Historical Common Cents for November 16, 2018

For good reason, it seems the Chinese ‘trade war’ and the Federal Reserve have dominated the post-election business headlines. They should have all along, but politics are far more interesting than monetary policy or international trade negotiations for/to most people. I am the outlier.

Recently, I either wrote here in this newsletter or mentioned on our podcast (Trading Perspectives) the Chinese don’t adhere to US election cycles. They don’t care too much about arbitrary quarterly earnings estimates or corporate guidance. They negotiate differently than we do. In short, the Chinese play the same game, just very differently and with different definitions of success and/or victory.

In so many words, the Chinese think in terms of years, decades, and even centuries, and act accordingly at both the individual and institutional levels.

I will cut to the quick: the current Chinese nation state is not our friend or ally, nor is it for any significant Western power or Japan. Period. That doesn’t mean it won’t negotiate treaties, trade, or even dine with us barbarians. However, their view of history suggests the Chinese shouldn’t trust the West, even if it does have to deal with us.

While most contemporary Americans probably aren’t terribly familiar with either the Opium Wars or the Boxer Rebellion, they still resonate in the collective Chinese consciousness. Of particular disgust is the Second Opium War and the ultimate destruction and looting of the Summer Palace. Here is what the BBC’s Chris Bowlby wrote on the matter in an excellent piece from February 2015:

“There is a deep, unhealed historical wound in the UK’s relations with China – a wound that most British people know nothing about, but which causes China great pain. It stems from the destruction in 1860 of the country’s most beautiful palace.

It’s been described as China’s ground zero – a place that tells a story of cultural destruction that everyone in China knows about, but hardly anyone outside.

The palace’s fate is bitterly resented in Chinese minds and constantly resurfaces in Chinese popular films, angry social media debates, and furious rows about international art sales.

And it has left a controversial legacy in British art collections – royal, military, private – full of looted objects.”

A contemporary examination of the matter, including the impetus for the war leading up to it, is difficult to read. But…but…but…that happened, what, 158 years ago? Come on, man. Right? The Chinese should be able to get past that, and think about the help it got in defeating the Japanese in the Second World War, right? Perhaps, but then we have to consider the Korean War, which takes us back quite a few spaces, if not to start.

Here is the truth: we can’t fault the Chinese for being distrustful of the West for the latter’s behavior during the 19th Century and first part of the 20th, most of it bad, until we get past our own history…a lot of it bad.  To that end, regardless of what anyone wants to say on the matter, the Civil War, its causes and aftermath, had and continues to have an enormous impact on US society and regional economics. We still debate it, particularly down here, and it still causes divisions.

Why, then, are we, or should we, be surprised the Chinese aren’t going to “play ball” the same way other countries might? Why don’t they just forget the past and get with the program? Why don’t they just suck it up? Why don’t they play the game by the same rules? Why don’t they adhere to the Western notions of copyright protection, etc.? Why aren’t they, well, more Western?

This is why learning history is so important, particularly that of your enemy. How can negotiate with them IF you don’t know how they negotiate? IF you don’t know what is important to them and why? Those are great questions.

In the end, and I am serious, DO expect to read about how more ‘treasures’ from the Summer Palace (and elsewhere) are mysteriously making their way back to the Middle Kingdom as part of China’s negotiations with Europe, Japan, and the US. That/those and a few official apologies along the way for things that happened long ago by people long since dead.

Trade war? It ain’t trade China is worried about.


Have a great weekend.

John Norris

For those of you interested, by all means, go to Wikipedia or encyclopedia outlet of your choice, and read about the horrific 19th and 20th Centuries for the Chinese. While they have themselves to blame for much of their misfortune, the West heaped a whole bunch of misery on them. Yet, here they are.