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China Tightens The Vise On Eurozone Bailout
Wolf Richter www.testosteronepit.com
The European Union has filed a laundry list of complaints against Chinese dumping, from shoes to fasteners. Ceramics, for example. Household ceramics got hit last week. In 2011, it was building ceramics. In 2010, it was ceramic tiles, which led to a punitive tax of 69.7%—punitive for consumers who ended up having to pay higher prices, though it was a nice gift to European producers. Now, it has chosen another target, Chinese steel. But with nearly half of the world’s steel production, the Chinese steel industry is the bully on the block. And it flexed its pumped-up muscles—putting at stake the very manna that European officials have been praying for.
Rumors of the Chinese savior appearing on the horizon goosed financial markets innumerable times. China, out of the goodness of its big heart, would use its $3.2 trillion in foreign exchange reserves to bail out the Eurozone with the stroke of a plastic pen. Turns out, China didn’t have a big heart but a list of unpalatable demands—so unpalatable that even a desperate European panhandling delegation sent to Beijing in November turned them down. For this “slap in the face” and the fiasco that followed, read.... Chinese Money and the Quid Pro Quo.
Ten days ago, another top-level EU begging expedition tried to lure Premier Wen Jiabao into plowing part of China’s foreign-exchange trillions into the European bailout fund, a dreadfully convoluted and opaque creature that they passed off as a rose. But rather than kick the conniving beggars out, Wen declared soothingly that Europe was an important partner, and that China and the EU would work together to solve the debt crisis—and the delegation left once again empty-handed. Read.... Bitter Irony of the EU Begging Expedition.
But yesterday, it was brutal. It was an unnamed official at the Commerce Ministry who slugged the EU and everyone who was still steeped in some sort of hope that China would, out of the goodness of its heart, bail out debt sinner countries in the Eurozone.
The trigger: earlier this week, the European Commission opened an anti-subsidy investigation of Chinese organic-coated steel (galvanized and pre-painted) of the type used in household appliances. In December, the Commission had already launched an anti-dumping investigation of the same products. Two separate investigations and two complaints with the World Trade Organization on the same products.
The instigator: Eurofer, the European Steel Association. In January, it whined to the Commission about Chinese steelmakers that didn’t respect the rules of free trade—they received a range of subsidies, such as tax exemptions, preferential loans, and below-market cost of materials that the government purchased for them.
The European steel industry is in trouble. Demand cratered. Producers from ArcelorMittal to ThyssenKrupp have shut down steel mills to prop up prices—but all it did was invite Chinese steelmakers.
And they’re desperate. After years of explosive growth, they’re facing colossal over-capacity, just as demand is slumping. Premier Wen Jiabao acknowledged the problem during a visit to Hunan, where much of the steel is made, and he exhorted the industry to consolidate. So the trade complaint came at a very inconvenient moment.
"Launching an anti-subsidy investigation at this time sends the wrong signal of trade protectionism that will not only cast a shadow over China-EU steel trade, but also damage China-EU efforts to respond to the crisis," said the unnamed Ministry of Commerce official. "With ... many European countries deeply trapped by the sovereign debt crisis, all countries should have a more open, cooperative and forgiving attitude in facing the crisis."
Open, cooperative, and forgiving towards China—the new rules that China is imposing on the game. Or perhaps just a re-write of very ancient rules. Those with the money get to set the terms when those who need it are desperate. Remains to be seen if someday the Eurozone will be desperate enough for Chinese money to compromise on the support for its coddled industries.
Meanwhile, life in China goes on in its crazy manner: all heck broke loose when Zhejiang's Provincial Administration announced that 30,000 blood nests, the rarest and most expensive bird's nest, contained high concentrations of sodium nitrite. Well-off Chinese were suddenly worried about an insidious food-safety scandal that has changed ... nothing. Read: Poisonous Blood Nests—Still a Delicacy in China.
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Does that mean they hold their trades on the VIX for longer than a week?
they wanted to name "the partenon"," the new red square."
Turn by twist, day on day, the beast lurches toward its rendevous with the apocalypse.
Now we see what they meant by "socialism with Chinese characteristics."
Seriously, after all the China bashing over the past 50 years even up to today, we actually think they might want to help save our mis-managed Western style crony capitalism? I'd laugh about it if it weren't so pathetic.
"Investigation of Chinese organic coated steel"; once again; in reality. In reality; it has nothing to do with China; Too much capacity exists; specialty and alloy steels are being dumped on the market from Argentina and Brazil; it's the result of over installed capacity. The party is over; now comes the hangover. deflation; national subsidies, bankruptcies, currency disruptions, all will follow.
Such overcapacity was also the primary cause of the "Panics" of the mid-19th Century. "Irrational exuberance" during periods of expansion (of railroads, textiles, banks, etc) always lead to overcapacity and a "correcting" recession ... with or without a Federal Reserve.
The central planning globalists just need to keep their meddlesome paws off the controls and the market will sort out the misallocation of resources ... far more quickly than any "planned" recovery. The only ones who will be hurt by such a natural levelling will be those who misallocated the resources in the first place.
not the only ones to be hurt. The misallocated human resources will also be hurt. To be fair, they "should have known" but, yea.
I do not disagree that the market will sort these things out faster, but during all those "panics" there was great human suffering.
Overcapacity is one of the characteristics of global depressions; it was an important component in the "Great Depression". I should say, over "Installed capacity", as that is the usual term found in the textbooks. Reading "it's different this time" by Rogoff, et al. we find that we have many years to go before there is any kind of "recovery".
Overcapacity? There is no way that we can have overcapacity. We are in a recovery!!!
/sarc
wait, hold on a sec, you read????
Man who complain about neighbor's Sharpei dog shit should put diaper on own St. Bernard first.
Neoconfucius
More Chinese bashing from clueless roundeyes.
No-one is bashing the Chinese. No-one is bashing the Europeans. No-one is bashing the Americans.
We all bash the governments.
Fluctuations.
Fluck you Westerners too!
I think the piece did a pretty good job of bashing both Euroland and Chinaland.
But, I'm not a KneeJerkian.
or a BallChinian
i'm a consumerista
..and i want my cheap-as-chips Chinese steel
Thought Govt was supposed to champion the consumer, not stick a spanner in the works of cheaper prices in order to protect bloated old corporations???
And yes now you ask, i was born yesterday
It has nothing to do with china; per se. Over installed capacity is over installed capacity. Argentian and Brazilian quality, alloy, steels are equally significant.
Hey! At least we have double eyelids, neener, neener, neener...
3.2T? Please. If anyone thinks that will seal the gash in the euro-Titanic's hull, they're delusional or cant do basic arithmetic. Even if the Chinese wanted to, it would not make a bit of difference. This mother's going down; the only question remaining is who gets a lifeboat seat and who has to wear a lifejacket in near-freezing water.
Coats on ladies and gentelmen, please. This way...
Unfortunately, you're correct; they're goin' down. Watch the dominos and hope we all don't fall, too. What's going to be tough is how to get this bad mother to Phoenix out of whatever's left. Pray, boys. Pray.
Ah, but US citizen maths have led to throw the smaller insolvent economies to feed the larger insolvent economies.
Sustainable debt, or no debt at all, it does not matter.
The question is whether there is enough to extinguish the insolvency.
What is going on right now is simply insolvency spreading around on a global scale.
750%.
Nuff said. Everything else is at best wishful ignorance, and at worst outright malicious deceit.
And in any case, it is full frontal retard.
ancient chinese secrets
Can't quite blow it up with a decent resolution, bit it looks like your avatar is el Mescalito :-)
ah, yes, my fav way to fly
Yeah, it sure does : )
ancient Native American wisdom
China's oligarchy seems to have read a lot more Adam Smith than our oligarchy.
The Chinese don't have Jews running their politics or economy and that in it self buys you a lot of prosperity even with all other corruption being equal
Or the Chinese are at a different stage in Smithian economics...
With US citizenism, everything is situational.
Ok, AnAn, how the hell did you arrive at US Citizenism here???
Quite easily. Smithian economics is the core of US citizenism tenets.
No matter how fast Chinese go, their transformation into US citizens was started later than historical US citizens.
Dont expect them to be at the same stage in every thing US citizen.
US citizenism go through several stages.
Everything is situational in US citizenism. So US citizens use that trick to deny others behave the US citizen way.
It is like a job done is a job no longer to be done.
US of A have purged the Indians heresies. It is a job done. No longer to be done.
Chinese have a lot of work left to be done domestically because their previous systems were much more tolerant of diversity than US citizenism.
Chinese are doing the job in China US citizen way.
And US citizens who have already gone through this stage of US citizenism use that lag to deny the Chinese are behaving US citizen way.
Both populations behave the US citizen way. Different stages only.
You are a tedious little man, you are.
Dont ask then.
Or put up with what you've got.
Ah, I forgot, you are a US citizen, so you are used to discarding the negative consequences of your actions onto others.
AnAnonymous... you're almost as good as MDB for a laugh.
US Citizenism! It's everywhere!
C'mon, man. I've been to China, and a ton of other places with a variety of Govt's. Truth is this: People are people - pretty much the same everywhere. The problems arise when some knot-head or other leader or wannabe thinks the grass is greener or that his poo don't stink as bad as the next guys, or his God is better than the other God. .....well, ya' know what, brothers, it's the same old chartreuse everywhere; poo stinks, period; and there's God - and we are his, period. So get over yourselves. Be nice. Would you smack your child for asking for something good? We're all each other's children.
if i may, i'd like to gently push back on the concept that "people are people" the same everywhere. living in california, i don't need to travel far to compare different people and their cultures. in fact, all i need to do is drop my son off at high school. people are very very different. and even though many of these differences tend to cluster in various ethic groups, even within the same group you can find enormous differences in personality. i think we do ourselves a disservice when we adhere to the meme that we are all alike under the skin. we are not and we would be better off if we recognized that we have substantial differences. imho, much of the problem with failed government social policy derives from this falacious meme.
btw, under no circumstances could i gather up a group of dozens from my neighborhood to decapitate a woman on the pretext that she is from a country that has disrespected my holy book. you may say that if i grew up ignorant and in grinding poverty that yes, i could and would act in exactly the same way. we'll never know, but i disagree with that thesis. (and yes, i did grow up surrounded by poverty and ignorance and yes people with poor impulse control do tend to be over represented among the poor [in america]). thus, there are neighborhoods close by where i might be able to gather up some folks for a killin spree ... just not on my block. so yes, my poop does stink less, thank you very much.