Gold Market Wire
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The Long View
China and America Accelerate the Drift towards Conflict
May28, 2020 – (Gold Market Wire) There is little doubt now that a completely new era of Sino-American relations has been established since the beginning of this year. Although the the shift in relations has been apparent since the election of Trump and the policy ascendency of Steve Bannon, Covid-19 has accelerated the pace of this deterioration in relations.
“We are at war with China,” Bannon said, repeatedly, in his 2019 tour of the UK and Europe. He was, as ever, quick to point out that war could, of course, be non-kinetic... and can also be what he calls “guns up”. Interestingly, Bannon has now rolled out the George W. Bush mantra that Trump is “a wartime President.” China would seem to agree.
Policy disputes are now coming thick and fast; from the old ones like trade and tariffs, to the recent ones like Hong Kong, which will, in short order, bring the island under almost the complete control of Beijing.The US, as has been complicit in producing this state of affairs by outsourcing its manufacturing industry to China in return for outsized financial gains for the (US) elite. Covid-19 has highlighted the problem. The majority of parts needed for ventilators, which many western nations recently found themselves in short supply of, can only be manufactured and assembled in China. The Trump administration seems to see such situations as a signal that the extension of American capital in the service of the homelands' supply and distribution networks, must be re-organized away from China.
In short, supply chains are to be re-routed.
But while it is easy to see this in terms of American manufacturing making a long journey home, the re-routing of supply chains is also a warning signal that the potential for war is rising.
“We’ve been working on (reducing the reliance of our supply chains in China) over the last few years but we are now turbo-charging that initiative,” Keith Krach, undersecretary for Economic Growth, Energy and the Environment at the State Department, according to Reuters.
Tax incentives are beginning to emerge from Washington to provide the economic push to modify and change supply chains. One can envision, before long, that Washington will mandate these changes, rather than just incentivize them. Covid-19 and Hong Kong have become true game-changers.
“This moment is a perfect storm; the pandemic has crystallized all the worries that people have had about doing business with China,” one US official has said.
The two nations' respective civilian population are now exchanging vitriol. The Rubicon has been crossed.
In monetary terms, the “theater of escalation” could now include China's devaluation of the Reminbi – an act Washington would truly see as a provocation, and, perhaps, elicit the demand for an ending of the Honk Kong Dollar in totem by China... to be replaced by the Reminbi. If retaliation measures by Washington over Hong Kong were to include the seizure of Chinese assets on American shores, the USA and China will be in as close to a state of war as one can be, before the shooting starts.