, Germany, Italy and New Zealand. The parliamentarians said the attempts by the Chinese government to "threaten, bully and coerce Australia into acquiescing to its political demands were a threat to democratic countries everywhere.

 

Governments in Europe have been reluctant to stand up to China and incredibly naive for some years. But the evidence of Beijing’s nefarious intent is mounting, and governments are under increasing pressure from their electorates and parliaments to toughen up. Australia might be a little fish in a big pond, but the other fish are not prepared to let it be devoured by a monster of the Deep.

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Bruce, that was merely a trigger. It started the ball rolling.

 

The Chinese government owned Telco manufacturer was found to have embedded software in its broadband backbone equipment (not customer equipment), that was sending extra data back to the manufacturer. This data was not (as far as I'm aware) ever decripted. But it was a lot of data not related to operation of the equipment, and was suspected to be hidden surveillance of data content being carried by the equipment.

 

Incidentally, although Great Britain and USA and Telstra don't use this brand at present, there is millions of dollars worth of it in Australia, installed privately, carrying data for all the carrier's.

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I, unlike many of our political and corporate leaders, have never forgotten that China is a Communist country, with its Communist system aimed at undermining Western democracies, and then replacing those democracies with Communist-aligned political systems, once they crumble. They can do it in two ways - by War, or by stealth and attrition.

The Chinese have learnt that War doesn't work, so they have figured out that they can carry out their aims by concentrating on slow and steady stealth, over a long period of time - unlike our leaders, who only see as far ahead as the next election.

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I agree that the Chinese have a longer-term view than our pollies. A good example was when Howard sold 50 years of natural gas to china for 5 cents a liter.  ( I worked it out, the media never told the 5 cents bit ). 

I honestly think that Howard was more stupid than nasty, I think he thought there was infinite gas there. These days, it is cheaper to buy Australian natural gas in china than here.

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OME - Spot on.. And OT, I too, have never forgotten that China is a communist country and have managed to ensure some companies I have dealt with in the past had no supplies manufactured for them in China apart from plastic casings..

 

Bruce, I was thinking along the same lines as you.. although, not on the property tax; I think an excise tax on iron ore should do it.. And only on Chinese exports.. they need it and will have to pay more for it.. Yes, other countries can supply it, but not in the quantities and cost - even with an excise duty - that Aus can... Otherwise you can bet your bottom dollar, China would have slammed iron ore with duties or banned it.

 

This is the one problem with democracy and global corporatism.. democracy, expecially with the incompetents we have globally, can't look past their noses, and, well, I don't need to mention the problems with corporatism.

 

Where I can source a competing product not made in China, I do, even if it costs quite a bit more. Unf, there are some products where that doesn't seem to be the case.

 

My son won't even go near a Cirrus...

 

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So far our pollies are counting their iron ore chickens before they are hatched. They do not seem to realise that China can refuse to take our iron ore and just sit back for a while and we will be begging them to take it at half the price. Not only stupid but also gutless.

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China in theory can do it, but they are heavily reliant on our ore while they look to source it elsewhere. Otherwise, there is a stong chance they would have done it by now. As the government and corporations are realising, there are risks with having your eggs all in one basket - otherwise known as concetration risk. The problem is, up until now, it has been too easy for Australia to sell to China. Australia is now turning to India as the next most populated place on earth with some wealth, I guess. Australia will have its work cut out beause India already has established markets. But that is not bad in itself; Australia has towork hard to get markets in the rest of the world and learn to compete with others. An investment in these markets now may still pay dividends later..

 

 

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1 hour ago, Yenn said:

So far our pollies are counting their iron ore chickens before they are hatched. They do not seem to realise that China can refuse to take our iron ore and just sit back for a while and we will be begging them to take it at half the price. Not only stupid but also gutless.

China’s great leader seems to have blundered; at the moment they are dependent on Australian iron ore, the price of which has risen enough to counteract our losses in Chinese beef, grain and wine markets.

 

https://www.smh.com.au/business/markets/schadenfreude-as-chinese-steel-mills-ask-for-help-from-rio-and-bhp-20201217-p56oa6.html

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China cannot do without our iron ore, they rely on it to underpin their massive domestic industrialisation and development - buildings, bridges, factories, railways, gas pipelines - and ships - as well as their metal-containing exports.

Their supplies from Brazil have dried up due to the massive tailings dumps disasters there - shipping from Brazil is more expensive - and W.A. iron ore is the highest grade iron ore, and the least contaminated with impurities, in the world.

 

We need to put an export tariff on iron ore, just to show the Chinese we can play the same game. Just enough tariff to make up for our losses in barley, meat, coal and wine.

Funnily enough, China playing ducks and drakes with our coal, has sent the coal price up substantially. And iron ore has hit new highs, because of Brazils supply problems, and a potential shortfall between global supply of iron ore and demand for it.

 

Can you imagine the situation if COVID-19 had seriously impacted our production output of iron ore? The price would be double today.

Edited by onetrack
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The other benefit of slapping an exicse tax on iron ore for China is it does help level up the international trade playing field a little. I would be minded to have massive import duties on Chinese imports as well.. We can live without hammers that break and plastics to entertain kids for 5 miutes before the toys break or the kids tire of them.

 

I bought a Stihl kombi system - with the attachments, I paid around £500; A mate bought a cheapie Chinese rip off and was laughing at me.. Mine had worrked 13 acres week in week out - especially in summer where everything grows at phenomenal rates- even my stomach, apparently...  I have had it 5 years (although now only on 2 acres, but neglected for 20 so still puts in a lot of work).. It has been serviced once and hasn't skipped a beat, the attachments have taken more punishment than a Port Arthur convict.. yet they still are pretty good at doing their job...

 

The Chinese one, on a 1/4 acre manicured block gave up just after the warranty expired... He could not start that thing for love nor money... He took it apart, replaced the plugs, replaced the filters, etc.. checked the ignition, etc, the thing just wouldn't fire up.. On a per use or volume of work cost is much lower on the Stihl. I haven't checked, but it is probably made in China; just the quality control of major companies seems to be a lot better.

 

I purchsased a Mountfield ride on early last year, with a Briggs & Stratton engine rather than their own. Although a UK company, all of their manufacturingis in China now. Although, touch wood, the mechanics are great, the body bits after a year of pretty light use, are rattling off. Thankfully, it has a 5 year warranty, and we have alreadyt had a couple of bits replaced - panel crews just work themselves loose, and the throttle tip clean broke off. And of course, the battery died shortly after 12 months (which was the warranty on the battery).. So that was another £40. Unfortuately, a non-China made one was the price of a small car.. so couldn't justify that for the use it would get. Mind you, they did go, and would have looked great with mag wheels and a fluffy dice.. 😉

 

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I have to smile, the Chinese steel mills are moaning that they can't make any money, now that the iron ore price is around AU$140 a tonne - and the Chinese Govt is making them buy low grade domestic coal, which makes their steel making more difficult. Plus the price of that coal has gone up - all the while the Chinese Govt is pressing the steel mills for maximum production, to underpin their major increase in domestic industrialisation.


So the Chinese are moaning to Rio Tinto and BHP-Billiton that they can't afford these high prices and the iron ore companies have to come to some new kind of agreement and ignore the "market" price that iron ore is currently priced at, and reduce the price for the Chinese, seeing as they are Rio's and BHP biggest customer!

 

Naturally, the iron ore producers are uttering soothing corporate words that effectively mean SFA - and in effect are telling the Chinese to get fXXXXX. What the Chinese seem to forget is that the iron ore miners have long memories - and when iron ore was sold under individual contract - a system the Japanese started - it didn't take long for the Chinese (and the Japanese) to break the contracts, when the spot market price fell.

It was a case of "heads we win, tails you lose" for the Chinese and Japanese under the individual contract system. But now the agreement to sell on a spot market price (really, a fairer system, based on supply and demand) is in place, the Chinese are calling foul and want to revert to a fixed (lower, of course) contract price.

 

You can't have your cake and eat it too, as the Chinese are finding out - and just as employees and workers can hurt each other with wages bickering - so the Chinese are starting to find, if you want to start a Trade war, you have the high likelihood of hitting yourself in the nuts with your wild swings of the Trade club.

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There's often some small good comes out of something bad. The China thing appears to convincing some drongos in government and industry that putting our eggs in one basket is not a good idea. There's reasons why those old sayings exist. With coal, the writing was on the wall anyway. The day will come when China sources it all locally and from Mongolia and Russia. We just have to get used to the fact, move on, and establish more diverse markets. It would have eventually happened with or without a diplomatic and trade spat. If we do diversify, it will put us in a better place further down the line.

 

What often happens with trade wars and sanctions is that the entity trying to do the hitting finds that the stick bounces back and hits them on the head. Hit with their own stick in effect, as we are now seeing reports of in China.

 

Russia is a good example for the learning process. They are certainly not booming economically due to sanctions from Obomber and Trump, compounded by Covid. But thanks to the sanctions, they are in a much better place than recent pre sanction times in relation to setting themselves up for the future and strengthening domestic economy. They have embarked on a lot of measures to counter the sanctions. Apart from moving to insulate themselves from the petrodollar and increasing physical gold reserves, they've restarted domestic production and self reliance. They've diversified their economy and trade partners to the point that oil and gas now only account for 30% of budget income, and that figure is shrinking. Their former dependence on selling hydrocarbons for most of their income made their economy vulnerable, and now thanks to Barack and Donald they are heading in the right direction economically for the future. The sanctions have hurt the economies of the hitters to a larger degree than that of Russia itself.

 

I hope we have smart enough people in Australia to learn from the world's trade and production mistakes and act sensibly for our future.

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Looks like Greta Thundbeg is having an impact on Vlad, after all? 😉

 

It may show a bit of forward thinkng, too... The world is easing up on its demands for hydrocarbons and not basing your source of revenue on it sounds like de-risking as well...

 

The problem with Aus is similar to the problem that besets the UK; it is easiier to hang on to the cash cows than to invest in the future

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I will be sorry to see cheap Chinese tools disappear from the market. Their cost has enabled me to have wonderful things like a table saw ( $200 from Bunnings ) that I could never have afforded. While they do indeed make some cheap stuff, I reckon the value for money is good most of the time.

At the farm here I have a new Chinese tractor with a front-end loader and a slasher for about half the cost of an alternative second-hand one. And it doesn't have a computer, which is great. We had an new American ( Massey-Ferguson ) with a computer and it was unreliable and cost us heaps. This was the opposite of Jerry's experience I know.

With chainsaws, I bought a too-cheap Chinese one and my son bought a Husquvarna which I agree was much better. This mirrored Jerry's experience. But now I have a Chinese battery chain-saw ( 56 volt Ego ) and it works great. Stihl also have an electric chain-saw for about twice as much.

 

 

 

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Bruce, I understand that the Chinese have leveraged their advantage as a low cost country to be able allow other countries to afford accroutments at incredibly cheap prices... And I don't bedgrudge that, not the fact that the stuff falls apart in no time.. you get what you pay for. RM Williams moved their non-moleskin shirt production to China (they don't do moleskin shirts anymore - hopefully under new ownership they will resurrect them). In the shop they told me the Chinese shirts were both cheaper and higher quality.. The cheaper was accurate - the higher quality - definitely not. Most non-Chinese owned manufacturers who move their prodution to China often have strong QA and ethics, but their goods are generally inferior to where they were originally made. So, Bruce, re the tractor - check where it was made... Not sure if MF have moved their production..

 

The reality is that Chinese quality has improved over the years and it will... Remember Japanese made stuff in the early dase of Japan's rise to global manufacturing domination - when I was a kid, it was known as Jap Crap. Today, I doubt you would eve hear the term.. and they are the go to for quality of almost everything they manufacture. However, the prices have also gone up - partly because they use better materials, but also because they cost of labour went up with it.  People were sharing the spoils and a relatively free market and country allows that evolution to continue so the next country in line can take its place, etc...

 

China breaks that.  The control everything and they will artificially keep their prices low thorugh control and importantly, opression. There are other countries that do it, too, although not on the scale of China. Emirates are one I can think of..

 

It's ironic - people today are demonstrating against and desecrating statues of slavery of years gone by that, while reprehensible, was the norm at the time and many countries exploited it. Apparently, the Slavics were the ones who were the first to be enslaved and probably of the worse treated (though I would have to look that up for myself), and is apparently where the term Slaves originates from. Apparently, even African countries used slavery as did most European, etc. But these same protestors no doubt revel in their cheaply purchased Chinese goods, and don't give a second thought to the opression and slavery those goods are made under.  Again, areas such as the EU happily accepted this, too, until they realised their subsidised uindistries were getting smalled in their local markets by cheap Chinese imports. .

 

Also, even if they are not slaves, their conditions are much worse.. the article I referenced above speaks about how people have to still go towork when its 3 degrees and there's no heating; they are forced to climb 30 floors of steps.. which will warm them up a bit, of they don't die on the way up.. But not for long.. And while those working in heavy industry factories may warm up (think furnaces, etc), spare a thought for the sewing machinist who's fingers are numb and the risk she stitches herself up...

 

As I said, I don't begrudge China for taking advantage of its low-cost position - I begrudge what they will do to maintain it.

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The Chinese have two main problems in their production of tools and machinery. One is, they are gung-ho in their workmanship, and don't pay attention to detail like the Japanese do.

Secondly, their QC is poor, aided by corruption, and pressure to produce items in very large numbers. So, you get a Chinese item and it can be good or bad, depending on how it was produced, and by which factory.

 

Chinese Lathes and machine tools are often badly finished with swarf and dirt in gearboxes, and assembly faults. Many people claim you need to disassemble and check everything on them, if you buy one new.

Their tool quality is highly variable due to the use of lower steel grades that are not up to American/English/Australian grades of tool steel. It's rare for the Chinese to actually use high quality Chrome/Vanadium/Molybdenum tool steel.

They use S2 steel for a lot of tools, because S2 is simply a hard high carbon steel and doesn't need the extra work of adding expensive alloys such as Vanadium or Molybdenum.

In addition, the Chinese will cheat on steel additives, and label a tool "Cr-V" - when the Chrome and Vanadium content is lower than the Western specification calls for.

 

I do have to admit though, that the Chinese tools have enabled many people to equip themselves for ordinary jobs and consumer-style repair work, that doesn't involve really heavy or extreme conditions.

It's when you get into the extreme service work - such as repairing earthmoving and mining equipment - that you find the Chinese tools don't cut it.

A high quality tool steel is tough and won't break under extreme load - whereas a Chinese tool will simply snap.

 

The best tool steel is one called Protanium, made by Bondhus. The formula is secret, but Protanium steel is at least 20% stronger and tougher than any other Chrome-Moly-Vanadium tool steel.

 

I buy Chinese lathe tips - and not surprisingly, they will offer genuine Mitsubishi (made in Japan) or Korloy (made in Korea) tips, alongside the Chinese equivalent tips.

But I rarely buy the Chinese tool tips, as they usually offer the genuine Korloy or Mitsubishi tips at prices that are not a lot more than the Chinese offerings.

 

The Chinese tractors, like the Chinese utes, have abysmal resale value, for good reason. Parts are difficult to source, you get 14 different name brands, coming from 10 different factories, and instruction books and parts books are a nightmare of Chinglish. The Chinese fail to recognise the pursuit of excellence and superior build quality, and the advantage of establishing a "name brand" that produces a reaction of quality recognition.

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A bloke once told me about a cocky he knew who bought a Chinese dozer. It was back in the day when Chinese machinery was a relatively new thing in Australia. The story was that it had a cast sump pan that was so porous it used to seep oil through the casting. I think it was a CMC.

 

I saw a couple of new Chinese dozers once at a machinery sale yard. One was a Cat D6D copy and the other a copy of a Komatsu D65EX-12. At the time the genuine Cat and Komatsu were around the $500,000 mark and the Chinese knock offs about $350,000 if the memory is reliable. After looking them over, I had the opinion that the saving wasn't worth the risk.

 

The Komatsu appeared to be hand welded; I didn't see any evidence of smooth robotic welds. On the main support piece of the outer track frame there was a plate welded in, about the size of a small BBQ plate. It stood out from other plate steel on the tractor as it had deep rust pitting. It looked like they'd sandblasted a badly rusted piece of plate and welded it on. I hopped up inside the cab and saw that the inside of the cab had been painted by hand with a paintbrush. A poor show for a new machine.

 

I think if you bought one for the long haul you would wish you hadn't. And if you bought one for a short term contract thinking you are saving $150,000, it would have little re-sale value even assuming it didn't have a major breakdown during the job. Final assessment - you'd be crazy to waste money on one.

 

They remind me of the Belarus tractors. A mate bought one back in the 90's and used it as a general farm tractor. If you went easy on it, it was capable of a bit of plowing and rotary hoeing and a bit of bucket work with it's front end loader. If you tried to haul out cane with one, it wouldn't last till smoko on the first day.

 

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