Central planning has only so much room for slight of hand tricks to keep up its sleeve. When the going gets tough, everyone goes home. For China, that means devaluing its currency, a complaint Trump has long lobbed against the trade giant.
Maintaining good relations with Apple and almost achieving the manufacturing capability long held by Samsung is quite the accomplishment for the Chinese. Good job. Everyone owes them a hand. China’s BOE company hopes to be able to start manufacturing the flexible, “organic” LED displays by 2020.
Devaluing currency as a response to trade tariffs from the US, however, is likely to make those tariffs higher, considering that devaluation of its own currency was one reason Trump argued for tariffs before his election. This, and turning to Africa, means that the international bite is felt. Silicon Valley also has its eyes on Africa, meaning that Apple and China may meet again in Africa, as well as Google. But, doing more of the same things that initiated tariffs is likely to cause more tariffs than tariff problems it alleviates.
China has a hard set of choices ahead and as those choices narrow, the tiger will feel more and more like its been backed against a corner. This path doesn’t endure entirely peacefully.
Americans love flags. The over-sized flag, the “Star Spangled Banner”, was a strategic tool of Fort McHenry at the Battle of Baltimore and the US national anthem itself is named after the flag. If the United States ever truly intended to communicate that it believes Beijing seats the rightful government over the island of Taiwan, then Washington DC would have demanded that Taiwan fly the Chinese Communist flag over its own flag, like Hong Kong does. But, it didn’t and they didn’t ask. The test of what Donald Trump thinks about China is not a question of how many times he sees the word “China” on his globe at home, but what flags he accepts flown where.
Is China wise to what’s going on? Perhaps money is making all the difference. China’s PLA Navy is headed for an increased budget. If money was China’s answer, perhaps money tipped-off Beijing in the first place.
According to Obama Treasury rules, China is only 1/3 of a “currency manipulator”, exceeding a $20B trade deficit with the States. The other two rules relate inflation to GDP and official currency purchases to GDP—two things where China plays by a different set of rules than American economics. China “declares” its own currency value, it is not determined by the markets, making what the US refers to as “inflation” irrelevant to China. The second irrelevant Obama rule relates to “official” currency purchases. If only economics were only affected by “official” purchases, many other economic problems would be solved. But, economies are affected by “actual” purchasing, not merely whatever we happen to label as “official” this decade. The Chinese, especially, are experts at looking good “officially” while doing the bulk of their work under the table. Why else would Asians be so focused on cram schools and testing?
Then, there is the task of calculating “GDP” in a heavy back-and-forth trade economy. In 2011, the US slapped tariffs on China-made solar panels, which were made with materials imported from the US, which China also slapped a tariff on. Not only is actual “domestic” product difficult to measure in a “Venn diagram” of overlapping markets, there is also the problem that China’s government behaves like a company itself—benefiting from tariff revenue, thereby triggering another slew of investing and purchasing opportunities. If economics were a pair of glasses, China operates in ultraviolet light that no pair of US lenses can detect.
So, not only were the Obama Treasury “currency manipulator” rules an attempt to measure the light with a wind sensor, Trump gets what Trump wants. If China is destined for the “currency manipulator” list, it will get on that list one way or another, and there is a laundry list of ways that can happen.
But, then, there is North Korea.
While the “experts” lecture the world about how “trade wars” always backfire, China harbors its own trade war with the government in Northern Korea. Kim Jong Un isn’t happy with Beijing and Beijing wants to talk about it with the US.
President-Elect Trump criticized the intelligence community for having fake reports and allowing those reports to leak. He conducted his own “leak” fishing expedition and plugged the leak—or “caught, fired, and fried” the leak. If he can find his leaks with no power of the pen, why can’t the “intelligence” people find their leaks? That must be Trump’s question, anyway. Of course he Tweeted against the agencies.
Is it wrong for a president-elect to criticize people he can soon fire? There is no way that this president-elect has criticized his soon-to-be subordinates as much as the soon-to-be ex-president will continue to criticize without end. Obama plans to stay in Washington, and it isn’t because he likes gazing at the Eisenhower Building.
When Brennan lectures, “It’s more than about Mr. Trump; it’s about the United States of America,” he’s talking about his future boss. That’s not right or wrong; that’s just not smart. Even Comey was smart enough not to go up against Obama. Maybe Brennan expects to be fired anyway.
A lot of people aren’t thinking about what will happen when the man they continue to criticize becomes president. They weren’t thinking about all the deals they made that weren’t going to last. Whether the trade deals were good or bad, Americans were never going to tolerate China and Mexico taking American jobs forever. Clinton’s and Bush’s and Obama’s trade deals weren’t going to last. But, people didn’t see that either. They didn’t see a lot of stuff that was coming. That’s somewhat of a unifying quality among the anti-Trumpists. It still is, apparently.
China has reportedly announced that it has been outdone by US technology. This implication came from the statement that it can only respond to the US “freedom of navigation” exercises by sending nuclear subs to the South China Sea. While some claim that the reports from Beijing are “exaggerated”, either scenario shows Beijing revealing its position of weakness and needing to resort to drastic measures. The report seems to have come as a response to reports of the US Navy’s use of the new electromagnetic-powered hypersonic railgun.
An international tribunal on China’s claims, activities, and islands in the South China Sea is expected in the coming weeks. China has already announced to declare the ruling illegal and will not comply. There seems to be no word on whether “contempt of court” charges against China will be included in the tribunal, in lieu of the recent comments. Elementary power brokers strive to understand the concept that, in our day, law comes from the resolve of the masses and to change the law, one must first court the masses. We’ll see.
Then, there’s money. Concern is growing over an ENRON-style ingrowth and implosion in China’s economy. While wealth management portfolios formerly focused on deriving profits from bonds (AKA real, individual people), the swelling trend is to invest in other banking investments. This is an exceptionally large problem since many banking investments now get their money from wealth management. So, Chinese banks are making more of their money by getting money from each other, and less from actual people.
Then, there’s currency. China has set the value of its currency at a five-year low. This in the shadow of recent comments from the US Fed chair. The high seas are not the only battle front irritating the international community. And, currency value isn’t either, for that matter.
There’s also trade. Not only Taiwan, but now Europe is getting cold feet in trading with China. Taiwan won’t resume cross-straight talks until it gets some laws passed to make the playing ground even. And, some in China’s circles echo similar statements from front-running US presidential candidate, Trump.
Speaking of Taiwan, the newly elected president, Tsai, visited a Taiwanese Air Force base for the first time in her new presidency. She seems less shy of talking about her own the military than Obama is of his. While China may not notice the responses of the international community, China will notice Tsai. Perhaps that is why the nuke subs are on the way.