The Liberty magazine interviewed a finance expert on the next battle after the U.S.-China trade war.

Interview



Economic Analyst Tetsuya Watanabe Born in 1969, he graduated from the Nihon University before working at a trading company and eventually becoming a freelance analyst. He has numerous publications in Japanese.

For a long time, the U.S. has been under the illusion that progress and wealth will make China embrace freedom. But with the Xi Jinping administration, China is heading back towards socialism. Now in the U.S., not just Trump, but also Congress is bipartisan in acknowledging this mistake. They are now trying to separate China from the global market.

Congress Stricter Than Trump

Congress’ hardline stance against China is stricter than Trump’s.

For instance, in July, the House of Representatives passed a policy bill restricting China’s power to buy American companies with valuable advanced and infrastructural technology.

The Bill bans the government use of goods and services by Chinese tech giants ZTE and Huawei who use remote controlled data transfers to steal information. Both companies are attempting to create 5G technology, but Chinese telecommunications services are connected to the military and pose a huge threat to the U.S.

So American government institutions and related businesses and organization are prohibited from using services from those two companies after September of 2019. This will be a huge blow for China.

The U.S. also has the International Emergency Economic Powers Act (IEEPA). It authorizes the president to block foreign investments if he recognizes an unusual and extraordinary threat to the country. This is somewhat like a nuclear bomb: if used, it could cause the collapse of the Chinese Yuan and the end of many Chinese businesses.

The U.S.-China conflict is essentially a military conflict. As we can see from the South China Sea problem, the ‘hypothetical enemy’ against whom the U.S. implemented the 2014 Freedom of Navigation Operations was China. Countries that don’t protect the basic values of freedom, democracy, equality and human rights are enemies of the U.S.

The U.S.-China Cold War has already started.

The U.S. Preps for Finance War

The top priority for U.S. state security is to protect the U.S. dollar supremacy. In 2016, however, China declared that they would destroy the dollar supremacy system after the Chinese Yuan was added to the Special Drawing Rights (SDR) basket of the IMF.

After that, the U.S. Department of the Treasury that used to be a pro-China, quickly became anti-China to protect the dollar supremacy. The U.S. aims to use trade tariffs to destabilize the Chinese Yuan and destroy the Chinese economy.

China’s foreign exchange reserves that peaked at $4 trillion have dropped to $3 trillion. Additionally, the actual contents of the foreign exchange reserves are suspect, and may not even be the amount announced.

If China runs out of foreign exchange reserves, they will no longer be able to protect their currency and will have no choice but to switch to the floating exchange rate system [which constantly fluctuates]. If this happens, the value of the Chinese Yuan will drop to half.

If China switches to the floating exchange rate system, banks that they initiated, such as AIIB and BCRICS, will collapse.

A War for Democracy

In fact, China should have upon joined the IMF on the same conditions as other developed countries: the liberalization of foreign exchange, an independent financial policy by the central bank to stabilize commodity prices, and the liberalization of capital flow with foreign countries.

Xi’s ideal for a powerful socialist country is the exact opposite of this, which is why Trump is trying to destroy China’s financial market and direct them towards democratization.

Considering this, we see that the U.S.-China trade war is now about to shift to a finance war.