Even though the news lately has been dominated by inner city people who riot, loot and burn, Communist China has not gone away. The US news cycle, it seems, can only focus on one thing at a time…maybe there is a reason for that?

Camo

Pretend that you don’t see anything, he’s doing the best he can.

That’s a metaphor for what’s going on with the Communist Chinese situation on the world stage. Of course, I’ll explain.

President Donald Trump’s recent threat to penalize China and Hong Kong for Beijing’s decision to impose a national security law on its special administrative region could mark the beginning of a process to cut off access to US dollars.

While the composition of “the measures” from the United States remains unclear, most analysts do not expect the Trump administration to impose extreme sanctions against Chinese financial institutions which would cut them off outright from the US dollar payment system, which is underpinned by the Swift network. In addition, avoiding a full-blown financial war with China over Hong Kong would preserve the current phase one trade deal.

However, the US will begin to separate itself from the Communist Chinese supply chain over time, reducing financial and trade ties with China, gradually choking off the supply of US dollars in China.

Either China has to ensure that dollars keep flowing or the globalized dollar world excludes China, which is equivalent of putting a ‘bamboo curtain’ around the country.

Depending on the exact nature of the sanctions, they could force other international financial institutions to limit or even sever their relationships with these Chinese banks, cutting them off from much of the global US dollar market.

The sanction threats from the US over the national security law proposal in Hong Kong come on top of existing concerns that the nation may be running short of US dollars, which is still the primary choice for international trade, investment and payments.

The effect of the Chinese Plague created an acute need for US dollars in China to pay for its massive imports and payments on US dollar-denominated debt because of its sharply reduced ability to earn foreign exchange income through exports, tourism receipts and foreign direct investments. That led to China recording a negative current account balance – the difference between current receipts from abroad and current payments overseas – in the first quarter of 2020, the first deficit since 2018 when Washington began to balance trade with the communists.

For most of the last decade, China’s current account posted large surpluses, a key source of US dollars, but it fell to a deficit of US$29.7 billion in the first quarter, down from a surplus of US$40.5 billion at the end of 2019, making China a net exporter of US dollars.

China’s US dollar shortage may still worsen further as the US-China trade war moves ahead, with many analysts expecting China to shift to a near zero trade balance over the medium term.

That trade situation with Communist China will deteriorate as nations around the world begin to bring production of goods back home, securing a stronger domestic supply chain. It seems that nobody trusts the communists anymore. Not even the Europeans, who took massive Chinese bribes over the years.

Beijing is pinning on hopes that its domestic financial reforms will boost portfolio investments inflows into its capital markets, especially through the Stock Connect and Bond Connect schemes for foreign investors.

Beijing has relaxed its foreign ownership rules to lure foreign companies to remain connected. It may be working in the short term because of the greed factor. Last week, Credit Suisse week took control of its China securities joint venture, Credit Suisse Founder Securities. It joined US banks JPMorgan, Goldman Sachs and Morgan Stanley, as well as Hong Kong’s HSBC, Switzerland’s UBS and Japan’s Nomura, as foreign majority owners of China-based securities firms.

Though the word is spoken very softly, the communists are pinning their future on the election of corrupt, creepy, senile old Joe Biden to the US presidency. The question isn’t only one of a Biden victory, but whether Joe will stay bought, and will his vice president/successor stay bought too.

At the end of May, Trump instructed a presidential working group of top financial regulators to study “differing practices of Chinese companies listed on US markets with the goal of protecting American investors”, particularly their practice of not complying with the auditing requirements for other listed companies. The comments followed his executive order in early May banning the main government pension fund from investing in Chinese stocks.

Another source of US dollars for China comes from the money raised by Chinese firms in the US. In total, Chinese firms have raised over US$1 trillion by listing their shares on US stock exchanges. A bill passed by the US Senate with broad bipartisan support would require Chinese firms to comply with US auditing requirements, as well as make disclosures about government shareholdings in their firms and members of the Communist Party in management positions, which could lead to delisting of Chinese firms that do not comply, potentially preventing other Chinese firms from pursuing initial public offerings in the US.

Over half  Communist China’s US$3.1 trillion worth of foreign exchange reserves are held in US dollar dominated assets. BUT –

How long can China sustain its economy [amid a US dollar shortage] by cutting back on its imports and depend on self-reliance?

The reserves are maintained only because authorities are clamping down on outbound remittances through draconian capital controls on its citizens, which do not support China’s integration into a globalized, US dollar-dominated world.

The Bamboo Curtain is going up even with the continued participation of American and other banks as Communist China, an international pariah, has had its camouflage stripped from it and as its true intentions have been made obvious.

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30 COMMENTS

  1. IDK, that’s a pretty good Ghillie Suit for an Elk. They aren’t the smartest critters, after all.
    -Kle.

    • Elk, at least the elk that live near me, are not all that bright. But they aren’t as dumb as sheep or Democrat voters, which is the same thing, except one walks on four legs and one walks on two.

  2. Much of what you say is beyond my limited knowledge, and interest in such matters. My concern is how long until the US Dollar collapses? We, or the Federal Reserve, keep printing money with nothing to back it up.

    Full Faith and Credit
    A situation in which a government agrees to repay a debt no matter what. For example, if a bond is backed by the full faith and credit of the United States, the U.S. government must find some way to repay the bond. U.S. Treasury securities, Ginnie Mae bonds, and some other debt securities are call full-faith-and-credit bonds because they have this backing. Municipalities may also attach full faith and credit to their bonds, but this means less than the credit of the United States.

    How?

    As a debt collector and repo man, I know how to do this at the micro level. The world vs the USA?
    Didn’t our bonds get downgraded during the Lightbringer’s term.

    Does China have the means to collapse the US Dollar, push come to shove?

    • American bonds have been the gold standard as debt instruments for a very long time. Nations hold them to prop up their own currencies. There was a threat to downgrade the bond rating during the miserable years of ObamaNation, but it didn’t happen. China holds US dollars but they need to use them to pay for ANYTHING that they import. Nobody will take RMB outside of China because it doesn’t float with the world’s fiat currencies. It’s what the Chinese government says that it’s worth. No more and no less. If China spends all of its dollars, they will need to buy dollars (or British pounds, or Euros) with GOLD, if they plan to buy anything. Or they can just pay gold. With the trade deficit with the US going away, they face a crisis.

  3. “Though the word is spoken very softly, the communists are pinning their future on the election of corrupt, creepy, senile old Joe Biden to the US presidency.” That’s the key IMHO.

    • The Chinese would certainly love to have Biden in office for a month or so before he dies mysteriously or is declared mentally incompetent and his successor, a communist, takes over.

    • Welcome to the blog, Steven.

      You can fight over the orange peel chicken and General Tso’s Chicken, but nobody is going to fight over Aunt Sally’s chicken. Nobody ever.

      All I can advise is that you need to avoid the tilapia that are raised in those sewer ponds in China and then are scooped out, frozen and shipped to the US…and if the Chinese are on the ball, they’re labeled as “free range fish”.

    • It’s more than a whiff. Corrupt Joe Biden and his filthy son took $1.5 Billion from the Bank of China. The media ignores that because it doesn’t play to their agenda. It’s not just a donkey thing. Media companies these days are merely acquisitions by conglomerates such as Comcast (owns NBC) which have huge investments in China. Looking for forthright reporting from them will make you go blind with stress.

        • Joe and Hunter flew to China on Air Force Two and came back with $1 billion. Then Joe got on the horn and the Bank of China raised it to $1.5 billion. That bribe had NOTHING to do with Ukraine. It was extra.

  6. We don’t have any “news” outlets…..we have propaganda outlets.

    And China isn’t going to back down. They know they may have to wait till Trump leaves office but they are
    betting when the commie left retakes the White House they will regain full cooperation from them in their quest to remove the US from the number one spot in the world

    • The world’s posture toward China has changed since the onset of the plague. India and Australia signed a defense pack 10 days or so ago and now you have three Indian soldiers shot by the Communist Chinese on Indian territory on the roof of the world. It won’t play well in India, which looks to take over Chinese control of the semiconductor industry.

      China will continue to push, but today isn’t a year ago for them. A lot has happened in the last trip around the Sun.

      • And over 30 missing in action. The ChiComs are acting like spoiled children caught doing something wrong trying to divert attention from the broken window by pushing the neighbor’s kid down.

        Friggin Middle Kingdom rat bastards.

        Hope India hands them their collective asses like the Viets did.

  7. “..whether Joe will stay bought, and will his vice president/successor stay bought too.” I expect they will/would, disgusting people that they are.

    “A bill passed by the US Senate with broad bipartisan support would require Chinese firms to comply with US auditing requirements..” And any politician getting money from China would never let such a bill pass.

    Didn’t China have some crazy plan to make their currency the dominant currency? How is that working out for them?

    • They want the RMB to be the world’s reserve currency but they didn’t find one taker. It doesn’t float on the international economy. Nobody knows what it’s worth.

      • Oh, I think you can depend on Biden, Inc. and it’s heirs to stay reliably bought.

        Until the payments stop or there’s a higher bidder.

        • I think that the Chinese would pay whatever PRESIDENT Biden asked for by way of a bribe, if they could get back to a $500+ billion a year trade deficit with the US losing.

  8. Very interesting that some economists said a couple years ago that the ChiComs were in trouble economically, starting about the end of The Lightbringer’s reign of terror.

    Glad to see they overextended, as usual, and pissed off all their neighbors, as usual.

    Can’t wait to find out how well the ChiCom farms in Africa work out as the locals attempt to prove the Kim du Toit concept of “Africa Always Wins.” The ChiComs obviously haven’t learned anything from watching all the failed colonies and failed nations fail as the local populace of warlords and tribes take over.

    Wonder how many hacked-apart Chinese overseers it will take before the ChiComs try to militarily assert itself in Africa.

    I am rubbing my hands with glee in anticipation of watching the ChiComs fail and fall on their faces. And then watch their One Road project fail also, as various nations cancel their debts.

    • Read the short story “Seven Kill Tiger” in Jerry Pournelle’s anthology “There Will Be War Volume X”. It’s available for free on Amazon (the story is in the “Look Inside” free sample).

      https://www.amazon.com/There-Will-Be-War-X-ebook/dp/B019KYLOKQ

      I have ZERO doubt that IF the Chicoms had the capability, and were not worried about the reaction of the West, they’d genocide sub-Saharan Africans in an instant. (Yes, I *am* using “genocide” as a verb, annoying as that is. Sorry.)

      My two cents on China-in-Africa and China v. India. China may think it can succeed in Africa (for values of “succeed”) because the Chinese are the second most ethnocentric and bigoted people on Earth. Chinese may not refer to all non-Chinese as “cattle” but they basically think that way too. The Chinese feel that they will not weaken in their resolve as whites did, and they have no concept of “yellow guilt”.

      As to India v. China, it is good to have them at each others’ throats, but do not for a moment believe that Indians will make better friends or trading partners than the Chinese. The resentment that Indians feel toward the British (and by extension Americans) is quite remarkable, even if it is concealed by apple-polishing behavior to your face. Also, look at Indians in the US. If any group is going to displace Jewish power in the US, it is the Indians. East Asians in general, and Chinese in particular, will NEVER be able to fill the political/legal/corporate roles that Indians are already sliding into. Never mind the high IQs, the vast majority of Chinese do not have the verbal aptitude and ability to rules-lawyer needed to grasp real power in the West. (Chinese simply BREAK rules, they are not very good at twisting them to make themselves out to be the actually righteous ones, or The Victims, or both.)

      • I’m with you. I don’t think that China’s experience in Africa has any long term viability. There are too many barriers to success. However, I think that it’s a splendid idea for them to dump a lot of national treasure into that pest hole.

        It’s good to have India to the south of China with a large army. It’s also a good idea for Indians to stay in their homeland.

      • “…the Chinese are the second most ethnocentric and bigoted people on Earth.”

        Who, Mike_C, are the first?

        Paul L. Quandt

        • Opinions differ on who are the MOST ethnocentric. Let’s leave it at that.

          To be clear, I actually don’t have a problem with a person, or a people, being ethnocentric. And even if it would put me personally in an awkward position, I have no problem with someone wanting an ethnostate. The problem I have is with people who demand that WE accept any person from any culture, and work tirelessly to flood the West with low-IQ, low impulse control, unskilled mystery meat, while they do the opposite for themselves.

          • I think that the Japanese are more ethnocentric than the Chinese, and are more concerned with racial purity than the Han. But to the issue at point, my sense is that the Democrats are more comfortable bringing in people with genetically provable low-IQ people to provide a voting base that will remain reliably dependent on them for generations. There is a precedent for that.

    • Beans, I think that the One-Road Project is doomed and I think that the Chinese know it. They put a lot of national pride and a lot of money into that and it’s unraveling.

  9. One of the many things I like about this blog is China news. Of course we don’t get that in our Dem agitprop “press.”

    • I’ve backed off a little on China news. There is a lot there, but much of it is obscured by China’s ongoing struggle to find its way forward.

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