Sundance writes at The Conservative Treehouse,
China is a central planning economy. Meaning it never was an outcropping of natural economic conditions. China was/is controlled as a communist style central-planning government; As such, it is important to reference the basic structural reality that China’s economy was created from the top down.Read more here.
This construct of government creation is a key big picture distinction that sets the backdrop to understand how weak the larger Chinese economy really is.
...Broadly speaking, the modern era Chinese are not able to think outside the box per se’ because the reference of all civil activity has been a history of box control by government, and compliance to stay (think) only within the approved box. The lack of intellectual independent thought-mapping needed for innovation is why China relies on intellectual theft of innovation created by others.
American culture specifically is based around freedom of thought and severe disdain of government telling us what to do; THAT freedom is necessary for innovation. That freedom actually creates and drives innovation.
Again, broadly speaking Chinese are better students in American schools and universities because the Chinese are culturally compliant. They work well with academics and established formulas, and within established systems, but they cannot create the formula or system themselves.
The Chinese Planning Authority skipped the economic cornerstone. When China planned out their economic entry, they did so from a top-down perspective. They immediately wanted to be manufacturers of stuff. They saw their worker population as a strategic advantage, but they never put the source origination infrastructure into place in order to supply their manufacturing needs. China has no infrastructure for raw material extraction or exploitation.
China relies on: importing raw material, applying their economic skill set (manufacturing), and then exporting finished goods. This is the basic economic structure of the Chinese economy.
See the flaw?
Cut off the raw material, and the China economy slows, contracts, and if nations react severely enough with export material boycotts the entire Chinese economy implodes.
Insert big flashy sign for: “One-Belt / One-Road” HERE.
Again, we reference the earlier point: Economic strength is the ability of a nation to sustain itself. [Think about an economy during conflict or war] China cannot independently sustain itself, therefore China is necessarily vulnerable.
China is dependent on Imports (raw materials) AND Exports (finished goods).
The 800lb Panda in the room is that China is arguably the least balanced economy in the modern world. Hence, China has to take extraordinary measures to secure their supply chain. This economic dependency is also why China has recently spent so much on military expansion etc., they must protect their vulnerable interests.
Everything important to the Chinese Economy surrounds their critical need to secure a strong global supply chain of raw material to import, and leveraged trade agreements for export.
China’s economy is deep (manufacturing), but China’s economy is also narrow.
China could have spent the time to create a broad-based economy, but the lack of early 1900’s foresight, in conjunction with their communist top-down totalitarian system and a massive population, led to central government decisions to subvert the bottom-up building-out and take short-cuts. Their population controls only worsened their long term ability to ever broaden their economic model.
It takes a population of young avg-skilled workers to do the hard work of building a raw material infrastructure. Mine workers, dredge builders, roads and railways, bridges and tunnels etc. All of these require young strong bodies.
The Chinese cultural/population decisions amid the economic builders precluded this proactive outlook; now they have an aging population and are incapable of doing it.
[*insert* consideration for conscripted N-Korean labor here]
This is why China has now positioned their economic system as dependent on them being an economic bully. They must retain their supply chain: import raw materials – export finished goods, at all costs.
...U.S. President Donald Trump and the U.S. economic team fully understand this dynamic and fully understand the inherent needs of China. When you are economically dependent, the ‘bully plan’ only works until you encounter a ‘stronger opponent’. A stronger opponent is an economic opponent with a more broad-based stable economy, that’s US.
...President Trump is putting on a MASSIVE economic squeeze.
Squeeze #1. Trump and Mnuchin sanctioned Venezuela and cut off their access to expanded state owned oil revenue. Venezuela now needs more money. China and Russia are already leveraged to the gills in Venezuela and hold 49% of Citgo as collateral for loans outstanding. Venezuela has been paying back China and Russia with oil, but Venezuela needs money. Now China and Russia will need to loan more, directly.
Squeeze #2. China’s geopolitical ally, Russia, is already squeezed with losses in energy revenue because of President Trump’s approach toward oil, LNG and coal. Trump, through allies including Saudi Arabia, EU, France (North Africa energy), and domestic production has driven down energy prices. Meanwhile Russia was spending heavily in Syria.
Squeeze #3. Trump and Tillerson put Pakistan on notice they need to get involved in bringing their enabled tribal “extremists” (Taliban) to the table in Afghanistan. Pakistan’s primary investor and economic partner is China. If U.S. pulls or reduces financial support to pressure Pakistan toward a political solution in Afghanistan, China has to fill void.
Squeeze #4. China’s primary economic threat (competition) is next door in India. President Trump has embraced India as leverage over China in trade and pledged ongoing favorable trade deals. The play is MFN (Most Favored Nation) trade status might flip from China to India. That’s a big play.
Squeeze #5. President Trump has launched a USTR Section 301 Trade Investigation into China’s theft of intellectual property. This encompasses every U.S. entity that does manufacturing business with China, particularly aeronautics and technology, and also reaches into the financial services sector.
Squeeze #6. President Trump, Secretary Ross, Secretary Mnuchin and USTR Robert Lighthizer are renegotiating NAFTA. One of the primary objectives of team U.S.A. is to close the 3rd party loopholes, including dumping and origination, that China uses to gain backdoor access to the U.S. market and avoid trade/tariff restrictions. [China sends parts to Mexico and Canada for assembly and then back-door entry into the U.S. via NAFTA.]
Squeeze #7. President Trump has been open, visible and vocal about his intention to shift to bilateral trade renegotiation with China and Southeast Asia immediately after Team U.S.A. conclude with NAFTA renegotiation.
♦Squeeze #8. President Trump has positioned ASEAN (Association of Southeast Asian Nations) as trade benefactors for assistance with North Korea. The relationship between ASEAN nations and the Trump administration is very strong, and getting stronger. Which leads to…
♦Squeeze #9. President Trump has formed an economic and national security alliance with Shinzo Abe of Japan. It is not accidental that twice North Korea’s Kim Jong-un fired his missile over the Northern part of Japan. Quite simply, Beijing told him to.
Add all of this up and you can see the cumulative impact of President Trump’s geopolitical economic strategy toward China. The best part of all of it – is the likelihood China never saw it, meaning the sum totality of “all of it”, coming. Beijing’s central planning statements today reflect a reactionary position as they are catching up to the ramifications.
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