China Exposed — Investors Should Adopt the Brace Position

China Exposed — Investors Should Adopt the Brace Position

Dear Reader,

The four most expensive words in history are said to be ‘it’s different this time’.

Normally those words are used to justify some sort of insane price rise in an asset class. In other words, people trot out those four words when a bubble is forming, and the high prices have decoupled from the fundamentals.

Today, when I say it’s different this time, it’s not to justify high prices or a rallying sector. Rather it’s to let you know that this upcoming decade of investing is going to look very different from the decade before.

Buy and hold was a strategy that saw many investors come out of the financial crisis unscathed. The 2020s may not present the same opportunity.

Which is why my digital desk buddy Callum Newman has developed a unique investing strategy to help investors ‘ride the news’, as opposed to just buying now and hoping for the best. You can check out what Callum’s idea is over here.

Oh, and the other thing that’s very different about this new decade? The China growth story. Or as Jim puts it below, more like the ‘China myth’ story…

Today Jim tells us that the Chinese economic miracle is nothing more than a mirage, and we can’t rely on their economic growth for our future prosperity this time…

Read on for more.

Until next time,

Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia

The China Myth, Exposed

For almost 20 years, the myth of a ‘rising China’ and the ‘Chinese century’ has been gathering steam.

Of course, the US is recognised as a superpower now, but its days as the greatest power in the world were numbered, according to this myth.

China was prized both by US manufacturers for its cheap labour and by US consumers for the cheap prices on Chinese exports (never mind that the goods were shoddy with few exceptions, and often fell apart not long after you removed them from their glossy clamshell wrappers).

The globalists praised the advent of highly integrated supply chains and just-in-time logistics that would bind global economies together and pave the way for One World governance, taxation, and money.

There was only one problem with this narrative. It was completely false…

Globalist dream is over

Chinese labour is running low because as many as possible have already moved from the country to the city.

Tight supply chains proved fragile as we saw during the COVID-19 pandemic when the US could not get protective gear made in China and China threatened to cut off exports of antibiotics to the US.

Our craze for cheap Chinese goods meant that China piled up over US$1.4 trillion in US Treasury notes, which makes China their biggest creditor.

Beyond that are horrific human rights abuses such as organ harvesting (without anaesthetic) from political dissidents, concentration camps, re-education camps, forced abortions, forced sterilisations, firing squads, and more.

The Silicon Valley CEOs simply turned a blind eye in pursuit of profits. The cost in lost US jobs was catastrophic.

The China myth has now been revealed to be a fraud.

China has shown its true colours by suppressing freedom in Hong Kong in violation of a treaty with the UK that was supposed to run until 2047.

China’s military is still weak, despite advances in recent years.

Its economy is bloated with unpayable debt and it is alienating potential friends from Australia to Japan, and beyond.

The globalist dream for China has crashed and burned. Good riddance.

Meanwhile, dramatic developments may be under way within China itself…

The coming geopolitical shock

Washington Times national security reporter Bill Gertz has excellent connections inside the US intelligence community and a long track record of accurate geopolitical predictions far in advance of events.

Gertz now reports that China is going on red alert.

It’s putting up signs telling citizens how to get to bomb shelters. Military factories are being moved away from factories that produce civilian products.

Ham radio operators report rumours of an impending attack on some remote islands technically controlled by Taiwan.

These activities suggest China may be preparing military action of some kind.

More importantly, rumours persist of an internal power struggle between Chairman Xi and what is known as the Shanghai political faction led by Zeng Qinghong.

China is entirely subordinate to the Chinese Communist Party. You can study the Chinese government all you like, but you won’t learn anything about how China works unless you study the role of the party.

The Communist Party and its survival come first. Everything else in China is devoted to that end.

The problem is that the Communist Party itself is opaque and difficult to understand. Written rules mean nothing. What counts are personal loyalties and control over organs of state power through party cadres.

For the time being, Communist Party Chairman Xi seems to be in a dominant position. He has the firmest grip on power of any leader since Mao Zedong, who died in 1976.

Considering China is much richer and more powerful militarily today than in the days of Mao, Chairman Xi is arguably the most powerful individual in history with firm control over the lives of 1.4 billion Chinese and many more in surrounding countries.

It’s difficult to know, but Chairman Xi may be walking on shaky ground.

It’s often difficult to sort fact from fiction in China, but investors should be braced for some kind of geopolitical shock emerging from China in the next few months.

It could be military action or what could essentially be a coup.

The rumours may amount to nothing, but they may indicate a major shock. And I should point out that Bill Gertz has a great track record for accurate forecasting.

US Treasuries, gold, and cash would benefit from a Chinese shock, while Chinese stocks and emerging markets would be badly damaged.

Investors should prepare accordingly.

All the best,

Jim Rickards Signature

Jim Rickards,
Strategist, The Daily Reckoning Australia

PS: Aussie Gold Miner Stocks: Free report reveals why Australia is set to become the next ‘gold epicentre’ — which could result in a HUGE spike in Aussie gold stock prices. Click here to learn more.