The Chinese Communist Party has held only 20 party congresses in its history, one every five years, and few as notable as the just-concluded meeting at which President Xi Jinping claimed his unprecedented third five-year term.
In a two-hour address, Xi aggressively signaled that China will focus on national security, invest in a “world class military,” “develop unmanned, intelligent combat capabilities,” and unrelentingly pursue the takeover of Taiwan under the banner of “reunification.” All this against a backdrop of asserted rising external threats from the West and a forecast of “high winds, choppy waters and dangerous storms.”
It did not take long for Chinese investors to react. On Monday, the Hang Seng plummeted 6.4% (equivalent to a 2,000 drop in the Dow Jones index), for the largest one-day drop since November 2008. The index is down 42% for the year and within 2% of its 52-week low. In the tech sector, e-commerce giant Alibaba fell 10%, bringing its losses to more than $600 billion since it peaked in October 2020.
Chip stocks are being dumped in response to expected U.S. export controls. The property sector is facing unrelenting pressure from massive over-building and excess debt. Chinese entrepreneurs are leaving the country. Official and unofficial accounts track massive movements of capital to havens outside of China. All in all, quite the contrast to President Xi’s boasting rhetoric of “the great rejuvenation of the Chinese nation.”
Hidden in the current malaise is a far more startling fact. The Hang Seng index is now officially flat since 1997. In the comparable period, even after U.S. market declines, the S&P index is up 3.2x, while the tech-heavy Nasdaq is up 5.9x. These numbers lay bare the fundamental lie that communism can coexist with, and channel free enterprise growth.
Twenty-five years of stagnation, especially during the boom in technology, contradicts the narrative promoted by Chinese leadership, believed by many, that China will inevitably eclipse U.S. economic performance. Doubling down, liberal pundits such as Thomas Friedman fawn over the command and control powers of the Chinese government, in contrast to our messy democracy, especially when it appeared China was in an unstoppable ascendency from the 1980s onward.
The misreading of China has its roots, as much else, in Nixon’s opening of China in 1972, which neatly works out to its 50th anniversary. Lost to current memory, Nixon was motivated to invigorate China as a counterweight to the Soviet Union, a misreading perhaps understandable at the time, but that has worn poorly as China has emerged as the leading global threat to the West.
Feeding Nixon’s decision is the “useful intellect” of the story, Henry Kissinger, who even to this day retains his aura of command as America’s foremost statesman. In reality, Kissinger has been an unrelenting shill for China and Chinese interests: in books, in public pronouncements, and within the insular world of the foreign policy establishment. It comes as no surprise that one of Kissinger’s greatest boosters is none other than President Xi, who called Kissinger an “old friend of the Chinese people.”
Due to the miracles of declassification, Kissinger’s infatuation with China, and his infatuation with himself as the instrument of global power realignment, can be heard in his own words. The ‘present at the creation’ moment is dated July 14, 1971, and it is a 27-page, single-spaced memo from Kissinger to the President — the subject lines reads, “My Talks with Chou-En-lai,” and in all caps, the words “Top Secret/Sensitive/Exclusively eyes only” can be found across the top. It opens with a flourish, “My two-day visit to Peking resulted in the most searching, sweeping and significant discussions I have ever had in government.” It ends even worse, in words that will haunt us for decades to come:
These forty-eight hours, and my extensive discussions with Chou in particular, had all the flavor, texture, variety and delicacy of a Chinese banquet. Prepared from the long sweep of tradition and culture, meticulously cooked by hands of experience, and served in splendidly simple surroundings, our feast consisted of many courses, some sweet and some sour, all interrelated and forming a coherent whole…. We have laid the groundwork for you and Mao to turn a page in history.
Eight months later Nixon is in China, stunning the world as predicted.
Tell the “miracle” story to the Uyghurs. Tell it to Hong Kong, reduced under Chinese rule to a wasteland where once stood one of the most dynamic, freest, prosperous, and pioneering cities on this earth. Tell that to the Chinese entrepreneurs now castigated, imprisoned, and whose wealth plummeted by $35 billion in response to Xi’s speech alone, compounding years of ruinous loss and unrelenting Communist government attack.
Tell that to U.S. investors in Chinese companies who have seen the Nasdaq Golden Dragon China Index, 65 U.S. traded stocks with majority business in China, fall 78% since February 2021. Tell that to the Taiwanese who live in the shadow of Chinese invasion and worse. For that matter, tell that to the 1.5 billion Chinese citizens, locked down in Covid, suffering the lash of Xi’s dictatorship, at the hands of 97 million Chinese communist party members.
Nixon’s big bet, schemed and delivered by Kissinger, who later in life fatuously described himself to political journalist Oriana Fallaci as the “cowboy who leads the wagon train by riding ahead alone on his horse,” was a China opening leading to economic integration with the West and a moderation in Communist ideology.
Xi’s speech is the latest confirmation of the strategy’s grand fail. For five decades, China has benefitted from our stolen intellectual property and military secrets. Now, mission accomplished, Xi has set autonomy from the West as China’s goal, “in food, energy, and resources as well as key industrial and supply chains.”
As termed by economists, in the choice between guns and butter, China has chosen guns, encapsulated in Xi’s promise to deliver his world-class military by mid-century, while the U.S. has gorged on butter, leading to the alarming assessment this month that America’s military capability is “weak.” Chinese financial markets have correctly assessed the sacrifice of economic growth to militaristic strength, far ahead of policy makers.
The collapse in the Hang Seng and twenty-five years of stagnation tells all that needs to be known about Communist rule, its priorities, and its ruinous economic choices.
This article was first published in American Thinker