Initiating a Divorce

The general move and mood of the day is that the US supply chain needs to be vertically integrated in North America for any item deemed to be ‘critical’.¬† This means that US factories, currently located in China need to either leave China or set up a parallel manufacturing system in the USA. Since labor rates in China have skyrocketed over the past decade, the advantages to locating a business in China have diminished.

The move will likely cost China somewhere between US$400 billion and $500 billion in exports. The question of whether China will continue to buy agriculture products from the US remains, but there are other international markets for US farmers. Likely China will still buy US agriculture because it can’t feed itself. Or it will buy Australian Beef (good beef). A swine plague wiped out the Chinese pig population last year before the COVID Chinese Plague created a human pandemic.

Viruses love the worker’s paradise. What else can you say about the place.

FAS

Foreign Affiliated Sales (FAS) by US companies doing business out of China (for Chinese markets and for export from China) amounts to US$600 billion. That will simply be diminished over time as the supply chain moves from one place to another. US investments in China are about US$2 trillion. How that came to be is a discussion for another day. Adding all or part of that $600 billion to the US/North American economy will be significant.

Other Asian Nations

As investments and manufacturing leave China, they will not all return to North America. Other Asian markets (hostile to China) include Vietnam and Japan and trade will go there. Indonesia (280 million people) stands in a difficult position as does Malaysia (32 million people). They are Muslim nations and if there is anything that the Communists Enjoy, it’s persecuting its own Muslim citizens and putting them into re-education camps to make good comrades of them.

The Australian Gambit

Beijing slapped an 80 per cent tariff on Australian exports as punishment for demanding an independent coronavirus inquiry – which 100 nations including the UK supported. I wonder how that is going to play out? Will the British respond or will they be cowed by the Communist Chinese?

Last month, Foreign Secretary Dominic Raab said China faces ‘hard questions’ about the source of the coronavirus pandemic, adding there would have to be a ‘deep dive’ into the facts around the outbreak. He also said it wouldn’t go back to ‘business as usual’ between the UK and China after the pandemic eases.

Chinese state media and leaders warned of trade retribution that could wipe $135 billion from the Australian economy. Maybe the 100 nations that joined Canberra in calling for an independent inquiry need to DIVORCE THEMSELVES FROM CHINA?

Trade Zones

Some suggest that there will be a US Trade Zone and a Chinese Trade Zone that will include Europe (except the UK). I don’t know if that’s how it will go down. Yes, Europeans are a fickle lot, but I don’t see them throwing in with China. Most of them are not happy with the millions of military age Muslim male that settled in. Giving what is left over to the Communist Chinese doesn’t seem to be getting much traction. What about Italy? Ready for another virus with your pizza. Lots of grandparents died in the recent plague in Italy. Even Iran is re-thinking having a Chinese Belt Road terminus in their Islamic Paradise.

What about Russia?

Hillary’s famous “Russian Reset”

The Donkey Party in America hates the Russians. What does that suggest to you? I’m not saying that we need to have a love fest with Russia or a Clinton style Russian Reset. However, Russia has NEVER trusted Communist China. They will sell oil to China because its in their interests to do so. I get it and I don’t blame them. BUT I don’t see Moscow trusting Beijing. The US is a better and more reliable trading partner and Russians are pragmatic.

When CNN and MSNBC blaggard Russia every single day, you need to take a step back and ask yourself why. Clearly those propaganda outlets do NOT have American interests at heart.

Back to the Divorce

China can retreat behind the Bamboo Curtain and be what they are. Maybe if they are content with that, they can avert a war with the rest of the planet. Maybe they’ll try and collect on foreign debt, but how will that work out? I’ve heard that Italy owes them money. How quick will the Italians be to pay that off. The same is true with many nations.

Contain Communist China

The first step is for the world to seriously scrutinize Communist Chinese visa applications. Second, recognize Taiwan. They deserve it and it ticks off Beijing. Third, establish bi-lateral trading relationships, avoiding China as a trading partner whenever possible.

Fourth, disassociate yourself with the China Belt Road Initiative.

It’s ok for China to remain China, but they need to stay behind the Bamboo Curtain.

16 COMMENTS

  1. If the PRC were denied the use of the oceans and space they might be contained. But I think that doing that means war.

    Thanks for the post.
    Paul L. Quandt

    • I don’t think that we need to deny them the oceans. Nations simply need to decide for themselves not to trade with China.

  2. Interesting post. I’ve always held that having so much of our critical goods produced in an unfriendly nation was stupid at best.

    • There may be things like rubber barf, novelty items, that we still would want to buy from China. But that’s about it. Time to move on. Let them do what they want to, behind the bamboo curtain.

  3. Of all the blogger writing about China, you have the most direct knowledge of dealing with them. Might be a good idea to take heed of your words.

    In the long history of China, it has rarely been one cohesive country. They don’t even have a common language. The economic situation, as it becomes worse for them, may cause internal revolt. History shows many examples of “leaders” starting wars as a way to unify their own populace. The Chicoms won’t go quietly into the night.

    • The written language is the same.

      When visiting the Forbidden City, there is Chinese script and there is Manchu script. It’s interesting to note the differences.

      WSF, I had good teachers. I didn’t learn China all on my own. The most interesting thing about things Chinese are their comprehensibility. The Chinese are predictable. And most “secrets” in China aren’t very secret because the Chinese gossip. Politburo whores (male and female) often blab about what their masters tell them privately. The inscrutability of Chinese is a myth, even though East is East and West is West and never the twain shall meet (Kipling).

      Chinese are often disturbed when a round-eye gets what’s going on because they lie and obfuscate as a matter of practice and culture. But they lie and obfuscate in COMPLETELY PREDICTABLE ways.

      Westerners, I was told by a PLA General are the “Mysterious East”. The Han people (Mandarin China) pride themselves on being the same. Westerners, and particularly Americans, pride themselves on being INDIVIDUALS. So the Americans appear one way and then another as the Japanese found out in 1941-2 when they expected an easy victory.

      America was distracted by endless Middle Eastern wars (and the Subcontinent War in Afghanistan and Pakistan) and the Chinese exploited that distraction. America isn’t distracted anymore and Communist China is profoundly disturbed.

    • “The written language is the same. ”

      And in addition to that, there has been a very big push to get everyone speaking Mandarin. Cantonese speakers (southeastern China, Hong Kong) have traditionally been hostile to Mandarin (the language of northern barbarians, so far as they are concerned), but over the last few decades more and more of them have learned Mandarin. [1]

      There used to be multiple written languages used in the geographical region that comprises China. The semi-legendary “Yellow Emperor” Qin Shi Huang, upon consolidating power at the end of the Warring States period (c. 221 BC), ordered that a single form of calligraphy be used across his new domains. To further this end, he had scholars, especially those versed in other forms of writing, killed (buried alive, to be precise) and their works burned. Personally I suspect this was a loss on the order of the burning of the Alexandrian Library, and hold the Yellow Emperor in contempt for that, but then again I am absolutely crap at being Chinese. To proper Chinese Qin Shi Huang-di was the great unifier.

      [1] In the US Cantonese is still widely spoken in Chinatowns and many Chinese restaurants. Personally I cannot understand it and find it an ugly, choppy language, the sort of noise you’d expect from angry, nasal ducks. There is a saying that it is more pleasant to listen to two people arguing in Beipinghua (the Peking accent/variant dialect of Mandarin) than to listen to two lovers cooing at each other in Cantonese.

      • Thanks, Mike_C. I’m preparing another blog post to amplify what I wrote in answer to WSF. I always appreciate your timely comments.

  4. They DO need to stop the expansionism into the Spratleys etc… Also, one of my neighbors builds high end speaker systems as a business. He was using contractors in China for some of the simpler parts/cases/etc. He’s moved to a US manufacturer at a cost of about 15% per item, however, the better QC has saved him almost as much as it is costing him extra. He said he’s within 3% of original cost on most monthly invoices.

    • I think that your neighbor’s findings will be mirrored by MANY other American businesses.

    • Yes… then after him, it was greatly encouraged by the “Clinton Global Initiative”.

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