May 27, 2025: Supply chain opacity is the ability to know where your supplies are coming from and how the supplier operates. Is the supplier reliable? Can the supplier adapt quickly to your changing needs? All this becomes a problem when you realize that the largest supplier of just about everything is China. This is something that began in the 1980s and kept growing until China was the largest supplier in the world. The Chinese government then realized that it did not know important details of how their suppliers operated, where they operated and what their plans were. In the 1980s when China declared that businesses were free to prosper any way they could. Chinese entrepreneurs responded by making China the largest manufacturer and supplier of products in the world. Now the government realizes it has little control over all this because it lacks knowledge of how it works.

China recently adopted new reporting procedures for foreign firms doing business in China or with Chinese companies. While western companies have adapted to constantly evolving reporting practices, this is all new for most Chinese firms. Chinese businesses quickly adapted, the Chinese government did not. When Chinese businesses cause problems for foreign businesses, customers and governments, the Chinese government finds itself unable to cope. The heart of this problem is a government that still operates as if it were a communist dictatorship. That can work inside China but not with foreign customers. The foreigners with complaints have no one inside China who can help them. This is bad for Chinese businesses, which have responded by moving more of their manufacturing operations overseas. There they employ locals to help set up operations and deal with local practices. The Chinese government is unable to keep track of all this foreign expansion, much less solve problems with the offshore operations.

China’s government cannot halt all these businesses without crippling the economy. The Chinese Communist Party/CCP remains in power by providing a growing economy for the Chinese people. The government is desperately seeking ways to understand and manage how this growing economy works. That can be done inside China. It is difficult figuring out how Chinese firms operate in over a hundred foreign countries.

There are unique problems in every country. In China the government has failed to overcome the corruption that has been part of Chinese culture for thousands of years. Commercial corruption briefly diminished in the early years of communist rule. It didn’t disappear but migrated to the new government institutions. This was especially true with the military, whose main job was to keep the CCP in power. The military was corrupt, as it had been in China throughout history. In the 1980s China’s economy was unleashed by CCP leader Deng Xiaoping. He declared that it was alright to become rich and family members of CCP officials were the first to take advantage of this.

On the plus side, Chinese military corruption was so acute that China was incapable of invading Taiwan. Current ruler Xi Jinping took power in 2012 and made the awful discovery in 2023 that China’s navy and air force were unready for a major conflict. There were too few spare parts and many weapons like missiles of all types didn’t work at all. Those that did work would do so for only a month or so in a major war. The generals had become rich by diverting money needed to make the weapons work. The generals stashed the cash in foreign banks and made plans to leave quickly with their families if their hustle was discovered. Xi discovered that many of these families had already established legal residence in foreign countries. Xi had many of these generals prosecuted and sought to increase production of aircraft and ship spare parts. The goal was the ability to convincingly threaten Taiwan with invasion. Many Taiwanese are descendants of anti-communists who fled China after losing a long civil war. These Chinese kept track of events in China and know all about the corruption and futile efforts of the government to deal with it. For the Taiwanese Chinese corruption is a major factor in protecting them from invasion. Another asset was the Taiwanese free market economy, which the Chinese were trying to emulate.

To China all this prosperity made Taiwan vulnerable. That is becoming visible now as Chinese business operations spread throughout the world and displace Taiwanese suppliers. China offers lower prices for the same goods so, when the competition is gone, China can raise its prices. These practices have put a lot of other foreign firms out of business. The rest of the world began to realize that their local economic problems were caused by Chinese business practices. As the largest supplier of industrial and commercial products, Chian believed it was invulnerable to retaliation. That was not true and many major customers, especially the Americans, began punishing Chinese imports with high tariffs and efforts to produce locally or find other suppliers. The Chinese thought this was not possible, because China could not carry out such a task. The western countries had more control over their supply chains and were accustomed to quickly adapting to new circumstances. The CCP still believed in central planning, even with their new free market economy. This problem became visible when the Americans threatened to blockade a China that threatened Taiwan or any other nation.

Chinese leaders realized that they were not capable of dealing with an American blockade lasting several years. A blockade of China by the U.S. Navy lasting several years would be fatal for the CCP and China’s unity as a country. China’s economy exists primarily to create full employment to keep the CCP in power. Nearly half of China’s GDP and employment is based on exports, most of which reach their customers by sea.

China’s critical problems in the event of a U.S blockade will be unemployment, food and potash, especially the latter as it is a critical fertilizer with China lacking most of what it needs. Russia can produce and deliver all the potash China needs by the Trans-Siberian Railroad provided the two governments are on good terms and the railroad works. If the Russians don’t send China any potash, there will be mass starvation after about three years. Currently Russia and its entire rail system are in bad shape. The number of functioning Russian rail cars has declined from two million in February 2022 when the Ukraine war started to about 1.5 million today and continues to decline at a steadily increasing rate. More cannot be built due to inability to manufacture or obtain rail car axle bearings, and that cannot be fixed without massive Western aid. In no more than 12-18 months, Russian national survival will depend on cutting off service to less important areas, of which the first will be Central Asia (the “Stans”) and the second will be the Trans-Siberian Railroad east of Irkutsk.

China will have a direct conflict between fuel needs and keeping employment up. If they accept 40 percent unemployment, they’ll have enough fuel because fuel needs will go down that much due to idle factories, mines and construction. But they won’t have the fuel to shift production of export goods to other products, even useless ones, to keep almost half their labor force employed.

An American blockade means the Chinese Communist Party will suffer its most feared calamity – mass unemployment for the duration of the blockade. The CCP acts as though that would be a political catastrophe.

China’s loss of the imported 35 percent of its food supply would not be an immediate problem as most of that is used to improve their peoples’ diets, not to keep them alive. But loss of their entire meat supply, especially their treasured pork, will make the Chinese people very unhappy. Food rationing will then be essential for the duration of the US blockade.

More importantly, China’s history makes them very insecure about their food supplies. China contends 100 million of its purported 1400 million people (the real number is at most 1200 million) are members of the corrupt Chinese Communist Party (CCP), which requires that its members get disproportionate amounts of China’s available food and other goodies. This will be increasingly resented when rationing is of barely sufficient food for everyone as opposed to rationing of abundance.

As soon as real dearth arrives, and it will if Russia cannot or will not deliver enough potash, or the Chinese Communist Party steals too much food (no more than four years), the Chinese people will panic about starvation, destroy the food rationing system through hoarding, and China itself will collapse and end the CCP.

The CCP concedes that a U.S. blockade would be effective. The American navy could conduct it from several thousand miles away if it wished, far out of range of even intermediate range ballistic missiles. China’s navy and air force just don’t have the range to project power that far, and its navy couldn’t survive American submarines if they try.

China assumes that, after a few years of a U.S. blockade, enough nations suffering from loss of trade with China would successfully persuade the Americans to end it. This has many issues, but it assumes that the renewed trade with China would be that important. Instead, things would have changed enormously during the blockade.

The western supply chains are more flexible and accustomed to problem solving. China would like to be like that, but they are not yet there. China doesn’t understand how crucial and critical supply chain management is. Many Chinese entrepreneurs understand, but they don’t run the government.

While effective supply chain management is a Chinese goal, the government doesn’t appreciate how critical it is for the foreigners to have control of their supply chains while China is still working on it.