Good article. As an additional point, it is also strategically prudent for China to let the regional conflicts elsewhere distract the empire against itself.

When people meme about China “do nothing and win”, it must also include that China will literally do nothing in response to these regional conflicts except for playing both sides and increase the sales of Chinese businesses (see the Russia-Ukraine conflict for the most recent prominent example).

I think you’ll have a faster way of provoking a response out of China if Israel somehow boycotts Chinese companies and fucks with their profit margins (like the recent incident of Brazil investigating BYD treatment of its construction workers, which China responded in kind by investigating and halting Brazilian beef import), and Israel has so far been very astute when it comes to not pissing off China.

Au Lushan moment

I fucking hope not. Apparently post-rebellion census records implied a de-population of 36 million, suggesting that two-third of China’s population was wiped out over 8 years. That’s more people dead than the USSR lost during WWII.

Equally worse, it ended the openness and multicultural policies of the 8th century Prosperous Tang, and for nearly a thousand years, subsequent dynasties would turn inward until the Opium War in 1840 that pried China’s door open to foreigners again.

BRICS needs to propose a new economic framework beyond multipolar neoliberalism, and only then could we take them seriously.

They’ve had three years to come together and draft something together, and yet in the end it seems that Russia is the only country who is interested in forging a new path. The very modest Kazan proposal last year really shows how much BRICS has squandered the golden opportunity (changes not seen in a hundred years) afforded by the Biden administration.

I feel like I’m talking to ChatGPT lol. You talk a lot of convoluted words but without substance.

Let me cut through all that fat and goes straight to the point to end this once and for all:

If we are under a bancor system today, then China would accumulate vast trade surplus in the form of bancors (instead of dollars), and if they choose to hoard like they did with the dollar, they would literally lose those bancors. Worse, those bancors would become the overdraft basis of other countries.

This, my friend, is a penalty and how the ICU enforces the global trade rule to prevent the build up of imbalances. It is designed with the intention to punish countries running huge trade deficits (the US) or surplus (China). I guess you could call it incentives too lol, because it forces those countries to actually spend their bancors (to promote trading of goods instead of hoarding money).

Even worse, a primary mechanism of China expanding its monetary base is from the exporters selling their dollars to the PBoC, who in turn issue RMB into the exporters’ domestic accounts. If China is not allowed to build up its dollar reserves and use them as the basis for new RMB issuance, how are the exporters going to pay their workers?

Similarly, China would not be able to lend its dollars in the form of infrastructure loans to Belt and Road countries, and without this mechanism, how is China going to invest in those countries?

Once again, you could make less of a nonsense claim by just spending a few minutes to think through what you think you’re saying and walking through the steps of how the system actually works.

Look, the reason I even bother to comment in this thread is to provide some context in the hopes that people don’t get fooled by Austrian school libertarian crap.

If anyone wants to take out their life savings and invest in gold or crypto, it’s in their own right. I am just here to provide the warning.

Did you even listen to the Hudson interview? At which point did Hudson say it came from Petrodollar?

I have, and I don’t see why that’s a problem.

You don’t see a problem that China would be the country that receives the most severe punishment by running the largest trade surplus in the world?

The whole point of Bancor is to punish countries for running huge imbalances, so as to return the world to a more balanced trade.

Like, why do you think Keynes proposed Bancor in the first place?

How much surplus any one country runs is utterly irrelevant.

No offense, I don’t think you understand how Bancor even works.

In fact, petrodollar has been a big aspect of what gave dollar stability.

This could not have been more wrong.

Petrodollar was simply the US forcing the Saudis to accept US dollars for oil (after the embargo ended in 1974), which the US can freely print, but the Saudis were not allowed to use it anywhere to develop their own economy except to buy US military equipments (and to fund the lavish lifestyle of their elites). And because there is nowhere else to spend those large quantity of US dollars they had earned, the only place for those money to go would be to buy US treasuries to earn interests.

That’s it, there is nothing special about the “Petrodollar”. It does not finance the US government, nor did it confer the dollar its “reserve currency” status.

More accurately, Petrodollar is an imperialist tool by the US to force oil-producing countries into selling oil in exchange for freely printed US dollars but cannot use them to invest in their own domestic economy, hence they all ended up buying US treasuries.

The whole Petrodollar myth is perpetuated by Austrian school libertarians who are obsessed with gold and later crypto because their faulty model believes that the US dollar will collapse one day (never gonna happen unless by choice).

The reason their model is wrong is because they believe in a natural interest rate for the US dollar, which did exist when the dollar was pegged to gold previously during the gold standard and Bretton Woods era (fixed exchange rate), but is now completely irrelevant after the US dollar turned into fiat after 1971 (free floating exchange rate).

This is why the gold backed reserve currency is never gonna happen, folks! There is no natural interest rate in a free floating exchange rate system. Without government intervention, the interest rate will simply fall to 0%. The dollar is never going to crash, unless by choice. But the Austrians don’t understand this. Their model is completely and utterly wrong.

The only way to de-dollarize is for the countries to not have to export their surplus goods to the US anymore, and this requires another player (like China) willing to run a trade deficit to absorb those surplus goods from the exporting countries. Otherwise there is nowhere else for those surplus goods to go, and they still have to sell to the US. This is why all the exporting countries are panicking and trying to make a deal with Trump right now.

but I can definitely see something akin to Bancor being created by the BRICS and to give it legitimacy, it could be backed by a basket of commodities that BRICS countries produce.

Please explain how are we going to get a Bancor-like system with China running a $1 trillion trade surplus annually? Have you ever thought about that?

I think at least 50% of AI researchers are Chinese nationals, or something like that. I kid you not, but this is a country where many people unironically like Elon Musk and see him as some kind of visionary genius. They love this kind of stuff.

But the traction on AI at the national level really only took off after DeepSeek exploded as a phenomenon. Before that, nobody (important in the country) gave a shit about DeepSeek, until prestigious Western universities started talking about how much of a game-changer it was, and only then did the government officials at the national level began to take notice.

What’s funny is that immediately after the government turned towards AI as a potential platform for “economic transformation” (against the backdrop of the infrastructure building era coming to an end), many Chinese businesses started to adopt DeepSeek in almost everywhere - they put it into refrigerator, into vacuum cleaner etc lol. These businesses will do anything to jump on the hype train and hope that consumers will fall for it.

That was before Hudson and Harvey went to the Marx conference in Beijing in 2018, where they were both stunned that Capital Vol. 3 was never taught in China.

Read his interview from 2018 here: China’s housing: It Doesn’t Have to be This Way

You’d think that China would have learned this by looking at the West, or at least by reading Volume 3 of Capital. In fact the Peking University meeting, the Second World Conference on Marxism, David Harvey gave the opening and closing speech. His point was that the Chinese should read Volume III of Capital to understand why and how the volume of debt and credit grows exponentially. As banks get richer and richer, the One Percent get richer. They need to nurture more and more markets for their credit and debt creation. So they lend on easier and easier terms, at a rising proportion of the home’s value. So it’s bank credit that has been inflating the price of housing.

David Harvey asked how China can let the price of housing go up so high in Shanghai (the most privatized city) that almost everybody who has a house is a millionaire. How can China expect to remain competitive in exporting industrial products when the cost of housing is so high?

Unfortunately, his talk and mine were almost the only economic talks at the meeting in Peking. As one of the Russian attendees pointed out to me, “Marxism” is the Chinese word for politics. “Marxism with Chinese characteristics” means to doing what they want politically. But economically they’ve sent their students to the United States, to attend business schools to learn how U.S. financial engineering practices.

Shanghai is where Milton Friedman and the Chicago Boys came in the 1970s and early 80s, because the Chinese government worried that if western Marxists came over, they would tend to interfere with domestic Chinese politics. So actually, China had less exposure to foreign Marxian economics than to U.S.-style neoliberal teaching.

From today’s Naked Capitalism links:

At the Rio Summit, signs of BRICS in retreat – just when we need serious anti-imperial muscle CADTM

On Sunday-Monday, July 6-7, leaders from the BRICS countries will meet in Rio de Janeiro for their annual summit. Because Brazilian president Luiz Inácio Lula da Silva will also host the UN annual climate summit in November in Belem, the BRICS event was pushed relatively early. That means the bloc’s work schedule has been curtailed, even in a year for which much more robust preparation and greater consensus are needed to withstand U.S. imperialist aggression.

Vladimir Putin had hosted 2024’s summit in Kazan, Russia in late-October. In most other years, the dates have been in the busy September-November period, allowing many pre-meetings to set the stage for a more meaningful heads-of-state meeting.

BRICS is far more complicated now, with consensus difficult to reach in part due to the 2023 Johannesburg summit having expanded the bloc to ten member countries (assuming Saudi Arabia is counted, as does Lula, even though last December the Russians ‘froze‘ its participation), and to eleven with Indonesia early in 2025.

They carry an enormous burden in mid-2025: to stand up to Donald Trump’s juggernaut, at a time – as historians may deem this – of the peak moment of his power, winning corporate tax cuts and austerity at home, while bullying countries abroad to bend to his erratic will on trade, aid, climate, public health and especially military matters.

Worse, next year, the bloc will be hosted by India, whose leader Narendra Modi is considered among the most loyal of (several) BRICS elites to Trumpism, due not only to parallel neo-fascist ruling tendencies but also to strongly-overlapping economic, military, migration and regional geopolitical interests.

Hence, even in this crucial period, in which the cry ‘No Kings!’ resonates from the world’s grassroots against Trump, here are ten pessimistic features that can be expected to derail the 2025 BRICS summit:

Even just 5 years ago I would never have expected to see self-proclaimed Marxists posting Austrian school libertarian crap, but here we are.

To be fair, it is very difficult to govern a country with 1.4 billion people, and many problems began their rot at the municipal/provincial level that were not adequately or incapably addressed by the central government. This is why there has been so much corruption scandals across all levels being exposed in recent years. Almost scary to see a never ending number of corruption cases, almost on a daily/weekly basis. A long-term consequence of post-Mao decentralization, which clearly needs to be reformed.

As an enjoyer of Chinese history, I cannot help but notice the recurring pattern across the dynasties: centralization of power led to inefficient bureaucracy and economic calcification, while decentralization led to a flourishing economy but also set in the rot of corruption with disastrous consequences down the road. A cyclical trend that has gone on for thousands of years as dynasties rose and fell. Sometimes I wonder if the Communist Party in China will also succumb to the same cyclical pattern that has so pervaded the entire history of our civilization? What does the future even look like? After all, the country is not even 80 years old - a mere blip along the 5,000-year civilizational history.

Adam Tooze was famous for saying that Germany can take a 5% GDP hit by cutting off Russian energy without having to go through deindustrialization. Look where Germany is heading today lol.

He was also adamant that the countries could just export their goods to one another when Trump went off with his Liberation Day tariffs because the US comprises only a small proportion of the world trade.

I really want to like Adam Tooze because he seems very knowledgeable in many things but also incredibly naive in others.

Regarding China, it was never about economic collapse. The real questions to ask are why hasn’t China’s incredible GDP growth and technological advancements translated into wage growth and social safety nets for the poor? There lies the answer to China’s deflation problem.

I’ll just give one example to make the point: China absolutely dominates the solar panel industry, and easily took 90% of the global market share. It has no peer competition in the world. It produces twice the amount of global solar panel demand in a single year!

And yet all major Chinese solar panel companies including their entire supply chain are now making huge losses and none of that growth ended up being transferred to income growth for the workers in the sector. If anything, we’re looking at production and investment downsizing simply out of sheer overproduction crisis, and that means unemployment down the road.

A major reason that the solar panel industry has not yet imploded was because the local governments had invested so much wealth (guess where did the money come from) into giving massive subsidies to the solar panel companies that it has become a sunk cost for the local governments. If the solar panel companies shut down their production, it’s going to incur even more losses to the local governments (the main tax revenue for both central and local governments is value-added tax) this will in turn impede their operating expenditures (somebody has to run the subways, trains, road maintenance, public services, and pay the civil servants etc, you know) and their ability to pay off the massive amount of debt these governments have owed to the financial institutions.

And so, even more wealth (again, where did those money come from) had to be invested to keep the industry from imploding, and then they wonder why the average working class people refuse to spend their money to consume?

PS. does anyone know what’s the beef between Tooze and the Chapo boys? The last time I heard about him being mentioned on the pod (maybe 2021 or 2022, some time around Covid, Matt was definitely still around) they got really sarcastic about him. I remember something about Felix insinuating that he was hitting on their partners or something?

China releases plan to improve rural workers’ skills, CCTV reports Reuters

HONG KONG, July 7 (Reuters) - China on Monday released a plan outlining 14 specific tasks to promote retraining of the rural workforce to improve their job prospects, state broadcaster CCTV reported.

The announcement comes after China in April announced a 10-year plan to build an agricultural powerhouse, amid escalating tensions with the United States, an economic slowdown and challenges posed by climate change.

The plan, issued by several government departments including the Commerce Ministry and National Development and Reform Commission, announced policies including vocational education for rural workers.

China has close to 300 million rural migrants in cities, with around 100 million of them reaching retirement age over the next 10 years, according to official data.

To improve employment security of rural labour, it said it would “strengthen housing security, create favourable conditions for rural workers in cities to enjoy basic public services equally and integrate into the local society as soon as possible,” CCTV said.

The report said the scheme would help support job-seeking services for rural labour and support the employment and entrepreneurship of college graduates.

The plan would help improve the supply and quality of workers and better meet employers’ needs, CCTV said, citing Zou Yunhan, deputy director of the Macroeconomic Research Office of the Economic Forecasting Department of the National Information Center.

Seems like a pretty good plan.

Xiaomi begins YU7 SUV deliveries as wait times reach up to 14 months CNEV

• Xiaomi has begun its first deliveries of the YU7 in 58 cities across China, with its founder personally handing over vehicles to some owners.
• The wait times for the YU7 has been extended across the board, while the SU7 series has seen wait times shortened.

Xiaomi (HKG: 1810, OTCMKTS: XIACY) has started delivering the YU7, but production constraints have extended the wait times for its first electric SUV (sport utility vehicle) to as long as 14 months.

Xiaomi EV, the smartphone giant’s electric vehicle (EV) unit, announced today on Weibo that the first deliveries of the YU7 have begun, with Xiaomi founder, chairman, and CEO Lei Jun personally handing over vehicles to some owners.

Xiaomi EV did not disclose the number of YU7 vehicles delivered in the first batch but said that deliveries began today in 58 cities across China.

With deliveries underway, the wait time for the YU7 has further increased.

Customers purchasing the standard version of the YU7 now face a waiting period of 59-62 weeks for delivery, up from 58-61 weeks as of Friday, according to daily monitoring by CnEVPost.

Very very impressive with 800km range. This is going to give BYD a good run for their money.

This is like when you send a generic letter to all the recipients with the Find and Replace function.

Therefore, we invite you to participate in the extraordinary Economy of the United States, the Number One Market in the World, by far.

lmao. this timeline is not real!

This is quite common. In the 1980s, a few Southeast Asian countries like Malaysia had hoped to receive some technology transfer by giving massive tax breaks to multinational semiconductor companies (Intel, AMD, Hitachi etc.), but mostly they ended up doing the finishing packaging, assembly and testing work for foreign corporations to sell to their export markets. The core technologies are usually kept protected.

China can of course choose to democratize the technology by sharing them with the developing countries, but that would end up killing their own private companies that needs to survive on the market economy.

As they say, if you borrow a bit from a bank, the bank owns you. If you borrow a lot from a bank, you own the bank.

Similarly, if you import a bit from an exporting country, the country owns you. If you import a lot from that country, you own their economy.

Covid was practically a trial run for a supply chain shock of the eventual global trade war the US would launch.

China’s BYD to start assembling electric cars in Brazil Reuters

• Chinese electric vehicle maker ready to open Bahia factory
• BYD eyes Brazilian assembly of some 50,000 cars in 2025
• Executive says labor lawsuit will not derail factory timeline

SAO PAULO, July 7 (Reuters) - China’s BYD (002594.SZ), opens new tab is poised to start assembling electric vehicles at a new factory in Brazil as early as this month, a top executive said, reducing imports as tariffs start to rise in its largest foreign market.

Alexandre Baldy, senior vice president for BYD in Brazil, said the goal is to assemble 50,000 cars this year at the plant in Bahia state from imported kits, adding that he is negotiating a lower tax rate on those vehicles.

“We should inaugurate in the coming days,” Baldy said in an interview late on Friday, without specifying a date, as final regulatory approvals are still pending. “We’ve already completed this year’s imports, taking advantage of the period before the import tax increase that took effect on July 1.”

BYD had sent a surge of finished cars into Brazil this year to take advantage of temporarily lower tariffs, shipping some 22,000 from China in the first five months, according to Reuters calculations.

That stirred complaints in Brazil’s auto industry that BYD was privileging Chinese manufacturing over production from Bahia, where a labor probe and heavy rains have disrupted plans. A state labor secretary said in May that the plant would only be “fully functional” at the end of 2026.

However, Baldy said it would begin full production in July 2026, after assembling vehicles from “complete knock down” (CKD) kits for the next 12 months.

Once fully operational, he said, the complex in Camacari is likely to generate up to 20,000 direct and indirect jobs. Expectations for the operation, on the site of a former Ford plant taken over in 2023, suffered in December when labor inspectors leveled accusations of labor abuses involving Chinese contractors hired to build the complex. Brazilian prosecutors filed a lawsuit in May holding BYD responsible for human trafficking and submitting workers to “slavery-like conditions,” after talks on a settlement fell through.

“BYD has always sought to respect Brazilian law and human dignity in all operations,” Baldy said, adding that the company wanted to reach a resolution. He did not say why efforts to negotiate a settlement had fallen through.

All it took was for China to halt Brazilian beef import for Brazil to cave. Amazing. Brazil has less leverage than it thinks it has.