Taiwan is next

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I feel for the people of Ukraine but they are largely irrelevant in geopolitical terms. No great power is coming to their rescue and the conflict will be shaped by whatever they choose it to be. My hope is they will fight Russia into a long-term quagmire, and liberal democracies should supply them on that basis if they choose to do it, but nobody knows.

What matters very much more is this:

This is what Western powers need to focus on quickly. They need to draw up a much more severe set of economic consequences for China than they have for Russia. Sanctions are useless and the global economy too dependent upon Russian energy.

These consequences for China need to include plans for goods and capital blockades. The type of stuff that will smash the Chinese economy and therefore create a very large disincentive for the CCP given the consequences of invasion will result in deep unrest from its own people.

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That means Western nations should be actively disengaging from Chinese goods and capital supply chains now. Have plans for domestic manufacturing revitalisation. Contingencies for the secure supplies of goods between themselves. And iron-clad plans to quarantine the always treasonous Wall Street from China.

These measures need not be deployed so actively that it appears China is being punished in advance. But they need to be active enough that the intent is clear.

Basically, if a Sino-Russian autocratic block wants to form itself, then it should be made clear that that comes at the cost of exiting a global economy that is based upon freedom.

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If that is not enough to prevent the Chinese invasion of Taiwan then nothing was ever going to be. And when it happens, liberal democracies will be much better placed to defend themselves through the long Cold War that follows.

That is why the following must be treated with radioactive skepticism:

China’s top representative in Australia says his country is willing to go “halfway” on repairing the relationship.

Ambassador Xiao Qian began his post in Canberra last month and says the appointment is a sign the Chinese Government wants open communication with the federal government.

“This relationship is very important and this is good for both sides, and now we’re in a difficult situation,” the ABC reported Mr Xiao as saying.

“But from the Chinese side, we’re ready to work together with our Australian counterparts to move towards the same direction [with] joint efforts, so we can move this relationship back on the right track, back to the right direction.”

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Sure, let’s be friends, as we head in opposite directions as fast as economically possible.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.