China Wants to Fight

Chairman Xi has addressed a forum of American and European business leaders, telling them he wants to fight rather than bow to US pressure.  That was not what they wanted to hear, but that terminology has been used before in a number of matters that have nothing to do with trade.  One of his military leaders said the US should "get a bloody nose" for venturing into the South China Sea on these "freedom of navigation" runs that declare our interest in protecting the rights of the US and others in that sea.  This time, we are trying to disrupt the China 2025 initiatives, which is a principle pillar of China's trade and technology future.

Those multi-national business leaders are the ones who will be damaged by trade disputes played out in public the way the current one is, and the Chairman knows that very well.  He is trying to get business leaders to influence their friends in the Trump Administration, and their business partners who are most likely to suffer.  It is the kind of approach that business leaders understand.  They like to do their influencing behind the scenes, in board rooms and private meetings of their peers.  They will win with that strategy.

I have heard business leaders reference the number of Chinese customers they have relative to the US.  By sheer numbers, the trade war favors the Chinese, but that trade comes with a cost that most business leaders have not considered.  They continue to think about numbers, while the Chinese trade for influence and technology - that is their 2025 direction.  So, Chairman Xi establishes himself as the leader of the customer base of many large businesses, and that fits their business model.  His strategy is to take over a sector at a time until China dominates world trade.  Tell me how many domestic computer manufacturers are still around in your country?  How many network technology sectors are dominated by the Chinese?  Who makes all the telephones and smartphones? Add to that all of those technology sectors in 2025.

The business leaders need to think about the future and not just the number of customers that will help them look good in the short run.  Xi will use you now to exert influence, but in 10 years he will be making your products in his own country and you will be retired from a failing business.  Ask the computer, network and phone OEMs of the world.