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18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
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Chinese Stocks Rocked After Trump Questions One China Policy

In a Sunday interview with Chris Wallace, President elect Donald Trump did the unthinkable: he refused to cow tow to the One China policy, drawing a hard line in the sand with China that resulted in harsh rebuttals from both Chinese government officials and state run media.

Trump said, “I fully understand the ‘One China’ policy, but I don’t know why we have to be bound by a ‘One China’ policy unless we make a deal with China having to do with other things, including trade.”

This, coming after Trump dared to pick up the phone to receive congratulations from Taiwan’s democratically elected leader, President Tsai Ying-wen, has Chinese officials throwing temper tantrums.

Source: Financial Times
“Adherence to the One China policy is the political bedrock for development of [bilateral] relations,” Geng Shuang, a foreign ministry spokesman, said on Monday. “If compromised, there will be nothing to discuss on co-operation in major fields.”

Mr Trump’s remarks dramatically upped the ante with Beijing just a week after he broke diplomatic precedent by accepting a phone call from Taiwan’s leader, Tsai Ying-wen.

Both incidents have sorely tested the Chinese government’s patience. “We urge the new [US] leadership to recognise the sensitivity of the Taiwan question and to deal with it in a prudent manner,” Mr Geng said. “Upholding the One China policy was America’s promise and we want them to fulfil this promise.”

Chinese state media shills, Global Times, weren’t as tactful with their statements.

Source: Global Times China
On Sunday, US President-elect Donald Trump made some surprising remarks about the Taiwan question again. When interviewed by the Fox News network, he said, “I fully understand the ‘One China’ policy, but I don’t know why we have to be bound by a ‘One China’ policy unless we make a deal with China having to do with other things, including trade.” From these remarks, Western media believes that Trump may use the policy to force China to make a compromise on trade.

It seems that such an analysis is credible. During a phone call with Taiwan leader Tsai Ing-wen, Trump called Tsai “Taiwan President,” making many people suspect that the businessman-turned US President-elect will use the One China policy, the cornerstone of Sino-US relations, as a bargaining chip to peddle America’s short-term interests.

With Trump’s new remarks on Taiwan, many people marveled at Trump’s commercial thinking and naivety for diplomacy. The One China policy has gone through the ages since the Richard Nixon administration. In addition, the policy has become a fundamental principle of international order. Leaders all around the world, including US leaders, understand the importance of the policy.

The One China policy is not for selling. Trump thinks that everything can be valued and, as long as his leverage is strong enough, he can sell or buy. If a price can be put on the US Constitution, will the American people sell their country’s constitution and implement the political systems of Saudi Arabia or Singapore?

Trump needs to learn to handle foreign affairs modestly, especially the China-US relationship. More importantly, a hard struggle against Trump is needed to let him know that China and other world powers cannot be easily taken advantage of.

If Trump gave up the One China policy, publicly supported Taiwan independence and wantonly sold weapons to Taiwan, China would have no grounds to partner with Washington on international affairs and contain forces hostile to the US.In response to Trump’s provocations, Beijing could offer support, even military assistance to US foes.

The One China policy has maintained peace and prosperity in Taiwan, and, if abandoned, cross-Straits ties would see a real storm. China would introduce a series of new Taiwan polices, and may not prioritize peaceful reunification over a military takeover if Trump insisted on his provocations. The US has no control over the Straits, and Trump is naïve to think he can use the One China policy as a bargaining chip to win economic benefits from China.

Eventually, those who advocate Taiwan independence will tremble. Taiwanese authorities may regret to being a pawn of Trump and his radical policies. And Tsai will refuse to answer Trump’s call some day. Nothing is impossible if the Trump administration goes too far.

In the meantime, it’s very likely that Trump may not have put too much thought into it. He is no geopolitical maniac, but just has little experience in diplomacy. He doesn’t understand how dangerous it can be when he involves the US in such an explosive game. After all, this requires some personal experience.

Given his inexperience, Trump is easily subject to the hawkish advisers around him. He assumes whatever he says doesn’t matter before he takes office. We will learn more about how he interprets the One China policy after he is sworn in. Meanwhile, China needs to be fully armed and prepared to take a Sino-US rollercoaster relationship together with Trump. And many others in the world will probably also need to fasten their seatbelts.

Such advice should’ve been offered to Chinext investors today, as that tech heavy index plunged by 5.5% — hitting 5mo lows.

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The Shanghai was plucked for 2.5%.

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And the yuan continues its slow march lower — fast approaching the all important 7 to the dollar level.

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10 comments

  1. braveflaps

    By all means, fuck China, but what Trump is saying isnthat he will give Taiwan TO China if he can extract enough in return.

    So if you’re Taiwan, the squeeze is on: you’re either going to be sold out by Uncle Sam for money, or finally invaded by China because of the provocation.

    And how are you feeling right now if you are Lithuania, Estonia, Georgia, Latvia, etc? If Putin gives Trump enough on one issue he won’t support NATO intervention in any Russian aggression in former Soviet client states?

    Or in return for bilateral trade items the US will look the other way when China literally takes over an African nation like Tanzania?

    Trump foreign policy is looking like Operation Infinite Chaos. Watch for the return of McGarrett’s dreaded nemesis Wo Fat.

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  2. traderconfessions

    Just as I predicted a week ago.. now traders have to worry about waking up to a Trump tantrum in addition to a reckless analyst call. The horror.

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  3. juice

    hence, the art of the deal .. something Obama knew zippo about, except taking his marching orders from the military industrial complex, i.e. the CIA/unintelligent intelligence agencies, as the real reason for making a nuke deal with Iran surfaces, a $17 billion deal for Boeing

    http://www.wsj.com/articles/boeing-seals-nearly-17-billion-iran-deal-1481507413

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    • traderconfessions

      Yup, the goal of the Iran negotiations was more plane sales for Boeing. Keeping Iran from producing a nuclear weapon was just a bonus. Just think of all the jobs Obama created at Boeing. Hooray!

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  4. pptsd

    Trump also mentioned N Korea so perhaps he’s using “One China Policy” as leverage. “You want your “brand” back, you get N Korea to stand down with nukes.”

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