Monday 25th May 2020
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The stock market hit the lows of the day after China responded to overnight accusations from President Donald Trump, warning that it will safeguard its sovereignty, security and interests, and threatened countermeasures. Markets were under pressure after the Senate overwhelmingly passed a bill that could bar some Chinese companies from listing on US exchanges.
The President then went on to ramp up tensions by tweeting “criticism of Xi Jinping’s leadership just ahead of the biggest Chinese political gathering of the year, due to start today.” Trump’s argument against China, looks finally to be swaying the rest of the world.
Globalisation served China more than any other. And their true colours are now showing as they try to bully other nations into submission over the Covid-19 outbreak. They are totally oblivious to the fact that they need the rest of the world to buy their stuff. Globalisation worked for a while – but it no longer works for the rest of us. China got to build its economy and we got to delay inflation and buy stuff from them at cheap prices. But who is going to “Buy China-made today”?
Brand China is in danger of being permanently damaged and anyone walking into a store today will have a brand bias going forward. What China needs to do now is “make up” with the rest of the world and start actually looking after their customer base rather than going on the defensive, Bullying tactics are not going to work and will likely backfire.
As if Australia cannot find another buyer for its world class beef and barley? Iron ore I’m not sure about - but what I do know is what happened in the 1970s when OPEC restricted supply. Of course, China would reconfigure its iron ore supply lines but the question is how? Then there is the fact that Australia imports some US$58 billion in goods from China annually.
Australia imports from China
This all begs the question that if China stays on its current path, who is going to buy “China-made” again? All of a sudden if the now different world looks through this prism, the conclusions are going to be the same. Maybe Donald Trump does get a second term?
Self-preservation is a powerful motivation. The question has to be just when will the penny drop in Beijing – when do they finally understand and get the message that “the customer is always right”? It stands to reason that China has a lot more to lose if it loses its customer base.
The latest encroachment by China into Hong Kong could not have been more ill-timed. The world will seize on this and if China is not careful it will be staring down the barrel very shortly of a global boycott of whatever it manufactures and exports. The rest of the world will soon come to the conclusion that is better to put its own work force back to work and start making its own stuff like it use too and pay more for it.
Source: Fat Prophets
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