All your interests are belong to us…. There was previous discussion of how Beijing would respond if/when their economic interests were challenged. In essence, the prediction was that China would drop the panda mask and revert back to their oppressive totalitarian tendencies.

It is an interesting dynamic because the more the communist state moves to punish and control western business interests, the less likely any western investment flows into China. It’s a simple question: Why would anyone want to engage a business relationship inside a totalitarian system that could move at any moment to control your business?

(South China Post) China will publish a list of “unreliable” foreign entities deemed to have damaged the interests of Chinese firms – a move set to ratchet up tensions in its escalating conflict with Washington, after the US government blacklisted Chinese telecoms giant Huawei.

The Ministry of Commerce said on Friday that it would blacklist foreign businesses or individuals that violated market rules and contractual obligations, or took “discriminatory measures” to hurt Chinese business rights and interests, as well as national security and interests.

Specific measures for those on the list would be revealed “in the near future”, said ministry spokesman Gao Feng.

Gao said the “unreliable” blacklist would be based on China’s foreign trade, anti-monopoly and national security laws, and it would target entities that had blocked Chinese businesses out of non-commercial concerns. (read more)

The Red Dragon is going to do what the Red Dragon does.  Thus begins the phase when corporate interests, particularly multinationals, recognize at its core China is a communist state-run, controlled-market, system.

The reaction from China is immensely predictable; and creates a downward spiral.  If any corporation is perceived as working against the interests of the state; the state will take control of the corporate interest.   What western business interest would want to do business within China when that reality is the landscape of every economic decision?

The willingness of China to self-immolate is the golden arrow in President Trump’s economic quiver.  The inability of China to modify itself based on downstream economic outcomes is the inherent weakness… Overlay that weakness with the zero-sum outlook and you get this quote from Chinese State-Run broadcast:

…“If the US wants to negotiate, our door is open. If you want to fight, we will fight to the end.”…

Think about the logical reality of this statement as expressed.  Put another way: ‘if you agree to our terms we will work with you; however, if you don’t agree to our terms, we will self destruct.’  That’s the economic reality of the zero-sum dragon mindset.  This inevitable position is what CTH has been outlining for several years.

China has no cultural or political space between peace and war; they are a historic nation based on two points of polarity.  They see peace and war as coexisting with each other.

Chinese engagement stems from a belief that opposite or contrary forces may actually be complementary, interconnected, and interdependent in the natural world, and they may give rise to each other as they interrelate to one another.  However, it must benefit China. 

Peace or war. Win or lose. Yin and Yang. Culturally there is no middle position in dealings with China; they are not constitutionally capable of understanding or valuing the western philosophy of mutual benefit where concession of terms gains a larger outcome.  If it does not benefit China, it is not done. The outlook is simply, a polarity of peace or war.  In politics or economics the same perspective is true.  It is a zero-sum outlook.

As soon as an internal business interest, or an affiliated business relationship, is considered to be a compromise or loss to Beijing, the enterprise is destroyed.

Who decides? The communist regime.

Thus President Trump only has to position U.S. policy to benefit non-engagement with China (see Huawei); and China will respond by destroying any affiliated business they view as participating in, or supporting, the adverse policy. Beijing cannot help itself. The dragon will act as a dragon will act.

President Trump has positioned this geopolitical trade reset perfectly.  Trump is applying Chairman Xi’s own “us -vs them approach” toward confronting China. The supply chain investment Beijing needs to sustain itself is now being controlled by elements outside China.  Beijing responds by attacking those in the international community who control the investment.

This will not end well for China.

Watch as time goes along and more companies, and nations, slowly walk toward the exits with China.  There is just too much inherent financial risk.