A pressure cooker ready to explode.

As expected, an international tribunal at the Hague has ruled decisively against China on its claim on the entire South China Sea. China has drawn 9 dashes on the map of the South China Sea, the so-called 9-dash line, just off the coasts of other countries bordering the sea and says that all the area inside that line belongs to it. It has been building artificial islands on reefs within the sea and has stationed armed vessels on those islands. Other countries bordering the sea also have claims on its waters. The former president of the Philippines, which brought the case to the tribunal, compared China's actions to those of Nazi Germany. The Tribunal also found that Chinese fishermen have seriously destroyed coral reefs and depleted the sea of fish and endengered species, like sea turtles and giant clams. Also as expected, China, a nation of uncivilised barbarians, has reacted by threatening and snarling at its neighbors. What happens now? Nothing in the short term. China will presumably continue to tighten its grip on the Sea. In the long term it depends on the economy. A government economist said that its total debt is more than double its GDP, at $28 trillion by the middle of 2014. Companies have borrowed heavily from banks and since the government owns the banks any problem will quickly become systemic. Assets controlled by shadow banks amount to 80% of the GDP, which are now lending to commercial banks. Total US debt is over $19 trillion. Around $5 trillion worth of shipping passes through the sea every year so we shall see if China decides to levy taxes on ships passing through if there is a sudden deterioration of its finances. The IMF has warned China of the risk of its corporate debt. With global growth remaining tepid China cannot export its way out of the problem. The government is doing everything to stimulate the economy by focusing heavily on innovation. The government is encouraging the creation and manufacture of robots but like all its efforts this has also turned into an investment bubble. Its drive for innovation has turned into another property bubble. Innovation takes time and has to make allowances for failure. Local government officials cannot afford to fail so they must be showing investments in real estate as progress. The world is poised at a very interesting point. The UK has left the EU which could come under further economic strain. US jobs report predicts a rise in interest rate. China is not only depleting the South China Sea it is depleting other oceans as well. Those countries are poor and weak but may retaliate. How many wars is it going to fight? China harvests organs from innocent people accused of subversion and arrests anyone who protests. It is ready to explode and events far away may act as catalysts. We hope it is very soon.