Myanmar’s Instability Deepens as the World Watches Silently

John P. Ruehl

Militant groups are increasingly threatening Myanmar’s military government. But other non-state actors, as well as China, are playing powerful roles in the divided country.

Myanmar’s stability has eroded significantly since the 2021 military coup. But the coordinated attack by multiple separatist and pro-democracy groups in October and November 2023 has seen military outposts, villages, border crossings, and other infrastructure overrun. While the Tatmadaw, Myanmar’s military, clings to control in central and coastal regions populated by the country’s ethnic majority, much of the country’s border areas are increasingly slipping into anti-government control.

This current turbulence is not an aberration but deeply rooted in Myanmar’s history. Since gaining independence from British rule in 1948, the country has grappled with what is commonly described as the world’s longest-running civil war. Initial experiments with democracy witnessed limited clashes between Myanmar’s central government and Ethnic Armed Organizations (EAOs.) Following a military coup in 1962 that established the junta, more EAOs emerged to challenge government power.

Infighting and splintering among EAOs, coupled with their growing antagonism toward the Burma Communist Party (BCP), itself waging a war on the central government, allowed the junta to implement fragile ceasefires in exchange for limited autonomy. By the end of the Cold War, democratic protests in 1988, the collapse of the BCP in 1989, and free elections in 1990 all suggested Myanmar was cautiously embracing a peaceful future.

Despite losing the elections in 1990, however, the junta did not relinquish power, drawing international condemnation. EAOs and other groups like the Myanmar National Democratic Alliance Army (MNDAA), which split from the BCP, then continued their struggle for two decades until the junta ceded some powers to a civilian administration in 2011. Elections in 2015 and 2020 saw landslide victories for the National League for Democracy (NLD), as well as some progress toward reconciliation.

But in 2021, the Tatmadaw reestablished the junta and plunged the country back into destabilization, culminating in the 2023 autumn offensive by anti-junta forces. In addition to EOAs and a reorganized BCP, the junta has also been forced to contend with People’s Defense Forces (PDFs), loose armed organizations backed by the National Unity Government (NUG), set up by lawmakers and politicians in the aftermath of the coup. Additionally, the role of the Burman ethnic majority and grassroots civil defense forces in opposing the junta has also complicated its response to unrest.

The junta has proven adept at managing its restive elements before, and can also rely on its Border Guard Forces (BGFs) and other pro-government militia groups. But the broad swathes of Myanmar’s society fighting against it have made the junta’s traditional policy of divide and rule far less effective. Myanmar’s Acting President Myint Swe has said the country could “split into various parts”, prompting Myanmar military officials to retreat to the capital, Naypyidaw, a planned city completed in 2012 that effectively serves as a fortress located near the most restive regions.

China’s role in Myanmar has undergone significant shifts since the latter’s independence. Despite Chinese support for the BCP and other communist groups, Myanmar grew closer to China after its isolation from the West in the 1990s. Beijing supported the junta to stabilize Myanmar and prevent adversaries from establishing a foothold on China’s southern border. Other interests included maintaining access to Myanmar’s raw materials and natural resources, as well as infrastructure development to turn Myanmar into a strategic gateway to the Bay of Bengal through the China-Myanmar Economic Corridor (CMEC), part of China’s Belt and Road Initiative (BRI).

China maintained ties to the junta, democracy advocates, and ethnic groups from 2011 to 2021. However, the 2021 coup disrupted development projects and led to attacks on Chinese-run facilities by rebel groups, and the junta’s inability to protect infrastructure exacerbated historical tension between it and Beijing. Four Chinese civilians were killed in 2015 after a Myanmar military airstrike hit across the border into Yunnan, while the junta burned down a Chinese-owned factory and killed Chinese and Myanmar civilians in 2021.

China’s ongoing support to some militia groups, such as the United Wa State Army (UWSA) and MNDAA, provides Beijing leverage over the junta and a say in the ceasefire processes. Chinese firms also often work with armed groups in “special economic zones” near the border, and some of the anti-junta groups regularly cross the border to China to escape the junta and its proxy forces. Beijing’s tacit approval of their activities may also be partially fueled by wariness that rebel groups were becoming closer to the U.S. prior to the new offensive.

Beijing has nonetheless attempted to sustain a balancing act, arresting a UWSA deputy military chief in October 2023 and initially ignoring calls for assistance from the rebels after the launch of their offensive. But following the steady string of defeats suffered by the junta, China has since altered its outlook. China’s affiliates now form some of the most powerful groups operating in Myanmar, and China’s foreign ministry has called for a ceasefire.

Myanmar’s porous borders have not only allowed armed groups to flourish but also facilitated the expansion of organized crime networks. Increased cooperation between militant and criminal groups in recent decades, known as the terror-crime nexus, has elevated the power of these groups worldwide.

American efforts to counter communism inadvertently helped develop drug networks in Myanmar during the early Cold War, while transnational organized crime in Southeast Asia burgeoned in the 21st Century. The COVID-19 pandemic further established Myanmar as a hub of criminal activity, expanding the funding networks available to the country’s armed groups. Both local and international criminal networks operate in Myanmar’s special economic zones, engaging in human and wildlife trafficking, slavery, cybercrimes, money laundering, communication fraud, illegal casinos, and online gambling centers.

The relationships between these entities and governments are intricate, with shifting alliances commonplace. Beijing and transnational Chinese gangs play central roles in Myanmar’s heightened criminal activity. The junta has also had close ties to criminal networks for decades, and since the 2021 coup has become increasingly reliant on criminal activity to finance itself and offset international isolation.

China, while entangled in Myanmar’s criminal underworld, has grown steadily more concerned with rising illicit activity on its border with Myanmar and the willing and unwilling participation of Chinese citizens. China’s signals to the junta to address the forced-labor networks since May 2023 went unheeded, leading to China issuing arrest warrants for junta allies and the UWSA to raid online scam compounds and trafficked labor centers in border regions.

However, the resilience of regional criminal groups became evident after the NLD failed to disrupt their activities during the decade of partial democratic rule from 2011 to 2021, and they have only grown financially stronger since. And despite their interweaving with regional elites, criminal networks and their militant partners have developed newfound agency and an ability to act independently from governments since the 2021 coup.

Additionally, while the junta styles its current campaign as a counterinsurgency, Myanmar’s armed groups possess significant military capabilities. Minority groups such as those belonging to the Karen ethnic group were prominent in Myanmar’s armed forces during the British colonial administration, gaining valuable experience. As in Ethiopia, certain ethnic groups have developed and maintained well-equipped forces capable of both insurgency and conventional warfare.

Like other anti-government forces around the world, Myanmar rebel groups have also embraced new technologies and strategies in recent years. This includes crowdfunding initiatives, which have expanded significantly since 2021, to offset the junta’s control over the central bank and other national economic levers. Large-scale application of drone warfare has also made a marked difference on the battlefield, even before the current offensive by the rebels.

Myanmar’s militant groups have also worked with European criminal groups to obtain weapons, and groups like the UWSA have proven capable of manufacturing weapons since 2008. The use of 3D-printed guns by Myanmar rebel groups, just ten years after the first 3D-printed gun was produced, also marks a distinctive feature of the current conflict. The NUG has meanwhile been busily setting up local civic administration and public services and People’s Administrative Teams (PATs) in PDF-controlled or contested areas, indicative of their state-building capabilities.

Hindered by international isolation, increasingly powerful rebel groups, and a growing dependence on a Chinese leadership willing to support multiple sides, the junta’s outlook appears bleak. But it does maintain some other allies abroad. Russia grew closer to the junta throughout the 2010s and despite being tied down in Ukraine, Moscow has offered more support for Myanmar since the coup, including the first ever Russia-Myanmar joint naval exercise in November 2023. Bordering states Laos and Thailand also maintain friendly ties to the junta, and Laos, holding the chairmanship of ASEAN since September 2023, has shielded Myanmar from greater institutional isolation.

Myanmar’s other neighbors, India and Bangladesh, are also wary of additional instability and the potential emergence of a failed state on their borders. India has already seen tens of thousands of refugees (as well as soldiers from the junta) cross the border since 2021, while Bangladesh has seen close to one million Rohingya refugees enter the country since 2016, and India has recently shown it is still willing to engage with the junta despite its vulnerability.

Efforts to further unite anti-government forces meanwhile face obstacles due to differences in strategies, objectives, and allegiances. Several organizations have been set up to encourage greater coordination, but infighting is still common. Some EAOs, like the Restoration Council of Shan State (RCSS), are still open to adhering to the Nationwide Ceasefire Agreement (NCA) while others consider a federal system a viable alternative to complete independence. Perceived indifference to the Rohingya crisis in 2017 on behalf of the democratic government at the time also reveals the persistent ethnic tensions among Myanmar’s population despite alternative leadership.

Convincing criminal and militant groups to give up their lucrative illicit networks, as well as untangling their links to the junta-dominated economy, will also prove challenging. And with the U.S. diplomatically tied down in Ukraine and Israel and ASEAN’s divided approach to the crisis, China enjoys relative freedom to manipulate the situation on its border. Yet despite positive relations across Myanmar’s political spectrum, Beijing’s reluctance to intervene more directly only amplifies the persistent uncertainty surrounding Myanmar’s future.

Hostages and families clash with Netanyahu

Jean Shaoul

Recently released hostages and families of hostages still held in Gaza vented their anger over Prime Minister Benjamin Netanyahu’s refusal to make the safety and release of the remaining 138 hostages a priority.

Emerging from a tense and angry meeting with members of the “war cabinet” on Tuesday afternoon, they denounced the government, saying it had no plan to secure the release of the remaining hostages and that its tactics were endangering their lives. Some reportedly told Netanyahu to step down, echoing the now daily calls for his resignation.

While 110 captives were returned to Israel, of whom 86 are Israelis and 24 are foreign citizens, under a seven-day ceasefire, an estimated 138 hostages remain, of whom 117 are men and 20 women. While 11 are foreign nationals or holding dual citizenship, the rest are Israelis, of whom most are thought to be soldiers.

Israeli Prime Minister Benjamin Netanyahu attends a press conference with Defense Minister Yoav Gallant and Cabinet Minister Benny Gantz in the Kirya military base in Tel Aviv, Israel, Saturday, October 28, 2023. [AP Photo/Abir Sultan]

Since the “operational pause” ended on Friday morning, Israel has resumed its savage aerial bombardment, targeting Khan Younis, Gaza’s second city in the south, with a renewed ferocity ahead of an expected ground attack, as Israeli tanks approach the city from the north.

The UN said “some of the heaviest shelling in Gaza so far” took place between Sunday and Monday afternoon. On Monday, it was reported that Israel had prepared plans to flood Hamas’s network of tunnels under the Gaza Strip with water pumped from the Mediterranean Sea.

Such a move, aimed at driving Hamas’s fighters above ground, is to be carried out with no consideration for the safety of the remaining hostages, who have been cynically employed to justify the genocidal assault on Gaza. The truth is that Netanyahu and his fascist allies could not care less whether the hostages live or die. “Bring them home” is a useful slogan, but the real goal is mass murder and ethnic cleansing, whatever collateral damage this might involve.

Largely ignored by Netanyahu and his cabinet of war criminals, the families, who had only been granted one meeting since the October 7 incursion, had been demanding an urgent meeting to discuss what the government was doing to secure the safe return of the remaining hostages. Netanyahu was finally forced to agree a meeting on Monday.

This followed a small rally—joined for the first time by families of some of the captives—on Saturday evening outside Israel’s military headquarters in Tel Aviv to protest the resumption of the bombardment of Gaza they blamed for halting the release of the captives still held by Hamas. The protest was a breakoff from the regular gathering calling for the Netanyahu government to prioritise and secure the release of hostages, which takes no position against the slaughter in Gaza.

The meeting in Herzylia, attended by Netanyahu, Defence Minister Yoav Gollant and opposition leader Benny Gantz, as well as Gal Hirsch, Netanyahu’s coordinator for captives and missing persons, confirmed that the hostages are viewed as cannon fodder in the wider cause of Zionist expansionism “from the river to the sea,” and American imperialism’s domination of the resource-rich region.

The war cabinet kept the former hostages and families waiting 45 minutes after the arranged time. According to one of the attendees, “There was great disrespect at the entrance and there was a camera in the room, despite promises of a sterile meeting.” She said it was “turbulent and tense.” Their phones were taken away so they could not record what was said. Many families left in disgust even before the meeting started.

Netanyahu’s pro-forma responses prompted a furious response, with people shouting and screaming that they wanted all the hostages brought back and that the prime minister should resign.

One of the former hostages explained that Netanyahu “didn’t respond to the questions that were posed—instead, he read from prepared remarks on a piece of paper.” She added that “Netanyahu stated that it wasn’t feasible to bring everyone back, and questioned whether any of us thought that if such an opportunity was available, anyone would reject it.” Some of the families were so outraged that they got up and left the meeting mid-stream.

Bashir Alziadana, one of Israel’s Bedouin citizens whose brothers remain in captivity after two other relatives were released, said, “We asked if returning the captives is the primary goal now, and I didn’t leave with a clear answer.”

As reported by Channel 12, Sharon Cunio, one of the released hostages, whose husband David and other relatives are still held captive, told the war cabinet, “You are putting politics above returning the hostages.” Ha’aretz reported that another hostage who had been held separately from her husband challenged Netanyahu, saying, “He was taken to the tunnels, and you talk about flooding the tunnels with seawater.”

Another person said, “Gallant informed us that Hamas only responds to the use of force, insinuating that any cessation in the hostage release stages was purely Hamas’ decision. The discussions were truly distressing, and those who attended were visibly upset about the divisions made between various groups and categories. Netanyahu’s reply was curt, and he seemed detached from the conversation.”

Gallant’s response was met with anger from the mother of one of the hostages, who said: “I’m not prepared to sacrifice my son for your career… My son did not volunteer to die for the homeland. He was a civilian abducted from his home and his bed… Promise me that you’ll get back my son and all the other hostages, alive.”

While the Israeli media carried reports of the families’ meeting with the war cabinet, they were low-key and headlined the hostages’ mistreatment in line with government’s attempts to portray the Palestinians in general and Hamas in particular as monsters to justify their extermination.

While some of the hostages reported that they had been denied adequate food and water and kept in horrible conditions underground and without access to the news, it was clear they were unaware of both Israel’s denial of all supplies of food, fuel, power and even water and its carpet bombing of Gaza.

Further fueling the families’ anger are the almost daily revelations indicating that the Netanyahu government possessed detailed advance knowledge of the Hamas battle plan for the October 7 attack, but took the decision to stand down the military and intelligence forces to create a pretext for its ethnic cleansing of Gaza.

On Monday, Ha’aretz reported that just hours before the October 7 attack, Israel’s security forces, having received warnings that Hamas was trying to stage an attack inside Israel, could have prepared at least partially for the possibility of an incursion from Gaza. Although the Gaza Division’s Northern Brigade had approved the staging of the SuperNova music festival in the Kibbutz Re’im parking lot, was responsible for its security, and its commander was aware of the warnings, the military had not informed either the organisers or the thousands of party-goers about the threat or demanded that the event be shut down. Even the army units on duty in the area at the start of the Hamas attack were unaware that the music festival was taking place.

The organisers said that if they had received a warning even an hour beforehand, they could have evacuated the festival in time. The army’s failure to warn the organisers led to the deaths of 360 attendees in a shoot-out between the Palestinian infiltrators and the Israeli military, and the capture of at least 40 hostages.

It also now appears that some of those in the know sought to take advantage of the inevitable military repercussions by selling their shares on the Tel Aviv stock exchange. Reuters news agency reported on a detailed study by two US professors, who wrote, “Days before the attack, traders appeared to anticipate the events to come.”

They cited short interest in the MSCI Israel Exchange Traded Fund (ETF) that “suddenly, and significantly, spiked” on October 2, based on data from the Financial Industry Regulatory Authority (FINRA). They added, “And just before the attack, short selling of Israeli securities on the Tel Aviv Stock Exchange (TASE) increased dramatically.”

UK homelessness figures rise amid council funding crisis

Charles Hixson

Homeless charities and local housing authorities in the UK are struggling with record numbers of people unable to balance the costs of renting a property with increasingly expensive food, energy and other basic needs.

As of March, 104,510 English households, including 131,000 children, were in temporary accommodation, a 10 percent increase on the previous year and an all-time high.

Between April 2022 and March 2023, English councils supported 298,430 families (1.2 percent of all households) to relieve or prevent homelessness, a 6.8 percent annual increase.

Even when temporary accommodation is available, families with children often spend years living in situations which threaten their health, according to Just Fair. Patricia Leatham, who became homeless after her mother’s death, spoke of moving into housing without proper heating—a leaky, mouldy and damp place with open wires. She struggled to make it liveable for herself and her son, who desperately needed Wi-Fi for school. “That’s it”, she said, “they’ve given you somewhere to live and you can’t say no.”

This misery stands in the shadow of the monumental residences of the rich. Perhaps the most obscene example is at Embassy Gardens in Nine Elms, southwest London, where, 10 storeys up, sits the “Sky Pool”, described as the world’s first swimming-pool bridge, connecting two sections of the luxury development.

Nine Elms [Photo by sludgegulper / Wikimedia / CC BY-SA 2.0]

Part of a 230-hectare area stretching from Vauxhall Cross to Battersea Power Station, the Vauxhall Nine Elms Battersea (VNEB) development was described two years ago by Guardian writer Oliver Wainwright as taking “the inequities of the real estate-industrial complex to extremes. It is a place where penthouses with private chapels and running tracks loom above crumbling council estates across the railway line, where scores of flats lie empty, held by secretive shell companies in off-shore tax havens, and where the division between absentee investors and owner occupiers confined to poor doors couldn’t be more stark.”

The VNEB was touted as an “opportunity area” and described by former prime minister Boris Johnson as “the greatest transformational story in the world’s greatest city.” Responding to criticisms that the VNEB encourages separateness and absentee ownership, Ravi Govindia, Conservative leader of Wandsworth Council from 2011-22, proclaimed, “London is an international city. It has always had people who didn’t live in their homes for 365 days a year.”

In what was known as Billionaire’s Row in Bishop’s Avenue in the Borough of Barnet, north London, only ruins remain after nine Saudi-owned mansions were abandoned in the early 1990s. By 2014, investigative reporters found the buildings overgrown with vegetation, their swimming pools and ballrooms in a state of advanced decay. The number of long-term empty homes in England has increased by 60,000 since 2018, and now stands at over a million properties.

Architects have suggested that up to 300 homes could be built on one site. The owner of the current property is a registered company from the Isle of Man, whose beneficial owner is listed as a Cypriot businessman with a Dubai address. Russell Curtis, director of architecture firm RCKa, asked, “Is it right that there should be land like this sitting in a ridiculously expensive part of London that is unused?” The waiting list for housing in Barnet has more than tripled in the last decade to over 3,000 households.

The Conservative government is waging a war on the homeless, most notoriously with former Home Secretary Suella Braverman’s proposals to ban tents in urban areas, and description of living on the streets as a “lifestyle choice”.

According to housing charity Crisis and real estate firm Zoopla, only 4 percent of English properties (and 2 percent of London’s) are affordable at the government-set housing allowance rates, which were frozen in 2020. Deborah Garfield, policy manager at the homelessness charity Shelter, observed that social housing stock in England had fallen by 14,100 in the last year alone.

The spiraling housing crisis spurred 158 local councils—more than half of England’s local government organisations—to meet in an emergency summit hosted by Eastbourne Borough Council and the District Councils Network on October 31. Participants reported that more than 20 councils were on the verge of bankruptcy and were overwhelmed by the cost-of-living crisis and the sharp rise in evictions, as well as the shortage of social housing.

In a letter to Tory Chancellor Jeremy Hunt, councillors insisted they would have to start withdrawing services, and requested a meeting in advance of his Autumn Statement. The Local Government Association (LGA) predicted that councils in England faced a funding gap that would reach £4 billion over the next two years, an additional £1 billion on its July forecast. Its analysis showed that “by 2024/25 cost and demand pressures will have added £15 billion (almost 29 per cent) to the cost of delivering council services since 2021/22.”

Hunt was forced to make a gesture, ending the three-year freeze on the local allowance housing cap. The allowance will finally cover the cheapest 30 percent of market properties simply by providing 1.6 million households some £800 in additional support each year.

A homeless man sleeping in a shop doorway in Romford, London, December 2022

Housing charities Shelter and Crisis criticized the delay until April 2024, with the latter adding that councils faced immediate financial collapse. The Salvation Army warned that Hunt’s measures would fail to stop the widening poverty gap, and St. Mungo’s predicted a difficult winter with record numbers of rough sleepers.

Jonathan Carr-West of the Local Government Information Unit accused Hunt of simply “tinkering around the edges”. “Each year citizens are paying more and getting less from their councils, and without significant structural changes to the way funding is allocated it is difficult to imagine these dire straits ending.”

In London alone, 4,068 slept on the street in summer (June to September), over 25 percent more than the previous winter. The Big Issue warned that the recent Home Office decision to reduce support for asylum seekers after their claims are processed from 56 to seven days could drive as many as 6,900 onto the streets nationwide by year’s end.

Many rough sleepers are killed by entirely treatable diseases. A new study by University College London, published by the Bureau of Investigative Journalism, shows that a homeless person dies every seven hours. Some 25 percent of these are under 40, succumbing to tuberculosis, COVID-19, pneumonia, diabetes, gastric ulcers.

Invisible People, a US-based group which reports on the “growing homeless crisis, affordable housing, and the criminalization of homelessness”, noted this month of the situation Britain that crowded conditions in shelters and transitional accommodation cause these diseases to spread, as well as “formerly eradicated plagues, diseases and viruses.”

Giant Chinese property developer Evergrande given stay of execution

Nick Beams

The ultimate fate of the bankrupt Chinese property developer Evergrande continues to hang in the balance after a Hong Kong judge granted the company a stay of execution on a move by one of its creditors to liquidate it.

On Monday Judge Linda Chan said liquidation proceedings would be held over until January 29 next year to give the failed company more time to come up with a restructuring plan that met the agreement of creditors.

Residential buildings developed by Evergrande in Yuanyang [Photo by Windmemories/Wikimedia Commons / CC BY-SA 4.0]

The suspension of proceedings, which came as a surprise to other creditors many of whom would have opposed it, came as the company that brought the liquidation petition, Top Shine Global, said it would not oppose the move.

Evergrande’s lawyers said in court the company was considering a deal that involved giving “certificates” to creditors which would “neither be a share nor a bond but a right to distribution based on certain assets.”

The certificates would allow creditors to be repaid money when some of Evergrande’s assets were sold.

One of the lawyers representing other creditors, Neil McDonald, said the adjournment had come as a “surprise.” He had been expecting that the company would have been wound up at Monday’s hearing and only heard about the change 15 minutes before it began.

Judge Chan’s decision clearly reflects fears in legal and financial circles about the liquidation of Evergrande which has $300 billion in debts. In a liquidation process there is always a scramble by creditors to grab what they can with the possibility of legal suits and counter suits with unknown consequences in a collapse of this colossal size.

Judge Chan indicated that there was still a way to go before a deal might be agreed to.

She said “crucial details” of the new plan were missing and Evergrande should have “direct discussion with relevant authorities” to make sure it was “doable.” Evergrande’s lawyer said: “We will try our best.”

Chan was referring to the situation which developed in September when a deal with offshore creditors collapsed when the company’s founder, chairman and chief shareholder Hui Ka Yan was detained by Chinese authorities because of as yet unspecified financial irregularities.

According to company filings, Hui has paid himself and his wife more than $7 billion in dividends since the company went public in 2009.

The deal had been more than a year in the making, involving a series of complex negotiations. After the detention of the company chief, however, Evergrande said it could not go ahead because of new regulations which prevented it from issuing notes that would facilitate the restructuring.

The liquidation of Evergrande, which seems at this stage to be the most likely outcome, would bring little or no return for its creditors. Analysts have said they anticipate a recovery rate of below 5 percent on its debts.

While domestic creditors will get little, the Chinese government will be anxious to insure than foreign creditors can agree to some kind of restructuring because liquidation will cast a pall over the raising of credit by Chinese companies in international markets.

The government will also be concerned about the political consequences. There are an estimated 1.5 million homebuyers who have paid the company for their still unfinished apartments. When Evergrande’s problems first surfaced there were angry protests outside its offices that rang alarms bells in Beijing which is acutely sensitive to signs of social protest and discontent.

There are concerns that an Evergrande liquidation could call into question the position of other highly indebted real estate developers.

Among those is Country Garden which was touted as an exemplary real estate firm, but it too has defaulted on loans. The group has said it will not be able to meet all its overseas debt repayment obligations. It has total liabilities of around $200 billion of which some $11 billion are international debts.

It has been reported that most of the top ten real estate developers in China have been experiencing sharply falling sales.

According to estimates by Bloomberg, more than half of the biggest 50 developers in 2020 have defaulted. It has said that Chinese developers have defaulted on around $115 billion of $175 billion of outstanding offshore loans since 2021.

There are also significant domestic financial ramifications involving the so-called shadow banking system, estimated to be around $3 trillion, and which is exposed to the crisis in the property sector.

In a letter to investors last month, Zhongzhi, one of the larger companies in the system, revealed that it confronted a shortfall as high as $34.6 billion and was “severely insolvent.”

Its problems first came to light back in August when it missed payments on several products. It blamed its problems on the 2021 death of its founder and the departure of “multiple senior executives” after which it said “internal management ran wild.”

“The group’s investment products have defaulted one after the other, and we deeply apologise to investors,” it stated. Most of those investors are high-wealth individuals so it is considered very unlikely that there will be state intervention. The amount involved is large but is small relative to the entire trust industry. But it is nonetheless a warning as to how quickly events can turn and companies that had seemed to be secure turn out to be a house of cards.

The crisis in real estate development and associated financial interests is bound up with the boarder structural shift which the Xi Jinping regime is trying to effect in the Chinese economy.

The real estate boom began in the aftermath of the 2008 financial crisis when the government initiated a massive infrastructure and real estate development program based on stimulus spending, estimated to be around $500 billion and an expansion of credit.

The result was that real estate and construction, together with its associated industries, is estimated to account for between 25 and 30 percent of the Chinese economy.

The troubles for the real estate sector began in mid-2020 when the government introduced new regulations, dubbed the “three red lines,” which restricted access to credit. It was aimed at lessening the dependence on real estate and infrastructure development.

The result has been a marked slowdown in growth, which has been reflected in the rise of unemployment, particularly among youth aged 16 to 24 years old where it is running at more than 20 percent. As a result, the government has halted the publication of youth unemployment figures.

Worse may still be to come. In a speech to bankers in Hong Kong last week, the governor of the central bank, Pan Gongsheng, warned that the economy was on a “long and difficult journey” away from its reliance on property and infrastructure investment.

In a sign of the political sensitivity of the government to the prospect of lower growth, the Chinese transcript of Pan’s speech omitted the phrase “long and difficult.”

The official growth target for this year is just 5 percent, one of the lowest levels in decades. After the lifting of COVID restrictions at the start of the year there was increase in consumer spending. But since then, consumer confidence has fallen, investment is down, and export earnings have been described as “disappointing.”

Minor measures have been introduced to try to stabilise the property market but there is no stimulus package in sight and the focus will be on what growth target the government sets for 2024 and how it intends to achieve it.

Yellow bankruptcy auction raises $1.9 billion for Wall Street

Alex Findijs

Yellow Corp. trailers at a YRC Freight facility on July 28, 2023, in Richfield, Ohio. [AP Photo/Sue Ogrocki]

The bankruptcy auction of freight company Yellow was completed on Monday, with what formerly had been the third-largest less-than-truckload carrier in the US selling its real estate assets for nearly $2 billion. This sale has generated significantly more revenue than required to pay back Yellow’s extensive debt, which totaled nearly $1.6 billion, including a $700 million loan from the United States government.

According to industry publication Freight Waves, several rival freight companies snatched up large swathes of Yellow’s 170 terminals across the country. XPO purchased 28 terminals for $870 million; Estes Express, which had offered $1.525 billion for all of Yellow’s terminals, purchased 24 for $248.7 million; Saia purchased a further 17 for $235.7 million; and Knight-Swift purchased 13 for $51.3 million, while several other companies purchased a handful of terminals each.

XPO is seeking $585 million in senior unsecured shares and a further $400 million in senior secured debt to finance the purchase and to refinance existing debts. Saia saw a significant increase in volume, up 18 percent over last year in quarter four, after Yellow’s bankruptcy as it absorbed much of Yellow’s volume. It has increased its workforce by 1,000 to 13,000 along with its bid for Yellow’s terminals to meet this new demand.

Court documents show that Yellow still retains 46 terminals that remain to be sold. Objections to auction sales may be made through this Friday and the bankruptcy court is expected to hold a hearing to finalize the sale of terminals on December 12.

In addition to Yellow’s terminals, it also owns 12,000 tractors and 35,000 trailers that will be sold in separate auctions through auction houses Nations Capital, Ritchie Brothers and IronPlanet. Liquidating Yellow’s rolling stock is expected to take up to six months and could generate millions in additional funds.

The auction of Yellow’s terminals comes after a bidding war between Estes Express and Old Dominion, which had both offered at least $1.5 billion to take over all of Yellow’s terminals. Estes Express’s most recent bid of $1.525 billion was accepted as a “stalking horse bid” which meant that it set the floor for all additional bids.

Yellow’s management will be pleased with their decision to auction their terminals separately, however, as they have raised substantially more money than Estes offered. With $1.9 billion raised, and with additional terminals and assets up for sale, Yellow will not only be able to pay off its immediate debt obligations, it will be able to consider payments to unsecured creditors.

The largest of these unsecured creditors is the Teamsters Central States Pension Fund. Tom Nyhan, executive director of the Central States, Southeast and Southwest Areas Pension Fund, said he believes they are owed almost $5 billion because Yellow withdrew from the fund prematurely. Yellow’s sale is incapable of raising enough funds to pay the pension fund what it is owed, and it is unclear how the Teamsters might seek legal action over the outstanding funds.

Yellow’s auction also disrupts a last minute offer by auto shipping company Jack Cooper to purchase Yellow and revive the company. Jack Cooper, whose main customers are Ford, General Motors and Stellantis, offered nearly $2 billion to purchase Yellow, repay its debts and fund the resumption of its operations, potentially rehiring thousands of the 22,000 Teamsters whose jobs were eliminated by Yellow’s bankruptcy.

Jack Cooper’s offer received support from the Teamsters and from several US senators, including Elizabeth Warren and Bernie Sanders. In a letter authored by Democratic Senator from Ohio Sherrod Brown, the senators argued that, “At the end of the day, there are thousands of American families that want to see the company’s doors reopen. Treasury needs to be clear-eyed that union families and the strength of our economy rely on jobs like the ones that were lost.”

A major obstacle to the plan was the request by Jack Cooper for the US Treasury to extend the due date of a $700 million Cares Act loan by two years to 2026. The US Treasury was reportedly reluctant to do so. According to a report by the Wall Street Journal, Treasury officials argued that Congress would have to vote to extend the loan.

Yellow’s demise and dismemberment has been, and will continue to be, a massive payday for Wall Street at the expense of the livelihoods of its 30,000 employees. Major creditors MFN, a Boston-based hedge fund that purchased a significant stake in the company as it was declaring bankruptcy, and Citadel, a private equity firm that purchased $500 million of Yellow’s debt from Apollo Global Management, will reap a healthy payout from the auction. The two investment firms made a joint offer to take over as “debtor-in-possession,” meaning they would fund Yellow’s final operations as it prepared for auction in exchange for oversight of the liquidation process. They and other creditors will take home a sizable cut of Yellow’s sale, recouping not just their investments but the interest on their loans.

Blame for Yellow’s bankruptcy has been placed on corporate management for their inability to manage the company’s massive debt. But blame also lies with the Teamsters, who gave billions of dollars in concessions to Yellow and refused to mount any resistance to the elimination of the jobs for 22,000 of its members. Yellow ultimately declared bankruptcy because it could not meet the demands of Wall Street that it force workers to pay for its debt. Wall Street investors, as well as the United States government which held a 30 percent stake in the company, decided that it was more financially beneficial to allow the company to perish than to make any effort to save the jobs lost. Even months after Yellow declared bankruptcy, former Yellow workers have found it difficult to find work elsewhere.

The bankruptcy of Yellow is a warning to the working class globally that the capitalist class is willing to put thousands of jobs to the sword to maintain the flow of profit. Tens of thousands of jobs were sacrificed to generate profit for Wall Street, with billions of dollars generated to satiate the demands of finance capital that the working class pay for its profits.

Spain: Trade unions support Telefónica’s scheme to lay off a third of its workforce

Santiago Guillen

Last week, Spanish multinational telecommunications company Telefónica announced its intention to layoff over 5,000 workers across Spain. This represents a third of its 16,000 staff.

These layoffs come after 11,300 workers were made redundant in 2015, 2019 and 2021, on top of 6,830 redundancies between 2011 and 2013. In 12 years, Telefónica has destroyed more than half its workforce. In 1992, 74,437 people worked at Telefónica, 60,000 more than those employed three decades later.

Telefónica headquarters in Madrid, Spain [Photo by Luis García / CC BY-SA 3.0]

Telefónica is the fifth largest telecommunications company in the world and the second largest in Europe, behind only Vodafone, with operations across Europe and Latin America. In Spain, it is the fourth largest corporation by revenue and market presence, behind textile company Inditex (Zara, Bershka, Massimo Dutti, Pull&Bear and Lefties) led by billionaire Amancio Ortega, and banks Santander and BBVA.

Unlike the last three rounds of layoffs in 2015, 2019 and 2021, implemented through so-called voluntary resignations and early retirements, Telefónica will return to the redundancy scheme it used in 2011, known by its Spanish acronym ERE (Expediente de Regulación de Empleo). This enables companies to carry out collective dismissals based on so-called “objective” reasons, such as economic downturns, technical innovations, organisational changes and productivity increases.

It allows companies to slash severance pay and saves them money by not having to continue paying for health insurance and pension plans. And, unlike voluntary resignations, workers cannot refuse their dismissal.

The announced job destruction has little to do with the company’s economic results between 2013 and 2022. Throughout this period, Telefónica has achieved profits of 32 billion euros. Meanwhile, the average salary per employee has decreased in this period by 2,000 euros.

Last June, Telefónica announced accelerated growth during the second quarter of the year reaching a net income of €462 million, 44.5 percent more compared to the same period in 2022. This ERE will allow Telefónica to save between 200 and 400 million euros in wages.

Telefónica claims that the ERE seeks to resolve a “functional surplus” of workers who are no longer necessary, either due to technical improvements or due to the disappearance of services such as copper-based telephone wiring. However, this process must be placed in the context of the drive for profit by telecommunications companies throughout Europe, where up to 100,000 layoffs are expected in the coming years.

This is a sector with fierce competition between companies, especially due to the appearance of low-cost operators. One result is a bidding war to lower prices for customers and increase market share. To this must be added multimillion-dollar investments by companies into fibre optics and 5G.

The announced layoffs seek to put all these costs on the backs of the workers, by reducing the workforce and wages, and increasing precarious work conditions. This is the reason why Telefónica prefers to make redundancies rather than retrain workers in other positions. In this way, companies such as Telefonica plan to expand their profits.

Telefónica’s announcement is part of a global offensive against telecommunications workers. British company BT Group (the former British Telecom) has announced it will cut its workforce by between 40,000 and 55,000 employees this decade, slashing between 30 percent and 42 percent of its workforce. Finnish company Nokia will lay off 14,000 people and British Vodafone will make 11,000 layoffs, 10 percent of its workforce. The Swedish Ericsson will lay off 8,500, Virgin Media 02 (Telefónica's subsidiary in the United Kingdom) will lay off 2,000, whilst Deutsche Telekom and the Swedish Telia have announced 1,650 and 1,500 job losses, respectively.

The global character of the capitalist offensive against workers shows that jobs and living conditions can be defended only through an internationally coordinated struggle by telecommunication workers across all companies to oppose the race to the bottom. But the pro-capitalist trade unions are opposed to any such global struggle.

In Spain in recent decades they have refused to organise any fight against Telefónica’s mass dismissals or against the more than 4,000 jobs destroyed by Vodafone and Orange, two of the largest operators in Spain.

Two of Spain’s main trade unions, the Sumar-linked Workers Commissions (CCOO) and the social-democratic General Union of Workers (UGT), have made clear they have no intention of challenging Telefónica's ERE. As of writing, they have called no protests or any other significant action. Instead, they have made clear they accept the savage redundancy scheme.

UGT, the largest trade union within Telefónica, has stated that “any redundancy plan will be linked to the signing of a new Agreement... with a minimum duration of 3 years that protects the workforce and their working and economic conditions”. In other words, UGT accepts the ERE in exchange for some symbolical concessions which will not prevent new dismissals from being repeated in the future.

From CCOO, the person responsible for Union Action in the telecommunications sector, Ramona Pineros, assessed the layoffs positively. He agreed with the company’s claims by stating that “it is true that...there are a lot of jobs that have stopped having activity”.

Rejecting any alternative or protest, he summed up perfectly the role of the unions. Their role is not to defend jobs, but to work with companies to slash them. He said that “our job, in this case, will be to achieve the best conditions for the people who take advantage of the dismissal.”

The unions have also whipped up a nationalist frenzy, seeking to minimize attacks against “their own” workers, favouring attacks against those of other countries. This doomed perspective serves to divide workers along national lines, giving the companies a free hand to implement their corporate agenda.

When Vodafone announced 11,000 layoffs in May, the aforementioned Ramona Pinero of CCOO described the news as a “probe balloon” saying that “the explanation they give has given some peace of mind.” The Spanish unions claimed to have received guarantees that no layoffs would be made in Spain among the 11,000 the company intends to carry out worldwide, ensuring that these would be imposed in the United Kingdom, Italy, Germany, India, Egypt and Hungary.

If unions act in practice as a sub-department of human resource management, specialising in policing the workforce, the role of the pseudo-left Sumar embodied by its leader and Minister of Labor Yolanda Díaz is not very different.

Minister of Labor Yolanda Díaz [Photo by U.S. Department of Labor / CC BY 2.0]

In an interview with La Sexta on Monday, Díaz said, “When I have the ERE on my table, I’m going to evaluate it and meet with the parties to learn about it”. Díaz knows fine well that her ministry has no veto power over an ERE, thanks to the right-wing Popular Party’s labour reform in 2012, that she herself expanded last year. This year, 25,000  collective dismissals took place through EREs compared to 24,215 last year, without either Díaz or Sumar opposing the measures.