2016–2018 = China Seismic Shifts

2016–2018 = China Seismic Shifts.

40-Year Cycle Reinforces Outlook.

Feb. 2016 Stock Cycle Low Corroborates.

01/29/16 INSIIDE Track:   

40-Year Cycle & China;  2016 = (Extremely?) Unsettled Period

            01-29-16:  1976 (-1978) was a very unsettled time in China that involved seismic shifts – economic, social & even geophysical.  (The 1930’s were similar, with three Major 7.5-8.0 earthquakes followed by civil war and war with Japan.)  40 years later, the stage is set for a similarly unsettled period in 2016 (–2018).

Sept. 1976 saw the death of Mao Zedong, leaving the PRC (People’s Republic of China) without a commanding leader.  After the passage of a complete 40-Year Cycle, economists & historians are also able to pinpoint 1976 (–1978) as the death of China’s Marxist/Leninist economic approach as well… as Zedong’s death ultimately ushered in the rule of Deng Xiaoping and an eye toward reform for the ensuing ~40 years.  But that was not the only seismic shift in 1976…

Just before Mao’s death, on July 28, 1976, China suffered the most deadly earthquake of the 20th century – the Great Tangshan Earthquake – with fatalities estimated to be at least 240,000 and potentially as high as 650,000, from this 7.8 (–8.2?) quake.  A 7.1 quake quickly ensued – about 16 hours later – exacerbating the consequences and reinforcing the instability coursing through – and about to course through – that nation.

About 3 weeks later, a 7.2 quake struck Songpan & Pingwu (following a reported ~3-year swarm of increasing seismic activity).  Only days later, a devastating 8.0 struck the Philippines (though not in China, this citation is included to reinforce the ‘swarm’ or ‘cluster’ nature of massive earth disturbances).

1976 was an inflection point in China’s evolution.  It was preceded by slow reforms that began in 1972–1976 and followed by accelerated reforms in 1976–1978 (and the ensuing ~40 years) – hastened by the deaths of Mao and two other Communist Party leaders.  Multiple reforms were enacted by Deng Xiaoping – who ascended back to power after Mao’s death – in 1976–1978.

While historians can now look back and assess 1976–1978 as a positive transition & transformation – in China’s economic approach – there is no denying that it was also a tumultuous period… as all cycle transitions tend to be.

That was also a turbulent time in US/China relations, leading to the 1978 establishment of full relations.  If any time is linked to a shift in China’s global standing and economic progress, it is 1976–1978… when the reforms of Deng Xiaoping began to unwind the devastating effects of almost 30 years of Mao Zedong’s Marxist/Leninist approach.  That led to China exhibiting an average growth rate (GDP) of over 9% in the ensuing 3+ decades… and ultimately to the bubble that is now unfolding – at the culmination of that 40-Year Cycle.

Exactly 40 years later, 2016–2018 is projected to be a volatile transition period for China, involving a major shift (and overlapping/compounding China’s 17-Year Cycle that reaches fruition in 2014–2017).

Recent events – including the bubble (parabolic rise from ~2,000 to ~5,100+ in 12 months) & developing crash (drop below 2,800 in 7 months) in the Shanghai Composite AND the announcement that the Yuan will join the IMF’s SDR composition in Oct. 2016 (as well as the devaluing of the Yuan) – corroborate this analysis.

From a cycle (and half-cycle) standpoint, there is one other point to consider.  At the half-cycle (of the 40 Year Cycle) – 20 years after 1976 and 20 years before 2016 – the US & China experienced one of their most contentious confrontations – the Taiwan Strait Crisis that involved the US sending two carrier battle groups into the Taiwan Strait after China conducted military exercises aimed at intimidating voters in Taiwan’s election (their first ever direct presidential election).   Could 2016 see something similar?

With South China Sea developments, the contentious US Election campaigns, and the likelihood of more (and accelerated) downside in both China’s and the US equity markets & economies in 2016, the groundwork is certainly laid for a new confrontation.  However, it could be Taiwan’s governing transition – to a more independence minded leader & party in May 2016 – that could eventually usher in the real flashpoint.

That flashpoint – which could involve the Philippines, Viet Nam, Taiwan, China & the US – is likely to surround the artificial islands China has been building in the South China Sea.  That development – like so many other 17- and 40-Year Cycle fulfillments (BRICS New Development BankAsian Infrastructure Investment Bank, etc.) began right on schedule – in 2014… when the 17-Year Cycle & 40-Year Cycle converged.

It has progressed at break-neck speed, with China able to begin 2016 by landing a test flight on one of those man-made islands, in early-January.  That runway is capable of handling jet fighters & long-range bombers as well as military patrol aircraft.

This also means that 2016 will be the year when China is able to dramatically increase their air & sea presence throughout the South China Sea – a vital trade route (described as being worth trillions of dollars) – and begin to exercise the claims they have unilaterally made for several decades.

Bottom Line:  From a cycle perspective (17-Year Cycle from 1999–2000, when China joined the WTO and the US granted China permanent trade relations – instead of an annual review & renewal of Most Favored Nation trade status – 20-Year40-Year & 80-Year Cycles from wars, etc.), 2016–2018 could/should be a volatile period with, involving & surrounding China… just as their currency, economy & equity markets are collapsing.  Historically, that is usually a recipe for disaster – on some level.

Consider the following phases of the 40-Year Cycle and how it has impacted China’s conflict with key nations, including Britain, the US & Japan… as well as with her own citizens (civil wars)…

1810’s – America joins Opium Trade in China, initiated in 1600’s and accelerated in late-1700’s by Britain  (East India Company).  Key graphs of Opium imports time the transition/acceleration points to the 1650’s, 1770’s & 1810’s – all phases of this same 40-Year Cycle.  The 40-Year period – encompassing the late-1810’s to the late-1850’s – timed the tipping point in this trade, yielding two major Opium Wars.  The Second Opium War lasted from 1857–1860 (40 years after this phase)

1850’s – The Taiping Rebellion (1850–1864) was a massive civil war, considered bloodiest civil war ever with varying estimates of 20–70 million deaths.  It overlapped the Second Opium War (1857–1860).

1890’s – Sino-Japan War (1894–1895); Boxer Rebellion (1899–; coinciding w/severe drought)

1930’s – 2nd Sino-Japan War (1937–1945); Chinese Civil War; Soviet Invasion (1934);

1970’s – (1976–1978 = watershed events; see page 4); Sino-Vietnamese War (1979)

2010’s – 2014–2018 = 40, 80, 120 & 160 years from Major China-involved wars… as well as 200, 240 & 360 years from underlying triggers and the original Sino-Russia conflicts (see below) starting in 1650’s.

The 40-Year Cycle is ubiquitous in China’s military & geopolitical evolution.  Another prime example involves the two primary Sino-Soviet conflicts of 1929 & 1969… exactly 40 years apart.  Going back much farther, a near 40-Year Cycle of war existed between China & Russia in 1652–1689.

2016 could be another unsettled time in China, just as 1976 was.  And, with the Shanghai Composite & Yuan plummeting, domestic turmoil often prompts national leaders to look for an external conflict as a convenient distraction.  And that is where the South China Sea comes into play.

As L.U.C. would have it, with the potential for China’s economy to keep crashing, and for Chinese investors to pull out of recent hotspots like S. California, does the Law of Unintended Consequences reveal that China & California could be on a (financial) Cyclic Collision Course.  There are many reasons (cyclic & otherwise) to suspect that.  To be continued…    IT


China’s cycles – that enter a crescendo in 2016–2018 – could have dramatic impact on markets & global geopolitical structure.  Their Stock Indices have fulfilled projections for a sharp drop in January and are now approaching a multi-year cycle low (when a 1–2 year bottom is most likely) in Feb. 2016.  If fulfilled, that would corroborate related analysis for continued volatility and two-sided action – in US Indices – throughout 2016.

US Elections, IMF developments, geopolitical & geophysical cycles focus on late-2016 to accelerate these cycles and usher in a tumultuous period into/through 2018.