Beijing

It may be Saturday, but there is no rest for the onslaught of negative data from China, which overnight reported the latest, December, consumer and producer price inflation numbers, with the former printing at 1.6% Y/Y, matching consensus estimates, and a tiny increase from the 1.5% in November: the rebound was largely due to one-time items. For all of 2015, CPI rose 1.4%, the slowest annual increase since 2009 and well below Beijing's goal of keeping last year's inflation below 3%. In 2014, CPI rose 2.0%.

When last we checked in on the dispute over Beijing’s land reclamation efforts in the South China Sea, several dozen protesters from the Philippines were camped out on Pagasa island in a demonstration aimed at raising awareness of what they say is an illegal occupation of the Spratlys.

To let China tell it, it’s the other way around.

That is, the Filipino troop presence in the archipelago represents an illegal occupation of territory that belongs to Beijing and China would be well within its rights to forcibly expel the occupying army.

One topic we’ve spent quite a bit of time discussing is the rise of the PLA navy. 

2015 was the year Xi reasserted China’s maritime might - and not just in the South Pacific. 

Two days ago, an armed Chinese ship and two other vessels entered the waters north of Kuba Island and encroached on Japanese territorial waters starting at around 9:30 a.m. Kuba is part of the Senkakus which are at the center of a longstanding dispute between Beijing and Tokyo.

We and others have long wondered how long it would be before China looks to flex its military muscle in the Mid-East under the “war on terror” banner. 

Xi has been especially keen on demonstrating the PLA’s growing influence in 2015 especially as it relates to Beijing’s maritime might. Anyone who follows geopolitics is likely well acquainted with China’s land reclamation efforts in the Spratlys, where dredgers have been busy constructing some 3,000 acres of new sovereign territory on which Xi is building a number of things including runways and ports.