Escobar: China, Hong Kong, & The Art Of Blinking

Authored by Pepe Escobar,

So, predictably, Captain Chaos did blink first. As much as he – and his sprawling media circus – could not possibly admit it.

It all started with “tariff exemptions” – from smartphones and computers to auto parts – on products imported from China. Then it veered towards carefully manicured leaks implying tariffs “could” be reduced to a range between 50% and 65%. And finally a terse admission that if there’s no deal, a “tariff number” will be unilaterally set.

China’s Ministry of Commerce was unforgiving: “Trying to trade away others’ interests for temporary gains is like bargaining with a tiger for its skin – it will only backfire”.

And it got fiercer. The Ministry was adamant that any Trump 2.0 claims of any progress on bilateral negotiations have “no factual basis” – de facto depicting the US President as a purveyor of fake news.

Tigers, tigers burning bright: the image does not recall poetry superstar William Blake, but Mao’s legendary depiction of the US Empire as a “paper tiger” – a flashback that struck me over and over again last week in Shanghai. If the US Empire was a paper tiger already in the 1960s, the Chinese argue, imagine now.

And the pain will increase, not only for the paper tiger: any dodgy deals made by foreign – vassal – pussycat governments at the expense of Chinese interests simply will be not be tolerated by Beijing.

Last week in Shanghai I was reminded over and over again – by academics and business people – that the weaponized Trump Tariff Tizzy (TTT) goes way beyond China: it is a desperate offense ordered by the US ruling classes against a peer competitor that scares the hell out of them.

The best Chinese analytical minds know exactly what’s going on in Washington. Take for instance this essay originally published by the influential Cultural Horizon magazine breaking down the “triangular power structure” of Trump 2.0.

We have all-power Trump forming a “super-establishment”; Silicon Valley money politics, represented by Elon Musk; and the new right-wing elite represented by VP J.D. Vance. End result: a “governance system that is almost parallel to the federal government.”

European chihuahuas – caught in the crossfire of Trump 2.0 – are simply incapable of such synthetic and precise conceptualization.

Paper tiger meets fiery dragon

What a deep dive in Shanghai has revealed is that China has been handed over a rare earth-like opportunity by Trump 2.0 to consolidate its strategic initiative solidifying the role of leader of the Global South/Global Majority, at the same time carefully managing the risk of a New Cold War.

Call it a Sun Tzu move that may paralyze the Empire in its tracks. Professor Zhang Weiwei, with whom I had the pleasure to share a seminar in Shanghai on the Russia-China strategic partnership, would agree.

China is on the move across the spectrum. Chinese Premier Li Qiang sent a letter to Japanese Prime Minister Shigeru Ishibe urging a joint drive, right now, to counteract the tariff dementia.

President Xi’s top message in his Southeast Asia tour last week was to stand up against “unilateral bullying”.

Xi deftly moved between Malaysia – current rotating chair of ASEAN, always avoiding taking sides – and Vietnam – with its “bamboo diplomacy” always hedging between US and China.

Xi told Malaysia’s Prime Minister Anwar Ibrahim, directly: “We must safeguard the bright prospects of our Asian family”. Translation: let’s create an exclusive sphere of influence close to the ‘community of shared destiny’ but that does not include outside powers such as the US.

In parallel, there has been a strong debate – from Shanghai to Hong Kong – that transcends the role of China as the world’s factory: what matters now is how to redirect some of China’s astonishing manufacturing capacity towards the domestic market.

Of course there are problems – such as the lack of purchasing power among scores of Chinese domestic consumers, even as the bulk of national China income is directed to fixed-asset investments. A great deal of China’s rural elderly population survives on a monthly pension of roughly $30 a month, and the hourly rate for the gig economy has stagnated at around $4.

Meanwhile, in several high-tech fronts, China just built the fastest high-speed train on the planet: 400km/h, soon to run between Beijing and Shanghai. China is already receiving orders for the C919 commercial wide-bodied airliner. And China has come up with the world’s first thorium-powered nuclear reactor. Translation: unlimited cheap and clean energy is at hand.

The Mafia way of doing business

Hong Kong is a very special case. HSBC executives, for instance, worry about a possible decoupling between US and China – and wonder whether Hong Kong may survive without US trade.

Yes, it can. The US is Hong Kong’s third largest trade partner; yet Hong Kong’s export and import to the US are only 6,5% and 4%, respectively, of its total global exports and imports, including transshipment of goods back and forth from the mainland.

HK is a world-class logistics hub and free port. So as long as Trump 2.0 does not forbid trade with Hong Kong – well, anything can happen – imports should not be affected. Anyway, most of what HK exports – electronics, luxury goods, clothes, toys – can easily find alternative markets in Southeast Asia, West Asia and Europe.

The crucial point is that over half of Hong Kong trade is with the mainland. And the key fact is that China can easily survive without US trade. Beijing has been carefully preparing for it since Trump 1.0.

From Shanghai to Hong Kong, the best analytical minds are in tune with the inestimable Michael Hudson, who has emphasized, over and over again, how “the United States is the only country in the world that has weaponized its foreign trade; weaponized its foreign currency, the dollar; weaponized the international financial system; and treated every economic relationship in an adversarial way, to weaponize it.”

A self-confident, high-tech savvy China, from academics and business people to xiao long bao and pulled noodles vendors, graphically understands that the Empire of Chaos, in its drive to “isolate” China, is only isolating itself (and its chihuahuas).

Moreover it’s such a joy to see Michael Hudson also referring to the same “paper tiger” syndrome that I witnessed in Shanghai these past few days: “Well, America has become a paper tiger financially today. It doesn’t really have anything to offer except the threat of tariffs, the threat of suddenly disrupting all of the trade patterns that have been put in place over the last few decades.”

In Shanghai, I heard serial implacable dismissals of the so-called “Miran plan” – as in the paper published last November by Trump’s economic advisor “restructuring the global trading system”. Miran is the brain behind the Mar-a-Lago accord – whose rationale is to weaken the US dollar by forcing major economies – from China to Japan and the EU – to sell US dollar assets and swap short-term US Treasuries for 100-year bonds with zero interest.

Miran’s brilliant idea boils down to nations having only two options:

1.Meekly accept these US tariffs, without retaliation.

2. Write cheques to the US Treasury.

Zhao Xijun, co-dean of the China Capital Market Research Institute at Renmin University, destroyed the scheme succinctly: transferring money to the US Treasury like this is like “collecting protection money on the streets”. Translation: that’s the Mafia way, “a thuggish and domineering act, merely dressed up with the lofty justification of providing public goods”.

Meanwhile, in the Grand Chessboard, Beijing keeps working steadily side by side with Russia towards a Eurasian-wide security architecture anchored on a balance of powers: it’s all about the new Primakov triangle (RIC – Russia, Iran and China).

Top BRICS members Russia and China will not allow the Empire to attack fellow BRICS member Iran. And support comes in more ways than one. Example: more imperial energy sanctions on Iran? China will increase imports via Malaysia, and invest even more in Iran’s infrastructure, in tandem with Russia in respect to the International North South Transportation Corridor (INSTC).

In a nutshell: Captain Chaos definitely does not have the cards – which as even South Pacific penguins know, are all made in China.

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Views expressed in this article are opinions of the author and do not necessarily reflect the views of ZeroHedge.