Good morning, and welcome to the Global Situation Report for Tuesday, 19 December 2023.
- CHINA IMPORTS RECORD CORN, BOOSTS FOOD SECURITY: China imported a record amount of corn in November despite a bumper domestic corn harvest – a sign that Beijing is focused on improving the country’s food security while geopolitical chaos increases.
- In the first 11 months of 2023, China’s corn imports were up 12% from last year, according to the country’s General Administration of Customs data released yesterday.
- China’s large domestic corn crop and these higher imports lowered the country’s corn prices and will help livestock farmers that feed corn to the world’s biggest herd of pigs.
Why It Matters: At best, Chinese policymakers are preparing for more global supply chain interruptions, which could lead to higher commodity prices. At worst, China is methodically preparing for a military conflict with Taiwan – an action that would likely result in U.S. sanctions. According to the latest Treasury data, food security is just one element of Beijing’s possible war preparations, as China has sold 14% of its U.S. Treasury holdings within the past year. By selling Treasurys and getting dollars in return, China has more dollars on hand, and they’re taking advantage of this situation by extending dollar-denominated loans to key commodity-exporting countries but demanding repayment in yuan. This strengthens China’s supply chain of vital imports and increases the global demand for yuan – steps that will have China in a strong position. – H.B.
- PHILIPPINES BUDGETS FOR 2ND THOMAS SHOAL PIER AND BASE:The Philippines’ 2024 national budget allocates funding for a “place for [their] ships to go,” according to Senator Angara of the Filipino Senate.
- Almost two million USD was proposed in August to build a pier and lodging on the Second Thomas Shoal, where the grounded BRP Sierra Madre resides.
- Filipino President Ferdinand Marcos Jr. signed a Memorandum of Cooperation with Japan “to further strengthen cooperation in maritime safety capacity building” between their two Coast Guards.
- Japan is also sending a new coastal surveillance Radar system to the Philippines.
Why It Matters: China’s recent deterrence escalation was justified by accusing the Philippines of building a proper base on the Second Thomas Shoal. These accusations are now budgeted and becoming a reality, which will justify even further escalation by China. Filipino officials recently voiced concern that China would begin boarding Filipino vessels as the next step of deterrence, which the Filipino government would encourage their people to resist. Boarding a non-cooperative vessel is frequently lethal for all parties, and both sides are now justified in their national narratives. All parties are barreling toward an engagement that is likely to result in further lethal escalation and war if no one steps in. – J.V.
- NIPPON STEEL PREPARES TO BUY OUT U.S. STEEL: Japanese steel manufacturer Nippon Steel is preparing to buy out U.S. Steel, an American company, for $14.7 billion.
- Nippon Steel “is eager to establish a global network for a new era by having a foothold in the world’s biggest steel market, which is expected to expand further,” Nippon Steel Corp. President Eiji Hashimoto told an online press conference.
- Nippon Steel expects this acquisition to bring them to 86 million tonnes of steel produced annually. This would make them the second-largest steel company in the world. Japan, as a whole, produced 83 million tonnes of steel in 2020.
- U.S. Steel produces Non-Grain Oriented Electrical Steel (NGOES) used in electric motors and generators. U.S. Steel also maintains its own mining operation to reduce costs.
- Nippon’s press release says this will help them “[provide] across the globe products and services made by the technologies across both companies in high-grade steel including electrical steel and automotive steel.” It also points out that U.S. Steel products have only been for the U.S. domestic market.
Why It Matters: Nippon Steel’s press release shows an intent to export American-made steel products around the world when they haven’t been historically. This would reduce availability, increase costs for the average American, and likely hit the American preparedness community the hardest as generators and automotive parts become harder. Additionally, this will likely boost Japan’s defense industry and exports as these steels are needed for shipbuilding and high-end electronics manufacturing. Japan recently proposed a change to its constitution allowing lethal weapon exports and has ramped up non-lethal defense product exports to ASEAN. – J.V.
THAT’S A WRAP: This does it for today’s edition. Thank you for reading. If you know folks who would also like to receive this email, would you please forward it to them? We appreciate you spreading the word. – M.S.