As the Beijing Winter Olympics get underway, all the world’s eyes are on China. But are the big financial players aware of what’s really going on that’s right before their eyes?
China Stocks Crash in US Markets
As tighter U.S. regulations came into force last year, weakness and fraud were revealed in many Chinese companies. As a result, we saw the crash of U.S.-listed China stocks in 2021.Looking for a Rebound?
Now, just a few weeks into the new year, the speculation among financial observers and investment banks is that after the crushing losses, a stock price comeback in 2022 is a reasonable possibility.That’s typical. When stock prices fall so quickly, conventional financial thinking has investors assuming that assets have been oversold.
The investment bankers remain dazzled and hypnotized by the prospect of gaining more access to the China market and the profits that it would bring.
But is expecting U.S. market-listed Chinese stock prices to fully recover reasonable?
This Time, It’s Different–Power Trumps Money
For one, unlike financial institutions, the Chinese Communist Party (CCP) ultimately is not about making money. Yes, the Party is full of millionaires and billionaires, but that’s beside the point. The two are linked, but as Alibaba’s former owner Jack Ma and other tech moguls discovered, power trumps money.With the first, you can always get the second. But it doesn’t always work so well the other way around.
The CCP’s national objective is to grow China’s power and project it around the world.
Hong Kong and Beijing: The Alternative to Wall Street
Moreover, the CCP no longer needs or cares if Chinese stocks perform well on Wall Street. With its takeover of Hong Kong, the Party now has the Hong Kong Stock Exchange, or more formally, the Hong Kong Exchanges and Clearing Limited (HKEx), for that.Normalcy Bias and the Rise of the Middle Kingdom
Meanwhile, global investment banks and Wall Street firms that are heavily invested in China insist that Chinese companies will regain their value on U.S. exchanges, but it doesn’t really matter.Part of the execution of that plan likely involves a crash in the U.S. markets and Beijing shorting them to take billions, if not trillions, of dollars out of the U.S. economy virtually overnight.
The net effect would be a loss of world confidence and prestige for the United States.
How might this crash come about? How could the CCP trigger it?
The Opportunity Is Now
The larger point is that the Chinese regime is now positioned to damage the United States in ways that other adversaries cannot, while providing the world an alternative.As a global economic power, Beijing enjoys the currency clout, established top-tier, China-based stock exchanges and heavy investment in China by U.S. financial interests.
The United States, on the other hand, is increasingly looking like a global economic power in decline.
This emerging reality has terrible implications for the United States and for what remains of the free world.