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


US Strategy to Win the Non-military War against China


Chinese Gifted Strategist Sun Tzu’s Teaching
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。)”

The surprise ingenious move can be a part of the frontal engagement or but 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 is itself an ingenious surprise move.

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 talents to design his ingenious surprise move in his specific combat.

Trump’s Strategy
According to Sun Tzu, one shall calculate his factors to win and lose 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 naïve calculation.

What counts is not the scale of tariff hikes but the amount 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 a combat in Korean War, US troops kept on air raids and artillery bombardments on the Chinese troops stationed on a hill. 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 raised 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 lower prices. China’s exports of those goods have not been affected prices of the goods hiked to include the tariff hikes, the US has to keep on importing such goods. As a result, US tariff hikes do not hit China. They, on the contrary hit US itself by hiking American people’s living costs.

China’s Retaliation Hits US Farmers Hard
China’s retaliation tariff, on the contrary, hurts 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.

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.


China’s Xi Silently Exploits Trade War to Facilitate His Vital Reform


Xi’s predecessor Hu Jintao has already realized the need of further reform to switch from export- and investment-geared economic growth to innovation-, creation- and consumption-geared economic growth. Without such reform China’s further economic growth will be impossible. He has not, however, made any significant progress in his reform due to the resistance of vested interests.

Xi carries on Hu’s reform and has made some progress but far from enough as the reform is a hard and even bitter transformation. Lots of export-oriented enterprises have either to move abroad to lower their labor cost or switch to products with higher technology through innovation and creation.

For those two aims, Xi has put forth the Belt and Road initiative to build infrastructures in underdeveloped countries to facilitate transfer of export-oriented industries to countries with cheaper labor and the Made in China 2025 Plan to encourage and subsidize innovation and creation.

Xi has already begun to carry out the initiative and plan but it takes time. If Xi has already attained the two aims, Trump’s trade war cannot hurt China. Now the trade war may give rise to quite serious hardship as the transformation needs more time.

Trump, being a strategy illiterate, is giving Xi the precious time he needs. If Trump had been a master of strategy, he would have concentrated superior force to conduct surprise attack at China, i.e. imposing very high tariffs on all China’s exports to the US at once. That will give rise to lots of bankruptcies and unemployment as export-oriented enterprises do not have time to move abroad or switch to high-tech production.

Trump, however, fails to understand his enemy. Sun Tzu says that in order not to be in peril in war, one has to know oneself and one’s enemy. Trump is ignorant about China, He believes that gradual escalation will gradually make China yield as the hardship caused by tariff hikes grows. He does not know that China is a heroic nation when it has a wise and brave leader so that it will never surrender whatever hardship the trade war may bring to it.

The failure to concentrate superior force to conduct surprise attack and illusion about China’s weakness foretell that Trump is doomed to failure.

With Trump’s gradual pressure, China will have enough time to carry out its transformation in haste but not too much haste to cause serious hardship, but will complete its transformation earlier and surpass the US earlier not only in economy but also and especially in high technology.

Why? China has abundant financial resources and gives priority to funding and subsidizing the research and development of science and technology as Xi wants to realize his China Dream of national rejuvenation. How can he attain his goal if China cannot become the best in the world in science and technology?

The US however, lacks funds and understanding of the importance of funding and subsidizing basic sciences. The Washington Post’s article “America is sacrificing the future” on August 3 tells us that the US has no future:

Entitlement spending (retired people’s spending) and the cost of servicing the surging national debt increasingly crowd out rival claims on scarce public resources, including those for basic science. Because it is politically expedient to sacrifice the future, which does not vote, to the consumption of government services by those who do, America is eating its seed corn.

For Trump obtaining votes for his reelection is much more important than basic science.

Article by Chan Kai Yee.

Full text of Washington Post’s article can be viewed at https://www.washingtonpost.com/opinions/america-is-sacrificing-the-future/2018/08/03/21085a3c-9660-11e8-80e1-00e80e1fdf43_story.html?utm_term=.b40699e34176&wpisrc=nl_most&wpmm=1.


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


Tit-for-Tat Retaliation Stupid for China in Trade War with US


Sun Tzu’s teaching: In all fighting, ingenious surprise move shall be taken to win the battle while frontal engagement is being carried out.

Such ingenious surprise moves are quite few in wars now perhaps because there are too many strategy illiterate generals now.

So is trade war.

SCMP says in its article “China and Trump’s tariffs: stop, or I’ll shoot myself too” today that as US import $505 billion from China while China imports only $130 billion from the US if the US increases tariffs on more than $130 billion imports from China, China will not be able to retaliate with tariff on equal value of imports from the US.

China’s other options to strike back such as devaluation of its currency, dump of US Treasury debt or boycott US companies will all damage China at least as much as the US. The wise writer believes if China shoots the US that way, it will shoot itself.

However, tariff itself is a weapon that shoots the enemy while shooting oneself. White House economic adviser Peter Navarro’s words “It’s clear that China does have much more to lose” shows that the US clearly knows that the US will suffer as high tariff will force American consumers to pay higher prices for lots of imports from China indispensable for them. However, if one fears loss there will be no war at all. The US wants to fight a trade war because it believes that China will suffer much more seriously that the US does.

Perhaps wise people shall assess whether the US will suffer more seriously than China does if they use any of the above three weapons of devaluation of currency, etc.

However, even if the US does suffer much more than China, I would regard China as stupid in using any weapon that hurts itself while hurting its enemy.

Therefore, the above-mentioned tit-for-tat retaliation including retaliation of tariff increase that hurts China itself while hurting its enemy is stupid.

At best, those are frontal engagement. If China has no ingenious surprise moves, I would regard Chinese leaders as strategy illiterate too.

Are there such moves? There are and quite powerful. Let’s wait and see.

Comment by Chan Kai Yee on SCMP’s article, full text of which can be viewed at http://www.scmp.com/week-asia/opinion/article/2151970/china-and-trumps-tariffs-stop-or-ill-shoot-myself-too.


Great Chinese Emperor’s Way to Conquer Turkic Khanate


When the US challenged China with a trade war, Chinese President Xi Jinping made concessions to the US while Chinese media and other officials expressed their firm determination to fight. The following story about Emperor Taizong’s way to deal with enemy’s challenge will perhaps help readers understand Xi’s way.

When Emperor Taizong of Tang succeeded to the throne in 622, Tujue (the Turkic Khanate) was very strong. For decades China’s northern states when China was divided into a few states and China’s central government when China had been reunified into one empire had to enter into peace treaties with Tujue on humiliating terms of sending a princess to marry Tujue’s king and giving him lots of gold and silk. Emperor Taizong of Tang, one of the greatest emperors in Chinese history, drew up and carried out a plan to finally conquer Tujue. The following is my translation of the description of Taizong’s wise way to deal with Tujue invasion of China in 622 in Volume 191 of the Comprehensive Mirror to Aid in Government, a history book specially compiled for emperors to refer to in governing their empires:

Sili (Tujue King Jieli’s envoy) said with exaggeration, “Kings Jieli and Tuli have brought one million troops here.”

The emperor scolded him, saying, “We have concluded a peace treaty with your king, sent our princess to marry your king and given you countless amount of gold and silk once and again. Is your king not ashamed in unilaterally breaching the treaty and bringing your troops deep into our territories! You are barbarians but you still shall have human conscience. How can you entirely forget our great favor and boast your strength! I now will kill you first.” The envoy was scared and begged for mercy. Xiao Yu and Feng Deyi asked the emperor to be courteous to the envoy and release him. The emperor said, “If I release him now, the enemy would think that I am afraid of them and would rely on their strength to act more wantonly.” He then detained the envoy at the Edict Examination Bureau.

Then Emperor Taizong and five of his officials rode out of his palace on horseback directly to the bank of the Weishui River. He talked with Jieli (King of Tujue) across the river. He condemned Jieli for breach of the peace treaty between Tang and Tujue. The troops of Tujue were panic-stricken and all got down their horses and fell on their knees to salute the emperor. Soon various Tang troops came and the field was covered by flags, helmets and armors. Jieli looked scared when he found that his envoy did not come back but the emperor came with few entourages and that the Tang troops looked well organized. Emperor Taizong told the messengers from various troops to go back to deploy the troops while he alone stayed to talk with Jieli.

Xiao Yu thought that the emperor took the enemy lightly. He stopped the emperor’s horse and insisted on remonstrating with the emperor. The emperor said, “I have drawn up a plan through careful consideration that you are ignorant of. The reason why Tujue dared to come all out directly to the suburbs of our capital was because there was trouble in our country. They thought that as I had just succeeded to the throne, I was not able to resist them. If I had shown them that we were weak and closed our city gates to resist them, then they would have told their troops to loot at will and we would not have been able to stop them. That is why I come alone to show them that I take them lightly. On the other hand, I give a show of the strength of our troops to tell them we would certainly fight against them. This has surprised them and they are at a loss what to do. As the enemy has come deep in our territories, there is certainly fear in their hearts; therefore, we will surely win if we fight against them and the peace will be a stable one if we enter into a peace treaty with them. We depend on what I do now to subdue Tujue. You just wait and see.”

That very day, Jieli came to ask for peace. The emperor gave the order to accept his request. The emperor then returned to his palace. Two days later, he went to the west of the city, killed a white horse and entered into a peace treaty with Jieli on a temporary bridge. Tujue then withdrew its troops.

Xiao Yu asked the emperor, “Before entering a peace treaty with Tujue, the various generals vied with one another in asking for a battle against it, but your Majesty did not allow them to fight. We the officials also wondered what your Majesty would do. Soon the enemy retreated. What was your strategy in achieving that?”

The emperor replied, “I observed and found that Tujue troops were not well organized though they were large in number. What their king and officials wanted was only gifts of gold. When their king asked for peace, only he alone stayed at the west bank of the Weishui River while all his high officials came to have an audience with me. If I had made them drunk and arrested them and then attacked their troops, I could have defeated them like smashing rotten woods. I could have ordered Changsun Wuji and Li Jing to ambush the enemy in Youzhou (the border area with Tujue). When the enemy ran away, there would have been the troops in ambush before them and our major troops in their back. It would have been very easy to defeat them. I did not fight because I just succeeded to the throne, the situation in our county was not stable, our people had not become rich and we should let our people rest and foster them.  If we had fought against the enemy, we would have suffered quite a few losses and incurred deep hatred of the enemy. Then they would be afraid of us and be on their guard so that it would be difficult for us to achieve our goal to conquer them later. Therefore, we did not fight but gave them gold and silk. They naturally would retreat since they got what they wanted. They will become conceited and be unprepared. When we have build up our strength and found an opportune timing, we will annihilate them at one stroke. ‘To take it from someone, surely one must first give it to him’ (a quotation from Chapter 36 of Laozi’s Daodejing). (This blogger’s underline) That was my strategy. Do you understand now?”

Xiao Yu saluted the emperor again and said, “That is beyond my wisdom.”

Three years later Emperor Taizong conquered Tujue.

China is now moving its labor-intensive industries to Silk Road economic belt to avoid US tariff increase on Chinese products of those industries, making efforts to produce import substitutes to reduce its imports from the US. It will win its trade war with the US without tariff increases. That is what China is doing to subdue the enemy without fighting according to China’s gifted strategist Sun Tzu’s teaching.

Article by Chan Kai Yee


Import Substitutes, the Way to Kill in Trade War


Sun Tsu says, “Fighting and winning each and every battle is not the best of the best; subduing the enemy without fighting is the best of the best.”

What about that teaching in a trade war. Imposing tariffs on lots of imports is not the best of best, producing import substitutes is the best way to kill.

For example, China’s retaliation at US tariff increases by imposing high tariff on its import of US soybean. It certainly is not a good way, let alone the best of the best ways.

American experts are not worried as China cannot find alternative source for soybean to satisfy its huge demand for it. As a result, Chinese consumers either have to pay higher prices or suffer soybean shortage.

If China has no import substitute for American soybean, in terms of soybean it is defeated by the US.

However, if it can find alternative sources of supply and put an end to US export of soybean to China, there is no need for tariff increase. China will completely win without fighting.

Chinese leaders are wise to see that inability to supply enough food to satisfy China’s hugh population’s needs is dangerous, especially in wartime. As a result, China has been improving its agricultural technology and greatly increased its food output, but there is a limit to that. There are lots of mountains and deserts but limited arable land in China.

What shall China do? Utilization of other countries’ redundant land is a way out. China is now conduct agricultural win-win cooperation with Ukraine. It can either grow soybean there or transfer its wheat or other food production there and use the land freed for soybean production. Xinhua’s report on the cooperation will be reblogged at the end of this article.

China can also rent Russian land near its northeast border for soybean production. In fact Northwest China was a major exporter of soybean in the past. The import substitute strategy will enable China to subdue the US without fighting.

China’s “made in China 2015” will enable China to produce import substitutes for lots of high-tech products, especially airliners. China has already been conducting test flights of its 130-seat airliner C919 and is developing jumbo airliners in cooperation with Russia. When China and Russia use its own airliners and other high-tech products and even export them in competition with the US. The US will be in real trouble.

We can foresee the grievous defeat the US will suffer in its trade war with China.

The following is the full text of Xinhua’s report about China’s win-win agricultural cooperation with Ukraine:

Chinese investors breathe new life to Ukraine’s rural

Xinhua | Updated: 2017-04-19 14:30

KIEV — Newly sown fields, well-kept houses and modern farms — the rural area surrounding Koryukovka settlement shines like a pearl among the string of abandoned villages in a remote corner of Ukraine’s northern Chernigov region.

After experiencing labour force outflow for decades, Koryukovka gained new life in 2013, when it attracted the interest of investors from central China’s Henan province.

The Chinese State-owned Huangfanqu Farm entered into a joint venture called Fanda with a Ukrainian partner and has already invested more than $10 million in the development of farming in Koryukovka district, changing the lives of locals.

Reanimation of livestock farm

“Since the Chinese company started to finance us, we have significantly increased the number of livestock and boosted the productivity of our cattle,” Olga Ruchko, a technician at the Koryukovka livestock farm, told Xinhua.

Standing proudly in front of the modern farm, Ruchko was not trying to hide her pleasure with the Chinese investors.

In 2013, the farm in Koryukovka faced a threat of closure because the previous owners failed to provide enough funds even for buying protein-rich feeds for cows to help the animals produce enough milk and gain weight.

“Previously, we could not afford good feeds and our livestock has not got enough nutrition. But now, with Chinese financing, we buy everything we need — oil cakes and concentrated feeding stuff for cows and mixed cattle feed for calves,” Ruchko said.

Due to better feeding and improved animal welfare after the renovation of the farm, the daily milk output per cow has increased from 10 to 22 liters.

Chinese investment has helped double the livestock at the farm to 2,000 cows and calves and provided jobs to about 100 residents of Koryukovka.

The farmers sell about 9 metric tons of fresh milk to local cheese producing plants per day. They also provide free milk to a local kindergarten.

“Currently, we supply milk as a raw material, but the company plans to build its own processing plant to produce finished products,” Viktor Yushchenko, chairman of Gorky enterprise, which runs the Koryukovka farm, told Xinhua.

Decent life for villagers

The farm at Koryukovka, nearly 300 kilometers north of the Ukrainian capital, is one of the two agricultural enterprises managed by Fanda. The other is located in Naumovka, a suburb of Koryukovka, just 15 minutes’ drive away.

Once a flourishing village during the Soviet times, Naumovka lost most of its younger generation, who left in search of better life in the city.

Now, young people stopped moving out from Naumovka as the village offers them new employment opportunities. Chinese investment revived about 3,000 hectares of arable farmland in Naumovka, providing jobs to more than 130 villagers.

In 2013, Volodymyr Metla, a 40-year-old resident of Naumovka, was considering moving to Kiev to take a job as a construction worker so that he could support his family.

Metla’s life has changed since Chinese investors came to his village and gave him a job as a tractor driver, while employing his wife as a junior accountant.

“I have been working for the Chinese company for about four years and I like my job. Chinese managers pay the wages timely, they have good agriculture equipment and they are good people. We made friends with some of them,” Metla told Xinhua.

Farmers from nearby villages also came to work in Naumovka.

“I am from Kholmy, it is 30 km away from here. I used to work for a local enterprise, but it had collapsed. Here I work as a driver of a combine harvester, a sowing machine and a truck,” Sergey Onopchenko told Xinhua.

Win-win cooperation

Apart from managing livestock farm in Koryukovka and fields of corn, oats and lupine in Naumovka, Fanda rents a forest of 2,700 hectares, where it plans to raise wild animals, such as deer and hunting birds.

Zhang Zhenhua, the director of Fanda, said that the agricultural cooperation between Chinese and Ukrainian enterprises is a win-win for both sides due to the complementary advantages of the two economies.

China has experience and knowledge of modern farming technologies, its investors have financial resources, while Ukraine has fertile land and good farming infrastructure.

“Before coming to Ukraine, we have visited many countries in Africa and Southeast Asia. Then we found out that agriculture is very well developed in Ukraine and decided to invest in this country,” Zhang told Xinhua.

The intention of the Ukrainian authorities to join the Chinese Belt and Road Initiative has reassured the Chinese farmers of prospects in Ukraine.

Speaking of his dream, Zhang said it is simple: to further develop his enterprise to bring benefits for his employees and local people.

To bring his dream to life, Zhang is seeking fresh investment for reconstructing a pig breeding complex, building a greenhouse for vegetables and fruits, and constructing a milk processing plant.

“Throughout the world, agriculture works on the same principles: the cultivation of land and breeding of cattle does not make a big profit. To get more income, you need to process the products,” Zhang said.

Fanda is expected to invest more than $50 million in total. The projected capital injection will allow the company to create up to 1,500 new jobs in the Koryukovka district.

Article by Chan Kai Yee


China Moves Abroad Labor-intensive Industries through One Belt One Road


Hambantota deep water port

Sri Lanka’s Hambantota deep water port for China’s One Belt, One Road

Hambantota airport for China's One Belt, One Road

Hambantota airport for China’s One Belt, One Road

There will be quite a few advantages for Chinese President Xi Jinping’s Silk Road economic belt and 21-century maritime Silk Road (One Belt, One Road) initiative.

The most important is trade security by establishment of land trade route to Europe through Russia and Central Asia and safer maritime route through Indian Ocean with ports in Bangladesh, Sri Lanka and Pakistan.

The other also very important advantages include:
Finding an outlet for China’s overcapacity in its industries of construction, construction material, energy, transport, etc.;

Exploiting investment opportunities for China’s surplus capital; and

Moving China’s labor-intensive industries through development of infrastructures in the belt to the countries in the Belt where labor and other resources are much cheaper.

Reuters says in its report “Sri Lanka launches China-led investment zone amid protests” that the zone will create 100,000 jobs, which undoubtedly will mostly be jobs in labor-intensive enterprises moved from China.

According to Reuters, China’s port, airport and investment zone make “some countries, including India and the United States, nervous with Sri Lanka’s proximity to shipping lanes through which much of the world’s trade passes en route to China and Japan.

Those are trade passes to China and Japan not US or India, why shall they be nervous?

Anyway, we see from the developments Xi’s wisdom and vision. US president-elect Trump’s threat of a trade war may create difficulties for the export of China’s labor-intensive industrial goods, but Xi has taken a step earlier in building infrastructures abroad for China to move such industries to poor countries for export to the US. Xi has been subduing the US with his wise One Belt One Road strategy before the US starts the trade war.

The best way in military conflict is to subdue the enemy with strategy, the next, with diplomacy, the next, with fighting…                                                                                                                      Sun Tzu

Comment by Chan Kai Yee on Reuters’ report, full text of which can be found at http://www.reuters.com/article/us-sri-lanka-china-investment-idUSKBN14R0JG.