Will China Change Its Strategy Over the Next 90 Days?

This article was published by The McAlvany Intelligence Advisor on Wednesday, December 5, 2018: 

Donald Trump’s tariff negotiators have 90 days to accomplish the impossible: get China to give up on its plans: first, to be the dominant power in East Asia, and second, to challenge, threaten and then subdue the U.S. in its drive for global hegemony.

One has to give Trump credit. He has rushed in where angels have long feared to tread: first, by exposing the media as being nothing more than the mouthpiece for the Democrat Party; and second, by exposing China’s plans to gain complete global economic and political control.

Consider its “Made in China 2025” policy designed to challenge the West in eleven key areas: information technology, numerical control tools and robotics, new materials, state-of-the-art vehicles (rail, ships, aviation, and electric), agricultural machinery, power equipment, medical devices, and 5G wireless communications technology. As Insight (the Journal of the American Chamber of Commerce in Shanghai) explained:

China’s goal of becoming a global leader … will require several steps: localize, indigenize [and] then substitute foreign technology with locally developed or acquired technology, and finally, to capture global market share across key industries.

Insight performed a remarkable service in noting that MC2025 relies heavily on “foreign technology” and “acquired technology” to accomplish its goal of capturing global economic and political dominion. Just how do they obtain this highly valued and necessary technology? They obtain it mostly from U.S. companies, either through hacking into their private information systems, or through blackmail.

Insight explained just how they obtained the technology for their high-speed bullet trains from the Japanese: “Over 1,000 bullet trains speeding around China may have been predominantly built by local manufacturers, but many patents originated from Japanese partners who came into licensing agreements with Chinese companies.” Just how those Chinese partners “came into” those agreements with the Japanese patent holders was explained by Insight:

China’s high-speed rail is setting off to conquer overseas markets – Shinkansen has spawned off a rival, which now threatens [Shinkansen’s] position on the global scene.

Surely, this is not what Kawasaki Heavy Industries (the maker of Shinkansen) had in mind when it entered into cooperation with the Chinese, but it was lured by the prospects of China’s huge market.

There’s another obstacle facing the Trump administration as it seeks to confront and defuse Chinese expansionism: its “Belt and Road Initiative.” Launched in 2013, China is investing billions of dollars (of American reserves it has purchased from the U.S. Treasury) to improve infrastructure along the old Silk Road that links it with Europe. The Economist magazine estimates that the Chinese are spending $150 billion a year in 68 countries hankering to have state-of-the-art transportation systems built and paid for by someone else. A year later, Wang Yi, Red China’s foreign minister, explained that the investment came with chains: that the initiative was Premier Xi’s “most important foreign policy,” that its ultimate aim is to make Eurasia – dominated by China – an economic and trading area “to rival the transatlantic one” – dominated by America. In other words, those 68 countries would enjoy state-of-the-art transportation systems at the cost of their economic (and eventually their political) sovereignty.

That’s what makes Larry Kudlow’s remarks so foolish. The day after the “truce” between the U.S. and China was declared, he cheered it, saying “Those [improvements in relations] should kick in soon. We should see palpable change on the Chinese side immediately. I don’t want to be too specific, but I think the generic answer is we will see changes very quickly.”

If there are changes, they will relate only to the low-hanging fruit, including reducing tariffs on U.S. vehicles back to their level in August, and promising to purchase an undetermined but “very large” quantity of American agricultural products starting immediately. But when it comes to the really important issues, expect the Chinese to be much less conciliatory.

Those issues include China’s hacking into U.S. company networks to steal their secrets, violating trademark and copyright laws, coercing American companies to give up trade secrets to the Chinese in exchange for the opportunity to sell in China, and discriminating against U.S. goods.

But even those issues hide the underlying foreign policy objectives of the communists: they have instituted those programs to become the dominant economic and political power in East Asia, eventually becoming the dominant economic and political power in the world.

China must have U.S. technology in order to threaten the U.S., either by theft or by blackmail. Any plan that disrupts this major foreign policy objective by the communists running China will be rejected out of hand. President Trump has exposed the enemy’s tactics. Winning the war with China is another matter entirely. As Investors’ Business Daily put it, “Nothing short of China abandoning its export-driven model to extending its economic domination of Asia and its CM2025 plan to dominate world markets – at the expense of the U.S. – will satisfy Trump.”

Trump has already recognized that reality. On Tuesday he tweeted: “The negotiations with China have already started. Unless extended, they will end 90 days from [now].” (Emphasis added)

No, Mr. President, they will not end 90 days from now. There is every good chance they will still be going on through the end of your second term.

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Sources:

Twitter.com: Trump’s tweet on “unless extended”

CNBC.com: Kudlow says progress in US-China trade will happen ‘very quickly’

Investors.com: Can Donald Trump’s Tariffs Force Radical Changes On China?

FoxNews.com: Gordon Chang: Trump’s latest China tariffs are the right thing to do

Economist.com: What is China’s belt and road initiative?

Background on China’s Belt and Road initiative

The Wall Street Journal: U.S., China Face Thorny Obstacles to Lasting Trade Peace

Manufacturing in China by Insight (China’s MC2025 strategy)

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