Is China Australia’s Friend or Foe?

Dear Reader,

Is China our friend or foe?

It depends who you ask.

If you’re Andrew Forrest (majority shareholder of iron ore miner Fortescue Metals Group Ltd [ASX:FMG]) or Kerry Stokes (majority owner of Seven Group Holdings Ltd [ASX:SVW]) for example, China’s your friend.

These prominent businessmen owe a great deal of their wealth (or in Forrest’s case, all of it) to China. There are tens of thousands of China-dependents like them all around the country.

But when your relationship is about money and little else, it doesn’t take much to put it under pressure.

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As you know, the global economy has ground to a halt because of the coronavirus pandemic. You also know that the virus originated in China. The official story is that it came out of a Wuhan ‘wet market’, where live animals are killed and eaten.

Wuhan also contains the Wuhan Institute of Virology, China’s only level 4 biosecurity lab. There is a growing view that the virus may have accidentally escaped from this lab, rather than the city’s nearby wet markets.

Whatever the case, what we do know is that following the outbreak in Wuhan, China locked down the city and the country internally. But it didn’t lock down international travel until months later.

As India’s Economic Times reports:

There is new evidence to show that China locked down all domestic traffic internally by end January 2020 but pushed to open foreign travel till end March. Data from Tom Tom traffic index, a traffic location site that covers 416 cities across 57 countries show that as a result of this strategy, China, intentionally or otherwise, was able to lockdown its cities unknown to the world. While this reduced the spread of the Corona virus within China, China’s aggressive foreign travel policy lead to a virus explosion worldwide

Scott Morrison is calling for an investigation into the origins of the pandemic, and China aren’t happy.

Now, they are retaliating. They are threatening to place hefty tariffs on our barley exports and have also banned some beef exports.

The official rhetoric is that these actions are not related to the virus investigation. But everyone knows that is rubbish.

Not surprisingly, it’s having an impact on financial markets. The Aussie market has been under renewed pressure over the past few days.

Are these the actions of a friend or foe?

Well, when it comes to international relations, trade is obviously an important part of a relationship. But so are shared political ideals. In the case of China, we have no shared political ideals. Zero.

Well, there are no doubt many on the loony left that think China’s political system is great. You know, those who talk about ‘benevolent dictatorships’ and believe socialism would work if it was only done properly.

But let’s be realistic. China is a communist dictatorship. Australia is a capitalist democracy. Well, it was. Thanks to COVID, we are lurching hard to the left as the state now becomes a greater part of the economy, providing employment and care for everyone.

To be blunt, China (and here I’m talking about the state, not the people) couldn’t care less about Australia. They take full advantage of our free and open markets while denying access to theirs (to the extent they need to protect industries).

They buy up billions worth of our productive farmland and we happily sell it off, knowing full well we’re not dealing with a country that plays by the same rules.

China places restrictions on capital, movement and thought. Oh, and they harvest the organs of political dissidents. On the plus side, there are no wait times for organ transplant surgery…

But now, as soon as we dare ask a tough question, China wants to throw its economic weight around and pressure us with trade threats.

Australia has been soft in the past, so China obviously expect us to fall into line if we want to keep receiving their money. It’s been gaming the rules of the capitalist system ever since it entered the World Trade Organisation 20 years ago. And until Trump came along, successive US governments have let it happen.

Where will Australia go from here?

We will zip it and compliantly take the cash?

Or should we push ahead with calls to investigate just how, why (or whether) China let this virus escape into the world?

Yes, China is our most important trading partner. But when friends stuff up, you call them out. A good friend is open and honest about their actions. They admit fault. They take responsibility. And hopefully, through self-reflection, they become better people.

But herein lies the main problem in dealing with a socialist/communist mindset.

There is little self-reflection and certainly little concept of taking personal responsibility for actions. When ‘the state’ looks after you, how can there be?

More on that tomorrow…


Greg Canavan,
Editor, The Rum Rebellion

PS: Learn about the critical factors that affect the rise and fall of the Aussie Dollar. Download your free copy of this special report: ‘Will the Aussie Dollar Enjoy a Post-Pandemic Resurgence?’ by clicking here.

Greg Canavan approaches the investment world with an ‘ignorance is bliss’ philosophy. In a world where all the information is just a click away at all times, Greg believes we ingest too much of it. As a result, we forget how to think for ourselves, and let other people’s thoughts cloud our own.

Or worse, we only seek out the voices who are confirming our biases and narrowminded views of the truth. Either situation is not ideal. With regards to investing, this makes us follow the masses rather than our own gut instincts.

At The Rum Rebellion, fake news and unethical political persuasion are not in the least bit tolerated. It denounces the heavy amount of government influence which the public accommodates.

Greg will help The Rum Rebellion readers block out all the nonsense and encourage personal responsibility…both in the financial and political world.

Learn more about Greg Canavan's Investment Advisory Service.

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