Why I Was Wrong about China – China’s control over capitalist America

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I have a confession to make.

I was wrong about China.

13 days ago I wrote to you about China in Money Morning. I wrote:

How our world functions in another five, 10, 20 years’ time will depend significantly on China. Whether you like it or not, they are and will become the most influential world economy in just a matter of a few years.

I was referring to China’s progression towards global technology dominance. But I was also alluding to the fact that the next 100 years may be what we’d call the rise of the ‘Chinese Empire’.

The 20th and early parts of the 21st century have been about the ‘American Empire’. The growth and dominance of corporate America around the world can’t be ignored. But my take is that for the rest of the 21st century, long after you and I have left the face of this Earth, it will all be about corporate China and the Chinese Empire.

Now I postulated this might take a few years to start to become truly apparent. And I was wrong. It won’t’ take a few years…

It’s happening right now.

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Unless you’ve been living under a rock, you’ll know tensions are running high in Hong Kong right now. Ongoing protests are causing massive disruption to Hong Kong’s economy and are raising the ire of China.

Hong Kong was already feeling the brunt of the China–US trade war. But now with protests continuing, it’s expected that Hong Kong will head into a recession for the first time in over a decade.

Protests are particularly hurting tourism. It’s believed that visitor numbers are down around 30–40% in August and September.

The protests have now been going for four months. What’s most concerning is they’re getting increasingly violent on both sides. Both protesters and police are using escalating force.

Also the original reason for the protests, an Extradition Bill, has since been rescinded. The reason why protests are still continuing is a much bigger picture. The people of Hong Kong want full autonomy and separation from China.

The problem is, that’s not what China wants.

Hong Kong is set to fully integrate into China in the year 2047. That’s some time away, but achingly close for people in Hong Kong. They’re used to the ‘one country, two systems’ approach that’s been in effect since 1997.

However, they know the Chinese grip on the freedom of Hong Kong is getting much tighter. And this is why the protests continue. If the residents of Hong Kong had their way, they’d remain an independent, autonomous state forever.

But that’s not happening. China want Hong Kong back under their full control and they’ll do anything to make sure that’s the outcome.

For example, the NBA’s Houston Rockets are one of the most valuable sports teams in the world. In 2017 the franchise was bought for a whopping US$2.2 billion. And traditionally one of their biggest overseas markets has been China.

This is in part because of the 2002 #1 NBA draft pick, eight-time NBA All-Star, Yao Ming. Ming played for the Rockets for a decade from 2002 to 2011. He’s China’s most famous and successful basketball player ever. Houston even retired his number 11 on his retirement.

And standing at seven foot six inches, Ming is quite the powerhouse. These days he serves as an executive on the Chinese Basketball Association. But his time at the Rockets helped propel the team and build their value in the world’s largest consumer market.

However thanks to the Houston Rockets’ General Manager Daryl Morey, the Rockets and quite possibly the entire NBA are facing a ‘blackout’ across China.

All Morey did was tweet support with Hong Kong protestors. He posted a picture (since deleted) of the ‘Fight for Freedom, Stand with Hong Kong’ logo and text. That’s all he did. But it was enough to send China apoplectic.

China has effectively banned everything to do with the Rockets. All their games have been pulled from Chinese TV. Most of their Chinese sponsors have withdrawn their sponsorship. And Tencent has pulled everything to do with the Rockets from their scheduling, and online.

The Rockets and now the NBA are in a scampering kiss-and-make-up mode trying to salvage their most lucrative market outside the US. In short, the NBA is bending over backwards to please their real masters…the Chinese.

Of course one instance of dominant Chinese influence in the US does not make for a trend.

But there’s more…

What’s it’s like to be deleted from the internet

Activision Blizzard Inc [NASDAQ:ATVI] is the world’s largest publicly listed video game industry company. They currently have a market cap of around US$41.5 billion. Activision Blizzard is involved in all aspects of gaming, from developing and publishing games, through to running eSports tournaments and eSports teams.

‘Hearthstone’ is the moniker for an eSports player that participates in a number of tournaments run by Activision Blizzard. And at the end of winning a tournament in a live feed, Hearthstone said, ‘Liberate Hong Kong revolution of our time.’

Again, nothing too bad, you’d think…

Except for the fact that on Tuesday, Activision Blizzard suspended the player and banned him from any Activision tournaments for a year. They also took back all prize money he had earned in their tournament.

The reason was apparently their ‘terms and conditions’ about players taking actions to harm the image of the company.

The only image damaged by the player’s comments would be in mainland China. And we speculate that pressure may have come from external forces to take action and send a message to other eSports players who go out to huge global audiences, particularly in China.

And then just to prove the real flex that China has, they’ve also gone and deleted every existence of the TV show South Park from China’s internet.

South Park aired an episode this month called, ‘Band in China’. It was South Park’s genius way of taking a jab directly at how Hollywood and the US is prepared to bend over backwards, like the NBA, to appease China and the Chinese authorities.

Of course the episode of South Park was banned. And the rest of the show has been deleted in its entirety from the internet. According to the Hollywood Reporter:

‘[Chinese] government censors, in the real world, have lashed back at South Park by deleting virtually every clip, episode and online discussion of the show from Chinese streaming services, social media and even fan pages.

A cursory perusal through China’s highly regulated internet landscape shows the animated series conspicuously absent everywhere it recently had a presence. A search of the Twitter-like social media service Weibo turns up not a single mention of South Park among the billions of past posts. On streaming service Youku, owned by internet giant Alibaba, all links to clips, episodes and even full seasons of the show are now dead.

This is China at their most powerful and most influential. They can make multibillion-dollar American organisations bend to their will. They can control and delete information on the domestic internet.

But the real takeaway here is China’s control over capitalist America, even while in the midst of trade wars and the ‘struggle’ for global economic power.

There is no struggle. This display of force shows where the real power lies. And the US’ efforts to wrestle that power back in my view, is futile.

Welcome to the new 100-year Chinese Empire.


Sam Volkering,
Editor, Money Morning

PS: US–China trade tensions have actually created some incredible opportunities for Aussie investors. Click here to discover three unique plays on the US–China trade war.

About Sam Volkering

Sam Volkering is an Editor for Money Morning and is small-cap, cryptocurrency and technology expert.

He’s not interested in boring blue chip stocks. He’s after explosive investments; companies whose shares trade for cents on the dollar, cryptocurrencies that can deliver life-changing returns. He looks for the ‘edge of the bell curve’…

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