142A. Understanding China [Updated 24-8-25]
Westerners have been misunderstanding China for a full century, and I'm becoming increasingly concerned. Here I break my silence on China and provide some basic history you may have missed in school.
[I’ve added an update at the end to point out that Commerce Secretary Howard Lutnick should have read this paper before being let anywhere near a camera]
My policy for at least 15 years was “You don’t talk about Fight Club”, but replace that with China. My brand is honesty, insight, and productivity. China is very keen on those last two things, and also appreciates my honest narrative on Western behavior and strategy. I’m not so sure where the honesty barrier starts if I shift my gaze to China.
I guess we are going to find out.
From what my Chinese followers tell me, the country on Earth where my papers are most read is China. All of them are dutifully translated and even illustrated. Generally anything that is considered cutting edge Western tech gets this treatment, and my work is exactly that. It doesn’t bother them at all that I publish content that is critical about Western game development ethics and business models. While I expect anyone mature enough to run a large corporation to be able to handle this treatment, that’s not the reality on the ground. Thus most of my work over the last 15 years has been in the East.
What concerns me the most, and what is prompting me to break my silence, is that the rules of engagement in the West are totally different than in the East. The East 100% understands this, but the West just assumes that the East will/should follow their rules. To understand those rules, you have to understand some history. History that was likely omitted from your primary school education. It also will be missing from your business school or technical education.
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Wargames have been my passion since the age of 5, decades before computers were capable of playing them. Most of those wargames focused on World War 2 since it was a pretty exciting war. The trench warfare of WW1 was still full of lessons, but doesn’t paint as colorful a story. To understand the current conflict between the West and China, we have to go back a full century before WW2, to at least 1839. Before I take you there, let me explain a bit about why I’m familiar with this history.
Most wargames about WW2 that I played in my childhood focused on the USA, UK, Germany, USSR, and Japan. There was a LOT going on elsewhere, but these rarely make it into the games that non-grognards encounter. What really started to get me interested in the East was the table top RPG Bushido. I bought the rule book pictured in the wiki in 1980, I was 14 years old. That same year the TV series Shogun aired. I got so excited about the culture that I decided I was going to go to Japan, even though I grew up very poor.
I found out I could get there as an exchange student so I went to college early (at the age of 16) to study Japanese, which was my first college class. I could speak and write some basic Japanese including the alphabet and about 500 kata by the time the interview with the exchange student organisers came. It turned out they picked the school’s richest kid to go instead of me, because they thought he would better represent America. This was Santa Monica High, so you can imagine how rich this person was. He could just snap his fingers and be in Japan the next day. When he got back he told me how awful it was there, and that he never left the host’s house because he couldn’t speak any Japanese. Note also that languages are hard for me so this took an extra effort. I hypothesize that my math brain needed more room so it ate part of my language brain.
This was a legendarily frustrating moment for me that would be repeated very often in my life after I would jump through all the hoops society asked of me, and then they would just hand the achievement to some nepo baby.
Later that year I took a college class on Chinese and Japanese history. The Japanese part is what pulled me in but then I was shocked how little I knew about the rich history of China. A history that is rarely taught to Westerners unless they go looking for that knowledge. Which they don’t. Thus I’ve been very interested in the culture for almost 45 years.
I never did make it to Japan. My Thai partner promises to take us in the next year. I will probably cry when I get there. I cried when the plane landed in Beijing in 2011 on my first and last trip to China. My sociopathic father and then a series of Olympic coaches trained me to never show weakness, so I’ve only cried twice in the last 50 years. That was one of those times. Before I explain how that trip went, let me take you to China in the 1830s.
Prior to 1839 the “illegal” opium trade was pervasive in China. The UK, primarily through the East India Company, was flooding China with opium. Addiction was crippling the country. [note that the flooding of the USA with fentanyl in modern times is rooted in historical vengeance] Attempts to stop this trade led to a full blown war called the First Opium War (1839 to 1842). Due to their technological advantage, the UK won and forced a series of concessions:
Hong Kong was given to the UK (it was returned in 1997 after 156 years of UK occupation)
The ports of Amoy, Canton, Foochow, Ningpo, and Shanghai were forced open to UK trade
An indemnity was forced to be paid to the UK. A similar indemnity (a habit of the UK) was forced on Germany at the end of WW1 and is often cited as a reason for WW2’s ultimate start. Note that no such thing was attempted at the end of WW2.
UK citizens were granted extraterritoriality, making them immune to Chinese laws.
Prior to that war, foreigners had to pay for the privilege of trading with China, so this was quite a violation of their sovereignty. This marked the start of the “Century of Humiliation” for the Chinese. It cannot be understated the mark this left on the culture. Of course the West wanted more, so they started the Second Opium War in 1856. This time it was primarily the UK and French, with help from the USA and Russia.
Western powers won again and this time they burned the Summer Palace to the ground when they conquered Beijing. Opium was legalized, forcing even greater addiction rates. Of course more land was also ceded. Note that significant territory was lost to Russia, which is still fresh in the minds of today’s Chinese leadership.
When the Chinese people organised again to repel Westerners, and especially Christian missionaries, it ended up being a huge rebellion. We call this the “Boxer” rebellion because many of the rebels were trained in what we would today call martial arts. This went on from 1899 to 1901, finally being suppressed by the armies of 8 Western countries. War crimes and atrocities were widespread, with the wives of opposition leaders being raped or even gang raped by Western armies. The husbands in some cases turned to suicide due to shame. AI gathered sources put the total death toll at around 100,000, but my 20th century education put the number much higher.
Note that people are created by stories. Great change is uncomfortable, and people don’t normally change that much voluntarily. If change is forced upon them, they can react by wanting to change to make things better. But that motivation is driven always by some story. This is especially true from my experience in the Olympic community. People don’t do great things as a product of normal lives.
So the next link in this intense story takes us to Russia, where the royal family had discovered the joys of wanton hedonism fuelled by a magnetic personality named Rasputin. The stories of orgies in the royal palace wouldn’t have impressed anyone in the Hippie culture I grew up in in California up until my 10th year. But in the 1910s in Orthodox Christian Russia, this was just too much. An uprising called the Bolshevik revolution led to the murder of the Czar and his family, and an attempt to wipe out his gene lineage across the massive Russian empire. My family on my father’s side were nobility in Azerbaijan, part of that empire, and they had to flee south to Tabriz to survive the rebellion/purge.
In response the West did pretty much the same thing they did with the Boxer rebellion, but this time with fourteen countries sending armies. One of those was China, but likely the pro western elements. This army had some secondary objectives, but the primary one was to stop communism, which was a new economic model that challenged the pro-feudalism capitalism promoted by Adam Smith. [I’ve already written a lot about what a monster Smith was, especially how he talks about murdering children via starvation to balance labor supplies in Book 1 Chapter 8 of The Wealth of Nations] What was different this time was that the rebellion won and those 14 armies lost. This gave the Chinese survivors of the Boxer rebellion the courage to embrace Communism and give rebellion another try. But they were much more careful and organised this time. Their movement, the Chinese Communist Party, was initially mostly an intellectual movement but became more populist as it gained strength.
This rebellion had a harder time than the Russian rebellion that inspired it. But as Fate would change this story, the Fascist Japanese would invade China and split the attention of the Nationalistic forces fighting the rebels. Fascism is an extreme variant of capitalism, and diametrically opposed to Communism. This would ultimately give the CCP the time they needed to rally rural China and they would win that civil war in 1949. The Nationalists (the relatively pro Western government) were forced into exile in Taiwan where they continue to rule to this day.
As the leadership in Taiwan represents an age old arch enemy to the CCP, the conquest of Taiwan is very personal for them. In a sense, it would be the end of the Chinese civil war which never quite had closure. Taiwan is propped up by the West because that’s what’s left of the pro-West Chinese government. If China had another rebellion, the Nationalists could return to China with the help of the West. The CCP is well aware of this possibility.
Adam Smith’s capitalism is a formula for how to optimize supply chains with resources being provided by colonies. It’s Colonialism. Communism opposes Colonialism, but modern versions hypocritically also engage in Colonialism. It’s a century old power struggle. So when there was an East/West contest in Korea in the 1950s, the West was shocked by the amount of support the North Koreans got from China and Russia. When the resistance to French colonialism in Vietnam got to be too much, the French pulled out. But the USA said “oh, are you going to eat that? No, okay we will!” They landed thousands of troops with the same amount of forethought as buying a subway sandwich. What was initially partisans resisting colonialism ended up being a USA/China proxy war. The Vietnamese weren’t pro China, but they welcomed the help. Then they pushed the Chinese out when China tried to colonize them and now Vietnam is carefully trying to weave a path between the East and West in order to maintain their independence.
I believe that when the West gives up their addiction to colonialism, China will have the freedom to move away from their reactionary dystopia. But Western colonialism is as strong as it ever was, and getting even more sophisticated with AI being used to target specific demographics for military action. Until that time, which may not happen in my lifetime, China and the USA (and her allies) will be in an adversarial relationship. You could call it a Cold War. China still has a war-time economy, which is why the general population still endures such austerity. That austerity means that civilians in China can’t afford enough goods to balance the Chinese economy.
China is using every conceivable method of economic warfare to beat the West. They live every day like they are in a life or death struggle. Given the all too real and recent experiences they had with being colonised by the combined forces of the West, I’m not in a position to second guess them here. My purpose is to understand, and to pass that understanding on to my readers.
“Engagement” (started by Nixon in 1972) thus just became a system where the West sent China investments and technology and China used that to narrow the economic and military gap between East and West. You could say that the end goal is for China to achieve military superiority. But that’s not even necessary, because you win wars by breaking the other sides morale and/or supply chains. China can and is doing that already without firing a shot.
Previous generations of Westerners understood how to win wars. Today they just know how to sell military equipment because the military industrial complex has taken over their military. All that expertise has aged out. China has spent nearly my entire lifetime compromising the supply chains of the West. That’s all that is needed for victory. I’m not taking a side here. I’m not pro East or West.
What happened to me when I went to Beijing in 2011? Within minutes of arriving I had 30+ cabbies fighting over my luggage. I wasn’t going to start an international incident by defending myself. I waited for them to decide the victor, who then had the right to force me into his cab because he had my luggage. On the 3rd day of my 3 day trip I took a long walk to the Forbidden Palace. Because of course I did. While there I was lured into a tea shop by a criminal gang and was held hostage for over an hour until I agreed to pay a ransom. My Chinese hotel manager said this was common and the police are complicit so no point reporting it.
But that was just civilians exploiting an American because they are taught to do that. The government wasn’t directly involved. About 10 months later I landed in the UK to assist the UK gaming industry with my technologies. Before I even got out of the airport I was detained, for about 12 hours. Without food. I endured hours of interrogations. I wasn’t allowed to speak to the consulate, and was told I was in “no man’s land” and could be held indefinitely. Why? They claimed it was a visa irregularity even though Americans don’t need visas to visit the UK. When they went through my luggage and stole my unpublished Supremacy Goods microeconomic model (they told me they were sending it to intelligence agencies for “analysis”) it became clear what the shakedown was about: Tech. They wanted it, and they didn’t want to pay for it. Four years later the industry begged me to come back and I wasn’t thrilled about the idea.
Both sides play this game, and I’m not a fan of either. But both sides need to better learn how to play this game as right now they are pushing each other towards war and that doesn’t need to be the End Game here.
The follow up paper to this one will explain supply chains in more depth, and explain how the West has lost their way in this regard.
[Update 24-08-2025: It’s come to my attention that right about the time I published this the USA Commerce Secretary, Howard Lutnick, was interviewed on our trade policy with China. I can appreciate his attempts to be snarky, hip, and in control. But it would be difficult for me to conceive of anything worse he could have said. He basically said that he wanted for force China into a “chip addiction”, where we would keep selling them almost worthless chips and they could become dependent on our “tech stack”. From a Chinese cultural perspective, it doesn’t take much effort to replace “chip addiction” with “opium addiction”. And suddenly almost two centuries of generational psychological loops activate within Chinese society. In under two minutes he teleported the trade relations under his care back into the 19th Century. Disney needs some new material, maybe they can do some movies about Lutnick’s Time Machine.]