Roberto CoelhoBy Roberto Coelho|August 23, 2021|11 Minutes|In Opinion


Red Future ?

China, the world’s second-biggest economy, is as strong, if not stronger than the likes of the United States and Russia. With a self-declared President for life Xi Jinping, an unpredictable controlling Communist Party and rising international tensions, the future is unpredictable.

From the moment former President, Donald Trump took power set his sights on battling with China; from minimalistic tiffs to large-scale trade wars.

China’s response was initially muted. However, as the years continued their attitude towards internal and external pressures changed.

The internal change was seen by the harsh ‘big tech’ crackdowns and an attempt to bring tighter controls in Hong Kong.

Externally, President Xi has become outspoken towards any criticism of China and his method of ruling.

Yet, the world seems to ignore the growing Eastern Power. Should global news, business, and politicians be more focused on The Red Dragon?

One man who has studied this question down the years is Clem Sunter, experienced scenario planner and futurologist at Mind of a Fox.

“I refer to the threat of China, Russia, and North Korea as the Red Flag.”

Without an immediate threat, do ordinary individuals need to concern themselves with authoritarian politics on the Eastern side of the globe?

Unfortunately, yes, as Chinese political decisions affect everyone’s back pocket.

Whether it is increasing costs of manufacturing or the crackdown on local tech giants, Tencent or Alibaba.

When these behemoths come under fire pension portfolios are seeing red.

The crackdown began in 2020 when the ruling party fired shots across the bowl of ‘free markets.

On the eve of the world’s largest IPO, Chinese regulators stepped in front and blocked the process of Ant Groups IPO (a fintech firm ahead of Western times).

The reasoning behind such rash and harsh decisions was inadequate liquidity and solvency positions held by the fintech giant.

Yet, the Wall Street Journal reported Xi himself was involved in preventing the IPO. Later in 2021 Ant Group was transformed into a holding company overseen by the Peoples Bank of China.

Free-market dynamics were met with political interference, nationalization, interference, and personal grievances. The free market lost.

As the story develops, the true incentive behind preventing Ant’s IPO was the founder’s, Jack Ma’s larger-than-life influence on local society.

Ma attacked the Communist Party’s actions of essentially overrunning Hong Kong. The distortion of the independent one-country-two system rule via the implementation of the new National Security Law.

The law makes it easier to punish demonstrators and activists within Hong Kong. The little freedom of speech the people of Hong Kong enjoyed, no longer exists.

Ant Group was not the only Ma interest attacked by the Communist Party. His private life and holdings were similarly investigated. The impact was large enough to remove him from the public’s eye for three months

Ma was not the only target on the CCPs hit list.

The next target was China’s private education firms. They were barred from profiting from tutoring in core school subjects resulting in financial pressure on Chinese families.

The US-listed TAL Education Group, based on Chinese education firms, plunged 71% on the news.

South African investors were next to feel the heat from The Red Dragon when state media described online games as “spiritual opium”. With the horrific context of previous opium wars and epidemics.

Tencent’s game repertoire includes the likes of League of Legends, Fortnite (40% ownership of Epic Games), and Assassin’s Creed (5% ownership of Ubisoft)

Naspers (and Prosus) South Africa’s largest entities own a combined 30% stake in Tencent. Share prices tumbled rapidly and have remained volatile following this news.

Simultaneously, investors in New York were feeling the burn when China released an investigation into Didi (an Uber-like platform based in China) days after its initial public offering in New York. The suggestion is this may have been punishment for the Chines ride healing company choosing an American listing over a local listing.

The CCPs displease over an American listing is part of a wider revolt against American rule.

Other groups continued their American revolt as we move from panic on stock markets to panic on Afghanistan soil.

The Taliban overran the local government and the world watched in shock as the United States rushed to evacuate locals and allies.

“After 20 years of America, we are now back to another episode of the Taliban.”

Biden may argue the decision to ‘pull out of Afghanistan was correct, but as a humanitarian crisis unfolds his perspective is difficult to side with.

“This is a major flag, an indication of a weakening United States influence. You may know China has a small slither board with Afghanistan. Their influence in the reign will be felt.”

As the United States losses influence as the “global cop” predicting how the CCP’s influence will spread is nearly impossible to predict.

A select few individuals in the west truly understand China’s motives behind each decision.

Sunter is part of this select group with his unique view as he lectured both at Harvard and the Central Party School in Beijing.

“I believe China hopes to improve the homeland and is not seeking to control the world by expansionist policies.”

Improving the local society in China is completed using the well-known 5-year plan system designed by Stalin.

Few know China’s 5-year plans aim towards a larger 100-year plan.

An ingenious system mostly encouraged by motivational speakers, ‘Ensure your daily routine is aligned with your long-term goal and you will reach your long-term goal.’

This method has been proven to work as the initial 100-year plan set into motion at the beginning of the Communist Party’s birth in 1921 was to eradicate poverty in China.

With images beaming around the globe of megacities larger than New York and as sophisticated as Dubai, their goal was reached.

The future goal is more concerning and impacting the global community.

In 1978 China was ranked the 100th global economy in the world, by the end of the 2020s it may be number 1. Within 50 years to number, it’s extradentary.

With the possibility of China ascending to number one, America will slip to number two.

“The biggest event during the 2020s will be America slipping to Number two,” says Sunter.

However, China’s economic strength may not result in a ‘World War 3’ type scenario.

“The lost thing we want is conflict on a global scale. Both the Chinese and Americans understand the war on a nuclear scale will result in mutual destruction,” says Sunter.

Nevertheless, Xi’s intermediating and threatening remarks on the centennial of the Chinese Communist party seem to disagree with this theory on the face of it.

Claiming foreign powers will “get their heads bashed” if they attempt to influence the country.

Further imposing that “we (China) will never allow anyone to bully, oppress or subjugate China”.

Xi’s attitude towards the west seems intently clear, reinforced by remarks made around the investigation of the coronavirus in China.

Repeatedly accusing the United States, Australia, and other nations of “smear campaigns and blame-shifting” with “zero interest in a serious science-based study of the origins.”

Strong words from the nation that denied W.H.O. access to investigate for six months.

With most individuals around the globe impacted by the pandemic, these remarks by the ‘the founding nation’ leave a distasteful taste in the mouth.

Yet, these remarks are in defense and are in response to an ever more skeptical global society. He did not pro-attractively threaten the United States.

Whether their goal is simply the betterment of their individuals over others or an intention to become the world’s sole superpower is still unknown.

But there is a bellwether test to determine the true long-term goal, Taiwan.

It is no secret the Chinese Communist Party identify Taiwan as a renegade province. The international community views Taiwan as a nation view as a major non-NATO ally.

If China was to overrun Taiwan by force, and the United States was responded, the worst may happen.

No matter the intentions, anyone with an S&P500 ETF should care about Chinese politics.

Their decisions affect you more than you know.

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