China Is On the Verge of Losing Its “Mandate from Heaven.”

U.S. policy through the Bush and Obama Administration was to outsource American manufacturing, soft-pedal questionable Chinese trade practices, overlook Chinese currency manipulation, marginalize Chinese pirating and theft of U.S. intellectual property, in return for cheap manufactured goods and China’s willingness to finance trillions of dollars of U.S. government debt. Now Trumpzilla is changing the rules of the game just as the Chinese economy is stalling due to rapidly slowing economic growth, an insolvent banking system, a massive real estate bubble, and a $1 trillion wealth management product Ponzi scheme that is starting to fall apart.

Also, China has hit the wall of what economist call the “middle-income trap” – when developing national economies have exhausted their easy growth potential by moving their working population from low income to middle income, then face the far more difficult and complex task of moving from middle income to high income through the creation and adoption of high-value-added products enabled by high technology. However, China has not shown much capacity for developing high technology on its own other than stealing such technology from trading partners in Japan, Europe, Canada, and the United States.

Based on China’s unsustainable growth model, a problematic international financial climate, its excessive debt, and worsening geopolitical issues and concern of military confrontation with the United States in the South China Sea, will make the economic issues even harder to resolve.

Therefore the odds of a full-blown financial crisis in China are rising each day as it struggles to fight both inflation and deflation simultaneously during a full-blown trade war with the United States that has the potential to turn into a hot war.

China does not want war at this time, but in the midst of a financial crisis, China’s leaders may divert the people’s attention away from domestic problems toward a foreign foe – an old trick the NAZI leadership used to unite the German people in times of uncertainty – rallying the Chinese people around the flag is a tried and true method to garner support.

Should such a crisis should occur during the Jupiter-Saturn-Pluto alignment 2020 – 2021 with the danger of popular unrest emerging on a scale much greater than the 1989 Tiananmen Square protests creating a definitive existential threat to Communist power.

The question that needs to be addressed is will China’s leadership decide that the risk of losing legitimacy at home outweighs the risk a military conflict with the United States? If so the likelihood of war between now and 2021 dramatically rises.