Are We Witnessing A Massive Shift In The U.S. - Chinese 'Relationship'?

The People's Republic of China flag and the U.S. Stars and Stripes fly along Pennsylvania Avenue near the U.S. Capitol in Washington during Chinese President Hu Jintao's state visit, January 18, 2011. Credit: Reuters/Hyungwon Kang

Zero Hedge: Kyle Bass Warns Of "Tectonic Shift" In US-China Relationship

Hayman Capital's Kyle Bass ventured on to CNBC this morning to drop some painful truth bombs about Trump's "drastically changed Chinese diplomacy" and China's looming "come-uppance."

Bass began by highlighting what he calls a "tectonic shift" in US-China relations in the last few days, pointing to two crucial events...

1. Things changed drastically when US launched unilateral sanctions on China over North Korea...

"Xi is a control freak and he absolutely doesn't appreciate the United States acting unilaterally"

2. Things escalated when Trump sold $1.4bn in weapons to Taiwan, angering Beijing more as Bass notes:

"Taiwan was the one area which Beijing has asked Trump to stay away from during his meeting at Mar-a-Lago."

"Since the death of Otto Warmbier, any chance of meetings with North Korea are now off.. and our diplomatic relationship with China took a major step for the worse yesterday."

Read more ....

WNU Editor: Kyle Bass nails it by outlining how vulnerable China is today with its dependency on credit and the need to maintain massive trade surpluses (especially with the U.S.) to finance its economic and military growth. Any change in this dependency will have profound implications back in China .... especially if they cannot meet their needs to provide employment to the millions who are added to their workforce every year. The unfortunate part of all of this is that President Trump has been consistent since the U.S. election campaign that he wants to change the trade imbalance, and he has more than given enough warnings to everyone (Mexico, Canada, Germany, South Korea, etc.) ..... and especially to the Chinese .... that this is going to change. Well .... for the Chinese that moment has arrived. I now expect one of two things from Beijing .... a more accommodating approach from China to work with the U.S. on issues like North Korea, maritime border disputes, and trade .... or a confrontational approach that will escalate maritime border disputes, putting more pressure on Taiwan, and ignoring North Korea's development of nuclear weapons and delivery systems. Knowing the Chinese and how they operate .... I expect them to adopt the confrontational approach in the coming months by fuelling Chinese nationalism and positioning naval assets that will make everyone nervous .... and this in my opinion will be a huge mistake.