In just a few short days, China has proved that investors who have been underestimating the geopolitical risks stemming from the simmering tensions between the US and China over the latter’s territorial claims in the South China Sea and paranoia over the fate of Taiwan – a de facto independent state that President Xi Jinping is aggressively seeking to bring under the heel of Beijing – have done so at their own peril.

Earlier this week Xi Jinping, the Chinese emperor for life president provoked an angry rebuke from Taiwan’s pro-independence president when he demanded during a landmark speech earlier this week that Taiwan submit to “reunification” with Beijing.

Xi

And as if tensions between China and the international community weren’t already high enough amid a worsening economic slowdown that’s hurting global economic growth and a tenuous trade “truce” with the US,  in another speech delivered on Friday during a meeting of top officials from China’s Central Military Commission which he leads, Xi took his belligerent rhetoric one step further by issuing his first military command of 2019: that “all military units must correctly understand major national security and development trends, and strengthen their sense of unexpected hardship, crisis and battle.”

“The world is facing a period of major changes never seen in a century, and China is still in an important period of strategic opportunity for development,” Xi said and added that China’s armed forces must “prepare for a comprehensive military struggle from a new starting point,” Xi said adding that “preparation for war and combat must be deepened to ensure an efficient response in times of emergency.”

Xi’s order prioritizes training with a focus on combat readiness, drills, troop inspections and resistance exercises.

It applies to all units of the PLA, including troops, academies and armed police, and is designed to “ensure new challenges are met and battles are won,” according to a copy of the guidelines seen during the television report.

In other words, Xi just ordered the Chinese military to prepare for war.

According to the South China Morning Post, the order “will kick-start a year of enhanced military training and exercises.” Which, of course, will build on the expansive military exercises carried out in 2018, where China flexed its military muscle in the South China Sea and Strait of Taiwan to show foreign powers that might support Taiwanese independence (i.e. the US) that China still takes the “One China” policy very, very seriously.

Xi

In addition to prioritizing training for military readiness, the CMC issued a separate set of guidelines intended to boost morale, affirming that military personnel would be promoted on the basis of merit while promising greater leniency and understanding for mistakes made during training.

As one Chinese “military expert” quoted by the SCMP pointed out, the order was probably intended as a warning to foreign powers who might try to interfere in its affairs.

Shanghai-based military expert Ni Lexiong said the recent “high-profile gestures” were probably intended as a warning to those who sought to obstruct the mainland’s plans for the reunification of Taiwan.

“[They] show how seriously Xi is taking China’s military training and its preparations for war, while also flexing its strength,” he said.

A former PLA officer was more explicit: a retired PLA colonel Yue Gang said that as well as the rising tensions between Beijing and Taipei, Xi’s rallying call to the military was a response to the growing uncertainty over the geopolitical struggle between China and the United States.

“China is increasing its military training so that it has the best solutions for the worst outcomes, either related to the US or across the [Taiwan] strait,” he said.

“Over the coming year, the US might use Taiwan and the South China Sea as bargaining chips to get what it wants from China with regards to the trade war,” he said.

“And there is always the possibility of increased independence calls from Taiwan.”

Meanwhile, China’s People’s Daily, the official publication of the Communist Party, reported Thursday that the PLA has begun an extensive “realistic training exercise” with live fire in Shandong, eastern China. The publication did not specify what the objective of this live-fire exercise was, nor did Chinese agencies report whether Xi mentioned any particular acts to improve combat readiness that the PLA either has already begun to take or will do so in the future.

That same day, the nationalistic Chinese state-run Global Times highlighted comments by acting Pentagon chief Patrick Shanahan, who told reporters that his top priorities were “China, China, China.” The publication warned American officials against anti-Chinese “paranoia” while also threatening to make America “pay an unbearable price if the U.S. infringes on China.”

“When Shanahan shouts ‘China, China, China,’ Beijing must respond by accelerating construction of a deterrent against the U.S. China must make good use of deterrence, learning to make others feel fearful without being furious.”

Despite these explicit warnings and military ambitions, we are confident that in the eyes of the market and general population, the prospects for a prolonged “trade war” with China will remain completely distinct from speculation about the possibility of a hot war – that is, until it’s too late to heed the warnings from US military personnel in the Pacific, who have been outspoken about the threat posed by the Chinese and their growing military ambitions.

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