My Father traded in Asia from 1935 to 1942 and then from about 1953 to 1990. I was privy to many discussions and engagements with our customers over the years as well my transactions in my own right. I don't think the Washington decision makers, as opposed to perhaps career Sinologists in the State Department, quite understand the dynamics of the Trump Administrations relationship with China and the risks America appears to be running. The bit that seems to be missing is a realistic appreciation of "Face".
A quick search of the internet reveals scholarly definitions of "Face" together with the description of it in socio – cultural terms that in my opinion do not do it justice. Couple that with Western insensitivity, NeoCon hubris and Trumps preference for believing everything is a negotiable transaction and we are set up for a monumental falling out with China that has lethal consequences for America.
I will give a few examples of Face, you can find plenty more on your own. Did you know it is an insult to request a Chinese to sign a written contract? If he has agreed to the terms and said as much in front of other Chinese then that is enough. "Face" does the rest. Did you know that in certain circumstances "Face" requires you to lie to, or ignore, authorities in support of family and friends? This last, in my opinion, is the reason for the current Chinese attempt at omnipresent surveillance; "we tremble at the power of the Emperor in Peking, but the mountains are high".
Col. Lang makes the point that the Japanese went to war to dispel the threatened perception that "they weren't the men they thought they were". Well with "Face' in China its more than that, you are your "Face". To damage someones "Face" is to create a lifelong mortal, implacable enemy. There is no way, short of death, to recover once you have given offense. Against that standard Trump, Bolton and Pompeo are playing with fire. "Just kidding" doesn't cut it.
It may surprise some of you to know that the West was trading with China right through the cold war – in US dollars only. Nixon didn't discover China either. It also may surprise some that China is perfectly capable of making very high quality reasonably priced sophisticated goods, and always has been. The reason that Walmart sells cheap Chinese schlock is because that's what they asked China to supply. As for "stealing intellectual property", don't make me laugh. We all do it and China has plenty of very smart people that create first rate IP of their own.
I make the case that China is a sophisticated and capable economy, with its own amour propre, not some third world hole populated by leaders that can be bought or threatened, and Trump risks forgetting this at our peril.
To this end I note that the trade war is not going to Americas advantage, China has vast holdings of American debt, China buys Iranian oil, judging by reports of Sochi discussions, Russia AND China are likely to support Iran and both Korea and Taiwan are vulnerable. In my opinion President Trump has a very small window left in which to fire Bolton and perhaps Pompeo and embark on a more conciliatory line, before China becomes an irreversible, implacable enemy.
What says the Committee?
Agreed, there is a very fine line being walked here in heavy footwear. China has patience and quite naturally plays the long game which of its own gives an advantage. Any ruler of China knows their Confucius — ‘The green reed which bends in the wind is stronger than the mighty oak which breaks in a storm. It has not been hard to see China as the green reed bending to the wind for some time now which has made it difficult for Western policy makers, they push, the reed bends, they turn and the reed springs back. The Chinese I have spoken too within the anonymity of travel when the conversation has turned in that direction have all indicated a willingness to accept, indeed an expectation of war with America and have no illusions as to its potential cost to them. A cost that is deemed acceptable ( preserving Face) whereas they voice scepticism of Americans willingness to accept that cost, such a war will not be distant from the Continental USA. You can but hope that a great Presidential administration comes along to navigate these increasingly troubled waters.
My son, Jason, is fluent in both Mandarin and Cantonese was headquarered in Hong Kong for years but now works out of Tokyo but spends a great deal of time in China conducting business. He would probably argue that, if anything, Walrus is understating the importance of Face in China. There are numerous rituals associated with interacting with Chinese that must be observed in order for communication and agreement to flow properly.
I think many in America, maybe even Trump, have an image of China as a backward country full of uneducated dumb people. Nothing could be further from the truth as a large segment of the population is not only eductated but intellectually the equal of Americans.
As far as handling the trade war between China and the U.S., I think in some ways China has an advantage in it’s government directed relationship with business. It allows China to react quickly to adverse conditions, faster and with more cohesiveness than our capitalist system. Watch for China to move it’s manufactured products through numerous other countries to avoid some of the impact of tariffs.
China is also not as responsive to consumer complaints as the U.S. democracy. As soon as Trump’s base starts complaining about the higher prices at Walmart etc. Congress and Trump’s re-election campaign officials will start to make China tariffs seem intolerable.
I would think the Chinese see Trump as something to be persevered for a few years regardless of who he surrounds himself with at this point. I wonder if they have a term for “face incapable” as a parallel concept to the Russian “agreement incapable”? As such they probably see his administration as a no more sophisticated than a hornets nest, to be avoided if possible and swatted if necessary.
Well, America has “Face” too, in addition to real economic interests.
A compromise will have to be reached in which both countries get what they need (if not what they want) and each country’s face is preserved.
I think Bolton types disregard the concept of “face”. They need to go. IMO, Trump gets it and would be fine in negotiating sans neocons.
i think those in washington never learned or have forgotten the utterly degrading loss of face china was forced to endure at the hands of the british and americans in the opium war of the early 19th century.
imo this is part of all the calculations the chinese people and the chinese government make when dealing with washington.
we may think holding a grudge this long is absurd, i doubt the chinese feel or think that is the case.
we can only hope in the west that china treats us better as we collapse than we did to them.
What about America’s face? “President Trump has a very small window left in which to fire Bolton and perhaps Pompeo and embark on a more conciliatory line, before China becomes an irreversible, implacable enemy.” Well, I guess our “face” doesn’t matter as long as we do as the foreigner tells us. I’m sure if you watch CNN/MSNBC/etc you’ll figure your golden to denegrate the US. Just ask your recently returned American educated Chinese employee, he learned the same thing here. Dare I ask where all those great Chinese Universities went that turned out all those great leaders who make all that great IP you spoke of? Perhaps they had a cultural revolution like the one we are going through. My understanding of history is a bit hazy, feel free to educate me on that.
“both Korea and Taiwan are vulnerable.” That’s why Trump is trying to negotiate an end to North Korea’s nuclear program. John Bolton did no one on Earth any favors with his sabotage of that effort. At the same time Xi Jinping has plenty of candidates for “John Bolton of China” he has to deal with, or didn’t that thought occur to anyone? As to Taiwan, just what the hell have they done for the USA in the last 50 years?
It has always seemed to me that “Face” is the distant inferior cousin of Honor and a much closer sibling to Pride or even Hubris. That is, the Asian concept of Face has everything to do with how you are perceived and almost none with how you “are”. Honor, meanwhile, demands a rigorous adherence to a code of conduct and force of will that places less emphasis on perception and more on “being”. Westerners (myself included) tend to get those two confused.
If the Chinese were bound by the authors concept of Face, China must be a paradise without corruption. Instead of polluted water land and air, wizened elders concerned over their stewardship and the lose of face from an environmental catastrophe, would provide a harmonious balance between man and nature. Instead, its a paradise and a ghetto where passerby’s walk nonchalantly around the dieing. Where companies reluctantly provide netting to slow the steady suicide of their workers. They do tend to plan for the long term, and they can certainly hold a grudge I would agree. How far are you willing to bend-knee for someone else’s concept of pride though? Tariffs, which have been around since antiquity, seem like a small infraction for all this talk of life-long mortal, implacable enemies. Yesterday I saw a Chinese TV program that roughly translated said Donald Trump was literally in the White House crying over soybean prices. POTUS literally crying over the Chinese governments response to our rising tariffs after decades of unfair trade practices that benefited the Chinese (elites anyway). So you shouldn’t think that saving Face is a two way street or will result in a mutually beneficial deal.
IMO, China has been “an irreversible, implacable enemy” for decades now. It just so happens that our own fifth column in the Party of Davos have aided and abetted this implacable enemy while making sure that we voluntarily disarmed and did not fight back a war that they are fully engaged in. The consequence has been that we are paying for our own destruction. China is more authoritarian & militaristic today than it was three decades ago and there are several people who believe they currently pose an existential threat to the US & the West in general.
While tariffs may not be the best strategy, we have to admire Trump’s courage and determination to finally fight back in the face of massive internal opposition from our fifth column. When you look at the sheer scale at which the Chinese are buying think-tanks, academics, media, K-Street lobbyists & political influence it is staggering and only the Israeli influence operation is bigger in depth & breadth. Ever since Bill Clinton gave China Most Favored Nation status and the Party of Davos furthering their own narrow short-term financial interests, we have directly financed and transferred technology to China and dismantled our industrial base. China joined the WTO but has thumbed their noses at every adverse WTO ruling that showed they play not by the rules but are predatory.
You dismiss the scale of IP theft, forced technology transfer, product dumping, state subsidies and industrial espionage as everyone does it. That’s typical of the China apologists in the West.
I think you over-estimate China’s financial strength. There are several macro analysts with excellent long-term analytical track records who believe that China is desperately short USD. This theme that you note that China can crash the UST market is already proven to be false. China in fact sold hundreds of billions of UST in 2014-2016 with no perturbation in the UST market.
On the contrary the financial pressure on China is increasing as their debt-fueled malinvestments grow. I’m willing to bet you that we’ll see this pressure manifest in a devaluation of the RMB.
I will leave you with a speech from your fellow countryman, John Garnaut. Chilling!!
I don’t care one iota about their “Face”. Not at the expense of deindustrializing large sections of the American Heartland. Which has already happened. Our trade relationship with China has been a disaster. The only people to benefit are large shareholders.
As for them holding our debt it’s threat is non-existent. Let them sell all of the bonds. China currently owns $1.13 trillion in Treasurys, a fraction of the total $22 trillion in U.S. debt. The Federal Reserve if need be can buy them all up but even that won’t be necessary due to insatiable demand for the bonds even at these ridiculous low interest rates.
In fact their obsession with “Face” indicates a psychopath. Defines as no sense of right and wrong and is generally bolder, more manipulative, and more self-centered than a sociopath. That sums up their dealings with us the last 25 years.
Only a fool continues to play this game of theirs. Stealing our technology at will, forced 50/50 partnerships, currency manipulation, dumping into our country to destroy industries, etc. etc. etc.
Plus they are expanding geographically now due to us making them rich. They are 1.3 million homogeneous Han for the most part. Especially compared to our country. I have to say their government has definitely improved the lives of their citizens as a whole and I respect that. But enough of our weak kneed leaders giving away the store.
I personally am being hurt by the tariffs due to many LVP flooring products I sell are sourced from China. I have no problem taking a hit for the greater good and have been working on sourcing from different locations.
Excellent analysis by Chas Freeman on US/China relations.
Something to which not enough consideration is given is that China has a considerable volume of foreign loans, those are increasing, they are denominated in dollars (particularly since the yuan is not convertible), and must be serviced in dollars. That means that China needs a lot of dollars which it obtains via selling goods to the United States.
Said another way, China cannot reduce the amount it sells to the U. S. or buy more from the U. S. without a convertible currency or reducing its level of foreign debt.
“Did you know it is an insult to request a Chinese to sign a written contract?”
So, assume that they are dishonest negotiators, as they just showed by walking away from 6 months of negotiations that they “agreed to?”
Your commentary exudes the naivety that the Chinese have preyed on for the past 50 years. Their meekish and subservient mannerisms hide a ruthless and immoral inner nature. They would still be a backward country if not for our elite’s insatiable greed. What have they produced organically that wasn’t ripped off from developed countries? What do they offer cultural other than a social credit system with improved state surveillance techniques? They treat their own people like dogs and they still have dog eating festivals. China offers a way of life that is an antithesis of the West, so it is inevitable that there will be a clash. The question isn’t if but when. The longer we delude ourselves into thinking that economics will change China, the more blood will be shed when the reckoning occurs.
Chinese chauvinism puts American exceptionalism to shame. They’ve been the Celestial Empire thousands of years longer than the upstart Anglo-American Empire. In last 30 years the Western Elite dumped “noblesse oblige” for “get it while you can”. China’s entry into the WTO directly hallowed out manufacturing in the Mid-West ultimately resulting to Donald Trump’s trade war. This was a result of CEOs and Wall Street Raiders moving manufacturing to low wage, no environmental regulation, nations to make a quick buck. China was a willing partner in the con in order to modernize. China’s retail sales are now greater than America’s. Since the US declared an economic war, GM will have to drop Buick and Cadillac brands and market their cars in China as Chinese. But “Face” likely will make that ploy unsuccessful.
I always enjoy your comments due to your experience. Do you see nothing threatening about China expanding into the South China Sea?
Do you agree there has been significant sections of the country devastated by deindustrialization?
“I think in some ways China has an advantage in it’s government directed relationship with business. It allows China to react quickly to adverse conditions, faster and with more cohesiveness than our capitalist system.”
I couldn’t agree more and by implication of this statement China will never deal fairly with us unless we change our system via abandoning Capitalism(AOC) or via Protectionism which was originally how we established our industrial powerhouse.
Let’s say they react against Apple. Apple shareholders may be upset but the average deplorable I promise you won’t give two cents. And yes I agree prices will go up at Walmart. I recently had to replace a HVAC unit and paid more than $400 more than 3 years ago due to the price of steel rising. Probably due to tariffs or maybe I just got ripped off. I didn’t mind spending more if more steel jobs are created in the US. Also the old saying the cure to high pricing is high pricing. The market will quickly settle this out. Companies and consumers will adjust.
Why can’t most of the low value added manufacturing be transferred from China to Mexico and Central America to help stem the immigration from these countries?
No doubt China is full of intelligent people. Why should we continue to give away our prosperity to a 1.3 billion people superpower? Even Thomas Friedman says American Business in China no longer believes in the dream of endless China sales. Serves the fools right. Major shareholders may disagree but my perception is the base of Trump will support him to the hilt on this. Or simply put Rural America will.
So unless we economically surrender to them expect war? How are they going to dodge the overwhelming superiority we have in nuclear armed submarines? Are they going to walk on water like Christ to deliver the goods they must via sea?
A war with China is Armageddon and nobody wants it especially them.
China has been emboldened as the west moved their manufacturing base there and transferred their technology. They’ve been taking the next steps directly influencing our politics.
Huawei while it claims it is an employee owned company is controlled by the CCP as many “private” companies in China. The west would be foolish to not put an end to Chinese subterfuge that undermines their economy and national security.
I say if Face is important, respect their Face. After all written agreements are broken all the time so what difference does it really make.
Kyle Bass on why China has to sell its US Treasury holdings. Twin deficits.
I don’t buy it at all. As others have pointed out China requires access to American markets to 1) make their dollar denominated loan payments and 2) keep foreign manufacturing located in the country. The cost of tariffs to the United States is finding alternative sources in supply chains and higher end cost to consumers. We’re insanely rich, we can afford that without issue. The cost of tariffs to China, in the ultimate analysis, is foreign companies moving their manufacturing out of the country, which would utterly devastate them.
So far as I understand the Trump administration is demanding nothing more than China play by the rules of the game as written. If they’re not willing to do so, **** ’em.
“Watch for China to move it’s manufactured products through numerous other countries to avoid some of the impact of tariffs.”
They’ve been doing that for years.
A well written contract contains enforceable penalties for non-performance with the money often held in escrow. That’s the way I write them. Trump is using the balance of US/China trade to penalize the Chinese for reneging on the verbal and draft agreements they made with us.
Not surrender, recognise.
The Chinese didn’t make you buy.
America doesn’t have Face. It isn’t Chinese. You are not dealing with people who subscribe to Judeo Christian ethics.
As for Universities, you’ll find out when the Chinese start luring the best and brightest talent to China. What are you going to do then? Take their passports?
Face has nothing to do with Judeo Christian ethics. Corruption and pollution can earn you a bullet behind the ear in China.
The issue with Face is that duties don’t extend much outside the family. That’s why they can sell poisoned baby formula, etc.etc.
It also explains why the CCP is afraid of losing China’s Face. They will be blamed.
This is a traditional problem deeply embedded in Chinese culture. Westerners in the 1800s concluded that it was impossible to write a binding contract in classical Chinese. There were hopes for Mandarin, but… I was reading about this as a college student studying Chinese in the 1970s and have never ceased running across complaints about it. Chinese contracts are only as good as the will of the contractors and the influence you can bring to bear. When you are dealing with government, a contract is good until the officials get replaced with new faces. Even big players like McDonald’s are not exempt.
“…what was meant as the flagship of McDonald’s planned expansion into the People’s Republic of China (it already had outlets in Hong Kong and Taiwan) was destined for controversy. In 1994—only two years after opening—a legal battle pitted the transnational corporation against Beijing’s government in a land dispute symptomatic of China’s no holds barred modernization.
“In question was McDonald’s 20-year lease on the strategically located property at Wangfujing—a busy central shopping district—and the city’s attempts to shutter the restaurant to make way for a new super sized shopping mall. McDonald’s balked at the eminent domain order, which flattened the surrounding neighborhood. In the end the burger joint was the lone building standing amid acres of rubble. The dispute raised serious concerns among foreign investors over the efficacy of business contracts in China at a time when the Communist state was seen as the future of global markets.
“But in late 1996 McDonald’s China president Marvin Whaley announced a reconciliation. “In a spirit of teamwork and partnership, we’ve developed a plan that will allow our strong expansion in the city to continue.”
Note that it took two years for the “spirit of teamwork and cooperation’ to kick in for a multi-billion dollar cooperation who could presumably have just been given another good spot for a hamburger stand. If the officials involved had been willing. Your mileage may vary, but you are unlikely to do better.
So the Chinese are playing us at our own game and winning? Boo Hoo. Throwing over the chess pieces is not a useful response.
Denial is not a strategy. For the record, I don’t like eating dogs either. but i’m willing to make an exception for pit bulls.
Chinese will respect a verbal contract – the difficulty is getting them to say the terms in front of other Chinese. Lieing to you is permissible.
Our business solved the problem by using irrevocable letters of credit. That way we could both blame the banks and not accuse each other of skulduggery. Hence Face was always kept intact.
Harlan – Yes China is a formidable competititor to the U.S. – not necessarily an enemy but they are getting there. China’s use of artificial islands etc in the South China Sea is a dangerous development because of the amount of commerce that must traverse that area. The U.S. must show the military capability in tha area so China dies not make a mis-step.
Yes, I don’t like that our manufacturing capacity has been devastated along with the people associated with it. However, the nature of our capitalistic system is to promote the greatest efficiency regardless of any negative fallout. Importing from China was the easiest way to gain that efficiency. If that is blocked, then virtual hi-tech machine manufacturing will restore capacity still absent jobs. What has been missing is a program to assist deplaced workers regain productive and self-esteem building jobs.
Long term we have to come up with a solution to the fact that our manufacturing business is not competitive with other countries. If China is blocked, U.S. companies will do business with Malaysia, Thailand, Mexico or whomever can supply product the cheapest. Yes, we will counter those moves as they emerge but long term the only way for the U.S. to compete is hi-tech automated factories that will not be able to sustain good paying jobs for 300+ million Americans.
Thank you Fredw for an excellent example of how McDonalds came to grips with Face, to everyone’s benefit.
What rules? Who wrote them? Respect? Ask Iran. Poppycock.
For the record and to preclude pointless ad hominem attacks, the Chinese are intelligent hard working people for whom sophisticated business and finance was a way of life while we were still living in mud huts. They revere education. They do not subscribe to Modern Judeo Christian ethics but a much older Confucian creed. For that reason pleas for China to ‘play by the rules” just do not compute.
China is not some modern, fly by night, Westphalian creation. You are dealing with the Middle Kingdom – 3000 years old and the Chinese, after centuries of oppression now demand respect. The idea that once again the West can dictate to China is offensive to Chinese and, considering their economy, downright delusional.
China has its problems. Face as a concept does not extend beyond family and immediate friends, so the concept of higher loyalty to a Chinese nation (ie patriotism) is not strong. Neither is respect for national law, nor respect for institutions or companies. This is the source of all commercial crime (eg: fraud, adulterated products pollution).
The governments reaction to the tendencies of its population include draconian punishments and now attempts at nationwide surveillance.
The problem Trump fails to recognise is that the CCP and its leaders have Face. Threaten that and China will become an implacable and unbeatable enemy.
Any opinions on this?:
“Former Trump Senior State Dept. Official Tells Beijing to Wait Until Trump is Removed…”,
by sundance at CTH, 2019-05-16
Walrus, I find the most illuminating thing about your informative post is the reaction you elicited. Comment after comment, in my opinion, illustrates some degree of unwillingness or inability to acknowledge and tolerate a culture clearly different from ours. I am reminded of a South Park episode called “Toleration” in which the whole town wrongly assumes toleration of the other requires wholehearted celebration of the other. Nothing could be further from the truth. There’s plenty many of us don’t like about today’s Chinese culture and society, but it’s their culture and society. They don’t have to conform to our ways anymore than we have to conform to theirs, but we should acknowledge the difference and deal with it.
True. I am not familiar with the agreements so can’t discuss it intelligently.
Just saying it seems hardly anyone lives up to agreements any more regardless of in writing or not.
And dealing with countries is dealing with the people who represent it ..I do believe you catch more flies with honey than vinegar. You can always swat them later if honey doesn’t do the trick.
The underlaying philosophies are in some ways diametrically opposed. We in the West are object and goal oriented, with an ideals based culture, while the East has more of a feedback oriented view, ie. Yin and Yang. Even the concept of time is different, as we think of ourselves as individuals, thus moving through our context, the future is in front and the past behind, traveling the events of our lives. While the Eastern view is the past is in front and the future behind, as they see themselves as part of their context and necessarily witness events after they occur, then the situation continues. Both are valid in their own context. Though our presumption of moving toward some ideal is flawed. When some is good, more is not always better. Consider efficiency, which is to do more with less. Then the ideal of efficiency would be to do everything with nothing. Those most committed to this view see Armageddon as the door to their ideal state.
What should be kept in mind about the East is that with Communism and the Party system, then becoming China Inc, to global capitalism, they have adopted essentially Western ideas and tried framing them through their own lens. The reason would be that such an ideals, goal oriented paradigm is very effective in the short and medium term, but creates that much more blowback, in the long term. While China might seem a threat to the current American status quo, the real danger is our own social and economic breakdown. We have been living on the equivalent of a national home loan since Reagan, if not Roosevelt and if the holders of that debt try calling it due, say trading it for remaining public assets, we will be revisiting feudalism. The Russian and the Chinese, as well as the Iranians, etc. are really just boogie men, being thrown up to distract us. This Iranian situation seems to have be a total disconnect with reality. Something is brewing, whether planned, or just the wheels really coming off the train.
Both we and the Chinese seem to be headed to our own versions of Brexit. The Russians went through it with the fall of the Soviet Union.
Thanks for responding.
I understand fully well that the US does not need to abandon her Christian heritage when conducting trade negotiations with the People’s Republic of China. At no time have President Trump or President Xi Jinping shown anything other that the greatest respect for one another. No one has lost face during this trade dispute other than the globalist experts who have been enabling the screwing of America’s middle and lower classes for a couple of generations.
“As for Universities…” You misunderstand me. I asked where all those graduates of the great Chinese universities were. What need do they have of the west’s “best and brightest’? Which, by the way, they have been luring away for a couple of decades. Good for the professors, we’ve go plenty.
“What are you going to do…”
Take away their (Chinese students’) visas, they can study in their own great colleges. It will make plenty of room in ours for actual Americans aspiring to a better future than the ones their parents had. Which is an obligation our elected representatives have been shirking for a couple of decades now.
” GM will have to drop Buick and Cadillac brands and market their cars in China as Chinese.”
You seem to be misinformed. China has required building those vehicle lines in China for some time now. GM moved all that production there with the intent of exporting from China to other markets in addition to what small portion of the Chinese car market they already have.
Quote -“The idea that once again the West can dictate to China is offensive to Chinese and, considering their economy, downright delusional.”
I believe this is the underlying driver to the individual Chinese acceptance of the cost to any conflict, it also links directly to what they see as a Century of Humiliation where China wasn’t powerful. The very use of the word Humiliation in any translation directly links into their concept of Face.
Quote- “China has its problems, Face as a concept does not extend beyond family and immediate friends”
I believe to extend and change this cultural concept of what constitutes Face is behind the national introduction of Social Credit scores for all citizens and available on line to all citizens. It is in fact intended as a national reputation system whereby an unrelated Chinese can lose Face when interacting with other citizens. China is the elephant in the room in any Western political, defence and economic policy debate.
“…the concept of higher loyalty…” Sounds like the Chinese exclusion act might have been a good idea afterall. How many generations in the US will it take for a Chinese national to actually assimiate and become “American”?
“…unbeatable enemy.” The PRC is not the Middle Kingdom. President Xi is not the subject of Master Po’s “Everlasting Wrong” and he is well aware that China is certainly not “unbeatable”. These are trade negotiations and right now they need us one hell of a lot more than we need them. Convincing his fellows in the CCP of that is probably going to be harder for him than for Trump to do the same with Congress.
Thanks for pointing the finger at China -looking out for their own interests – the bloody bas-ards.
I guess you believe that had China had remained insular, the US would not have de-industrialized to a different country? As if NAFTA wasn’t a great sucking sound. Hmm. Me things the problem lies closer to home – but no finger pointing there.
Totally impressed with the TrumpTareef – Totally on top of everything.
Oh wait, the tax advantages that encourage de-industrialization remain. But I guess Trump doesn’t understand taxes and how wealthy corporations and people use them to move production overseas and not pay taxes ….
Meanwhile, global de-dolarization accelerates. At some % the US loses its special status and there will be a reckoning.
I see a lot of hot air – not new policy: Manufacturing did not come back, US infrastructure is a joke and continues to crumble, workforce participation continues dropping, and hourly median wage remain stagnant. Why? Because it requires actual policies that lessen the profitability of some (very wealthy friends in the circle Trump wants to run).
Here’s my prediction – Trump will fold by summer or sooner.
Americans had nothing to do with the Anglo-Chinese Opium Wars. We did though give them grief by sending missionaries and gunboats. We were also involved in the Boxer Rebellion, but that was on the side of the Qing government and not the rebels.
IMHO, the USA holds most of the cards in this negotiation:
1. The USA trade deficit with China is huge and China needs to sell to the USA, as it will not find other countries to make up for the lost market.
2. It is not uncommon for supply chains to change. Goods that today are manufactured in China will likely be made in other asian countries which have even lower wages if the trade war really goes for a significant amount of time.
3. The inflationary and GDP contraction risk of a trade war is not that high, as the imported chinese goods make up only 2,3% of the USA GDP.
4. The fact that China has lots of USA sovereign debt is not something that can not be solved by the FED. A few economists have already pointed that in the past 5 or 10 years.
5. China already is an enemy of the USA. Worst case, it will be more active in the hotspots in the World, instead of only spying and hacking the hell out of the USA.
So, do not panic. The ones that should be panicking are the chinese.
Their is still some cachet in China to have your children taught by “white eyes’ (europeans) at the great universities. At some point China will literally copy Harvard, Oxford, etc. to the last stone and lure the best and brightest staff to them. I’ve seen them do something like this already.
Look Fred, I agree VV seems a bit confused where to side on the issue or whom to blame beyond Wall Street. Thus good you put him on the right track.
But China required or GM management found it convenient considering production conditions?
We’re insanely rich, we can afford that without issue
That’s a curious statement.
You too? Insanely, that is.
China gets our middle class and the west gets cheap socks in return.As our middle class disappears overseas our cheap socks become unaffordable because there are no jobs for our young workers.The only way to get our middle class back is to stop buying cheap socks.or to put the price up on our middle class.any idiot can make cheap socks but middle class is priceless.the backbone of a stable society.Secondly any society that lives beyond its means through over population is doomed and under no circumstances must it be allowed to expand.China’s growing affluence will increase competition for resources as it’s middle class expands and this will lead to conflict.Cheap socks might end up causing WWIII
Interesting article by David P. Goldman, Asia Times, about how to deal with China.
In the name of tolerance of another culture are we going to surrender to their predatory behavior? Are we going to allow the Chinese to continue to “beat us at our own game” as Walrus alludes? Sure the Party of Davos have benefited from the current relationship but why should the US in it’s national interest continue to allow an authoritarian state to steal our IP, subsidize their companies to dump products in our market and prevent our companies to sell into their market unless they transfer technology, only to have it stolen?
That type of predatory behavior is not about cultural difference but taking advantage of a situation that we allowed. Tariffs may not be the best strategy but at least Trump is saying the current arrangement no longer works. It makes no sense to say in order to protect Chinese “face” we should continue this arrangement where we have the short end of the deal. I hope that Trump doesn’t back down in the face of Chinese influence operations in the US and his perception of what’s best for his reelection. IMO, the Chinese threat is significantly larger than any threat from Russia or Iran, and saying we should walk on eggshells to not offend their cultural sensibilities is frankly ridiculous.
I believe Walrus over-estimates their strengths. There is a reason why their “best and brightest” continue to immigrate to Silicon Valley in droves. I know some of them personally as I have backed their entrepreneurial ventures. They will be the first to tell you that they have given up a lot in terms of familial connection to immigrate to the US as they don’t share nor do they want their kid’s futures to be subject to the capriciousness of Xi Jinping’s authoritarian vision.
“If that is blocked, then virtual hi-tech machine manufacturing will restore capacity still absent jobs…
“but long term the only way for the U.S. to compete is hi-tech automated factories that will not be able to sustain good paying jobs for 300+ million Americans.”
If we’re making choices, that is a vast improvement over the situation we have now. It’s what we should have done in the first place. And while I can’t prove this, the second order effect of having hi-tech automated factories all over the country would do quite a lot to improve the lives of the people who might have worked in factories in generations prior.
Chas Freeman was president Richard Nixon’s senior interpreter for Nixon’s visit to China. Here is an interesting description by Freeman of some of that trip–
Just as a reminder – having run International businesses, I just want to clairify that U.S. Businesses are not saints. There is a certain amount of cheating, browbeating and stealing as long as we don’t get caught and profits are increasing. We might not like the Chinese using our methods but that is the way the cookie crumbles. At this point about two-thirds of Prudential’s profits come from overseas subsidiaries and one of the reasons for that success is our ability to mimic what works in their domestic companies and to do it somewhat better and cheaper. Since the profits were repatriated to the U.S., I had to deal with a lot of government flack about hurting their domestic companies and their employees.
From my own interactions with the Chinese:
1: Highly sophisitaced Culture. They tend to react pretty well if one can show a more then basic degree of understanding of their history.
2: They great prefer nuance. Simple awnsers imply simple minds.
3: I have not been in the position to actually have to get formal contracts with them. I can certainly echo however that making a Chinese promise something in front of other Chinese about whose perception he cares is usually sufficient to have a pretty honorable commitment to something, it is often easier said then done.
4: I initially had some disdain for the Chinese way of not directly letting you know how annoyed they are at any given point (Russians are fairly straightforward in this), but essentially, their point of view is also that if you are incapable of assessing how annoyed they are you are not a valid negotiation partner.
Also, keeping annoyance beneath the radar does not create scenes, and if a scene is created reactions may have to be forced. Vengeance is a thing with the Chinese . My impression is that they can be mollified though, and generally regard vengeance as an expensive luxury item, I also got the impression that you need to go out of your way to seriously become a target of vengeance, just professional disagreements are not a cause for vengeance, especially not if you are a foreigner. They also have a pathway of not having to take vengeance to save their faces by asserting that the offender is insane/feebleminded/crazy and thus beneath vengeance. Its not a position you want to be in though.
It goes a pretty long way to be aware of some more imaginative things that especially state aligned business can do if you are in China. Things like precision weighing any electronic equipment you take there before and after are just best practice.
GM sold over 4 million vehicles in China last year, even more than it sold in the North American market. The U.S. only exported 267,000 passenger vehicles to China. Apple sales declined 30% in China. In an economic war Chinese will avoid buying American branded products. They have alternatives. Americans don’t have a choice at Walmart except to pay the higher prices due to the tariffs.
Sure, they’ve kicked our ass these past couple decades. Now they’ve got cocky and think they own us. Supply chains can re-orient.
As a red-blooded American I’d like my home team to seriously up their game and of course beat the Chinese at their own mercantilist game. A good start would be to put the squeeze on their massive USD short position. Eurodollar market is a perfect spot to begin. The Chinese have US$1.3 trillion debt maturing in 12 months. They’ve either got to redeem or rollover. Devalue & bleed reserves. Or else sell USD assets & lose collateral. Margin call time! Wake-up call time for BRI – if Trump chooses to squeeze at this immediate vulnerability. Trump can also take the next critical step – restrict their access to our capital markets. The SEC can also come down hard on all their fraudulent listings.
Maybe Australia is losing its best & brightest moving to China. Not here. In fact it is the opposite. Young Chinese techies whoever can get a visa are immigrating here. Wealthy Chinese including top CCP officials are using every mechanism that they can avail to get their capital out. Chinese capital controls are tightening. If they had an open capital account their trillion dollar reserve would vanish overnight as capital flees. You must know that China’s domestic security budget is larger than their defense budget. The CCP fear their own people more than anyone else. Why do you think they’re amping up their domestic surveillance expenditure?
I can also give you an anecdotal experience. Newly minted billionaire and founder of Zoom, Eric Yuan spoke to our tech analyst team a year ago. I happened to be in that meeting. He was categorical that if he had been in China and had half the success, CCP would effectively control his company. He said every Chinese techie dreams of moving to America.
Jack Ma, was banded out here in the west as the new breed Chinese tech entrepreneur. A billionaire on the Davos circuit. Did he really own Alibaba or was it the CCP? How come his shareholding was suddenly zeroed out?
Do you think any smart Chinese really trusts the CCP? Why would they? You talk about “face” & culture and the 3,000 year history of the Han people. What about the history & culture of the Tibetans? Or the culture & traditions of the Uyghurs with over 2 million of them currently undergoing brutal “re-education” in concentration camps in Xinjiang?
The authoritarian CCP have had a free ride on us for over two decades. It is time to suit up and give them a little taste of their own medicine. I hope Trump retains his resolve.
Apologies for butting-in in an otherwise fascinating conversation… but….
There is considerable but misplaced talk of “capitalism” being thrown about in some threads, whilst Harlan worries about the deindustrialization of the West, ostensibly, due to China.
China has little to do with deindustrialization.
A centralized monetary system coupled with electoral politics, can only be sustained through the use of perpetual fiscal deficits.
In order for the political construct to be able to run perpetual fiscal deficits, national debt must necessarily expand.
As debt conforms to the law of diminishing marginal utility however, this is a compounding strategy.
Thus, in order to compensate for the loss of purchasing power, government borrowing must progressively increase till eventually it goes parabolic. Hence the reason debt in the USA doubled between 2008 and 2016. This is the parabolic phase.
In order to sustain this strategy, fiscal revenue must ideally expand.
In order to increase fiscal revenue however, legislation must be brought to bear.
As legislation and fiscality become progressively more restrictive in one country, economic actors migrate to countries where they can achieve an economic advantage.
As a corollary, as legislation and fiscality become progressively more restrictive, barriers are raised in business and industry. As barriers rise, so does unemployment and/or under employment whilst business dynamism is proportionally stifled.
In this context therefore, artificially lowering interest rates to ostensibly kick start the economy, actually reinforces the offshoring dynamic to the detriment of SMEs and the benefit of large corporations.
If China can be blamed for anything therefore, it can only be blamed to have opened the doors wide open to Western corporations to allow them to shift their production technology out of Europe and the USA.
All the while, the finance industry is laughing all the way to the bank…. their own bank that is….
Those GM vehicles were built in China by a jv with majority Chinese ownership. The product line sold at Wal-Mart has plenty of things made in countries other than china. We have a twenty trillion dollar economy with Chinese imports making up 500 billion. We’ve got plenty of options.
See, that’s the attitude Trump and the Trade Representative display. It is impossible we could find a compromise that would be better for both sides. It is a purely binary zero-sum game. If we do not “win,” then we “lose,” which means surrendering to an implacable enemy who will destroy us. It’s no wonder the majority of the world’s people think America is the greatest danger to world peace. This is why Bolton is able to find support throughout the nomenklatura. Most Chinese still hold to Confucian concepts of honor, something the American elites abandoned decades ago as unprofitable.
Is “showing military capability” a provocation? If the Iranians “show military capability” by mounting anti-ship missiles on dhows (small wind-powered sailing vessels, primarily used for commerce), will that prevent the U.S. from making a misstep? Or will it cause us to send a carrier group to the Persian Gulf? Does nobody here remember the results of the Millenium Challenge war game in 2002?lose.
America also took advantage of the Chinese losses to get all the benefits of the “unequal treaties,” and the Chinese noted it at the time and have not forgotten.
Jack, why surrender to their predatory behavior? Just stop dealing with them. Stop allowing American nationalists to buy Chinese made goods and stop selling China our goods. Why not make the stuff ourselves or learn to do without? Why are those American farmers growing soybeans for the Chinese. Let them grow stuff for Americans. Sure this approach is even more extreme that the current tariff war, but it will make us immune to Chinese predatory practices, won’t it? The isolation of Sakoku as the purest form of American nationalism. As an added benefit of implementing a policy of Sakoku, there would be no more American foreign adventurism.
I say this tongue in cheek realizing it will never be implemented. But wouldn’t this a better implementation of American nationalism than demanding that all other countries simply bend to our demands in all matters?
I wholeheartedly agree with you that we should end our overseas interventionism. I’ve opposed it for a long time from Vietnam to Iraq & Syria. The costs in the trillions of dollars, the destabilization of fragile societies to the unnecessary sacrifices of our soldiers and their families have not provided any meaningful benefit to us.
As far as China is concerned I believe the situation is more complex. One thing I’ve noticed in general and exemplified by the comments on this thread is the conflation of the heritage and Confucian values of the Chinese people on the CCP. Let’s not be under any illusion. The CCP is unabashedly totalitarian. I’ve no quarrel with the Chinese people. On the contrary they have my deepest sympathies for having to endure under the boot of the CCP. Of course any change in their form of government is for them to effect just as our forefathers did here. The important point that I believe needs to be made is that we provided the finance, the technology and the markets to enable the economic development of an authoritarian regime. An argument can be made that those early decisions to bring in China into the global economic framework was in the belief it would enable them to reform. I was persuaded then by Sir James Goldsmith & Ross Perot and others that the GATT trade deal driven by Wall St would be a disaster for our working class. Neither Bill Clinton nor the Republicans asked the question then what if the CCP doesn’t reform and instead intensifies their authoritarianism?
Of course the big transfer of our industrial base was completely our own doing as our political system is fully captured by the Party of Davos. In retrospect it should be clear that the CCP never intended to relinquish their monopoly on power and would become even more repressive to maintain it. The CCP is not our friend. They are an implacable enemy who are now using their growing economic and military strength to directly interfere and subvert our societies. The scale of their influence operations and the direct use of cash to purchase influence and espionage is something much larger than at the depth of the Cold War with the Soviet Union. It is high time we understand this threat and act. At least Trump in his own limited way gets that something needs to change even if in his mind it is purely transactional. I’d like to highlight a current example where the Trump administration is moving to ban Huawei from our market. Opeds are being furiously written and published in our national media in defense of Huawei, while the company hires the top cybersecurity official in the Obama administration with top secret clearance as their lobbyist. There are no Opeds here or in China that Google, Facebook, and other US companies are banned in China. Why is that? IMO, it’s because we accept the authoritarianism of the CCP. The neocons made a lot of noise demonizing Sadam & Assad as brutal dictators, yet they’re silent as Xi Jinping has millions of Uighurs in concentration camps. If we don’t act to check the CCP now our grandchildren will regret it as they’ll have to fight a war.
I also think that many in this thread considerably overestimate Americas economic strength compared to Chinas. There are very few cases in history were the debtor defeated the creditor in an economic contest. The Opium wars were military, and the Chinese have invested much into those not happening again.
I also believe that the Chinese are currently quite stable, the current Mao dynasty will follow the trajectory of other dynasties and probably has a couple of hundred years more left in it.
Meanwhile the state of American ideology somewhat reminds me of the state of catholicism just before Luther nailed his theses to the church door.
Many of Americas quite positive traditions appear to have been corrupted or forgotten, several competing heterodox creeds have essentially became “dogma”, freedom of speech is underassault by mobs of online witch hunters and any state attorney can essentially imprison anyone, the US legal code has a crime for everything.
Traditional Chinese society was heavily damaged by the Great Cultural Revolution; the One-Child Policy finished it off. Consider that filial piety has been replaced by a near slavish devotion to the child–all hope rests on this single descendant. It’s understood that the abolition of this policy came too late to avoid the demographic repercussions. The social repercussions may be easier to undo, but it will take generations–if China wishes to undo them.
China is a communist state. Those who know communism know that the communist state wishes to be the father and the mother; the aunt and the uncle; the grandfather and grandmother; the well-spring of all things good. Communism insists that devotion to the family be transformed into devotion to the state, at least for the masses. It is an error to speculate that the surveillance state is implemented to counter traditional filial piety: filial piety will be eradicated.
The masses are required to report biographical data on their families and themselves. Technology will make it possible to cross-check accounts for falsehoods. Families are encouraged to report each other for criminal activities. This is only a sampling of what is going on in China. If you wish to study further, the China Uncensored channel on YT is a good place to start. I suggest China has changed significantly recently and is under greater economic and social stress (to say nothing of international politics) than is commonly understood: it’s worth updating your knowledge of China if you haven’t looked at it in the past ten years.
It’s possible that China is the target of intense propaganda; the possibility that it is also a totalitarian state is not mutually exclusive.
Col. Lang, I understand if you don’t publish this comment. I hope you will take it under advisement nonetheless.