China’s Grand Plan To Take Over The World
President of Mauldin Economics
When the US and ultimately the rest of the Western world began to engage China, resulting in China finally being allowed into the World Trade Organization in the early 2000s, no one really expected the outcomes we see today.
There is no simple disengagement path, given the scope of economic and legal entanglements. This isn’t a “trade” we can simply walk away from.
But it is also one that, if allowed to continue in its current form, could lead to a loss of personal freedom for Western civilization. It really is that much of an existential question.
Doing nothing isn’t an especially good option because, like it or not, the world is becoming something quite different than we expected just a few years ago—not just technologically, but geopolitically and socially.
China and the West
Let’s begin with how we got here.
My generation came of age during the Cold War. China was a huge, impoverished odd duck in those years. In the late 1970s, China began slowly opening to the West. Change unfolded gradually but by the 1990s, serious people wanted to bring China into the modern world, and China wanted to join it.
Understand that China’s total GDP in 1980 was under $90 billion in current dollars. Today, it is over $12 trillion. The world has never seen such enormous economic growth in such a short time.
Meanwhile, the Soviet Union collapsed and the internet was born. The US, as sole superpower, saw opportunities everywhere. American businesses shifted production to lower-cost countries. Thus came the incredible extension of globalization.
We in the Western world thought (somewhat arrogantly, in hindsight) everyone else wanted to be like us. It made sense. Our ideas, freedom, and technology had won both World War II and the Cold War that followed it. Obviously, our ways were best.
But that wasn’t obvious to people elsewhere, most notably China. Leaders in Beijing may have admired our accomplishments, but not enough to abandon Communism.
They merely adapted and rebranded it. We perceived a bigger change than there actually was. Today’s Chinese communists are nowhere near Mao’s kind of communism. Xi calls it “Socialism with a Chinese character.” It appears to be a dynamic capitalistic market, but is also a totalitarian, top-down structure with rigid rules and social restrictions.
So here we are, our economy now hardwired with an autocratic regime that has no interest in becoming like us.
China’s Hundred-Year Marathon
In The Hundred-Year Marathon, Michael Pillsbury marshals a lot of evidence showing the Chinese government has a detailed strategy to overtake the US as the world’s dominant power.
They want to do this by 2049, the centennial of China’s Communist revolution.
The strategy has been well documented in Chinese literature, published and sanctioned by organizations of the People’s Liberation Army, for well over 50 years.
And just as we have hawks and moderates on China within the US, there are hawks and moderates within China about how to engage the West. Unfortunately, the hawks are ascendant, embodied most clearly in Xi Jinping.
Xi’s vision of the Chinese Communist Party controlling the state and eventually influencing and even controlling the rest of the world is clear. These are not merely words for the consumption of the masses. They are instructions to party members.
Grand dreams of world domination are part and parcel of communist ideologies, going all the way back to Karl Marx. For the Chinese, this blends with the country’s own long history.
It isn’t always clear to Western minds whether they actually believe the rhetoric or simply use it to keep the peasantry in line. Pillsbury says Xi Jinping really sees this as China’s destiny, and himself as the leader who will deliver it.
To that end, according to Pillsbury, the Chinese manipulated Western politicians and business leaders into thinking China was evolving toward democracy and capitalism. In fact, the intent was to acquire our capital, technology, and other resources for use in China’s own modernization.
It worked, too.
Over the last 20–30 years, we have equipped the Chinese with almost everything they need to match us, technologically and otherwise. Hundreds of billions of Western dollars have been spent developing China and its state-owned businesses.
Sometimes this happened voluntarily, as companies gave away trade secrets in the (often futile) hope it would let them access China’s huge market. Other times it was outright theft. In either case, this was no accident but part of a long-term plan.
Pillsbury (who, by the way, advises the White House including the president himself) thinks the clash is intensifying because President Trump’s China skepticism is disrupting the Chinese plan. They see his talk of restoring America’s greatness as an affront to their own dreams.
In any case, we have reached a crossroads. What do we do about China now?
In crafting a response, the first step is to define the problem correctly and specifically. We hear a lot about China cheating on trade deals and taking jobs from Americans. That’s not entirely wrong, but it’s also not the main challenge.
I believe in free trade. I think David Ricardo was right about comparative advantage: Every nation is better off if all specialize in whatever they do best.
However, free trade doesn’t mean nations need to arm their potential adversaries. Nowadays, military superiority is less about factories and shipyards than high-tech weapons and cyberwarfare. Much of our “peaceful” technology is easily weaponized.
This means our response has to be narrowly targeted at specific companies and products. Broad-based tariffs are the opposite of what we should be doing. Ditto for capital controls.
They are blunt instruments that may feel good to swing, but they hurt the wrong people and may not accomplish what we want.
We should not be using the blunt tool of tariffs to fight a trade deficit that is actually necessary. The Chinese are not paying our tariffs; US consumers are.
Importing t-shirts and sneakers from China doesn’t threaten our national security. Let that kind of trade continue unmolested and work instead on protecting our advantages in quantum computing, artificial intelligence, autonomous drones, and so on.
The Trump administration appears to (finally) be getting this. They are clearly seeking ways to pull back the various tariffs and ramping up other efforts.
China’s 30-year ROADMAP: Overtake USA and DOMINATE world with military ‘built FOR WAR’
CHINESE leader Xi Jinping has laid out his plans for world domination with a 30-year plan to transform the country and surpass the US to become the biggest global superpower.
Thu, Oct 19, 2017 | UPDATED: 13:11, Thu, Oct 19, 2017
China’s president Xi outlines economic growth for nation
https://imasdk.googleapis.com/js/core/bridge3.436.0_en.html#goog_1210251973PlayUnmuteCurrent Time 0:23/Duration 0:54Loaded: 100.00% FacebookTwitterShareFullscreenSign up for FREE now and never miss the top politics stories again SUBSCRIBE
We will use your email address only for sending you newsletters. Please see our Privacy Notice for details of your data protection rights.
Xi warned of “severe challenges” ahead but said China will become “more and more open”, and be a “model for whole humankind” by 2050.
But he also issued a menacing threat to build one of the biggest and most powerful armies in the world ensuring they would be built to fight.
He told delegates: “By 2050 China will become a global leader in terms of comprehensive national strength and international influence with the rule of law, innovative companies, a clean environment, an expanding middle class, adequate public transportation and reduced disparities between urban and rural areas.https://imasdk.googleapis.com/js/core/bridge3.436.0_en.html#goog_1607356518about:blank
GETTYXi Jinping outlines his 30-year plan to make China a globally dominant superpower
GETTYXi Jinping addresses delegates in a three-hour opening speech
China is approaching the centre of the world stage
“Chinese people will enjoy greater happiness and well-being, and the Chinese nation will stand taller and firmer in the world.
“China is approaching the centre of the world stage.”
He declared victory over “many difficult, long overdue problems” since he took power in 2012 and pledged to open China’s doors to foreign businesses, defend against systemic risks, deepen state-run enterprise reform, strengthen financial sector regulation and better co-ordinate fiscal and monetary policy.
Xi told delegated: “Right now both China and the world are in the midst of profound and complex changes.
“China is still in an important period of strategic opportunity for development. The prospects are very bright, but the challenges are very severe.”
Trump: I’ve ‘developed friendship’ with President Xi Jinping
GETTYThousands of delegates attend the Community Party Congress
Outlining China’s place in the world, he called for a strong military but said he wanted avoid a conflict with US President Donald Trump over North Korea.
Xi said the Communist Party will strive to fully transform the People’s Liberation Army into one the world’s top militaries by 2050 and emphasised the need to modernise its combat capability.
He said: “A military is built to fight.”
The president outlined his vision in a wide-ranging three hour speech at the start of the twice-a-decade Chinese Communist Party Congress.
Mon, July 31, 2017
As the temperature reached 32 degrees Celsius in Fushun, China, people enjoyed themselves in the slightly overcrowded water park
GETTY IMAGES1 of 7
People play with inflatable rings and toys at a water park to avoid heat
Xi’s speech included sections on politics, the economy, national defence, foreign policy and Hong Kong and Taiwan.
He reiterated the goal of attaining “moderately prosperous society” by 2020, which has helped drive economic policy over the past five years.
Xi then unveiled his ambitious plan to make China a “great modern socialist country” over two stages in the following 30 years – part of what he has called the “Chinese dream.”
Throughout the week, more than 2,000 delegates to 19th Party Congress will discuss and approve Xi’s report and revisions to the party charter.
- China on LOCKDOWN ahead of crucial summit to cement Xi’s power
- Chinese President Xi Jinping to become as powerful as Mao Tse-tung
- China’s Xi Jinping may become ‘as powerful as Chairman Mao’
Here’s Where All That Chinese Money Came From
Capital FlowsContributorOpinionGuest commentary curated by Forbes Opinion. Avik Roy, Opinion Editor.POST WRITTEN BYJerry L. JordanDr. Jordan is a senior fellow of the Atlas Network’s Sound Money Project and former president of the Cleveland Federal Reserve.This article is more than 3 years old.
Chinese President Xi Jinping meets with Madagascar President Hery Rajaonarimampianina. (Photo by… [+]
Have you read about tens of billions of U.S. dollars — sometimes over $100 billion — “flowing out of China” every month? Makes one wonder where, how and when China got the plates, paper and special ink to start printing American currency. Of course, it is all electronic money, but press reports still leave readers wondering where the Chinese businesses and households get the U.S. dollars they are investing in the U.S. and other places around the world.
In one way, the answer is simple, the Chinese government is selling dollar assets while the Chinese people are acquiring dollar assets — consolidated, “China” has the same amount of dollars as before. The people have more dollars, the government (including the central bank) have less.
What is going on can best be understood by rewinding the past couple of decades and looking at how the Chinese government came to have about $4 trillion as of a year or so ago. The Chinese economy has had a persistent trade surplus with the U.S. and the rest of the world for about a quarter century; that means they sold more stuff to the rest of the world than they bought. The excess cash that was earned from selling stuff abroad — but not buying a like amount of foreign goods — wound up in the hands of the government (central bank intervention in the currency market to keep the Chinese currency from appreciating against the dollar and other foreign currencies).
The Chinese government didn’t actually have a big vault full of U.S. and other foreign currencies — they “invested” all that cash in the U.S. Treasury and other government securities. This huge cookie jar is called “foreign reserves.” Sometimes there were press reports that the Chinese were “financing the U.S. government deficits,” which was partially accurate. U.S. consumers bought goods made by Chinese workers and the Chinese government bought bonds issued by the U.S. government.
Sometime in 2015, Chinese businesses and households began to want to “diversify” their asset holdings with less Chinese yuan and more U.S. dollars and other foreign currency-denominated assets. In a free-floating exchange rate system, the value of the yuan would fall relative to the dollar, euro, yen, British pound, et. al. However, the Chinese government chose to meet the increased demand for foreign currencies (decreased demand for Chinese yuan) by selling assets they held — such as U.S. Treasury bonds — and turning the proceeds over to households and businesses that wanted to exchange excess yuan for dollars, etc.
Now, more than a year later, the Chinese government has over $1 trillion less foreign currency assets and the Chinese people have over $1 trillion more foreign currency assets. So what?
Reports in the press and “investment advisory letters” go something like this: “more than a trillion dollars worth of Chinese currency has been converted into dollars and moved offshore in the last few years, finding a new home in real estate, stock markets and other investments.” Often the analysis suggests that asset prices in western countries are being “driven up” by Chinese private investors. That may be true, but the stories would be more balanced if it were also reported that the source of all those dollars was the Chinese government selling other dollar assets such as Treasury bonds. Net, China does not own any more or less dollar assets. In fact, if the preference of private Chinese investors was to acquire exactly the same assets being sold by the Chinese government, there would be no story at all.
As far as anyone knows, the Chinese government (again, including the central bank) still has around $3 trillion of assets denominated in foreign currencies — they are far from broke. Nevertheless, if the Chinese people continue to want to convert on the order of $100 billion worth of yuan into dollars every month at the prevailing exchange rate, there will soon come a point when the government faces a tough policy choice: either sharply increase interest rates on yuan savings/investments so the people want to hold them (maybe very bad for a struggling economy); or let the yuan/dollar exchange rate decline significantly (making foreign goods more expensive and Chinese goods cheaper for foreigners) which would no doubt trigger an adverse political response from trading partners such as the U.S.
At the moment, press reports indicate that the Chinese government is tightening up “exchange controls” in order to make it very difficult — or even illegal — for Chinese businesses and households to convert more than a limited small amount of unwanted yuan for dollars and other foreign currencies. That may temporarily slow the pace of capital flight from China, but does not address the fundamental problem of an over-valued currency.
There is no painless way out of this policy dilemma. The domestic Chinese economy would be harmed by a “tightening” of monetary policies to slow the “capital flight,” but floating the currency or tolerating more rapid currency depreciation could provoke misguided foreign tariffs and other barriers to Chinese exports. Either way, Chinese management of the problem — and foreign policy responses — will be a major factor in determining the course of world economies in 2017.