Archive for the ‘Communism’ Category

Mikhail Gorbachev, RIP

Wednesday, August 31st, 2022

There are some people whose staggering failures are so awesome that they put ordinary successes in the shade. Like Christopher Columbus trying to find a quicker route to India and discovering the New World instead.

Such is the case with Mikhail Gorbachev, who died yesterday at age 91.

Gorbachev never meant to destroy Soviet Communism, he merely meant to reform it so that it could run more efficiently, allowing the Soviet Union to compete more effectively with capitalist nations that were stomping their communist counterparts both economically and technologically. Moore’s Law was creating a tech boom racing so far ahead that the Soviets couldn’t even copy technology fast enough to keep up. Reagan’s obvious resolve and the threat posed by SDI scared them even more. To compete with the west, Gorbachev had to reform his stagnant nation.

His means for doing so were glasnost (openness) and perestroika (reform, or restructuring). Those two methods, meant to rejuvenate Soviet communism, actually ended it. Glasnost made it clear that a majority of Soviet citizens across the various republics hated the oppressive nature of communism. Perestroika was a hard sell to stagnant and ossified state agencies and enterprises. While some well-connected oligarch’s got rich on the first green shoots of capitalist reform, western companies proved unenthusiastic about investing in Soviet co-ventures.

Politically, Gorbachev’s reforms eventually resulted in the draft New Union Treaty, which would have devolved more power to the constituent Republics. This was deemed so threatening to the status quo that an abortive coup was launched against Gorbachev by communist hardliners the day before it was supposed to be signed. The coup, opposed by Russian President Boris Yeltsin and a large swath of Soviet citizens, collapsed in a matter of days, sealing the fate of the Soviet Union, which would dissolve on December 25, 1991.

In the process trying to reform the Soviet system, Gorbachev would stop funding communist movements around the world and withdraw troops from eastern Europe. These were great, liberating decisions, but they were committed in support of reforming Soviet communism, not ending it. By that grand mistake, Mikhail Gorbachev did more to make the world a better place than all previous Soviet Premiers combined.

Is China Buying Texas Land?

Wednesday, August 10th, 2022

The issue of Chinese interests buying up Texas land is one of those stories that has been flitting around the edges of my peripheral awareness for a while. Now Robert Montoya, Jessie Conner and Emily Wilkerson of Texas Scorecard has done a handy deep-dive on the subject.

Many Americans assume incorrectly that American soil is reserved for our citizens and businesses.

The sobering fact, however, is that foreign nationals—both individuals and corporations—own a lot of land in America.

Particularly troubling are incursions by the Chinese Communist Party (CCP) absorbing Texas soil for its strategic geopolitical ends.

Texas Scorecard recently launched a four-part investigative series exposing CCP infiltration of our state’s education apparatus. During our months-long investigation on the CCP’s activities, it became clear that education was merely one part of a multi-prong incursion into the United States of America.

The second prong we will explore here is their infiltration of our agricultural land.

There are some who wave a hand at concerns about foreign entities and individuals owning land stateside, dismissing them as conspiratorial or xenophobic. However, a review of adversarial countries’ actions suggests land holdings are strategic and could undermine national and resource security.

Furthermore, concern over CCP ownership of U.S. land isn’t a partisan issue. During our investigation, we found multiple instances of Republicans and Democrats making public statements, authoring legislation, and warning of the national security implications of such ownership of U.S.-based assets.

Snip.

For the past decade, the number of purchases of agricultural resources by foreign actors has dramatically increased across the nation, with Texas being No. 1 according to a review of USDA documents. Currently, at least 4.7 million acres of Texas’ agricultural land is owned by a foreign entity or individual.

What is even more troubling is the intended uses of the land and the actors involved in development.

In theory, the U.S. federal government should be keeping track of foreign agricultural land ownership. But time and again, it’s not until the last moment that disclosures are made and concerns are publicly raised. Texas Scorecard’s research on these holdings shows that on more than one occasion, foreign acquisitions that should have been stopped immediately were allowed to progress and only ultimately stymied with great effort.

Overview of the widely ignored Agricultural Foreign Investment Disclosure Act (AFIDA) snipped.

For instance, take China’s land holdings overall. 2020 figures from the USDA put total foreign-owned agricultural land holdings for China at 352,140 acres, up from 191,652 acres in the prior years report. Because of high-profile purchases starting in 2015, a single company owned up to 140,000 acres in South Texas alone.

Instead of comprehensive reporting from the USDA or state agricultural departments, Americans are left with what amounts to—at best—a (self-reported) guess and a steady stream of stories about foreign entanglements that spring up from time to time.

Also, it’s a poorly guarded secret that foreign land ownership is hidden.

One way some foreign farmland owners circumvent disclosure or state-level laws barring foreign ownership of farmland is shifting property into majority U.S.-owned subsidiaries—not to mention that land holdings by foreign owners are often a moving target. For instance, a particular parcel’s inclusion as foreign-owned land can fluctuate annually if it’s owned by a publicly traded corporation. The threshold of stock ownership is relatively low at 10 percent.

This is the national component of foreign land ownership and the limits of what we can know at that level.

When it comes to Texas, the state does not prohibit the ownership of agricultural land by foreign individuals or entities. There are multiple states that have total bans, while others at least have limits.

While this complacency has been the status quo for the better part of the past two decades, lawmakers appear to be more proactive about keeping tabs on foreign actors.

Global supply chain disruptions in 2020 due to the Chinese coronavirus, followed quickly by the war in Ukraine and growing tensions between the U.S. and China over Taiwan, have lawmakers critically examining foreign infiltrations at home.

A recently concluded comment period on AFIDA disclosed that foreign interest required to make disclosures increased by 2,250, as more foreign persons acquired or transferred an interest in U.S. agricultural land than in prior years and must comply with AFIDA reporting requirements.

According to the latest AFIDA annual report, foreign holdings of U.S. agricultural land increased modestly from 2009 through 2015, increasing by an average of 0.8 million per year. Since 2015, foreign holdings have increased by an average of nearly 2.2 million acres, ranging from 0.8 million acres to 3.3 million acres per year.

Of this increase, most of the purchases are of forest, crop, and pasture lands. Changes in crop and pasture land are “due to foreign-owned wind companies signing, as well as terminating, long-term leases on a large number of acres.”

Indeed, the largest wind farm in the state of Texas, the Roscoe Wind Farm outside of Abilene, is owned by RWE, a German multinational corporation. The project spans multiple counties and sits atop leased farmland.

While the American public’s attention has been seemingly fixated on Russia since 2016, the CCP’s activities in the U.S. are just as troubling, if not more. Their ruthless oppression of Chinese citizens, hostile stance towards America, and methodical plan for domination all touch the issue of agricultural land ownership in the U.S. and Texas.

The latest available data from the USDA reported China holding just 352,140 acres of agricultural land, which is slightly less than 1 percent of foreign-held acres. But, as is the case with foreign funds flowing to higher education, the tracking of these transactions is imperfect.

It’s likely that China’s ownership of land in the U.S. is understated in USDA’s annual reports.

They describe the “Blue Hill Fiasco”:

Beginning in 2015, Sun Guangxin, a Chinese billionaire, began acquiring land to develop a wind turbine farm in South Texas. Eventually, Guangxin snatched up around 140,000 acres in Val Verde, roughly 7 percent of all land in the county.

In 2019, five years after acquisitions began, the proposed development of a wind farm on the land led to an uproar in Texas and at the national level.

A member of the People’s Liberation Army, Guangxin reportedly built his fortune by establishing close ties to Communist party officials, and leveraged these connections to cheaply acquire and redevelop government property to become a real estate tycoon.

Wang Lequan, who was re-elected as secretary of the Xinjiang Party Committee of the Communist Party of China for three consecutive terms since 1995, is the backer behind Guangxin; the forces behind Wang Lequan are Zhou Yongkang and former President of China Jiang Zemin. Supported by Wang Lequan, Sun Guangxin, chairman of the board of directors of Guanghui Group, is one of the few private oil field owners in China.

His base of operations in China deserves special attention too.

The Xinjiang province is where the widely reported oppression of the Uyghur population is taking place. In part, the Uyghur population is used as forced labor. According to Irina Bukharin, two of the goods produced in this region, in disproportionately high figures, include polysilicon (used in solar panels) and wind turbines.

Sun’s plans for the wind farm in South Texas were covered by state and national media outlets. A billionaire, Guangxin is the chairman of Xinjiang Guanghui Industry Investment, which is the parent company of GH America, the company spearheading the wind farm project.

But there’s more to this story.

“The acquisition by General Sun out near Del Rio was done by them forming a Delaware Corp called GH America,” J. Kyle Bass, chief investment officer of Hayman Capital and founding member of the Committee on the Present Danger: China, told Texas Scorecard. “They funded the Delaware Corp with dollars from a CCP-owned institution in America. You basically had a U.S. corporation, funded with U.S. dollars, buying U.S. property. It was really difficult to understand who the actual owner was and what kind of sovereignty was represented there.”

GH America also positioned itself to influence the legislative process. According to Texas Ethics Commission records, Stephen Lindsey is registered to lobby for the company. He’s widely reported as the vice president of government and regulatory affairs for GH America. According to Transparency USA, from January to September 2021, during the regular and special state legislative sessions that year, Lindsey’s contract was anywhere from $93,150 to more than $186,000.

There’s also a national security risk. Sun’s planned wind farm at Blue Hill was not far (70 miles) from Laughlin Air Force Base. This proximity alarmed many. There are also liquified natural gas deposits in the area.

Bass says the CCP’s aim here is surveillance.

“Basically, they call it ‘over the horizon’ mapping. If you get the point higher and higher, you can map more and more, i.e. you can increase the linear distance that you can map,” he explained. “With their new ability … they can map things within one inch of specificity and clarity of things that are 50 miles away from 700 feet. What’s interesting about that is Laughlin Air Force Base is 30 miles away, and the restricted airspace is 10 miles away from the main ranch.”

Texas Agriculture Commissioner Sid Miller told Texas Scorecard the CCP bought farm land near another Air Force base in North Dakota. “We don’t need to give them listening capabilities to our aircraft coming in out of those [military installations] and other communications coming out,” he said. “It’s crazy enough just to allow our biggest enemy to be purchasing our own soil.”

Bass discussed how the South Texas purchase was allowed to take place. “Steve Mnuchin at [U.S.] Treasury gave a quick Friday-night special OFAC [Office of Foreign Assets] approval without [U.S. Dept. of Defense] being in the room, which is pretty crazy,” he said. “If Treasury is the nexus of [the Committee on Foreign Investment in the United States], and all of the other departments chime in when they can, there should not be an ability for a unilateral approval or approval by the U.S. Treasury secretary, who might be corrupted by the Chinese government.”

When asked, Bass said we don’t know how much land the CCP or its connected entities have in Texas. He explained the Lone Star Infrastructure Protection Act (Texas Senate Bill 2116 passed in 2021), “encouraged” the U.S. Dept. of Defense to assign task forces to examine CCP land holdings near DOD installations. “I know they found some more in Texas, but I don’t know how much more.”

Sen. Ted Cruz (R–TX) was a vocal opponent of the Blue Hills wind farm development, issuing a letter in 2020 to then-Treasury Secretary Mnuchin seeking a private briefing on the project. The junior senator from Texas also proposed legislation that would trigger the review of wind projects within a certain distance of a military installation.

This isn’t the first time a Chinese company has tried to install a wind farm near a U.S. military installation.

In 2012, Ralls, an American company owned by two Chinese nationals, purchased multiple American-owned wind farm companies with several project sites. Four of these sites were within restricted U.S. Navy airspace in the Pacific Northwest.

This part of the purchase raised national security concerns, and Ralls was told to divest and destroy the cement pads they’d poured for construction of its mills near the base. The company sued the government and, troublingly, was successful at first.

Eventually, the company was defeated in its efforts and had to divest. The fact that this episode did not dissuade future attempts speaks to the persistence of the CCP to take part in the production of energy stateside.

There is also a connection between Ralls and Texas. The blades spinning at many wind farm sites in Texas are produced by SANY, the parent company of Ralls, which is owned by the richest man in mainland China, Liang Wengen.

According to a Forbes profile, Wengen worked as a top manager at a state arms plant before getting into heavy construction equipment. He joined the ruling elite in 2011, becoming a member of the CCP.

At the very least, Chinese nationals and the corporations owned by them should have to abide by the same limits China itself places on foreign ownership of land in China. Fundamentally, foreigners cannot own land in China without actually living there, and are further limited to one property per location. Plus there are a wide number of complex rules on foreign ownership of Chinese businesses.

It seems, at the very least, that a survey of land within 10 miles of military bases in Texas to determine if any have hostile foreign ownership may be in order…

Top Chinese Chip Executives Arrested

Saturday, August 6th, 2022

Remember Tsinghua Unigroup, a wholly owned business unit of Tsinghua University and itself owner of Yangtze Memory Technologies Co. (YMTC) (Previously mentioned here.) Well, it turns out that a bunch of their top executives just got arrested:

  • The video shows a picture of six semiconductor executives, all of whom have reportedly been arrested:
    • Dia Shijing, co-president of Tsinghua Unigroup
    • Lu Jun, president of Huaxin Investment
    • Zhao Weiguo, chairman of Tsinghua Unigroup
    • Ding Wenwu, president of National IC Industry Investment Fund,
    • Zhang Yadong, president of Tsinghua Unigroup
    • Qi Lian, another co-president of Tsinghua Unigroup

    How a company runs with three presidents I couldn’t tell you. Must be a Chinese thing.

  • “In the past few days, several senior executives of the organization behind the semiconductor industry in Mainland china have been taken away by the CCP Central Commission for Discipline, Inspection and Investigation.” Given my knowledge of communist nomenclature, I strongly suspect that this is not the sort of organization you want to enfold you in their tender mercies.
  • “In 2014, the General Office of China’s Ministry of Industry and Information Technology announced the official establishment of the National Integrated Circuit industry investment Fund Company Limited [ICF], also known as the National Big Fund or big fund.” Probably best to think of them like USA’s SMEATECH, but with a whole lot more opportunities for graft.
  • Together two rounds of government funding added up to 320RMB, or about $47.4 billion, which should have driven additional public/private capital investment of some $240 billion divided up between China’s Ministry of Finance and large central Chinese enterprises, most of which are also owned by the state. Even for the semiconductor industry, that’s a lot of cheddar.
  • By some estimates, $100 billion of that had already been spent by 2021.
  • “The two phases of investment cover all aspects of integrated circuits (ICs), including IC manufacturing IC design, packaging and testing semiconductor materials and equipment, and industry ecological construction.”
  • ICF provides overall direction and management, while Huaxin Investment provides management of the second phase of fund investment.
  • “Eight years have passed, but high-end Chinese chips haven’t yet been produced, and the management of the state level chip industry has collapsed.” Reading between the lines, this means TSMC is still kicking their ass. If that’s the standard, then it’s a bit unfair because every other semiconductor manufacturer in the world is in the same boat.
  • On July 28, Xiao Yaqing, head of MIIT, fell from power. “Xiao was the spearhead of the Chinese communist party’s attempt to build a world-class chip industry, and eliminate its dependence on the US.” He supposedly tried to slit his wrists.
  • “The very next day, Xi Jinping immediately appointed a replacement a longtime aerospace official to take over MIIT.” Yeah, that’s really going to help your semiconductor goals.
  • “On July 15, Lu Jun, former deputy director of the China Development Bank Development Fund Management Department, was investigated Lu Jun was involved in many investment operations of the Big Fund, of which he was the sole manager. He was also former president of Huaxin.
  • Yang Zhengfan, another Huaxin executive, was also taken away.
  • Also arrested: Wang Wenzhong of Hongtai Fund and Gao Songtao, both involved with Huaxin and the Big Fund. And that’s probably not all. Evidently a whole network of semiconductor executives are being rounded up.
  • Dia Shijing of Tsinghua Unigroup was among those reported arrested, but Tsinghua Unigroup is saying “Nah, everything’s good here! Go about your business, citizens!”
  • In July 2021, Tsinghua Unigroup announced that it was overwhelmed by 200 billion RMB of debt and filed for bankruptcy because it couldn’t pay its bonds at maturity. Keep in mind that Tsinghua Unigroup, partially owned by Tsinghua University, is itself owner of YMTC, which is (I think) China’s biggest domestic memory chip manufacturer. Tsinghua/YMTC was previously one of China’s biggest semiconductor manufacturing success stories, second only to SMIC, and supposedly “the largest integrated circuit company in China.” They have actual working fabs up and running. And they’re still evidently a money-losing failure.
  • Tsinghua Unigroup has grown through mergers and acquisitions, buying up over 20 companies. This strategy is not unknown among western companies, as GlobalFoundries and NXP are both the results of a similar strategy. But neither of those companies is on the cutting edge.
  • “Tsinghua Unigroup has been using short-term loans rolling over to create long-term loans. These made the group’s cumulative liabilities too large and its financing structure unbalanced.” Yeah, I bet. “Get big quick” worked for a few doctcom era mega-success stories, but I don’t think it works in semiconductors.
  • Zhao Weiguo once boasted he was going to buy TSMC. Also, I’m going to kick Shaq’s butt in the slam dunk contest just as soon as I take time off from dating all these supermodels.
  • China Development Bank extended Tsinghua Unigroup 100 RMB credit between 2016 and 2020. Still a lot of cheddar.
  • I’m skipping over a whole lot of blow-by-blow “who owns what” in the corporate structure. Imagine if Spectre, the Gotti Family, and the Bank of England all had shares in Amway.
  • “Due to debt, Tsinghua Unigroup abandoned its plan to build DRAM memory chip manufacturing plants in Chongqing and Chengdu in southwest China earlier this year.” I bet that left a lot of pissed-off local commissars holding the bag.
  • “When the chip industry becomes a national strategy, but with no real oversight, it becomes a disaster zone of corruption, and a big cake for those in the circle to get rich for themselves.” True of any industry anywhere, but especially true of China, and especially true of semiconductors, where “fake it until you make it” isn’t an option if you’re actually building fabs.
  • “China cannot make high-end chips to this day.” True.
  • “American chip technology is far ahead of the world.” Also true, though with caveats. For semiconductor manufacturing, TSMC is on the cutting edge, with Intel and Samsung within striking distance. For semiconductor leaders, two American companies (Applied Materials and Lam Research) dominate a fair number of technologies, but Tokyo Electron is competitive in many of them, and ASML dominates the stepper market.
  • Skipping over the bits where China stole US (and other) tech, which should be familiar by now.
  • Enter the Trump Administration, “blacklisting and embargoing more than 600 Chinese high-tech companies and high-end manufacturing companies, as well as universities and research institutions.” Pissing off your biggest trade partner is generally not a great plan.

  • Result: Bottlenecks in China’s supply chains.
  • EDA makes software to design chips, and China has no real substitute.
  • SMIC’s supposed 7nm chip breakthrough (which I’m still skeptical of) reportedly copied TSMC technology.
  • Skipping over the coverage of America’s own ill-advised semiconductor subsidies.
  • Semiconductors are still a big item in China most recent Five-Year Plan (and yes, the Chicoms still use Five Year Plans, just like Mama Stalin used to make).
  • “The outside world has not seen the investment of the Big Fund break any bottleneck. However, the earthquake happening in the industry has directly shown people that there is a deep corruption in the Chinese chip industry.” Why should it be different than any other Chinese industry?
  • And just who is going to step up to those jobs running China’s increasingly-unlikely-to-succeed semiconductor moonshot, given that the last batch got rounded up by the Chinese Inquisition?
  • Interesting bit of history: Previous CCP head Jiang Zemin put his own son Jiang Mianheng in charge of developing China’s semiconductor industry, and also managed to make the country even more corrupt than it already was. And here we are.
  • It’s ironic that just as Washington was passing a giant graft bucket of semiconductor subsidies because China was supposedly kicking our ass, China itself was sacking the very people presiding over China’s own bucket of graft for not catching up to the west. The truth is somewhere between.

    China was never going to catch up to western semiconductors because the gap was too large and you need a crazy swarm of free market capitalist entrepreneurs risking private money to eek out important incremental process tweeks to keep Moore’s Law going. China was never going to have that as long as they suffered under Communist rule. And a huge percentage the government money that was sloshed into semiconductors was indeed swallowed up by graft and diversion of funds. But all that money does appear to have helped China close the gap some. Granted, a lot of that was via systematic IP property theft, but it got them into the game.

    Ultimately it wasn’t nearly enough, just as the prophecy foretold.

    Is China’s semiconductor industry a giant pit of graft, disappointment and failure? Yeah, but probably less than most of the rest of the economy.

    Scenes From China’s Slow-Motion Collapse

    Tuesday, July 26th, 2022

    Remember the bank runs in China story after all those bank accounts in Hunan were frozen? I’ve been looking for signs of wider contagion amidst the Chinese banking sector, and mostly haven’t seen it. But I have seen a lot of other cracks appear in China’s overall economic system, so here’s a roundup.

  • One reaction to the frozen accounts: “Chinese Bank Run Turns Violent After Angry Crowd Storms Bank of China Branch Over Frozen Deposits.”

    A large crowd of angry Chinese bank depositors faced off with police Sunday in the city of Zhengzhou, and many were injured as they were taken away, amid the freezing of their deposits by some rural-based banks.

    The banks froze millions of dollars worth of deposits in April, telling customers they were upgrading their internal systems. The banks have not issued any communication on the matter since, depositors said.

    According to Chinese media the frozen deposits across the various local banks could be worth up to $1.5 billion and authorities are investigating the three banks.

    On Sunday, about 1,000 people gathered outside the Zhengzhou branch of China’s central bank on Sunday to demand action; they held up banners and chanted slogans on the wide steps of the entrance to a branch of China’s central bank in the city of Zhengzhou in Henan province, about 620 kilometers (380 miles) southwest of Beijing.

  • China’s communist government reacted to the protests with their usual tact and understanding:

  • Also, it looks like the province suddenly had an outbreak of Flu Manchu, forcing protestors to stay at home. What are the odds?
  • But it looks like some of them will finally get some money back:

    (Plus more on the property slump.)

  • The official line on the Hunan account freeze: “Henan police said in a statement on July 10 that further investigations showed that, since 2011, a criminal group led by a suspect named Lu Yi had gradually taken control of several rural banks, through companies including the Henan New Wealth Group, to illegally transfer out funds. The police said they had arrested more suspects and seized more assets involved in the case.” I have no doubt the aforementioned were probably guilty, but I bet a whole lot more bank officials, regulators, and CCP officials (to the extent that those are separate groups and not mostly-overlapping Venn circles) were in on the scheme, plus a whole bunch more in dozens of other schemes that siphoned off depositor money into various pockets and a host of entirely different schemes. As I’ve said before, it’s smoke and mirrors all the way down.
  • Another thing driving unrest: “Rotten tail buildings,” that is residential buildings on which all construction is stopped, but for which those with mortgages for individual units are still expected to pay for:
    

  • The Result? Disgruntled homebuyers are refusing to pay their mortgages.

    A rapidly increasing number of “disgruntled Chinese homebuyers” are refusing to pay mortgages for unfinished construction projects, exacerbating the country’s real estate woes and stoking fears that the crisis will spread to the wider financial system as countless mortgages default.

    According to researcher China Real Estate Information, homebuyers have stopped mortgage payments on at least 100 projects in more than 50 cities as of Wednesday, up from 58 projects on Tuesday and only 28 on Monday, according to Jefferies Financial Group Inc. analysts including Shujin Chen.

    And that was over a week ago.

    According to Citi analysts, average selling prices of properties in nearby projects in 2022 were on average 15% lower than purchase costs in the past three years. Meanwhile, it’s only getting worse as China’s home prices fell for a ninth month in May, with June figures set for release Friday.

    The crisis engulfing Chinese developers is reaching a new phase, with a debt selloff expanding to firms once deemed safe from the cash crunch, including investment-grade names such as Country Garden Holdings, the largest builder by sales.

    The payment refusals, which come at a time when China’s economy is set to post what may be a negative GDP print due to the latest economic shutdown over Xi’s catastrophic zero covid policies, underscore how the storm engulfing China’s property sector is now affecting hundreds of thousands of average citizens, posing a threat to social stability ahead of a Communist Party Congress later this year. Chinese banks already grappling with challenges from liquidity stress among developers now also have to brace for homebuyer defaults.

    As a result of the unprecedented push for a debt jubilee, shares of China’s banks extended their recent decline Thursday, with the CSI 300 Banks Index falling as much as 3.3% before closing down 2.2%. A Bloomberg Intelligence index of Chinese developer stocks slid as much as 2.7%, even though Chinese lenders were quick to try and dispel fears that the movement could crash the economy: according to Bank of Communications, its outstanding balance of overdue mortgage loans linked to housing projects with risks of delayed delivery is 99.8 million yuan, accounting for 0.0067% of its domestic housing mortgage balance. The bank added that its housing mortgage loan quality is stable and risks are controllable, the Shanghai-based lender says in an exchange filing. At the same time, Postal Savings Bank of China says its overdue mortgage loans linked to halted housing projects is 127m yuan, and risks are controllable. Of course, it’s not like Chinese banks would ever lie, now is it?

  • There are some signs that the cracks are spreading.

    The Great Debt Jubilee is picking up speed: China’s homebuyer mortgage boycott, which prompted Beijing to scramble to avoid a potentially devastating crash in what is the world’s biggest asset is spreading, and according to Bloomberg, some suppliers to Chinese real estate developers are now also refusing to repay bank loans because of unpaid bills owed to them, a sign that the loan boycott that started with homebuyers is starting to spread.

    In a jarring case study of what happens when a ponzi scheme goes into reverse, hundreds of contractors to the property industry complained that they can no longer afford to pay their own bills because developers including China Evergrande Group still owe them money, Caixin reported, citing a statement it received from a supplier Tuesday.

    Similar to homebuyers who have taken a stand and refuse to pay for properties that remain uncompleted, one group of small businesses and suppliers circulated a letter online saying they will stop repaying debts after Evergrande’s cash crisis left them out of pocket.

    “We decided to stop paying all loans and arrears, and advise our peers to decline any requests to be paid on credit or commercial bill,” the group said in the letter dated July 15, which was sent to the developer’s Hubei office. “Evergrande should be held responsible for any consequence that follows because of the chain reaction of the supply-chain crisis.”

    As Bloomberg oh so perceptively puts it, “the payments protest is the latest sign of how a movement by homebuyers to boycott mortgages on unfinished homes in China is spreading to affect other sectors in the economy.”

    Yes it is, and it’s also why Beijing should be freaking out (if it isn’t), because what is taking place in China is far worse than what took place in March 2020 when the global credit machinery ground to a halt, only back then it’s because there was no other option, now it’s a voluntary development and not even fears of reprisals from China’s ruthless, authoritarian, Lebron-beloved dictatorship is stopping millions of people from calling for a systemic boycott, one which can topple China’s entire $60 trillion financial system in moments.

    Probably an overstatement, just because it takes a whole lot to overcome the inertia of the average Chinese citizen just wanting to keep their head down and not be the nail that sticks up.

  • Speaking of Evergrande, the rats there continue to flee the sinking ship.

    Embattled Chinese real estate giant Evergrande is expected to deliver a preliminary restructuring plan this week, following the exit of two bosses.

    The firm says its chief executive and finance head have resigned, after an internal probe found that they misused around $2bn (£1.7bn) in loans.

    Chinese businessmen misusing funds? Try to contain your shock.

    Evergrande has more than $300bn in liabilities and defaulted on its debts late last year.

    The crisis has spooked traders who fear contagion in China’s property sector.

    On Friday, Evergrande said it found that chief executive Xia Haijun and chief financial officer Pan Darong were involved in diverting 13.4bn yuan ($2bn; £1.7bn) in loans secured by its property services unit to the wider group.

    The firm said in a filing to the Hong Kong Stock Exchange that Mr Xia and Mr Pan had resigned because of their “involvement in the arrangement of the pledges”.

    Getting caught trying to cook the books even after it’s hit the fan. Classic Chinese management.

  • “Some big-name Chinese stocks including Alibaba Group Holding Ltd. and Baidu Inc. face the prospect of getting kicked off the New York Stock Exchange and Nasdaq if they refuse to let U.S. regulators see their financial audits.”

    The U.S. Securities and Exchange Commission has started the process, compelled by a 2020 law, and investors have started to pay attention. So has China, which moved to potentially clear a big hurdle that stymied U.S. regulators for years.

    1. Why does the U.S. want access to audits?

    The 2002 Sarbanes-Oxley Act, enacted in the wake of the Enron Corp. accounting scandal, required that all public companies have their audits inspected by the U.S. Public Company Accounting Oversight Board. According to the SEC, more than 50 jurisdictions work with the board to allow the required inspections, while two historically have not: China and Hong Kong. The long-simmering issue morphed into a political one as tensions between Washington and Beijing ratcheted up during the administration of President Donald Trump. The Chinese chain Luckin Coffee Inc., which was listed on Nasdaq, was found to have intentionally fabricated a chunk of its 2019 revenue. The following year, in a rare bipartisan move, Congress moved to force action.

    2. Where does it stand?

    As required by the law, known as the Holding Foreign Companies Accountable Act or HFCAA, the SEC in March started publishing its “provisional list” of companies identified as running afoul of the requirements. While the move had long been telegraphed, the first batch of names fueled a sharp decline in U.S. shares of companies based in China and Hong Kong as it dashed hopes for some kind of compromise. In all, the PCAOB has said it’s blocked from reviewing the audits of more than 200 of those businesses. The companies say Chinese national security law prohibits them from turning over audit papers to U.S. regulators. SEC Chair Gary Gensler said in late March that the Chinese authorities faced “a hard set of choices.” Days later, China announced it would modify a 2009 rule that restricted the sharing of financial data by offshore-listed firms, potentially clearing one obstacle.

    3. What is China changing?

    The China Securities Regulatory Commission said the requirement that on-site inspections should be mainly conducted by Chinese regulatory agencies or rely on their inspection results would be removed. It said it would provide assistance for cooperation with foreign regulators. The CSRC said it’s rare in practice that companies need to provide documents containing confidential and sensitive information. However, if required during the auditing process, they must obtain approvals in accordance with related laws and regulations.

    4. What’s the broader issue?

    Critics say Chinese companies enjoy the trading privileges of a market economy — including access to U.S. stock exchanges — while receiving government support and operating in an opaque system. In addition to inspecting audits, the HFCAA requires foreign companies to disclose if they’re controlled by a government. The SEC is also demanding that investors receive more information about the structure and risks associated with shell companies — known as variable interest entities, or VIEs — that Chinese companies use to list shares in New York. Since July 2021, the SEC has refused to greenlight new listings. Gensler has said more than 250 companies already trading will face similar requirements.

    5. How soon could Chinese companies be delisted?

    Nothing is going to happen this year or even in 2023, which explains why markets initially took the possibility in their stride. Under the HFCAA, a company would be delisted only after three consecutive years of non-compliance with audit inspections. It could return by certifying that it had retained a registered public accounting firm approved by the SEC.

    6. How many companies will be affected?

    There’s not much discretion. If a company from China or Hong Kong trades in the U.S. and files an annual report, it will soon find itself on the SEC’s list simply because those have been identified as non-compliant jurisdictions. In the March interview, Gensler pointed out that the law focuses on non-compliant countries, rather than specific companies.

  • Up to 10,000+ rich Chinese are looking for a way to flee the country.
  • For that and other reasons, Beijing is looking to impose more controls to prevent capital flight.
  • What would a “China is screwed” roundup be like without a Peter Zeihan video?

    “Demographically they’re in collapse…China’s not even going to survive this decade. They don’t even have the numbers to try…China doesn’t have the naval capacity to secure markets and resources….Xi Jinping has enacted a cult of personality that is tighter than anything that has existed through Chinese history. It’s gotten so tight that no one wants to bring him information about anything…This is how countries die.” Plus: China doesn’t know how to store grain.

  • Some more Zeihanian deglobalization thoughts from Stephen S. Roach.

    The widely acclaimed globalization of the post-Cold War era is now running in reverse. A protracted slowdown in global trade has been reinforced by persistent pandemic-related supply-chain disruptions, ongoing pressures of the US-China trade war, and efforts to align cross-border economic ties with geostrategic alliances (“friend-shoring”). These developments tighten the noose on China, arguably the country that has been the greatest beneficiary of modern globalization.

    Of the many metrics of globalization, including financial, information, and labor flows, the cross-border exchange of goods and services is most closely tied to economic growth. Largely for that reason, the slowdown in global trade, which commenced in the aftermath of the 2008-09 global financial crisis and intensified in the COVID-19 era, points to a sea change in globalization. While global exports went from 19% of world GDP in 1990 to a peak of 31% in 2008, in the thirteen years that followed (2009-21), global exports have averaged just 28.7% of world GDP. Had world exports expanded on a 6.4% trajectory – halfway between the blistering 9.4% pace of 1990-2008 and the subdued post-2008 rate of 3.3% – the export share of global GDP would have soared to 46% by 2021, far above the actual share of 29%.

    China’s gains from the globalization of trade have been extraordinary. In the decade prior to China’s 2001 accession to the World Trade Organization, Chinese exports averaged just 2% of total world exports. By 2008, that share had risen nearly fourfold, to 7.5%. China had timed its WTO membership bid perfectly, just when the global trade cycle was on a major upswing. While the financial crisis took a brief toll on Chinese export momentum, the interruption was short-lived. By 2021, Chinese exports had surged to 12.7% of world exports, well above the pre-2008 peak.

    China is unlikely to maintain this performance. Overall growth of global trade is slowing, and China’s slice of the trade pie is under mounting pressure.

    The ongoing trade war with the United States is especially problematic. During the first phase of China’s export-led growth surge in the aftermath of WTO accession, the US was consistently China’s largest source of external demand. Largely due to former US President Donald Trump’s tariffs, that is no longer the case. By 2020, US imports of Chinese goods and services had fallen 19% below the peak levels of 2018. Despite rebounding sharply on the heels of the US economy’s post-pandemic snapback, in 2021, US imports from China remained 5% below the 2018 peak. Partial tariff rollbacks for selected consumer products, which President Joe Biden’s administration is apparently considering as an anti-inflation gambit, are unlikely to jump-start bilateral trade.

    At the same time, enduring pandemic-related supply-chain disruptions are likely to take a sharp toll on China and the rest of the world.Over the six months ending in April, a “global supply chain pressures index” constructed by researchers at the Federal Reserve Bank of New York averaged 3.6, well above the 2.3 reading in the first 21 months following the February 2020 onset of pandemic-related lockdowns, and sharply higher than the “zero” reading associated with the absence of supply-chain disruptions.

    This is a big deal for a world connected by supply chains. Global value chains accounted for more than 70% of the cumulative growth in overall global trade from 1993 to 2013, and China has enjoyed an outsize share of this GVC-enabled expansion. As supply-chain disruptions persist, exacerbated by China’s zero-COVID policies, pressures on Chinese and global economic activity are likely to remain intense.

    Mounting geostrategic tensions are the wild card in deglobalization, especially their implications for China. “Friend-shoring” in effect turns Ricardo’s efficiency calculus of cross-border trade into an assessment of the security benefits that come from strategic alliances with like-minded countries. China’s new unlimited partnership with Russia looms especially relevant in this regard. With China edging closer to crossing the line by providing support to Russian military efforts in Ukraine, the US has recently moved to impose sanctions on five more Chinese companies through its so-called Entity List.

  • You’ve heard about the ghost cities. Did you hear about the failed ghost developments that were built as weird, cheap imitations of western structures?

  • Is Xi Jinping in danger from a coup?

  • No doubt I’ve missed many other examples of cracks in China’s economic edifice. Feel free to share them in the comments below.

    LinkSwarm for July 23, 2022

    Saturday, July 23rd, 2022

    Paying people not to work makes them worse off, Democrats sleepwalk toward disaster, another would-be assassin of a Republican congressman walks away without bail, more Democratic judicial officials who refuse to obey the law, and a disturbing number of pedophiles in our school systems. Welcome to a special Saturday LinkSwarm!

  • News flash: Universal basic Income makes recipients lives worse.

    The “experts” didn’t expect it to turn out this way. An experiment conducted by Harvard University and University of Exeter social scientists found no-strings-attached handouts harmed low-income recipients rather than help them.

    Funded by an anonymous nonprofit, the study centered on an experiment in which 2,073 low-income people were randomly selected to receive a single, unconditional cash transfer of either $500 or $2,000. Another 3,170 low-income study subjects received no money from the study.

    The experiment was conducted from July 2020 to May 2021. On average, the subjects were earning roughly $950 a month while receiving another $530 in food stamps and other government benefits. A little over half were unemployed and 80% had children.

    Over a 15-week period, participants were periodically surveyed about their financial, physical and mental health. Across a wide range of financial and non-financial attributes, researchers found no positive effects on those who received free money — but plenty of negative ones.

    For a few weeks, people who received the extra money spent more than the control group — $182 a week for the people who received $500, and $574 a week for the ones given $2,000.

    The additional spending didn’t bolster their financial health. The handout recipients reported the same rate of overdraft fees, late-payment charges and cash advances as did those who didn’t receive the extra money. And it was all downhill from there. The handout recipients reported:

    • Less earned income
    • Less job satisfaction
    • Lower work performance
    • More financial stress
    • Less liquidity
    • Worse sleep
    • Worse physical health
    • More anxiety
    • More loneliness

    The Wall Street Journal’s Allysia Finley writes:

    “It’s no surprise that people who received a large percentage of their monthly income for doing nothing were less motivated to work and less satisfied with their work.

    Earning a paycheck can give workers a sense of personal agency that encourages them to make better financial and health decisions. Receiving a handout may do the opposite.”

  • The Democratic Party’s embrace of social justice lunacy has them sleepwalking toward disaster:

    The editors of The Economist beg the Democratic Party’s leaders to “wake up” to the fact that they’re about to get demolished in the upcoming midterms. Politico reports that, “The gubernatorial race in Pennsylvania has begun to look more competitive than either party expected.” The Economist blames the loud voices of the hard-left fringe, and warns that Democrats must “moderate, or die.” But this is just about the least likely moment for centrist Democrats to launch a new fight against the Alexandria Ocasio-Cortez types, and Democrats won’t have that fight until a midterm thrashing forces them to — and even then, Democrats may well choose to learn the wrong, but more comforting lessons, from a sweeping defeat.

    The editors of The Economist, sensing an impending midterm blowout and the ensuing empowerment of a Trump-friendly GOP, beg the Democratic Party’s leaders to distance themselves from their fringe elements:

    Fringe and sometimes dotty ideas have crept into Democratic rhetoric, peaking in the feverish summer of 2020 with a movement to “defund the police”, abolish immigration enforcement, shun capitalism, relabel women as birthing people and inject “anti-racism” into the classroom.

    Snip.

    First, out of all the possible times for the leaders of the party and its centrist members to embrace a fight with their hard-left grassroots, four months before Election Day is perhaps the worst time. Right now, Democrats desperately need progressives — the Bernie Bros, the Squad fans, and your crazy Aunt Edna with the Ruth Bader Ginsburg prayer candles — to turn out in November; they’re disappointed enough with Joe Biden already. The future of Senators Raphael Warnock of Georgia, Catherine Cortez Masto of Nevada, Maggie Hassan of New Hampshire, and Mark Kelly of Arizona depends upon frustrated and impatient progressives in those states.

    Second, rebuking the fringe Left is going to be difficult, and few people embrace difficult change until they hit bottom. Nobody likes admitting that they got something wrong, and nobody in politics wants to admit that their approach didn’t work — until after they’ve paid a high price at the ballot box.

    The disappointing results of 2020 were clearly not enough. Shortly after the election, Representative Abigail Spanberger of Virginia seethed about her party’s left wing: “Tuesday was a failure, it was not a success. . . . If we don’t mean defund the police, we shouldn’t say that. . . . And we need to not ever use the word ‘socialist’ or ‘socialism’ ever again. Because while people think it doesn’t matter, it does matter, and we lost good members because of that. If we are classifying Tuesday as a success from a congressional standpoint, we will get f***ing torn apart in 2022.”

    Do the Democrats seem more centrist and results-focused now than they did in 2020?

    Democrats can’t rebuke their social justice warrior radicals because the shock-troops of that “fringe” has taken control of vast swathes of the party machinery. The SJW faction is willing to endure electoral disaster as along as it lets them sieze full control of the party machinery and thus all the spigots party patronage.

  • How bad is it? Ruy Teixeira, whose “emerging Democratic majority” thesis is is so central to Democratic administrations refusing to enforce border controls, is leaving the Center for American Progress because it’s gotten too radical.

    Ruy Teixeira, a prominent scholar at the left-leaning think tank Center for American Progress (CAP), is leaving his job for a conservative organization because of liberals’ obsession with race, gender and other identity issues, according to Politico.

    The obsession with identity politics at CAP made it difficult for him to do work involving class and economics, he told the outlet, so he’s leaving for the conservative think tank American Enterprise Institute. Left-leaning think tanks have given in to demands of junior staffers and made it difficult for scholars to discuss crime, immigration and other issues beyond a narrow set of default assumptions, according to Teixeira.

    The culture within left-leaning organizations “sends me running screaming from the left,” Teixeira told Politico. “It’s just cloud cuckoo land … the fact that nobody is willing to call bullshit, it just freaks me out.”

  • Attack a Republican congressman? Enjoy your Get-Out-Of-Jail-Free card. “A 43-year-old man [David G. Jakubonis] accused of attacking Representative Lee Zeldin (R., N.Y.) with a sharp object at a campaign stop in upstate New York on Thursday evening was charged with a felony and released from custody just hours after his arrest, police said…Jakubonis was charged with attempted assault in the second degree and was released on his own recognizance.”
  • The groomer plague is not your imagination. “At least 181 K-12 teachers, principals, and staff have been arrested for child sex crimes in the United States so far this year.”
  • “Self-Proclaimed Socialist Judge in Harris County Facing Removal by Judicial Conduct Commission. Judge Franklin Bynum allegedly ordered the sheriff not to collect DNA samples required by law and repeatedly dismissed domestic and family violence cases for no probable cause.”
  • Cost of living index for cities worldwide. Weirdly, Austin is still pretty affordable in relation to purchasing power compared to most of the world. Also weirdly, New York City is the index city…
  • “Man found dead in Georgia house used by black nationalist communist group ‘Black Hammer.'”
  • Things the media doesn’t want you to know: “10-Year-Old Rape Victim’s Mom Is in Domestic Relationship With Child’s Alleged Illegal Alien Rapist.”
    

  • Soros-backed Los Angeles District Attorney George Gascon has hired the highest paid attorney in the country to fight against being forced to obey the law.

    Gascón’s prosecutors sued him so they could “charge repeat offenders to the fullest extent of the law.” The DA wants to appeal in front of the California Supreme Court:

    In June, the Second Appellate District Court upheld portions of a lower court’s injunction that said Gascón cannot refuse to charge three-strike cases, which can dramatically increase prison sentences for some of the most serious repeat offenders.

    Gascón is hoping to have the court’s order overturned, arguing that it is “draconian,” creates “a dangerous precedent” and amounts to “taking the charging decision out of a prosecutor’s hands.”

    “The district attorney overstates his authority,” the Second Appellate District ruling reads. “He is an elected official who must comply with the law, not a sovereign with absolute, unreviewable discretion.”

    Don’t the peasants know that laws are for the little people?

  • Good. “San Francisco’s New DA Goes On Firing Spree After Voters Recall Soros-Backed Predecessor…”The new district attorney in San Francisco fired at least 15 employees from the prosecutor’s office after her left-wing predecessor Chesa Boudin was recalled last month.
  • “Charlene Carter, a flight attendant who had worked at Southwest Airlines for 20 years but was fired in 2017 because she had publicly opposed the use of her union dues to fund pro-abortion protests, has now won a $5.1 million lawsuit against both Southwest and her union.” Good. Coerced speech violates the First Amendment. (Hat tip: Sarah Hoyt at Instapundit.)
  • Kill someone in self-defense? GoFundMe will close your account. Get Darwinated after shooting at police? GoFundMe is A-OK with your family raising money off your dimwitted corpse.
  • “Starbucks CEO Howard Schultz blames Dem-run cities for store closures.” As well he should. (Hat tip: Sarah Hoyt at Instapundit.)
  • Mario Draghi resigns as Italy’s prime minister after losing a no-confidence vote, which will trigger a new election.
  • How do we know Ray Epps is a fed? Because the New York Times is going to great lengths to defend him.
  • North Carolina town hires new woke city manager. Result: Town’s entire police force quits. Bonus: She was fired from her last job. (Hat tip: Stephen Green at Instapundit.)
  • Beto O’Rourke gets a $1 million donation from George Soros. Well, at least that’s $1 million that won’t go toward burning down small businesses and defunding the police. Also, remember how Democrats are always saying they want to get money out of politics? They never mean it.
  • “I’m a big fan of American airlines. They’re screwing us around a whole lot on this trip.” Plus: Monster Trucks!
  • The small part of Yellowstone national park where you can theoretically get away with murder.
  • An amazing 1949 Cadillac Fastback restomod.
  • Whoa!
  • Boing!

  • LinkSwarm for July 15, 2022

    Friday, July 15th, 2022

    The Biden Recession continues to wreck the pocketbooks of Americans, EU economies are sucking even worse than ours, more Bidens Behaving Badly, and unlimited abortion is not nearly as popular among the American public as it is among New York Times staffers.

  • Another month, another 40 year inflation high.
  • More Biden economic magic: “New Job Openings Drop In 47 States, Nationally Down 17%.”
  • The Euro has now reached parity with the dollar for the first time in 20 years.
  • Cold comfort from Peter Zeihan: The economy and food security is going to get much worse, but Europe is going to suffer much worse than America.
  • Support for unlimited abortion is deeply unpopular:

    (Hat tip: Stephen Green at Instapundit.)

  • Widespread criticism of Jill Biden’s failed hispander proves that Democrats are no longer interested in excusing Joe Biden’s many manifest failures.

    Democrats are just tired of Joe Biden and of having to explain away his poor performance. Since Biden was elected, the only thing that has gone right is that the Covid-19 pandemic effectively ended and the unemployment rate has remained low. Inflation is out of control, gas prices are at record highs, grocery bills are skyrocketing, the stock market is getting battered and people’s 401(k)s are shrinking, crime remains high, mass shootings keep bedeviling America’s public spaces, Russia’s invading Ukraine, there’s a global food and commodity crisis, and the Taliban is running Afghanistan and oppressing women again. Democrats are apoplectic that the Supreme Court struck down Roe v. Wade, a New York State gun law, and the EPA’s right to regulate carbon emissions without explicit approval from Congress. Parents are up in arms, the teachers’ unions look like callous fools who kept schools closed and harmed a generation of schoolchildren, and “abolish the police” looks like a suicidal public policy. Republicans notice that waves of illegal immigrants headed north shortly after Biden’s inauguration and haven’t stopped coming since.

    You didn’t even mention the Social Justice insanity and all the transexual madness.

    That New York Times poll found that 64 percent of Democrats want a different presidential nominee in 2024. Nobody’s willing to cover for this guy anymore; no one is inclined to avert their eyes when Biden or his wife blurts out something tone-deaf now.

    There are some of us who would argue that Joe Biden has always been an insecure, abrasive, presumptuous, disingenuous, demagogic, insufferable blowhard who was largely protected by a cozy, all-too-friendly relationship with a press inclined to airbrush his glaring character faults, presenting him as a wacky neighbor or a kindly, ice-cream loving grandpa.

    What we see now is what happens when much of the national media, the Democratic Party establishment, and liberal interest groups stop playing along with the narrative that Biden is a wiser, sharper, kinder, more energetic and sensitive man than he is. And the truth isn’t pretty.

  • Speaking of unwanted Bidens: “Hunter Biden could face prostitution charges for transporting hookers across state lines and disguising checks to them as payments for ‘medical services.'” I’ll believe Hunter Biden prosecution when I see it. Also, I’ve been treating the 4Chan “Hunter Biden iPhone leak” with a certain amount of skepticism. Certainly the Hunter laptop revelations were real, and Hunter is a big enough scumbag to do the the things alleged iPhone leak materials depict. But I try to be cautious about anything that fits too neatly into my preconceptions. (Hat tip: The Other McCain.)
  • “Left-Wing Nonprofit Scores $171.7 Million-$1 Billion Government Contract To Help Illegal Immigrants Avoid Authorities.”

    A liberal non-profit group has been given a taxpayer-funded government contract worth at least $171.7 million — which could potentially reach just under $1 billion — for assisting illegal immigrant minors in avoiding capture or incarceration by U.S. Border Patrol and state officials.

    The Department of the Interior was the awarding agency and “The Vera Institute of Justice,” based out of New York — which supports the “defund the police” movement and has lax views on immigration enforcement — was the beneficiary.

    (Hat tip: Director Blue.)

  • Is paper gold being manipulated?
  • China bubble update: Alibaba just just laid off one-third of its strategic investment team.
  • A look at the sniping war in Ukraine. (Hat tip: Dwight.)
  • Houston demonstrates the case against zoning.

    Thanks in part to a lack of zoning, Houston builds housing at nearly three times the per capita rate of cities like New York City and San Jose. It isn’t all just sprawl either: In 2019, Houston built roughly the same number of apartments as Los Angeles, despite the latter being nearly twice as large. This ongoing supernova of housing construction has helped to keep Houston one of the most affordable big cities in the U.S., offering new arrivals modest rents and accessible home prices even amid seemingly endless demand.

    Houston is by no means a model for planning. Like every other Sun Belt city, it struggles with segregation and sprawl. Yet its continued success as one of America’s most affordable and prosperous cities reveals the workability—indeed, the desirability—of non-zoning. Houston is a profoundly weird place, resistant to seductive oversimplifications. But it provides insight into what comes after the arbitrary lines that have misshapen our cities—and how we might get there.

    So why didn’t Houston adopt zoning like every other U.S. city? The answer comes down partly to process. Unique among major cities, Houston subjected zoning to a citywide vote. While most city councils had, historically, quietly adopted zoning after a few perfunctory public hearings, the Bayou City invited voters to decide on zoning in 1946, 1962, and 1993. Voters rejected it each time—a reality that calls into question the often-postulated popularity of zoning.

    Zoning critics rightly dispensed with the comforting myths surrounding zoning—that its purpose was to merely rationalize land use—and zeroed in on its tendency to restrict new housing construction, limit access to opportunity, institutionalize segregation, and force growth outward. Far from being duped, Houston’s working-class residents exhibited a subtler understanding of the purposes of zoning than many contemporary planners and rejected it accordingly.

    But the answer to why Houston remains unzoned also comes down to politics. Zoning proponents didn’t merely lose the referendums—they were also tactfully bought off by being allowed to have something resembling zoning in their immediate vicinity. Indeed, the dark little secret of non-zoning in Houston is that it depends on a system of land-use regulations known as deed restrictions, which empower certain communities—principally middle- and upper-class homeowners—to effectively “opt out” of non-zoning, writing their own land-use rules for their own neighborhoods. In exchange, Houston is able to protect the vast majority of the city from the types of arbitrary-use distinctions, density limits, and raucous public hearings that cause so much harm in every other U.S. city. That is to say, in exchange for respecting pockets of private land-use regulation, Houston is able to grow, adapt, and evolve like no other city.

    Deed restrictions are private, voluntary agreements among property owners—typically the homeowners of a particular subdivision or neighborhood—regulating how they can and cannot use their land. These rules are literally tied to the deed, meaning that a property owner must agree to them as a condition of the sale. Since the failed 1962 zoning referendum, the city has enforced these agreements on behalf of the relevant parties, refusing to issue permits that run afoul of their provisions and bringing legal action against violators.

    Is this system of publicly enforced deed restrictions “basically zoning,” as some might argue? On the one hand, deed restrictions—like zoning—demarcate specified areas subject to a distinct set of stricter land-use rules. Both zoning and deed restrictions in Houston are enforced by the government, principally with the aim of propping up home values and maintaining a certain quality of life. Many deed restrictions even have rules banning apartments and enforcing a strict two-and-a-half-story height limit.

    Yet, the similarities end there, and Houston’s system of deed restrictions is a significant improvement over zoning. For starters, deed restrictions only cover an estimated quarter of the city, largely in areas with low-rise, detached, single-family housing. Industrial areas, commercial corridors, mixed-use and multifamily neighborhoods, urban vacant lots, and yet-to-be-developed greenfields are virtually never subject to their provisions. This means that roughly three-quarters of Houston—including its more dynamic sections—are largely free to grow without anything even resembling zoning holding them back.

    Another key difference is that deed restrictions must be voluntarily opted in to. This serves to discipline deed restrictions in a way that is rarely true of zoning: If the rules are stricter than what prospective homebuyers might prefer, or not strict enough, or simply focus on the wrong concerns, this may translate into lower home values. This in turn nudges homeowners to think through the optimal form of land-use regulation to a degree that rarely happens with zoning.

  • Speaking of Houston, a new poll shows Harris County judge Lina Hidalgo in a dead heat with Republican challenger Alexandra del Moral Mealer. November will be a good time to determine if the Hispanic realignment in Texas extends to America’s fourth largest city.
  • After deciding to let drug-abusing transients use their restrooms, Starbucks is now closing 16 stores because of rising violence, and the fact that transients are shooting up in their restrooms. Golly, who could have possibly seen that coming?
  • “White progressives do not have the moral authority to excommunicate a black man from his race because they disagree with him.”
  • Best gun oil? Project Farm does some testing, and Clenzoil and BreakFreeCLP come out on top.
  • “Beto O’Rourke Lags in the Polls.” Try to contain your shock. And I bet the polls overstate his popularity…
  • Score another one for the good guys.

    Another Texas school superintendent has stepped down amid criticism from parents concerned about liberal indoctrination in their children’s classrooms.

    At a special meeting Monday afternoon, Clear Creek Independent School District’s board of trustees accepted the retirement of Superintendent Eric Williams, effective in January 2023.

    Conservative parents in the Houston-area district had complained that Williams, who started in early 2021, was subjecting their students to liberal ideologies he brought from his former job as superintendent of

  • Justice for Jim Thorpe.
  • Somebody didn’t listen to Jack Handy. (Hat Tip: Ann Althouse.)
  • “San Francisco DA Announces Innovative New Plan To Arrest People For Breaking The Law.”
  • Been super hot in Austin this week, but there are ways to keep cool:

  • LinkSwarm for July 8, 2022

    Friday, July 8th, 2022

    More pain at the pump, an assassination in Japan, and a whole new crop of Democrat child sex offenders. It’s the Friday LinkSwarm!
    

  • Why you can indeed blame Joe Biden for high gas prices.

    On May 12, Biden’s Interior Department blocked a proposal to open up more than one million acres of land in Alaska for oil and gas drilling. Two days later, Biden’s Environmental Protection Agency blocked plans to expand an oil refinery in the US Virgin Islands.

    Biden and his defenders said he had to block the expansion of the Virgin Islands refinery, given how polluting it was.

    But had Biden’s EPA allowed the Virgin Island refinery to expand, the owners would have poured nearly $3 billion into retrofitting the plant so it produced gasoline and other products more cleanly, while significantly increasing production at the same time.

    In truth, there are many things Biden could have done, and still should do, to lower energy prices. He could invoke the National Defense Act to accelerate the rate of oil and gas permits. He could set a floor of $80/barrel for re-filling the Strategic Petroleum Reserve (SPR), which would be a powerful incentive for the industry, because it would prevent prices from falling to unprofitable levels. Biden could announce trade agreements with American allies to supply them with liquified natural gas, which would incentivize more natural gas production and lower prices.

    If Biden got America on a wartime footing, as he should be given Russia’s aggression in Europe, we would see the lowering of oil, gas and petroleum prices in less than one year.

    Why won’t Biden do it? Because he has declared war on fossil fuels. “I guarantee you, we’re going to end fossil fuel,” Biden promised a student climate activist in 2019. “I am not going to cooperate with them,” he said, referring to the oil and gas industry.

  • Related: “Despite Record Gas Prices, Biden Rejects New Drilling in Atlantic and Pacific.”

    Joe Biden has proven once again that he has no interest in reducing the record-high costs of gasoline, which have gone up throughout his time in office.

    Biden not only wants to block all new oil drilling in the Atlantic and Pacific Oceans, but he’s also taking steps to shut down exploration of oil and gas on federal lands.

    “A plan released Friday shows the White House proposed no more than 10 potential lease sales in the Gulf of Mexico, an option for one potential lease sale in the northern portion of the Cook Inlet of Alaska, and no lease sales for the Atlantic or Pacific planning areas over the 2023-2028 period,” reports Breitbart. This plan is not finalized, however, but any potential areas of exploration or sale not mentioned in the proposal will reportedly be off-limits from 2023-2028.

    (Hat tip: Stephen Green at Instapundit.)

  • Former Japanese Prime Minister Shinzo Abe assassinated by a man with a homemade shotgun while giving a speech.
  • Abe’s Japan was a reliable ally to the United States. But we should not let the shocking assassination blind us to the fact that Abe’s much-praised (by western MSM outlets, anyway) runaway deficit spending “Abenomics” efforts to lift Japan out of its long-running recession were a colossal failure, jacking up Japan’s national debt to the highest debt-per-GDP ratio in the world while failing to measurably increase actual economic activity.

  • How our feckless woke elites are ruining the military.

    Here’s a little leadership secret that’s actually not a secret at all to competent commissioned and non-commissioned officers. There are no bad cohorts of soldiers, sailors, airmen, Marines, Coast Guardsmen and whatever the hell Space Force people are called. There are only bad leaders, and we have the worst military leadership in American history, starting right at the top with a commander-in-chief who is less like Ike than Beavis.

    In fact – and this rips me up to say because I would not trade my about 27 years in the Army for anything – the reluctance to enlist of the traditional, normal Americans who are most likely to serve and who are the most desirable for service, is entirely rational. You do have an obligation to serve your country in some way, the military being the highest and best way for those who are able. But you do not have an obligation to do so if your life is going to be squandered by a leadership whose strategies are a disaster, whose priorities are not the defense of this country but some sort of bizarre pan-global progressive ideology, and who will use you as a guinea pig in freakish and morally bankrupt social experiments, all while failing to fulfill even the most basic obligations of the leaders to the led. Our military today is failing to meet its recruiting goals because it has failed to earn the trust of normal Americans who would otherwise be inclined to raise their hands.

    Snip.

    That social justice nonsense is another reason we can’t recruit. Would you want to waive your civil rights and sleep in the dirt to be part of an institution that hates you? Would you feel like joining an organization whose leadership is very, very focused on mythical “white privilege” and those scary “insurrectionists?” Remember, if you are conservative, you are an official extremist threat. If you are a believer, you run afoul of the official morality of CRT. If you think men can’t become women because they feel like it, you are a horrible bigot and you will be ordered to lie and use the pronoun du jour or else.

  • This is your city on Woke: “Over 400,000 High-Priority Incidents In Chicago In 2021 Had ‘No Police Available To Send.'”
  • Problem: GPS tracker for bonded suspect in Detroit shows him participating in a drive-by and other gun crimes. Solution: Judge orders the GPS tracker removed. (Hat tip: Mike the Musicologist.)
  • Speaking of Democratic Party-ruled city approaches to crime, look at the New York City case against Jose Alba, who “was sitting in his store working and was no harm to anyone. Then the perpetrator came behind the counter and attacked him.” Alba defended himself by killing his attacker with a knife. Naturally, Soros-backed DA Alvin Bragg charged Alba with murder.
  • The Social Justice Warrior love affair with pedophiles continues: “Top New Biden Staffer Defended Underage, Gay Prostitution Website Raided By Feds.”
  • Speaking of Biden-related pedophiles: “Another Democrat Sent to Prison for Child Sex Crimes. Biden campaign surrogate Jerry Harris gets 12 years for solicitation, sexual assault.” (Hat tip: Ed Driscoll at Instapundit.)
  • “The owner of a Washington sex shop, who also serves as the director of the local school board, is hosting a pair of sex education workshops for children as young as 9 years old. Jenn Mason, the owner of the Wink Wink Boutique in Bellingham, Washington, and the director of the Bellingham School Board, is hosting a sex-ed workshop titled ‘Uncringe Academy: Sex Education Without (most) of the Awkward’ for children ages 9-18.” If the story seems familiar, it’s because she tried to do the same thing in May. According to their website, she’s still a Bellingham School Board Director.
  • More companies migrating from blue to red states, including Texas. We’ve covered this a whole bunch of times before…
  • The Biden Administration sues Arizona for demanding proof of citizenship to vote.
  • Speaking of preventing voting fraud, the Wisconsin Supreme Court outlawed drop boxes and ballot harvesting.
  • More on four gun control cases the Supreme Court sent down to be reexamined.
  • Breaking: Elon Musk giving up on buying Twitter?
  • “The ailing #WokeSuperheroes and teenagers-talking-in-hallways network The CW has been sold for zero dollars.” Plus $100 million in debt assumption. Bonus: Critical Drinker reviews Batwoman.
  • Truly insane charter bus build.
  • Important safety tip: Don’t do this:

  • Or This:

  • Chocolate dragon:

  • “Democrats Proudly Introduce The ‘Raise Gas Prices Even Higher And Make More Kids Trans’ Bill.
  • LinkSwarm for June 17, 2022

    Friday, June 17th, 2022

    The Fed goes Volcker, more Welcome Back Carter cosplay, Big Yellow moves to Texas, and Florida Man makes a run for the ocean.
    
    FYI, Blue Host has been acting weird today, giving errors when you tried to save, even though everything appears to be there upon reloading. (Shrugs.)
    
    

  • Fed hike rates 75 basis points. The attempt to Volckerize inflation during the Biden Recession has begun.
  • Speaking of St. Volcker, there were a lot of other factors that helped kill inflation in the early 1980s:
    • Oil was one of the primary causes of the 1970s inflation and everyone remembers the oil crisis. During the decade, oil ran all the way from $2 to $39. However, the flipside to this story is that with a lag, high oil prices will eventually incentivize production. The issue was that the US specifically disincentivized US producers and importers. Ronald Reagan signed an Executive Order in January of 1981 to eliminate oil price controls and then removed Jimmy Carter’s idiotic Windfall Profits Tax a few years later. As expected, global production expanded rapidly and with the removal of price controls, that production flooded into the US. By the middle of the decade, despite repeated production cuts by OPEC, there was a global glut of oil and by 1985, oil had collapsed all the way to $7. It wasn’t interest rates that made oil decline, it was government policy on the deregulation side, along with rapid production increases from non-OPEC countries.
    • President Reagan’s Economic Recovery Tax Act was signed into law in August of 1981, designed to reduce tax rates and incentivize investment by rewarding risk-taking by businesses. In particular, the Accelerated Cost Recovery System served to accelerate depreciation, reducing taxes for those that invested in productive capacity. Once again, government policy, not interest rates led to an increase in investment and ultimately supply, helping to tame inflation.
    • It wasn’t just Reagan working on de-regulation; The Staggers Act of October 1980, deregulated the railroads, The Motor Carrier Act of July 1980, deregulated the trucking industry, and the Airline Deregulation Act of October 1978 effectively deregulated transport industries. The net effect was dramatic price competition, better ability to invest and innovate, and the ability to eliminate unprofitable business that was funded by profitable business. Almost immediately after passage, pricing for transport services collapsed and the ease of transporting goods expanded.
    • Organized labor was also dealt a near-fatal blow when Reagan fired the air traffic controllers in August of 1981. This may have reduced the wages for a generation of middle-class workers, but it sure wasn’t inflationary. It also accelerated the decline of unions which had already peaked out as a percentage of workers. More importantly, it reduced the militancy of unions and took the teeth out of their ability to disrupt businesses, leading to better efficiency and lower costs for consumers.
    • At the same time, when it comes to macroeconomics, demographics equals destiny. In this case, Volcker simply got lucky. Think of the Baby Boom generation, the last of whom was born in 1964. By 1982, these last Boomers hit 18 and started joining the workforce. The eldest Baby Boomers, born in 1946, were already 36 by then. Look at the massive increase in workers starting in the late 1970s and into the 1980s, which tamped down wages and tamed inflation—especially as female participation in the workforce expanded dramatically. This added labor slowed a key component of the inflation.

    The Biden Administration looks capable of pursuing none of those policies, and the Baby Boomers are starting to retire…

  • More Biden Magic: “The Dow has now had 11 down weeks out of the last 12. This has never happened before… (in Nov 1929, The Dow fell for 10 of 11 weeks)…”
  • How did we get here? Well, in addition to those SUPERgeniuses in the Biden Administration, decades of deficit spending, and loose Fed money printing, there’s the Flu Manchu lockdowns.

    For weird reasons, some people, many people, imagined that governments could just shut down an economy and turn it back on without consequence. And yet here we are.

    Historians of the future, if there are any intelligent ones among them, will surely be aghast at our astounding ignorance. Congress enacted decades of spending in just two years and figured it would be fine. The printing presses at the Fed ran at full tilt. No one cared to do anything about the trade snarls or supply-chain breakages. And here we are.

    Our elites had two years to fix this unfolding disaster. They did nothing. Now we face terrible, grim, grueling, exploitative inflation, at the same time we are plunging into recession again, and people sit around wondering what the heck happened.

    I will tell you what happened: the ruling class destroyed the world we knew. It happened right before our eyes. And here we are.

    Last week, the stock market reeled on the news that the European Central Bank will attempt to do something about the inflation wrecking markets. So of course the financial markets panicked like an addict who can’t find his next hit of heroin. This week already began with more of the same, for fear that the Fed will be forced to rein in its easy-money policy event further. Maybe, maybe not; but recession appears impending regardless.

    The bad news is everywhere.

  • More Welcome Back Carter 70s throwbacks: labor unions want to wage war strikes against the U.S. food chain.
  • A closer look suggests that Democrats are actually doing worse than their horrible polls suggest.

    The polling error for the 2020 election was roughly 4% nationwide, the largest in the last 40 years.

    Fast-forward to today. Inflation is 8+ percent, the price of food and gasoline is way up, crime is up, there is a nationwide shortage of baby formula, and don’t get me started on the border crisis. Yet Joe Biden’s job approval is close to 40% positive. That means almost four out of every ten Americans think Joe is doing a good job if you believe the RealClearPolitics average. And I don’t.

    Snip.

    If the polls are overestimating approval numbers for Biden and other Democrats, how bad is it? The political climate today is different since the 2020 election, but the Democrat poll bias seems intact, which was 4% nationwide. Since nonresponse bias, 4%, and registered voter bias, 2.6%, should be mutually exclusive, we can add them together. This gives us a total Democrat bias of roughly 6.5%

    What does this mean? Until pollsters switch to sampling likely voters right before the election, you can subtract a solid 6 percent from Joe Biden’s approval numbers. And if nothing changes before the election, any Democrat who leads by 3 percent or less is likely to lose.

  • Another Russian ship sunk.
  • “Paxton Wins Lawsuit Against Lax Biden Immigration Policy.”

    Texas Attorney General Ken Paxton is enjoying a victory against a Biden administration policy that has allowed illegal aliens to cross the southern border without consequence.

    In 2021, President Joe Biden’s Department of Homeland Security issued a rule giving immigration law enforcement officials the power to decide whether or not to detain illegal aliens who attempt to cross the border (in contradiction to federal law, which says they must all be detained).

    This policy caught the attention of Texas Attorney General Paxton and Louisiana Attorney General Jeff Landry, who sued to stop the rule change, arguing that Biden was violating federal law when refusing to take custody of criminal migrants.

    Paxton bashed President Biden, arguing that the policy was contrary to federal law and was instituted without following the proper procedure. Over a year since the original lawsuit was filed, a federal judge issued a ruling against the Biden administration on Friday.

    Federal District Judge Drew Tipton said in his decision that the rule was “an implausible construction of federal law that flies in the face of the limitations imposed by Congress.” Tipton added, “Whatever the outer limits of the authority, the executive branch does not have the authority to change the law.”

    After a legal fight lasting almost a year, Texas judges ruled a final judgment banning Biden’s detention-discretion rule.

  • The Sheriff’s Office of Isabella County, Michigan has to stop responding to some 911 calls due to rising gasoline prices.
  • Sixty years ago came the birth of the New Left via Tom Hayden, Students for a Democratic Society and the Port Huron Statement. (Hat tip: Stephen Green at Instapundit.
  • Most of what you know about Watergate is probably wrong. (Hat tip: Dwight.)
  • Leaked internal emails showing Twitter employees debate banning Libs Of Tik-Tok for crimes against social justice.
  • “Round Rock ISD Trustee Sues Superintendent Over Alleged Illegal Investigation. The saga continues in Round Rock ISD as trustee Mary Bone files against scandal-plagued Superintendent Hafedh Azaiez.”
  • Caterpillar is moving their headquarters to Texas.

    (Hat tip: Stephen Green at Instapundit.)

  • Elon Musk: “Democrats ‘Would Rather Tesla Was Dead Than Be Alive And Non-Unionized.'” Of course they would. If they can’t rake graft off you, or harvest votes from your ghetto, you’re worse than useless to them.
  • Speaking of Musk: Several snowflakes working at SpaceX circulated a letter calling Musk “an embarrassment” and demanding the company be more “inclusive.” Result: He fired their ass. Good.
  • McDonald’s gives up on healthy food.
  • Florida Man Crime Blotter: Accused Medicaire fraudster Ernesto Graveran captured trying to escape to Cuba on a jet ski. (Hat tip: Dwight.)
  • How bad is the Biden economy? There’s now a Sriracha shortage.
  • San Antonio symphony orchestra shuts down and files for Chapter 7 bankruptcy. “The last bargaining session between the Symphony Society and the Musicians’ Union took place on March 8, 2022 after which the Union declined to return to the bargaining table, despite efforts of federal mediators and the Symphony. The Musicians’ Union has made it clear there is no prospect of the resumption of negotiations, absent the Board agreeing to a budget that is millions of dollars in excess of what the Symphony can afford.” (Hat tip: Dwight.)
  • “School District Announces Summer Enrichment Program For Kids Who Need Extra Grooming.”
  • Swim like no one’s watching.

  • Banks Runs In China?

    Tuesday, June 14th, 2022

    Reader Kirk suggested Chinese bank runs might be the next story to cover. I think I covered bank runs at smaller rural Chinese banks in a previous “China is screwed” post. Is a wider run in progress? Maybe.

    Multiple sources contacted by Asia Markets, have confirmed deposits at the following six banks have been frozen since mid-April.

  • Yuzhou Xinminsheng Village Bank (located in Xuchang City, Henan Province)
  • Zhecheng Huanghuai Bank (City of Shangqui, Henan Province)
  • Shangcai Huimin Rural Bank (Zhumadian City, Henan Province)
  • New Oriental Village Bank (City of Kaifeng, Henan Province)
  • Huaihe River Village Bank (Bengbu City, Anhui Province)
  • Yixian County Village Bank (Huangshan City, Anhui Province)
  • It’s understood the banks with branches across the Henan and Anhui Provinces successively issued announcements in April, stating they would suspend online banking and mobile banking services due to a system upgrade.

    At the same time, clients reported their electronic deposits in online accounts, mobile apps and third-party platforms could not be withdrawn.

    This led to depositors rushing to local bank branches, only to be told they were unable to withdraw funds.

    By late May, images emerged on Chinese social media of demonstrations at the front of numerous bank branches. Asia Markets has verified these images with local contacts.

    Snip.

    Regardless of the cause, the developments raise serious questions about the health of China’s and its regulatory oversight. The more immediate concern, however, is the prospect of contagion, which could see the (so-far) rural-only bank run spread to bigger cities.

    There’s evidence this is already happening.

    In one of the only mainstream international media articles to report on the unfolding situation, local residents highlighted the seriousness of the situation and the likelihood of contagion.

    From the Financial Times on June 9:

    “Some depositors such as Xu have already lost trust in the system. The 39-year-old said he had withdrawn all of his deposits from 10 other small banks that had promised him an annualised yield of more than 4 per cent.

    “Another depositor, a 30-year-old father, said he had placed more than Rmb900,000 in his village’s banks since 2020 at a return of 4.1 per cent. “I felt like being slaughtered,” he said, declining to give his name. He drove overnight to negotiate with the banking regulator in Zhengzhou, capital of Henan, in mid-May. “This is the money my wife and I have saved together since we got married. I had to lie to her that I was away for work.”

    On Twitter, a video of a large line at an ICBC Bank in China (one of China’s largest state-owned banks) posted on Tuesday, June 9, suggest contagion is in progress.

    Translated to English, the tweet reads “The bank card system is locked, and these people are here to unlock it. Massive runs are coming.”

    Blogger, Jennifer Zeng, has reported major issues with withdrawing cash from banks in Shanghai in recent days. The uncertainty no doubt exacerbated by the prospect of more lockdowns as COVID cases again spike.

    “All banks in Shanghai have restricted depositors from withdrawing money… A bank run is about to sweep China,” she said.

    Maybe. This, from five days ago, suggests Shanghai banks are limiting total transactions to 300 a day.

    While I’m always willing to believe the worst about China’s smoke-and-mirrors economy, it’s possible that Shanghai’s problems are just temporary post-lockdown issues that will subside, assuming China doesn’t lock that city down again. (Don’t count on it.)

    All the reports of bank runs I’m seeing either link to that Asia Markets piece, or the Hal Turner radio show piece that largely reprints it.

    Right now I’m going to go with “Not Yet Proven” for current bank runs in China.

    Though Lord knows if I were stuck in China (and had somehow managed not to get imprisoned or executed), I’d be pretty intent on getting my money out of Yuan entirely and into something more stable like gold, silver, or even U.S. dollars…

    China’s High Speed Rail Network Is A Trillion Dollar Debt Sinkhole

    Monday, June 13th, 2022

    Lefty sorts are always whining that other countries have high speed rail networks and we don’t. Many point to China’s extensive network of high speed rail as what we should be doing.

    Tiny problem: China’s high speed rail network is a giant, unprofitable sinkhole of $1.8 TRILLION worth of debt.

    Some take-aways:

  • The average operating loss for the system is $24 million per day.
  • The official amount for China National Railway debt for high speed rail is $900 billion, but since roughly half of the debt comes from local governments, the total is probably closer to $1.8 trillion.
  • For comparison sake, $1.8 trillion is about South Korea’s entire yearly GDP.
  • “Shanghai, the richest city in China, has a total GDP of $600 billion in 2020, which means that even the whole year of Shanghai’s GDP won’t be able to cover the debt of China National Railway.”
  • It’s extensive: 37,900km, nearly double the length from 2015.
  • Return on high speed rail investment is only about 2%, and the bulk of bond payments for loans are coming due over the next few years. “Cash flow from railway transportation revenue isn’t enough to cover the operating costs, let alone the ability to pay the debt and interest.”
  • Local government debt levels are around 100%.
  • “More than 85% of the funds raised through urban investment bonds are earmarked for repaying old debts with new ones.”
  • Even the most profitable high speed rail stretch, Beijing to Shanghai, only earns a return on investment of 5%.
  • Japan’s successful high speed rail network serves three metropolitan areas (Tokyo, Nagoya and Osaka) that have 55% of that nation’s population.
  • “A professor at the School of Economics and Management of Beijing Jiaotong University concluded that the operating costs are only just covered when the transport density of a high-speed rail line reaches 36 million passenger kilometers per kilometer. In China the average transport density is only about 17 million passenger kilometers per kilometer.”
  • High speed rail can’t transport heavy freight.
  • “The Lanzhou Uramuchi HSR in western China can run more than 160 trains per day. In reality, this route only runs four trains per day.”
  • High speed rail occupancy rate is only 30%, and is still too expensive for most Chinese to use.
  • High speed rail construction has squeezed out much-needed construction of regular rail. “China’s rail freight capacity can’t meet market demand. China’s market share of road freight turnover has risen rapidly to 49% market share in 2016.” China rail has jacked up freight costs to make up for losses on high speed rail.
  • China’s freight trucks get overloaded all the time.
  • China’s containerized shipping accounts for 40% of global trade, but “the proportion of China’s sea rail intermodal transport volume in 2017 was only about 2.5 percent.” 84% of port containers go out by road.
  • So why all the money poured into high speed rail? Opportunities for corruption.

    Officials see the high-speed rail project in which China is involved as a lucrative opportunity. China’s former minister of railways, known as the father of high-speed rail, was sentenced to death for corruption. Emerging industries such as high-speed rail, which offer both substantial commercial value and political achievements for local officials, have enormous room for corruption. In a systemically corrupt environment white elephant projects, that is a large project that falls significantly short of its goals, and the costs of upkeep outweigh its usefulness, are favored by many officials and businessmen looking to make a fortune. The vast majority of high-speed railways around the world can’t make ends meet on passenger revenues alone to cover their construction and operating costs. Most operate at a loss.

    In light of all that, why do American leftists keep complaining about America’s lack of high speed rail? Simple: It’s the corruption, stupid. High speed rail construction offers boundless opportunities for graft and corruption, and refusing to build any keeps them from getting their snouts into another giant trough of taxpayer money…

    (I didn’t expect this past week to become a string of “China’s economy is smoke and mirrors all the way down” posts, but I keep running into more examples.)