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China - What Do the Next Thirty Years Have in Store?

July 19, 2019

Over the thirty years following the Tiananmen Square massacre, we have seen China develop into a powerhouse economy with unprecedented economic growth in foreign exchange reserves, foreign direct investments and a clear direction to exert as much control as possible through its “Belt and Road Campaign” around the world. In a short period of time, many of the developing countries will be sufficiently indebted and subordinated by China to potentially become vassal states with a clear commitment of their resources to support future economic growth back home in China. Confucius Institutes, funded by Beijing, have appeared on hundreds of college campuses around the world in an attempt to influence the hearts and minds of others. Accordingly, what does the future have in store?

The author served on the board of a Hong Kong listed company for a number of years which was a good listening post to the mainland. The major shareholder and managing director of the company was the niece of a Chinese general who headed the Military Police of China. In all probability, he had a hand in the Tiananmen Massacre. Nonetheless, he was a good guy to know if you were relying on Chinese equipment to go to Mongolia. The handover of Hong Kong from the British to China in 1997 came with a guarantee of a “high degree of autonomy” until at least 2047 under the “one country, two systems” theory espoused by China. The same theory has been set forth relative to Taiwan though China leaders have repeatedly stated that the U.S. would not fight a war over Taiwan.

Hong Kong has been able to maintain a modest measure of autonomy and even has a small museum dedicated to the memory of Tiananmen Square though its existence is anything but secure.

The above image of the museum was taken by Chan Long Hei and published in The Telegraph. Moreover, the mainland turned a blind eye to a small demonstration to recognize the Tiananmen Square massacre but, rest assured, if things get out of hand there will be consequences that might result in a free trip to the mainland. In fact, China has pushed through new legislation in Hong Kong that would enable China to extradite certain suspects to the mainland. The clear path forward for Xi Jinping is to concentrate his power while eliminating all rivals, a takeaway from 30 years ago.

The Nikkei Asian Review recently published an article by Katsuji Nakazawa entitled: The New Long March-Xi’s 15-year Battle Plan With the US. Xi spoke in Jiangxi, the starting point for Mao’s “Long March” from 1934-36, to state that China is now on a “new Long March” to overcome challenges at home and abroad. The new Long March is Xi’s strategy to deal with Donald Trump as he does not believe Trump is ready for a trade deal unless Beijing bends over backwards.

The underlying theme is that Xi’s ultimate message is to win a 15-year war with the U.S. much like Mao’s retreating maneuvers and subsequent victory. Mao always avoided a “head-on” confrontation. Jiangxi, China was where Mao formed his Red Army following the creation of the Chinese Communist Party. Mao is shown below with Zhou Enlai who would go on to serve as the first premier of a “new China” with Mao being the party Chairman.

The “Long March” ultimately covered over 7,000 miles. Fifteen years following their policy of evasion and avoidance, the “Long March” ended with Mao winning the war against the Nationalist Party of Chiang Kai Sheik, ally of the U.S., and the formation of the People’s Republic of China in 1949. 

The Red Army is shown below in the now familiar Tiananmen Square in 1949.

Xi has one particular advantage in the trade war and that is he is “Emperor for Life” as opposed to his adversary, Trump, who faces many threats to his assumption of a similar title - such as calls for impeachment, a future election and ultimately term limits. The Economist reported that Trump is aware of the Tiananmen incident thirty years ago describing it as a “strong powerful government quelling a riot.”

The clear Xi strategy is expressed in Chinese as “tan tan da da” meaning “talk-talk strike-strike” reflecting the awareness of the need to prepare for war lasting through 2035. The magic of 2035 is the target year for China to overtake the U.S. economy. There is just over 15 years to reach that time which matches the 15-year period of the “Long March” and the founding of a new China.

Interestingly, events continue to unfold in Hong Kong relative to Xi’s crafted extradition legislation which prompted Ms. Carrie Lam, Chief Executive of Hong Kong, to suspend the enactment of the bill following demonstrations in Hong Kong. There can be no doubt as to the architect of the legislation as Xi and Ms. Lam are shown together in a happier period in Beijing last year.

Of greater surprise than Xi’s willingness to suspend the extradition, was the reaction in Hong Kong when some two million protesters turned out seeking Ms. Lam’s resignation for the affront to the people of Hong Kong. The demonstrations began March 2019 and have intensified to this point in time despite the suspension of the enactment of the extradition bill.

Once the people sense a weakness in the system, they often react as they did in Hong Kong. Moreover, their strength sends a strong message to any aggressive competitors of Xi back home that his position as the “omnipotent and competent” emperor for life may be in jeopardy. On the other hand, this could be another detour in Xi’s personal “Long March” to pick the appropriate time to deal with the Hong Kong people who have enjoyed too many personal freedoms most of their lives.

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