The following is from an article by Hideo Tamura that appeared in the Sankei Shimbun's Sunday Economic Lecture on April 25.
Economic reporters and academics in the Japanese media are nothing more than editorialists for the Ministry of Finance's ECHO.
He is one of the few who continue to talk about real economic theory.
This article reveals the reality that the world's economic players are complicit in Xi Jinping's crackdown on Hong Kong.
It reveals the chilling reality that people who only care about making money are complicit in the worst evil in history.
It is also the reality of pseudo-moralism and political correctness that permeates the world's media.
It is a genuine article that Greta Thunberg and Naomi Trauden should read.
The Source of Xi's Brutal Expansionism
China's ballooning foreign currency debt
Amid a new coronavirus pandemic, surplus funds from Japan, the U.S., and Europe pour into China.
For the Xi Jinping administration, this is not only a way to expand the economy.
It can also be used as a source of funds to accelerate its offensive against the outside world, as represented by the "One Belt, One Road" plan for a vast economic zone and "vaccine diplomacy.
As I have pointed out before, China has a de facto dollar standard. The People's Bank of China, the central bank, buys up dollars at the official rate, accumulates foreign exchange reserves, and issues yuan accordingly.
The source of foreign exchange is the current account surplus, including the trade balance and the increase in foreign debt.
Foreign currency allows China's economy to grow and its military expands and provides a source of funds to attract other countries worldwide.
Foreign debt is now the driving force behind the growth of the Xi administration.
The graph shows the year-on-year change in China's external debt and assets.
By the end of 2020, China's total external debt will have increased by $1.68 trillion from the end of the previous year, 4.55 times the increase in 2007.
The increase in gross external debt mainly reflects the increase in foreign investment and loans to China.
Looking at the breakdown of the increase in gross foreign debt as shown in the bar graph, the increase in direct investment debt, equity debt, and bond debt was remarkable in 2008.
The increase in debt is due to the inflow of funds from investments in China by Japanese, U.S., and European manufacturers and financial institutions.
Banks and investment funds are investing in Chinese companies listed on the stock markets of Hong Kong, Shanghai, and Shenzhen.
The three stock markets are integrated through a system called "Stock Connect," which allows foreign investors to buy and sell shares of Chinese companies in the Shanghai and Shenzhen markets via the Hong Kong market.
The Xi administration can quickly raise foreign currency at a low cost by using initial public offerings (IPOs) in the stock market.
According to the World Federation of Exchanges (WFE), the total amount of capital raised through IPOs in Hong Kong, Shanghai, and Shenzhen in 2008 was $124.2 billion, surpassing the combined total of $85.1 billion raised by the New York and Nasdaq markets, which are the headquarters of IPOs.
While the previous Trump administration in the U.S. tried to block Chinese companies with links to China's military from the U.S. stock market to prevent them from raising dollar funds, the Xi administration countered with the full Chinaization of Hong Kong.
At the end of June 2008, the Xi administration enforced the application of the Hong Kong Law on the Maintenance of National Security (the National Security Law). It thoroughly suppressed democratic forces in Hong Kong, and in March of this year, it effectively wiped out the democratic parties in the Hong Kong Legislative Council (Parliament).
Since the summer of 2007, there have been many new listings of mainland Chinese companies on the Hong Kong stock market. As of March this year, mainland company stocks accounted for 80% of the market capitalization and nearly 90% of the market's trading value.
Overlaying Beijing's robust control over Hong Kong politics, a system has been established. The Hong Kong financial market, which handles the bulk of the mainland's foreign currency settlement, can be manipulated at the will of the Xi administration.
I'm going back to the graph.
In the three broken lines, we can see the contrast between the increase mentioned above in total external liabilities and the change in total external assets, excluding foreign exchange reserves and foreign exchange reserves.
The foreign exchange reserves are like collateral for the issuance of the yuan and are challenging to move, so their increase or decrease is slight.
On the other hand, the increase in gross foreign assets excluding foreign exchange reflects not only the acquisition of foreign resources and real estate but also the increase in foreign loans through "economic cooperation" such as the provision of cottage industry vaccines and infrastructure investment in countries participating in One Belt, One Road.
However, the increase is far less than the increase in total external debt, which reached over $1 trillion.
In a nutshell, this means that the Xi administration is using foreign debt to push its foreign expansion offensive.
Behind this is the vast money glut and zero interest rate policies of Japan, the United States, and Europe.
Western investors are competing to invest in China with dollar funds raised at a very low cost.
The Xi administration's approach has always been like that of a shady financier, even before Corona.
A report titled "China's Lending Methods" released at the end of March this year by experts from the U.S.-German foreign aid analysis think tank revealed this reality.
Most of the loans provided by the Chinese government and state-owned banks to developing countries are "secret clauses" that are favorable repayment conditions for China.
It imposes high-interest rates far from what the Chinese authorities call "economic cooperation."
It also refuses to apply the Western "Paris Club" rules, allowing developing countries to postpone debt repayment and seizes investment assets if a partner country defaults on its debt.
It is the path to a "debt trap.
These crude foreign policies of the Xi administration are supported by the greedy financial capital of the West, which is willing to add to its foreign debt.
Market participants in New York, London, and Tokyo are determined not to care whether totalitarians rule Hong Kong or whether the Xinjiang Uyghur Autonomous Region suffers massive human rights violations.
Even if a Taiwan emergency breaks out, there is enough fear.
To deter the Chinese threat, the political leaders of Japan, the United States, and Europe will have to intervene in the financial sector.
