Offering the people of Crimea a referendum — on whether to secede from Ukraine and join the Russian Federation — may appeal to Vladimir Putin but he should not expect support from China. For two very simple reasons: Hong Kong and Taiwan. China claims these two territories as part of China, but there are no prizes for guessing the outcome if a similar referendum (to secede) were held in either territory.
Shanghai remains bearish
China’s Shanghai Composite Index is testing short-term resistance at 2080. Breach would suggest another test of 2180. But the primary trend is downward and follow-through below 1990 would signal a decline to 1850*.
* Target calculation: 2000 – ( 2150 – 2000 ) = 1850
China Sides With Russia on Ukraine | The Diplomat
Shannon Tiezzi writes:
China’s ambiguous position reveals its dilemma. Beijing’s instinct is to back Moscow, both to uphold the fruitful cooperation between these two nations and to stand firm against pressure from the West. However, vocally supporting Russia would violate China’s principle of non-interference. More importantly, it could arguably set a precedent of Chinese support for military intervention to protect separatists unhappy with their government—which goes against all China’s instincts, given its own issues with Tibet and Xinjiang provinces. Yet as the Global Times put it, at the end of the day power calculations mean more than principles. China’s geopolitical strategy requires Beijing to at least tacitly support Russia, and at the end of the day that argument outweighs more abstract philosophical concerns.
Read more at China Backs Russia on Ukraine | The Diplomat.
As China looks on, Putin poses risky dilemma for the West | Reuters
David Rohde at Reuters quotes James Jeffrey, a retired career U.S. diplomat:
Jeffrey said the days and months ahead will be vital. If Putin faces few long-term consequences for seizing Crimea, it will set a precedent for China and other regional powers who may be considering establishing 19th century-style spheres of influence of their own.
“The Chinese,” Jeffrey said, “are in the same position.”
Read more at As China looks on, Putin poses risky dilemma for the West | Reuters.
China faces challenges
I have kept Michael Pettis January summary of the four challenges facing China:
- China is over-reliant on credit to generate growth;
- Attempts to boost consumption will reverse the long-standing subsidy of new investment;
- Attempts to resolve excess capacity also slow growth; and
- Unrecognized bad debt on bank balance sheets means that growth is overstated.
China’s Shanghai Composite Index is again testing support around 2000. Follow-through below 1990 would signal a primary decline to 1850*. Reversal of 21-day Twiggs Money Flow below zero would warn of medium-term selling pressure. Respect of support is less likely, but would suggest another attempt at 2150/2250.
* Target calculation: 2000 – ( 2150 – 2000 ) = 1850
China hesitant but Hang Seng bullish
China’s Shanghai Composite Index recovered above 2100, suggesting another test of 2250. 13-Week Twiggs Money Flow oscillating around zero reflects indecision typical of a broad consolidation. Breakout above 2250 would complete a reversal, but breach of 1950 remains as likely and would warn of a decline to the 2008 low of 1700*.
* Target calculation: 1950 – ( 2200 – 1950 ) = 1700
Hong Kong’s Hang Seng Index displays a large bullish ascending triangle on the monthly chart. Breakout above 24000 is more likely and would signal a primary advance, but reversal below the rising trendline would warn of a decline to 20000.
Shanghai rally
Declining 13-week Twiggs Money Flow (not shown) warns of long-term selling pressure on China’s Shanghai Composite Index, but the daily chart shows medium-term buying pressure. The index is currently testing 2080 on Monday, after the lunar new year last week, but the primary trend remains down. Respect of resistance at 2120 would reinforce this. Breach of support at 1950 is unlikely at present, but would test the 2008 low of 1700*.
* Target calculation: 1950 – ( 2200 – 1950 ) = 1700
Shanghai decline
China’s Shanghai Composite Index found short-term support at 2030 on Tuesday, but another test of the primary level at 1950 appears inevitable. Declining 13-week Twiggs Money Flow warns of selling pressure. Breach of support at 1950 would offer a target of the 2008 low at 1700*.
* Target calculation: 1950 – ( 2200 – 1950 ) = 1700
Shanghai surprise
The Shanghai Composite Index found support at 2000 and is retracing to test resistance at 2100. Respect would indicate a strong primary-down trend, confirmed if support at 1950 is broken. Some may find the move surprising after weak manufacturing PMI data on Thursday, but the real estate sector surged on the back of falling money-market rates following a liquidity injection by the PBOC. A 13-week Twiggs Money Flow peak below zero would also warn of long-term selling pressure.
* Target calculation: 2100 – ( 2250 – 2100 ) = 1950
China: Roiling the Waters
Roiling the Waters: Why the United States needs to stop playing peacemaker and start making China feel uncomfortable.
BY Elbridge Colby, Ely Ratner
History has demonstrated the perils of focusing too much on stability at the expense of deterrence. The Cuban missile crisis, the modern world’s closest brush with the apocalypse, was precipitated by Soviet Premier Nikita Khrushchev’s perception that the United States, especially President John F. Kennedy, was overly concerned about stability and cooling tensions between the superpowers. Khrushchev’s sense that America could be pushed was formed by Kennedy’s cautious reactions to assertive Soviet moves toward Berlin, as well as Khrushchev’s measure of Kennedy at the 1961 Vienna superpower summit as “weak” and accommodating……..
OF COURSE, CHINA IS NOT THE SOVIET UNION. And 2014 is not 1962. The point is simply that a country with the power of the USSR or China, unsatisfied with features of the existing order, motivated to do something to change it, and skeptical of the resolve of the United States, could well pursue a policy of coercion and brinkmanship, even under the shadow of nuclear weapons. As historian Francis Gavin has argued, the whole history of the Cold War shows that countries like China — and, at times, the United States — can bluff, coerce, and threaten their way to geopolitical gain.
The worst way to deal with such a power is to leave it with the impression that these approaches work. Just as the United States would have been far better off if Kennedy, at the Vienna summit, had squelched Khrushchev’s doubts about his resolve to defend Berlin, it will be far better if the leadership in Beijing has the clear sense that the United States will meet each challenge to its and its allies’ interests resolutely.
Read more at Roiling the Waters.
An appeaser is one who feeds a crocodile, hoping it will eat him last.
~ Winston Churchill