The most stupid things China can do. Media Choice.

[Marcin + 519]

I was reviewing "good ideas" for China found in media last week. Chosen 3 most stupid ones.

1. Create and enforce own list of "unreliable" companies, a copycat of US blacklist of restricited entities.

2. Send army to Hong Kong.

3. Dump US Treasuries.

Short take on each one:

1. Blacklisting entities that are not stricte military but are producing consumer products is a very bad move by United States. The consequences will haunt US for many decades. Each and every country would ask the question, what if I am no longer coveted friend of United States ? What would happen to my national champions if the same embargo is enforced against them ? China can maybe face the pressure because of largest in the world domestic market for consumer products and enormous resources and leverage. What with us 3, 10  or 30 times smaller than China ? Should we hedge against possible US wrath ? With whom ? So I think China will never do it, but instead open another 1000 R&D centers around the world.

2. Not that stupid as the 1st on the list but close 2nd place. Even if Hong Kong is literally burnt to the ground by protesters, has long recession etc. China should never interfere in Hong Kong matters, not by the use of physical force. In economic terms Hong Kong with 350 billion GDP is 2.5% of Chinese economy, so China is creating another Hong Kong in 5 months. The longer the protests destroy the city the more independent it will seem to the outside world. Today's media consumers are fast adapting to novelties. War in Yemen in evening news, another thousand dying, a good pasta we have today for dinner. The same with Hong Kong protests, until 50 are killed in the streets every week nobody actually cares. Propaganda effect for Mainland China is better than anything CCP can manufacture. Fantastic city, at least once visited by majority of urban Chinese population is burning every night. We certainly do not want this to happen in Beijing or Shenzen, we are getting rich. But if China ever uses force to calm situation the spin would be: bloody CCP regime killing these innocent peaceful protesters.

3. China is slowly decreasing its exposure to US Treasuries, but should keep a trillion or so, as a good leverage over indebted US. It is also a good way to stabilize yuan. Damping Treasuries will have no long-term significant effect on US charts, FED will simply buy everything overnight and park on its balance sheet. US patriotism will increase a lot, another Pearl Harbor moment etc. Apart from this nothing would happen, only China would have very big problem were to park 1 trillion cash. The cash that will be forbidden to buy anything American. It is too much to launder it like drug barons. So they can go on shopping spree for some companies&resources elsewhere but will be banned to buy anything substantial. So maybe some growth of European and Asian stock indexes, a little lower debt financing by some governments, nothing positive for China.

 

If you have anything similarly stupid on your mind please share.