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Chinese Military,Political and Social Superthread

"Socialism" with Dragon characteristics at work in Africa (with a jab at the Liberals)
http://unambig.com/socialism-with-dragon-characteristics-at-work-in-africa/

Imagine the outrage amongst the usual suspects if a Western company acted like this...

ZambiaMining_1742713c.jpg

Vincent Chenjela was injured when managers fired randomly at the workers protesting against poor working conditions...

Mark
Ottawa
 
I guess there isnt room for flexibility in China if there were the power plants would be generating some heat. Sounds like if every apartment had a thermostat the government might be able to control costs.

http://www.cbsnews.com/8301-503543_162-20020269-503543.html

Since the Communists came to power, November 15 has been circled in red on many Beijing calendars. It's not Mao Zedong's birthday. November 15 is the day when city officials dutifully flick the switch to turn on the capital's centrally-controlled heating system, supplying warmth to most of Beijing's 22 million residents.

In one of the last vestiges of collective living, Beijing's coal plants pump heat to city apartments on a strict schedule, from November 15 to March 15, every year. Since the 1950s, the schedule has rarely changed, even if temperatures plummet before the appointed day.

After enduring record heat-waves this summer, with the mercury soaring to its highest mark in 60 years, and thick pollution in the fall (which the government blamed on "fog"), Beijingers are now suffering through the early onset of bitter cold. China's state-run media reported October 18 as the city's coldest autumn day since 1986, with temperatures peaking at 48 degrees and then dropping to 44.

Many residents of the capital city are counting down the days to November 15 hunched over their computer keyboards, commiserating about the frigid weather and lack of government-provided relief.

"I can't function in Beijing's October without a hot-water bottle and an electric blanket," complains one Chinese internet user. Others employ greater creativity to stay toasty.

"I highly recommend doing slow-motion exercises while surfing the internet in order to stay warm," suggests one energetic web chatter. Most local apartments don't have thermostats, so residents have no idea whether it's warmer inside than outside. Many use electric space heaters and turn their air conditioners to the "warm" setting to thaw their icy homes.
There is one silver -- or green -- lining to weeks of goose bumps. Beijing's power plants burn through 41,000 tons of coal every day to keep the city's residents warm in winter. That energy is saved each day the government keeps the radiators turned off. Beijing officials grumble that last year, the heating was turned on a few days early but then the weather warmed up again, wasting precious resources.

Until the grim mid-November countdown is over, Beijingers have little to do but sit, shiver and, ironically, pray for extremely cold weather. Local officials have promised to turn on the heat if the mercury dips below 40 degrees for five days in a row, or if the city is blanketed in snow.

And those wishes may be answered soon; a cold front is expected to hit Beijing on October 23. Miserable meteorologists warn, however, the capital won't likely be blanketed in snowflakes... but sheets of cold rain instead. That probably won't get the heat turned on.
 
An interesting look at Chinese investment patterns and the expected goals. I follow the "Austrian" school of economics, and will stand with the prediction that this hyperinvestment is generating a "bubble" economy which will eventually take it's toll. I'm also of the opinion that the form of the Chinese bubble popping will resemble the Japanese "lost decades" rather than a short, sharp crash. Like the Japanese, the Chinese will seek to protect the reputation of the banks and financial institutions and refuse to clear the decks of nonperforming loans and investments (TARP in the United States seems to have unintentionally done something similar).

The only reason they have "gotten away" with this so far is they are starting from a very small base and laying out basic infrastructure is a positive investment. However, once you have built your highway, building another one nearby is much less of an investment; soon the laws of diminishing returns comes into play. Massive overbuilding in some regions sees unbelievable vacancy rates while the rural West is still underserviced.

http://nextbigfuture.com/2010/10/escape-velocity-infrastructure-spending.html#more

Escape Velocity Infrastructure spending in China and AI is one of three things in IT that China sets out as Strategic

Raghav Bahl is the Rupert Mudoch of India. He owns several TV Stations.
Recently he has written a book 'Super Power?' which compares the two developing country China and India.

Raghav writes in Forbes

    China today is investing nearly half its GDP, something that is simply unprecedented. Over 200 years of economic experience tells us that hyper-investment creates a bubble and ends in a dreadful collapse. But China has consistently defied all such prophesies of doom.

    The time has come to acknowledge a truth: either conventional economic theory will have to be rewritten, or China will eventually collapse. The two cannot coexist.

    I would venture a 50 per cent wager on China actually trumping conventional theory. Why do I say that? Because by investing on a scale hitherto unknown and untested, China may have defined a new "escape velocity" of capital spending. By putting so much capital, not in factories, but in infrastructure, China may have escaped the "gravitational pull of low thresholds."

    Big factories create waste, while big infrastructure, especially life-enhancing social assets, empowers people. The sheer scale of your activities could end up swelling the tide in which everybody and everything rises together; a new model of "tidal wave investing" could buoy the whole ocean to a much higher watermark.

China has identified 7 strategic sectors that they want to be major GDP contributors. IT is one of the seven and AI (artificial intelligence is one of three things mentioned as important in the IT goal.

China's most recent five year plan is summarized in a different article.

Some new goals listed in the five-year plan include:

1. Improving the social welfare and livelihood of the people

2. Boosting domestic consumption to accelerate economic restructuring away from its traditional export-oriented focus

3. Narrowing the differences between the western and coastal parts of China.

4. Improving energy efficiency and environmental protection

5. Developing seven strategic key industries, with the aim of increasing their GDP contributions from the 2 per cent of GDP now to 8 per cent by 2015 and 15 per cent by 2020

7 STRATEGIC SECTORS

China is also shifting its focus and resources to seven strategic industries that have been identified to tackle unfavourable demographics, raise productivity, develop home-grown technology and move its industries up the value chain. They are:

1. New energy: Developing clean or alternative energy from nuclear, wind, solar and bio-fuel sources

2. Energy conservation and environmental protection

3. New materials: Rare earth, alloys, membranes, high-end semiconductors

4. Biotechnology: Drug and vaccine development, advanced medical equipment, biomedical research and development

5. New IT generation: Broadband and mobile communication networks, Internet security infrastructure and artificial intelligence

6. High-end equipment manufacturing: Aerospace, telecom and railway equipment and marine equipment

7. New Energy vehicles: Electric cars, plug-in hybrid cars
 
The Dragon and developing ententes cordiales?
http://unambig.com/the-dragon-and-a-developing-entente-cordiale/

Mark
Ottawa
 
China develops a wide array of military UAV's:

http://nextbigfuture.com/2010/11/25-different-chinese-models-of-unmanned.html#more

25 different Chinese models of the unmanned aircraft at air show

WJ600 jet powered drone

Wall Street Journal - China is ramping up production of unmanned aerial vehicles in an apparent bid to catch up with the U.S. and Israel in developing technology that is considered the future of military aviation. Western defense officials and experts were surprised to see more than 25 different Chinese models of the unmanned aircraft, known as UAVs, on display at this week's Zhuhai air show in this southern Chinese city. It was a record number for a country that unveiled its first concept UAVs at the same air show only four years ago, and put a handful on display at the last one in 2008

This year's models in Zhuhai included several designed to fire missiles, and one powered by a jet engine, meaning it could—in theory—fly faster than the propeller-powered Predator and Reaper drones that the U.S. has used in Iraq, Afghanistan and Pakistan.
U.S. anxiety about China's UAVs were highlighted in a report released Wednesday by the U.S.-China Economic and Security Review Commission, which was formed by Congress in 2000 to assess the national security implications of trade and economic relations with China. 12 page U.S.-China Economic and Security Review Commission’s 2010 Annual Report Exec Summary to Congress Links to the full annual report is here

    "The PLA Air Force has deployed several types of unmanned aerial vehicles for both reconnaissance and combat purposes," the report said. "In addition, China is developing a variety of medium- and high-altitude long-endurance unmanned vehicles, which when deployed, will expand the PLA Air Force's 'options for long-range reconnaissance and strike,' " it said, citing an earlier Pentagon report.

    The Chinese drone of greatest potential concern to the U.S. is the one with several missiles and a jet engine—called the WJ600—which was displayed by China Aerospace Science & Industry Corp., or Casic, one of China's top weapons makers.

    Casic officials declined to comment, but a video and a two-dimensional display by the company showed Chinese forces using the WJ600 to help attack what appeared to be a U.S. aircraft carrier steaming toward an island off China's coast that many visitors assumed to be Taiwan.

    Drone in Space? China Aerospace Science & Technology Corp., one of the main contractors in China's space program, displayed an attack drone, complete with air-to-ground missiles.

    Largest Drone:ASN Technology's ASN-229A Reconnaissance and Precise Attack UAV, the largest drone at the show, carries air-to ground missiles and uses a satellite link to find targets over a radius of 2,000 kilometers 1,250 miles.

    Avian Drone:The ASN-211, a model under development, is about the size of a large duck and has flapping wings. It is designed for reconnaissance behind enemy lines.
 
Chinese credit bubble?

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8182605/Chinas-credit-bubble-on-borrowed-time-as-inflation-bites.html

China's credit bubble on borrowed time as inflation bites
The Royal Bank of Scotland has advised clients to take out protection against the risk of a sovereign default by China as one of its top trade trades for 2011. This is a new twist.

Officially, inflation was 4.4pc in October but not many in China believes it is that low. Photo: EPA
By Ambrose Evans-Pritchard 6:43PM GMT 05 Dec 2010

It warns that the Communist Party will have to puncture the credit bubble before inflation reaches levels that threaten social stability. This in turn may open a can of worms.

"Many see China’s monetary tightening as a pre-emptive tap on the brakes, a warning shot across the proverbial economic bows. We see it as a potentially more malevolent reactive day of reckoning," said Tim Ash, the bank’s emerging markets chief.

Officially, inflation was 4.4pc in October, and may reach 5pc in November, but it is to hard find anybody in China who believes it is that low. Vegetables have risen 20pc in a month.

The Communist Party learned from Tiananmen in 1989 how surging prices can seed dissent. "Inflation is a redistributive mechanism in favour of the few that can protect living standards, against the large majority who cannot. The political leadership cannot, will not, take risks in that regard," said Mr Ash.

RBS recommends credit default swaps on China’s five-year debt. This is not a forecast that China will default. It is insurance against the "fat tail risk" of a hard landing, with ramifications across Asia.

The Politburo said on Friday that China would move from "relatively loose" money to a "prudent" policy next year, a recognition that credit rationing, price controls, and other forms of Medieval restraint are not enough. The question is whether Beijing has already left it too late.

Diana Choyleva from Lombard Street Research said the money supply rose at a 40pc rate in 2009 and the first half of 2010 as Beijing stoked an epic credit boom to keep uber-growth alive, but the costs of this policy now outweigh the benefits.

The economy is entering the ugly quadrant of cycle – stagflation – where credit-pumping leaks into speculation and price spirals, even as growth slows. Citigroup’s Minggao Shen said it now takes a rise of ¥1.84 in the M2 money supply to generate just one yuan of GDP growth, up from ¥1.30 earlier this decade.

The froth is going into property. Experts argue heatedly over whether or not China has managed to outdo America’s subprime bubble, or even match the Tokyo frenzy of late 1980s. The IMF straddles the two.

It concluded in a report last week that there was no nationwide bubble but that home prices in Shenzen, Shanghai, Beijing, and Nanjing seem "increasingly disconnected from fundamentals".

Prices are 22 times disposable income in Beijing, and 18 times in Shenzen, compared to eight in Tokyo. The US bubble peaked at 6.4 and has since dropped 4.7. The price-to-rent ratio in China’s eastern cities has risen by over 200pc since 2004

The IMF said land sales make up 30pc of local government revenue in Beijing. This has echoes of Ireland where "fair weather" property taxes disguised the erosion of state finances.

Ms Choyleva said China drew a false conclusion from the global credit crisis that their top-down economy trumps the free market, failing to see that the events of 2008-2009 did equally great damage to them – though of a different kind. It closed the door on mercantilist export strategies that depend on cheap loans, a cheap currency, and the willingness of the West to tolerate predatory trade.

China is trying to keep the game going as if nothing has changed, but cannot do so. It dares not raise rates fast enough to let air out of the bubble because this would expose the bad debts of the banking system. The regime is stymied.

"The Chinese growth machine is likely to continue to function in the minds of people long after it has no visible means of support. China’s potential growth rate could well halve to 5pc in this decade," she said.

As it happens, Fitch Ratings has just done a study with Oxford Economics on what would happen if China does indeed slow to under 5pc next year, tantamount to a recession for China. The risk is clearly there. Fitch said private credit has grown to 148pc of GDP, compared to a median of 41pc for emerging markets. It said the true scale of loans to local governments and state entities has been disguised.

The result of such a hard landing would be a 20pc fall in global commodity prices, a 100 basis point widening of spreads on emerging market debt, a 25pc fall in Asian bourses, a fall in the growth in emerging Asia by 2.6 percentage points, with a risk that toxic politics could make matters much worse.
It is sobering that even a slight cooling of China’s credit growth led to economic contraction in Malaysia and Thailand in the third quarter, and sharp slowdowns across Asia. Japan’s economy will almost certainly contract this quarter.

Albert Edwards from Societe General said the OECD’s leading indicators are signalling a "downturn" for Asia’s big five (Japan, Korea, China, India, and Indonesia). The China indicator composed by Beijing’s National Bureau of Statistics has fallen almost as far as it did at the onset of the 2008 crash.
"I remain convinced we are witnessing a bubble of epic proportions which will burst – catching investors as unawares as the bursting of the Asian bubbles of the mid-1990s. Ignore these indicators at your peril," he said

In a sense, inflation is a crude way of curbing China’s export surpluses and therefore of resolving a key trade imbalance that lay behind the global credit crisis.

If China continues to stoke inflation – and blaming the US Federal Reserve for its own errors help – there will no longer be any need for a yuan revaluation against the dollar, and the US Congress can shelve its sanctions law.

On a recent visit to a chemical plant in Suzhou, I was told by the English manager that wage bonuses for staff will average nine months pay this year. This is what it costs to keep skilled workers. His own contract is fixed in sterling, which has crashed against the yuan over the last two years. "It is a sobering experience," he said.

China may have hit the "Lewis turning point", named after the Nobel economist Arthur Lewis from St Lucia. It is the moment for each catch-up economy when the supply of cheap labour from the countryside dries up, leading to a surge in industrial wages. That reserve army of 120m Chinese migrants everybody was so worried about four years ago has already dwindled to 25m.

China’s problem is that this is happening just as the aging crisis starts to bite. The number of workers will decline in absolute terms within four years. The society will then tip into precipitous demographic decline. Unlike Japan, it will become old before it is has built a cushion of wealth.

If there is a hard-landing in 2011, China’s reserves of $2.6 trillion – or over $3 trillion if counted fully – will not help much. Professor Michael Pettis from Beijing University says the money cannot be used internally in the economy.

While this fund does offer China external protection, Mr Pettis notes wryly that the only other times in the last century when one country accumulated reserves equal to 5pc to 6pc of global GDP was US in the 1920s, and Japan in the 1980s. We know how both episodes ended.

The sons of Mao insist that they have studied the Japanese debacle closely and will not repeat the error. And I can sell you an ocean-front property in Chengdu.
 
Pushback from Japan. I'm sure this isn't the ordered tributary state system China was looking forward to...

http://www.nytimes.com/2010/12/13/world/asia/13japan.html?_r=3&src=twt&twt=nytimes

Japan Plans Military Shift to Focus More on China
By MARTIN FACKLER
Published: December 12, 2010

TOKYO — In what would be a sweeping overhaul of its cold war-era defense strategy, Japan is about to release new military guidelines that would reduce its heavy armored and artillery forces pointed north toward Russia in favor of creating more mobile units that could respond to China’s growing presence near its southernmost islands, Japanese newspapers reported Sunday.

The realignment comes as the United States is making new calls for Japan to increase its military role in eastern Asia in response to recent provocations by North Korea as well as China’s more assertive stance in the region.

The new defense strategy, likely to be released this week, will call for greater integration of Japan’s armed forces with the United States military, the reports said. The reports did not give a source, but the fact that major newspapers carried the same information suggested they were based on a background briefing by government officials.

The new guidelines also call for acquiring new submarines and fighter jets, the reports said, and creating ground units that can be moved quickly by air in order to defend the southern islands, including disputed islands in the East China Sea that are also claimed by China and Taiwan. These disputed islands are known as the Senkakus in Japanese and the Diaoyu in Chinese.

Details of the realignment, which was delayed a year by the change of government in September 2009, have been leaking out since large joint military drills this month between Japan and the United States that included the American aircraft carrier George Washington.

Since initially clashing with the Obama administration over an American air base on Okinawa, Japan’s new Democratic Party government has been pulling closer to Washington, spurred by a bruising diplomatic clash three months ago with China over the disputed islands and fears about North Korea’s nuclear program.

The United States has used Japan’s concerns as an opportunity to strengthen ties with the country, its largest and most important Asian ally, and to nudge Japan toward a more active role in the region. In particular, Washington has proposed stronger three-way military ties that would also include its other key regional ally, South Korea.

During a visit to the region last week, Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, urged Japan to join American military exercises with South Korea. In a meeting with Japan’s defense minister, Toshimi Kitazawa, Admiral Mullen said the two nations needed to support South Korea after North Korea’s deadly shelling last month of a South Korean island.

The proposal of three-nation drills has already met resistance in Japan, whose military is severely constrained by its pacifist, postwar Constitution, and also in South Korea, where bitter memories of Japan’s brutal early-20th century march through Asia still run deep. However, Japan has slowly begun to shed some of the postwar phobias against a larger Asian role for its military, known as the Self-Defense Forces, one of the largest and most technologically advanced in the region.

In recent days, Prime Minister Naoto Kan has raised the possibility of changing laws to allow Japanese forces to be sent to the Korean Peninsula to rescue Japanese expatriates in the event of a crisis, and also to search for Japanese known to have been abducted by North Korea in the 1970s and 1980s.

“We need to slowly move forward with consultations with South Korea about whether they would allow in transport aircraft from the Self-Defense Forces,” he told reporters on Saturday.

In another sign of growing coordination, South Korea’s vice minister of defense, Lee Yong-gul, visited Tokyo late last week for talks with his Japanese counterpart, Kimito Nakae, on increasing bilateral cooperation.

Newspaper descriptions of the new Japanese defense strategy did not mention joint drills with South Korea. They did, however, make it clear that Tokyo views North Korea and particularly China as its biggest threats.

The revised guidelines call for shifting some ground forces from the northern island of Hokkaido, where they were originally intended to fend off a Soviet invasion, to its southern islands to fill a “gap” there, the reports said. This gap was exposed by recent Chinese naval maneuvers near islands in the Okinawa chain that raised alarm in Japan.

Under the reported revision, Ground forces would be maintained near their current level of about 150,000 personnel, the reports said.
 
Some history. This is probably the biggest attempt to break traditional Chinese civilization ever attempted, with disasterous results. What the Maoists had in mind to replace the traditional civilization is almost unimaginable, and memories of this are probably part of the reason social harmony is such an overriding concern among the Chinese elites:

http://www.nytimes.com/2010/12/16/opinion/16iht-eddikotter16.html?_r=2

Mao's Great Leap to Famine
By FRANK DIKÖTTER
Published: December 15, 2010

HONG KONG — The worst catastrophe in China’s history, and one of the worst anywhere, was the Great Famine of 1958 to 1962, and to this day the ruling Communist Party has not fully acknowledged the degree to which it was a direct result of the forcible herding of villagers into communes under the “Great Leap Forward” that Mao Zedong launched in 1958.

To this day, the party attempts to cover up the disaster, usually by blaming the weather. Yet detailed records of the horror exist in the party’s own national and local archives.

Access to these files would have been unimaginable even 10 years ago, but a quiet revolution has been taking place over the past few years as vast troves of documents have gradually been declassified. While the most sensitive information still remains locked up, researchers are being allowed for the first time to rummage through the dark night of the Maoist era.

From 2005 to 2009, I examined hundreds of documents all over China, traveling from subtropical Guangdong to arid Gansu Province near the deserts of Inner Mongolia.

The party records were usually housed on the local party committee premises, closely guarded by soldiers. Inside were acres of dusty, yellowing paper held together in folders that could contain anything from a single scrap of paper scribbled by a party secretary decades ago to neatly typewritten minutes of secret leadership meetings.

Historians have known for some time that the Great Leap Forward resulted in one of the world’s worst famines. Demographers have used official census figures to estimate that some 20 to 30 million people died.

But inside the archives is an abundance of evidence, from the minutes of emergency committees to secret police reports and public security investigations, that show these estimates to be woefully inadequate.

In the summer of 1962, for instance, the head of the Public Security Bureau in Sichuan sent a long handwritten list of casualties to the local boss, Li Jingquan, informing him that 10.6 million people had died in his province from 1958 to 1961. In many other cases, local party committees investigated the scale of death in the immediate aftermath of the famine, leaving detailed computations of the scale of the horror.

In all, the records I studied suggest that the Great Leap Forward was responsible for at least 45 million deaths.

Between 2 and 3 million of these victims were tortured to death or summarily executed, often for the slightest infraction. People accused of not working hard enough were hung and beaten; sometimes they were bound and thrown into ponds. Punishments for the least violations included mutilation and forcing people to eat excrement.

One report dated Nov. 30, 1960, and circulated to the top leadership — most likely including Mao — tells how a man named Wang Ziyou had one of his ears chopped off, his legs tied up with iron wire and a 10-kilo stone dropped on his back before he was branded with a sizzling tool. His crime: digging up a potato.

When a boy stole a handful of grain in a Hunan village, the local boss, Xiong Dechang, forced his father to bury his son alive on the spot. The report of the investigative team sent by the provincial leadership in 1969 to interview survivors of the famine records that the man died of grief three weeks later.

Starvation was the punishment of first resort. As report after report shows, food was distributed by the spoonful according to merit and used to force people to obey the party. One inspector in Sichuan wrote that “commune members too sick to work are deprived of food. It hastens their death.”

As the catastrophe unfolded, people were forced to resort to previously unthinkable acts to survive. As the moral fabric of society unraveled, they abused one another, stole from one another and poisoned one another. Sometimes they resorted to cannibalism.

One police investigation from Feb. 25, 1960, details some 50 cases in Yaohejia village in Gansu: “Name of culprit: Yang Zhongsheng. Name of victim: Yang Ecshun. Relationship with Culprit: Younger Brother. Manner of Crime: Killed and Eaten. Reason: Livelihood Issues.”

The term “famine” tends to support the widespread view that the deaths were largely the result of half-baked and poorly executed economic programs. But the archives show that coercion, terror and violence were the foundation of the Great Leap Forward.

Mao was sent many reports about what was happening in the countryside, some of them scribbled in longhand. He knew about the horror, but pushed for even greater extractions of food.

At a secret meeting in Shanghai on March 25, 1959, he ordered the party to procure up to one-third of all the available grain — much more than ever before. The minutes of the meeting reveal a chairman insensitive to human loss: “When there is not enough to eat people starve to death. It is better to let half of the people die so that the other half can eat their fill.”

Mao’s Great Famine was not merely an isolated episode in the making of modern China. It was its turning point. The subsequent Cultural Revolution was the leader’s attempt to take revenge on the colleagues who had dared to oppose him during the Great Leap Forward.

To this day, there is little public information inside China about this dark past. Historians who are allowed to work in the party archives tend to publish their findings across the border in Hong Kong.

There is no museum, no monument, no remembrance day to honor the tens of millions of victims. Survivors, most of them in the countryside, are rarely given a voice, all too often taking their memories with them to their graves.

Frank Dikötter is a professor at the University of Hong Kong, on leave from the University of London. His books include “Mao’s Great Famine.”
 
Back to the present. The general Chinese real estate bubble sounds pretty familiar (Japan at the end of the 1980's had a massive real estate bubble which the government tried to keep from popping, and the United States today...), and building "ghost cities" is diverting billions of dollars of resources from productive uses (empty buildings are dead capital). People who are expecting the Chinese to pull the global economy out of the fire might be in for a very unpleasant surprise:

http://www.theneweditor.com/index.php?/archives/12244-Is-China-the-Next-Bubble-Cont.....html

Is China the Next Bubble? (Cont.)...
Ten days ago, we linked to a piece by the Telegraph's Ambrose Evans-Pritchard that noted:

    "The Royal Bank of Scotland has advised clients to take out protection against the risk of a sovereign default by China as one of its top trade trades for 2011. This is a new twist."

Now we have Business Insider's Chandni Rathod and Gus Lubin reporting on the possibilities of a bubble in China's real estate market:

    One red flag is the vast number of vacant homes spread through China, by some estimates up to 64 million vacant homes.

    We've tracked down satellite photos of these unnerving places, based on a report from Forensic Asia Limited. They call it a clear sign of a bubble: "There's city after city full of empty streets and vast government buildings, some in the most inhospitable locations. It is the modern equivalent of building pyramids. With 20 new cities being built every year, we hope to be able to expand our list going forward."

See the photos here.
 
China is flexing its muscle. The ROK wont back down. Its only a matter of time before someone overreacts.Video at the link.

http://www.youtube.com/watch?v=eE1MHtTUTbU&feature

http://www.bbc.co.uk/news/world-asia-pacific-12026765

Fishermen and officers are seen fighting in footage filmed by the coast guard.

The crew of a Chinese trawler and a South Korean patrol ship have clashed, leaving one fisherman dead and two missing, South Korean officials say.

The clash reportedly happened as the coast guards tried to prevent Chinese boats from fishing illegally off South Korea's west coast.

Video filmed by the coast guard shows officers fighting with fishermen wielding metal bars.

Four coast guard officers were injured, reports say.

About 50 Chinese fishing boats were in waters off the South Korean city of Gunsan at the time of the clash, coast guard spokesman Ji Kwan-tae said, according to the Associated Press.

Mr Ji said one of the boats intentionally struck the patrol ship to try to allow the others to sail back into their waters - but the boat sank after the impact.

At least eight men were rescued from the sea, but one later died.

SeaFood Demand

More guard boats and helicopters were dispatched to try to locate two missing fishermen. China has also reportedly sent a rescue boat to the area.

Scores of Chinese fishing boats are captured for illegal fishing every year, the South Korean coast guard says.

Chinese vessels appear to be going further afield to feed growing domestic demand for seafood.

In September, a confrontation between two Japanese patrol boats and a Chinese trawler in the East China Sea provoked a bitter diplomatic spat.

The latest clash comes amid heightened tension on the Korean peninsula and in the waters around it.

Last month North Korea - incensed by live-fire military exercises conducted close to its coast by the US and South Korea - shelled a South Korean island.

It has threatened fresh action if a planned new drill takes place.
 
More information about the Chinese housing bubble. Given the fact a command economy can allocate resources based on the desires of the rulers rather than according to market signals, this bubble has the potential to grow far larger than the corresponding Japanese and US housing bubbles did before it pops:

http://seekingalpha.com/article/238912-how-big-is-the-chinese-property-bubble

How Big Is the Chinese Property Bubble?
20 comments  |  November 28, 2010  | about: TAO   


In times of crisis alternative economic models become more appealing. Since the USA, the beacon of capitalism was the epicentre for the current crisis and the Chinese economy escaped relatively unharmed, there is a certain logic in asserting that the central planners in China have the right economic prescription.

But as James Chanos and others have pointed out, centrally planned economies lead to malinvestment and nowhere is that malinvestment more manifest than in China’s Property market. Consider John Mauldin’s November 24th, Outside the box interview with Vitaliy Katsenelson. Katsenelson compares Japan’s property bubble of the late 1980′s to modern day China and the results aren’t pretty, from the article:

VK:In the same way that everyone in the United States decided they “must” own a house, this belief was reinforced by continuously rising house prices. You can see how big a problem this became in big cities such as Beijing and Shanghai where the affordability ratio is horrible, so the property-value-to-income ratio in Beijing is pushing 15. In Shanghai it is over 12. If you look at the national average, it is over eight times.

TCR: Can you explain that ratio to our readers?

VK: You get the ratio by taking the property value and dividing it by annual disposable income.

Basically, if you spent all your money, after you paid your taxes, just to pay off the mortgage, it would take you 14 years – which means you didn’t pay for food, electricity, etc.

This ratio is important because it helps put the scale of the Chinese real estate bubble in its proper context. In Tokyo, at the peak of the massive Japanese bubble, the ratio stood at nine times. In Beijing it’s already 14 times. In Shanghai it’s over 12 times. The national average for China is pushing 8.2 times right now. So housing affordability is very, very low, and the housing prices are extremely high.

Here is another interesting piece of data: property investment in China in 2009 was 10% of GDP, up from 8% in 2007. In Japan, at the peak of its bubble, it did not exceed 9%; in the U.S. it never exceeded 6%.

A recent study found that 64.5 million apartments basically don’t use electricity because they are empty. Chinese people buy those condos, and they don’t rent them. Similar to new cars in the U.S. when taken off the lot, in China an apartment is worth less once rented out. So they just keep them unoccupied with the hope to flip them, and you know how that story ends.

If those numbers don’t scare you at least a bit I don’t know what would. As usual, the identifcation of the bubble is not the hardest part, it’s the timing of the pop. Bubbles have a habit of going on a lot longer than most think they can and given the political pressure to keep it going and the financial resources available to the central planners, this bubble may have a way to go yet.
 
Start and end of a piece in Small Wars Journal:

Is China’s military a paper tiger or a real tiger?
http://smallwarsjournal.com/blog/2010/12/is-chinas-military-a-paper-tig/

Contradictory stories on China’s military capabilities arrived this week. China’s long-awaited DF-21D medium-range anti-ship ballistic missile (ASBM) is now assumed to be operational, according to Admiral Robert Willard, commander of United States Pacific Command. And Aviation Week and Space Technology reported (with photographs) that China’s new J-20 fifth-generation stealthy fighter has begun flight testing.
http://www.aviationweek.com/aw/blogs/defense/index.jsp?plckController=Blog&plckBlogPage=BlogViewPost&newspaperUserId=27ec4a53-dcc8-42d0-bd3a-01329aef79a7&plckPostId=Blog%3a27ec4a53-dcc8-42d0-bd3a-01329aef79a7Post%3a1a18ec63-5bf5-471c-9997-9f0bd783d131&plckScript=blogScript&plckElementId=blogDest
Are the United States and its allies losing an arms race in Asia? Not so fast, says the Washington Post: China’s military struggles to perform the most basic peacetime tasks and has gone over 30 years without any combat experience.
http://www.washingtonpost.com/wp-dyn/content/article/2010/12/24/AR2010122402788.html
By the Post’s account, China’s military is a paper tiger and is years away from operational competence. But this assessment also implies that time, diligence, and money - all of which China possesses - will fix its operational problems.

In an interview with the Japanese newspaper Asahi Shimbun, Willard asserted that China’s DF-21D ASBM has achieved “initial operational capability” although he expects that China will continue to test the missile for several more years...
http://www.asahi.com/english/TKY201012270241.html

With enough time, diligence, and money, China can fix its problems with training, equipment maintenance, and engine manufacturing. None of the input factors, especially money, are limiting in China’s case, a marked contrast with most other countries and, increasingly, the United States. U.S. policymakers will need to make clever and agile adjustments to a Chinese military modernization program that seems to be advancing faster than forecast and that has the resources needed to fix its backlog of operational problems.

More J-20 photos:
http://www.aviationweek.com/aw/blogs/defense/index.jsp?plckController=Blog&plckBlogPage=BlogViewPost&newspaperUserId=27ec4a53-dcc8-42d0-bd3a-01329aef79a7&plckPostId=Blog%3a27ec4a53-dcc8-42d0-bd3a-01329aef79a7Post%3aa3fbcaf7-a35d-4351-a848-95ddfa7bbb72&plckScript=blogScript&plckElementId=blogDest

129b42b2-63da-4fb5-989c-e74c945dfdfb.Full.jpg


Mark
Ottawa
 
This is probably a fair assessment:

With enough time, diligence, and money, China can fix its problems with training, equipment maintenance, and engine manufacturing. None of the input factors, especially money, are limiting in China’s case, a marked contrast with most other countries and, increasingly, the United States. U.S. policymakers will need to make clever and agile adjustments to a Chinese military modernization program that seems to be advancing faster than forecast and that has the resources needed to fix its backlog of operational problems.

In my opinion China is not gearing up to face a US threat or to threaten the USA. The Chinese need to be able to:

1. Defeat Taiwan, quickly, while, simultaneously, facing down US threats of interference. This is China's worst case scenario: it plans to absorb Taiwan into China, as a province, under a previously porposed "One Country Three Systems" approach with US support but, and it's a big BUT, if Taiwan does something to distance itself from eventual reunification then China may, for internal purposes - because most Chinese people believe, firmly, that Taiwan is a Chinese province, need to force the issue no matter what the USA or, indeed, the rest of the world, says or does.

2. Assert Chinese hegemony in and around East Asia, including Japan, the Koreas, Vietnam, Laos, Cambodia, Thailand, Burma, Malaysia, Singapore, Indonesia and the Philippines.

3. Face down India and Russia and India and Russia with allies in all of Asia.

4. Earn "face' from all nations.

The PLA has a major role in all these plans. It must be a credible, respected force that gives China the hard power it needs to use its fast growing soft power.
 
Interesting Russian article:

The future of China's fifth-generation stealth fighter
http://en.rian.ru/analysis/20101229/161986565.html

...
Experts call it a combination of the Russian and U.S. fifth-generation fighters, but that greatly simplifies matters. In the last 20 years, China has been working closely with Russia to develop a modern fighter jet. But the J-20 is not simply a copy of a Russian design. Rather China has tried to build a completely new aircraft based on the technology and knowledge it has gained during its years of cooperation with Russia.

The future of the new Chinese fighter will depend on several factors.

Engine

It is not clear what kind of engine the plane will have. Some say it will use the prospective Chinese-made WS-15 engine with a maximum thrust exceeding 18,000 kg, but the engine is still in the pipeline.

China has been unable to reproduce Russia's highly efficient high-temperature turbofan AL-31F engine, designed in the early 1980s and currently mounted on the Su-27 fighter and its modifications. The engines for Sukhoi planes manufactured in China are made in Russia and then assembled and adjusted in China.

The AL-31F engine is also mounted on China's J-10 fighter planes. The engine's Chinese analogue, the WS-10, is less efficient than the Russian prototype.

Materials

A fifth-generation stealth fighter must be able to evade radar, and so it must be made from modern composite materials. However, China does not produce such materials in commercial amounts, and experts doubt that it can develop and produce them for its Air Force...

Electronic equipment, primarily radar, in China stands at approximately the same level as its engines. Chinese designs fall short of the capabilities of their Russian, European and American counterparts...

Weapons

The guided weapons used in the Chinese Air Force were mostly copied from U.S., Israeli and Russian prototypes made in the 1960s through 1980s. China will have to spend a great deal of time and effort to develop its own weapons...

If the J-20 is accepted as the prototype for a new series, China will be able to produce a fifth-generation fighter plane within 10 years. If not, it will begin batch production no sooner than 15 or 20 years from now.

No one knows for sure what will happen, but it's certainly not too early to make predictions about the future of the new plane.

Given its traditional policy of aircraft manufacturing, China will most likely create a functional analogue of foreign-made 5G planes that will cost 50% to 80% less than Russian and U.S. models. China will most likely sell the plane in Central Asia, the Middle East, Latin America and Southeast Asia, as well as to the richest African countries...

...in the next 20 to 30 years China will have to continue to import modern aircraft technology. Despite the strides made by China's aircraft designers in the last 20 years, China has only slightly narrowed the technological gap dividing it from the global leaders.

Mark
Ottawa
 
Despite the strides made by China's aircraft designers in the last 20 years, China has only slightly narrowed the technological gap dividing it from the global leaders.

With all the technology transfers made to China, compliments of Industrial Espionage, I would have thought they would be a little further along....
 
Batch production in 15-20 years.... won't we be looking at starting designs for a 6th gen aircraft around then? They seem like they're behind the 8-Ball to get something out to counter the JSF.
 
In a potentially-related issue, the Chinese Deputy Premier, Li, is visiting Spain, Germany and the UK over the next week or so. Most of the media speculation is that China is considering buying up some of Europe's outstanding debt in 2011.

The other issue, not mentioned so much, is European protectionism: a couple of weeks ago the Italian EU commissioner said that he would like to see the EU set up something similar to the U.S. Committee on Foreign Investments to review whether certain assets should be sold to foreign bidders, specifically citing Chinese purchases of European technology.

Tied in with these discussions could also be China campaigning to have the EU rescind its embargo on arms trades with Beijing. I suspect the protectionism and arms embargo would be much more 'flexible' if China owned a significant portion of Euro-debt.
 
Further, China, which is already building a high speed (300 km/h) rail link from Nanning (Yunnan) to Rangoon (Burma) has just announced (so far only in the Chinese language media) that it will build a high speed line to Singapore through Laos, Thailand and Malaysia. Now that's soft power in action.
 
An article from just this past Christmas:

Military strength eludes China, which looks overseas for arms

(Demystifying China's Military 101)



Washington Post, December 25, 2010

MOSCOW - The Moscow Machine-Building Enterprise Salyut on the east side of town has put up a massive Soviet-style poster advertising its need for skilled workers. The New Year's party at the Chernyshev plant in a northwest suburb featured ballet dancers twirling on the stage of its Soviet-era Palace of Culture.

The reason for the economic and seasonal cheer is that these factories produce fighter-jet engines for a wealthy and voracious customer: China. After years of trying, Chinese engineers still can't make a reliable engine for a military plane.

The country's demands for weapons systems go much further. Chinese officials last month told Russian Defense Minister Anatoly E. Serdyukov that they may resume buying major Russian weapons systems after a several-year break. On their wish list are the Su-35 fighter, for a planned Chinese aircraft carrier; IL-476 military transport planes; IL-478 air refueling tankers and the S-400 air defense system, according to Russian news reports and weapons experts.

This persistent dependence on Russian arms suppliers demonstrates a central truth about the Chinese military: The bluster about the emergence of a superpower is undermined by national defense industries that can't produce what China needs. Although the United States is making changes in response to China's growing military power, experts and officials believe it will be years, if not decades, before China will be able to produce a much-feared ballistic missile capable of striking a warship or overcome weaknesses that keep it from projecting power far from its shores.

"They've made remarkable progress in the development of their arms industry, but this progress shouldn't be overstated," said Vasily Kashin, a Beijing-based expert on China's defense industry. "They have a long tradition of overestimating their capabilities."

Ruslan Pukhov, the director of the Center for Analysis of Strategic Technologies and an adviser to Russia's ministry of defense, predicted that China would need a decade to perfect a jet engine, among other key weapons technologies. "China is still dependent on us and will stay that way for some time to come," he said.

Indeed, China has ordered scores of engines from the Salyut and Chernyshev factories for three of its new fighters - the J11B, a Chinese knock-off of the Russian Su-27; the J10, which China is believed to have developed with Israeli help; and the FC1, which China modeled on an aborted Soviet design. It also told Russia that it wants a third engine from another factory for the Su-35.

How China's military is modernizing is important for the United States and the world. Apart from the conflict with radical Islamism, the United States views China's growing military strength as the most serious potential threat to U.S. interests around the world.

Speaking in 2009, Liang Guanglie, China's minister of defense, laid out a hugely ambitious plan to modernize the People's Liberation Army, committing China to forging a navy that would push past the islands that ring China's coasts, an air force capable of "a combination of offensive and defensive operations," and rocket forces of both "nuclear and conventional striking power."

The Pentagon, in a report to Congress this year, said that that the pace and scale of China's military reform "are broad and sweeping." But, the report noted, "the PLA remains untested in modern combat," thus making transformation difficult to assess.

'Could be sitting ducks'
One area in which China is thought to have made the greatest advances is in its submarines, part of what is now the largest fleet of naval vessels in Asia. In October 2006, a Chinese Song-class diesel-powered attack submarine reportedly shadowed the USS Kitty Hawk aircraft carrier and surfaced undetected four miles from the ship. Although the Pentagon never confirmed the report, it sparked concern that China could threaten the carriers that are at the heart of the U.S. Navy's ability to project power.

China tried to buy Russian nuclear submarines but was rebuffed, so it launched a program to make its own. Over the past two years, it has deployed at least one of a new type of nuclear-powered ballistic-missile submarine called the Jin class and it may deploy as many as five more.

The Office of Naval Intelligence said the Jin gives China's navy its first credible second-strike nuclear capability; its missiles have a range of 4,000 miles. But in a report last year, the ONI also noted that the Jin is noisier than nuclear submarines built by the Soviets 30 years ago, leading experts to conclude that it would be detected as soon as it left port.

"There's a tendency to talk about China as a great new military threat that's coming," said Hans M. Kristensen, director of the Nuclear Information Project at the Federation of American Scientists. But, when it comes to Chinese submarines carrying ballistic missiles, he said, "they could be sitting ducks."

Another problem is that China's submariners don't train very much.

China's entire fleet of 63 subs conducted only a dozen patrols in 2009, according to U.S. Navy data Kristensen obtained through a Freedom of Information Act request, about a tenth of the U.S. Navy's pace. In addition, Kristensen said there is no record of a Chinese ballistic-missile sub going out on patrol. "You learn how to use your systems on patrol," he said. "If you don't patrol, how can you fight?"


Anti-ship capabilities

China's missile technology has always been the pointy edge of its spear, ever since Qian Xuesen, the gifted rocket scientist who was kicked out of the United States during the McCarthy period in the 1950s, returned to China.

U.S. government scientists have been impressed by China's capabilities. On Jan. 11, 2007, a Chinese missile traveling at more than four miles a second hit a satellite that was basically a box with three-foot sides, one U.S. government weapons expert said. Over the past several years, China has put into orbit 11 of what are believed to be its first military-only satellites, called Yaogan, which could provide China with the ability to track targets for its rockets.

China is also trying to fashion an anti-ship ballistic missile by taking a short-range rocket, the DF-21, and turning it into what could become an aircraft-carrier killing weapon.

Even though it has yet to be deployed, the system has already sparked changes in the United States. In September, Defense Secretary Robert M. Gates said China's "investments in anti-ship weaponry and ballistic missiles could threaten America's primary way to project power and help allies in the Pacific - particularly our forward bases and carrier strike groups." The U.S. Navy in 2008 cut the DDG-1000 destroyer program from eight ships to three because the vessels lack a missile-defense capability.

But the challenge for China is that an anti-ship ballistic missile is extremely hard to make. The Russians worked on one for decades and failed. The United States never tried, preferring to rely on cruise missiles and attack submarines to do the job of threatening an opposing navy.

U.S. satellites would detect an ASBM as soon as it was launched, providing a carrier enough warning to move several miles before the missile could reach its target. To hit a moving carrier, a U.S. government weapons specialist said, China's targeting systems would have to be "better than world-class."

Wu Riqiang, who worked for six years at the China Aerospace Science and Industry Corporation as a missile designer, said that while he could not confirm that such a missile existed, he believed weapons such as these were essentially "political chips," the mere mention of which had already achieved the goal of making U.S. warships think twice about operating near China's shores.

"It's an open question how these missiles will do in a conflict situation," said Wu, who is now studying in the United States. "But the threat - that's what's most important about them."

Morale trouble

The deployment of a naval task force to the Gulf of Aden last year as part of the international operation against pirates was seen as a huge step forward for China. The implication was that China's military doctrine had shifted from defending China's borders to protecting China's interests, which span the globe. But the expeditionary force has also provided a window into weaknesses of the People's Liberation Army, according to a new report by Christopher Yung, a former Pentagon official now at the National Defense University.

China's lack of foreign military bases - it has insisted that it won't station troops abroad - limits its capacity to maintain its ships on long-term missions. A shortage of helicopters - the workhorses of a naval expeditionary force - makes it hard for the ships to operate with one another. China's tiny fleet of replenishment ships - it has only three - doesn't give it enough capacity to do more than one such operation at a time.

China's navy, according to Yung, also has difficulty maintaining a fresh water supply for its sailors. And poor refrigeration on its ships makes it hard to preserve fruit and vegetables, something that makes for griping on board.

"The sailors during the first deployment had a real morale problem," Yung said, adding that following their mission, they were taken on a beach vacation "to get morale back up."

Empowering local commanders, considered key to a successful fighting force, is something that Beijing clearly has yet to embrace. British Royal Navy Commodore Tim Lowe, who commanded the Gulf of Aden operation for the U.S. 5th Fleet up until May, noted that while other navies would send operations officers to multinational meetings to discuss how to fight pirates, China would dispatch a political officer who often lacked expertise. The concept of sharing intelligence among partner countries was also tough for the Chinese to fathom. To the Chinese, he said, "that was an unusual point."

Tension with the Kremlin

China's military relations with Russia reveal further weaknesses. Between 1992 and 2006, the total value of Russia's arms exports to China was $26 billion - almost half of all the weapons Russia sold abroad.

But tensions arose in 2004 over two issues, Russian experts said. Russia was outraged when it discovered that China, which had licensed to produce the Su-27 fighter jet from Russian kits, had actually copied the plane. China was furious that after it signed a contract for a batch of IL-76 military transport planes it discovered that Russia had no way to make them. After receiving 105 out of a contracted 200 Su-27s, China canceled the deal and weapons negotiations were not held for several years.

Purchases of some items continued - S-300 air defense systems and billions of dollars worth of jet engines. An engine China made for its Su-27 knock-off would routinely conk out after 30 hours whereas the Russian engines would need refurbishing after 400, Russian and Chinese experts said.

"Engine systems are the heart disease of our whole military industry," a Chinese defense publication quoted Wang Tianmin, a military engine designer, as saying in its March issue. "From aircraft production to shipbuilding and the armored vehicles industry, there are no exceptions."

When weapons talks resumed with Russia in 2008, China found the Russians were driving a harder bargain. For one, it wasn't offering to let China produce Russian fighters in China. And in November, the Russians said they would only provide the Su-35 for China's aircraft carrier program if China bought 48 - enough to ensure Russian firms a handsome profit before China's engineers attempted to copy the technology. Russia also announced that the Russian military would buy the S-400 air defense system first and that China could get in line.

"We, too, have learned a few things," said Vladimir Portyakov, a former Russian diplomat twice posted to Beijing.
 
The US response to the emergence of the J20 mentioned above in Mark Ottawa's post.

Reuters link

U.S. downplays Chinese stealth fighter status

Wed, Jan 05 17:22 PM EST

By Phil Stewart

WASHINGTON (Reuters) - China is still years away from being able to field a stealth aircraft, despite the disclosure of images indicating that it appears to have a working prototype, Pentagon officials said on Wednesday.

The images have been posted on a number of websites and were published on the front page of The Wall Street Journal on Wednesday. The Pentagon said they appeared to show a Chinese J-20 stealth fighter prototype making a high-speed taxi test.

The disclosure of the photographs comes just days before U.S. Defense Secretary Robert Gates is due to travel to Beijing on Sunday, and analysts could only speculate about the motives for their sudden appearance.

"This might be just a way of demonstrating that whatever obstacles there might have been (to China developing these technologies), they've overcome them," said Randy Schriver, a China expert and former State Department official for Asia.

The pictures are likely to heighten concerns about China's military buildup, including possible deployment in 2011 of its first aircraft carrier and a new anti-ship ballistic missile seen as a threat to U.S. aircraft carriers.

Some analysts say that the J-20 photos, if authentic, are a strong indicator that China is making faster-than-expected progress in developing a rival to Lockheed Martin's F-22 Raptor, the world's only operational stealth fighter designed to evade detection by enemy radar.

But U.S. Vice Admiral David Dorsett, director of naval intelligence, said deployment of the J-20 was years away.

"It's still not clear to me when it's going to become operational," he said. "Developing a stealth capability with a prototype and then integrating that into a combat environment is going to take some time."

He dismissed any suggestions that the Pentagon had underestimated China's stealth capability.


Pentagon spokesman Colonel Dave Lapan said China was still having problems with the engines for its previous generation of fighter jets.

"Our assessment of when China might have an operational fifth generation fighter puts it at some point in the future, close to the end of this decade," Lapan said.

PREMIER U.S. FIGHTER

A U.S. intelligence official estimated in May that the J-20 could rival the F-22 Raptor within eight years.

The Raptor is the premier U.S. fighter, with cutting-edge "fifth-generation" features, including shapes, materials and propulsion systems designed to make it appear as small as a swallow on enemy radar screens.

The United States hopes to field a successor to the F-22, known as the F-35, in the coming years, and news of faster-than-expected Chinese stealth technology could add pressure on Lockheed Martin and the Pentagon to speed development.

The revelation comes on the heels of warnings from the head of U.S. forces in the Pacific about China's new anti-ship ballistic missile, which could target U.S. aircraft carriers.

U.S. officials acknowledge China has moved faster than expected in developing the missile and is now in a position to start deploying it.


Dorsett said it would be a mistake to underestimate China's military advances, fueled by its fast-growing economy. At the same time, their military capabilities were only a shadow of the U.S. armed forces, he said.

"We see them progressing rather dramatically across a variety of areas, but no, I don't view them as 10-feet tall," he said.

(Additional reporting by David Alexander; editing by Anthony Boadle)


Plus more pictures of China's supposed J20 prototype, courtesy of Aviation Week and other sites:

a6b39c67-3e20-4d75-a279-e9e931a58735.Full.jpg


129b42b2-63da-4fb5-989c-e74c945dfdfb.Full.jpg


512430ff-5b70-40f1-8681-a04c255ea6f1.Full.jpg


e4e13ce2-eaf4-4980-b62a-992e72d97c30.Full.jpg
 
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