The 5 Elements of Chinese Economic Warfare 1 Andrew Bustamante - EverydaySpy.

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Economic warfare is a powerful tool that mainstream media, TV pundits, and even politicians
misunderstand. Surprisingly simple and useful, it confuses many ‘experts’ simply because they
fail to understand the core purpose behind it: balance.

Economics is the science of supply and scarcity. At the center of

economics is the need for balance. But when people hear the word
Economic warfare
warfare, they think of traditional conflict. They think of battle. And is not about
every battle has to have a winner and a loser. Economic warfare is
not about dominating - it’s about changing the balance of power.
dominating - it’s
about changing the
The goal of economic warfare is to make other countries economi-
cally dependent on your country so that you gain power over them. balance of power.
Unlike traditional conflict, the goal is not destruction, dominance,
or eradication. It is simply to put yourself at the center of balance. Because balance is hard to
break.

The United States became a world superpower while the Soviet Union crumbled because all oth-
er countries needed the US economy to keep balance in world markets. And the reason China is
waging an economic war against the United States right now is because they understand eco-
nomics. And they want to be the new center.

China’s economic warfare strategy is based on two key aspects of Chinese culture. First, the Chi-
nese are a collectivist culture, which means they value themselves as part of a group even more
than as individuals. In contrast, Americans place great value on being individuals - on breaking
away from the group. Chinese will always support, prefer, and part-
Chinese always ner with other Chinese - no matter what. But Americans will always
support, back, and support, prefer, and partner with whoever they think offers them the
best outcome.
do business with
other Chinese - no A second, equally important cultural
trait is that Chinese are one of the
Their long history
matter what. most ethnocentric cultures on the based in imperial
planet. Their long history based in
imperial lore has led them to believe that they are genetically lore has led them to
superior to all other people. Their faith in the collective is one believe that they are
manifestation of that belief. But you can find evidence of their
sino-centric bias in everything from their country name (Zhong- genetically superior
Guo - translated: Middle/Center Kingdom) to the popular rheto-
ric of their ruling central party.
to all other people.

The 5 Elements of Chinese Economic Warfare 2 Andrew Bustamante - EverydaySpy.com

When collectivism meets the assumption of cultural superiority, the result is what you see in mod-
ern-day China. An obedient, patient hierarchy of people who outcast those outside the norm and
turn away their own blood in favor of the collective. It is also the reason you see corruption and
lopsided political power even while subjugated masses sit quietly by and let it happen.

There are 5 elements to the Chinese economic warfare model being used against the United
States today:
1. Trade Agreements
2. Currency Valuation
3. Import/Export Balance
4. Proxy Conflicts
5. Diplomatic Relations

In this report, we will look at each of these elements and give you the tools to stay ahead of Chi-
na’s strategy as it plays out in headlines and world events.

1. Trade Agreements
China is a huge land mass that is almost fully self-sufficient The reason China seeks
in terms of indigenous technology and natural resources.
Even so, they intentionally seek specific trade agreements trade agreements isn’t
with other countries. The reason they seek these agreements to serve their population
isn’t to serve their population better or benefit their own
economy. Instead, it is to position their economy in a way better or benefit their
that makes other countries dependent on China.
own economy...
China seeks trade agreements that serve two functions
simultaneously. First, they want to trade with countries that have a developmental need for Chi-
nese goods. This includes third-world countries in Africa and Southeast Asia that have high need
for infrastructure, medical expertise, and education but little to offer in return. When China steps
in to support these countries, it does not share skills/capabilities but instead offers goods and
services. This keeps the trade country reliant on China instead of helping them develop their own
capacity.

China wants to trade Second, China wants to trade with countries that have high
with countries that wealth and high consumer spending. These first-world coun-
tries (Australia, United States, Japan, South Korea) have
have high wealth and embraced globalization to meet domestic demand and Chi-
na is happy to partner for the same reason they serve third-
high consumer spending. world countries… to make them reliant on Chinese goods.

The 5 Elements of Chinese Economic Warfare 3 Andrew Bustamante - EverydaySpy.com

As seen early in 2020 with the spread of Coronavirus
in China, first-world economies suffered as Chinese
The COVID19 crisis was
manufacturing stopped to respond to the outbreak. The an unintentional test-bed
COVID19 crisis was an unintentional test-bed for Chinese
leadership (and global leaders) to see just how dependent for Chinese leadership to
first-world powers had become on Chinese goods. see just how dependent
first-world powers had
become on Chinese goods.

2. Currency Valuation
Currency is the lifeblood of any country. It is how domestic goods are created and traded and
how a domestic economy stays healthy.

Currencies are slave But in a globalized world, goods and services need to be
transferred between currencies. That need creates a market
to the laws of supply where currencies themselves are a product that carry their own
and demand. value. And like any good, that makes currencies a slave to the
laws of supply and demand.

China wants its own currency to be a primary currency of inter-

national trade. When the world buys and sells in Chinese Ren-
China wants its own
menbi (RMB), it means they also must buy and sell the currency currency to be a
itself. Because China is the only country that can create RMB,
they have incredible power over not just their own currency but
primary currency of
the value of the RMB in the world market. international trade.
The way China uses its While being able to manipulate RMB is a useful tool, it
currency as an economic is rife with issues. You saw this in 2010 when China was
under global pressure to revalue their currency and return
warfare tool is by using it to a fair market price (nearly 20% undervalued at the
the RMB to buy and sell
other currencies.
The 5 Elements of Chinese Economic Warfare 4 Andrew Bustamante - EverydaySpy.com
time!). The way China uses its currency as an economic warfare tool is by using the RMB to buy
and sell other currencies. By creating scarcity (through purchase) or overwhelming supply (by
selling/dumping) another currency, China is able to give the perception that their RMB is not
only strong, but also consistent and reliable.

3. Import/Export Balance
Mainstream media likes to focus the most on import/export balances as proof of China’s eco-
nomic warfare. By exporting more goods to the United States than it imports, China is able to
create a negative trade balance for the US. This strategy is closely tied to what we covered
above in trade agreements, but has a more important connection to what you just learned about
currency valuation.

An imbalance in An imbalance in imports/exports results in an imbalance in currency

values. Because each country must buy/sell in a common currency,
imports/exports the result is that currencies are also part of every exchange. In the
case of the US trade deficit, the US is buying Chinese goods in USD
results in an (converting to RMB) which puts more USD into the market and increas-
imbalance in es supply (while decreasing demand). But China is not buying equal
trade back from the US, which means the USD value does not return
currencies. to the US but instead ‘lives’ as RMB in the international market.

Through the lens of ‘economic balance’ and Chinese ambitions to be the new center of balance,
it is clear to see how the RMB could be seen as desirable in terms of value and strength in a
US trade deficit. Now multiply that same effect with other
strong world currencies in the UK, India, Singapore, Can- Multiply the currency
ada and more - all countries that have high trade deficits
with China. It becomes clear how China is using the three effect with other strong
elements of economic warfare we’ve covered already. world economies in the
While mass media wants you to focus on the simple idea UK, India, Singapore,
that the US buys more from China than it sells, do not be
fooled. Imports/exports are just one small piece of the
Canada and more - all
larger hostile economic strategy. The importance of trade countries that have high
imbalance has little to do with the goods themselves and
everything to do with the currency that buys vs. the curren- trade deficits with China.
cy that sells.

The 5 Elements of Chinese Economic Warfare 5 Andrew Bustamante - EverydaySpy.com

4. Proxy Conflicts
Proxy conflicts are a tool for nations that want to gain power without appearing outwardly
aggressive. They have become more popular since the early 2000s as Islamic extremism and
terrorist groups became proxies for wealthy Arab countries. Hezbollah in Lebanon, Houthis in
Yemen, and Iraqi militias are all well known proxies for Iran. But even outside of Iran, proxy con-
flicts are an active tool for Chinese interests around the world.

Proxy conflicts The key to any proxy conflict is that the sponsor state must not actively
engage in direct military conflict. Instead, domestic fighters for the cli-
are an active ent state engage in battle and sponsor states are seen as non-military
tool for Chinese actors.

interests around You see China serve as a sponsor

You see China engaged
state in proxy conflicts throughout
the world. Southeast Asia, the Middle East, in proxy conflicts
and Africa, in countries like Myanmar, Djibouti, and the Phil-
ippines. They actively support pro-Chinese groups fighting US throughout Southeast
objectives in Turkey, Kashmir, Darfur, and Yemen. Proxy con-
flicts backed by Chinese support are undermining US interests
Asia, the Middle East,
for everything from natural resources to strategic partnerships. and Africa, in countries
It is commonly believed at the highest strategic levels that di-
like Myanmar, Djibouti,
rect conflict between the US and China is unlikely because the and the Philippines.
two have more to gain from proxy conflict than direct conflict.
If this is the first time you’ve heard of Chinese-backed proxy conflicts, then you are seeing exact-
ly how effective this economic warfare element can be. China can use proxy conflicts to gain
economic leverage and block US regional goals without anyone even knowing it’s happening.

5. Diplomatic Relations
The final piece in China’s complete economic warfare strategy is based in diplomatic relations.
More than any other element we covered today, this is the one that most reflects Chinese culture
and mindset.

China has established itself as a savvy international player, able to offer everything from humani-
tarian aid to disaster relief in very little time. Leveraging their money, labor force, and collectivist
culture, China has created a network of loyal Chinese all over the world. Even when a Chinese

The 5 Elements of Chinese Economic Warfare 6 Andrew Bustamante - EverydaySpy.com

national lives in a foreign country for generations, they still self-identify as Chinese - making them
a powerful asset to the mainland.

Leveraging their Leaning on their network of expat Chinese, the mainland has an
incredible asset base to use as informants, deal-makers, business
money, labor force, brokers, intel sources, and any type of physical support you can
imagine. This gives China a powerful advantage in getting in
and collectivist front of the right decision makers in politics, business, finance,
culture, China has and government all over the world. Access to the right people,
along with China’s deep pockets and ability to bypass bureau-
created a network cracy at will (thanks to corruption), is the Chinese recipe to build
of loyal Chinese all diplomatic ties faster than
a law-bound democracy Leaning on their network
over the world. like the United States.
of expat Chinese,
As a result, China can build diplomatic relations with stra- the mainland has an
tegic countries and engage in trade, aid, and partnerships
quickly. Because China does not have to consider social incredible asset base
issues like human rights, civil liberties, and other democrat-
ic ideals, they are able to gain favor in key regions and
to use as informants,
leverage the other economic warfare elements outlined in deal-makers, business
this report in an effort to become the new center of eco-
nomic balance worldwide.
brokers, intel sources,
and any type of physical
support you can imagine.

A B O U T TH E A U T H O R Andrew Bustamante, Founder of EverydaySpy.com, is

a former covert CIA Intelligence officer, decorated US Air Force Combat Veteran,
and respected Fortune 500 senior advisor. Learn more from Andrew on his Pod-
cast (The Everyday Espionage Podcast) and by following @EverydaySpy on your
favorite social media platform.

The 5 Elements of Chinese Economic Warfare 7 Andrew Bustamante - EverydaySpy.com