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    Trump's Squeeze Play Suffocates China's Economy

    July 18, 2019
    Trump's Squeeze Play Suffocates China's Economy
    Image by Scott Meltzer
    New and affordable shop space in Beijing

    You wouldn’t know it if you read the mainstream business news, but the Chinese economy is in real trouble.

    Goldman Sachs recently reported that capital flight from the Middle Kingdom is ramping up once again, at a 10-month high in June with $20 billion in outflows as Chinese savers move assets in earnest (mainly using cryptocurrencies) away from Beijing’s control.

    The phenomenon is similar to executives of a troubled company selling stock before the public grasps a negative business trend. It’s the canary in the coal mine of bad things to come.

    Chinese manufacturing has dipped sharply in recent months. The Trump tariffs are hurting. For instance, Apple announced recently it is moving a large percentage of production out of China to elsewhere in Southeast Asia — to such jurisdictions as Vietnam because the risk of price increases in the Chinese market has become just too great to not diversify.

    It’s not just Apple by the way. Dell, HP and Amazon are moving production facilities offshore from China as well.

    The “Chinese Miracle” has peaked. All it took was a few months of tough leadership from an American president who actually cared about the people of his country, and was not bought and paid for by globalist elites.

    The manufacturing losses being incurred by China may very well not come back to Beijing anytime soon, if at all. It looks more and more likely that President Xi Jinping has decided to try and wait out the Trump administration, in hopes of getting a more compliant White House after 2020. That decision is a miscalculation on China’s part.

    Just as in the U.S. with the #NeverTrump movement and the resistance of the left, China has underestimated and misunderstood the Trump phenomenon from the beginning.

    The current sea change comes after years of massive misallocation of capital in China. The famous “ghost cities” are a shining example of the need to keep the population working to avoid civil unrest, what the Chinese Communist Party fears the most.

    In addition, China is about ready to walk off a demographic cliff, as the population ages and the consequences of the “one-child policy” that Beijing has foisted upon its people for decades come home to roost.

    It is well-known that the Chinese economy cannot innovate. Chinese companies have to steal new ideas and technologies. This is the fatal flaw of a managed economy.

    In addition to the tariffs, the White House is clamping down on forced technology transfers and intellectual property theft. This does not bode well for China’s GDP growth in future years.

    I believe the Chinese economy could already be in recession. Beijing is famous for cooking the books and reporting economic data that are always just where they should be, with slight variances.

    The pressure on Chinese unicorn Huawei is enormous, as Mr. Trump has barred the import of the bug-riddled equipment into the U.S. over national security concerns. Halting the purchase of American parts to assemble Huawei’s products could be a death knell for Mr. Xi’s vaunted “Made In China 2025” plan to dominate global industry — something the Western globalists have shown themselves perfectly ready to accept.

    On top of all of this, Mr. Trump still has one big arrow left in his quiver with the threat of tariffs on the remaining $300 billion worth of Chinese imports into the U.S.

    As time goes by, the sting to the American economy from the trade war will lose its potency. The world will find out that Mr. Trump was spot on when he said that China needs the U.S. market much more than America needs China’s consumers.

    This truth will manifest itself — no matter the cries of gloom and doom from bought-and-paid-for Wall Street pundits or the crowing from the ivory tower about the madness of Donald Trump.

    Originally posted at The Washington Times



    L Todd Wood

    L Todd Wood, a graduate of the U.S. Air Force Academy, flew special operations helicopters supporting SEAL Team 6, Delta Force and others. After leaving the military, he pursued his other passion, finance, spending 18 years on Wall Street trading emerging market debt, and later, writing. The first of his many thrillers is "Currency." Todd has been a national security columnist for The Washington Times and contributed to One American News, Fox Business, Newsmax TV, Moscow Times, Novaya Vremya (Ukraine), the New York Post, National Review, the Jerusalem Post, Zero Hedge and others. He is also founder/publisher of CDM. For more information about L. Todd Wood, visit LToddWood.com.
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    "The current sea change comes after years of massive misallocation of capital in China. The famous “ghost cities” are a shining example of the need to keep the population working to avoid civil unrest, what the Chinese Communist Party fears the most."

    Similar to the US 'full employment' situation?


    Harryo. Not all that similar to the US situation (at least in terms of the employment situation). There is actually demand for the products & services in the US whereas China is building things (as in the case of these "ghost cities") literally to keep people working. It's similar to some infrastructure programs in the USA or the past "bridge to nowhere" pork in bills - i.e. building things that aren't needed just to be able to pay people.
    The majority of US jobs are private sector & a ton are unrelated to government. When the economy is run by the government you have "bridges to nowhere" EVERYWHERE. That is what these ghost cities in China are.


    Likewise, in a capitalistic country pushing for innovation, which China has a lack of due to limited education in the populous, the goal/American Dream is to get small companies to grow through innovation and hiring of people. Basically, get out of their way (not the "you didn't do that yourself; govt helped you" nonsense that zero pushed) and let them flourish.

    China, not so much.
    We are Communist, so almost everything is owned by the state, and we (the Chinese govt) redistribute to those who cannot.
    The Chinese are capitalistic in nature, so they will claw and cheat and steal to get ahead, regardless of the "Communist" mantra. The problem is, the govt needs to use the military to quash these true desires for freedom and in order to stay in power and allow the party elites to maintain control and wealth.


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