China to Decouple from US, Ally with Russia
Right now Xi Jinping is visiting Russia and having talks with Vladimir Putin, who has just been accused of war crimes by the International Criminal Court (ICC). This visit is no doubt very important to global geopolitics and shows that Xi Jinping has made up his mind to ally with Russia, decouple the US, and further close China to actively prepare for war while compounding evidence shows Xi Jinping has allocated $2 trillion to a sovereign emergency wartime fund.
The world needs to scrutinize CCP movements regarding China’s economy lately. First you might have already read the news that right before Xi Jinping’s visit to Russia, the CCP held joint military drills with Russia and Iran in the gulf of Oman. Keep this in mind, as this is certainly a warm up for Xi’s trip to Russia and a sign of the close military relationships between the three countries.
Mid March of this year it was reported that the famous auditing firm Deloitte was fined $31 million by the CCP for “failing to perform its duty in assessing the asset quality of China Huarong Asset Management Co. (CHAMC)” and Deloitte’s Beijing operations would be suspended for 3 months. In the meantime, CHAMC was fined 700k yuan ($101k). So why was Deloitte fined so much more than CHAMC? Ignored Chinese language news from February this year should provide insight to the outside world on this question. The CCP has ordered all of its state owned enterprises not to renew their contracts with the global “Big Four Accounting Firms” Deloitte, Ernst & Young, KPMG, and PwC when they expire. The CCP stated this was only to ensure information security. So what does this mean? To look back on this news now, reveals the CCP no longer cares about gaining capital or investment from Wall Street. It’s been said to be common knowledge in New York City that without an auditing report from the big four accounting firms, it’s almost impossible to have your company listed on Wall Street. Now the CCP has proactively ordered it’s state-owned enterprises to cut their ties with the big four. Also look back to news in July 2021 that reveals the Chinese version of Uber, Didi Changxing, was suppressed by the CCP after it listed its shares on the New York Stock Exchange, leading to their exit of Wall Street altogether in December 2021. These 2 pieces of news tell the same story: the CCP wants to decouple from the US in preparation for war.
China’s allocation of $2 trillion to their military should be scrutinized. On February 9th, a famous Chinese economic analyst Lao Man published a Weibo post stating that 2 trillion US dollars has disappeared from China in the past 3 years. His points are: According to Chinese Customs data, during a 3 year period from 2020–2022, China’s total trade surplus was $1.897 trillion. In 2022 alone the surplus was $877.6 billion. However, such a huge amount of US dollar surplus has not been reflected or “appeared” on any other macroeconomic data, such as China’s foreign exchange reserve data, foreign exchange accounts, and commercial banks settlement data. It seems China’s huge amount of surplus income during the pandemic and later, just disappeared out of thin air. Lao Man has said, usually, trade surpluses have 2 destinations. One is to become an increase in China’s foreign exchange reserve, or deposited in domestic commercial banks. However, China’s foreign exchange data reflected $3.1079 trillion in 2019 and then almost no difference of. $3.1277 trillion in 2022. Also, according to the data released by China’s central bank, the foreign exchange of commercial banks was $760.4 billion in 2019, $996.9 billion in 2020, and $854.9 billion in 2022 so there wasn’t a huge change in this data either.
It can be easily assumed, but Lao Man also stated, that any trade surplus that was reflected in official data, was created by the private sector. For example, in 2022 private enterprises had a surplus of $1.1322 trillion; foreign enterprises (including Hong Kong, Macau, and Taiwan) had a surplus of $170.3 billion; and state-owned enterprises had a negative balance of $447.6 billion, which meant they showed a trade deficit. According to the CCP’s foreign exchange regulation rules, private enterprises must exchange their foreign currency into RMB within one year and are not allowed let foreign currency sit outside of China for a long period of time. Therefore, where the $2 trillion has gone has become a mystery.
Lao Man’s article has sparked a lot of public attention and discussion. Chinese citizens have been making different speculations as to where the money has gone but the majority of speculation is the same: this money has been moved out of China via all sorts of illegal money laundering methods. Some say there wasn’t such a huge surplus and that the customs data was faked.
However, Chinese whistleblower Lao Deng said in his program on YouTube that, according to his source in China, the $2 trillion was used by the CCP to secretly set up a fund called the “Rejuvenation Fund.” This was learned from Russia, which also put aside some funds 2 years ago when oil prices were high, so that it could be used during an emergency. This fund is a sovereign wealth fund and is currently being used by Russia in the war in Ukraine. The reason the CCP set up their own emergency sovereign fund it to prepare for a future war against Taiwan. This fund will be used on one hand, to fund the war itself, and on the other hand, to buy energy and food in light of expected sanctions from the west during this prospective war. Lao Deng and He Lifeng, the current chairman of the National Development and Reform Commission (NDRC) both stated that a member of Politburo of the CCP is the secretary of the Rejuvenation Fund, while Xi Jinping’s younger brother, Xi Yuanping, is the chairman. These are the main 2 people in charge of China’s Rejuvenation Fund, the missing 2 trillion dollars in China’s trade surplus, their war time emergency sovereign fund.
