The four mar-kets drive the shipping market cycle. When the freight rates in the beginning of the cycle starts to raise the cash will flow into the shipping industry, leading to higher prices for second-hand ships. As prices continue to rise, this will lead investors into the newbuilding market. When ship-owners have ordered sufficient of new ships, the cycle is usually at its peak, and eventually the process will go into reverse. When freight rates start to decline leading to less cash inflows, this will have a negative impact on ship-owners, since in this stage they will start to pay for their newbuilding ships. If ship-owners do not have enough liquidity this will force them to sell their ships on the second hand market for scraps. If there are enough new ships supplied in the second hand market to low prices, the older ships will not get any offers and the owners are forced to send them to the demolition market. As more ships are scrapped the supply of ships will go down and freight rates will once again start to rise and the whole market cycle will start from the beginning. (Stopford, 1997)
It is not just that seeking to placate the public at home with braggadocio overseas will make it harder still for China to garner allies and respect. There is a deeper problem. Many countries around the world admire, and would like to emulate, the undemocratic but effective way that China has managed its decades of growth. If China’s domestic politics look less stable, some of that admiration will wane. And even if things can be held together, for the time being, admiration for China does not translate into affection for it, or into a sense of common cause. Economically and militarily, China has come a long way towards regaining the centrality in Asia it enjoyed through much of history. Intellectually and morally, it has not. In the old days it held a “soft power” so strong, according to William Kirby of Harvard University, that “neighbours converted themselves” to it. Now, Mr Xi may know how to assert himself and how to be feared, at home and abroad. But without the ability to exert a greater power of attraction, too, such strength will always tend to destabilise.