Friday, April 24, 2020

Looks as if the Year of the Metal Rat will not be kind to China - Peter Skurkiss

by Peter Skurkiss

Every 60 years, it seems, China has a really bad year. This is one of them.

The U.S. is not the only country that has realized the folly of having so much of its vital production concentrated in China. Add Japan to the list. In early March, Japanese prime minister Shinzo Abe proposed at a conference of Japan's leading businessmen that Japan must become less dependent on China so as to better avoid supply chain disruption. Abe went on to say, "Of the products that rely heavily on a single country for manufacturing, we should try to relocate high added value items to Japan. As for everything else, we should diversify to countries like those in ASEAN."

According to the Nikkei Asian Review, Abe's words were quickly followed by action.
In its emergency economic package adopted on April 7, the Japanese government called for the re-establishment of supply chairs that have been hit by the [Chinese] virus's proliferation. It earmarked more than 240 billion yen (about $2.2 billion) in its supplementary budget plan for fiscal 2020 to assist domestic companies to move production back home or to diversify their production bases into Southeast Asia.
This has the Chinese extremely worried. The very next day, China's Politburo Standing Committee, the top decision-making body of the Chinese Communist Party, met in Beijing. There, the committee heard Chinese president Xi say the country must get ready for a protracted battle. That is an understatement. The United State and Japan, the world's biggest and third largest economies, are not just talking about moving production out of China. They have actually started the process. This can only throw the Chinese worldview upside-down and ultimately undermine the control the CCP has over China. President Xi knows this.

Another sober analysis is presented by Cary Huang of the South China Morning Post. In a column entitled "The world is waking up to the risks of relying on China for its critical medical supply," he writes:
The pandemic has served to convince policymakers in the West not only of the economic risk of their over-reliance on a single country for critical supplies, but also the geopolitical risk of relying on a nation they call a "strategic rival."
Covid-19 will undoubtedly hasten the efforts of Western nations to not only diversify their supply sources to reduce economic risks, but also to diversify away from China to reduce national security and geopolitical hazards.
Up until now, China has had the best of all worlds. Large companies in advanced countries recklessly dumped much of their manufacturing into this communist country and allowed their technology to be stolen. This was all in the name of higher profits. This allowed China to grow at a phenomenal rate and to create monopolies in many areas. This is now unwinding, and it is hard to see how the CCP can stop it. Putting on a "happy panda face" won't change the dynamics as it has in the past. 

Adding to China's angst is a superstition held by many of its intellectuals. According to the Chinese astrological chart, 2020 is the year of the rat — and not just the year of the rat, but the year of the "metal rat." 

The year of the metal rat cycles every 60 years. Many Chinese feel that it is associated with a big history-shaking incident taking place. Katsuji Nakazawa writing in the Nikkei Asian Review, outlines the history of the year of the metal rat for the last 180 years. He found that in 1840, the Opium War broke out, leading to China's stagnation and its Century of Humiliation. Then, in 1900, the Boxer Rebellion started, resulting in another Chinese defeat and further humiliation. The metal rat next returned in 1960. This coincided with the famine caused by Mao's "Great Leap Forward," resulting in between 18 and 45 million deaths.

Now we're at 2020, and the metal rat is seeming to say the stars are not lining up in China's favor. Other mortals believe the same thing. The question is not if China is going to fall from its current lofty perch, but how far down it will go.

Peter Skurkiss


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