YWR: The #1 Trade Pt.2: China 'blinks'.
China ‘blinked’.
That’s what everyone says.
But the real reason is not what people think.
It’s not capitulation.
It’s not a sudden desire to re-engage with the US.
It’s not love for Trump.
It’s something else.
Read between the lines.
There’s only one strategy to beat the US. But it’s radical and totally different from what everyone is expecting.
It’s a shift nobody is anticipating. Except YWR.
China’s ‘blink’ is a subtle sign they’ve figure it out.
But they can’t say it.
The good news for us is, if it is what we think it is, there’s money to be made. For years.
It’s confirmation The #1 Trade is happening.
Boxed in a corner with one way out.
Out US’ing the US
Why the sudden pivot?
What to look for next.
How we are playing it.
Reference posts
Boxed in a corner with one way out
Xi was anxious and couldn’t sleep. He held the cup of tea without drinking gazing out at the night stars. He enjoyed the feel of the warm tea cup in his hands. At times like this, when he couldn’t sleep, he liked to sit in his garden and think. A small fountain trickled in the background.
What to do? This was a difficult situation.
It was a fork in the road for China and for his legacy.
America and Europe’s decision last year to shut Chinese EV’s out of their markets had been a moment of realisation for Xi. A realisation things had changed.
China’s two largest customers were not going to allow China to gain market share in yet another of their industries. Their previous openness was changing. China’s trade surpluses had gone too far. They wanted the trade to be more ‘balanced’ they said, even though their workers were overpaid and inferior to Chinese engineers. Public opinion towards China was turning hostile. Trade competition was turning into a ‘trade war’.
Then Trump had taken things to a new level.
Trump had taken quiet animosity to full confrontation.
He was openly calling China an enemy of the US.
Then there was the US security apparatus telling American companies they couldn’t sell high tech products to China and that they should diversify their supply chains out of China. They even had a word for it. ‘China + 1’. China + 1 and everyone was doing it.
What kind of a future was it to have your country dependent on selling to someone who thinks you are the enemy and is constantly trying to undermine you? Xi ruminated.
And… they were broke or would be soon. To some extent it didn’t matter whether they liked China or not. They were a dead man walking. Trying to grow by selling more products to the US and Europe wasn’t the future.
But the other markets in the world weren't much better.
Xi had spent years increasing China’s influence in Africa and Central Asia, but in the end they didn’t have money either. Or not enough to matter.
Another dead end Xi concluded.
Then there were the other little things which bothered Xi.
Bright students in other countries never wanted to come to university in China. Why not?
And the tourists weren’t coming to China anymore. How would the rest of thew world appreciate China’s greatness and culture if they didn’t visit?
Now Trump had hit China hard with his tariffs. This blow had come at a bad time. A rare moment of weakness for China.
For once Xi worried China might be in real trouble. Which was why he couldn’t sleep.
China’s property market, the biggest sector of the economy had been in a slump the last 4 years. There had been numerous high profile bankruptcies and financial distress. And the 10-20% drop in apartment prices was hitting everyone on a personal level. The property downturn made everyone anxious.
But China’s record exports had been the bright spot. Xi liked to boast he was transitioning the economy to high tech exports. His ‘Made in China 2025’ strategy was working. It was good for his image.
But now these tariffs were smashing everything. If they continued indefinitely it would create a 1-2 punch. Property and manufacturing crashing together might put China into a depression.
And that was dangerous.
But what do you do?
Do you bend a knee to Trump and those fat, lazy Americans with their stupid oversized drink cups?
And for what? Sign some agreement to buy another year or two before they squeal like pigs again because they can’t compete?
How could he turn the tables on the US?
How could he be the one running the world? Trump running around the Middle East being feted like a king. That should be him. It would be someday.
That was the whole mission. Be the new Mao who restored China’s greatness. Instead he was stuck; at risk of losing it all. The leader who crashed China’s economic miracle.
What’s the play here? How do you get out of this difficult situation, live another day and still win,’ Xi wondered.
Xi’s mind turned to that American blogger in London. YWR.
One of his economic advisors had shared with Xi a post YWR had written last year about how China should change. Xi had initially dismissed the idea, but as time passed he couldn’t stop thinking about it. Increasingly, he wondered if maybe this YWR guy was right.
This YWR plan made sense. China would look good to the world, appear gracious. While secretly, slowly, like a boa constrictor, it would make China even stronger. Xi liked that part.
Xi had already kind of being doing this YWR strategy already. Although mostly out of necessity. Til now he’d felt out of control; reacting to events, without a plan. Always worried he looked weak. But maybe it was the opposite. He hadn’t seen how doing what the Americans wanted could actually be a winning strategy.
‘Be like water’ Sun Tzu used to say.
Xi breathed in deeply and sighed while letting a long breath out. This felt right.
Just thinking about it he could feel the anxiety falling away.
Yes. This was the way