China ‘In a Panic’ to Start War (Uncut) 04-30-2025

China ‘In a Panic’ to Start War, The U.S. is Preparing : Gordon Chang

The Chinese economy is facing desperate times. This is the warning of my guest today, Gatestone Institute Senior Fellow Gordon Chang, an author of Plan Red, China’s Plan to Destroy America. Gordon, thank you so much for being with us.

Thank you so much, Daniela. Look, this is developing minute by minute here. You say and warn, look, China is tough, but Trump is tougher.

How does this play out for you? This is going to be a long struggle. Part of it is because I think Xi Jinping has boxed himself in. He has configured the Chinese political system so that only the most hostile answers are considered to be acceptable.

For about a half decade, he has told the Chinese people that China has already surpassed the United States, which means that if he gives in to Trump, or even if he just reacts to pressure to begin negotiations, that undermines everything that he’s told the Chinese. I think that that makes it very difficult for him to come to terms. We’ve seen this in this controversy over the last couple of days, where you have President Trump saying, we’ve been talking to the Chinese about trade, and the Chinese saying, no, there are no trade discussions at all.

I think that’s a real indication that the Chinese really find themselves in a hard position. Now, of course, we don’t know, people on the outside like me don’t know 100% who’s telling the truth. But we do know one thing, and that is that the United States and China talk to each other all the time.

Forget about the trade war. Forget about the tariff war. We talk to each other all the time.

For the Chinese to say that there have been no discussions about trade, especially with all of the tariffs, that’s not very credible. This begs the question of Gordon, who needs who more? Does China need the U.S. or does the U.S. need China? Oh, that one’s clear. China needs the U.S. more.

First of all, we are the larger economy. China’s economy is less than two-thirds the size of ours. More important, we’re the trade deficit country.

Last year, China’s merchandise trade surplus against the U.S. was $295.4 billion. That was up 5.8% from 2023. But also, remember, China is a trade-dependent economy, export-dependent, because Xi Jinping has turned his back on consumption as the fundamental basis of the economy.

The only way for him to rescue a desperate situation is to export more. And one other thing. China’s right now probably contracting.

It’s not growing at the 5.4% pace that they reported for Q1. And we see this from, for instance, price data for February and March, where the CPI was down for two consecutive months and the producer price index, which measures factory gate prices, that was down in March for the 30th straight month. That says deflation.

And I think that really says, look, China, maybe it’s growing, but it’s probably contracting. So you have all of these factors at the same time. And that means President Trump, at least from the objective factors, he holds almost all the high cards.

What about reports, Gordon, that China has been preparing for this moment? They’ve been looking for partners outside of the U.S. Was the whole reset summit with other Asian nations of them uniting and forming some sort of alliance to defeat the U.S.? Yeah. Xi Jinping went to Vietnam, Malaysia, and Cambodia recently. Now, Cambodia is a Chinese vassal.

So I’m sure that Xi Jinping got everything he wanted out of Cambodia. But Malaysia and Vietnam are much more dependent on the U.S. So for instance, Vietnam, which is the most important of those three countries, they run a trade deficit with China. They have a big trade surplus with us.

And just after Xi Jinping left, a senior Vietnamese official said that the relationships between Hanoi and Washington were of core importance to the Vietnamese. So that was basically Vietnam saying to Xi Jinping, yeah, it was nice you were here. Glad you stopped by.

But no, we’re not going to let you decimate our economy. Danielle, the one thing here is that because of Trump’s tariffs, he has shut a lot of Chinese products out of the United States. That means Xi Jinping’s got to sell them somewhere.

Countries are not going to allow the Chinese to decimate their economies with the goods they would have otherwise sold the U.S. And in fact, India just slapped a 12% tariff on steel to prevent the Chinese from flooding the Indian market with Chinese steel that otherwise would have been sold to America. Well, that’s why you raised a really good point. And we saw Scott Bessett’s points that we want to help them.

We want to get them on the right side of the page. But then I was speaking to investor Kevin O’Leary, who would say, but look what they did when we invited them into the World Trade Organization. They never abided by the rules.

So why do we think that they’re going to be accommodative or listen now? Well, Scott Bessett was trying to talk to the markets, trying to appease them. But what he said was 100% right. Yes, of course, China needs to rebalance.

But what it ignores is Xi Jinping does not believe in consumption as the basis of the Chinese economy. Matter of fact, last couple of years, consumption’s contribution to gross domestic product has declined. It’s now about 38-39%, like one of the lowest in the world.

Xi Jinping wants a wartime economy. He doesn’t believe in empowering Chinese citizens. And also, he does not want to offend core Communist Party constituencies, especially the state banks.

So Scott Bessett can say those things, and maybe Americans will say, oh, yeah, that sounds right. But we’ve been saying that to the Chinese for a couple decades now. I look at that and just shake my head and say, what Scott Bessett should have said was, we’ve said all these things for two decades.

The Chinese are absolutely determined not to listen to us. So we’re going to impose costs. Now, that would have tanked the markets.

But at least he would have been telling the truth. Very good point. What I’m hearing from you, though, overall, and correct me if I’m wrong, is that the US will come out on top.

Trump will win here in his negotiations? I think Trump will win. China has one card to play. And that is, it’s trying to pressure Wall Street, Main Street, C-suites, farmers to put pressure on Trump to cave.

Most presidents, they probably would cave. Most presidents, we know, wouldn’t start this in the first place. Trump’s pretty determined.

Trump believes that this is the contest, I think, for a very long time. I believe it’s a contest for the century. But Trump may not see it in those terms.

But Trump believes in tariffs. We know that because during the campaign, he kept on talking about tariffs. He talked about William McKinley, for God’s sakes.

So clearly, he believes this. This is in his heart. And if he has a core belief, tariffs is it.

Gordon, are you at all concerned that this escalates more than a financial war, that it becomes some sort of a military war? Yep. And the reason is that, you look at the objective factors, basically, China doesn’t have a way out of this. And Xi Jinping could very well decide that his only way out is actually to cause trouble someplace.

Now, I don’t think that Xi Jinping would start a war to rally the Chinese people, because we know that Chinese people do not want war. But I think Xi Jinping might think a war would be extremely useful because it would prevent senior Communist Party figures from challenging him. We know that Xi Jinping’s hero is Mao Zedong.

We know Mao employed this tactic in 1966, when he started the Cultural Revolution. Mao didn’t have the ability to start a war, but he did have the ability to start a struggle with other Communist Party figures, and so as to preserve his position in the regime. I think that this is Xi Jinping looking at what his hero did, and I think he’s going to probably do the same thing.

So yes, I’m very worried about that. With Vietnam? Core or South Korea? In the last three weeks, we have seen hostile Chinese activities, military activities against South Korea, Japan, Taiwan, Philippines, and Australia. So yeah, anything can happen.

And it could be Vietnam, or it could be somebody else, could be the United States. So yeah, we should never rule that out. We always have to be prepared for what the Chinese will do.

But now, especially at a time of distress in the Chinese economy. Gordon, what do you think is China’s plan with all that gold? Why have they upped purchases of gold in their central bank? Oh, that’s a great question. And I wish I knew the answer.

I think that there’s a number of things. First of all, they are worried about their dependence on dollar-denominated assets. I think that they are thinking ultimately of maybe a gold-backed Chinese currency.

I think that that is more of a pipe dream than most people think for a lot of reasons. But nonetheless, I do think the Chinese are at least contemplating that. And Xi Jinping likes to accumulate stuff.

So what better than gold? So I think they’ll continue to do that. And I would be very optimistic about gold in general. Even though I think the Chinese plans are unrealistic, it doesn’t matter.

What matters is these guys are buying gold. He who holds the gold makes the rules. Golden rule.

Last point. I’d love to pick your brain on, Gordon. I’m currently in Canada.

I’ve been covering the election here. There’s been many talks that the Chinese have infiltrated this election, that the liberal government is compromised by the Chinese. Do you have any research that backs that up? Yeah, we’ve got to be concerned because Justin Trudeau did his best to bury the parliamentary investigation into Chinese infiltration of Canadian politics, in other words, of Liberal Party politics.

And Mark Carney is probably going to be worse than Trudeau. I mean, we saw that with that Liberal Party candidate, Paul Chiang, who actually asked people in Toronto to turn in a Conservative Party candidate because the Hong Kong government had put a bounty on his head. And what did Mark Carney do? Well, Mark Carney stood behind Chiang.

That was outrageous. Eventually, he had to relent. But what did the Liberal Party do? Well, they got another Chinese candidate who’s even worse than Paul Chiang.

So yeah, we’ve got to be extremely concerned about the Liberal Party’s direction. And whether they are using Canada’s ports, Vancouver, Montreal, to bring the fentanyl into the United States. I mean, that’s what certain experts here are claiming.

Well, the largest fentanyl lab in the world, it was not in China. It was not in Mexico. It was in Vancouver.

Now, fortunately, it was closed down last November. But that shows you the Chinese influence in that city. And just to give you one reason why Americans should be concerned, Justin Trudeau allowed Canadian soil to be used by hostile elements as a staging ground for assault on America.

In US federal fiscal 2024, which ended on September 30, 2024, the number of people apprehended on the terrorist watch list coming in from Mexico was 155. Even though the number of people coming in from Canada was far smaller than coming in from Mexico, the number on the terrorist watch list from Canada was 358 in fiscal 2024, which shows you the problems that we have with our neighbor to our north, because I’m in the States. Gordon, why? And I know this is, I’m not being naive here.

But why would Trudeau sell out Canada like that? Money, a seat at a certain table? What? I have absolutely no answer to that question, because it completely baffles me. And the other thing that baffles me is why do American presidents, whose names were Trump, Biden, and Trump, why did they let this continue? So there’s a lot of unanswered questions here. Wow.

All right. Gordon Chang, fascinating insights. Thank you so much.

Well, thank you, Daniela. And thank you all for watching. We’ll have more great content.

Be sure to stay tuned to the Daniela Cambonis show here on ITM Trading. Thanks for watching.