Cadence of Conflict: Asia, April 2, 2018

China and the US have fixed their rudders on a ramming course. The only remaining question will be over whose hull is stronger.

The “yuge” US trade deficit with China is purported to be $375B USD. Bloomberg was sure to point out that the figure is inflated, some way or another. Xinhua news reports that a more accurate figure is a mere $298B USD deficit. Trump sent a “Section 301” notice of unfair trade tactics to China along with $50–60B USD in tariffs, depending on which news source you read. Trump also asked China to reduce the deficit by a whopping $100B USD and China says that the US is being unfair, placing tariffs on US food.

Asian markets are up, but a Caixin market index—something like a DOW Jones average in China—isn’t up as much as hoped. Everyone has an opinion on what all that means.

Companies in America believe that tariffs harm the consumer. Some voices argue that the US has a “service” trade surplus with China, but still a deficit overall. Trump argues that trade deficits harm the worker and the overall economy. Basic macro-economic theory would say that workers would afford higher prices with much higher pay.

Trade deficits initiated the Opium Wars with China when China welcomed a one-way flow of silver from Britain for tea, but would not allow the eager Chinese population to import British goods. The Opium Wars ended with surrender of several lands to Britain, including Hong Kong. China’s current and main land dispute is over Taiwan. The stage is set for history to repeat and so far it has.

Taiwan is certainly chumming up to the US as China attempts to endear the Taiwanese. Most recently, Taiwan is buying more advanced missiles from the US while two Senators advocate selling F-35s to Taiwan—a sale more likely since Taiwan’s current administration is unlikely to set up secret talks with China as the rival party attempted nearly four years ago. China banned Taiwanese movies casting a purportedly pro-independence Taiwanese actor, Lawrence Ko.

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Cadence of Conflict: Asia, March 12, 2018

As talks between Kim and Trump march forward, China is resigned to the new situation at its eastern border and is focusing on other areas, specifically trade. In truth, China’s main trade opponent is not the US, but Vietnam.

Vietnam’s main edge in trade will be that it is less expensive. Vietnam is, in many ways, less developed, yet more free to be expressive. Hanoi doesn’t sanction the same censorship as Beijing does. Many hard-working Vietnamese are hungry, even desperate for income. A hard-working, uncensored, hungry, less-expensive people will be difficult for China to compete with on many fronts. This is entirely beside any point about political tension between China and Vietnam.

The meeting between Kim and Trump is less-than-satisfactorily explained. Suddenly they want to talk? Some “teamwork” consultant trying to sell a book will likely attribute it all to diplomacy, along with the preemptive speculation that Kim would give up the nukes because he got them. More is going on behind the scenes and if the true story is ever told it may not be told for ten or twenty years.

As for the Western spin about China’s constitutional changes, it is all about the party, not about Xi. The humble pig farm worker, Xi Jinping, did not rise to power by publicly trying to serve himself. He has followed Robert Greene’s 48 Laws of Power to a tee and will continue to do so—that means putting the party first in his public agenda.

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Cadence of Conflict: Asia, September 25, 2017

China is taking a turn for the better over North Korea’s “Rocket Man”. Stronger sanctions, limits on trade, cutting off oil, halting banking—it was all a wise move on China’s part.

At the United Nations, North Korea made no new friends. They made no indications of any change of heart. North Korea shares the same view of President Trump as the American Left: that he is crazy and irrational and should be called the types of names expected on an elementary school playground.

Even China’s new best buddy, Russia, is concerned for stability in the region. It’s not a threat. It doesn’t sound like a threat. Russia is genuinely concerned. Conflict with North Korea is, indeed, a nosedive and it does affect all Koreans, both North and South, as well as Japan, Russia, and, of course, China. Ending trade is the best bet.

Keeping North Korea alive and kicking as a China-Russia buddy is no longer a reasonable “hopeful”. Now, it’s about damage control. China is being urged to consider cleaning up the dismembered parts of a soon-to-be-former North Korea to avoid other problems.

Japan’s Prime Minister, Shinzo Abe, is expected to call an election. There’s no better time to get re-elected than when the backyard “Rocket Man” is firing missiles over your country and Russia and China won’t do anything about anything except cut off trade with “Rocket Man”. So, from this week’s ongoing drama with North Korea, Japanese Prime Minister Abe is likely to remain in office and China got more involved.

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Cadence of Conflict: Asia, September 4, 2017

Korea’s situation is amplifying. We know this. North Korea is making more threats than ever with it’s “boy king” on the iron clad throne. We know that military options are 1. relevant and 2. undesirable. The Pentagon consistently barks about “military options”, while “economic options” stay on the table—don’t overlook how talk of military bolsters economic action. Rather than reviewing the obvious, consider North Korea through the eyes of the White House—viewing both economics and security—and from the rest of the world.

As the Pentagon, economists, and surrounding nations sees things, not China, but specifically the Communist Party seated in Beijing, is viewed as the “menace of Asia”, venturing into increased trouble with Vietnam, India, the Philippines, Japan, South Korea, Taiwan, Myanmar, Malaysia, Mongolia, Africa, Europe, and others. North Korea has six months of oil remaining, and China does 90% of North Korea’s trade. No Beijing Communist Party feeding the Kim Dynasty equals no Kim Dynasty nukes. That’s how the Pentagon, the US Treasury, and many surrounding nations view China and North Korea.

It will never be said, just as much as it will always be considered: North Korea is a stepping stone to facing the Beijing Communist Party. For the Pentagon, it’s practice and demonstration. For economics, North Korea is an excuse to cut off trade with China who manufactures technology, but does not develop their own, and uses copied technology with trade money to make it more difficult for their neighbors to sleep at night. Right or wrong, justified or not, that’s how others view China these days.

Now, Xi Jinping addresses an assembly over the BRICS bank group, while still not having dealt with the menace in its own back yard. Without a word being mentioned, Brazil, Russia, India, and South Africa—and the nations who trade with them—will view China as being the “maker of promises that won’t be kept”.

China had so much going for it, as did the Communist Party in Beijing. They had trade, they had marked-off territory that no one encroached. But, it wasn’t “what they deserved by rite”, thereby provoking them into too much venture and not enough housecleaning. Make no mistake, North Korea is only the tip of the iceberg marking regional vendettas that loom beneath the surface, both militarily and economically. The US is not as friendly as it seems, “considering either” economics “or” military; it has already been implementing both as part of a greater regional ambition.

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Cadence of Conflict: Asia, February 27, 2017

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.

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