This is part of a series of FOCUS reports that are primers for our FOCUS: Latin America 2019 Report. To understand the entire situation, you must understand each of the players and their motivations. Immediately below you will find all of the links in this series. This details all the players, their history and motivations as military action looms large in Venezuela. We must understand the entire geo-political situation in the region.
We recently discussed Russia in a FOCUS report (Click Here for the Russia report). While the media often focuses on Russia as our biggest threat, they often overlook China as a threat, or at least understate the threat.
Some of this may have to do with our dependence on China for the purchase of our federal debt and the cheap supply of products that we consume like candy. No one wants to upset the apple cart by speaking too harshly about China.
According to Nation's Encyclopedia:
"China's form of government is a communist state known as a People's Republic. The Chinese Communist Party (CCP) is the leading political party in China. Unlike parties in Western democracies, CCP is a tightly organized political force that controls and leads society at all levels. The party sets policy and controls its execution through government officials who are required to be CCP members. It is organized as a hierarchy, with power concentrated at the top. Above the local units, or cells, is a pyramid-like structure of party congresses and committees at various levels, culminating in the National Party Congress."
Sure, there's more to it than just the bit above. In 1949, Mao Zedong's Communist Revolution brought the Communist party to power. Over some decades, factional disputes kept the country disorganized and fighting amongst themselves.
President Xi Jinping, the son of a revolutionary war hero, took office in 2013 succeeding Hu Jintao. He won by a vote of 2,952 to 1. You can read more about his background by clicking here.
You can certainly read more, in the link above, about their National Congress, Central Committee, Political Bureau, Standing Committee, and the Secretariat, who carries out the day-to-day business of the country. But, aside from the latter, it's quite simply all for show.
China is learning from the mistakes made by the Soviet Union. The Soviet's brand of communism suffered from a major fault when President Ronald Reagan exploited the communist regime's inability to generate the necessary revenue to compete with a capitalist powerhouse. This was the reason for the fall of the Soviets. The U.S. just outspent them.
But, President Xi has learned from this. Through various means (mostly unfair and illegal), he has created an economic powerhouse of his own. The goal of China is global domination, in their own words, and unlike the Soviets, they currently have an economy that can do it.
President Xi has instituted a hybrid version of communism and capitalism. This increases the countries economic power while still keeping the companies, and the people, under the control of the government. It gives the people just enough, so that they have something to lose. This keeps the people from revolting, and appeased, at least for now. But, it has been effective so far.
In recent decades, and certainly since President Xi took power in 2013, there has been a strong consolidation of power within China, to an elite few, at the top of the communist party.
According to Freedom House who rates China an 11 out of 100 on their "freedom" scale, "China’s authoritarian regime has become increasingly repressive in recent years. The ruling Chinese Communist Party (CCP) is tightening its control over the state bureaucracy, the media, online speech, religious groups, universities, businesses, and civil society associations, and it has undermined its own already modest rule-of-law reforms. The CCP leader and state president, Xi Jinping, has consolidated personal power to a degree not seen in China for decades, but his actions have also triggered rising discontent among elites within and outside the party. The country’s budding human rights movements continue to seek avenues for protecting basic rights despite a multiyear crackdown."
While consolidating power, President Xi, has increased his grip on the people. Internet and other avenues of free and open access to information have been strictly controlled.
Companies like Google have submitted to creating an entirely new search engine to provide the Chinese government with control of what people are able to search for. Social media too has submitted to various controls in order to be able to do business in China.
They have rolled out new programs that implement "Social Controls". If you do "good things" you get social points, if you do bad things you lose them. Those with more points get societal benefits.
There are no free and fair elections and the oppressiveness of the Chinese government is simply off the charts. It's an Authoritarian regime.
Unlike other tyrannical governments around the world, China is aggressive! And, they have a dramatically growing economy to support their aggression in more ways than one.
They have a long history of aggressive espionage here in the U.S. They steal trade secrets through pure theft, and they force companies that desire to do business in China to hand over their intellectual property as a price for being able to conduct that business.
They routinely attack the U.S. government infrastructure and Defense industries with cyber attacks. They probe our electrical systems on a routine basis looking for weaknesses. Frankly, China is just very aggressive, and they don't seem to mind if anyone knows it.
What is currency manipulation?
We touched on a number of things that the Chinese do to affect their economy in a positive way, and although many things are illegal, they have been effective. Currency manipulation is another, and maybe one of their fiercest weapons.
While everyone will concede that paying workers pennies on the dollar in terrible working conditions is a bad thing, no one really wants to do anything about it. The same goes for the constant currency manipulation that China has been engaged in.
For decades China has been involved in Currency manipulation. It's a process of intentionally devaluing their national currency. U.S. President, after President, has spoken about this, and like the situation on North Korea, no one has decided to take the situation on.
Much of that has to do with the short-term focus that President's have while in office. The downside to short terms, every 4 years in our case, is that President's feel the need to make things as good as possible right now, and not deal with issues that will be beneficial for the country down the road, after they are out of office.
The purpose of this is obvious. Re-election is always "imminent" and some of these issues will require short-term pain to correct. The concern is that some voters may not understand this and it may put their re-election in jeopardy.
This isn't the situation for President Xi of China, since he has now named himself "President for life". China can take a much more "long-term" approach to their goals. This has allowed them to prosper, while other more democratic nation's, like the U.S., suffer.
Sometimes, all a tyrannical dictator, somewhere else in the world, needs to do it to wait out a U.S. President, and in a few short years the winds of political change may blow. It is not doubt difficult in our political system to have long terms plans.
These long-term approaches are often left to those career appointments that work within agencies in the defense departments and other alphabet agencies. That's where the real power lies and is also where the deep state thrives. They too, at times, just need to wait out the current political breeze that comes through Washington.
But, of course, every once in a while you get a force so disruptive they must take action. JFK was once such force, Trump is now another. Not to get off on that too far, but in most cases the modern Presidents are simply "controlled" by the deep state through the information that they present to the President.
The information they provide can be tailored to paint a picture that they want, and thus weighs heavily on the decisions that the President would make, especially in foreign affairs. Ok, enough of that.
But, I did need to touch on that in order to explain why leaders like President Xi and Putin seek more long-term power, aside from the more obvious reason. If a leader truly wants to make a long-term lasting impact, they must rule long-term. Too many things take decades not 4 years.
Now, we understand why all of these things have been allowed to go on for so long, let's get back to what it is that China is doing.
According to the U.S. Census Bureau's Foreign Trade Division, The U.S. Trade deficit with China reached 376 BILLION in 2017. This doesn't all have to do with currency manipulation, but it is part of it.
During a recent speech at a CPAC meeting, President Donald Trump said he wants a strong dollar, "but not too strong". We all want a strong dollar right? It just sounds right. But, what did the President mean, and why is it important?
I don't want to go too far into this, but there are negative effects to a strong dollar. While retirees who want to travel the world will find a strong dollar very beneficial, foreigners traveling to the U.S. will not. U.S. travelers will see their money go farther due to currency exchange rates which is good for them
But, U.S. travelers going abroad doesn't help the U.S. economy. Foreign travelers coming here do. When their money doesn't go as far, the tourism industry here suffers, resulting in reduced profits across the board, which generally also means less jobs.
The above is merely an example and is not isolated to the tourism industry. All U.S. manufactured goods and services sold overseas will be at a higher price for foreign consumers with a stronger dollar. They then have to make a decision, which is most commonly to buy a more affordable local product. That increases our trade deficits around the world, and reduces U.S. manufacturing and jobs.
So, while there are benefits to a strong dollar, there is also a price to be paid. A President looking to add jobs to the U.S. economy doesn't want a dollar that is too strong for these reasons. You can find out more about the pros and cons of a strong dollar from Investopedia (click here).
I used that example to give you a "two-fer". I got to explain what President Trump means and why it's important, and I was able to use that as an example of why China doesn't want a strong currency (I hope you appreciate that).
EconomicsHelp.org has a nice simple explanation
"An undervalued currency suggests that agents (i.e. Government) are keeping the currency below it’s ‘fair’ market equilibrium price by currency controls and intervention buying.
Many analysts argue that in a free market, the Chinese Yuan would appreciate because of the strong demand for Chinese goods and the large Chinese Current Account Surplus. However, the Chinese government is trying to prevent the currency rising. Essentially, the Chinese Central Bank is buying Dollar assets which increase the value of the US dollar relative to the Chinese currency.
This policy of buying foreign assets has led China to accumulate $2.4 trillion of foreign currency reserves."
Powering Their Economic Engine
Why is currency manipulation important? It is one of the main drivers to their economy. It, along with ridiculously cheap labor rates, allows the country to have a massive advantage when it comes to selling their goods around the world.
Their addition of tariffs on foreign goods, increases this trade deficit, while continuing a flow of incredibly cheap goods into the U.S. and other countries around the world.
China's economy has increased at a massive rate. But, their currency doesn't properly reflect this growth, not even close. China is set to pass the U.S. as the global economic power house, all fueled by currency manipulation, slave labor to produce goods, and dumping on products on the open market, like steel.
China's steel dumping program is what drove the prices on steel so low, intentionally, that drove it's U.S. competitors, and others, out of business, allowing them an even greater advantage and control of the industry.
Everyone knows we are at a disadvantage on trade with China. And everyone knows that slave labor is not a good thing for humanity in general, but everyone likes cheap stuff right? No one wants to take on these issues that would greatly benefit the U.S. economy down the road. Well, until now.
Trump has taken on these issues, and you hear the chicken little's screaming from the rooftops! There maybe some short-term pain in dealing with trade wars with China, but in the end they will have to submit. We are their biggest buyer of goods by far. If the U.S. were to effectively cut off Chinese goods, the Chinese economy would fold like a wet napkin.
But getting China to play fair on global trade has a lot more ramifications than just the U.S. economy and jobs. The reason I went so far into this issue is because China is using this economic unfairness to fuel an economic domination of the world. This economic domination is fueling a massive retooling and expansion of their entire military.
Motive: World Domination
Express says,"Xi said the Communist Party will strive to fully transform the People’s Liberation Army into one the world’s top militaries by 2050 and emphasised the need to modernise its combat capability.
He said: “A military is built to fight.”
The president outlined his vision in a wide-ranging three hour speech at the start of the twice-a-decade Chinese Communist Party Congress."
As I always say, to understand anyone, you must first understand their motivations. We recently looked at Russia's motivations in a report titled "FOCUS: The Russian Federation".
In that report, I distinguished the differences between the motivations of Russia and China. We tend to lump them together, but there's an important distinction. Russia is a Nationalistic and proud country that just wants the betterment of it's people. They do not seek the world domination that China does.
Russia uses geo-political circumstances to boost their economy. China uses their economy to boost it's geo-political influence.
If their own admission of goals of world domination isn't enough for you, Let's look at the recent arrest of the CFO of China's own Huawei corporation.
The recent arrest of Meng Wazhou in December of 2018 in Canada got immediate blowback from Chinese Communist officials.
Who is Meng Wazhou?
- CFO of Huawei
- Referred to by Communist party officials as "Princess Meng".
- Her Grandfather was close to Mao (that we discussed above) during the communist revolution, who was close to Pres, Xi
- Daughter of Huawei's Founder and Chairman Ren Zhengfer, and is expected to replace him when he passes.
What is Huawei (Corporation)?
- China's largest and most advanced high-tech company
- Name means "To serve China"
- Heavily into 5g and is a vital aspect of China's global dominance. "Whoever owns 5g networks, owns the world".
- Vital part of China's "Made in China 2025" campaign to dominate high-tech industries around the world.
- Surpassed Apple as the number two maker of cell phones behind Samsung.
- They placed "spy tech" in their phones and has been banned for use by the U.S. military
- That are China's "National Champion". They are given preferential treatment over all other free market competitors.
- They are a spy agency, according to China
According to writer Steven Mosher ( publicized by Fox News/New York Post) The Chinese Communist Party Constitution declares, "all Chinese companies must collaborate in national intelligence work..." in a massive overseas espionage campaign.
Mosher continues, "Any network system (referring to 5g) installed by a company working hand-in-glove with China's intelligence services raise the danger of not only cyber espionage, but also cyber enabled technology theft."
The Chinese responded to the arrest of Wazhou, by arresting 3 innocent Canadians and are holding them in "secret jails". They have hinted that more may come if Wazhou is not released.
This whole, story within a story, is to demonstrate to you how aggressive and bold the Chinese are, not just with their stated plans, but also with it's implementation.
The full article from Steven Mosher can be found in this link to the Fox News story (Click here)
China has used the massive amount of interest payments from the U.S. to not only boost the U.S. Dollar against the yuen, but also to expand it's asset inventory around the world.
Buying companies in the U.S. and globally, China is diversifying it's interests, but not only that. As we stated before, China's Constitution, along with multiple vocal assertions, precludes any Chinese company from not taking part in the Chinese Intelligence gathering agenda.
How many of you know about all the Chinese acquisitions of U.S. companies, especially through the Obama years? They have expanded rapidly. They own the majority of our movie studios now. I'm sure they will be putting out content to help ensure the best interests of the country.
Frankly, there's way too many to list, and that's just in the U.S.. China is collecting companies globally. Here's one chart from CNBC, though not dated, it shows some of the highest target areas. I'll include a couple other links for the nerds who want to dive through the mounds of data, but the bottom line is that they are in everything. From our food to hotels, media, etc.
Globally, the Chinese are buying up companies around the world. They love energy and other resources. Gold is big on their list. They dominate gold mine acquisitions in Africa for instance. Where it is uncontrolled, they aggressively drive out others, even legal owners of property, with, and by, force. The Chinese do not play fair on any level.
Additional Resources on this topic:
Building Their Military Into The Greatest Power On Earth
Certainly, to secure global domination, China must have the fierce and competitive military. In the recent past, their military posture was mostly defensive in nature and sought to defend territories and engaged in border skirmishes. But, that is all changing now.
According to the Defense Intelligence Agency Report for 2019 "China Military Power- Modernizing a Force to Fight And Win", Lt. General Robert P. Ashley Jr., DIA Director, states the following:
Ashley continues, "...as China continues to grow in strength and confidence, our leaders face a China insistent on having a greater voice in global interaction, which at times may be antithetical to U.S. Interests.
I would actually go farther in saying any nation this aggressive with self-proclaimed goals of world domination are going to want more than "a greater voice in global interaction", and "at times" being antithetical to U.S. interests", would mean the vast majority of times, I would hope.
Hopefully, you are getting the point that while the country focuses it's news on Russia, Russia, Russia, as the evil enemy of the state, China is very quickly gaining ground on it's stated goal of world domination, with hardly a mention.
China continues to be in conflict within it's local sphere as well. China still has ongoing maritime disputes with Japan, Philippines, Brunei, Indonesia, Malaysia, and Vietnam.
China has built man-made Islands in the South China Sea, in order to try to extend it's coastal boundaries in order to control the waterways necessary to travel through the region.
In many ways, China is surpassing the U.S. in it's modernizing efforts. The U.S. has been embroiled in wars for decades with an non-technological enemy. Forces have been designed around this combat. A predator drone works great against a non-technological force like terrorists, but is not very effective against a modern army.
This is all part of President Trump's plan to rebuild and modernize our forces, but we have some catching up to do. China still doesn't match our capabilities overall but they are catching up fast, not only in shear numbers, but in their technology.
As we stated above, China's massive world-wide espionage campaign has been yielding results. Just looking at these pictures below, you can see the virtually carbon copies of our F-35 joint strike fighter aircraft technology.
The F-35 is the only thing duplicated by the Chinese. The most advanced stealth fighter we have, the F-22, has also been duplicated, but many other things as well such as drones, and other high tech military hardware.
China's ambitions are quite high, and 2025 is not far away. Their aggressive nature makes them a significant threat. Our biggest threat, not only as an economic competitor, but as a global military power with advanced technology. They still have the worlds largest standing army as well.
China has proven that they will not play fair to achieve these goals, and really don't care who knows about it. Espionage used to be low key and quiet, now it's open and in your face. But, to achieve such goals in such a short time they MUST be aggressive.
What is President Trump doing about this?
There's so much more to what President Trump is doing with China than just "trade". You probably gathered that on your own by now. President Trump is trying to take a chunk out of China's economy and knock them down a step.
Tariffs are a driver to get fair trade deals, but he's also negotiating on things like intellectual property rights, and talking with them over concerns about espionage. There's a lot going on in the background that the media has mentioned, but has under-reported.
Not everything can be addressed at one time. I don't think President Trump wants to tip his hand on the greater plan to knock China down a notch either. Not at least while he's trying to negotiate trade deals. Perspective. One piece at the time.
As long as we have a society more focused on "cheap" goods now, even globally, we will have a difficult time making true inroads into the other areas of intellectual property, and those other issues.
We must first gain the economic advantage again. This will fuel our own modernization. Now you know why President Trump is working so hard on these two points. Once secured, we can move forward with fighting against the other issues. These are "new territory" so-to-speak. These are areas where there is no playbook.
The Soviets engaged in espionage, but not even to this extent. Just remember, one step at the time. The President is aware. I think you will realize that now, especially listening to his speeches regarding the little things he drops.
When you read an article now, and it may mention something in passing, it may have a greater effect on you, now that you have a better understanding of the overall picture.
Again, this is something that the media has not focused on. Maybe they just don't want to upset the apple cart of cheap goods. Maybe they just want their 401k to go unaffected. Maybe, all of the above, plus it's always good to keep the focus on Russia after all right? We all know that's who Trump is really working for!