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Geopolitical Update : China advances all fronts – A Second Dunkirk

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By Christian Takushi, Independent Macro Economist. 11 July 2020 (truncated and delayed public release).

Historians, political analysts and even military observers have seldom seen a nation advance its interests so assertively and so unopposed as China is doing in 2020. But what is even more remarkable still is the way Western leaders are pretending it is business as usual with China.

For almost three decades Beijing rose quietly and hid its hegemonic ambitions, but since the “green light” from major Western capitals for President Xi Jinping’s total power grab in Beijing – moderate and democracy-leaning figures were removed, China’s Politburo has been showing an ever more assertive and aggressive face. Much of which Western leaders and press remained silent about. Only recently, some Western media and Western politicians are timidly exposing some of China’s actions. It is too little too late though. As noble as the stance by Canada’s Justin Trudeau and Australia’s Scott Morrison might be, they cannot sway the incredibly weak and compromised position of the USA, UK, Japan and EU.

Understanding rising Oriental powers

Every step of the way, since China’s hegemonic muscle-flexing began in 2013, the West has shown either passivity or it has given a tacit go-head. I have warned about this at many conferences and seminars. Something Western mainstream and financial media have failed to report about. In fact, many Western voters can raise the question .. whose interests were their leaders actually advancing in the 2000’s and 2010’s?

As you may know, I don’t entertain conspiracy theories – Actually straightforward geopolitical, economic and ideological interests can explain over 80% of all policy moves of our time. It is tempting to put the blame on a few evil people that want to control the world. But the truth is that this is systemic – We are all somehow part of it and we have all played our role. As a matter of fact most Western politicians, thought leaders and academics that enabled the rise of China at the expense of their own nations probably did so with altruistic goals in mind. It can be costly to try to replace wisdom with knowledge. And facts alone don’t necessarily lead to the truth, because humans have the tendency to gather data & facts with a gentle spin that fits their worldview. Every trained statistician will know what I am talking about. In times of widespread misinformation, few leaders can escape deception and stick to the truth. That is what a young German pastor named Dietrich Bonhöffer did when he stood up to defy Hitler. In the 1930’s people in the West wanted to appease Hitler and thought Bonhöffer was being too critical of him, in Germany many thought he was betraying his country and even the church. In hindsight, we know he was one of the few (along with Mr. Churchill) that saw through the deception early on. 70 years later, Western leaders and academics have done it again and ended up “selling” the West to China while appeasing an ever more assertive giant.

Few people can withstand the dual appeal of money and ideology. Making China strong at the expense of the West was seen as a necessary and profitable step towards a multipolar world. I shall never forget my meeting with German thought leaders. They told me “Beijing has given us assurances that they will respect our democracy and that they will protect us if needed be”. I replied, “I hope that you gentlemen have done your homework and studied the circular history, honour codex and religion (beliefs-set) of Oriental cultures, especially in North East Asia. Top government advisers from Ankara .. to Beijing have studied the West very well. What they don’t have in capabilities yet, they more than compensate by knowing their common adversary”. Knowing that I am half-Asian disturbed them. The long silence that followed was more than anybody could bear. Europe’s future is firmly sealed – Geopolitical powers from the East will shape every major aspect of her future existence: Russia, Turkey, Iran and China.

In a world of political correctness, people like me that are familiar with Western and Oriental cultures since early childhood can speak more openly and matter-of-factly about cultural differences without passing judgement.  I give you some examples: Ethical principles in the Orient differ greatly from Western ones. Honour can be more important than life itself – that is why someone would end his life to preserve the family’s honour, and why a family would kill a son that converts to another religion. On a state level, written agreements are often a tool to take advantage of a Western counterpart. In some Oriental cultures treaties are a weapon to advance your national interests and the honour of your ancestors. You can ask Japanese and Koreans why they don’t have a Peace Treaty. For Westerners unthinkable to share military intelligence with someone technically at war with you. In the Orient treaties have a different value as compared to the West. Reason why most Israelis don’t rely on any Treaty with their neighbours, only their Military Deterrence. In the Middle East, South Asia, East Asia and South East Asia treaties are only a complementary temporary aid to your Military Power.

Are you defending China? 

Although many in the West are angry at China, we have to lay most of the blame for what is happening on the West itself, not on China. I am not playing Beijing’s advocate. I have held this view for 20 years now. Beijing is simply advancing its geopolitical interests with all the means at its disposal and thanks to the impressive help of Western allies. No objective analyst or historian could blame China for this, otherwise we would be punishing it for being smart and taking advantage of our naive policies and ignorance of our adversary’s strategy. Can Western powers expand their influence, and forbid China to do the same?

There is a danger in mixing ideology with reality: While many world leaders believe most nations strive for global coexistence, which explains a centralised world government is their strategic goal, I see it differently. Most nations are competing and vying for power and dominion. They want peace, but they know without security, there is no peace nor progress. And security is only acceptable if you control it.

Every nation advances her interests and does have the right to do so. It looks like a level-playing field, right? It is not. The big difference in the struggle between the West and China is that America, Europe and Australia don’t have highly committed allies within China as China does in the West. Chinese businesses and political leaders would probably never sell out their country to the West for altruistic motives, and few would do it for money – Most Chinese are patriotic people. While universities and media in the West have understandably painted the term patriotism as something backward and nationalistic, most of the world (the vast Asian continent, Africa, the Middle East and Latin America) see it is as a noble trait that goes hand in hand with a person’s faithfulness and identity.

Accepting how nations are (culture, religion etc.) and not how they should be has helped us in pointing to some key events in the past 10 years. We stick to the principle that all nations advance their geopolitical interests with all the means at their disposal.  

Western decline & China’s rise – More than two decades in the making

The West made a tremendous strategic mistake to strengthen an autocratic China in order to boost profits margins for its large companies without demanding reciprocity or democratic opening by Beijing or any of those autocratic states. Those large firms barely paid any taxes at home and they also shifted production, technology and jobs to China.

Some are angry at China. But why should the Communist Party give up its total power if it can have both – the power and the full access to Western consumer markets?  I have always criticised the view paddled by European academia, business and politics .. that with increased trade, the world would become more peaceful and China a democracy. European nations dismantled their Armed Forces to show that an army won’t be needed in the future. That was extremely naive and is an example of what can happen, when people get more exposure to well-meaning ideology and activism than to history.

China didn’t rise alone – it has powerful allies within the West 

Without wanting to diminish the praise that is due to China for its impressive rise and hard work of its people, China’s rise has been driven from within and without. Among the most active helpers & enablers are the Western multinationals, big financial firms and liberal pro-globalisation political parties; and among the most passive but nonetheless effective supporters are Western consumers. Although they may argue ..  that the impoverished American consumer is forced to buy cheaper products made in China, while the large US firms grow their profits, avoiding taxation thanks to the huge tax loopholes they lobby for. Something similar can be said about the impoverished French or Italian consumer.

Over the past twenty years Western leaders have given a huge portion of their consumers’ ECONOMIC RENT to large Western corporations and China. Without ever making it public and explicit to their citizens. Tax practices did the rest. The rise of gigantic monopolies & oligopolies (both Chinese and Western) along the destruction of competition and the impoverishment of the middle class would weaken the national states and accelerate the transition to a better world. The idea is to some extent noble, but the question of “who guarantees the security” has always been the achilles heel. One of the reasons why it has never been put to a popular democratic vote. Just as Switzerland is being assimilated into the European Union through the back door, most Western political parties are weakening their own state to usher in a supranational centralised government or a globalist agenda through the back door. I am not passing any judgement here.

The only criticism I raise is that a majority of Western politicians of mainstream parties are advancing or tolerating a strategic agenda that will dramatically change society, without a clear popular mandate for it. All they talk is about greater cooperation, but their strategic goal is unspoken. I think they should tell their citizens openly about their final goal and put it to a vote. Democracy, even if suboptimal, is better than the pseudo-democracy we are seeing today. Most citizens may not have the academic training of the elites, but people have common sense and there are times when that can be trusted more than academic consensus – Especially in times when consensus in many sciences is highly politicised, close-ranks tight and exclusive of any dissenting voices.

West, beware what you wish for

As it is, growing political deception in the West is mirroring the meanwhile systemic Money Illusion. The truth be said, a large number of Western political & business leaders believe that China is their strategic ally and friend. Is it? Well, since China is a totalitarian regime we have to differentiate between the Chinese people and the ruling Communist Politburo. I rephrase, can the Politburo be the friend of Western civilisation? Have Western business & political leaders travelled the country and being to places unannounced and all by themselves? Chinese leaders aren’t prone to that deception, they know that Western civilisation’s yearning for freedom is unreconcilable with the Communist Party’s worldview. Let’s apply the historically consistent behavioural pattern of Communist regimes throughout history: Westerners may be useful to Beijing to achieve world dominion, but once that is achieved, they could be neutralised, subdued or worse.

While many business executives enable the rise of China for personal profit, not minding the suffering of the Uighurs, Christians & political dissidents, many a well-meaning Western politician is in for a rude awakening. Asians can adapt and submit to harsh authority – they are trained from earliest childhood to do so. Not Westerners. Should the Communist Politburo subdue the West, will dissenting Western people be spared the reeducation camps that the Uighurs, Christians and dissenting people in China are subjected to?

China has studied the West well – The West will appease till it’s too late  

The West has failed to learn the lessons from WW1 and WW2. If anything one may argue it took the wrong lesson: It became by and large a Pacifist society. There is nothing wrong with that, but it can be lethal if this desire for peace is made an absolute policy goal along the denial of broader reality. Not all nations care about peace and the wellbeing of their people. Rather the contrary.

Until 2013 Western capitals could have been excused for believing China would become a democratic state, but since 2013 Western thought leaders (governments, businesses and investors alike) are closing an eye to an ever more repressive Chinese Communist Politburo. The West predictably simply appeases Beijing.

This Western appeasement in the face of growing aggressive behaviour since 2013 has greatly enabled the rise of more totalitarian regimes in China, Russia, Turkey, North Korea, Venezuela, Iran etc.  With every passing month, autocratic states feel more and more emboldened by the refusal of the West to stand up. It has been said among analysts in Oriental capitals “the West learnt nothing of their appeasement of Hitler”. Indeed, school children are barely told history these days in the West. And the little they know of WW2 is blamed almost squarely on an Austrian extremist named Adolf Hitler. No man has that much power though, not unless all others yield theirs to him or enable him. The incredible appeasement of Hitler from 1933 to 1940 in the face of ever bolder aggression against minorities and neighbouring states is what led to such a gigantic tragedy as WW2. Had the West stood up to Hitler in the mid 1930’s, such a war would have claimed probably less than 1 million casualties, I humbly ascertain. It was blind pacifism and appeasement that created the monstrous magnitude of the tragedy of WW2.

Fast forward to 2020 – President Trump, from serious foe to constrained foe

President Trump was indeed the first Western leader willing to stand up to China’s overt hegemonic expansion. But as we have said before, it seems that President Trump has become a victim of a smart Chinese strategy. Beijing is using President Trump’s strategy against himself.

US-China Trade Deal Phase 1 is sealed – 15 Jan 2020

We have written an extensive analytical piece on why China is the biggest factor in the US Elections in 2020, but allow me to mention here only this: Washington was using the trade dispute with Beijing in 2019 to secure President Trump’s reelection. Washington used drama and tactics to delay the signing of a US-China Trade Deal well into mid January in order to go into the presidential race with the Trade Deal as a major achievement of his first term in office. During 2020 the White House wanted to focus its Trade Policy on Europe, while increased farm exports to China would be boosting the GOP’s appeal in key battle-ground states.

But this reelection-driven script by the White House became too transparent for analysts in Asia and Beijing was ready to unleash its fury as soon as the Trade Deal was secured at the end of December 2019. While 2019 went to Washington, Beijing has the initiative so far in 2020. As soon as the ink of the Trade Deal was dry Beijing unleashed an unprecedented offensive on all fronts. Something so overwhelming, no Western capital was prepared for it.

Since January Beijing has taken very assertive steps at sea, in the air, on the ground and with verbal threats on these countries: Taiwan, Malaysia, Japan, Hong Kong, Australia, Philippines, the United Kingdom, the European Union (several capitals were targeted), Vietnam, Canada, India, USA etc. Many analysts believe that the Covid-19 outbreak (or release as they say) was part of this Beijing counter-offensive. While the timing of the outbreak was conspicuously perfect to bring the West to its knees, we have no independent confirmation that this was the case. We thus give Beijing the benefit of the doubt. The outbreak has nevertheless given China a great advantage and confidence versus the West. No one can control its citizens as Beijing does. Not yet for years to come. The pandemic also shows the world that China is best prepared to deal with the threats of a highly globalised and urbanised economy.

What is most remarkable is the extraordinarily weak response of the world: most of these affected governments decided to give in to China’s demands –  they went silent or reduced their retaliation to a mere symbolic act. Some nations decided to conceal the Chinese overture or threat to spare themselves the public humiliation, because they have rightly ascertained they are on their own. Both Europe and the USA are too dependent on China and too afraid to annoy Beijing.

Exactly 80 years after Dunkirk, the West is at its lowest point again 

The three most remarkable moves by Beijing were on Hong Kong, Taiwan and India. While Beijing moved to de facto seize control over Hong Kong, it mobilised its military against Taiwan while not ruling out an invasion. The Chinese military has made several daring military incursions into the border with India.

President Trump threatened a sharp retaliation against China for these aggressive moves on democratic nations and allies, but constrained by the need to safeguard the “Greatest Trade Deal” ever, his probably biggest achievement in his first term, President Trump reduced his retaliation to sanction the Beijing middle-rank officials responsible (read put in charge) for the seizure of Hong Kong. This was a dark day for democracy around the world. Those middle-rank Beijing officials do nothing but implement the orders of the Central Politburo, which in turn pretty much implements the course President Xi Jinping has embarked on. The USA does not dare to hit the men that are really responsible for the demise of Hong Kong.

It would have been better for Washington not to issue any sanctions against any middle-rank Chinese officials. Washington’s move is unfair – those Chinese officials are merely executing orders as any US State Dept official would do. The damage is done and all rising adversaries of the West from Moscow to Caracas and from Ankara to Pyongyang are tremendously emboldened by what they see. Only two nations have had the courage to try to stand to Beijing: Canada and Australia. But there is so much they can do. All that is left is to rescue those who can get out, it seems.

Dunkirk, May 1940 – British soldiers are evacuated

It was in Spring of 1940 when the British and French Armies collapsed under the fulminant advance of German Tank Divisions through the Ardennes. And that culminated with the humiliated British Expeditionary Force retreating to Dunkirk. Thanks to Prime Minister Churchill most of those men were evacuated. The West was very close to a collapse. Two unconceivable errors by the German High Command and the bravery of RAF fighter pilots allowed Britain to survive 1940 and fight on, but May 1940 would enter history as a low point for Western Civilisation. The price of continued appeasement in the face of aggressive behaviour.

80 years later it is again a low point for Britain’s standing in the world. Not so much for how it failed to respond to the outbreak earlier, but because Britain failed to stand up for Hong Kong, its former colony. The words that came from Downing Street were too late and ambiguous to make any difference. In reality, London’s hesitation gave Beijing a green light to go ahead and seize Hong Kong. Britain doesn’t have the military power of the USA, but it is one of the greatest Western nations and it commands respect around the world. And, not without any cards in the hand – just the contrary. Had London immediately threatened to exclude China from any involvement in the 5G network should Beijing implement the new Security Law over Hong Kong, it would have had a significant impact. Now, Downing Street is considering doing that in a staggered manner until 2025, but it has missed the moment.

(A few personal words – As someone that has had the privilege to be in Hong Kong numerous times as an investment manager for work, I feel, humanity is losing a great city. People with European and Asian backgrounds felt at home, feeling perfectly Asian and perfectly Western in Hong Kong. I worked hard there, but the interaction with the local people, the Chinese food and the music by those amazing filipino bands at the hotel lobbies would sweeten my spare time. There has never been anything like it, and probably there will never be)

Hong Kong is a foretaste of the future that awaits the West  

China’s power grab in Hong Kong has given the world a foretaste of what it will be like to live under a China-dominated globalised economy. Having gone this far, what will China do? Most likely move forward – Although China has more options than the West, it may opt for getting yet more assertive and aggressive.

The West may not like it, but it sits in the trap. Something no Western leader has the courage to tell his citizens. 

But it is something Berlin, London, Paris and Washington are coming to terms with in 2020. They probably never thought Beijing would address them in that tone – telling them what to do next or face serious consequences. Despite their emotional public addresses to the contrary, my readers can know the truth, all these capitals did just as they were told. Even Washington had to shrink back and reduce its retaliation to punishing some lower rank Chinese officials for what the leadership in Beijing under President Xi had decided over Hong Kong. Thus, just as Dunkirk was a low point for France and Britain in 1940, Hong Kong is a low point for Britain and the United States of America in 2020. And what will the West do? Guess what, something similar – to rescue what can be rescued.

  • Britain brought its soldiers from Dunkirk to the safety of Britain in 1940, and
  • Britain may bring its Hong Kong residents to the safety of Britain in 2020

I make the daring forecast that by the end of this decade, the West will resemble China more than China will resemble the West. China may lose the next battle, but as things stand today .. it is on track to win the long haul war. And if it does, China will have deserved to win. Nevertheless, not all on its own merit, but to a significant extent thanks to powerful allies: Western heads of state, corporate leaders, investors and consumers. As an analyst and strategist I have to acknowledge “well played, China”.

If you want to read the full article, you can write to c.takushi@geopoliticalresearch.com 

By Christian Takushi MA UZH, Independent Macro Economist & Geopolitical Strategist. 11 July 2020 (truncated and delayed public release)

Disclaimer: None of our comments should be interpreted or construed as an investment recommendation

A distinct broad approach to geopolitical research

(a) All nations & groups advance their geostrategic interests with all the means at their disposal

(b) A balance between Western linear-logical and Oriental circular-historical-religious thinking is crucial given the rise of Oriental powers

(c) As a geopolitical analyst with an economic mindset Takushi does research with little regard for political ideology and conspiracy theories

(d) Independent time series data aggregation & propriety risk models

(e) He only writes when his analysis deviates from Consensus

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