Follow the money (if you can keep up)

The pillars holding up the myth of Communist China are coming down, one by one. The latest the bite the dust was the notion of the CCP as the great investment opportunity of the 21st Century. What makes this more important than the others is that in many cases, political leaders were drawn to "engagement" by the business communities in their respective nations. With the business community now exiting Communist China, the political backing for "engagement" could start to crumble.

We'll start with the news. The Royal Bank of Scotland, which bought into the regime-run Bank of China less than four years ago, has sold out, following in the footsteps of Bank of America. They're not be alone either, as Bloomberg notes:

The Edinburgh-based bank sold 10.8 billion shares for HK$1.71 apiece, or about 7.6 percent less than Bank of China’s closing price in Hong Kong today, said three people familiar with the sale who declined to be identified before a formal announcement.

. . .

Hong Kong billionaire Li Ka-shing raised $511 million selling shares in Bank of China on Jan. 7. Separately, Bank of America sold $2.8 billion of shares in China Construction Bank Corp., while Zurich-based UBS sold about $900 million of Bank of China shares last week.

Goldman Sachs still owns 16.5 billion shares in Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, and has agreed not to sell the
shares until after April 28.

Folks, when Li Ka-Shing is unloading his investments in Communist China, it's time to head for the exits. The fact that RBS lost over $750 million on the investment is another omen (BBC). If Goldman Sachs starts dropping stock on April 29, the jig may very well be up.

However, this is all in the economic and financial realm, and anyone who follows this space would know that economics is not reliable as a weapon. Certainly, the economic downturn will cause the CCP serious headaches - and is, in fact, causing a few already - but I doubt it will lead to the regime's demise per se.

What should worry the cadres - because this really could put the regime in danger - is what it means for the outside view of their regime.

As John Pomfret notes so well in the Washington Post Global Blog, "There's a cottage industry in Washington and in investment banks around the globe (who have a lot of skin in China's continued growth) that China is going to make it." Some of the investment banks to which Pomfret refers are the very banks that are taking their "skin" out of the game as fast as possible. These are the moneyed entities that have most politicians' ears on economic, political, and even some geopolitical matters. For years, if not decades, this bunch (Wall Street for Americans, Bay Street for Canadians, the City for Britons, etc.) have been insistent that the CCP is a fine group of folks, a decent player on the world stage and excellent steward of the economy. For all I know, these may still be the words used in the financial community, but now the money is saying something entirely different.

This could have dramatic implications whenever the CCP needs cover for its overseas intimidation (Epoch Times) or its human rights abuses (Epoch Times). No longer will the leading entrepreneurs and financiers in the free world have a vested interest in keeping the Communists' happy. No longer will they feel so compelled to come to the regime's defense. It may take time for that reality to trickle down to the political realm, but it will get there.

Thus bereft of the support of Western financiers (or at the very least, with that support diminished), the regime will have to rely on their anti-American terrorist allies to intimidate or defeat the free world (Epoch Times and One Free Korea). Lest anyone get the wrong impression, the Communists won't be increasing their anti-American activity or support; they'll just have more at stake in its success - at the exact same time when the democratic world will become more interested in seeing the CCP as it really is. For Zhongnanhai, that's a perfect storm - right on top of them.

The Soviet Union was never able to present itself as a part of the global economic community (it was decades before they were even willing to try). The CCP managed to pull that off in many circles, and they have used that as cover for their real objectives against America for years. We are watching that cover slowly disappear. Expect many more eyes to be opened to the real nature of the Chinese Communist Party.