(Article taken from Internet)
China is the most important and possibly most dangerous factor in the world of finance today.
Most of what the world believes about China is not true. Growth is not strong. The yuan will not be a world reserve currency. Their future is not bright, and China will not dominate the 21st century.
I realize that goes against the mainstream narrative. But I’m a lot more interested in the truth than the narrative.
The last 30 years have witnessed one of the greatest political self-deceptions in history.
The elite view was that engagement with China would lead to gradual internal reform. If trade were expanded, cultural exchanges encouraged and the Western education system thrown open to Chinese students, then the Chinese would see the benefits of capitalism and open discourse.
The expectation was that the Communists would drop their hard line, adopt market systems and gradually become “just like us.” At that point, China could join the community of nations as an equal partner despite its authoritarian leanings. This would ensure peace and productive collaboration.
The reality was nearly the opposite. It’s true, China did join the World Trade Organization in 2001. The Chinese yuan was included in the IMF’s world money basket (the special drawing right, SDR) in 2016. Tens of thousands of Chinese students flocked to U.S. universities.
A visit to any Chinese government agency today will bring you face to face with graduates of MIT, Harvard, Stanford, Johns Hopkins and other pillars of the U.S. higher-education edifice. The engagement took place exactly as the elitists hoped.
Yet the effect was the opposite of what the elites expected. Instead of becoming Westernized, the Chinese became more efficient Communists. Chinese students took the best of what the West had to offer in terms of technology and education and turned it to their own purposes.
China has grown rich by stealing Western technology, adopting Western manufacturing methods, developing some of its own technology and piling up multi trillion-dollar reserves of hard currency and gold.
Still, the world-historic economic growth of the Chinese economy over 30 years from 1989–2019 has not fulfilled the elitist delusion that they would become “just like us.” Instead, China is more Communist, more ideological and more threatening to the West than at any time since Genghis Khan.
The market implications of this are already playing out.
Chairman Xi has crushed the equity valuation of DiDi, a popular ride-hailing service sometimes called the Chinese Uber, because it did not kowtow to Communist demands to change its app and other tech features before going public.
This approach is now being applied to a long list of Chinese financial giants.
Western observers are mystified. Why would the Chinese government destroy the value of their most successful companies? That question reveals the ignorance of Western analysts.
They are approaching this through a market-oriented frame where governments regulate businesses but don’t destroy them. The Chinese are not market-oriented — they are Marxists. They simply ask who gains and who loses with the goal of making sure the Communist Party gains.
Since when do Communists care if their own oligarchs lose money? That helps to reduce a rival power center. Since when do Communists care if U.S. investors and funds lose money? That’s like weakening your enemy.
The Chinese Communist Party is glad that oligarchs and Western investors are getting crushed. All they care about is the power of the party. By that measure, their actions make perfect sense.
The elite vision has been discredited, although some still cling to it. Now, this does not mean that China is not powerful. It is.
China has the third-largest landmass in the world, after Russia and Canada as well as the largest population in the world, about 1.4 billion. It has the second-largest economy in the world, after the United States. It is the third-largest nuclear-armed power in the world, after Russia and the United States.
By every conventional measure, China is a superpower and will remain so.
Still, superpower status does not automatically translate into economic success or political stability. The Soviet Union became a superpower in August 1949 when it detonated its first atomic bomb, nicknamed Joe-1. Yet it collapsed uneventfully on Christmas Day 1991.
The Soviet Union’s landmass, nuclear power and military did not produce economic success beyond a certain middle-income status.
China is facing the same conundrum today.
Below, I show you the strong headwinds that China faces and why they’re so dangerous for the U.S. and its Pacific allies.
That’s because we’re witnessing a rare occurrence in the gold market that we haven’t seen for years, and it has serious implications…
I urge you NOT to invest in anything until you hear this:
(THIS ARTICLE WILL CONTINUE IN THE 12TH DELIVERY OF THIS BLOG: IN JANUARY 2022, TITLED: “CHINA: A SICK MAN OF ASIA”
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