After having stayed in Shanghai all though this week, I’ve just got back to HANEDA Int’l Airport in Tokio, my hometown. This time, I paid a visit to Beijing, Yantai and Shanghai (even twice!) and met lots of friends and colleagues. Actually, I had never gathered so many visit cards during previous visits to foreign countries on business as I did this time. This is the very reason why the people are still feeling attracted by China, the land of future. Even though everybody including the Chinese themselves is quite aware of difficulties to overcome, he/she never gives up and continue to dream of success in the continent.
Especially in Shanghai, I felt a breeze of “Zeitgeist”, since infrastructure in many fields are obviously standards which manage to satisfy the westerners. It was 1999 when I stepped in this city for the first time, which was once called “city of enigma (魔都)” before WWII. There was indeed only few infrastructure, for example, only one subway line, which you could make use of at that time. The famous landscape of “BUND” was being reconstructed, and you could find only an oddly shaped television tower beyond the Hangpu River. Nevertheless, “Time flies like an arrow”, and the new economic zone “Pudong” is full of skyscrapers. There, nobody believes in the end of China’s prosperity. Having fully forgot shadow of the Cultural Revolution in 1960s and 70s, which was originally started in Shanghai, everybody simply keeps “China dream”. “At least for four or five years, China’s economic development will continue and its strength will be shown to all over the world”, says one of young and talented Chinese lawyers I met this time.
Well, it’s true that China as a whole would survive to such an extent as we can expect right now. In addition, to keep our dreams brings much more to our daily life than being pessimistic. However, there IS a one simple fact you may never forget: China is not isolated but totally involved in the current turbulence of financial capitalism.
As I correctly predicted in the previous post on this official English weblog, the world stock market began to collapse exactly from December 8, the last Monday. The trend emerged in NY at first, and was expanded to other markets such as the Tokyo stock market. In Spite of de facto PKO (= price keeping operation) by the ABE administration just before Japan’s general election on December 14, which of course led to a little bit recovery of the Nikkei 225 index on Friday, the situation as a whole was never changed. The NY stock market kept collapsing mercilessly as shown below:
Now, the time has finally come. From Yokohama, my closest alliance partner, Mr. HKD, just sent me his latest statistical analysis of various data in the world market. Based on his legendary quantitative analysis, he pointed out that the trends would be dramatically changed on December 24, 2014 in NY. In accordance with this result, I as expert of qualitative analysis would say a historical, and irreversible collapse will be caused in one of the ways as follows:
*Scenario A: “Shale turns out to be the devil”
– Due to continuous fall of WTI, financial products related to high yields bonds issued by US companies dedicated to Shale oil/gas will burst to cause a dramatic domino effect in the world market. To rescue them, the USG will be forced to do financial assistance, which will then lead to the tipping point of its sovereign debt (or at least dollar) crisis.
*Scenario B: “Declaration of the WWIII”
– The so-called “ISIS” successfully commits a series of terrorist attacks in Europe and US, and declared a total war against the western coalition. The Obama administration, which closely coordinates behind the door with those who are directly involved including the leadership of the ISIS, will automatically decide to send a ground troop to ME. Hereby, US will evade the above shown scenario A and its default.
Facing either “A” or “B”, a violent reversal of the global market, which the BIS trumpeted since the last autumn, will suddenly emerge. To make all the things simple, I would say at this juncture, “Everything will be upside down”: Appreciation of JPY, WTI and gold, while depreciation of USD, stocks in advanced markets. This is what I’ve been calling a typical phenomenon of the “Le Chatelier’s principle”.
Once this will happen, money will seeks a safe haven and be squeezed to Shanghai, I suppose. Will the PRC be the ultimate winner of this end game? I would say, “NO”. Why? You can find the answer when you remember the ridiculous visit of Xi Jinping not to the US President but to the Japanese Emperor Akihito just before his inauguration to State President of the PRC. Or you may remember the fact that wealthy Chinese investors und families have been rushing for JPY by selling Renminbi massively. The more highly the PRC’s economy is developing, the more JPY will be needed and stored by the Chinese. Unless China’s economy will be backed by the Japanese, nobody including the Chinese themselves will believe in its future.
My final question to you: “Who’s the final winner at the end of this game?” Bloody Christmas Eve will show you the answer. Stay tuned and take care.