Gordon Chang Discusses President Trump’s Plan to Remove the Panda Mask From The Chinese Red Dragon…

Author of “The Coming Collapse of China”, Gordon Chang, discusses the effect of President Trump’s tariffs on China and the epic battle ahead.  Last night China announced their feeble retaliatory actions – SEE HERE.  A professionally nervous Maria Bartiromo, frames a series of questions from the perspective of Wall Street.

Fortunately Gordon Chang understands the Red Dragon, and more importantly understands Chinese Chairman Xi Jinping’s geopolitical goals through economic conquest. Mr. Chang is one of the few people who appear regularly in media and know the truth behind the Panda Mask.

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People often talk about the ‘strength’ of China’s economic model; and indeed within a specific part of their economy -manufacturing- they do have economic strength.

However, the underlying critical architecture of the Chinese economic model is structurally flawed and President Trump with his current economic team understand the weakness better than all international adversaries.

China is a central planning economy.  Meaning it never was an outcropping of natural economic conditions.  China was/is controlled as a communist style central-planning government; As such, it is important to reference the basic structural reality that China’s economy was created from the top down.

This construct of government creation is a key big picture distinction that sets the backdrop to understand how weak the economy really is.

Any nations’ economic model is only as stable (or strong) as the underlying architecture or infrastructure of the actual country.

Think about economic strength and stability this way: If a nation was economically walled off from all other nations, can it survive?  …can it sustain itself?

In the big picture – economic strength is an outcome of the ability of a nation, any nation, to support itself first and foremost.   If a nations’ economy is dependent on other nations’ for it to inherently survive it is less strong than a nation whose economy is more independent.

You might not realize it, but China is an extremely dependent nation.

When the central planning for the 21st century Chinese Economy was constructed, there were several critical cultural flaws, dynamics exclusive to China, that needed to be overcome in order to build their economic model.  It took China several decades to map out a way to economic growth that could overcome the inherent critical flaws.

Critical Flaws To Exploit:

♦Because of the oppressive nature of the Chinese compliant culture, the citizens within China do not innovate or create.  The “Compliance Mindset” is part of the intellectual DNA strain of a Chinese citizen.

Broadly speaking, the modern era Chinese are not able to think outside the box per se’ because the reference of all civil activity has been a history of box control by government, and compliance to stay (think) only within the approved box.  The lack of intellectual thought mapping needed for innovation is why China relies on intellectual theft of innovation created by others.

American culture specifically is based around freedom of thought and severe disdain of government telling us what to do; THAT freedom is necessary for innovation.  That freedom actually creates innovation.

Again, broadly speaking Chinese are better students in American schools and universities because the Chinese are culturally compliant.  They work well with academics and established formulas, and within established systems, but they cannot create the formula or system themselves.

The Chinese Planning Authority skipped the economic cornerstone.  When China planned out their economic entry, they did so from a top-down perspective.  They immediately wanted to be manufacturers of stuff.  They saw their worker population as a strategic advantage, but they never put the source origination infrastructure into place in order to supply their manufacturing needs.   China has no infrastructure for raw material extraction or exploitation.

China relies on:  importing raw material, applying their economic skillset (manufacturing), and then exporting finished goods.  This is the basic economic structure of the Chinese economy.

See the flaw?

Cut off the raw material, and the China economy slows, contracts, and if nations react severely enough with export material boycotts the entire Chinese economy implodes.

Insert big flashy sign for: “One-Belt / One-Road” HERE

Again, we reference the earlier point: Economic strength is the ability of a nation to sustain itself.  [Think about an economy during conflict or war]  China cannot independently sustain itself, therefore China is necessarily vulnerable.  China cannot even feed itself.

China is dependent on Imports (raw materials) AND Exports (finished goods).

♦The 800lb Panda in the room is that China is arguably the least balanced economy in the modern world.  Hence, China has to take extraordinary measures to secure their supply chain.  This economic dependency is also why China has recently spent so much on military expansion etc., they must protect their vulnerable interests.

Everything important to the Chinese Economy surrounds their critical need to secure a strong global supply chain of raw material to import, and leveraged trade agreements for export.  China’s economy is deep (manufacturing), but China’s economy is also narrow.

China could have spent the time to create a broad-based economy, but the lack of early 1900’s foresight, in conjunction with their communist top-down totalitarian system and a massive population, led to central government decisions to subvert the bottom-up building-out and take short-cuts.  Their population controls only worsened their long term ability to ever broaden their economic model.

It takes a population of young avg-skilled workers to do the hard work of building a raw material infrastructure.  Mine workers, dredge builders, roads and railways, bridges and tunnels etc.  All of these require young strong bodies.   The Chinese cultural/population  decisions amid the economic builders precluded this proactive outlook; now they have an aging population and are incapable of doing it.

This is why China is now dependent on their position as an economic trade bully.  They must retain their supply chain: import raw materials – export finished goods, at all costs.

This inherent economic structure is a weakness China must continually address through policies toward other nations.  Hence, “One-Belt / One-Road” is essentially a ‘bully plan’ to ensure their supply chain and long-term economic viability.

This economic structure, and the reality of China’s dependency, also puts China at risk from the effects of global economic contraction.

U.S. President Donald Trump and the U.S. economic team understand this dynamic and fully understand the inherent needs of China.  When you are economically dependent, the ‘bully plan’ only works until you encounter a ‘stronger opponent’.   A stronger opponent is an economic opponent with a more broad-based stable economy, that’s us.

President Trump, Commerce Secretary Ross, Treasury Secretary Mnuchin and U.S. Trade Representative Lighthizer, represent the first broad-based national team of economic negotiators who know how to leverage the inherent Chinese economic vulnerability.

 

 

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222 Responses to Gordon Chang Discusses President Trump’s Plan to Remove the Panda Mask From The Chinese Red Dragon…

  1. Okay, so seeing a mixture of rain/sleet/snow outside my window may have something to do with this odd metaphor, but the American economy and the Chinese economy are a lot like water and ice – both made up of the same core elements (manufacturing, services, financials, etc.) but with completely different structures.

    Water (US) is composed of millions of free moving, independent molecules that together compose a powerful dynamic fluid structure. Each molecule is self-positioned, free to move and adapt to changes in the system virtually independent of the impact on the system as a whole. It is more easily disrupted but entirely capable of self-rectifying.

    Ice (China) is composed of millions of rigid, co-dependent molecules that together form a solid crystalline structure. Each molecule is rigidly placed in its position and is unable to adapt to changes in the system based on its own requirements; instead reacting based solely on the impact of the system as a whole. It is less easily disrupted but incapable of rectifying damage from large disturbances

    To illustrate this, consider what happens when you hit water and ice with a hammer. The water’s surface will be temporarily disrupted while each independent molecule adapts to the system disruption. However, since each molecule adapts and moves based on its own individual needs, the system is capable of absorbing the impact and returning to normal. Ice on the other hand will crack or shatter because each molecule is restricted to a rigid frame, incapable of independent adjustment. This will result in significant structural damage since the system cannot readjust itself to absorb the impact.

    This is a natural example of the differences between a free dynamic economy and a centrally planned economy. On the surface, the security of a centrally planned economy appears to create a greater resistance to substantial damage from external disruptions (recessions, depressions, etc.), but the exact opposite is the case. While a centrally planned economy may allow a system to withstand small disruptions to the system (think tapping the surface of ice), large powerful disruptions can prove absolutely catastrophic and irreversible.

    And unfortunately for China (ice), President Trump is taking the hammer right to the heart of their crystalline economy.

    Liked by 2 people

  2. Kyrissaean says:

    high corporate tax+illegals=punish consumers. corporate tax only affect jobs within usa, dems force middle class through high living cost to sponsor mexico stay cheap for rich to outsource get richer

    Like

  3. BigE says:

    I learned something new thanks for sharing

    Like

  4. Michael says:

    Thank you for the insight.

    Like

  5. Ed Beckens says:

    This article should be required reading for any American government official.

    It cuts through the BS and it makes a lot of sense.

    The truth, when allowed to survive, usually does make sense.

    And President Trump’s strategy makes a lot of sense, assuming one wishes for a free America to survive.

    Liked by 1 person

  6. ATheoK says:

    Agreed, John!

    What most people do not understand that one generation back, i.e. the parents of the children attending American colleges today, were sent to the Country to work on farms every summer during their youth.
    During these summers and after farm chores were completed, youths were taught firearms handling and other militaristic activities.

    When summer ended and time for people to return to cities, low performers and slow witted students were told to stay at the menial tasks they had been performing.

    Farm work, mining, fishing, industrial laborer, sewage workers, all of the dirtiest most menial jobs, were staffed by the lowest performing workers for generations. Nowadays, their children are the workers.

    A similar process happens after students graduate schools in urban areas. The brightest are steered into areas, including higher education, needing bright new workers.
    Lesser qualified people are steered, permanently, into hard labor and service positions.

    A process that reminds me of the military.
    One can sign up to train for almost any technical or other service area; but fail any test during the training/experience process and one gets reassigned immediately.
    Pass all tests and the service person advances.

    While China’s determined march towards electrical aided civilization is increasing free time for all Chinese; that free time is directly proportional to urban centric residence. The farther away from the city, the less free time and less activities one can use their free time doing/visiting.

    Like

  7. beigun says:

    Sundance provides a great explanation that could have been used in the 1980s when discussing America’s trade friction with Japan. Closed vs Open Societies. Academic innovation vs rote imitation. MITI central planning vs competitive advantage decentralization. After all, the 301 trade tariffs on China were originally crafted for Japan decades ago. And China’s trade deficit is basically the same level that Japan had with the US in the 1980s when counting for inflation. Japan was smart enough to cloak exports to America via satellite countries, starting with SE Asia and Mexico, so the trade imbalance with Tokyo is actually much worse that the statistics show. That is why the US has a trade deficit with the Philippines, mainly in semi-conductors.

    America has an Asian trade problem. America has experienced 100 cumulative years of trade deficits with Japan, Korea and China. That is a lot of red ink in return for 70 years of overseas bases for the US military to protect Asian allies. China is really the new boy on the scene, merely following an economic model introduced by Japan and then Korea. In Japan, this economic policy is termed “Kokusanka” or “to make at home” which sounds so familiar to “America First.” All of NE Asia (except the DPRK) has followed Japan in this matter of economic development, but under different political systems. Culturally, NE Asia is Confucian under local conditions, such as State Shinto in Japan during the war, or “the shrimp between whales” mentality of Korea, or the dependence upon an academic elite–the Mandarins–for the longest running government in world history before Communism came to China.

    Regarding closed minds or thinking out of the box, please refer to Asian philosophy. In China, one can find all manners of traditional philosophical thinking, from “let one hundred flowers bloom, let one hundred schools of thought contend” to Mao’s restrictive “Little Red Book.” Japan, on the other hand, has no traditional philosophers or great religious texts beyond the “Way of the Samurai.” Athens and Sparta, no?

    The CCP has the greatest fear of democracy and open political thought, like the Imperial Dynasties of old, because the Chinese people have always been granted the right to “overturn the boat” once a government has lost the “mandate of heaven” or support of the people. Japan, on the other hand, is one fo the few nations that has not experienced a revolution and tradition is far stronger than other Asian countries. From an historical Chinese perspective, Xi is the new “Gold Emperor” and Mao the “Red Emperor.” All said, NE Asia’s Achilles’ heel is innate conservatism based on nepotism leading to corruption due to the lack of the rule of law. Korea and Taiwan seem to have the closest resemblance of a two-party state, critical for the rule of law.

    Trade deals can be remade, but implementation is the rub, so to speak. Asia can wait for US administrations to change, for “new hands” to relearn the lessons of previous administrations. In short, America is not currently equipped to engage competively with Asia due to a serious lack of understanding of the local conditions, just as US military endeavors have failed in Vietnam and SW Asia for the same reason. We Americans were never Colonialists or Imperialists and care little for overseas matters until it is far too late, hence the never ending foreign policy fiascos.

    If America is going to compete in Asia, it should be an intellectual endeavour, not a military manuever in the South China Sea. Otherwise, new trade deals will mean little if Americans can not speak the language nor understand the history or culture were business is to be made or lost. The saddest part of this situation is the defection of America’s foreign policy elite for foreign interests, like former AMB Foley joining Mitsubishi International Corporation only weeks from leaving the US Embassy. Foley couldn’t beat them on trade as Clinton told him to, so he joined them. FISAGATE has uncovered the depth and scope of unregistered agents, espcially former high-level US government officials working for foreign interests. That has been the focus of America’s foreign policy elite after leaving government, instead of building a cadre of experts for US business. How to fix that and the utter lack of interest in Asia by Americans academically?

    Like

  8. Rjones says:

    Per census.gov, 2017, China’s trade deficit with the US was ~$400bn out ~$500bn total trade with the US. China GDP was ~11t of which ~$2.5t was manufacturing. US GDP was about ~19t.

    I don’t know what defines an “export economy” but based on this it appears that the US trade accounts for <5% of Chinese GDP.

    Having said that, China bullies it's neighbors and, to avoid war, we must stand up to the bully. Additionally, unless China moderates it's behavior and ends its ambitions of territorial expansion, America is foolish to further integrate it's economy with China and increase economic dependence.

    Painfully, the question now is how to disengage without doing significant damage to ourselves in the process.

    Like

  9. spren says:

    I worked with a young Chinese woman who had emigrated here. She would return home for visits once a year. You were being kind to say that you are stepping back to the 18th century upon leaving urban areas. She told me that if you ventured out 100 miles from any city you were basically back to Stone Age conditions. Her mother, who has since passed away, was ecstatic that her daughter was able to escape those conditions and live in America.

    Like

  10. 10th Mountain says:

    I can attest that what Mr. Evans says is very true. In my many trips to China, I have found the Chinese to be great “copiers” but not great “originators” This is especially true in high tech where the engineers are lacking critical thinking skills. A defect found in a lithography step is to them a lithography issue, even though the defect may have been created many levels down in the process. Trying to convince them otherwise is a maddening process.

    Go 50km outside the larger cities and you have rural 16th century China alive and well, with open sewers down the middle of streets, no sanitation, and limited electricity.

    Like

  11. REVIDAM says:

    As an Indian American (second generation), I completely agree on the top down society that has been a part of India for ages. However, their government’s attempt to reverse age old policies has been fraught with problems. Reversing the quota system is one thing; however, doing so by granting more access to what was called “backward castes” has not panned out the way they wanted. This I believe because people in those situations never had the educational skill set in their younger years to fare well in their new access. People brought into the IT sector, for example, never seem to have the “work-ethic” and “follow-through” that is required to “finish the product.” Further, infrastructure and massive over-crowding is a huge problem. The basics in hygiene, sanitation and healthcare not withstanding, I don’t think India will succeed if there isn’t a concerted effort to tackle these issues. Their major problem is wide-spread corruption. Everyone is on the take and it’s very hard to get things done. It’s just not enough to have money there; you won’t succeed if you don’t have the network of people to get things done. And if you don’t know the ins and outs of that, it will be easy to get swindled.

    People who haven’t lived overseas and experienced life in other countries can’t comprehend how lucky we are to live here in America. Yes, we have lots of problems: corruption, more and more restricted free speech and government handouts where we have to support those who don’t want to work. But it is also a land where you can still succeed and enjoy the freedoms that many countries do not offer. In the 50+ years of my life here, I am so proud to be an American. It truly is the only country in the world that I would ever want to live in. Try going overseas and living in those conditions. If you don’t have money, you’ll suffer and ache to get back home.

    We have to continue fighting for POTUS DJT and his agenda. Lot is at stake here and I am constantly thankful to Sundance for the knowledge and wisdom that is imparted to us day in and day out. In God we must trust, especially in a time where the mere mention of faith and God is looked down upon.

    God Bless America!!

    Like

  12. czarowniczy says:

    If you look at the blue belt and compare it to the militarized islands China’s built/is building in the South China Sea and the joint-use commercial/military ports it is building around India and into the Arabian Sea and the large port construction projects in the Red Sea and Suez, China’s managing to build a new over-water Silk Road to match its overland one while establishing military security over its sea routes and giving India a wedgie. Don’t forget that rail line China’s also looking to build an alternative overland rail route from Eilat on the Gulf of Aqaba to Tel Aviv on the Med ass a backup to the Suez Canal – there’s a potential situation.
    The US has lost its edge, it’s been on top for so long it’s used to coasting and not peddeling. China’s hungry, the US is sated on past performance and being undercut by people all too ready to sell us out to the highest bidder. America erwache!

    Liked by 1 person

    • czarowniczy says:

      And an area totally ignored by our American MSM is Chinese veiled (thinly) aggression directed at India. Seems no one here’s concerned that China’s busily damming up a number of the rivers in Chinese controlled territory that bfeed Indian and other SEA rivers. Latest problem is a dam/tunnel complex that’s going to divert much of the Brahmaputea to a Chinese project to reclaim a desert area. Do I see handfs out there raised asking what’s the Brahmaputra and what does that have to do with me? Bless you, MSM.
      India is seen by China as it’s primary threat in Asia, especially as by mid-century India’s population will match China’s and be overall younger than China’s. There’s also the issue of India working to increase its arable land and is surpassing China…if China can steal India’s water to increase its arable land and in doing so set India back…….
      India may be the West’s hope in containing China but so far it seems Russia’s the only one actively working that…and has been for decades…though India appears to be looking to thec West more and more. Let’s see, regarding India, if the US can once again snatch defeat from the jaws of victory and let India go to the Chinese wolves.

      Like

  13. czarowniczy says:

    Nice piece:

    Like

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