By building roads, railways and ports, China will be able to export its products to these countries quite freely as transportation costs will have become considerably lower to move Chinese goods. China does not need to import even low technology products from anywhere in the world because its huge manpower is capable of producing all high and low technology products in China itself. In fact, China will be exporting all such products to nations around the world killing even low technology industries in all the countries to which it can easily ship its products. So, by allowing China to build infrastructure in your countries, you are making it easy for them to destroy your manufacturing industries and economy.
This is not difficult to visualize. Let me illustrate with a very simplified example of how China will be able to afford to sell its products in your countries below cost. For this purpose, one must understand fixed costs and variable costs in manufacturing and marketing products.
Let’s take the example of manufacturing a TV for which the sales price the company can realize in your country is $100. Assume that the initial investment in the plant to manufacture TVs is $10 million. Assume that this investment has to be recovered over 5 years in the form of depreciation, with $2 million to be recovered annually. To run the company, before any products can be produced and sold, the company will have to hire a CEO, and other administrative personnel. These costs have to be incurred annually, say to the tune of $400,000. These costs have to be incurred whether the company produces or sells any TVs. All these are called fixed costs, which in our example total $2.4 million annually.
Now to manufacture each TV, the company incurs raw material and labor costs. The amount of labor and raw material used varies with the number of TVs produced. These are called variable costs. Suppose to product each TV, it costs $20 in material costs and $20 in labor costs. Therefore, when a TV is sold for $100, it contributes $60 (i.e. Selling price of $100 minus the variable cost of manufacturing the unit of $40) towards covering the fixed costs and realizing a profit. Therefore, to break-even, meaning to realize no profit or loss by covering all its fixed costs and variable costs, the company must sell 40,000 TVs annually, which will enable it to cover its $2.4 million in fixed costs and $1.6 million in variable costs of manufacturing them at $40/TV. After breaking even, all the fixed costs have been covered, then any further sales contribute $60 to profits with the sale of each unit.
Now since China has reached a higher standard of living, assume that it pays its workers 50% higher wages than wages in your country. To produce the same TV, China will incur $20 in material costs, but $30 in labor costs since it pays 50% higher wages. Its fixed administrative costs will also be higher at $600,000 instead of $400,000 in your country. Therefore, the annual fixed costs China must recover are $2.6 million instead of $2.4 million in your country. Since China’s production costs are higher, the contribution to covering its fixed costs and profits is only $50 instead of $60 in your country. To break even by covering all its fixed and variable costs, the Chinese company must sell 52,000 TVs at $100/TV whereas the firm in your country had to sell only 40,000 TVs to break-even.
But since China has a huge market, it is very easy for the Chinese firm to sell 52,000 TVs in China and a little harder for the firm in your country to sell 40,000 TVs in your country. After the Chinese firm has sold 52,000 TVs in China and covered all its fixed costs, with the sale of each additional TV, the firm realizes $50 as profit (which is the sales price of $100, minus the variable price to manufacture each unit in China of $50.) This means that because of your country’s smaller population, while the TV manufacturing firm in your country is working hard to sell 40,000 TVs at $100 to break-even with no net profit, the Chinese firm can dump TVs in your market at $70, even after paying 50% more to its workers than your country’s firm can do and realize a handsome profit of $20/TV. In fact, even if China paid its workers double of what your country’s firm pays and sell the TVs for $90, which is $10 lower than what your firm is selling them at just to break-even, and still realize a profit of $20 per TV sold. Thus, if your country’s workers are being paid $10/hr on the average and China pays its workers $20/hr, it can still make a huge profit by selling its TVs in your country, whereas your countries companies will struggle to break-even. They will eventually go bankrupt, allowing China to capture your market. That is how China can kill your manufacturing industries one-by-one. With its OBOR infrastructure project, China will be in a position to kill manufacturing industries in much of the world.
Remember, the initial purpose for Britain building the railway, road and port infrastructure in India was to be able to sell its manufactured products in the country by reducing transportation costs; be able to effectively get raw materials from the hinterland to the ports, and to move its forces quickly to suppress rebellions against its rule. Because of the road, railway and the sea port infrastructure, it was able to effectively control a much larger territory than the predecessor Mogul Empire. So, China is simply following the blueprint developed by Britain in its colonization of many parts of the world.
The British public invested in Indian railways and irrigation projects to earn modest interest. But China is veering from the British blueprint here because it is investing to launder its dollars. That is why I am cautioning nations of the world that China’s OBOR initiative will destroy your manufacturing industries and you will become merely a raw material supplier for China. The British Empire had to provide a high standard of living for 40-50 million Britons. But nations who accept OBOR project funds will have to satisfy 1.4 billion Chinese before they can benefit from any trickle-down effects of Chinese colonialism. China can literally strip the earth of currently accessible resources and still have a hard time providing a standard of living equal to that of an average American.
China’s Plans to Control Countries Already Exposed
After the railways, roads and ports are built, what will be the next step for China? Because of these projects and increased trade with China, there will be a large presence of Chinese workers, engineers, and business people in other countries. In time, nations will realize that China is looting their economies and will resent Chinese presence. There will inevitably be some violent incidents. That will necessitate Chinese boots on the ground, eventually leading to Chinese colonization. The British did so because of a violent incident known as the “Black Hole of Calcutta” in India described earlier. China’s plans to do so have already been exposed.
On May 15, 2017 Forbes magazine reported:
“A leaked document on China’s Silk Road investment plan reveals details on China’s approach to security issues for its investments in Pakistan, including potential Chinese law enforcement and increased Chinese-supplied surveillance equipment to be rolled out in Pakistan one city at a time. The document, a summary of which Pakistan’s Dawn media site published on May 15, details surveillance equipment and possible Chinese enforcement of the law in Pakistan to protect Chinese companies against terrorism. The document poses diversity and multi-party democracy as problems, which raises questions about the extent to which the international community should allow autocratic China’s use of $1 trillion in upcoming investment to push its diplomatic and security objectives in economically and politically vulnerable recipient countries. Many of these countries are independent and democratic, but may not be for long given China’s document, ideology, and history of development finance. Beneath China’s plying of silk and rice in Pakistan, is an iron will to extend its military, economic, and diplomatic influence in Asia. This leaked document confirms that thesis.”
China did not need to invent this blueprint for colonization. It is described in my book “Britain Does Not Owe Reparations to Its Former Colonies,” which provides a concise but complete history of how the British colonized India. China is following the exact blueprint.
China has already militarized the South China Sea. At some stage China will impose customs duties, passes and fees on all the trade passing through. In my book, I explain how the Portuguese did this on all Indian shipping during the 16th and early 17th century after they controlled the Indian Ocean and Arabian Gulf shipping with their naval superiority.
Chinese Products Deliberately Designed to Harm Health
Now a warning about the products the Chinese will sell in your country. In America, China has sold toys and other products for children coated with lead paint (which causes developmental delay, learning difficulties, irritability, weight loss, sluggishness and fatigue, hearing loss, seizures and other health problems); suspect seafood; half a million radial tires in which its Chinese manufacturer had discontinued a safety feature that prevented the tires from coming apart; toothpaste containing dangerous amounts of the poisonous chemical diethylene glycol; cosmetics with harmful levels of lead, beryllium, aluminum, mercury and bacteria; counterfeit medicines; contaminated drywall which has caused health problems, metal corrosion, and which may be responsible for a rotten egg smell in affected homes, blackened or corroded pipes, failure of air conditioners and other household appliances, and health problems such as asthma, coughing, headaches, sore throats, and irritated eyes; and contaminated pet food that caused renal failure in cats and dogs.
USA has the technical capability and resources to detect these harmful products, but most other countries don’t. They will simply be inviting China to slowly poison their populations. Nations will be buying Chinese products at their own risk. You have been warned.