US Poor Strategy in Its Trade War with China


Chinese Gifted Strategist Sun Tzu’s Teaching

This blogger has mentioned Sun Tze’s teaching: In any war, one shall win with ingenious surprise move while conducting frontal engagement. (凡戰者,以正合,以奇勝。)”

The surprise ingenious move can be but a part of the frontal engagement. For example, the D-Day Normandy landing operations on June 6, 1944. The frontal engagement was across the strait between allied and German troops. The allied troops might invade Calais or Normandy. The choice of Normandy for the site of landing operations was ingenious as German defense there was weaker as Germany believed that Calais would have more probably been the site of invasion. As the time and date of the move were kept well in secrete, there was full surprise in the ingenious move.

In this case, the frontal engagement was across the entire English Strait Calais and Normandy while the ingenious surprise move to land in Normandy was a part of the frontal engagement.

Therefore, Sun Tzu says that there is unlimited variation in the relations between frontal engagement and ingenious surprise move. A specific commander in a specific combat shall have the talent to design his ingenious surprise move in his specific combat.

Trump’s Poor Strategy

According to Sun Tzu, one shall calculate his factors to win and lose a war before engaging in a war. Only when his factors to win exceed those to lose can he start the war.

Trump believes that his tariff hikes on Chinese exports will subdue China as China is unable to retaliate with equivalent hikes as US exports much less to China.

That is a naive calculation.

What counts is not the scale of tariff hikes but the extent of damages to one’s enemy compared with that of the enemy’s counterattack. That is very simple. In real war, what counts is not the comparison of the extent of fire power but the damages the fire power can do.

For example, in the last battle in Korean War, US troops kept on air raids and artillery bombardments on the Chinese troops stationed on hills. A unit of the Chinese troops hid in their tunnel and suffered no casualty. The only casualty brought about by US troops’ strong fire power was the death of three of the four members of an artist group who went to the tunnel through a long ditch to entertain the troops with their performance.

My older schoolmate Yu, the surviving artist, arrived at the tunnel alone. He did not know that his co-performers had all been killed but assumed that they had retreated as enemy shelling was too heavy. Yu, a lively boy 15 years old then, gave singing, dancing, rapping and joking performance alone and greatly pleased the troops. At that time, US air and artillery fire was so fierce that Chinese troopers were all confined in their tunnel like prisoners for days. It was really boring to stay in tunnel like that. Yu’s courage and performance greatly heightened Chinese troops’ morale. He was honored as a war hero later.

When US army attacked after repeated air raids and bombardments, they suffer much more casualty from the much inferior fire power of Chinese troops’ mortars, guns and grenades.

US Tariff Hikes Fail to Hit

US troops’ problem then was that its much stronger fire power did not hit while Chinese troops much weaker fire power hit.

It is the same with Trump’s tariff hikes. Most of the goods under tariff hikes are indispensable for US consumers and there are no alternative sources of goods of similar quality at similar low prices. China’s exports of those goods have not been affected because the prices of the goods increased to include the tariff hikes remain attractive. The US has to keep on importing such goods. As a result, US tariff hikes do not hit China. They, on the contrary hit the US itself by hiking American people’s living costs.

China’s Retaliation Hits US Farmers Hard

China’s retaliation of tariff hikes, on the contrary, hurt its enemy without harming its own people. Its tariff hikes on US agricultural products, especially soybean hit US farmers hard but do not harm its own as it can find alternative sources for such imports.

Belt and Road Became an Ingenious Surprise Move

In addition to the China-Pakistan Economic Corridor and China-Myanmar Economic Corridor for China’s trade security to its west, China’s Belt and Road initiative (BRI) aims at building railways, roads, power plants and other infrastructures to facilitate removal of its labor intensive export-oriented enterprises to developing countries with lower labor and land costs. Xi Jinping launched that initiative for China’s transformation from export- and investment-geared to innovation-, creation- and consumption-led economic growth, but when Trump launched his trade war with China, it became China’s move to counter US trade war attacks.

Is it an ingenious move? Certainly it is, as it will shift China’s trade surplus to the countries China has moved its export-oriented enterprises to.

Is it a surprise move? It depends. As the West, especially the US, regards BRI as a move to enhance China’s geopolitical influence instead of a trade war move, it is then a surprise move indeed.

Article by Chan Kai Yee


China’s Strategy to Defeat the US in the Non-military War


Plan for Long-term Victory
In the long run, China’s Belt and Road initiative (BRI) will bring economic growth to developing countries and expand China’s market there. It will enable China to switch lots of its exports from the US to those countries. Moreover, BRI will enable China to move the industries that produce goods for export to the US to the industrial parks built by BRI to avoid US tariff hikes and reduce labor costs. China will thus establish its invincible position in its trade war with the US.

According to Sun Tze, in a war one has to establish one’s invincible position and do not miss the opportunity to defeat one’s enemy.

Regarding to trade war, China is an entirely different country. Its government has centralized power to ban the import of enemy’s goods without tariff hikes. Its reduction in purchase of US agricultural products can do much greater damages than US tariff hikes on Chinese exports.

Trump’s Ingenious Move without Surprise
Seeing that tariff hikes are unable to subdue China, US President Trump tries another way to attack China. He remembers well that China’s telecom giant ZTE would have been killed by US Congress if he had not interfered in its favor. He saw his opportunity to subdue China through attacking Huawei, another Chinese telecom giant.

Americans have already been jealous at Huawei’ leading position in 5G in the world. Trump took the lead in banning Huawei’s 5G in the US and has been telling other countries also to boycott Huawei’s 5G with the lie about Huawei’s espionage on behalf of the Chinese government. Failing to make others ban Huawei’s 5G, Trump invents a much more evil way to kill Huawei by placing Huawei in US trade blacklist to cut US supplies of components and technology that Huawei needs for its survival.

Now tariff hikes are the frontal engagement in Trump’s trade war with China, but banning and placing Huawei in US trade blacklist are indeed an ingenious move that may do real harm to China..

US government’s large amount of tariff revenue from the hikes proves that the tariff hikes have failed to reduce Chinese exports to the US. It proves that the harm caused by tariff hikes to China is limited. Killing Huawei and threatening further killing of other major Chinese tech companies might have really made China suffer.

China has been prepared for Trump’s Ingenious Move
No surprise!

However, the Huawei move though Ingenious lacks surprise. At the very beginning of Trump’s trade war last year, Xi Jinping told Chinese firms to rely on themselves. He made Chinese firms realize the danger of dependence on US supplies of technology and components. Since then Chinese enterprises have been working hard to free from their dependence on US supplies.

It has especially been the case for Huawei. Trump’s banning and telling others to ban Huawei and US efforts to extradite Huawei CFO Meng Wanzhou have caused Huawei to develop substitutes for US supplies since long ago. When Trump placed Huawei on the blacklist, Huawei had already developed substitutes for US supply of components and been developing its own operation systems so that Trump is unable to win with that ingenious move.

China’s Ingenious Surprise Move
Banning supply of rare earth materials for the US may be China’s ingenious move but it also lacks surprise. There has now been too much media report on that now to warn the US about that. China bought rare earth technology from the US so that I do not think it is difficult for the US to develop the technology to produce substitutes.

In his recent visit to Russia, Chinese President Xi Jinping and his Russian counterpart President Putin concluded an agreement to develop bilateral trade and cross-border payments using the ruble and the yuan in order to bypass the US dollar. That is an ingenious surprise move that hits the US where it is most vulnerable.

US economy will soon be surpassed by China. Its military is being caught up by China and Russia. The financial dominance of US dollar is the only strong point that the US still maintains. If it has lost that dominance, there will be no US hegemony at all.

The agreement between China and Russia may set an example for other countries so that trade balance settlement everywhere may gradually be conducted through other currencies not only Russian and Chinese currencies. As a result, US dollar will not longer be the major currencies for trade and financial reserve.

In fact, most countries in the world want to put an end to US dollar’s dominance now. EU has developed Euro for trade settlement in EU. Malaysian PM Mahathir has suggested the use of gold as substitute for US dollar.

The US is hard up now. It does not have enough revenue to make ends meet so that it has to borrow lots of funds from other countries. However, it has no financial problem as it can issue as much US dollars as it needs due to the financial dominance of US dollars.

If US dollar is no longer the dominant trade and reserve currency in the world, the US will not be able to borrow as much as it will for its excessive military spending to maintain its military hegemony.

Article by Chan Kai Yee


Banning Huawei, Ingenious Trade War Move, but Lacks Surprise


This blogger has mentioned Sun Tze’s teaching “In any war, win with ingenious surprise move while conducting frontal engagement. (凡戰者,以正合,以奇勝。)”

US President Trump’s tariff hikes are frontal engagement in his trade war with China, but the large amount of tariff revenue from the hikes proves the tariff hikes are paid by US importers instead of Chinese exporters. The hikes cannot hurt China so that Trump takes the ingenious move to kill Huawei and threaten further killing of other major Chinese tech companies.

Ingenious though, the move lacks surprise. At the very beginning of Trump’s trade war late last year, the US threatened to kill ZTE but refrained. It only punished ZTE with heavy fines.

Xi stressed self-reliance at that time. Chinese firms are thus aware of the danger in relying on US supplies of technology and components. Since then they have work hard to free from their dependence on US supplies.

Huawei especially has long been aware of US attempt to ban it so that according to SCMP’s report “Huawei set to find out if consumers will still buy its phones without Google services under US trade ban” on May 21, Huawei has already developed substitutes for US supply of components and operation system so that Trump is unable to win with the ingenious move.

Now, some people believe banning supply of rare-earth metals for the US may be China’s ingenious move but Xi Jinping’s recent visit to major producer of the metals make such a move lack surprise. However, such visit may scare the enemy. I know that China can have quite a few ingenious surprise moves. Wiser than me, Chinese generals are able to design more such moves than me. Due to the surprise, China can win the war with those moves as US trade war commanders simply do not know what ingenious moves Chinese general may make.

I wonder whether they have learnt Sun Tzu’s teaching as most translators have translated the teaching wrong due to their failure to understand it.

If a translator had read Chinese history of war, they would not have committed such absurd mistake in translating the strategy.

Moreover, even if the translation is faithful and correct, can readers read with understanding without knowledge of Chinese history of war?

Comment by Chan Kai Yee on SCMP’s report, full text of which can be viewed at https://www.scmp.com/tech/big-tech/article/3010937/honors-new-smartphone-launch-london-become-immediate-test-reported.


China Has to Chose Best Timing for Ingenious Surprise Counterattack


BBC says in its report “US firms in China fear ‘retaliation’ against Huawei curbs: AmCham”, “A top business lobby group representing American firms in China said they have “real concerns” over how Beijing may respond to US action taken against Huawei.”

That shows the group’s ignorance of war. Trade war is also a war. It has to be fought with wise strategy. Retaliation is but front engagement mainly for one’s dignity. According to China’s gifted strategist Sun Tzu, in any war one has to win with ingenious surprise move while conducting frontal engagement.

If what one may do for retaliation in one’s frontal engagement hurts oneself instead of one’s enemy, one will be stupid in retaliating that way.

In a war, one must hit one’s enemy hard and do one’s best to benefit oneself. For example, China shall take back the Chinese market dominated by US firms in China.

For example, Apple nearly dominates China’s mobile phone market. The US has made things hard for Apple to sell its products back to the US due to its tariff hikes. China shall create difficulties to add fuel to the fire set by Trump to burn down Apple and thus take back its market.

There are also quite a few ingenious surprise moves China may take but China has to chose the best timing to take the moves all at once at a time when the US is most vulnerable. For example when the US is having a recession, a fiercely contended presidential election, etc.

According to Sun Tzu’s teaching, in a war, one shall keep oneself in an invincible position and not miss the chance when one’s enemy can be defeated.

Comment by Chan Kai Yee on BBC’s report, full text of which can be viewed at https://www.bbc.com/news/business-48361689.


Xi Happy at Tariff Hikes, Trump Furious to Place All-round Pressure


We have two very interesting reports on US-China trade war. The first is SCMP’s report titled “Xi Jinping says trade war pushes China to rely on itself and ‘that’s not a bad thing’” on September 26.

The report quotes Xi as saying, “Internationally, it’s becoming more and more difficult [for China] to obtain advanced technologies and key know-how. Unilateralism and trade protectionism are rising, forcing us to adopt a self-reliant approach. This is not a bad thing.”

By trade protectionism, Xi obviously refers to Trump’s trade war attacks at China.

However, Xi did not stop at technology self-reliance. The report quotes him as saying that China was a big country which must “depend on itself for food supply, depend on itself for economic development, and depend on itself for manufacturing”.

Now food ranks first in Xi’s self-reliance. It means Xi is determined to free China from its dependence on US exports of agricultural products. Sorry, US farmers.

Trump thought he would have brought China down to its knees by his high pressure of tariff hikes. Xi’s firm response, the first ever of Xi’s response to Trump’s trade war, makes Trump furious. Trump sees that he has limited ammunition in tariff hikes. What if he has imposed tariff hikes on all Chinese goods but still fail to subdue China?

He has to find other means. That is reflected in Reuters’ report today titled “Trump’s election meddling charge against China marks U.S. pressure campaign”. It says that according to senior US officials, Trump’s “accusation of Chinese meddling in upcoming U.S. elections marks a new phase in an escalating pressure campaign against Beijing that Washington is pursuing on multiple fronts”

The accusation is not supported by any evidence. Reuters says, “The only specific action by China that Trump cited was that it was ‘placing propaganda ads’ in U.S. newspapers, referring to a Chinese government-run media company’s four-page supplement in the Sunday Des Moines Register promoting the mutual benefits of U.S.-China trade.

The ad may has some influence on Iowa farmers but Reuters says, “However, the practice of foreign governments buying space in U.S. newspapers to promote trade is common and differs from a clandestine operation run by a national intelligence agency.”

Trump’s accusation proves what US senior officials said about Trump, being furious, resorting to all-round pressure on China to force it to surrender.

It is also proved by recent flights of US B-52 bombers in East and South China Seas, US planned sale of weapons to Taiwan, etc.

In my previous posts I said that a soldier may fight with emotion but a commander must fight with wisdom. It seems that Trump is now fighting with emotion while Xi, with wisdom. Trump’s accusation, B-52 flights and weapons sales to Taiwan cannot hurt China but Xi’s self-reliance may hit the US hard.

Tariff hikes are but frontal confrontation, according to Sun Tzu’s teaching, to win the war China shall have ingenious surprise move. Now, self-reliance is Xi’s ingenious surprise move.

Xi wants China to rely on itself in food, manufacture and technology. If so China will not import food, airliners, electronics, chips, etc. from the US. With self-reliance on China’s huge market, China will no longer rely on its exports to the US. Then what will be the use of tariff hikes?

Xi’s self-reliance will ensure Trump’s failure in trade war.

Comment by Chan Kai Yee on SCMP and Reuters’ reports, full text of which can respectively be viewed at https://www.scmp.com/economy/china-economy/article/2165860/xi-jinping-says-trade-war-pushes-china-rely-itself-and-thats and https://www.reuters.com/article/us-usa-china/trumps-election-meddling-charge-against-china-marks-u-s-pressure-campaign-idUSKCN1M72VQ.


Know Yourself, Know Your Enemy, China Never in Peril in Trade War


Know yourself, know your enemy, you will never be in peril in a war. That is Chinese gifted strategist Sun Tze’s teaching.

SCMP’s report “China sets up think tank alliance to better understand US as trade war continues” on July 17 reflects China’s efforts to know its enemy of trade war better.

The report, however, reflects common lack of understanding of China by saying that China sets up think tank alliance “is yet another efforts by Beijing to reduce rising tensions with Washington”.

No, it’s China’s efforts to win the trade war. To win a war, one has to know oneself and one’s enemy. In wars, China has to follow Sun Tzu’s teaching. Otherwise it may lose.

A war begins when tensions have risen to the maximum and all efforts to reduce the tensions have failed so that it is too late to form an alliance of think tanks to find a way to ease tensions.

Since the war has already begun, China has to focus on the way to win the war. That is not what those think tanks specialized in research to know the US is able to do. That is the job of a talented commander-in-chief. It’s the job to design ingenious surprise moves to win the war.

Some members of the think tanks know that well. The report quotes Liu Weidong, a US affairs expert from the Institute of American Studies, another alliance member, as saying that “it remains to be seen to what extent Beijing’s policies could be influenced by Chinese think tanks, since research by such groups did not play a big role in Beijing’s policymaking process”.

Not only SCMP but also Chinese think tanks fail to know the real goal in forming the alliance.

In my post “China Cannot Win Trade War with US by Passive Defense” on July 19, I comment SCMP’s report “How can China win a trade war? A Beijing think tank offers its top tips” the same day.

I said the suggestions of the Beijing think tank, Renmin University’s National Academy of Development and Strategy, are but passive defense, which may help reduce the injuries caused by US attacks in the trade war but cannot help China win the trade war.

Only very few commanders are able to design such ingenious surprise moves to win the war, whether military or trade war.

For example, Chinese commander-in-chief has proved his talents in dealing with the South China Sea issue. His ingenious surprise move in subduing the US and preventing a war the US might have started is his sudden fast construction of artificial islands to strengthen China’s defense there.

US military advantages there might have been its attack submarines that can fire hundreds of cruise missile at China from the South China Sea. The anti-submarine missiles and torpedoes deployed on the islands and the aircrafts stationed on the islands may wipe out US submarines as soon as they have revealed their locations in launching their missiles.

The US was taken by surprise so that it does not have enough time to make a decision stop the construction.

Since the Chinese commander-in-chief has determined to fight instead to surrender to the US without fighting, he must have designed his ingenious surprise moves but those are his secrets that only his closest assistants know.

The think tanks are far from being competent to design such moves. In fact, very few talented generals in the world are able to do so.

For another example, China’s talented general Peng Dehuai designed the ingenious surprise move to stealthily encircle US troops at the beginning of the Korean War.

His plan was to annihilate tens of thousands US troops encircled by him. That might have been the killing of lots of US troopers. To attain that goal, he deployed the 38th Army, a heroic army well-known for its achievements in the civil war, to prevent US troops’ retreat, but US air force bombed 38th Army’s strongholds so severely that it failed to stop the retreat of US troops.

General Peng was so upset that he scolded Qin Jiwei, commander of the 38th Army, so severely that made him feel profoundly humiliated.

Qin was determined to recover his army’s honor. In the next battle, his army excelled to make General Peng so pleased to shout: “Long Live the 38th Army!”

General Peng was excited as Qin’s army played the key role to enable Peng to realize his goal to kill and capture lots of US troopers.

In a war the general is pleased to inflict heavy casualty on his enemy. In a trade war, the commander shall hit his army hard to make his enemy suffer seriously.

That will raise the tensions to the zenith instead of reducing the tensions.

The results of a war are determined by military strength. In the Korea War, Chinese troops were much more inferior in weapons, equipment, supplies and other material resources. However, China’s military strength was compensated by popular support, the talents of its general and the bravery of its troops.

The results of a trade war are determined by economic strength. Unlike the Korean War, China now has more abundant resources than the US and much better popular support. If Chinese commander-in-chief is able to design and successfully carry out ingenious surprise moves, the US will suffer tragic defeat.

Comment by Chan Kai Yee on SCMP’s report, full text of which can be viewed at https://www.scmp.com/news/china/diplomacy-defence/article/2155678/china-sets-think-tank-alliance-better-understand-us.


The Ways China Hurts US, Benefits Itself in Trade War with US


In China’s wars, China usually hurts the enemy while benefiting itself.

For example, when it annihilate an enemy division, it hurts the enemy severely while benefits itself by taking the division’s weapons and supplies.

That is the right way to fight a war.

Now, SCMP’s article “China and Trump’s tariffs: stop, or I’ll shoot myself too” on June 25 regards devalue of Chinese currency, dump Treasury debt, boycott US companies as China’s weapons to strike back in its trade war with the US as tariff increase cannot cause as much damages to the US because US exports to China are much smaller than China’s exports to the US.

The article is right in its view that such three moves will hurt China while hurting the US, but it is wrong to believe that China has no options to strike back.

The article was written on June 25 after Chinese President Xi Jinping met Western business leaders on June 21 to promise them that China will widen opening to the outside world.

According to SCMP’s report “Which American CEOs did Xi Jinping meet in Beijing? UPS, Pfizer, Goldman all on the list” on June 22, CEOs of major American companies were among the major Western businessmen Xi met. SCMP says those were US business delegates at the Global CEO Council round-table summit on June 21.

SCMP says in its report, “The CEO council was set up in 2013 by the Chinese People’s Association for Friendship with Foreign Countries, one of Beijing’s diplomatic arms, to improve the government’s ties with multinationals.”

Premier Li Keqiang instead of Xi attended the four previous summits, but it was Xi who attended the summit this year. Why?

Chinese media reports on the summit do not reveal the contents of the summit but SCMP believes “It apparently was an effort to lobby foreign businesses to help ease trade tensions before July 6”.

However, it is unlikely that those CEOs may really affect Trump’s decision since US businessmen including the said American CEOs have lobbied hard in vain quite extensively for a long time.

What then has Xi told US CEOs in the summit since it is useless for the CEOs to make Trump change his mind at the last minute?

Tell them China will drive them home or make things hard for their enterprises in China?

Soldiers can fight with emotion in war but commanders must fight with wisdom instead of emotion.

I do not know what Xi said to them. What I know is that Xi is stupid if he boycotts or makes things difficult for the CEO’s US enterprises in China.

Trump is enacting a law to make it impossible for Chinese to take significant shares in US enterprises in order to prevent China from getting US technology. Now, those companies with US technology have already been in China so that China need not pay a penny to take shares in them. As far as I know most American enterprises in China are joint ventures in which China has substantial shares. Therefore, according to Chinese official media, Xi, instead, tell US CEOs China will open wider to them to encourage their investment in China.

That will be the wise way to fight trade war.

Trump has reduced tax to encourage US entrepreneurs to withdraw their investment from China and invest instead in the US to enjoy the tax reduction. Some big American companies do have plans to set up new plants in the US to provide jobs for American people.

That is the aim of the tax reduction. Is China wise in driving US investment back to the US so as to increase jobs in the US and reduce jobs in China?

China shall impose high tariffs on the goods that those CEO’s enterprises produce in the US. That will make their export to China unprofitable so that they will not be able to enjoy income tax reduction

China shall say sorry to them that the high tariffs though make them suffer are not directed at them. China is forced to increase tariffs as retaliation. Otherwise China will be humiliated.

That will be the frontal engagement in the trade war.

The ingenious surprise move is that China shall tell them to move to China their production for export to China. That will reduce US jobs and tax income while increasing Chinese jobs and tax income. It will hurt the US and benefit China.

China shall regard US enterprises in China as Chinese ones and China’s precious assets and powerful weapons in fighting the trade war with the US. Therefore, China shall provide preferential treatment for them to transfer their production to China.

There is another way to benefit US enterprises in China, which will benefit China as they are Chinese enterprises and hurt the US more severely. My wise readers can guess that from the above-mentioned ingenious surprise move so that I will not elaborate.

I am afraid that revelation of China’s ingenious moves may make such moves lose surprise but it may perhaps stop the trade war when US decision makers have learned from the description of the moves that there is no hope for them to win the trade war. However, I doubt US officials may read my posts and make decisions on the basis of my posts as my posts are not widely read.

Article by Chan Kai Yee