Shanghai is a municipality in China. It is roughly 6,340km2 in size.
Australia is a country and a continent in the southern hemisphere. It’s roughly 7.692 million km2 in size.
You could fit just over 1,213 Shanghais inside Australia — if you could do such a thing.
In terms of geographical comparison, there is none. Australia is immensely bigger. In fact you could fit Shanghai inside of Melbourne.
However there’s a very important statistic that Shanghai and Australia share. Population size.
Shanghai has an approximate population size of 25.88 million. Australia has an approximate population size of…24.72 million.
Let’s take some time to really consider this for a second. I do this regularly and it simply blows my mind. I usually do it when I’m back in Australia and stuck on a packed tram or train. Or sometimes when I’m sat on St Kilda Road in peak hour traffic.
Imagine every single human in Australia in one place. Imagine them all in Metropolitan Melbourne. Everyone you know. Everyone in Sydney, Brisbane, Perth, Adelaide and Melbourne. Everyone in regional areas. Everyone in the outback. Everyone.
Put those 24.72 million people in Melbourne…then add another 1.16 million.
Imagine that density of population.
It’s mind blowing. Utterly mind blowing.
But this is the kind of scale we talk about when we look at China. It’s almost impossible to properly comprehend just how immense the population of China really is.
Unless you’ve been there (I haven’t yet, by the way) there you really can’t appreciate it. You can only (like I do) try to fathom the sheer power a population like that provides.
And let’s not forget Shanghai is just a slice of China’s total population. China’s current population stands at 1.414 billion. That’s 57.2 times more people than all of Australia.
Cut them off and they’ll look elsewhere
You cannot deny that China is the market everyone wants to tap. Just on sheer weight of numbers, if you crack it in China, you’re ‘quids in’.
Of course ‘tapping’ that market hasn’t been so easy. There are cultural barriers to get over. There are trade barriers to work through. There’s incredible regulatory risk even if you can make it into the Chinese market.
But those barriers are beginning to soften. China knows they cannot be self-sustaining. They know they need imports. They know they need to trade with the rest of the world.
And that means they are beginning to really open their doors to foreigners.
Oh, except one mob.
China is a global powerhouse. They have a massive economy. They have a massive military. They have a massive, growing, wealthy population.
They’re no pushover. They don’t need to be. However, President Trump thinks that playing the hard line with China will work.
And it could set off a ‘Cold War of Trade’.
Trump’s current approach is demand and act first, negotiate later. It’s this strange approach that so far seems to have been working in his favour.
He first does something outrageous. Like remove the US from the Paris Agreement. Or like his hammering of NAFTA.
Then, understanding the weight and might of the US economy, he comes back to the table willing to negotiate. Thus with the world still relatively desperate for the US, they accept him back with open arms.
Trump’s playing on the Battered Woman Syndrome he inflicts on the world. I don’t mean to make light of a serious mental disorder…but it’s exactly what Trump is doing.
According to FindLaw there are three stages to abuse cycle of Battered Woman Syndrome.
‘First, the abuser engages in behaviors that create relationship tension. Second, the tension explodes when the abuser commits some form of abuse…Third, the abuser tries to fix his wrongdoing and apologizes. This third stage is frequently referred to as the “honeymoon” stage, and involves the abuser making amends for his bad behavior.’
Right now Trump is part way through the second phase. His abuse right now is coming in the way of a ‘tough stance’ on trade demands with China.
As the New York Times explains,
‘…senior Beijing officials do not plan to discuss the two biggest requests that the Trump administration has made over the past several months, according to people involved in Chinese policymaking. Those include a mandatory $100 billion cut in America’s $375 billion annual trade deficit with China and curbs on Beijing’s $300 billion plan to bankroll the country’s industrial upgrade into advanced technologies like artificial intelligence, semiconductors, electric cars and commercial aircraft.’
In other words, China is one country Trump can’t abuse. They aren’t going to fall prey to Trump’s nationalistic demands. And they don’t need to.
Instead, China will simply turn to the rest of the world. And we know they’re ready to do this because of a recent, massive change of stance.
A couple of weeks ago China mad a massive announcement. They said that by 2022 they will scrap foreign ownership restrictions on local auto firms.
This is huge.
Until now for carmakers to enter China they needed to undertake a joint venture with a local maker. That means BMW, Mercedes, GM, and Ford all have partnerships with local Chinese carmakers to get their ‘wheels’ into the country.
But within the next four years, they won’t need to. They will be able to simply enter the country and set up their own wholly owned subsidiaries. That gives the world’s major automakers carte blanche on the Chinese market.
It gives them access to 1.4 billion potential car owners. It also means that all the suppliers to these car OEMs will also have access to the Chinese market.
This is no coincidence. It will have a slightly negative impact on local carmakers. Giants like BYD and Geely and Cherry may feel the pinch. But it’s a blatant sign to the rest of the world that China is open for business.
However we also expect China to use this against the US. If the US plays hardball on trade, then China will return serve and play hardball on US industry. It will very likely shut off their economy to US companies.
The US should be careful whom they pick their fights with. They should be careful who they try to abuse. China is a might they can’t walk over. And if Trump persists, it’s going to spell trouble for US companies and US markets.
Welcome to the Cold War of Trade.
Editor, Secret Crypto Network