China’s expansionism is fast becoming a threat to the world. What can be done to stop it?

The last three decades were an age in which China experienced rapid growth. China’s economic growth has been around 10% per annum for the last 20 years, and in 2010 they overtook Japan to become the country with the second largest GDP in the world.

They are also raising their defense budget every year. In 2019 it rose to US$240 billion, which is around 3.8 times greater than Japan’s budget. And around 100 million Chinese tourists travel the world per year. The extent of China’s influence in the world can be felt in the quip, “When China sneezes the world catches a cold.”

Three Reasons Behind China’s Rapid Growth

There are three main reasons behind China’s rapid growth. The first is that the international community proactively invested in China. Back in the 1990s, the U.S. supported China’s growth to restrain Japan’s rising economic power. They also did this in the hope that by increasing trade relations with a free country like the U.S., the communist nation might someday adopt representational democracy.

The second reason for China’s growth was that many Japanese businesses entered China. Ever since Japan’s economic bubble burst, the country has been suffering from a long recession, brought about through measures such as introducing a consumption tax.

To escape this, a large number of Japanese businesses decided to transfer their factories to China. Banks even advocated this move. As a result, Japan saw a huge influx of goods made in China, dealing a huge blow to domestic industries.

The third reason is that China introduced a program for excessive domestic infrastructure investments. On paper, it would seem like China’s economy was in good shape, attracting more investments from overseas. They used this revenue to expand the military, and there we have the makings of a powerful threat.

The “One Belt, One Road” economic policy that Chairman Xi Jinping announced in 2013 is an unabashed declaration of China’s expansionism. China loaned huge sums of money to countries in Asia and Africa in the form of ‘infrastructure maintenance’ on seaports and harbors. They will later demand the loans be returned, but these smaller countries will not be able to meet the demand. China can then assume ownership of these ports and use them as military refuges.

Challenging China’s Reign

To sum things up, China has been expanding its military power with revenue from economic growth that came about through infrastructure investments and investments from overseas. The “One Belt, One Road” scheme then gave them power over resources and important facilities around the globe leading them to advance their expansionist ambitions.

They plan to completely overtake the U.S. by 2049, when they celebrate the 100th anniversary of the founding of the People’s Republic, and establish global hegemony and control the world order.

But as the second decade of the century draws to a close, we are beginning to see signs of a drastic change that awaits China’s reign. The U.S.-China Cold War has begun.

In October 2018, U.S. Vice President Mike Pence slammed China’s Belt and Road initiative, saying that it is a trap designed to plunge developing countries into debt. It was a landmark speech, which reversed the pro-China policies that the U.S. had been advocating since the 1990s.

In his address at the Hudson Institute last October, Pence declared with a touch of sarcasm that, “The United States offers a better option. We don’t drown our partners in a sea of debt. We don’t offer a constricting belt or a one-way road.” The U.S. is showing an unmistakable opposition to China. It has materialized in the U.S.-China trade war.

China is resisting pressure from the U.S., but it is undeniable that they have lost their bearings. In March, China lowered the goal for this year’s economic growth rate at the National People’s Congress.

Behind the scenes, China’s economic reliance is fading, as their over-the-top infrastructure investment programs have raised government and citizen debts to US$4.8 trillion (three times greater than their GDP).

Will China’s reign survive the U.S.-China Cold War? Here are some 30-year strategies to bring an end to China’s hegemony and stop their expansionism.

 
Strategy 1

Pressure China With A Financial War

The U.S. is fighting a trade war with China, but this is not just about attaining a trade surplus. The true purpose involves Japan, and global history.

But first we must understand China’s unique financial system.

USD A Source For Military Expansion

The Beijing government uses a fixed exchange rate system that pegs their Chinese Yuan currency against their foreign currency reserves (primarily the USD). In other words, China issues their currency in reliance on the U.S. dollar. China thinks their currency will become stable by pegging the Yuan to the currency used in the world’s most powerful country.

As foreign investments increase in China, their U.S. dollar reserves will increase. Then they use that to issue huge sums of Yuan, which fuels their extraordinary military expansion.

In other words, we can stop China’s predominance by blocking the influx of U.S. dollars into China, and making them spend their dollar reserves overseas: the “dollar siege” plan.

Without their U.S. dollar reserves, China’s fixed exchange rate system will collapse and the Yuan will become worthless scraps of paper.

Why The U.S.-China Trade War Was The Right Decision

As Japanese Sankei journalist Hideo Tamura has said, the most effective “dollar siege” technique is what Trump has done: demand that China cut the trade deficit with the U.S.

This way China will no longer be able to maintain their trade surplus against the U.S. and their fixed exchange rate system will collapse, as per the graph below.

 
The other effective method is to pressure China into transferring their dollar reserves overseas. There is a capital regulation in China that people can only exchange up to $50,000 per year into another currency.

But, fearing the collapse of the economy, wealthy Party authorities and even many ordinary citizens are exchanging Yuan for dollars and transferring their assets overseas to escape the regulation. Illicit currency exchange businesses are rife in Hong Kong and Shanghai.

Pressuring China to make them transfer their dollar reserves overseas is an effective measure.

Siege To Democracy

What happens after the “dollar siege” works and the Beijing government’s dollar reserves run dry?

This is when the fixed exchange rate will collapse. The Yuan will no longer be reliant, and analysts estimate that its value to drop to half its current rate. This would cause inflation – where domestic commodity prices soar – and the people will be unable to buy things in China. There will be riots all over the country. This may spell the end of the Communist Party’s one-party dictatorship.

In other words, Trump’s brave financial war initiative against China is aimed at achieving China’s democratization.

Japan’s Financial War Against China

Last month Master Ryuho Okawa, founder and CEO of Happy Science, gave a lecture in Taiwan entitled, “Love Surpasses Hatred”. In the Q&A session, he spoke about what direction Japan ought to take regarding diplomacy in Asia:

 
Japan wants to encourage China’s democratization without firing a single bullet. And there are 3 financial battles that must be fought to achieve it: 1) demand China to cut the trade deficit, 2) demand China to adopt financial freedom such as adopting a floating exchange rate system and abolishing capital regulation, and 3) freeze assets belonging to Party members who were involved in human rights infringements, including those against Uighurs and Tibetans.

It is time for Japan to start a financial war to bring an end to China’s reign.