The Global Economic Crisis from China Has Started

“There is an opportunity that comes once every 100 years"

The global economic crisis from China has already begun, and a book has been published in Japan by two renowned economist, Miyazaki and Tamura, claiming that this crisis has an opportunity that comes once every 100 years. The new book “The Global Economic Crisis from China Has Started” explains the cause of the crisis from China, which will bring more shock global financial crisis 2007-2009, and suggests concrete method to find opportunities in this crisis. The global economy in 2020 is likely to be a more difficult year than ever in history. It is because there is a high possibility that the economic crisis caused by inflation from China, which has been constantly raised so far, will become a global economic crisis in the aftermath of the US-China trade war.

Unlike what appears to as trade war due to U.S. trade deficit, the essence of the U.S.-China trade war is the war of technological hegemony. In the empire of IT or IoT represented by tech companies so called MAFAA (Microsoft, Apple, Facebook, Alphabet, Amazon), VS AT (Alibaba, Tencent), it is  a fight to take control of technology hegemony. U.S. cannot afford to let China dominate such an important future industry. However, China also has to revert their industry from traditional manufacture industry which produces little profit to the high value-added industry.

China 2025 (Smart Manufacture+) is the best project for China from avoiding in debt-ridden environment and raise its GDP. The problem is that Japan and South Korea are the most affected countries in the U.S.-China trade war over global economic hegemony. Korean investors must come up with strategic countermeasures in case the friction between the U.S. and China continues. This is to minimize the damage and take advantage over opportunities. The book mainly focuses on the risk, which is steadily arising from U.S. and China trade disputes such as China's OBOR (BRI) policy and China Manufacturing 2025, and internal issues in China.
See my blog: https://techongstudy.blogspot.com/2020/08/china-wants-to-revitalize-its-domestic.html

Fighting for techno-hegemony
The background of the trade war began with a number of complicated reasons, in which China has made rapid progress in attracting technology and capital from around the world to become a technology powerhouse that surpasses the U.S. based on a huge trade surplus. As, Chinese exports have been blocked due to the trade war, China is concentrating its domestic economy mostly in technology area. The U.S. government found that it used all sorts of methods, such as corporate espionage and acquisition of foreign companies, such as technology theft and human resources transfer. Recently, as China's ZTE and Huawei (Tik Tok recently) have begun to outpace U.S. technologies in semiconductor and telecommunication technologies, which are key technologies in the future. The dispute between the U.S. and China has intensified as U.S. has pressured China in the form of competition for technological hegemony. This is said to be the same in both partisans (democratic and republicans).

Chinese leader Xi Jinping will never end his presidency by extending his term indefinitely in the National Assembly in 2018. China is expanding its belt and road initiatives with its huge trade surplus capital against the U.S. as a weapon. Before Trump administration, many of the Wall Street-linked relatives and politicians who sought wealth through 'China capital'. After entering the Trump administration, China's prestige grows and threatens the United States. The way to stop it at the source is to intervene in Chinese trade surplus that attracts enormous wealth of China.

Belt and road initiative
The book provides detailed examples of the problems of China's RBI development project. Common problems are that China lends money to emerging and frontier countries through RBI. Projects are monopolized by Chinese companies, major equipment is imported from China, and Chinese laborers are used. The debts leased to developing countries are marked in dollars and carried by the local government. If the debts cannot be paid off, China confiscates the infrastructure or land. The United States recognizes the seriousness of the matter, and Vice President Pence warns of this plan as a 'debt trap'. China is even building a military base (Djibouti, Africa) through this project. In the one-on-one plan, there is a new version of Silk Road intention to secure crude oil in preparation for an upcoming military conflict. Countries that are trapped in debt by OBOR are Pakistan, Sri Lanka, Cambodia, Maldives, Myanmar, Bangladesh, Malaysia, Indonesia, Nicaragua, Venezuela, Thailand, Nepal, Angola, Madagascar, Uganda.

RMB and inflation issue
Issuing more RMB than US dollar reserves, can lay concerns about inflation sooner or later. On the one hand, the United States and Japan support China appropriately, fearing the impact on the world if the Chinese economy collapses. Mainly Japan plays this role because Japanese policy interest rate is negative, so most of Japan's funds are invested abroad, and are borrowed from China through Panda bonds.
"A Panda bond is a Chinese renminbi-denominated bond from a non-Chinese issuer, sold in the People's Republic of China. The first two Panda bonds were issued in October 2005 on the same day by the International Finance Corporation and the Asian Development Bank." - Wikipedia

Japan is also well-known in having massive fiscal deficit, but the authors say that Japan's debt is near zero according to the balance sheet. (Japan is the biggest net creditor country in the world) Unlike the high debt rates of the U.S. and China, Japan has a high savings rate, so financial assets such as deposits and stocks are said to be three times the GDP. (Most of debt-holder is BOJ and its nation) 

Covid-19
Currently, China is not only facing pressure from the United States, but also neighboring countries such as India. There is also internal problem in China as growing sign of dissatisfaction with the government has started to emerge and Covid-19 crisis has triggered it.

Will China collapse in crisis? Well, the paradigm of dispute has reverted from trade tariffs to national security and diplomacy problem after first U.S. and China agreement and pandemic. This book shows historical events through specific examples and data. Global investors are very exposed to the relationship between United States and China; reading this book can serve as an opportunity to seriously think about how to catch global economy trend and prepare for it.