As tensions rise between China and the US, and the race for hypersonic weapons heats up, the Chinese Communist Party's daily tabloid newspaper Global Times is reporting "record-breaking progress" has been made in scramjet technology to power its hypersonic weapons.

Researchers at the Institute of Mechanics under the Chinese Academy of Science developed and tested new scramjet technology that resulted in a ground test that lasted 600 seconds (considered a "technological breakthrough"). Now, this far outpaced the world record of 210 seconds set by Boeing's X-51 Waverider using experimental scramjet technology to achieve hypersonic flight.

A scramjet (supersonic-combustion ramjet) is a ramjet engine in which the airflow through the engine remains supersonic. Global Times notes that developing such an engine that can operate for an extended period remains challenging because advanced heat resistant materials and cooling of the engine are needed for March 5 (>3,800 mph).

Eight months after we penned a piece titled "Taiwan Warns Of Possible Invasion If China's Economy Continues To Deteriorate" -- a virus pandemic has crippled the global economy and Taiwan on Thursday (June 11) conducted missile tests off several of its coasts as tensions between China and the US are rising in the Taiwan Strait.

The South China Morning Post (SCMP) is reporting that Taiwan has test-fired missiles off its eastern and southern coasts as the self-ruled island increases its defense capabilities against mainland China.

The tests were held near Taiwan's eastern county of Taitung and the Jiupeng military base in the southern part of the island on Thursday night.

India and China agreed to resolve a current border standoff peacefully in line with various bilateral agreements and will keep each other engaged as talks remains deadlocked.

“The two sides will continue military and diplomatic engagements to resolve the situation and to ensure peace and tranquility in the border areas,” India’s ministry of external affairs said in a statement.

President Donald Trump’s pick to lead the US intelligence community said Tuesday that he would focus on China as the country’s greatest threat, saying Beijing was determined to supplant the United States’ superpower position.

Were China doing this by using news agencies like AFP to lie to the public to justify invading Middle Eastern nations, killing tens of thousands of innocent people, installing client regimes worldwide, and using its growing power to coerce and control nations economically and politically when not outright militarily – US President Donald Trump’s “pick” – John Ratcliffe – might be justified in focusing on China and its “determination” to “supplant the United States’ superpower position.”

However, this is not what China is doing.

China Building Rather than Bombing

A new and troubling question is suddenly looming for Beijing: will the Trump administration abuse the power of the US dollar to hurt China following Beijing’s plan to impose a new national security law in Hong Kong?
While the probability remains very low that China will be treated like Russia or Iran, and US President Donald Trump has not mentioned sanctions against Hong Kong or Chinese financial institutions, the risk of a financial war – including being cut off from the US dollar system – is no longer “unthinkable” for China.
If Washington were to sever China’s corporate and financial system from the US dollar payments system, which is underpinned by infrastructure such as the Swift international payments messaging system and the Clearing House Interbank Payments System (Chips), it could start a financial tsunami that would lead global finance into unchartered territory, officials and analysts said.

No shots have been fired, as the de facto border code dictates, but the soldiers have fought fiercely with rocks, wooden clubs and their hands in a handful of clashes. In one melee at the glacial lake Pangong Tso, several Indian troops were hurt badly enough that they had to be evacuated by helicopter, and Indian analysts said Chinese troops were injured as well.

Nobody thinks China and India are about to go to war. But the escalating buildup has turned into their most serious confrontation since 2017 and may be a sign of more trouble to come as the world’s two most populous countries increasingly bump up against each other in one of the bleakest and most remote borderlands on earth.

President Trump, unsolicited, stepped in on Wednesday, offering on Twitter to mediate what he called “a raging border dispute.”

Veteran traders couldn't help but laugh when they checked US equity futures last night and saw that - as some probably had suspected they might - Dow futures were tracking for a 100-point jump at the open. With so much emergency liquidity still sloshing around the financial system, it seemed the most near-term risk many could fathom was a probable spike in new coronavirus infections in the coming weeks, hardly an imminent, overnight risk.

But as futures faded into the red around 6amET, a headline showing Beijing had just given the US-China 'Phase 1' trade deal - which has been essentially moribund for weeks now even though President Trump spared it on Friday - one more 'kick' seemed to remind investors where the real near-term macro risk lies: That is, the light-speed "decoupling" of the world's two largest economies.

Li Zuocheng told Beijing's Great Hall of People today: 'The people's armed forces will take all necessary steps to resolutely smash any separatist plots or actions'

It is very rare for such a senior figure to make such a public threat against Taiwan

Beijing claims Taiwan, but the island democracy refutes it is part of China
It comes as China is cracking down on Hong Kong's democratic powers

China will attack Taiwan if there is no other way of stopping it from becoming independent, one of the country's most senior generals said today.

Li Zuocheng, chief of the Joint Staff Department and member of the Central Military Commission told Beijing's Great Hall of the People: 'If the possibility for peaceful reunification is lost, the people's armed forces will, with the whole nation, including the people of Taiwan, take all necessary steps to resolutely smash any separatist plots or actions.'

The Pentagon and national security agencies directed by the White House have also been discussing the viability of engaging in war with those same two global competitors Russia and China, either individually or even simultaneously. Yes, it is true that many countries wargame certain scenarios that are unlikely ever to occur, but there is nevertheless a certain consistency in the bellicosity that comes like an endless stream out of the Trump White House.

The US is waging undeclared war on China by other means.

Trump and congressional hardliners escalated things beyond where their predecessors went.

What’s going on is all about aiming to undermine China’s growing political, economic, financial, industrial, technological, and military development and prominence on the world stage.

It has nothing to do with a PRC military or other security threat. China is at peace with its neighbors and other nations.

On Thursday, Pompeo continued his war of words on China.

Falsely accusing Beijing of eroding Hong Kong’s liberties — a US specialty at home and abroad — he urged “decertification” of the city, saying:

“I can no longer certify that Hong Kong continues to warrant…deferential treatment under US law.”

He falsely claimed that China’s new national security law “contradicts the spirit (of) the one country, two systems framework.”

With a new round of trade war increasingly likely between the US and China, Beijing has been buying Brazilian soybeans in a sign the Asian nation may be looking to secure an alternative source of supplies. According to Bloomberg, the world’s top soybean importer purchased more than 10 cargoes in Brazil this week, despite higher prices. In a further sign that China appears to be distancing from the US, Bloomberg adds that while China bid for American soy on Tuesday, state-run buyers were absent from the market Wednesday, the people said.

The Washington-Beijing tit-for-tat is growing on a number of fronts, but has the potential for direct conflict in the South China Sea, where both countries are busy flexing, also on the heels of accusations and counter charges over the COVID-19 pandemic's origins and cover-up.

Fox's Lucas Tomlinson reports Thursday, "One month after U.S. guided-missile destroyer Mustin harassed by Chinese warship from a carrier strike group, the Mustin cruises by contested islands in move likely to irk China."

Specifically the Arleigh Burke-class guided missile destroyer sailed near the Paracel Islands in a contested area of the South China Sea.

As President Trump prepares to sign a bill imposing new sanctions on Chinese officials involved with the country's sprawling security state, the White House has just unveiled its latest measure to turn up the pressure on Beijing: Chinese grad students with ties to the PLA will be barred from returning.

Eleven years before the joint construction of the Wuhan Institute of Virology, French intelligence services warned Paris that China's reputation for poor bio-security could lead to a 'catastrophic leak,' according to the Daily Mail.

In 2004, the EU's chief brexit negotiator, Michael Barnier, ignored those warnings - signing off on the lab's construction when he was the French foreign minister.

Two dozen companies and institutions including the tech giant Qihoo 360 Technology were placed on the first so-called entity list for “supporting procurement of items for military end-use in China”
Nine entities were put on a second list for their alleged roles in rights violations in the Xinjiang region

CHINA is reportedly set to deploy its two new aircraft carriers off the coast of Taiwan as it warns the US of a “new cold war”.

The huge carriers, the Liaoning and Shandong, are currently engaged in combat readiness training in the tightly controlled Bohai Bay, in the Yellow Sea before sailing to join an invasion war game near Pratas island.

In his overnight market commentary, Rabobank's Michael Every laid out an interesting hypothesis why markets continue to fade the risk of a serious escalation in tensions between the US and China: "within serious HK money circles there is absolute certainty that the US is now an EU-style paper tiger and has no stomach for a real fight, and that Trump is so beholden to Wall Street that he won’t dare act."

And while Every himself disagrees with this sanguine assessment, saying this stance "captures the self-confidence in Beijing but utterly fails to capture the bipartisan anger in DC, or the fact that both sides are using Beijing as a stick to beat each other with in the 2020 presidential election, or that the US has financial weapons as fearsome as its military, or that the Fed is there to prop up the stock market anyway", he appears to have a point regarding China's "self-confidence."

And U.S.-Chinese relations could get even worse than they are right now.

Are you prepared for a bumpy ride?

Let’s unpack this…

Last year’s protests came in response to a proposed law that would have allowed the extradition of Hong Kong residents to Beijing for trial on charges that arose in Hong Kong.

That would have deprived Hong Kong residents of legal protections in local law and subjected prisoners to torture and summary execution.

The legislation was proposed by Hong Kong’s Chief Executive Carrie Lam, who many consider a puppet of Beijing.

The demonstrations grew exponentially, ultimately involving hundreds of thousands of protesters.

The list of demands also grew to include more democracy and freedom and adherence to Hong Kong’s rule of law.

Due to social media, these protests were seen around the world.

The proposed bill behind the original protests was scrapped last October, which was a victory for the pro-democracy protesters.

Authored by Bill Blain via MorningPorridge.com,

"Mumbled words and weird drawings in old books in the wrong hands is dangerous as hell, but not half as dangerous as they could be in the right hands...”

Sorry for being bit late this morning, but early morning call with Asia overran. HK is not going to end well.

I am watching the market moves and shaking my head. Up, Up, Down… The Dow broke 3000 on unconstrained optimism before Trump pulled it down with threats of China sanctions.. Shake it all about. Do the hokey cokey...

But, there are some particularly sickening stories out there – including Hertz executives paying themselves $16 mm in bonuses shortly before declaring bankruptcy and laying off 10,000 workers with minimum payments. I predict a series of political lynchings will shortly follow.. What next? Free cake on the dole queues? I suggest not.

SOURCE: HONG KONG FREE PRESS
Hong Kong police have fired tear gas after protesters gathered in Causeway Bay to rally against the looming national security law announced earlier this week by Beijing.

Hundreds of demonstrators convened at SOGO department store in Causeway Bay at around 1pm on Sunday and began marching to Wan Chai’s Southorn Playground.

Photo: Benjamin Yuen, Cezzna, Jimmy Lam/United Social Press.
In response, police fired tear gas at the crossroads of Hennessy Road and Percival Street, and near Hysan Place.

HKFP_Live: Hong Kong protesters are gathered in Causeway Bay in opposition to the national security law. Police have detained activist Tam Tak-chi.

Posted by Hong Kong Free Press HKFP on Saturday, 23 May 2020
It was the largest protests since the Covid-19 outbreak, despite social distancing rules – limiting groups to eight people – remaining in place.

India and China have been reinforcing their military presence in the disputed Galwan Valley since their troops engaged in clashes in the Ladakh region during patrolling earlier this month.

The Indian newspaper Economic Times cited defense sources as saying that soldiers were being sent to the Galwan Valley.

“The strict COVID-19 protocols are said to have been kept in abeyance as the situation has escalated,” the sources said.

Meanwhile, the Global Times, China’s state-run paper, reported on Monday that the People’s Liberation Army had successfully restored the status quo in the river valley.

Since President Trump fired the first volley in the US-China trade war two years ago, tensions between the US and China have intensified to unprecedented levels, and the prospect of an armed confrontation between the world's two largest military and economic powers is becoming a tail risk worth considering, according to Wall Street luminaries like David Tepper.

Around that time, the State Department launched a quiet campaign to pressure America's allies, including the UK, Germany and Australia, to prohibit parts made by telecoms giant Huawei in their 5G networks, as evidence of "backdoors" in other Huawei products, and Chinese companies are often required to cooperate with state intelligence agencies. For what it's worth, Huawei has persistently denied cooperating with Beijing, and has offered to sign a "no spying" pledge. When the UK decided to allow some Huawei equipment in certain "non-essential" parts of the UK 5G network, he received a dressing-down from Trump.

While the market remains oblivious to pretty much any news, diplomatic relations between the US and China continue to deteriorate by the day if not by the hour.

Earlier today we reported that Secretary of State Michael Pompeo tweeted congratulations on Tuesday to Taiwan's President Tsai Ing-wen who was sworn in on Wednesday for a second presidential term, China promptly denounce Pompeo's message as "wrong and very dangerous", with the Ministry of National Defense releasing a statement Wednesday that said the People's Liberation Army (PLA) would "take all necessary measures to firmly safeguard" China's sovereignty, while the Chinese Ministry of Foreign Affairs saying Pompeo's comments "seriously violated" the one-China principle.

This was followed moments ago by China's state-owned Global Times tweeting that China "urges" the US to:

Cut its official ties with #Taiwan;

Stop upgrading substantive relations with Taiwan;

Stop interfering in China's internal affairs;

The Chinese Virus began infiltrating the United States in early 2020, but the communist country already had a foot in the door well before then.

We predicted earlier that the United States is headed for another 'tanker war' with Iran, but unlike last summer this will take place far away from Persian Gulf and Mediterranean waters, instead in the Caribbean off Venezuela's coast, however unusual that scenario might be. Recall that Trump recently ordered a US naval build-up there to boot.

Currently there are five Iranian-flagged tankers transporting fuel to Venezuela across the Atlantic Ocean, with plans to break the American blockade on the Latin American country. Iran has warned that any US attempt at intercepting its fuel tankers "would have serious repercussions for the Trump administration ahead of the November elections."

A few days ago, Hayman Capital Management founder Kyle Bass published an editorial warning about Beijing's renewed focus on stamping out dissent in Hong Kong now that protesters are beginning to re-emerge as the number of new cases of COVID-19 declines to zero. Specifically, he warned of the possibility that President Xi would adopt new "laws" granting Beijing broad latitude to interfere in Hong Kong's affairs, in explicit violation of the 1984 treaty between the UK and Hong Kong that set the Special Administrative Region on the path back to reunification.

A day after the WHA approved a resolution authorizing a WHO-led investigation to the origins of the coronavirus in China, President Trump just lashed out at China's state-approved conspiracy-peddlers who are desperately trying to convince the Chinese people that the virus didn't come from China - but actually originated in the US.

He tweeted:

"Some wacko in China just released a statement blaming everybody other than China for the Virus which has now killed hundreds of thousands of people. Please explain to this dope that it was the “incompetence of China”, and nothing else, that did this mass Worldwide killing!"

Update (1240ET): As the Senate vote gets a broader airing on newswires, Chinese tech stocks - including Alibaba, Baidu & JD.com - are taking a beating.

Until very recently, analysts have mostly been in the lookout for signs that the administration was following through on threats to restrict portfolio investment flows into Chinese assets. But this bill - which now passes to the House - would almost be more extreme, if it had passed.

The CCP's leaders including President Xi are probably dedicating massive intelligence resources to try and discern how much of the White House's belligerent rhetoric toward China is just that - talk - and how much represents serious plans for action.

Well, after President Trump raised the prospect of delisting Chinese companies from US exchanges last week (around the time that Carson Block unveiled his latest bet against a "fraudulent" Chinese Co. trading in the US).

US lawmakers and officials are drawing up proposals aimed at encouraging American companies to move operations or major suppliers out of China.

There are widespread discussions currently underway about the proposals which will include tax breaks, new rules, and carefully structured subsidies, Reuters reported Monday citing interviews with a dozen current and former government officials, industry executives and members of Congress.

The proposals, which also include the idea of a “reshoring fund” originally stocked with $25 billion, aim to push US companies to drastically revamp their relationship with China.

The funding would encourage companies that produce essential goods to move production home, making it possible to make products far down the supply chain domestically, according to two administration officials.

The Pacific Fleet Submarine Force took the unusual step this month of announcing that all of its forward-deployed subs were simultaneously conducting “contingency response operations” at sea in the Western Pacific — downplaying the notion that Navy forces have been hampered by COVID-19.

The sub force said the missions were mounted in support of the Pentagon’s “free and open Indo-Pacific” policy aimed at countering China’s expansionism in the South China Sea.

At least seven submarines, and likely more — including all four Guam-based attack submarines, the San Diego-based USS Alexandria and multiple Hawaii-based vessels — are part of the effort.