What Does China Do Next and When?Obscure posted an excellent piece that I agree with. In reading his post, I got to thinking about China and what lessons have they learned from what Russia is doing in The Ukraine and more importantly how the West reacted.
Here are my thoughts....
1......before the invasion of The Ukraine, China and Russia signed a deal for two new natural gas pipelines to completed by 2025 and 2026 respectively. These pipelines will supply about 20BCF per day to China. Once completed these pipelines will go a long way to securing an energy supply to China independent of any western sanctions
2....the payment for the gas in these two pipelines will be settled in Euros NOT US$. This will further weaken the position of the US dollar as the reserve currency in the world. This will have huge implications on the world monetary situation and have even more impacts on future US ability to pay its debts and print money. Not good for the US!
3....Points 1 and 2 will IMO dictate the timeline for the invasion of Taiwan by the Chinese. Expect China to invade Taiwan in three to four years from now. Why is Taiwan so important to western economies right now? In a word - semiconductors which power just about everything we use. Control of Taiwan gives China yet another stranglehold on Western economies.
4....While Taiwan is a much smaller land mass than The Ukraine and since it is an island it is easier to blockade assistance from the West, it does share one thing with The Ukraine - a highly motivated population which is prepared to fight and die to maintain independence. This means that China, based on what is happening in The Ukraine, will use devastating force starting Day 1 when it invades. China will not fool around like the Russian did at the beginning.
5.....China has also leaned from Russia's experience that Western leaders are more about hot air than action and that sanctions have limitations due to the economic integration of the West and East. In the case of China, this integration is orders of magnitude greater than is the case for Russia. For this reason Chinese leaders, once there is security of supply of energy, will not fear Western sanctions. They know full well that Western companies will suffer more than they will ( where will Walmart get its stuff to sell if there was a sanction in the US of Chinese goods?)
6...ironically China is more advanced that the West and especially the US in the area of green energy. In some cities in China, gasoline powered motorcycles are banned and this will likely extend further reducing the need for imported energy. China already makes most of the world's solar panels and controls the mining and distribution of key rare earth metals to make batteries.
Great!! So what do we as investors interested in securing our financial future and those of our grandchildren do?
1.....do whatever you can to make sure your grandchildren speak Cantonese or Mandarin or preferably both. IMO opinion one of the best gifts Grandparents can give their Grandchildren is to pay for Chinese language lessons.
2.....realize that the World order is likely to change dramatically over the next few years and that is likely to result in greater volatility and things that were good investments in the past may not be so good anymore and vice versa and react/plan accodingly.
3....keep closer track on world affairs and their investment implications and correspondendly, be very flexible in portfolio and thinking. The "old ways" such as buy and hold make not work so well in the future.