"Every perception is to some degree an act of creation, and every act of memory is to some degree an act of imagination."

-- Gerald Edelman, Second Nature: Brain Science and Human Knowledge
The Rise from 1949 until Now2 The Rise from 1949 until NowThe Rise from 1949 until NowChapter 6: The Big Cycle of China and Its Currency2020-10-09JournalFrom 1949 until 1976 Mao (with his various ministers, most importantly Zhou Enlai) a) consolidated power, b) built China’s foundation of institutions, governance, and infrastructure, and c) ruled China as a communist emperor until he died in 1976.  During that period, he ruled China for the workers and against the capitalists, he kept China in isolation from the rest of the world, and he followed a strict communist system in which there was government ownership and tight government bureaucratic controls over everything.  Immediately following the deaths of Mao and Zhou Enlai, there was a power struggle in 1976-78 between the hardliners (i.e., the Gang of Four) and the reformists that Deng Xiaoping won, which led to the second phase. Deng (with his various ministers) ran China directly or indirectly until his death in 1997.  During that phase China moved to a more collective leadership model, opened up to the outside world, introduced and developed capitalist practices, and became much stronger financially and more powerful in other ways that didn’t appear threatening to the United States and to other countries.  During most of Deng’s tenure the primary enemy of China was Russia, so he viewed building a symbiotic relationship with the United States as helpful geopolitically.  Economically the relationship was symbiotic because the US bought items that were attractively priced from China and the Chinese lent back to the Americans a lot of the money they earned to make those purchases.  As a result, the US acquired US-dollar-denominated debt liabilities to the Chinese, and the Chinese acquired dollar-denominated assets owed to them by the Americans.  After Deng’s death his successors Jiang Zemin and Hu Jintao (and those who led China with them) continued in the same directions so China continued to quietly become richer and more powerful in fundamentally sound ways that did not appear threatening to the US.  In 2008 the global financial crisis led to greater tensions over wealth in the United States and other developed countries, increased resentment at job losses that were going to China, and increased debt-financed growth in all countries including China.  That, and the development of China that began to appear more threatening, started to change the relationship. Xi Jinping came to power in 2013 presiding over a richer, more powerful China that was becoming overly indebted itself (though its debt was internal debt) and increasingly at odds with the United States.  Xi accelerated economic reforms, took on the challenge of trying to contain debt growth while aggressively reforming the economy, and supported the building of leading technologies and going global.  He also became more proactive in reducing the gaps in educational and financial conditions and in protecting the environment and consolidating political control.  As China’s powers grew and Xi’s bold objectives (e.g., the Belt and Road Initiative and the Made in China 2025 plan) became more apparent, especially after Donald Trump (a populist/nationalist who was elected largely by appealing to those who were suffering from the loss of jobs) was elected president, US conflicts with China rose in a way that was analogous to the rise of Japan and Germany to challenge the then-existing powers in the 1930s. Continue reading…