You Know Nothing Chairman Xi

China Chooses to Lie Cheat and Steal Rather than Reform

China could have chosen to abandon its long practices of forced technology transfer, product piracy, arbitrary discrimination against foreign litigants in disputes with Chinese companies, large scale industrial espionage, and many other sins against fair trade. Instead Mr. Xi’s China chose belligerence. And now Chairman Xi’s country will pay.

A U.S. trade agreement with China would (if enforceable) certify China as a place where foreigners can invest and be protected against espionage, intellectual property theft and unfair legal treatment. That prospect of certification is now suspended. That makes investing in China less desirable for many multinationals, not just U.S. ones. That, in turn, limits Chinese domestic wages as well as long-term learning and technology transfer. A U.S. certification of China might even boost Chinese domestic investment, but again that is now off the table. __

Foreign companies are moving out of China, for good reason. Their products and their employees are not safe inside China, and other nations are offering more favorable labor costs and other incentives which cheating China no longer provides. And so China loses from being a place that no serious and intelligent company can trust.

Within a few years, a country such as Vietnam will provide the same products, perhaps at cheaper prices, because Vietnam has lower wages. So the costs to U.S. consumers are temporary, but the lost business in China will be permanent. __ Tyler Cowen

China Has More to Lose

In a tit for tat tariff war, China has more to lose in dozens of ways. One obvious way in which cheating China is vulnerable is that to avoid financial crisis, China has to sell to the US — whereas the US does not truly need to sell to China.

China imports less from the U.S. than the U.S. imports from China, which is why Trump is taking action in the first place. This means that China’s scope for imposing further tariffs is limited. What it could do is weaponize its foreign-exchange reserves and start selling some of its holdings of U.S. Treasuries. This would have the effect of forcing U.S. bond yields and borrowing costs higher. But it would also tend to reduce the value of China’s remaining hoard of Treasuries. __

The US economy does not rely on exports in the same way that China literally lives or dies by exports.

Right now we export less to China than we do to Japan, South Korea and Singapore put together. That’s the point. So the effect of China’s new tariffs on the U.S. are yet another rounding error. Even if China banned all imports from the U.S., that would amount to only 0.6% of our gross domestic product. And we’d sell the stuff somewhere else. __ MarketWatch

Certainly China can influence world stock markets through policy announcements and influence operations. But China’s shock announcement of retaliatory tariffs just before last Monday’s NYSE opening had far less effect than hoped for by Mr. Xi, who after all this time still knows nothing.

This game must continue to play out to its logical end, as most of the developed world — that had grown fat and lazily complacent — continues to allow itself to be startled, bullied, and manipulated by a China that is over leveraged and getting more over leveraged by the day.

When confronted by a trading partner that refuses to knuckle under to dishonest and predatory Chinese trading practices, the Chinese Communist Party leadership has chosen to lie, cheat, and steal, rather than to reform. This was predictable, when considering China’s global policies of debt slavery and military expansion. Mr. Xi has already pulled the trigger on China’s global strategy, and cannot afford to surrender on any front — particularly on a front that underwrites China’s real economic clout. At this point China’s leaders feel they can only attack, both overtly and covertly.

Foreign influence operations – which can be broadly defined as the coordinated utilization of capabilities to affect changes in the perceptions, practices, and policies of foreign target audiences – in and of themselves are neither new nor not unique to China. But growing concern about aspects of the Chinese state and its broader conduct, as well as a series of recent incidents which have spotlighted the more illicit and coercive aspects of alleged influence operations – be it election interference, the bribing of key influencers, or the manipulation of media environments – have contributed to increasing the spotlight on this subject. The focus on Chinese influence operations is also occurring amid a confluence of broader trends, including intensifying major power competition, deepening ideological struggles between democratic and authoritarian forms of governance, and rising scrutiny on the digital domain, all of which have been particularly worrying for open societies including the United States and its allies. __

Those who can only attack are at a decided disadvantage over a long term war — even if opponents are evenly matched. In a case where the underdog is massively over-rated — and in the case of hyper-leveraged China — the tactics can escalate rapidly out of desperation when the true stakes become more widely known.

Under President Trump, jobs have returned to the US at rates not seen for 50 years. But other countries are also profiting at the expense of China, due to lower costs of production and less expensive transportation costs — among other dynamic factors involved. China does not hold the clever hand it once held. Which is why China’s rapidly escalating militancy is somewhat difficult to excuse.

In the end, you know nothing, Chairman Xi. And neither do your masses of fawning acolytes among the western media and cash-strapped western governments such as Greece and Italy. Their nations will pay the price of their greed, and in the end you also will pay the price for your premature decision to fire.

China’s stock market card has so far been massively underwhelming in the act. But we should be prepared for more Chinese style kabuki theatre in the near future.

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2 Responses to You Know Nothing Chairman Xi

  1. bob sykes says:

    Who do you thinks wins the 21st Century?

  2. Pingback: China: The Red Dragon Mortally Wounded | American Partisan

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