Chinese Affair Takes New Twist

As the USA intensifies the pressure on China, a lot is happening as we all watch. In the long term, a lot will happen that may not be the best to other uninvolved parties.

it does matter to all big companies that trade with china first. second, it matters to all countries that trade with the Chinese, thirdly it will soon matter to countries that use the Chinese establishment in building their infrastructure and taking loans from them.

In this great geopolitical issue, what starts as simple sanctions will mostly turn out to be mammoth compromising positions, this issue will most definitely turn out to be a situation where both countries avoid losing face rather than a benefit in monetary measurements. 

....An essential element of Chinese business culture is reputation (called Mianzi) which the Chinese have within their personal relationships (Guanxi). Actions that can result in “losing face” for a Chinese negotiator are: interrupting while he is talking or directly challenging him or pointing out an error of his. If during negotiations someone is made to lose face before his peers, this person will react very negatively and it will be very difficult to reach an agreement, as decisions are reached as a group. As a counter position to the concept of “losing face” there is also “giving face” (Gei Mianzi) which is achieved, for example, by paying compliments or praising their work in front of a superior. This is recommended as it improves their reputation and will make them take a more favourable attitude in reaching an agreement. ...

Donald Trump is managing in dishing out embarrassment to the Chinese and at times can offer praise according to circumstance. The political undertones in the statements he puts across are 100% in his negotiation skills arsenal.

First things first: This game called " trade war " is a tit for tat affair, the parties involved have to retaliate for any sanctions placed that are meant to hurt them.

This situation causes a deterioration of their negotiating capabilities, the more the sanctions, the more the retaliation, the USA has the upper hand, for now, the Chinese are behind and trying to catch up as they seek to minimize the economic implications this will have.

Second: A simple occurrence like Banning Huawei has had a domino-like effect on other companies directly or indirectly related to the company. One of the immediate results of this has been Google reviewing some of the business it does with Huawei. As a big organisation, Huawei can comfort themselves all they can at this time but from here going forward it will be a downward trajectory. 

Most European countries cannot afford to sit on the fence and continue trading with Huawei, this issue was really hot in the UK, its only wise that they will follow up with reduced tech and business collaboration with Huawei. Eventually, they will join in " cold " sanctions on China, its the only sensible path they have, they prefer the USA over the Chinese at any time.

Cold sanctions mean that the European companies will not joining publicly in renouncing the Chinese giants but will increasingly make it difficult to operate together, this results in Huawei and others

 " obviously " seeing the writing on the wall without necessarily it being outright business denial.

Third: Huawei may be forced to reduce operating costs and freeze on expansions, for the time being, companies usually go into a wait and see sort of situation, a chain of events usually follows with other directly or indirectly related companies, finally layoffs begin. ( this won't happen soon but in the near future, near future in this context is 6 to 7 years ) how fast a company bleeds depends on lots of factors.

As the trade war escalates, companies will naturally move to other friendly countries eg Vietnam to avoid trade tariffs, it's very natural for them to seek profits.

The net effect of this developments means the Chinese will now have to face some teething problems at home, mainly employment problems and second most of the elites will really face difficulty abroad, this usually creates political problems at home, political problems usually have their own dynamics.

The country naturally may decide to concentrate on dissent at home hence more security and more secure investments, this slows down investment abroad, now they have to concentrate on home issues rather than assert themselves against Trump.

This is usually the perfect time for Regime change, Democracy issues, People being oppressed issues, underground movement issues and Chinese want freedom issues. 

Most countries will either identify with the USA or The Chinese to avoid trade barriers and tariffs, on a larger scale to avoid political upheavals ( African countries mostly )

If escalation continues, a lot may come up.

Very interesting indeed.