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ECONOMICS AND FINANCE

China declares “people’s war” on US economy

5/17/2019

2 Comments

 
Below is our translation from RIA Novosti. with commentary by Vince Dhimos.
 
All bets are off now that China has officially declared a “people’s war” on the US economy. As the comments section at the above-linked RIA site indicate, China is in a delicate position now. As the PRC admits, things will get very rough for both the US and China now that the economic war is on. But the bottom line for them is that the Chinese have a higher pain threshold. I think they may be thinking in terms of the 2020 elections. They know China can survive but are betting on Trump losing to a Democrat (they are hoping it will be Biden) thanks to the devastating effects of the Chinese gamble on the US economy. Presidents presiding over famines generally don’t get re-elected. Author Ivan Danilov assumes that, as a major offensive in this war, the Chinese will be ditching their Treasuries, with a devastating effect on the US dollar. I suspect that there may be a domino effect, with other nations joining in and ditching their Treasuries as well. After all, Trump has not been nice to his allies either.

Finally, here's a thought. Suppose China goes ahead with the dirty deed and ditches its Treasuries, and at that point, the dollar experiences some sort of slump as a result -- as one would expect -- and then reminds Saudi Arabia that, since the USD has taken a hit and will decline, it might be a good time to get out of the US dollar and start using the yuan. They could remind Saudi that China doesn't hold enough dollars any more to buy oil in USD. And then supposing the Saudis agreed. We have already seen that the Saudi-US relationship is souring and that Putin stands to become the head of a restructured OPEC. Just speculating of course, but it occurs to me that perhaps China has already had that chat with MBS. This could explain why Xi is feeling his oats right now.

http://www.newsilkstrategies.com/news--analysis/news-from-wsj-on-saudi-arabia-americas-ex-ally-yes-ex

 
BEGIN TRANSLATION
 
China declares a "people's war" on the American economy
 
May 16, 2019
 
Ivan Danilov
 
Judging by the reaction of the official Chinese media, Beijing does not expect a speedy or peaceful resolution of the economic conflict with Washington. Changes in the tone of the official media position of the Celestial Empire were noticed even in the USA: “China promises a “people's war,” since the trade conflict has taken a nationalist turn,” writes the US business news agency Bloomberg. It is noteworthy that the “people's war,” about which the Chinese state-owned foreign policy publication Global Times writes in its editorials, is not only a departure from the restrained and diplomatic rhetoric that was used before, but also a de facto recognition that, intentionally or not, the conflict with the United States is leaving (or has already left) the purely economic plane.
 
Global Times editor-in-chief Hu Xijin, [胡锡进Húxījìn] sometimes referred to in the US social network as a “Chinese oracle” because of his good knowledge of the state of US-China relations, explained on Twitter what the essence of the changed political and public discourse is: “China’s decision to raise tariffs and the fall of American stocks inspired Chinese society. Being tough with the United States, achieving peace through struggle, is the consensus of most Chinese. The US is planning new tariffs. “The state has reached a peak."
 
It should be recalled that the day before, Hu Xijin hinted: Chinese experts are actively discussing specific options for dumping the Chinese portfolio of US government bonds "onto the market," which caused a slight panic in the American financial media. The latter were quick to come to the conclusion that either China would not dare to take such a measure, or the use of such a radical measure would ultimately play into the hands of Donald Trump, although it would cause serious damage to ordinary Americans. “If China sells its bonds to the United States, Trump will win. The sale will weaken the dollar, which will help reduce the US trade deficit with China,” writes Bloomberg. This is an overly optimistic assessment that does not take into account how badly such an action by the PRC would undermine the US financial markets and how much harder the Chinese action would make it to build up US government debt, which is necessary to maintain American economic stability.
 
Peter Schiff, head of the investment fund Euro Pacific Capital, believes that the logical continuation of the current conflict does not bode well for the American economy, while many in the United States refuse to face the truth: The ignorance of the true nature of Sino-U.S.  relations is staggering. China has been subsidizing the US economy for decades by lending us money and supplying us with manufactured goods. When China withdraws its support, our credit based service sector economy will implode!” he writes on Twitter.
 
However, one should not assume that it will be a painless process for China. Quite the contrary: the Chinese economy has been growing for decades, thanks in part to preferential access to American technology, capital and markets, and its “disconnection” from the American system (if it comes to total embargoes and “dollar sanctions”) cannot but inflict quite sensitive damage on China that will have to be stopped by long-term and difficult reforms. It is not for nothing that representatives of the Chinese official point out that in Chinese social networks, the confrontation between the USA and China is described as a conflict between two books, ie, “The Art of the Deal” (by Donald Trump) and a collection of Mao’s speeches on the theory and practice of “protracted guerrilla war.” Roughly speaking, the Chinese leadership is making a public bet that the Chinese system in general and Chinese citizens in particular have a “pain threshold” much higher than that of the American opponents. And that they can withstand difficulties that would simply break the American political system and American society.
 
The Chinese strategy is to "tolerate what the United States will not tolerate." This did not go unnoticed at the White House, but Donald Trump and his team took the information in a rather specific way, reducing it to Beijing’s supposed bet that the next president of the United States in 2020 will be a Democrat and ex-vice president under Obama Joe Biden. Trump stated in plain language that China had abandoned the agreements already reached, since he expects to agree later with Biden or "one of the very weak democrats." A pro-Trump press began active promotion of conspiracy theories of a relationship of his Biden’s son with Chinese business. The American tabloid The New York Post writes that immediately after the then US Vice President’s visit to China, Hunter Biden’s (Joe’s son) firm received a contract for a half billion dollars with a Chinese state bank. And it is precisely this that allegedly explains the very soft position of Biden himself on the economic war with China.
 
Regardless of how true the above charges are, you can safely bet that Trump, his entourage, some American security officials and even some of the “system politicians” from the Democratic and Republican parties intend to “push China to the brink. At this time, in their opinion, the question of whether the United States will maintain its status as a world hegemon in the 21st century is really being resolved.
 
Here you can trust the assessment of Trump’s chief campaign strategist Stephen Bannon, who told CNBC that there are “no chances” for the US president’s retreat in a trade war. If a month ago there were grounds for believing that Trump would agree to some kind of "truce" and certain (albeit temporary) concessions on issues important to the United States, now he is likely to really be escalating until the negative consequences are unbearable for either China or the United States itself.
 
The role of Russia in the context of the growing conflict between the US and China (as well as the role of the European Union, and other countries that can "shift the balance of power" in the struggle between two rivals of comparable strength) will only increase. Moscow got rid of its American bond package in time (for if it sold after China, it would have had to take losses), and now its hands are completely untied to gain maximum benefits from reorganizing the global economic and political system.
 
[COMMENTS AT THE RIA NOVOSTI SITE]
 
Let’s not deceive ourselves. China falls short of the United States in many respects. The Chinese economy is focused on exporting its goods to the USA and its allies. In terms of military power, China loses significantly to the US. In its potentials of operational control and transfer of troops, the United States now has no equal in the world.
 
Vasya Ivanov
 
China will collapse immediately if the entire US debt is sold, their entire economy is based on this, as is ours on oil!
 
Yaroslav Vinokurov
 
END TRANSLATION
2 Comments
Edward Louis Welch
5/17/2019 07:48:21 pm

Indefinite premises. Why would PRC dump those treasuries all-at-once, as it were?

Reply
John Edward McClain
5/18/2019 04:50:30 pm

Wars are fought tactically and strategically. China is in the position to affect our dollar at will, by whim, and while we, or "deep state" can retaliate, ultimately, it will come down to "who can withstand the most pain", and I believe China can, simply because we, as a Country, are entirely insulated from real pain, and have been for a long time.
Our stock market is always operating in a bubble, so it can be shaken at will, and what appear to be minor fluctuations or changes can sometimes be vast and devastating. It's not how much bonds are traded, it's when that is critical, timing is always of the essence, tactically, and the Chinese know how to play go, as well as chess.
Semper Fidelis,
John McClain
Vanceboro, NC, USA

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