Archive for the ‘China’ Category

Dear President Trump–

I may be the only guy in American that loves what you are doing with tariffs.  (Please see here and here and here.)

And I love that you’re turning up the heat.

But, if you want to win this in our lifetimes OR until another president takes office (whichever comes first), you need to enlist the support of the rest of the commercialized world.

This might be difficult since you’re trying to create a level playing field with them, too…

… or, said another way, you’re hammering the rest of the world into submission as well.

But maybe you can pitch a win here.  Something like, “look at what we’re doing to China… so you know we can easily do that to you, too.  Net-net is you’re going to lose a little to us, it’s inevitable.  But opening up China isn’t… unless we go to China together… and if we do go together, we’ll both really, truly gain a huge new market, second largest in the world!”

To make this work, though, it has to be China vs. THE ENTIRE WORLD.

That’s because China is too proud to be “defeated” by just the U.S… and going it alone only forces them to act more defiantly… which includes them dragging things out in hopes of a political regime change… regardless of how long that takes.

So the only way to get this done in a reasonable time frame is to turn up the heat on the rest of the world… THEN, as a group, approach China.  This will allow China to compromise with dignity… because it won’t be perceived as a fight, rather, that “everyone” came together and “mutually” agreed to change, uhm, all the rules.

No loss of face for the Chinese.  100% victory for the world (and the U.S.).  Wrapped up before the next presidential election.

Tough timing but that’s what you have to do to bring this home.

Break a leg–

–Royal.

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Facebook has a lot going for it.  But one of its glaring weakness over the years is ZERO penetration into China.

Turns out dictatorships don’t like things like free speech.

Ironically, as much as FB gets slammed for privacy concerns, Facebook defiantly stood up to the Chinese government in 2009 when the Chinese demanded the release of private information from the company.

This was no small act:  For their privacy stance, the Chinese government blocked Facebook into the world’s most populous country… essentially halving their business opportunity.

THAT’S putting your money where your mouth is.

But, in a weird twist of fate, when many companies are getting slammed for the earnings impact of a US-China trade war, this isn’t an investment risk for Facebook… because they have no Chinese exposure.

And — it gets better — one of the expected outcomes of the trade war is a more level playing field, which (you guessed it) may mean Facebook becomes unblocked. 

If that happens, that could be a massive growth driver for FB earnings over the next few years.

Yet another reason why this trade war isn’t all bad.

Yesterday was proverbial d-day for the start of the great Trade War between China and America.

It’s about time… China is aggressively and overtly protectionist… and has been for decades.

I learned this first hand in the CAD business.  It was absolutely impossible for us to sell our product in China… even though we were successfully selling our product in other areas of Asia.

Why?  Because China mandated that Chinese businesses and consumers could only buy Chinese CAD…

… even though Chinese companies were happily selling their CAD — and we were competing against their CAD — unencumbered in the U.S.

But we were a small player, so maybe you can chalk up our failure to penetrate China on our size.

But what about Autodesk, makers of AutoCAD, the #1 CAD product in the world?

Nope, they’ve been shut out for years, too.

To make matters worse, Autodesk found out a Chinese CAD company had stolen their intellectual property.  The Chinese Company vehemently denied the allegations.  Autodesk had no choice but to sue the Chinese Company in the World Court where the Chinese Company continued to vehemently deny the charges… until, facing irrefutable evidence, they finally had to admit their wrong-doing.

But it gets even worse. 

While Autodesk could have collected major damages, they realized if they did, the Chinese government would have been EXTRA punitive… so Autodesk had to voluntarily give up any settlement value in the hopes of helping the Chinese “save face” so they could have any shot at selling in the country.

That is unfair governmental manipulation at its worse.

But that is the China I know about first hand:  Competitively rotten to the core.

So I don’t care about any short-term tariff pain.  When it comes to true capitalism, China is like a big but immature bully and I am so looking forward to a much more experienced fighter punching these guys in the face.  It is well deserved and long overdue.

 

China is trying to do an end-around and create some kind of “united partnership with Europe against the U.S.”

Despite a raging battle with the Trump administration, Europe flat out turned down the Chinese overture.

From ZeroHedge:

But why does Europe – which has so staunchly publicized its disagreement with Trump’s policies – refuse to align with China?  Simple: behind closed doors it admits that Trump’s complaints about Beijing are, drumroll, spot on.

And:

… perhaps because China’s veneer of the leader of the free trade world is so laughably shallow – China was and remains a pure mercantilist power, whose grand total of protectionist policies put both the US and Europe to shamethe European Union has outright rejected any idea of allying with Beijing against Washington ahead of a Sino-European summit in Beijing on July 16-17.

And:

Europe has absolutely no belief that Beijing will ever follow through with its promises.

China is so bad that not even the, “enemy of my enemy is my friend” maxim can hold water.

Everyone seems to HATE the fact that Trump is pulling the world into a tariff war.

I think it’s great… and long overdue.

The current tariff infrastructure has its roots after WWII when the U.S., the dominant economic might in the world, was magnanimous enough to give the war-torn countries in Europe and around the world economic advantages as a way to help them get back on their feet.

Similarly, the U.S. was magnanimous enough to give developing nations — like China — an economic leg-up in their quest to transform from rural to modern economies.

But come on people, all of that was decades ago!

Trump is absolutely correct:  It’s time to have a level playing field.  Why do we impose a skinny 2.5% tariff on cars imported from China, only to see China impose a stiff 25% tariff — 10 times larger! — on cars they import from the United States?

And why can Chinese companies own 100% of a factory in the U.S., but American companies can’t even own 50% of their factories in China?

And on and on!

I’m calling B.S. along with Trump and I have no clue why EVERYONE isn’t doing the same.  China is no longer a developing nation… it has the second largest economy in the world.  It’s time China stopped taking advantage of our good will.

While not as bad as the Chinese, there certainly can be more parity with the rest of the world, too.

Similarly, Trump is absolutely correct about stolen intellectual property… because in the modern world, economic might is not just measured in current service or manufacturing ability… but in the ability to use innovation and technology to dramatically improve old industries — or completely invent new ones — and reap the rewards that go along with that.

So who cares if China can manufacture complicated devices like iPhones better than the U.S. today?  Maybe the U.S. will invent a new way to build an iPhone that doesn’t require any manufacturing?

After all, that’s what we Americans do… we innovate… that’s our strength.

Eliminating the complicated manufacturing process for iPhones would be unbelievable… and the rewards would be immense… unless, of course, China simply STEALS the new technology to do this.

And THAT’S the situation we have today… China forcing intellectual property transfer as a condition to setting up shop in their country… or, worse, flat-out stealing our IP… and the Chinese government — literally — encouraging all of this.

Fuck that.  I’m all for taking our ball and going home if other countries won’t play fairly… because at the end of the day, WE’RE the world’s biggest market…

… and I think it’s awesome that Trump is reminding the world of this.

With that said, Trump does have one thing howlingly wrong about trade:  Who cares if there are trade deficits?

To me, a trade deficit benefits us… it means our costs are lower than they would have been… which means our profits will be higher… and our stocks will perform better… and that will enrich every American that does any investing or has a 401K plan or that even gets a paycheck.

That’s pretty much the vast majority of the country.

Trump, you’re a business person, you know artificially forcing a higher cost structure on businesses and consumers is exactly the opposite of how a free market should work.  Anything artificial always ends in disaster.

I know the counter-argument that Trump loves to tout:  If we “export” all of industries overseas, we can hurt ourselves strategically… maybe even get held over a barrel in the future.  Case in point, the decline of our steel industry.  If we can’t produce our own steel, we’ll be at the mercy of foreigners for such a strategic commodity.

Poppycock.

If the U.S. steel industry can’t compete with foreign competition, then go invent a new way to make steel 10x faster and cheaper.  Don’t tell me this can’t be done, Britain did it with glass.  Stop crying and get inventing — go create new jobs in new and re-invented industries where the United States can once again be the de facto leader.

So…

… I WELCOME a trade war — short term pain and all — if the end result is a fair global playing field (especially with China!)… and a kick-in-the-butt for our industries at risk to GO RE-INVENT THEMSELVES.

That can only be good for U.S. workers and companies.  And, ultimately, for the stock market, too.

 

I just read something that had this quote in it:

But the government quickly mounted a propaganda push, blocking some articles and publishing pieces praising the party.

Is this a quote about the Trump Administration?

Nah, it’s just about, oh, CHINA TAKING A MASSIVE STEP BACKWARD AND ELIMINATING TERM LIMITS FOR THEIR DICTATOR, ER, I MEAN PRESIDENT.

But it’s telling — SCARY — that it’s exactly what the Trump Administration does.  EXACTLY.

 

P.S.  It’s also scary that Trump’s response was:

I think it’s great. Maybe we’ll give that a shot some day.”

People aren’t sure whether he was joking or not… it doesn’t matter… that’s something The President Of The United States — defender of the U.S. Constitution — doesn’t joke about in public… unless he wants to invite comparisons with a Chinese dictator!

We have a LOT of problems in the United States.  All of them are important… but, realistically, if we can’t PRIORITIZE correctly, we’re shooting ourselves in the foot… and maybe the head.

It’s this prioritization that has strangled the Republican party… or should I say “hijacked.”

The greatest example of this is pro-life and pro-choice.  Clearly this is a hugely important issue… but it’s a hugely important PERSONAL issue… and as such should actually stay out of politics. 

Practically speaking, the Republican party has alienated large numbers of Americans on this single issue… meaning, no matter how intelligent the rest of the republican agenda may be, regulating right-to-choose is a complete and utter deal-breaker for many voters.

I would hope the Republican party would have learned this lesson by now.

But — unbelievably — Trump just created a SECOND complete and utter deal-breaker:  Climate change.

From Business Insider this morning:

The US officially tells the UN it is quitting the Paris climate change deal

Are you kidding me?

Whether you agree there’s people-made climate change or not… whether you agree this is good for business or not… Trump has just created YET ANOTHER deal-breaking issue for a mass of voters.

How stupid.

P.S.  My take on climate change?  Go live in Beijing for a couple months — A COUPLE OF DAYS — and then give me your opinion.

In 2014, China launched a war on pollution, vowing to cut down on hazardous emissions of PM 2.5. It's hard to do that amid a growing economy, but so far, Beijing has been able to shut down coal plants within city limits, and has tried to curb car emissions by limiting the number of license plates.