131 days ago, on Mar 30, 2020, The Rembau Times warned that a military confrontation between the United States and China will take place in the fall of 2020.
In that article, we stated the war was a result of political expedient choices for the respective leaders of both superpowers. At that time, this was an extremely out of consensus view. As of 8th August 2020, Bloomberg is now reporting this.
Our favorite SCMP columnist, Yonden Lhatoo also comes around to our view.
As the first outlet to actually predict that a war will take place in 2020, let us elaborate further on the odds of this event is much tighter than what stock markets or held by your favorite teh tarik macha’s view. (Teh tarik macha: Malaysian Home boy who sells tea)
Before we start, we have to give a 50 word explanation on what we term by odds and how we use it to form a risk view. If one were to ask what is the risk of a war between US and China taking place within the next 12 months at the start of 2020, it will be wrong to say it is zero. A zero odds event means that the event cannot take place. Actually, a reasonable first order approximation will be to calculate the longest time between a) open military conflicts between world super powers, or b) conflicts between US and China. The answer to a) is probably World War II which took place 75 years ago. The answer to b) is probably the Korean War, which took place 70 years ago. So a reasonable first order approximation will be 75 : 1 or 70 : 1. We call that the base odds.
To that, we add the various factors which could contribute to a war to arrive at the conditional odds e.g. hawkish leaders, personality conflicts, border disputes, proxy conflicts, public opinion, national agenda, political agenda, etc.. For example, if Beijing Biden was in charge of the United States, then it we would rate the “actual odds” which incorporates this information to much wider, maybe 10,000 to 1, because the hawkish leader factor, which ranges from the scale of “USA! USA! USA!” to “Never offend China” will be closer to the latter. Since a US President which has the view of never to offend China is much less likely to trigger a war with the country he does not want to offend, the chances of this happening is very low, or in the language of odds a 1 in 10,000 chance.
With that in mind readers can now actually examine all the factors we actually are facing in 2020 and probably arrive at the same conclusion we have which makes the probability of a war over the next 6 months being something like a 1 in 10 chance (10%) or even a 1 in 5 chance (20%). That means is 7x to 14x more likely that what it was at the start. More tellingly, because we have a hawkish President, the actual chances of a war occuring as compared to a dovish President, increased by 1/10 over 1/10,000 or by 1,000 x. So those who say war cannot occur must first ask themselves, is this view based on a hawkish, neutral or dovish President?
Readers must form their own opinion and not use the prices of equity markets as a gauge because equity markets are driven by short term news flow, technical strategies and investors inability to make rational predictions. You can find out more about that by following any YouTube tutorial on Behavioral Finance.
So the major factors of why a war between US and China is very likely is as follows.
Factor 1 : The President’s aggressive anti China stance is helping him
Blaming China is working in this US Election Cycle.
If you consider what China, or more specifically the Chinese Communist Party has caused on the world this year, not to mention its own people, you will think that most Governments would have cut off diplomatic relations with the country.
Of course that did not happen, as most countries count China as a trade partner and understand that even the slightest squeak of protest will be met by overwhelming consequences by the CCP. Even worse the centre left governments, or parties, be it the Democrats in the United States or the European Governments mostly kowtow to China for reasons best known to themselves.
With that in mind, consider what will be the effect of a US President taking the totally opposite view of what other governments are doing. Rather than kowtowing to China, the policy of the United States as echoed by Secretary of State Mike Powell is now of open hostility. People still do not get the full impact of the Secretary of State’s speech on China.
So since the President is saying exactly what ordinary citizens who have been sickened by this pro China stance taken by most of the world’s media, he is a messaging to a deep rooted desire people have, which is for a bigger bully to stand up against a bully. More importantly, this is actually working for the President.
This validated by a recent survey of the Pew Research centre, as 3 in 4 Americans hold China accountable for the Covid-19 outbreak and want more action on human rights in China. More tellingly, the President’s approval ratings have climbed recently as the administration has taken a stronger stance against China. As a side note, the action of the White House to confront China on human rights was in stark contrast to the actions last year, when the President was trying as hard as he could to deflect the human rights issue in favour of the trade deal.
Factor 2 : President Xi needs to save face.
Everyone who has written anything about China’s culture agrees on one thing. Saving face is the most important aspect and people will go to extreme lengths to save face.
The events of 2020 has made President Xi lose face in the CCP.
Recently, President Xi Jinping of China made a visit to the Xiping war memorial over here. In that speech he basically outlined something that was so startling which soon after led to several retired PLA commanders including the legendary PLA General, Wang Xiangsui (王湘穗), author of the book Unrestricted Warface coming out to openly criticize the idea of an invasion of Taiwan on account that the US holds a major military edge. This means that seasoned China watchers who are super clued on the situation in China suddenly “got the message”. Furthermore, if you watch exactly the military formations in the Pacific, you should be a bit more concerned that what the major news outlets are saying
Factor 3 Economic War has begun
On 07th August, the CEO of the Hongkong SAR, Carrie Lam, officially entered the US OFAC sanction list.
To give you the massive news. What it means is that US Banks in Hong Kong who chose to actually implement the OFAC sanction list will break Hong Kong’s National Security Law. We have repeatedly warned of staying away from US Banks in this climate. Nevertheless, the current situation is borderline crazy. How can a US Bank, like Citibank, JP Morgan or Goldman Sachs do business in Hong Kong when the leader is on the US Sanctions list? If you comply with the US order, you break the local law. Crazy!
And will HSBC decide to close accounts of people working in the Hong Kong SAR Government. As Admiral Yammamoto, the Japanese navy chief who was against the idea of going to war with the United States in World War 2 repeatedly warned the Imperial Japanese government not to “awake a sleeping giant.” With the hardliners in China making a massive miscalculation of US political climate in terms of perpetuating hostility against the US, US is now actively pursuing economic war against China.
Rembau Times is not advocating for a war. We have no influence on what future events hold and the course history eventually takes. However, as a organisation which believes in providing critical alerts early and at the right time, we are forced to provide an in-depth explanation devoid of the self-censorship most media organisations take. As such, we hold the view that the war between US and China is probably a 1 in 5 event, meaning it is very likely. As we have warned readers about this in 30th Mar 2020, we do not need to issue a new warning.