China – What’s the deal?

“What does that mean?  ‘China is here.’  I don’t even know what the hell that means.” – Big Trouble in Little China

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Had enough Mongols?  This is how you avoid Mongols, unless the 9th Circuit says you have to let them in.

I’ve had my eye on China for quite a while.  It knows why.

Anyway, China has in the past 50 years transformed itself from an example of the nation your parents warned you about:  “See, eat your peas and study hard, you don’t want to be like China,” to a country competing for prime representation in the International House of Pancakes®.  Okay, I made that up.  I don’t even know if they have Frosted Flakes™ in China, let alone pancakes©.

For four thousand years, China looked inward.  Only conquered twice, by the Mongols and by the Manchu, the 20th Century was a succession of weak leaders until the communist takeover at the hands of Mao Zedong.  Mao seemed content to play with the Chinese people and the Chinese economy like a Doberman’s chew toy until his death in the 1970’s.

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AOC will never be a doctor – she’s committing political Mao-practice.

Mao’s successor, Deng Xiaoping, looked around at the huge Doberman spit-covered collectivist mess left by communism, and decided that something had to change.  After visiting the United States, he decided that China needed way to get convenient chocolate milkshakes like that one Jimmy Carter got him at McDonalds®, and began reforming the economy based around market lines.  You know, capitalism.

Capitalism worked amazingly well at saving a communist economy.  Shocker!

The collective ingenuity of over a billion Chinese coupled with capitalist incentives and totalitarian controls has led to growth.  The economy of China in 2019 is 91 times larger than it was in 1978 when Deng’s reforms began.  Some before and after pictures become relevant at this point:

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Okay, I’m exaggerating.  But not by much.

What China has effectively done is make its citizens nearly 100 times richer since Star Wars® first came out.  Perhaps more impressive is the amount of expertise that has been imported to China.  By making first cheap junk in the 1980’s to radar detectors in the 1990’s to iPods® in the early 00’s to iPhones™ today, China has imported not only the technical know-how of cutting edge technology is design, it understands better than any other country in the world on how to build most things.

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See, I told you I wasn’t exaggerating much.  Two day shipping really changed their lives.

An engineer in California (who may or may not even be an American) designs the iPhone©.  In China, they figure out how to build it.  That know-how isn’t in a manual, it’s built up in thousands of mistakes that require solutions to produce a finished product.  All of those solutions are known by the workers and engineers in the factory, and used to make production lines that much faster.

In this way, China has traded lots of cell phones for zillions of dollars that we just printed up out of thin air, sure, but it’s also trained itself on how to be an industrial superpower.

Industrial.  But what about military?

No.  China has seen our military and has no ambition that it can in the near future compete with American military power.  Unlike the Joint Chiefs of Staff and the United States Congress, China has no desire to fight World War II again.  While the United States has fought in numerous conflicts in the last fifty years, China has fought in exactly one, an incursion into Vietnam back before Reagan was president.  The Chinese make the Italians look like Patton with Pizza.

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So, rumor is that they also have a tricycle attack brigade, but they were at nap time.

If I were Chinese President Xi Jinping, I would have no illusions about my military.  Even if it fielded better tanks and planes than the United States, it still would come up short because outside of games of Call of Duty®, the Chinese military has no experience.

Instead:  “China will use a host of methods, many of which lie out of the realm of conventional warfare. These methods include trade warfare, financial warfare, ecological warfare, psychological warfare, smuggling warfare, media warfare, drug warfare, network warfare, technological warfare, fabrication warfare, resources warfare, economic aid warfare, cultural warfare, and international law warfare…” (United States Army Special Operations Command, 2014)

In particular, China has focused on trade.  In the last five years, China has started an international cooperation scheme called the Belt and Road Initiative (BRI).  This has led to (so far) agreements with over 68 countries.  The stated objective of BRI is that it is meant to produce closer ties and stronger trading arrangements between China and the rest of the world.

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See, need some place to keep my stuff – Mom’s basement is full.

BRI consists of at least a trillion dollars of planned Chinese spending, and by spending, I mean loans.  China will loan countries money to develop infrastructure – pipelines, roads, harbors, PEZ® mines, railroads, industrial parks, electric power grids, and airports to better move people and goods throughout the world.  Certainly China won’t take advantage of the loan conditions if a country has trouble repaying it?

Actually, so far not really.  In only one case has China seized assets, and the rest of them it has either renegotiated debt payments or forgiven them entirely.

So what is China doing?

It came to me one night while I was thinking about the blog and just drifting off to sleep.  Thinking about this like a banker looking to gain leverage wasn’t the right framework.  China isn’t building this trading network to compete with the United States.  China is building this framework for life without the United States.  BRI replaces our markets, and replaces what we’re shipping to them.  But there’s more.

When you look at what China has, it is people, industrial capacity, and ingenuity.  China needs raw materials.  It’s short on food.  It needs oil.  By making inroads into Africa, China has started new mines, run by Chinese administrators and Chinese miners.  China has built, using Chinese laborers and Chinese steel, new railroads in Kenya.

And all of this BRI stuff isn’t paid for in dollars.  China has seen that the United States has managed to pay for debt in dollars it printed.  If China can be the dominant country, it can pay for things in Kenya with Chinese money printed by China itself, rather than have to make iPhones® and send them to iNdiana© in exchange for dollars.

Perhaps it’s just the economy of the United States that China expects will be gone?

Beyond that, closer economic ties with a country that could dominate your economy certainly isn’t dangerous, is it?  They’d never use their influence to change your laws, or influence your movies, right?

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Set from the 2010 remake of Red Dawn before China demanded they not be the villain.   Hmmm.

Belt and Road graphic (pre-meme) By Owennson – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=78386561

Author: John

Nobel-Prize Winning, MacArthur Genius Grant Near Recipient writing to you regularly about Fitness, Wealth, and Wisdom - How to be happy and how to be healthy. Oh, and rich.

14 thoughts on “China – What’s the deal?”

  1. China sells us cheap crap made by borderline slave labor. Then they loan that money back to us in the form of debt that we incur by military spending to protect us against non-existent military threats that also conveniently protects the shipping lanes that China needs to send cheap crap to us. Meanwhile we don’t make much in this country anymore and sure we get cheap consumer goods but they are mostly garbage that needs to be replaced in six months. It is a pretty sweet scheme by the Chinese who are also buying our politicians, along with AIPAC, while we worry about the Russians influencing our elections (the book Secret Empires lays out how the Chi-Coms own our political class, from Biden to Mitch McConnell: http://www.arthursido.com/2018/04/book-review-secret-empires.html ). At some point in the near future we will have the most expensive and technologically advanced military apparatus in the world but no one will be smart enough to be able to use the equipment thanks to diversity quotas.

    I stick by my prediction that the future is going to belong to the ethnically homogeneous nations in East Asia while the former Western powerhouses drown in “refugees” and debt. Just wait until Africa finds out that China doesn’t share our western altruism and when the famines and diseases run wild, the Chi-Coms aren’t going to organize a bunch of musicians to sing “We Are The World”.

  2. China has maintained an isolated society for thousands of years. Their biggest societal attribute is conformity to societal norms. By controlling what is allowed into China, either information or goods, the leadership can keep hold of absolute control over more than a billion people. If you need proof, think Tienanmen Square. World opinion was strongly against the government of China in how they reacted to the protests and yet, nothing really changed or at least, nothing changed that was not government approved.

    The excursions into world commerce by the Chinese are all calculated operations that have specific goals that reward China as a result. The participating nations that cooperate with China benefit too but the game is completely controlled by the Chinese government.

    China and the United States are not directly in competition but China recognizes that the US has a tendency to try to ‘control’ its trade partners though manipulation of the dollar and with tariffs. Normally the tariff wars are behind the scenes but with President Trump we see them on the front page and it has been a very long time since the people of this nation actually were aware of trade tariffs and how they affect our economy.

    China’s military is charged with keeping China Chinese only. This drives the reason that they want to re-integrate Taiwan to the mainland nation. To keep their society Chinese and to keep other cultures out. Prior to the revolution, Taiwan was a part of the mainland nation. The goal of re-unification is to restore to China that which is part of China. Think ‘Conformity’. If Taiwan were to ever re-join China proper, the people of the island would rapidly either integrate into the lifestyle of the main land or disappear into indoctrination camps to be ‘Re-Educated’ on how to be a proper Chinese Citizen.

    The red army serves to keep the foreigners out of China and as long as we do not venture within the walls of that nation with our forces and/or culture they will allow us to destroy ourselves slowly which seems to be what is going on in the US as of late.

  3. The Belt-Road initiative (BRI) is absolutely how the Chinese intend to make America irrelevant by 2040.

    An even greater worry is what the Chinese are doing to make America irrelevant TODAY – the petroyuan. This can absolutely wreck the American economy in only a year or two as it takes hold…

    https://asia.nikkei.com/Economy/China-Russia-and-EU-edge-away-from-petrodollar

    https://www.scmp.com/comment/article/2176256/chinas-petroyuan-going-global-and-gunning-us-dollar

    https://www.worldfinance.com/markets/the-petro-yuan-could-usher-in-a-new-era-for-global-energy

    Americans don’t understand the danger of the petroyuan because they don’t understand the critical importance of the petrodollar that Nixon set up in 1973, and the extreme danger if a viable alternative is created to it. Don’t kid yourselves, do the research. Flirtation with oil payments in euros instead of petrodollars is exactly why Libya, Iraq, Venezuela, Syria and Iran have all been attacked / sanctioned.

    https://www.investopedia.com/articles/forex/072915/how-petrodollars-affect-us-dollar.asp

    https://www.thebalance.com/what-is-a-petrodollar-3306358

    But the petrodollar was only part of why the US economy has been so dominant over the past 45 years. The other part was the acceptance of a wildly unfavorable trade deficit. That’s when the US went from being a global creditor to a global debtor under Reagan.

    https://www.latimes.com/archives/la-xpm-1985-09-17-mn-20088-story.html

    This is what you have to accept to have the dollar become a global reserve currency; it’s called Triffin’s Paradox. You can run vast trade deficits ONLY SO LONG AS THE COUNTRIES THAT YOU BORROW FROM GIVE YOU THE DOLLARS BACK BY BUYING INTO PETRODOLLARS AND US TREASURY SECURITIES. TP says this only works so long because interest on consumer and government debts EVENTUALLY BECOMES TOO HIGH AND UNPAYABLE.

    https://fee.org/articles/debt-interest-payments-will-consume-trillions-of-dollars-in-coming-years/

    TP is a effectively a Ponzi scheme that the US bought into 40-45 years ago and is the basis of why our economy is currently doomed today. It was a fun party while it lasted.

    https://realinvestmentadvice.com/triffin-warned-us/

    It remains to be seen if the Chinese will take the other part of the Devil’s bargain and start running trade deficits and embrace TP to make the yuan the next global reserve currency. If they only do part of the deal (petroyuan) and not the other part (trade deficits / TP) then the dollar fails as a global reserve currency AND NOTHING REPLACES IT. This would be a reversal of globalism and the beginning of every-nation-for-themselves and screw your allies. The current US – China trade war may very well be the start of this process. BRI may be the way the Chinese eventually win it.

  4. What about Star Trek’s “The Omega Glory”? Yangs for the win!!!

    I’ve been reading about the Eastern Roman Empire, the Crusader states and the Muslim countries.

    China is playing the long game. State sponsored capitalism along with ethnic identity.

    The USA will be bankrupt one day, slowly then all at once, but you will see the cracks in western europe first.

    Its already baked into the cake. Nothing we can do but play the long game ourselves.

    Raise your kids to be aware.

    Great blog. Jim sent me here, so blame him……

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