I mean, it’s not going to be worse than the 2014 sanctions. But the opportunity to revive the economy is now lost, and things aren’t going to get better until the so-called BRICS figure out among themselves how they want to move forward from the status quo.

The fact that both Russia (literally at war with NATO and the collective West) and China (literally under continuous sanctions from the US) continue to be obsessed with “replenishing the budget” just demonstrates the ideological victory of neoliberalism. Even the countries that want to decouple from Western imperialism find themselves unable to abandon neoclassical theories that sustain the global neoliberal free trade regime.

Until BRICS has decided that they want to create an entirely new economic doctrine and a new trade, financial and monetary system that opposes neoliberalism, they will continue to have to play by Washington’s rules. If it is just multi-polar neoliberalism, then nothing will change. Workers will still be exploited, rich countries will continue to extract from the poor countries, depriving them of economic sovereignty, international financial capital will continue to control the global supply chain in the guise of IMF bailouts and financial takeovers, and the probability of a world war rises as they cannot resolve the increasing contradictions of capitalism.

Finally, if you look at the central banks accumulating gold in recent months, is it not proof that nobody has a clue (or could not come to a consensus) on how to build a new international financial system to displace the dollar regime? So they turn to hoarding gold, hoping to offset the depreciating value of the dollar that they have accumulated over the years by running the IMF-advised trade surplus strategy, as Trump now insists on reducing the US trade deficits. After three years of intense debate, there is still no consensus. We need to see a theoretical and an institutional breakthrough here.

From Russian telegram:

A New Tax, an Old Trick: How Industry is Being Supported in Russia.

The Ministry of Industry and Trade and the Ministry of Finance have decided that Russian industry is too happy without additional “inspiration” from the state. An “industrial levy” is looming on the horizon starting September 1, 2026—effectively a new payment on finished industrial products in critical sectors. Officially, it is billed as a tool to support technological sovereignty; unofficially, it is another way to replenish the budget.

Both importers and domestic producers will be taxpayers. Initially, the levy will be levied only on finished products, and then the list of taxable goods will gradually expand. The levy rate is determined individually for each unit of production, but will not exceed 5,000 rubles , which officials call a “moderate burden.”

However, let’s add some context: the industry is already in decline—the manufacturing PMI is at ~47 points , indicating a contraction in activity. Government support is effectively being cut: industrial subsidies are included in the draft budget for 2025-2027, but they are comparatively small and will hardly cover the burden. As a reminder, approximately 186.5 billion rubles have been allocated for the electrical and electronic industry development program —less than 0.5% of all federal spending (or, more precisely, approximately 0.42% of the budget). This amount is intended to support domestic manufacturers of microchips and radio equipment, but funding for this program is planned to be cut starting in 2027, making the project more symbolic than industrial.

Investment loans have become extremely expensive—high interest rates make any project less profitable. Meanwhile, the profitability of most industries is low, margins are thin, and the burden is growing: raising VAT from 20% to 22% adds a burden, and the fee adds a burden.

The result is as follows: industry is in decline; there is almost no assistance; loans are expensive; taxes and new fees are plentiful.

Sad. You’d think a war economy would revive Russia’s industries? Putin is showing you what it’s like to fight a war while tying both hands behind your back.

Yes, and most countries do not like that. They want their local economy to benefit from foreigners’ spending, not for the money to go back to foreigners while their own people earn nothing. If you go travel, you visit a local shop and spend, you’re helping the local economy. That’s the whole point of tourism economy.

The situation is very bad, although the China-Japan tension comes and goes every decade or so.

As you can see Japan’s economy is struggling, and with a decreasing population, trying to open up immigration led to more backlash from the general population who are also struggling.

Right wing populism is on the rise globally, and in a weirder way, I think both China and Japan ruling classes welcome it - China gets to distract its population from the internal economy problem, and Japan is also the same.

This reminds me of the 1930s rise of militarism in Nazi Germany and Imperial Japan in the wake of the Great Depression. Perhaps we’re heading towards another great war. Scary but it’s increasingly likely because of Trump’s madness with his global tariffs. The US going into recession is going to kill a lot of exporter economies, and I am really scared what’s going to happen next.

Yes, that’s how my parents travel lol.

While it is true, most tourists still have to eat and shop at places owned by locals. You still take local transportation. That’s how tourism stimulates local economy, otherwise no countries would want to invest in tourism.

The genius part of the whole Chinese-owned loop is that you can literally visit a foreign country (especially Southeast Asia) with minimal spending into the local economy (and especially in countries that lower their taxes to encourage foreigners to visit). All the revenues get distributed among Chinese businesses and remitted back to China.

This strategy also enabled the whole monopoly to drive down prices, and destroy competition. If you’re a local shop, you don’t get to earn from Chinese tourists because they already have their designated places to shop and eat.

Yeah probably the same concept, although my understanding is that Westerners are less inclined to take tour groups when traveling?

The younger Chinese generation also prefers to travel by themselves but there are still plenty of people, especially the elderly, who use these tour groups, first because they don’t know how to do the research and are not used to traveling to a foreign country by themselves, and second because those tour groups can drive the price of the tour packages really low, which is enticing until you realize there are all sorts of hidden costs included.

If you look at the last election result, it’s very clear that many Japanese dislike Chinese tourists. There is a clear rise in anti-China sentiment for quite some time now, especially since the Japanese yen exchange rate has fallen over the past few years.

But zero-dollar tourism is a real issue, especially for the poorer Southeast Asian countries like Thailand.

Basically, if you have ever joined a Chinese tour group (popular with the older folks), they’ll bring you to Chinese-owned hotels, Chinese-owned restaurants, Chinese-owned shops, Chinese-owned transportation, etc. The entire loop is Chinese owned.

By creating such loop, Chinese tour agencies have been able to drive the prices down (and killing off the other competitors) and they get their profit back by earning commissions when bringing the tourists to Chinese-owned shops. If you’ve ever been in one of those Chinese tour groups, you CANNOT skip the shopping part, the tour guides will literally coerce you (emotional and psychological manipulation, begging, etc.) to buy from those shops, or you won’t be allowed to leave, because that’s where they actually earn their profit. It’s one of the worst parts of those tours lol.

As a result, the local economies of those countries barely benefit from Chinese tourists, and Chinese tour agencies drive the prices down and kill the profitability of local tourism. You can imagine why there are countries who really do not like Chinese tourists flooding their countries.

The US has no capability for infrastructure building anymore.

This is not new at all. Back in 2011, the (then) new San Francisco-Oakland Bay Bridge had to be built by China. That’s nearly 15 years ago.

I’m not an expert but do lurk around Chinese space nerd online groups.

Starlink (and SpaceX in general) is one of the few areas where even Chinese space nerds will admit the gap between the US and China is actively widening, as in SpaceX is actually doing way better than the rest of the world.

People don’t like SpaceX because it’s associated with Elon Musk. China’s manned space program has been around since 2003 and there has been a total of 16 crewed orbital missions. SpaceX’s Crew Dragon only started in 2020 and already has 18 crewed orbital missions, and have carried more people to space than the entire span of China’s 20+ years of manned space program. Apparently it’s because SpaceX has managed to bring the cost of rocket launch down significantly.

I also don’t think the US is trying to compete with China on industrial production. Both mainstream and alt media are guilty of perpetuating this narrative.

I mean, did anyone forget that the US could not even compete with Japanese industries back in the 1980s, when the US industrial base was MUCH stronger back then. Who in their right mind would think the US can now compete with China? It would require the entire US establishment to forget the decades-long struggle against Japan’s much more energy and cost efficient industrial base where the lessons were already learned 40 years ago, which is absurd.

The only way out for the US is to go full financialization, using tariffs to exploit China’s industrial power to kill other exporter economies in the Global South (since China refuses to give up its net exporter status), then the US comes in with financial takeover of the failing sectors, which will allow it to reshape the global supply chain.

There is one problem though: how would the US deal with the deteriorating conditions for the working class in the US, which had led to a rise in populist movements? Here’s where Europe comes into play. The US is going to force the EU into switching places with itself, where the US gets partial re-industrialization (with the EU being coerced to import from the US, since the US is not able to compete with China and other exporter economies at much lower cost) while the EU de-industrializes itself.

China is very pragmatic, and if you’ve seen my posts, China is currently going through a phase of economic downturn with prolonged deflation and local government debt crisis, and so without a domestic consumer market, it really cannot afford to let the US screwing up global free trade as Trump has been threatening to do. All the best cards (e.g. rare earth exports) are being used to keep the US from decoupling from China precisely because of this. The two economies are too closely tied to one another that China cannot afford to see prolonged inflation or a recession in the US.

The government has already spent trillions of stimulus to boost domestic consumption and resolving debt issue (化债) but the effects have been marginal at best. All the details that have been released about the 20th Five-Year Plan so far have shown that there will be nothing out of ordinary from its usual policies, except for more focus on high-tech sector and boosting consumption.

Government subsidies and high-tech sectors aren’t going to solve massive wealth inequality, it requires a complete restructuring of how the economy is run. If the government does not want to run a deficit to provide full employment, then it cannot resolve these fundamental issues.

On a side note, I’ve seen an uptick on the left internet lately that have fully bought into the “China is WINNING, the US is COLLAPSING” discourse, which is really just the inverse of “China is going to COLLAPSE any day now!” narrative fueled by right-wing propaganda, neither of which even made an attempt to understand the complexity and the dynamics of global economic, trade and financial systems.

And once you understand these and knowing that China is very pragmatic about saving its own economy, a lot of things will make sense.

Russia is also more or less the same. It has failed to use the opportunity provided by the Ukraine war to achieve an economic transformation under global sanctions, and so will have to continue to play by the rules set by Washington.

It’s not about whether they are doing it right or not, it’s about the fact that if there is no alternative bloc, the periphery (many Global South countries) will be the ones to be squeezed for the imperial core’s mistakes.

Yes the US is heading towards worsening situation, but the periphery will always suffer worse during this process under the current neoliberal free trade order. That’s why I talk so much about China’s domestic consumption but you already know that.

You want to think not just what one or two countries are doing, but the big picture of how their actions can have large impact on the global economy.

It won’t, but it has also become an inherent contradiction of American capitalism that can no longer be ignored. In other words, it has to be addressed one way or the other.

I truly believe that the bourgeois establishment had entirely bought into the idea that Hillary already had it in the bag during the 2016 presidential election, but Trump’s unexpected victory sent a different message and a wake up call to the establishment. The dissent that propelled Sanders and Trump’s movements could no longer be ignored.

(Also note how coincident it was that the technocratic social control on the internet and the development on AI and its vast influence on controlling the flow of information also began to be picked up by the establishment around 2016.)

Hence the 2018 US-China trade war, which can be seen as an initial probing attacks to identify the global reaction. Then the 2020 Covid pandemic which very conveniently turned into a dry run for logistics disruption from China. The 2022 Ukraine war eliminates the EU as a potential consumer market and the euro as a direct competitor to dollar hegemony, and paves the way for the 2025 Trump’s global trade war.

All of these seemed like madness at the time, but if we look beyond the superficial “great industrial power struggle” and “geopolitical chessboard” and focus more on the Marxian dimensions of class struggle and industrial versus finance capitalism, you will notice the method in the madness that at least attempts to want to resolve or lessen this contradiction by sacrificing European industries to force some level of re-industrialization just enough to quell the internal dissent, but at the same time still maintaining its financial hegemony to extract surplus values from the rest of the developing world.

Of course, China is not stupid and you can see it constantly dragging the US back into the neoliberal status quo. Unfortunately, China just doesn’t seem to want to have radical change (understandable) and it wants to continue to enjoy being the beneficiary of dollar hegemony (and has no intention of disturbing that arrangement). Hence, we’re probably going to see a renewed status quo at some point, or the two will continue to fight it out until both are exhausted and are forced to compromise.

Finally, I should point out that history has shown us that the future is just as unpredictable. Say you’re in 1985, the Plaza Accord has just been signed. The Japanese thought they had outplayed the Americans at a small cost of sacrificing some exports, and win with the greater glory of financially owning the United States of America. The Americans also believed they had outplayed the Japanese in their goal to re-industrialize America. But who won?

At that point in time, nobody could have anticipated that what would later transpire would be so far off anyone’s expectations.

And amidst the longstanding US-Japan trade war that had been going on since the 1960s, which culminated in the fight for semiconductor dominance in the 1980s, very interestingly, it turned out to be South Korea and Taiwan that overtook the American and Japanese giants.

I have said many times that we are going to see the export of dollars shifting from US running persistent trade deficit into foreign direct investment, as part of its new strategy to sustain dollar hegemony (Jia Genliang’s theory, not mine).

This is a win for the US as it gets to continue to extract cheap surplus goods from the rest of the world WHILE reducing its trade deficit that has caused domestic working class dissent due to long-term deindustrialization (the EU will most likely be the one to deindustrialize and being coerced to purchase American goods to balance that side out).

On the other hand, it’s also a win for China who wants to maintain its net exporter status and the foreign investment money will help bail out many of the struggling industries caused by sluggish domestic consumption and hence, deflation, since the Chinese government has listened to the IMF and is averse to running large deficits.

A win-win cooperation. The biggest losers are going to be Europe and many developing countries in the Global South, if this new status quo is the end result.

I usually don’t comment on Chinese military stuff (because reasons) but it’s undeniable that Chinese drone tech is already far ahead of anyone at this point. Russia may have a head start but China’s industrial prowess together with their advanced AI and computer vision stuff is no joke.

China probably learned all the lessons from just watching how Russia and Ukraine fight it out without even being in the war. Remember both sides also used a lot of Chinese drones and surely they have accumulated vast amount of data points from the drone usage in action.

And China can and already does outproduce everyone, not just in drones, but in all aspects of military equipments, in just the last 2-3 years. If China truly wants to ramp up its weapons production, nobody would be able to compete with it.

It came from the very comprehensive study by the IAR (Institute of Advanced Research) macroeconomic group from the Shanghai University of Finance and Economics at the end of 2020.

Using their advanced model (IAR-CMM), anticipating quick Covid recovery and various macroeconomic policies proposed by the government, of all the 8 scenarios, the most pessimistic calculation was 7% real (not nominal, which should be higher) GDP growth by 2021, the most optimistic being 10%. I am actually being conservative with 8%, taking a middle number from all the simulated scenarios.

Again, this was a very comprehensive study that took into account almost all the important parameters, including external trade, supply-side reform, market order, domestic uncertainty, local government debt, corporate debt leverage, US-China relations, global pandemic development and domestic uncertainty, etc. If nothing else, it’s very good summary on the many different facades of China’s economy, at least up to that point in 2020.

The point is just how difficult it is to forecast future economic growth, and especially the huge and unexpectedly prolonged disruption under Covid pandemic.

If you ask me, I think Covid really changed the game. Nobody really saw the aftermath coming. It was unfathomable just a few years back that we could see an economic downturn so fast, even though the property market bubble had been raising alarms.

Back in April 2020, when Xi’s Dual Circulation strategy (external trade balanced by internal consumption) was rolled out, it was expected to sustain an annual 8% growth rate over the next 20-30 years (!!).

Today, with the new FYP rolling out, the goal is to maintain 4.17% annual growth until the 2035 target of long-term development.

The disparity is wild, when you consider that the annual growth rate is exponential. A 4% differential means a 50% difference over 10 years! So the government has effectively cut its own anticipated economic growth by half over the next 10 years.

Today’s Naked Capitalism link but this should come as no surprise if you have been following what I said about China’s marked liberal turn in policies since last September - coincidentally, right after the Fed first cut its rate since 2022.

It’s a clear signal that China wants the US to return to the status quo, but will the US bite?

If Trump insists on reducing the US trade deficit, then dollar hegemony will have to be sustained via foreign direct investment. We could be seeing a shift in the export of dollar towards investment while the trade deficit is cut back.

China to embrace free market, free trade and import more: Premier Li Economic Times

Chinese Premier Li Qiang on Wednesday called for embracing free markets and pledged to open China’s consumer market after Beijing and Washington reached a trade deal, raising expectations of normalcy in the restoration of global supply chains.

“At a time when the world economy is slowing down and international disputes are intensifying, we must all the more adhere to equal and mutually beneficial cooperation, embrace free markets and free trade, and resolve cross-border contradictions and problems through joint development,” Li said.

He was speaking at the opening ceremony of the eighth China International Import Expo (CIIE) and the Hongqiao International Economic Forum in Shanghai.

“China is willing to work with all parties to create an open and inclusive development environment, enhance the level of trade and investment liberalisation and facilitation, ensure the stability and smooth operation of global industrial and supply chains, and better gather momentum for economic development,” he said.

He said China’s economic scale in the next five years was projected to exceed 170 trillion yuan (USD 23.9 trillion).

China will steadfastly advance high-level opening-up to the outside world, he was quoted as saying by the Hong Kong-based South China Morning Post.

…

Ahead of the final agreement, China has agreed to lift the ban on the exports of rare earth metals - much needed for the US defence industry - and resume imports of US soybeans.

Trump signed an executive order to roll back 10 per cent of the “fentanyl tariffs” imposed on China. Both sides officially extended the tariff truce they had agreed on the “reciprocal tariffs” for one year.

Li visited pavilions set up by some US companies after the opening ceremony, sending a clear signal to American and global businesses that the Chinese market would still be fully open to them amid the de-escalation of the trade war between the world’s two largest economies, the Post reported.

Li, however, condemned the rise of tariffs in international trade without naming the US, noting that they had “seriously undermined international economic and trade rules and disrupted the normal operations of enterprises” in various countries.

China, which continued to be an export-dependent economy, grappled with slow growth of domestic consumption as the Chinese were reluctant to spend due to concerns over job prospects and a poor economic outlook.

This year’s CIIE sets a new record in scale, featuring over 4,100 foreign exhibitors from more than 150 countries and regions, Chinese Foreign Ministry spokesperson Mao Ning told a media briefing in Beijing.

China will continue its effort of expanding and opening up so as to share the opportunities of China’s mega market with the world, she said.

Global Times are the so-called establishment (建制派) mouthpiece, meaning that they go with whatever is in favor by the establishment.

And I don’t know if you’ve noticed, but the establishment has turned increasingly liberal since last September. Xi has practically abandoned and even reversed his decade long effort to curb private capital by the beginning of this year.