A good discussion between Charles Payne and Gordon Chang on Fox Business over the U.S. -vs- China trade confrontation.  Mr. Chang makes a good point about 2018 being the year where Beijing realized they underestimated the cunning of President Trump.

.

He caught them off guard – There is no doubt in my mind that President Trump has a very well thought out long-term strategy regarding China. President Trump considered strategic messaging toward the people of china very important. President Trump has, very publicly, complimented the friendship he feels toward President Xi Jinping; and praises Chairman Xi for his character, strength and purposeful leadership.

2018 is the year China discovered that President Trump knows how to play their panda/dragon games.

Nuance and subtlety is everything in China. Culturally harsh tones are seen as a sign of weakness and considered intensely impolite in public displays between officials; especially amid adversaries. Respect is earned through strength and cunning.

To build upon a projected and strategic message – President Trump seeded the background by appointing Ambassador Terry Branstad, a 30-year personal friend of President Xi Jinping.

To enhance and amplify the message – and broadcast cultural respect – U.S. President Trump used Mar-a-Lago as the venue for their visit, not the White House. And President Trump’s beautiful granddaughter, Arabella, sweetly serenaded the Chinese First Familytwice in Mandarin Chinese song showing the utmost respect for the guests and later for the hosts.

Why the constant warm messaging?

What is the purpose?

What does all this have to do with a trade confrontation?

Historic Chinese geopolitical policy, vis-a-vis their totalitarian control over political sentiment (action) and diplomacy through silence, is evident in the strategic use of the space between carefully chosen words, not just the words themselves.

Each time China takes aggressive action (red dragon) China projects a panda face through silence and non-response to opinion of that action;…. and then the  action continues.

The red dragon has a tendency to say one necessary thing publicly, while manipulating another necessary thing privately. The Art of War.

President Trump is the first U.S. President to understand how the red dragon hides behind the panda mask.

It is specifically because he understands that Panda is a mask that President Trump messages warmth toward the Chinese people, and pours vociferous praise upon Xi Jinping, while simultaneously confronting the geopolitical doctrine of the Xi regime.

In essence Trump is mirroring the behavior of China while confronting their economic duplicity.

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 country’s economic balance.

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? …can it grow?

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 itself to survive it is less strong than a nation whose economy is more independent.

Most Americans don’t 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.

♦Because of the oppressive nature of the Chinese regime demands a compliant culture, the majority of citizens within China do not innovate or create.  Innovation must be imported or stolen.  The “Compliance Mindset”, reinforced by central communist planning, is part of the flaw in the overall economic system.

Broadly speaking, modern era Chinese populous are not innovators; cultural compliance-affirmation does not lead to independent ‘outside-the-box’ thinking  per se’.   Therefore China approves and sends students to study in the U.S. to learn a skill-set absent within their own culture.

Chinese civil activity has been a history of 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 inherent freedom is necessary for innovation. That freedom actually creates the breeding ground for innovation.

Again, broadly speaking, Chinese are better ‘studiests’ (students) in American schools and universities because the Chinese are culturally compliant. They work well with academics, and with pre-established formulas within established systems; but they cannot necessarily create the formula or system themselves.

In large measure their industrial force are good cooks if they already have the ingredients and recipe available to follow.  China is trying to overcome this inherent issue by allowing innovative thinking, importing industrial experts to teach innovation, yet simultaneously keeping a totalitarian grip on dissent.

♦ 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 skill set (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 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 has now positioned their economic system as dependent on them being an economic 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 their ‘bully plan’ to ensure their supply chain and long-term economic viability.

This economic structure, and the reality of China as a dependent economic model, also puts China at risk from the effects of global economic contraction.  But more importantly it puts them at risk from President Trump’s strategic use of geopolitical economic leverage to weaken their economy.

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.

China accepts and believes 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. Flowing between these polar states is a natural dynamic to be used -with serious contemplation- in advancing objectives as needed.

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.

If it does not benefit China, it is not done !

Therefore the economic battle must be carefully waged to deliver a series of alternative thoughts in the mind of Beijing – where they view specific action as their best interest.  Any reversal in the current standard of benefit is viewed as a loss; the Chinese will not cede to any losses.  To challenge those who hold this zero-sum position, you must first change the current standard.

This means China must lose first before the negotiations can begin.  The baseline within the negotiation must be reset.  Once the baseline position is reset, then negotiation can be viewed by the Chinese as a gain.  This is the only way to get the Chinese to agree to any terms.

If the baseline losses to China are not currently firmed, such that Beijing and Xi Jinping see their current position as the standard, then President Trump and Bob Lighthizer need to wait longer before engaging.

Big Panda must see their diminished bamboo forest as the natural, current, and diminishing forecast status.  Only then will Panda engage in negotiations.  China must be in a seemingly perpetual stasis of losing before they will contemplate their need to achieve gains.

This is an economic and geopolitical battle that requires nerves of steel and an incredible amount of cunning and strategy.  As Trump resets the baseline, China will make multiple simultaneous moves to counter any potential losses.

President Trump, Secretary Ross and U.S.T.R. Lighthizer must think well ahead of China (they have); and make moves early in the conflict (they have); long before China realizes they are being confronted (they did).   {Go Deep} As we saw with the DPRK showdown Trump was several moves ahead of Xi, and blocked the counter-offense position of the Red Dragon before it was deployed.

President Trump will not back down from his position; the U.S. holds all of the leverage and the issue must be addressed. President Trump has waiting three decades for this moment. This President and his team are entirely prepared for this.

We are finally confronting the geopolitical Red Dragon, China!