China's financial house of cards is collapsing and President Xi Jinping may be removed from power. Like any schoolyard bully, Xi has met an alpha sheepdog in President Donald Trump and doesn't know what to do. He's the proverbial deer in the headlights. The Chinese Communist Party may not take kindly to Xi destroying the Chicom dream of world dominance, by overplaying his hand with the U.S. and POTUS.
The world is starting to take notice of China's debt and misallocation of capital problems, now that the safety valve of the American consumer market has been taken away due to tough Trump tariffs and trade policy.
Something is seriously starting to break in China's financial system, writes Zero Hedge recently.
Three days after we described the self-destructive doom loop that is tearing apart China's smaller banks, where a second bank run took place in just two weeks - an unprecedented event for a country where until earlier this year not a single bank was allowed to fail publicly and has now had no less than five bank high profile nationalizations/bailouts/runs so far this year - the Chinese bond market is bracing itself for an unprecedented shock: a major, Fortune 500 Chinese commodity trader is poised to become the biggest and highest profile state-owned enterprise to default in the dollar bond market in over two decades.
CD Media has consistently written about the literal impossibility of China signing a long-term trade deal that is good for the American economy. By doing so, Beijing would dissolve its decades-long push to overtake America through deceit and theft of intellectual property and forced technology transfer. This will not be tolerated by the hawkish communist leadership.
China continues to play the same card over and over -- promising a 'phase one' trade deal with billions in American agricultural purchases and other goodies only to pull the football at the last moment, frustrating The White House negotiation team. We've heard that the deal is 'almost done' for years now, from both sides.
What the financial talking heads seem to be missing, but the financial markets are realizing all too well, is that the China 'trade deal' is becoming less and less important. What is really becoming material to market movements is the realization that Donald Trump will be easily elected to a second term. The American economy will be energized more than anyone could have forecasted during the depths of the Mueller 'investigation' or the 'impeachment inquiry'.
Xi does not know how to handle this. His 'power for life' may be very short indeed.
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Trump should keep raising tariffs until the annual trade deficit with China is erased.
We need to stop all support for China’s economy and intellectual thievery. A total embargo on all products made in China or by companies even partially owned by Chinese. This would force foreign firms making products in China to relocate if they want to sell their products in the largest single consumer market in the world. And China would lose its biggest export customer, which buys 19 percent of its exports. We also need to expel every Chinese citizen, including the 300,000+ students at U.S. schools and scientists working at our universities, private companies and national labs. If there’s a way to block Chinese Internet access to our websites, even partially, their ability to steal from and harm us would decline. I’m no expert, but since China buys only 5 percent of our exports, I think we could survive an embargo. We should treat them exactly like we used to treat them and rogue nations like North Korea and Iran. After all, China is a rogue nation that’s trying to destroy us or at least dominate us. It’s the biggest threat since the Soviet Union in the 1970s and 1980s.