China Will Respond

To the kidnapping of Maduro

It is clear that China is outraged by Trump’s actions in Venezuela. They have now demanded FOUR TIMES that the US release Nicolas Maduro.

I think we should assume China will find ways to hit back for the illegal kidnapping of Maduro. They will not do so tomorrow, and perhaps not even this month. Unlike the current President of the United States, China tends to think through carefully the consequences of any foreign policy actions.

What are China’s options?

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Covert Support for a Guerrilla war: I don’t see China actively taking part in any war between Venezuela and the United States. The supply lines are just too long. That said, the Venezuelan army is chock-a-block with Chavistas who passionately support the Bolivarian revolution. Even if the Venezuelan Government caves to Trump’s demands, we should expect tens of thousands of Venezuelan soldiers to melt into the jungle. The oil industry is extremely vulnerable to sabotage - and random murders of American oil company personnel. (If they want to play really dirty. they’ll attach a large limpet mine to an oil tanker headed for Houston - and blow up the mine somewhere near the coast of Texas.) China can covertly provide all sorts of logistic and hardware support to any insurgency that develops within Venezuela. (If caught, they can argue they are not doing anything different from what the US has done in Ukraine.)

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War With Iran: If Israel were to again attack Iran - which seems increasingly likely - Russia and China are both close enough to have manageable supply lines. Though I doubt either Russia or China would declare war directly, each could supply Iran with massive amounts of hardware. If Israel starts to lose badly, it is hard to imagine the US not entering the war. Hypersonic missiles are extremely difficult to stop. A volley of them could almost certainly sink a US carrier. The vulnerability of America’s carrier fleet would then be obvious to the entire world. Though Trump might be tempted to declare war on both Russia and China, wars in Ukraine and the Middle East have left American ordnance supplies seriously depleted. America would lose any war that lasted more than about three weeks.

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Divest From US Bonds: China holds something on the order of 800 billion dollars worth of US bonds. Unloading those bonds at, say, 100 billion dollars per month, would crash the US dollar. (Yes, America could just seize China’s bonds as was done with Russia’s reserves, but American companies have a LOT of assets in China, which China could seize.) What’s worse, trying to block China from selling its bonds would likely cause a great many nations to unload most or all of their dollar reserves.

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De-dollarization: Already credit systems are coming into place which by-pass the dollar. Linked international credit card systems will automatically convert between currencies. More and more international trade is taking place in local currencies. China is providing loans in rembini at a lower interest rate than can be borrowed in dollars. The fewer transactions take place in dollars, the less demand there will be for dollars. If the US dollar continues to fall in value, it will make it very unattractive for foreigners to hold US stocks, bonds, or real estate. (A huge amount of foreign ownership has until now inflated the value of American assets; that could change very quickly.)

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BRICS: I’ve seen a lot of bloggers saying that Trump’s actions in Venezuela will cause nations all over the world to fear antagonizing America. However, I suspect it will make joining BRICS even more attractive for any nation that has a less-than-warm relationship with the United States. If I were Russia or China, I would deliberately invite Nicaragua, Colombia, North Korea and half a dozen other countries to join BRICS, knowing how much that would infuriate Donald Trump. I think we can assume Mr. Trump would then slap at least a 50% tariff on every BRICS country. That would give all the BRICS countries the legal right to slap a 50% tariff on all American imports. The roughly 30 BRICS countries would each essentially lose one large trading partner - the US - but the United States would lose 30 trading partners that, between them, represent the majority of the global population. Trump’s promises of a golden age of great prosperity would evaporate very quickly - as would Republican mid-term prospects.

New Military Alliances: China could invite the various BRICS countries to become part of a formal military alliance, a la NATO. At minimum, China could sell a great deal of military hardware to countries which feel threatened by America belligerence. Setting up at least one major military base in Africa and one in South America would piss Trump off royally. I’m not expecting anything beyond lots of weapons sales - unless China has decided to draw a line in the sand, whatever the cost.

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Take Taiwan: America is now publicly arguing that its security depends on not having any hostile countries in its immediate neighbourhood, and that important resources nearby America should not be under the control of foreign actors. China could use exactly those same arguments to justify taking over Taiwan by force. Doing so would give China full control of Taiwan’s chip-making industry - including the fastest AI chips - which would immediately deflate the AI bubble in a spectacular crash. I’m not expecting China to actually do this, but publicly arguing that America has set a precedent in this regard might crash the AI bubble in any case.

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I’m expecting China will take two or more of the above steps in coming months. If readers think China best response lies in some other direction, I’d be curious to hear what you think that would be.

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PS: