Hi guys.



TLDR: Xi Jinping is now in total control of the entirety of the world's capital markets.



Three things I'll ask you to remember. 1 - I was a professional historical researcher for a very long time for some fairly high-profile authors and documentary makers. 2 - I work in TV telling stories that are meant to be entertaining whilst existing in the realms of possibility. 3 - I've been writing this for a little while, and the situation is VERY fluid, so the most recent elements can date rapidly.



This below is a paranoid gonzo theory-based endgame OpEd based on data from credible sources, and should in no way be taken as financial advice.



China May Have Won World War 3 Without Firing a Shot - Part 1 of 2



If there’s one nation on earth that truly understands the long game, it’s China. I mean truly understands the long game. China has existed as a relatively defined territory with a unified cultural identity for more than 3600 years, a period in which Greece was pre-democratic, Sparta hadn’t yet been founded, and storytellers were conjuring the labours of Heracles and Noah.



Perhaps we can think of a nation not in geopolitical terms, but as a loose collective who share a unity of purpose, a narrative history blended from myth, lore, legend, art, born of ancient, tribal affiliations, epochs of trade and cultural transactions, and brought together by a portmanteau language and urban sprawl, being governed by their own kind who conduct diplomatic relations with foreign governments on their behalf. These loose collectives will either develop to a point where their purpose achieves greater singularity – war, trade, manufacturing – and their identity strengthens, or they will wither or fracture. Winners have strong leaders. Strong leaders have foresight. Foresight breeds dynasties. And dynasties have a tendency to think eternalistically. Obviously, most are wrong, a misapprehension usually ending with a spectacular, megadeath-scenario implosion.



Considered the founders of China, the thing that made the Shang emperors good at ruling was their ability to appear equalitarian without ever having to concern themselves with the fripperies of democracy. They appointed councillors and bureaucrats based on their abilities to administer government effectively, they liked to diversify, they fostered an academic, liberal, free-thinking culture, making astonishing early advances in astronomy and mathematics, whilst wholeheartedly embracing the Sopranos diplomatic philosophy of ‘Come heavy or not at all’. The general consensus was not to fuck with them, and most who ignored the consensus came to a gnarly ending.



Crucially, they permitted freedom of religion and held no misguided belief in the divine right of kings. They knew that empires needed bloodlines, and any weak link in the genetic chain was, in all likelihood, game over. Following a highly productive 500-or-so-years, it was the Shang emperors’ slack religious tolerance and all-consuming concern with external enemies that was their undoing. Right under their noses, the Zhou Estate, loyal citizens for centuries, codified a singular religious doctrine and gave the Shang empire pretty much the first beating they ever took at the Battle of Muye with the purpose of unifying China under the ‘Mandate of Heaven’. But by retaining all of the Shang’s advances, they now had the tools, the smarts, the military hardware and they’d excised the one frail weakness, humanity, by installing new and improved emperors, now with extra heavenly clout. Now with no need for the populace to worry about which faith to follow, it was the Zhou Dynasty’s turn to became the longest reigning in Chinese history.. So far. Thus began the waxing and waning of Chinese dynasties. Warrior, Intellectual, Merchant, Chaos. But the people remained unified.



Becoming Agriphobic



Fast forward about 3500 years, and China was going through one of its waning cycles. Chaos, the final dynastic stage, was hitting all the peak values. To say that the Chinese were being tested would be radically understating the depth of ill-feeling and unrest. The Japanese had not yet morphed into their current wise-but-humble, industrious iteration and were making general Chinese misery their sole mission in life. A military coup in 1911 had toppled the last dynasty, the Qing, and established the Republic of China, but even this new, more egalitarian identity did not break the simmering tension. World War 1 raised the temperature further, seeing Japan move to permanently colonise the mainland, demanding control of everything from the economy to the judiciary. Diplomatic interventions even came from the US and UK – and consider the stunningly shady shit you had to be into to earn that during this period – but the Chinese government was so deeply in debt to Japan that they were forced to agree to many of Japan’s brutal ‘Twenty-One Demands’. The end of what the Chinese call their ‘Century of Humiliation’ was the build-up to a second world war. Many aren’t aware that more than 15 million Chinese died during their war with Japan and what would become World War 2, a shocking number only surpassed by the horror unfolding in the Soviet Union.



A minor skirmish between Chinese and Japanese troops in 1937 sparked a tinderbox fuelled by a nationally felt sense of injustice, penury, and usury. China, however, was entirely unable to fund a war with their neighbours, and by 1938 was near total collapse. With 100 million refugees and the nation racked by famine, the Nationalist and Communist parties set aside their own feuding and met to discuss the fate of China. This conference produced an agreement that few foreign leaders could fathom: There would be no surrender to Japan. Outgunned, ill-equipped, starving, and with no way of knowing that another conflict would distract Japan from their mission of total subjugation, they retreated inland to continue a hit-and-run guerrilla campaign. Think on this; if the Chinese had done the rational thing and surrendered in 1938, the Indian and Soviet theatres would have had another front, with a well-armed, well-trained, well-funded, 600,000-strong aggressor radically changing the dynamic. The war could have been lengthened considerably. Or there could have been a different outcome entirely. Unity of purpose.



The Embiggening of Small Men



Throughout this period, two men were starting to emerge as figureheads from the intractable melee. Deng Xiaoping and Mao Zedong had been leading the Chinese Communist Party and their army during a state of virtually constant civil war with the Nationalist Party. While the Japanese invasion made them temporary and uneasy allies, it also levelled the playing field, exhausting much of the Nationalist leadership’s cash reserves and manpower. Zedong had been busily establishing a staunch following in the Chinese countryside, even forming his own breakaway state, Jiangxi Soviet, as a fuck you to the government and a masthead for his politics. As World War 2 concluded decisively in the Pacific with the bombing of Hiroshima and Nagasaki, the Communists and Nationalists wasted no time in celebrating and returned to their vicious civil war. Proxy funding by the Soviets and the Americans began in earnest, with cash predictably distributed. Manchuria, 1948, and the Nationalists went into the Battle of Liaohsi as odds-on favourites. But fate had other ideas, and shit started to go rapidly downhill for the government. The Communists, more experienced in rural guerrilla tactics, divided then surrounded their opponents, before surgically cutting off their supply lines. Tian’anmen Square, 1949, and now-Chairman Mao proclaimed the war won and a new nation founded; the People’sRepublic of China. The remaining Nationalists and many of their sympathisers fled to Taiwan, declaring the island the (new) Republic of China, and the two states remain, to this day, officially at war.



Chairman Mao attempted various economic jump-starts during his tenure, but he’d perhaps spent too long as a guerrilla, secreted in the undergrowth, knife between teeth, and seemed much more content with plotting wars, vengeance, and purges than with forming any cohesive plans for reform. Following the destructive and expensive stalemate in Korea, Mao’s first attempt, ‘The Great Leap Forward’, was a masterplan to industrialise China; Factories, Not Farms! Unfortunately, the ‘not farms’ part was never adequately replaced, and famine once again began to take hold. One of the Party’s most dependable men, however, remained Deng Xiaoping, and Xiaoping was a considerably safer pair of macroeconomic hands. Just as China was recovering from the 5-year famine, Zedong again went looking for aggravation, sparking off the Cultural Revolution; a violent, paranoid purge that Zedong finally had to send in his own troops to quell. The bloodshed was so frenzied and pervasive that no accurate records exist of the death toll, but most estimates are in the millions. Despite his unfathomably brutal efforts to regain total control of the Communist Party, senior officials were forced to break it to the Great Helmsman that the 10-year revolution had failed to make the country into the shining Communist utopia that he had planned. Entirely foreseeably, famine, poverty, and further economic damage followed.



But by the end of the Revolution, the Chairman was in desperately poor health, his heart failing, and the elite had begun to furtively glance around for a successor. See, there are no hard-and-fast rules to this process in China. Sometimes it’s about securing yourself the most Chairs of the most box-office committees – the Military Commission, the State Council, the Standing Committee, etc – sometimes it’s about building coalitions of Party support, sometimes it’s about assembling the most guys with guns willing to do your bidding. There’s not really even an official title that comes with running China. It’s like playing 3D chess against Deep Blue while really, really high. You’ve gotta be be-yond the top of your game to win.



When Chairman Mao shuffled off this mortal coil, he went with the blood of countless millions on his hands, much of it entirely non-metaphorical. Xiaoping had been a faithful soldier, leading the Party’s forces in countless campaigns, gun in hand. But Zedong had long suspected that Deng’s politics were, if not quite centrist, then centre-left at best. Their complex relationship saw Deng twice purged from the party and imprisoned during the Revolution before rising again to become Secretary-General and Vice Premier under Mao, the man who had ordered his jailing. Mao had tapped up Hua Gofeng to succeed him when he died, but Hua was nothing if not unimaginative. He promised more Mao, the same Mao, a continuation of Mao, even dressing and cutting his hair to look like the boss. He bought himself a short spell in charge by removing the generally disliked radical clique, the ‘Gang of Four’, although this was entirely accidental. Naturally, Hua was then accused of colluding with a new cabal, the inventively titled ‘Little Gang of Four’, who were later charged with failing to combat the original Gang of Four… Yadda, yadda, yadda. The problem with totalitarianism is it can get cyclical. The problem with Hua was he lacked charisma.



Deng Xiaoping, however, was an altogether more astute and interesting player. He outmanoeuvred Hua and was appointed leader, supposedly bringing clear ideas for collectivism and introducing mechanisms that would prevent one-man cults of personality. The landscape was, as usual, not a hard read, especially for an old hand: the people were sick of famine, poverty, purges, and possibly even communism. He very quickly deployed his ‘Boluan Fanzheng’ program, literally translating as ‘eliminate chaos and return to normal’, then set about re-drafting the Chinese Constitution to demote Maoism and elevate economic pragmatism. He embarked on a global charm offensive, in 1979 becoming the first Chinese leader to be invited to the White House by Carter, and while in the US he showed himself to be a world-class charming bastard, sowing further distrust in the Soviets and sealing the deal to get American troops out of Taiwan. He scored tours of Ford and Boeing factories, inspecting the production lines closely. After a lifetime in the killing fields, he was entirely unfazed by an assassination attempt in Texas by a knife-wielding Klansman. Amateur hour. One can only assume that protests by both Maoists and Nationalists drew a wry smile.



Back home, Deng reformed education, reopened schools and founded the ‘863 Program’ to educate China’s brightest in science and technology. But his first big announcement to the world was the ‘opening up’ of China. The government would begin relaxing things, selling off some of the vast state-owned portfolio, eventually welcoming equity investment, private manufacturing, even banking. Perhaps, if records are ever published or witnesses could speak freely, Deng will be viewed as simply another emperor who learned lessons from his predecessor to bolster his personal grip on power. But it was now the 80s, and the rest of the world cared only for cocaine, money, and breakdancing.



Dead Red Redemption



So, after the dull, mechanical early stages, such as agricultural reform, were complete, China was wide open, and there seemed to onlookers to be no organised system of market oversight or regulation, just a naïve assemblage of insular, ageing political idealogues. Suffice to say that gleeful hands were being rubbed vigorously together in the Western financial hubs. This was virgin territory, ripe to be taught the fundamentals of capitalism by slick, hard-nosed Wall Street guys with money to spend and tough lessons to impart. If anybody could knock this backward agrarian economy into shape, it was the City and Wall Street. With Western lead in the economic pencil, the early 80s saw China do three consecutive years of double-digit GDP growth, and in ’88, Ping An Insurance and The China Merchants Bank were founded as joint-stock entities. Corporate finance had arrived. In 1990, Deng reopened the Shanghai Stock Exchange and founded the Shenzhen Exchange. The problem now was archaic State-run industries lagging behind the private sector, garnering unwelcome attention. Government subsidies began to flood in to plug the inefficiencies and pin back inflation.



1997 proved a pivotal year for China for a multitude of reasons: Deng Xiaoping died, Hong Kong was returned to Chinese control, and a huge proportion of the remaining state-run concerns began to be sold off. Shocked military grandees were told by Beijing that even the Army could no longer run businesses. By 2005, cracks had begun to appear. The ardent reformers had grown old and faded and the private investors had cut away the dead wood from former State concerns, leaving hundreds of thousands who could legitimately blame their unemployment on capitalism and foreign actors.. Again. Unaffordable property prices and stark wage inequalities were beginning to foment unrest and, as per the playbook, the leadership was expertly reading the national mood, paying heed to what had gone before.



Heavyweight Champions



2003 saw Hu Jintau get the corner office, and one of Deng’s distinctly conservative successor’s most successful policies was the to import a ‘National Champions’ program. Although late to the game, the boilerplate model got some typically Chinese upgrades. Ostensibly conceived to compete with foreign megacap corporations, the chosen companies would operate for-profit whilst benefiting from bespoke, protectionist benefits that only an autocratic national government could bestow. The less buzzworthy inclusions are outfits like the China Petrochemical Corporation, COFCO, CRRC Group, so on, so forth. Do some digging if you’re interested, but, for the purposes of this OpEd, suffice to say that, as an example, one of the hundreds of companies run by CRRC Group is CRRC itself. They make trains. In fact, they make more trains than anyone else, and they make more money making trains than anyone else. And acronyms you’ve never heard of becoming the biggest and wealthiest in the world at what they do is typical of China’s National Champions. What were formerly monolithic, dusty, State concerns, propped up by handouts and functioning only to keep unemployment low and cough sickly fuck yous to the capitalists, were now titanic international superpowers, owning assets globally that cannot be precisely, or even vaguely estimated, because.. secrets.



In 2012-ish, Hu Jintau tagged in Xi Jinping, an even more stringently conservative leader, and China’s National Champions evolved again. And these you’ll know well, even if you’re unaware of their champion status or the exact nature of the benefits of which they’re in receipt. Alibaba rocketed from $20 billion revenue in 2012 to $717 billion in 2021. Tencent went from $3.3 billion in 2011 to $68 billion in 2021. Huawei leaped from $146 billion in ’09 to $891 billion in ‘20. Because here you have to re-clarify ‘National Champions’. Suddenly it wasn’t the companies or sectors or industries that were chosen – been there, done that, locked it down, lessons learned – rather, it was the people. Whereas previous eras might have seen them purged as intellectuals or right-ists, these young men had travelled, observed, learned, then returned home to seek investment. And the government now had a lot of money to invest. Some were already loyal to the Party, others could be madeloyal with a drop of startup capital. The millionaires began to pile up in China. Then the billionaires.



After Jintau’s first draft, Xi’s polish saw China overtake Japan in 2010 to become the world’s second-largest economy. This year they took top spot for foreign direct investment from the US and are predicted to be the largest economy by 2028. After proving during the Shanghai equities collapse in 2015 that it could deftly and decisively handle a major wobble, the Chinese government seemed to be the gift that kept on giving. Gross inflows during the first quarter of 2021 totalled $590.1 billion, the highest comparable figure since 2010. $551 billion in Yuan bonds are held by foreign institutions and investors, with just 10% of government bonds in foreign hands.



C’est la VIE



Then a strange thing happened, kind of out of nowhere. The Chinese government began to increase oversight and regulation of a relatively small but highly valuable industry; online tuition. Middle class parents springing for an extra few hours of science lessons a week for their kids seems like an improbable spark for a financial crisis, but much like the skirmish with the Japanese at Marco Polo Bridge in 1937, the government rapidly escalated a minor event into something that could seemingly only end in their ignominious defeat. This time, however, the Chinese government’s war chests were chock full and the leverage was all theirs.



Something many Western fund managers had been speed-reading to the point of wilful blindness in Chinese investment prospectuses for nearly a decade was the Variable Interest Entity structure. Your Chinese company would register a holding company in, say, the Cayman Islands, then enter into a binding contract with its parent company in China. Legit US Depository Share structure. SEC compliant. So far, so good. But like any good scheme, the ROI on these equities and derivatives as China boomed was beyond all reasonable expectations, and, stress test passed, billions more flooded in.



The problem began with Huawei, and this problem boiled down to it being illegal under Chinese law for foreigners to own shares in companies whose business is technology and/or data. Which, when you think about it, is every company. The second problem was that the ‘binding contracts’ that the foreign offshoots selling shares in US and European markets had with their parent companies were legally ‘problematic’ to say the least. A not-very-deep dive into this second problem – which you would think is why banks have lawyers – revealed that foreign owners of Chinese stock had no legal right to attempt to petition or influence the boards of these companies. Simply put; no voting. And whether it be related to environmental issues, child labour, or corporate branding, being a nuisance – or ‘activist’ in today’s parlance – is the God-given right of allshareholders. Worse than this, the investors didn’t even own the underlying shares at all. I’m not talking about historically here. I’m talking about right now. Think on this; if you hold shares in a Chinese company that were purchased on US exchanges, this is on terms that are anathema to the theory of equities markets at the most fundamental level imaginable. Unless you bought on the Shanghai or Shenzhen Exchanges, you have little recourse. And even if you did.. Well, you still have very little recourse. But don’t sell Nio just because of that! The returns might get even more spectacular!



The reason Huawei were making headlines was lawyers who didn’t work for people trying to sell you financial products started to make the point that, since 2012-ish, Chinese companies have been required by ‘law’ to share any data that the government or security services requested. Sanctions, lobbying, bellowing, and word salad from the then-President of the US somehow translated into a great deal of pause for thought worldwide. The UK government conceded that CGN, the state-owned China General Nuclear Power Company, had happily stepped forward when the British government were courting China for investment a mere 4 years previously, writing cheques to the tune of $4.3 billion dollars for two nuclear power stations in England, and with plans to build more. Not only that, Huawei had positioned itself as the only global player who could deliver the 5G network in the UK. Again, lawyers who neither worked for government nor people who sold financial products began to uncover shadowy articles in Xi’s ‘renegotiations’ with business that could essentially negate any contractual clause in any of these agreements in any of the countries that they had been agreed in. Not only had the Chinese bought access to vast swathes of worldwide data traffic, some posited that pursuing a contractual dispute could end in both telecoms and power blackouts. If you hold the view as a free marketeer that the central role of government is to keep the utilities on and businesses business-ing, then that responsibility had been cheerfully handed to avowed communists with very murky motives. France, Australia, Sweden, and others quickly followed suit in locking out Huawei.



Another very interesting case study during this period is Luckin Coffee. Could there be a finer example of a US corporate success story springing forth from Jinping’s new China? Luckin raised billions selling depository shares on the NASDAQ from their registered office in – you guessed it – the Cayman Islands. Money goes in. More money comes out. Stress test passed with flying colours. Then, without word-one being said in China, Luckin revealed in an SEC filing that they were investigating an alleged $300 million fraud by a former executive involving the inflated reporting of revenue and GP. Shares plunged 80%, wiping $3 billion from the value in the US. Then it turned out that pretty much the entire board of Luckin Coffee and their family members had been pottering around New York securing vast loans against the US valuation. The Chairman alone had margin loans of over HALF A BILLION DOLLARS secured against his shares. He defaulted, and when Goldman Sachs disposed of the collateral shares, they did so at about 10% of their face value. Irrelevant, really, as Luckin’s US lawyers filed for bankruptcy protection shortly afterwards. Credit Suisse’s Singapore outfit was also on the hook for a substantial amount, so these were not babes in the wood that were being suckered in.



But the interesting thing here is the fallout, or really the lack of it. Luckin had taken the money and built a thriving business exclusively in China with a mission statement of toppling Starbucks, rapidly expanding to 4500 outlets. After the ‘scandal’, Luckin shrank just as rapidly.. to about 3900 outlets. They’re launching new products and are now successfully franchising the brand. Their customer base is not less loyal, but more loyal, and they built this base by aggressively giving out coupons for free and heavily discounted beverages to undercut the US giant entirely paid for by US investors. Ordering coffee is done exclusively through the Luckin app, and with news of the US meltdown – and for ‘meltdown’, read massive criminal conspiracy to defraud – app downloads rocketed into the millions. Big data.



Critically, the investigation into the fraud was entirely internal, the Chinese government expressing zero interest, despite it allegedly having occurred entirely within their jurisdiction. After a court hearing in – you guessed it – the Caribbean, the remaining shares were quietly transferred back to Beijing-based Centurium Capital – who expressed their profound shock – and the company cracked on. Chinese financial journalists combing social media detected more than a hint of smug sarcasm at the riotous success of the corporate smash and grab. The stress test wasn’t Wall Street testing China. It was China testing Wall Street.



The Black Hole of Opportunities



With Huawei executives still traipsing from studio to studio trying to execute a PR plan they’d clearly had no training in and exhibit charm they were clearly never born with, some began to wonder whether Deng may have made a slicker job of calming world jitters than his successors. After reading the room for a while, Xi Jinping stood, made eye contact with every single Chief Executive worldwide, then began to calmly and patiently explain the concept of ‘capitalism with Chinese characteristics’ by taking a wrecking ball to his own economy. In he stepped to quite deliberately dynamite Jack Ma’s $38 billion Ant IPO, which had $3 trillion in orders. In he stepped to quite deliberately eviscerate the perfectly viable Didi, fresh from a $68 billion valuation. Macau, a great deal more valuable than Las Vegas in terms of revenue and a taxation goldmine, saw $18 billion wiped from casino stocks as the government vowed harsh new regulations and licensing laws. More regulatory, tax, and social clampdowns came thick and fast. Kids are now restricted to two hours of videogames a week by law, tanking associated stocks, including the vast Chinese interests. Children now have to login through police fucking databases to play Fortnite. And you know who designed and manages that system? The nice people at Tencent. Who, by the way, also own a huge chunk of Fortnite that we decadent Westerners allow to rot our children’s synapses for a lot longer than 2 hours a week. And you know what? I spend a lot more time talking seasons and skins with my kids than discussing authoritarian regimes and investing for their futures. Pow. One more in the win column for Xi. Private education companies – patient zero, the original ‘skirmish’ – were told to re-register as non-profits or face ‘de-listing’, wiping billions from going concerns like TAL and Yuantiku, fresh from raising those billions in the US to inflate values which were then used as collateral for loans from US banks. See how the game works?



Here’s the rub; the Chinese government restricts videogames for children, whilst at the same time making extra online schooling free. What is any right-minded parent going to make their child do with all that extra free time and bandwidth? Yup. This was Deng’s 863 Program for the TikTok generation. But at the same time, the companies who implement and monitor this are buying up vast amounts of shares in US videogame developers to keep our kids quiet, happy, and stupid.



Then there’s Ali-fucking-baba. Apart from openly facilitating the sale and distribution of the estimated 70% of counterfeited goods worldwide that originate in China, Jack Ma, one of the world’s richest Communist Party members is alpha testing his own system of social security. Supposed to be up and running last year, the Chinese government is mashing together data like your shopping habits, friends, credit score, criminal record, and fingerprints to generate a user ID, “a single scoring system assessing Chinese citizens’ economic and social reputations, which can affect travel allowance, school choices, work, etc.” The number assigned to you – not your name, you no longer have a name – can then be entered into a national database that will produce a forensically detailed record of your entire existence and how fucked you are because of it. If that doesn’t sound like some cold-blooded Orwellian shit to you, then you, my friend, might be a sociopath and/or a Risk Manager. Due to Covid, status unknown, but Jack Ma is not shy in talking about his belief that data capture by Alibaba can help his government ‘deter crime’.. With the exception of counterfeiters, probably.



Why did Xi kill the Ant deal? Ma had the temerity to suggest, in a roundabout fashion, that ‘regulators’ – the PolitBuro – might be a little old to really understand youth markets. Perhaps without even realising how radically he’d gone off the reservation, Ma was summoned and forced to watch as Jinping put a gun to his newborn’s head and coolly pulled the trigger. $3 TRILLION in orders. The IPO’s suspension is estimated to have personally cost Ma $3 billion; a loyal Party member, a servant of the cause. Don’t try and bend the spoon, Jack. That’s impossible. Instead, realise the new fucking truth: you, money, the whole fucking market, is just a tool, a means to an end in a much larger plan. Now get the fuck out of my office.



What did Didi do wrong? In all likelihood, not much. In fact, they probably did everything right. They took tens of billions of dollars from the likes of Uber and SoftBank, with the stroke of genius being that, having already cost the Japanese firm $4 billion, SoftBank then also dumped their shares in Uber to cover the losses on Didi. But wait, there’s more! Uber had handed over their entire Chinese business in exchange for equity in Didi, with the mainstream media crowing that Jinping was punishing Chinese companies for US IPOs. Communists so stooopid LOL. Look at the facts; lots more money, no more Uber. Ride hailing apps. Biiiiig fuckin data.



Tencent? Well, their expertise is writing the adaptive algorithms that power Chinese state censorship, the Great Firewall that’s scanning this and everything else written about China on Reddit, amongst some other very shady shit. But they’ve also been tasked with playing a different string on the zither entirely. CEO Ma Huateng’s job is to spot the next generation. He’s scouted and executed strategic investments in what some estimate is anything from 800 to 1000 startups, each and every one of them now in hock to the government. Jack Ma was on stage with a mic, hyping the crowd, Xinping’s Flavor Flav. Didi CEO, Cheng Wei, is ex-Alibaba, a company man and expert administrator. Huateng’s the dude in the skinny tie and Raybans, cross-legged in a leather armchair, smoking, watching. Nouveau champions, nouveau riche.



And then there’s Evergrande. The real estate behemoth is now insolvent, has suspended trading of bonds, and is expected to default imminently on many of its vast obligations. This is where contagion can burst like a supernova, as there are nearly 300 institutions on the hook for Evergrande’s debt, including BlackRock, UBS, Ashmore, and Legal & General. The majority of those are Western banks and pension funds, but literally no financial institution worldwide is outside the event horizon. Notwithstanding Evergrande’s debts being $300 billion, a staggering 2% of China’s GDP, the company also has a permanent staff of 200,000 and hires over 3.5 million contractors a year, so this outfit alone will be responsible for some sizeable blips in not just China’s but the world’s employment numbers. But here’s the thing; Xi Jinping very, very deliberately caused this by enacting corporate debt restrictions for real estate companies that he knew full-well many of China’s largest developers were already trading irretrievably in excess of. As of now, the government, possibly needing a sit-down and a protein shake after their sustained bloodletting, remain impassive, saying there will be no bailout of the stricken corporation, even though it will likely crater the entire housing market; residential and commercial. And this must be stated loudly; the Chinese were really getting into buying off-plan, so the first money to evaporate will be the deposits of hard-working individuals, not corporate slush funds. If CPCG and SOHO China are the next dominos to fall, particularly after SOHO switched from a build-to-sell to a build-to-hold strategy – and how unlucky is that timing, right? – this could mean their huge portfolios of real estate, much of it ultra-prime, could potentially be rendered worthless.



See, some commentators are saying there is no conspiracy here, that this is simply the cyclical result of overspeculation. The Shanghai stock market had surged 150% in the 12 months leading up to the crash. It was too hot. This was iiiiinevitable. Others are asking why the authorities aren’t doing more to arrest the panic, as, at the time of writing, more than 1000 shares and bonds have been suspended to stem the sell-off and avoid loan defaults calculated against sky-high valuations. Sure, they cut interest rates and spread a little bailout money around, but 80% of investors in China are retail, and they’d been ‘encouraged’ to take out loans to play the markets for years, consumer credit that the government allowed to be cheap and barely regulated. The third camp is asking why on earth the Chinese government would deliberately pull the pin on this and then calmly walk the grenade into a missile silo. Nothing is accidental.



The Rug Pull



Now, my opinion, for whatever it’s worth, does require a little tinfoil work. But here goes: A large cadre of hardened Marxist-Leninist revolutionaries fight tooth-and-nail for a century for the Communist cause, a struggle that sees millions of their comrades die in wars and famines. They are mocked and marginalised for decades after suffering a hundred years of military defeat, national humiliation, invasions, foreign control, and atrocities. Then this most controlling of regimes permits the coronation of an alleged economic reformer, despite twice purging him in the early days for not being radical enough. Not purged and imprisoned for life or purged and murdered like the others, but purged only to be repeatedly re-invited to the top table. His open doors/open arms policy and stunning early returns start to suck money into a centrifuge that is gaining momentum. More foreign money goes in. Even more Chinese money comes out. The institutions are convinced, and the money centrifuge is approaching black hole status. The Chinese government watches, taxes, calculates.



A new helmsman, Xi Jinping, takes the wheel. Over this period, cyberattacks worldwide rise to unprecedented levels and large data breaches are daily occurrences. It’s no secret that the NSA and GCHQ are tracking a large number of these back to well-funded hackers in China. What if China intended this crash all along? What if letting their market fall by 30%, real estate by more, insurance and financial services by still more, is just the beginning, because the short term simply doesn’t matter to them? The losses are predicted, within tolerable ranges, and all part of a plan. Then, when things are at their bleakest, the Chinese government appoints state-run administrators for each and every one of these distressed entities, these smoking, bullet-riddled hulks. They casually amble around the assets with their clipboards, puffing out their cheeks like decorators pricing up a job, then offer dollars – possibly cents – on the square foot for what Evergrande and SOHO paid thousands on the square foot. They shuffle off to make the same offer to manufacturing, automotive, finance. They say that the state rescue offer will be equity based. They’ll own the land again and they’ll own large chunks of companies dragging themselves back to profitability.



Let’s go further than that. Let’s say that the brutal repression we’ve seen in Hong Kong is not the end of this British-built bastion of the international free market, but the beginning. Draconian new laws are seeing nonviolent protestors arrested, the free press shut down, sinister military units and plainclothes secret police violently dragging away protestors, dissidents jailed for decades, for life. Running for the Executive Council as a non-Communist Party member and hardcore loyalist is now impossible and religious clampdowns on the former colony have begun with cold, frightening efficiency. What if the Chinese government has a plan to underwrite loans to the companies crying out for credit? Not just in China, but worldwide. They now have equity and a large share of the corporate and consumer credit market. What if the Chinese banks with large domestic exposure ends up being subsumed, trillions in seized assets of foreign origin then coming under the control of the government? The Chinese government, remember, have one of the most awesome financial weapons on earth at their disposal; the ICBC. The Industrial and Commercial Bank of China doesn’t function as a central bank; that’s the job of the Party. The biggest bank in the world, with $4 trillion in assets, is a state-owned commercial lender. Before Brexit, people said financial institutions didn’t have to leave London. What if those same institutions simply can’t leave Hong Kong?



By this point, Western banks are caught in a terminal whirlwind of sell-offs and write-downs, desperately trying to cover their now-worthless positions in China with a fire sale of US and European equities, bonds, and commodities. Pension funds are having a collective aneurism, the futures of millions mortgaged not against the failure of China – that ship has sailed – but now invested in the rebirth of China under the total and absolute control of the Party. They’re locked in. Maybe for generations. Possibly forever. Debt is downgraded and downgraded, B to CCC to D, descending to junk status. Once-mighty corporations are humbled. Lenders become borrowers. Time horizons might just be very different concepts between East and West.



Once in a Lifetime Opportunities



These are the catalysts I’ve talked about before for GME MOASS; a series of large international crises in quick succession that pull focus – and cash – away from a battle to keep downward pressure on the price of one stock (or at least a TRS basket), and into a more existential battle. I believe this will then make GME stand out as a safe haven and money will begin to flow inwards while the SHFs are looking away, another front opening up where the existence of a greater number of larger institutions are at stake with bigger players calling the shots. Shiller P/E, inflation, reverse repurchasing, (un)employment, stimulus tapering, and thus the mathematical probability of FTDs is made certain.



In fact, frighteningly, a large redistribution of wealth in the West might not only be a welcome bonus in Xi’s game, it might just have been the game all along; sucking all the lifeblood out of Wall Street – perhaps Frankfurt, Sydney and the City, too – and rebuilding Hong Kong in his own image, with thousands of experienced financial professionals, now unemployed and feeling betrayed by central banks, who could quickly migrate to Asia and begin trading as soon as they’re at a desk. Better than that, Sotheby’s, Christie’s et al set up in Hong Kong precisely because of the vastly inflated prices that the champions were willing to pay for art, jewellery, and antiques. Sooo, basically anything you’d crack open the safe and tear up the floorboards to sell in an emergency is already gone? And you invested the returns in China? Fuuuck. Everything is deliberate.



Your Capital (Market) is at Risk



Everyone knows that the next epoch belongs to China. What nobody knew was that legally and illegally – ethereal concepts to the Party – the Chinese government has been concreting in the inevitable by funnelling billions into cyber attacks and datamining on a global, industrial level, whilst positioning themselves to be in total control of world credit markets from a financial HQ hand-built for imperial control then gifted to them by the UK, a state Chinese leaders have considered ‘hostile’ for centuries. They’re not interested in learning the same lessons as the West from Enron or Lehman or Credit Default Swaps or Iceland or Black Monday/Wednesday/Sunday. They were watching closely and calculating how they could be the ones pulling the strings, collapsing the pyramid of playing cards built by disparate foreign and domestic money managers before building it back on their own terms, no negotiation.



The timing is perfect. Europe has been weakened by a generations-long campaign undertaken for them by Russia, their thuggish, money-hungry henchman-in-chief, at a time when the EU was perhaps the only potential candidate to counter the onslaught. The US has failed to learn lessons from 2008, leaving markets fragile and corrupt. COVID has left thousands of institutions scrambling to claw back losses, desperately looking for energetic markets that demonstrate any immunity whatsoever, particularly since Chinese-led calls for cryptocurrency regulation, having long ago banned it from domestic markets, have again made the West wary of DeFi and evaporated huge chunks of crypto mining. There’s simply no point in citing the international treaties, WTO rules, or legal statutes in place to counter this campaign, because those are a collective irrelevance to Jinping. The Leninists had a saying about the West; “They will sell us the rope with which we will hang them.” That’s Jiangxi Soviet. That’s Mao. That’s now.



Still don’t believe me? Okay, look at the ‘other’ coming crunches; semiconductors and lithium. Oil was yesterday’s war, so China has taken a lot of that sweet foreign investment and heavily subsidised the entirety of its semiconductor industry whilst vastly outstripping the competition in mergers & acquisitions deals in the sector. The other three players in Asia, of course, are Japan, Taiwan, and South Korea, and China’s got major beef with all of them. None of these age-old foes can compete forever against massive state subsidisation.



Lithium? China is the world’s third-largest producer and is estimated to be sitting on the fourth-largest reserves. You know what doesn’t need a battery and silicon chips? Toys your grandparents played with.. Fruit.. Not much else. But national footprint be damned. China’s Belt and Road Initiative, an undertaking requiring vision only gifted to cinematic supervillains, is not designed for school buses and commuters, it’s designed to move heavy plant machinery to those neglected parts of the world that have either been abandoned by the US, forgotten by the Europeans, or in whom the Russians have lost interest. Ask an Uzbek or a Tajik, and they’ll tell you that a whole bunch of airstrips and highways have been appearing, almost overnight and seeming to serve no purpose. Many shopkeepers in Mongolia have lithium, not tourism, to thank for foot traffic. Lithium/opium. But these things are not for now. They’re for soon. For later. For whenever the next unlucky explorer triggers the next fatal boobytrap.



See, here is a plan coming together that’s been thousands of years in the making. By learning from hot wars in Europe, the Pacific, Korea, the Middle East, and the Cold War with Russia, Xi now knows exactly what it would take for the West to drop bombs – particularly nuclear-flavoured bombs – and financial and cyber crimes simply don’t pull triggers in London, Brussels, and Washington.



The Chinese government know the people won’t mind being poor again because they’ve been poor before. Not historically, but in their own lifetimes. To them, it doesn’t matter if you’re the CEO of an e-tailer, or one of their packers; wealth comes and wealth goes. Only the cause is eternal. As a populace and as a government, their history – their ancestry – is taken very, very seriously in China. They also know that poverty, famine, and war are transitory in a way that will never be understood in the West. If the populace seems relatively indifferent to the despicable human rights abuses being committed against the Uyghur Muslims, Tibetan Buddhists, and practitioners of Falun Gong, it’s because, again, pain is transitory, and the State doesn’t permit them to be anything but indifferent. The government fosters the idea that these oddities and outliers simply haven’t made the rational decision to let the State decide for them yet. It’s just what happens when leaders have never been freely elected, and the West is misguided in thinking that this system, deep down, is not what the poor foreigner wants. We’re projecting our pathological hand wringing and worrying into an echo chamber. We’re hearing our own spectral, disembodied voices emanating from the depths of the cave and mistaking them for cries for help.



The emperor’s mindset becomes a simple question of how he can require history to remember his dynasty as superior to those that have gone before. The body count is irrelevant. If empires have an average lifespan of 250 years, then 2026 marks the 250th anniversary of the birth of America. The British had a good run, so too the French and the Spanish, but the two World Wars put so many empires to the literal sword in making the typical error of overreaching in their quest for power that the lesson to learn was not to go searching for riches, but have others, with death knells tolling, deliver the riches to you.



Sweet tinfoil hat, bro. Care to join me in my bunker?



Soo.. Buy gold, right? On an exchange? Why? I’d be willing to bet that the commodities markets will be the most resilient to the new world order, but that’s only because commodities tend to be clunky, unwieldy, slow to ship. The ‘smart’ money is selling gold, and these sales will increase exponentially, making any gains temporary and resistance finite. Be-caaaause guess who’s doing all the buying? China! At a rate of about $3.5 billion a month since you ask. They’re shipping more that 900 tons a year to the mainland, because leaving it in some Swiss vault would be short sighted, and short sightedness is not their bag.



Cryptocurrency? Decentralised things, particularly currencies, don’t sit right with Xi, and mischievous scamps playing super-fun games claiming Japanese origin alone could have added Bitcoin to Xi’s lengthy and largely inherited shit list. But not liking something is not a good reason to not want to control the world’s markets of something. There’s a very serious question of how much Tether is underpinning and/or manipulating the world’s crypto markets. Tether is owned by Bitfinex. HQ: Hong Kong. Registered Office: the Caribbean. Besides, the core components required in crypto are semiconductors and lithium, and soon we won’t have those. Not cheaply, anyway. Buuut.. you bought some NFTs, right? Cool. Go see the guy with the clipboard and he’ll quote you for the resale value.



Now All Your Bases Are Belong to Us



Xi’s predecessors were stone cold killers who built fearsome reps and unquestioning loyalty by leading chariot charges, bayonetting Japanese troops, and garrotting nationalists. Xi is a stone cold killer of a different grain, but the emperor’s purpose remains singular, and the message remains the same: Your entire economic structures, your national identities, the systems on which you rely, are totally and utterly meaningless. Sun Tzu, the famed general and strategist, said “The supreme art of war is to subdue the enemy without fighting”, and he was doing his best work during the Zhou Dynasty, the MVPs I was discussing earlier. Lesson learned.



Douchebags from [insert fund name] keep asking in the financial media how serious these problems are for China. My question is how serious problems in China are for everybody else. Because problems in China and Chinese problems are very different things. But, by asking why anyone would want their growth to shrink back to 5 or 6%, they’re again projecting their own concerns, magnifying the weakness in their strategy. Not empathising. Not learning lessons.



It’ll be in the comments that I’m some kind of Maoist shill. I’m not. I’ve lived my life as a decadent free marketeer, and I’ll die as one. What I’m pondering on is whether that will be on an island paid for by MOASS and the VIX, in a house I’m hopelessly upside down on with a weak set of spectacularly non-transferrable skills and unable to fund my flight to Lap Kok, or in a cave, trading my 1st edition Lugia holo for a hogshead of diesel and grading my potatoes B for battery and A for alcohol. Some will say that I’m not Chinese, I don’t understand. You’re right. And that’s exactly my point. Others will say I’m paranoid and dead wrong. One of those is true. One of those I hope is true.



What can you do about this? Fuck knows. Learn Mandarin, I suppose. Personally, my money is in the certainties; GameStop and bear funds. [OP Edit: Physical gold and silver, in your possession.]



The Chinese government may have won World War 3 without firing a single shot. Genius, probably.. But I’m not sure I want to be on the winning side.