One way or another, the United States and China are edging closer to confrontation as the economic fallout from coronavirus continues to unfold.
The fallout from the coronavirus pandemic could spark a major confrontation between the United States and China, as Beijing grapples with a new wave of anti-China sentiment not seen since Tiananmen Square 30 years ago.
That was the main takeaway of an internal Chinese report presented to policymakers that included President Xi Jinping. Informants who viewed the report say it concludes by urging officials to prepare for a worst-case scenario: Armed confrontation with the United States.
Anonymous sources have revealed to Reuters that Beijing is preparing for an unprecedented surge in anti-China sentiment over its failure to contain coronavirus.
The tipsters say an internal report presented by the Ministry of State Security urged Beijing’s top officials to be prepared for a wave of hostility not seen since the 1989 Tiananmen Square crackdown.
Reuters, which did not have access to the report, says the document was put together by the China Institutes of Contemporary International Relations (CICIR), a government-affiliated foreign policy think tank.
Sources told Reuters that the report talks about preparation for an “armed confrontation” between the United States and China. While that seems far off right now, it highlights just how seriously China is taking the situation.
… the presentation of the report shows how seriously Beijing takes the threat of a building backlash that could threaten what China sees as its strategic investments overseas and its view of its security standing.
To say that coronavirus will permanently alter U.S.-China relations would be an understatement. President Trump was already in the process of extracting American supply chains from the mainland. Coronavirus will turbocharge the process, according to Michael Every of Rabobank.
In an article submitted to ZeroHedge, Mr. Every said the Trump White House would use an ‘all of government’ approach to breaking the China dependence:
… this including financial incentives such as tax cuts or subsidies for those firms; the U.S. is considering higher tariffs and targeted sanctions of Chinese individuals, and even close relations with Taiwan as well; and it wishes to bring other countries with it in a so-called new “Economic Prosperity Network”, which sounds like a combination of the TPP and the Cold War.
The turmoil unleashed by coronavirus has been so severe that Trump is abandoning the stock market to strike back against China. If you think “abandoning” is too strong a word, it’s at least apparent that Wall Street is no longer the top priority as the fight against China proves more pressing.
Even before Covid-19, the U.S.-China trade war was far from over:
The full effect of government lockdown orders wasn’t felt in the first quarter, yet the economy still plunged 4.8% annually, marking the worst decline since the financial crisis. The Federal Reserve Bank of Atlanta is forecasting a decline fo 17.6% in quarter two, even as several states begin to reopen.
A vital indicator of the U.S. services economy contracted in April for the first time since 2009, with 16 of 18 industries registering declines.
The Institute for Supply Management’s non-manufacturing purchasing managers’ index (PMI) plunged to 41.8 from 52.5 on a scale where anything below 50 signals contraction. The gauge of employment collapsed to 30 from 47 the month before.
A record 30.3 million Americans filed for unemployment benefits over six weeks, accounting for nearly 19% of the overall labor force. Jobless claims are expected to spike by another 3 million for the week ended May 2.
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This article was edited by Josiah Wilmoth.
Last modified: May 5, 2020 5:53 PM UTC