CHINADebate

Malcolm Riddell

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CHINADebate

‘Preserving a favorable balance of power against an aggressive adversary is the best means of deterring war, not an incitement to it,’ writes Hal Brands of the Johns Hopkins School of Advanced International Studies.

  • True or not (and many don’t believe this describes how international relations really work), we are seeing a return to alliances – a key balance of power tool – in the convergence of powerful countries aligning against what they increasingly see as an ‘aggressive adversary,’ China.

Whether you view it as an aggressive adversary or a nation asserting itself in ways commensurate with its rising status, China is creating risks – some subtle, some obvious -  that, along with reactions of the U.S. and its allies, have to be factored, into every related business, investment, and policy strategy.  

  • And the geopolitical response to the biggest risks is a return to balance of power in international affairs.

As Kathryn Judge of Columbia Law School notes in her excellent, ‘The global economy needs to be better prepared for the coming storm’: ‘The final lesson from finance is the value of “stress testing”—trying to work out just how a firm would fare in an adverse scenario before anything bad actually happens.’ For example,

  • ‘What would happen to a firm’s operations and finances if China invaded Taiwan and all trade between America and China temporarily ceased?’

Along with ‘stress testing’ such a scenario, you also have to estimate the chances of its occurring.

  • For major events like the invasion of Taiwan, calculating those chances depends on how the balance of power between the U.S. and China is working at any given time.

For that reason, executives, investors, and policymakers should be tracking the way alliances are being built on both sides, and assessing how effective they are in maintaining peace and stability – or not.

  • Here are some background and thoughts to help you track and assess.

1 | Biden’s Partner

During the Trump administration, with its lack of interest in strengthening U.S. alliances, power was balanced by the U.S. alone versus China.

  • President Biden, of course, has taken a different path.

His success in pulling in U.S. allies to face off with China is a tribute to good policy and good diplomacy.

  • But Mr. Biden has had a great partner: Xi Jinping.

When I talk with my Chinese counterparts, they often assert that the U.S. is the cause of deteriorating relations.

  • If the U.S. were a better actor, they say, it wouldn't have the need to forge alliances to counter China.

This point of view is well-expressed by Peking University’s Wang Jisi in his Foreign Affairs essay, ‘The Plot Against China?’

  • ‘The conventional wisdom in Beijing holds that the United States is the greatest external challenge to China’s national security, sovereignty, and internal stability.’
  • ‘Most Chinese observers now believe that the United States is driven by fear and envy to contain China in every possible way.’
  • ‘And although American policy elites are clearly aware of how that view has taken hold in China, many of them miss the fact that from Beijing’s perspective, it is the United States—and not China—that has fostered this newly adversarial environment, especially by carrying out what the CCP views as a decades-long campaign of meddling in China’s internal affairs with the goal of weakening the party’s grip on power.’

Mr. Wang continues: ‘In the United States, China’s rise is a source of neuralgia and anxiety.’

  • ‘Unsurprisingly, in China, the country’s growing status is a source of confidence and pride.’

‘ “As the world faces unprecedented turbulence,” Xi told a group of high-ranking CCP officials in January, “time and momentum are on China’s side.” ’

  • ‘Chinese officials seem to feel increasingly emboldened in confronting Washington.’
  • And Washington’s allies.

2 | We’re all bewildered.

But it’s not the confrontation itself but the nature of the confrontation that is persuading U.S. allies to band together.

As John Pomfret notes in one of my favorite essays, ‘China’s biggest global foil is often just China’:

  • ‘Across the globe, Xi’s diplomatic representatives in Europe, Beijing, Hong Kong, Canada, Australia and elsewhere, are lifting up rocks and smashing their own feet.’

‘The Chinese have termed these type of interactions “wolf warrior” diplomacy, inspired by a shoot-em-up action film of the same name.’

  • ‘China’s wolf warriors might play well in Beijing, but across the globe China’s envoys are snatching defeat from the jaws of victory.’

‘The moves are befuddling — with a buoyant economy and a practically covid-free country [this was written in 2021], China is poised to see its influence rise if it plays it smart.’

  • ‘But it’s not; instead, it’s alienating individuals and nations across the world.’

‘I’ve been studying China for my entire adult life, and I have to admit to being bewildered by China’s performance.’

  • ‘But I’m in good company.’

‘Thirty-one years ago, the great political scientist Lucian Pye wrote:’

  • ‘ “Just when all appears to be going well, Chinese officials create problems for seemingly unaccountable reasons.” ’

Mr. Pomfret writes that China’s ‘goof ups’ are ‘a string of diplomatic misadventures that have become a hallmark of the rule of Xi Jinping.’

  • And I would add to those diplomatic misadventures, another string of misadventures from aggressive moves from Taiwan to Hong Kong to the East and South China Seas and beyond.

In other words, Mr. Xi is either annoying or scaring the bejesus out of countries - all at costs that seem to outweigh any benefits.

  • Without Xi Jinping, Biden wouldn’t have been able to bring on U.S. allies and strengthen the balance of power in the U.S.’s favor.

3 | Case study: The EU

I have been tracking EU-China relations for some years and really didn’t think the Europeans would ever get on board with the U.S. in countering China.

  • Leery of being caught between the U.S. and China and of having its substantial economic ties with China harmed, the EU took a middle path.
  • No more.

‘The past two years have seen a major shift in Europe’s China policy,’ notes Philippe Le Corre in ‘Europe’s China Policy Has Taken a Sharp Turn. Where Will It Go Next?’

  • ‘Brussels no longer separates economic issues from human rights and values.’

As a result, says Ian Johnson of the Council on Foreign Relations in ‘Has China Lost Europe?: How Beijing’s Economic Missteps and Support for Russia Soured European Leaders’:

  • ‘Europe has become one of China’s biggest foreign-policy headaches.’
  • ‘In part, the current situation is a result of economic miscalculations by both sides, which overestimated the potential benefits of the arrangement.’

‘But China’s increasingly rigid position on Taiwan has made things worse.’

  • ‘The Chinese government has retaliated against Lithuania for giving a small amount of symbolic recognition to Taiwan; and over the past year, it has made threatening noises toward other European governments over the same issue.’
  • ‘Amid these souring relations, China’s support for Russia in Ukraine has brought its European troubles to a head.’

‘The stakes are not small.’

  • ‘The war in Ukraine has exposed how few allies China has and how badly the Chinese leadership miscalculated in pursuing close ties with Russia.’
  • ‘Beijing’s heavy-handed efforts to gain leverage in Europe have also backfired.’
  • ‘Even as its economy and growing military strength guarantee it power and attention, its failed European project has underscored its inability to win durable partners among the advanced democracies—a pattern that seems likely to hinder its long-term influence in the world.’

And to shift the balance of power.

  • Add Japan, Australia, South Korea, and the rest – along with the reinvigoration of the Quad and the new ANKUS alliance - and it’s destined to be a big shift.

4 | Even NATO is riled up

Mr. Xi has even got NATO – charged with defending Europe – riled up. As Bloomberg reports:

  • ‘In Madrid at the recent NATO summit, a preoccupation with China was evident.’

‘The meeting featured the remarkable presence of leaders from non-NATO members Japan, South Korea, Australia and New Zealand.’

  • ‘All of them have something in common: China.’
  • ‘With those nations represented, NATO for the first time singled out China as one of the alliance’s strategic challenges.’

That singling out came in the ‘NATO 2022 Strategic Concept’ released at the summit.

  • This is the first time that NATO has explicitly announced its intention to oppose Chinese “challenges.”
  • And the China part of the paper, below, is the toughest ever.

‘13. The People’s Republic of China’s (PRC) stated ambitions and coercive policies challenge our interests, security and values.'

  • ‘The PRC employs a broad range of political, economic and military tools to increase its global footprint and project power, while remaining opaque about its strategy, intentions and military build-up.’
  • ‘The PRC’s malicious hybrid and cyber operations and its confrontational rhetoric and disinformation target Allies and harm Alliance security.’
  • ‘The PRC seeks to control key technological and industrial sectors, critical infrastructure, and strategic materials and supply chains.’
  • ‘It uses its economic leverage to create strategic dependencies and enhance its influence. It strives to subvert the rules-based international order, including in the space, cyber and maritime domains.’
  • ‘The deepening strategic partnership between the People’s Republic of China and the Russian Federation and their mutually reinforcing attempts to undercut the rules-based international order run counter to our values and interests.’

‘14. We remain open to constructive engagement with the PRC, including to build reciprocal transparency, with a view to safeguarding the Alliance’s security interests.’

  • ‘We will work together responsibly, as Allies, to address the systemic challenges posed by the PRC to Euro-Atlantic security and ensure NATO’s enduring ability to guarantee the defence and security of Allies.’
  • ‘We will boost our shared awareness, enhance our resilience and preparedness, and protect against the PRC’s coercive tactics and efforts to divide the Alliance.’
  • ‘We will stand up for our shared values and the rules-based international order, including freedom of navigation.’

As The Brussels Times says in ‘NATO labels China threat to global security’:

  • ‘The European Union as previously described China as a “systemic rival” to the bloc, while the UK has opted for “systemic competitor.” ’

‘NATO has now upped the rhetoric, directing labelling the PRC as a challenge to be confronted.’

  • ' “We will work together responsibly, as Allies, to address the systemic challenges posed by the PRC to Euro-Atlantic security.” ’

When I used to negotiate multilateral treaties and conventions, we could spend a couple of weeks coming to agreement on one word.

  • So while these seem like ‘so what?’ changes, I have no doubt they represent intense wrangling among NATO countries – and wouldn’t have been possible if those countries did not themselves feel the threats from China as laid out in the paper.

The other side of the balance of power, China, is a different - and more difficult - story.

5| ‘China’s Search for Allies’

China has taken a different path from the U.S.

  • In her 2021 essay, ‘China’s Search for Allies,’ written before the invasion of Ukraine and China’s support for Russia, Patricia Kim of Brookings, explains that difference.

‘The United States’ network of alliances has long been a central pillar of its foreign policy—and, as competition with China has intensified in recent years, held up as a major U.S. advantage.’

  • ‘China, by contrast, has shied away from formal alliances, based on its supposedly distinct view of international relations and a pragmatic desire to avoid the risks of entanglement.’

‘China has avoided building a traditional network of allies thus far for reasons ranging from long-standing ideological inclinations to hardheaded strategic calculation.’

  • ‘Since the early days of the People’s Republic, Beijing has sought to portray itself as a leader of the developing world and a proponent of Non-Aligned Movement principles of noninterference and anti-imperialism.’

‘In more recent years, Chinese leaders have begun to insist that they practice a “new type of international relations,” eschewing traditional power politics in favor of “win-win cooperation.” ’

  • ‘Such language is meant to bolster the narrative that China’s rise should not be feared but be welcomed as a boon for global development and prosperity—and to distinguish Beijing from Washington, which Chinese leaders frequently criticize for maintaining an outdated “Cold War mentality.” ’

‘Today, China has only one formal ally—North Korea, with whom it shares a mutual defense treaty.’

  • ‘But it has dozens of official partnerships with states around the world.’

‘At the top of the pyramid are Russia and Pakistan (whose extra-special ties with Beijing are denoted by long and exclusive monikers, “China-Russia Comprehensive Strategic Partnership of Coordination for a New Era” and “China-Pakistan All Weather Strategic Cooperative Partnership”).’

  • ‘Then come several Southeast Asian states—Myanmar, Cambodia, Vietnam, Thailand, and Laos—as well as states farther afield, such as Egypt, Brazil, and New Zealand.’
  • ‘Beijing has also invested great energy into building Chinese-led multilateral mechanisms, such as the Shanghai Cooperation Organization (SCO), the Forum on China-Africa Cooperation, and the China-Arab States Cooperation Forum.’

‘In addition to such public diplomacy efforts, Beijing’s alliance-shy posture reflects a strategic decision to build relationships centered around economic ties in its quest for power and global influence.’

  • ‘This is not to say that China uses only economic statecraft to advance its objectives.’

‘In fact, China has rapidly expanded its military capabilities over the last two decades and used its newfound might to intimidate Taiwan, jostle with India along a disputed border, and press its sovereignty claims in the East China and South China Seas.’

  • ‘Nonetheless, while Chinese leaders consider military power essential for protecting their homeland, core national interests, and citizens and investments abroad, they have demonstrated little desire to take on external security commitments that could drag their country into far-flung conflicts.’

‘Beijing has bet instead that offering loans, investments, and trade opportunities, and doing business with any sovereign entity, regardless of its character and track record at home, will win China friends and influence.’

  • ‘And this strategy has paid off.’ [If maybe less so since this analysis was written.]

‘In the near term, China is unlikely to abandon its geo-economic strategy for dominance altogether.’

‘But there are two possible scenarios that could drive it to build a bona fide network of allies:’

  • ‘If Beijing perceives a sharp enough deterioration in its security environment that overturns its cost-benefit analysis on pursuing formal military pacts; or’
  • ‘If it decides to displace the United States as the predominant military power, not just in the Indo-Pacific region, but globally.’

‘(These two scenarios are not, of course, mutually exclusive.)’

‘Chinese leaders may come to such conclusions if they assess that the Communist Party’s core interests, such as its hold on power at home, authority over Xinjiang, Tibet, and Hong Kong, and claims of sovereignty over Taiwan would be untenable without striking formal defense pacts with key partners such as Russia, Pakistan, or Iran.’

  • ‘In fact, Chinese assessments have already begun to move in this direction.’

Given the hardening of U.S. alliances to counter China, I am a little surprised that move isn’t in full gear.

  • But even if China entered into full on alliances with, for example, Russia, Pakistan, and Iran, their combined economic and military heft is no match for the U.S., the EU, the UK, Japan, Australia, South Korea and the others taken together.

6 | Deterrence or incitement

As noted at the beginning: ‘Preserving a favorable balance of power against an aggressive adversary is the best means of deterring war, not an incitement to it.’

  • Conversely, a nation which feels the balance of power slipping away may feel it has to act while it still can.

Either way, the U.S.-China balance of power will create or mitigate geopolitical risks.

  • Well worth the work to track and assess each side's moves and countermoves.

7 | Tracking & assessing the shifting balance of power

Here are a couple of ways I track and assess how the balance of power is shifting,

Watch for announcements like the ‘NATO 2022 Strategic Concept’ and compare them to earlier ones.

  • In this case, have a look at NATO’s ‘Brussels Summit Communiqué’ from 2021, sections 55 & 56, and you will just how much views about China have hardened in just a year.

And watch for the actions of individual countries.

On this side of the power balancing, there are a lot of moving parts – and a lot to follow.

  • But by tracking these you will be better able to understand how geopolitical risks ebb and flow and to make better plans.

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China: 'Sleep Walking into Sanctions?'

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April 17, 2022

China Coup: How Worried Should Xi Be?

September 26, 2022
‘Xi and the phrase #ChinaCoup trended on social media after tens of thousands of users spread unconfirmed rumors that the president was detained and overthrown by the China's People's Liberation Army.’
keep reading

'How do you spy on China?'

Many of you have asked about my own take on the issues I analyze in these pages and about my background. Today is some of both.I am honored to have been interviewed by the terrific Jeremy Goldkorn, editor-in-chief of The China Project. Below is part of that interview.
September 18, 2022

Xi’s Dangerous Radical Secrecy

In a world of political hardball, investigative reporting, and tabloids, we know a lot (if not always accurate or unspun) about world leaders, especially those in functioning democracies. Not so with Xi Jinping.
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July 10, 2022

A Debt Crisis of its Own Making

Ever since Xi Jinping announced ‘One Belt, One Road’ in 2013, I watched it expand China’s economic and geopolitical influence and lay the foundation for projecting its military power – and become by many accounts an exploiter of the developing world itself.
July 1, 2022

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Ukraine won't speed up or delay Mr. Xi's timetable. (But it may cause him to work harder to strengthen China's military and insulate its economy from external pressure.)
June 22, 2022

'The competitiveness of China is eroding.'

Understanding the drivers of China’s rise to supply chain prominence gives (me anyway) insights to help analyze the changes – or not – of ‘decoupling.’
June 12, 2022

U.S.-China Relations: A Chinese Perspective

Wang Jisi notes that the views are his own, and certainly we don’t know how closely, if at all, they reflect the thinking of anyone in the leadership. But given his straightforward and thorough analysis, free of canned arguments and slogans, I hope they do. I also hope the Biden administration pays heed.
June 5, 2022

Is Xi Jinping China's Biggest Problem?

And while the impact of Zero Covid may be relatively short-lived, the impact of Mr. Xi’s return to the socialist path will be felt for a very long time, both in China and the world. So the impact will no doubt be felt as long as Mr. Xi leads China.
May 30, 2022

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‘The bad news is that very few corporations engaged in China have contingency plans or long-term strategies to hedge against the downside risks of growing geopolitical competition.’
May 22, 2022

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Here are some of the insights from ‘The Only Five Paths China’s Economy Can Follow’ by Peking University’s Michael Pettis. This excellent analysis of China’s economy is worth a careful reading.
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Joerg Wuttke is the president of the EU Chamber of Commerce in China - the 'official voice of European business in China.'
May 1, 2022

China: 'Sleep Walking into Sanctions?'

A looming risk is Russia-like sanctions on China. The sanctions on Russia are causing plenty of disruptions. But those disruptions would be nothing compared to the catastrophe of Russia-like sanctions on China. The good news is that if China does violate the sanctions, the violations would likely be narrow and specific - even unintentional. So secondary sanctions - if they come at all - likely won't hit China’s economy and financial system deeply – or (fingers crossed) U.S.-China relations.
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Faint Cracks

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February 19, 2022

'A Fateful Error'

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February 17, 2022

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January 18, 2022

Bachelors, Mother-in-Laws, & China's Economy

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Q&A 7 | Why Did Beijing Ban Online Tutoring?

‘Each policy in isolation – whether its banning online tutoring or protecting data or enforcing anti-monopoly regulations or any other - has its rationale.’
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Q&A 3 | Property 2022: Stabilization or Growth?

‘The goal is to stabilize housing prices while having housing sector grow.’
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What Are Your Top of Mind Concerns?

I asked the participants what are their top of mind concerns about China.
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Q&A 6 | China Reverse Its Declining Birthrate?

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Q&A 5 | Will Xi Continue to Favor the State Over the Private Sector?

‘He wants to see a bigger role for the state in the economy. But in the last two years, he has done some course correction. For example, after talking up the role of state-owned firms and building stronger, bigger state-owned firms, he is talking about the equal importance for the private sector.’
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Shang-jin Wei Presentation-1 | Drivers of Growth Momentum

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'‘China has its own issues. If you look at the CPI inflation, it looks more moderate. ‘If you look at the producer price inflation, it looks more severe.’
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Q&A 2 | Will the Gender Imbalance Keep Housing Prices Firm in the Medium Term?

‘The part of housing prices caused by gender-ratio imbalance is not going to go away in the medium term. But the government has ways to create volatility in the housing market.’
December 30, 2021

Shang-jin Wei Presentation-2 | Gender Imbalance as a Driver of Housing Prices

‘Why does gender imbalance have such an outsize impact on China’s housing prices?'
December 30, 2021

Q&A 1 | How Much Does the Gender Imbalance Contribute to China’s Rising Housing Prices?

‘Gender imbalance accounts for about one-third of the increase in China’s housing prices in the last two decades or so.’
December 30, 2021

Shang-jin Wei Presentation-3 | Analyzing the Gender Imbalance Data

‘Compare these with graph showing the impact of the same factors on rental prices...'
December 30, 2021

Watch What Beijing Says - and Does

Besides listening to Xi Jinping, you can discern Beijing’s priorities and its likely actions through its big policies - and this is my point here.
December 7, 2021

Getting (Xi Jingping's) Priorities Straight

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Look Through the Rights Lenses

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December 7, 2021

Sometimes You Just Have to Roll the Dice

Telling someone to align him or herself with Beijing's priorities still is generally good advice.And, when I tell you what those priorities are, I know I am right - until I'm not.
December 7, 2021

'Xi Jinping has made sure history is now officially on his side'

‘While there are murmurs of opposition, the historic plenary session would suggest that the future is in Xi’s hands. However, when politics is so deeply personalised and centralised, there is only one person to blame if things go wrong. Unless, of course, we get a new resolution on history that tells us who led the party astray, despite Xi’s earnest attempts to keep policy on the straight and narrow.’
November 23, 2021

'Biden Has a Summit With Xi, but No Strategy for China'

‘Neither Taiwan nor strategic arms are a hot campaign topic, and China is not yet at the forefront of public consciousness. To ensure America’s eventual strategy is workable, political leaders need to debate the challenges so citizens can appreciate the implications of the choices they will have to make.’
November 23, 2021

Xi Jinping's Leadership: 'The Inevitable Outcome of History'

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November 23, 2021

'America's China Plan: A Proposal' by Clyde Prestowitz

Outcompeting China and avoiding global extension of its authoritarian and coercive policies and practices is not really about China. It’s about America.
November 9, 2021

Why China Won't Invade Taiwan - Yet

Forget Evergrande and the energy crunch. After the recent flurry of alarming headlines, here’s the question I get most often these days from CEO’s and institutional investors: Will China invade Taiwan in the next few years?
October 27, 2021

An Energy Crunch. China's Latest Crisis. They Just Keep Piling Up.

‍‘Over the next six months or more, the energy crunch in China will be an even bigger challenge than Evergrande. Will make the Evergrande problem look tiny and has huge global implications. The lights go out in China!’ one experienced and very well-respected reader of long residence in China wrote to me in response the last issue on Evergrande.
October 17, 2021

Just How Contagious is Evergrande?

Just as a personal crisis can lead you to dig deeper into yourself, so the rapid-fire events in China - with trillions of dollars of business and investment on the line - have led us to (finally) go deeper into how China works – and to come to grips with uncertainties caused by Xi Jinping’s recent moves to reshape the Chinese economy and the Party’s social contract with the Chinese people.
October 7, 2021

'This Time Feels Different'

Just when we thought we were getting used to Xi Jinping’s tech reforms and social-engineering regulations, the Evergrande crisis heats up.
September 27, 2021

AUKUS: A New World Order?

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September 19, 2021

Xi Jinping: Today, video games. Tomorrow, well ... just be good.

Today's issue is a heads up on what may be Xi Jinping's efforts to reshape Chinese society.
September 7, 2021

The Taliban: 'China's Perfect Partner'?

Breaking through the blow-by-blow reporting that started when the Taliban began its sweep to victory are the geopolitical analyses of who gains and who loses in Afghanistan.
August 28, 2021

'China Signals More Regulation for Businesses in Coming Years'

‘The State Council’s statement provides a guiding context to interpret current regulatory thrusts. The blueprint as an attempt by Chinese authorities to help investors understand the motives behind the regulatory push.’
August 15, 2021

China Economy: Industrial Production Down, Demand Resilient

China’s industrial production down 10%. Demand resilient.
August 15, 2021

'Xi’s Dictatorship Threatens the Chinese State'

‘Mr. Xi is determined to bring the creators of wealth under the control of the one-party state.’
August 15, 2021

'Are you tired of losing yet, America?'

As I write this, Taliban forces have entered Kabul and are reportedly occupying the Presidential Palace.
August 15, 2021

‘Global investors shocked to have discovered that China is run by Communists.’

‘Global investors are shocked to have discovered that China is run by Communists.’
August 5, 2021

'Shocked Investors Scour Xi’s Old Speeches to Find Next Target'

‘While China’s policy moves can feel ad hoc particularly to foreign investors, the changes are quite targeted on certain sectors.’
August 5, 2021

'China Wants Manufacturing—Not the Internet—to Lead the Economy'

‘Social media, e-commerce and other consumer internet companies are nice to have. But in his view national greatness doesn’t depend on having the world’s finest group chats or ride-sharing.’
August 5, 2021

Don't Say Xi Jinping Didn't Warn You

‘Global investors are shocked to have discovered that China is run by Communists.’
August 5, 2021

'Xi's Four Pillars of Regulation'

‘Broadly, Beijing is concerned about four pillars of stability: banking, anti-trust regulation, data security and social equality. All of Beijing’s major interventions reflect these concerns.’
August 1, 2021

'Why China Is Cracking Down on Its Technology Giants'

‘Why, you may ask, is China crushing some of its most innovative unicorns? We’re in a new era led by President Xi Jinping, and politics are in command.’
August 1, 2021

China's Tech Crackdown: 'Nobody Saw It Coming.' — Huh?

‘Carnage in China's financial markets signals the beginning of a new era as the government puts socialism before shareholders, and regulatory changes rip apart the old playbook,’ writes Reuters’ Tom Westbrook.
August 1, 2021

'The most significant philosophical shift since Deng'

‘Carnage in China's financial markets signals the beginning of a new era as the government puts socialism before shareholders and regulatory changes rip apart the old playbook. According to some analysts, it is the most significant philosophical shift since former leader Deng Xiaoping set development as the ultimate priority 40 years ago.’
August 1, 2021

'Stock Market: China Doesn’t Care How Much Money Investors Lose'

‘Does Beijing not care how much money foreign investors have lost? Does the government really want to close China Inc.’s access to the deep pool of global capital? The short answer is, no, the government doesn’t care.
August 1, 2021

How China's Middle-Class China is Transforming China and the World

‘Among the many forces shaping China's domestic transformation and its role on the world stage, none may prove more significant than the rapid emergence and explosive growth of the Chinese middle-class.’
July 25, 2021

Part 2 | The DiDi VIE (as an example)

‘The prospectus has a diagram, above, of the corporate structure, which looks almost normal. But everything below the double arrow — the actual ride-hailing business, etc. — is slightly askew.’
July 22, 2021

Part 3 | Revising the Rules

‘The Chinese government could declare “all these VIE contracts are actually a disguised form of foreign ownership, which is not allowed by the rules, so they are all void and your Didi and Alibaba shares are worthless.” ’
July 22, 2021

Part 1 | 'Owning Chinese Companies Is Complicated'

‘ “Variable interest entities”(VIEs): The problem with this is that it sort of sounds like you’re kidding. But this is a standard method for mainland Chinese internet companies to go public, and the market has come to accept it.’
July 22, 2021

China: Signals Blinking Red & Oops, We Missed the Risks

I had intended to make this issue all about ‘Variable Interest Entities’ (VIEs) and the emerging risks to about $1.8 trillion dollars’ worth of Chinese shares listed on U.S. exchanges – that is, 4% of the capitalization of the U.S. stock markets.
July 22, 2021

'Crackdown on US listings: Will China close $1.6tn VIE loophole?'

‘If Chinese authorities start to question “Variable interest entities”(VIEs), amid the crackdown that has already battered ride-hailing company Didi Global -- another VIE user -- the resulting loss of investor trust could send shock waves through global financial markets.’
July 22, 2021

'China Plans to Exempt H.K. IPOs From Cybersecurity Reviews'

‘China plans to exempt companies going public in Hong Kong from first seeking the approval of the country’s cybersecurity regulator, removing one hurdle for businesses that list in the Asian financial hub instead of the U.S.’
July 18, 2021

'I will aim for Mao's Status.'

‘There on the gate was Xi Jinping, Chinese president and party general secretary, in a gray Mao suit. Just below his feet was the portrait of Mao Zedong, also dressed in a gray Mao suit.’
July 18, 2021

Why the U.S. Lacks Leverage over China

During the celebration of the Chinese Communist Party’s Centennial celebration, Mr. Xi stood in the same place on the balcony facing Tiananmen Square where Mao Zedong stood when he announced the founding of the PRC; Mr. Xi wore a gray Mao suit, among a sea of blue western suits; and he centered himself right above the portrait of Mao, who is similarly attired.
July 18, 2021

'Biden’s Warning on Hong Kong'

‘The pretense of Chinese and Hong Kong authorities is that their crackdown on the rule of law and dissent will have no effect on Hong Kong’s viability as an international center for trade and finance.’
July 18, 2021

Hong Kong and the Limits of Decoupling

‘The United States’ inability to make China regret—much less reverse—its transgressions in Hong Kong suggests that financial separation, sanctions, and economic barriers are less reliable tools than many in Washington believe.’
July 18, 2021

'US warns companies of risk of doing business in Hong Kong'

“In the face of Beijing’s decisions over the past year that have stifled the democratic aspirations of people in Hong Kong, we are taking action,” said Antony Blinken, US secretary of state. “Today we send a clear message that the US resolutely stands with Hong Kongers.”
July 18, 2021

'What's Wrong with Biden’s new China doctrine'

‘Mr Biden’s aides invariably start any discussion of China strategy with the need to restore American greatness after decades of decline.’
July 15, 2021

Part 2 | Joe Biden is determined that China should not displace America

‘Mr Biden’s aides invariably start any discussion of China strategy with the need to restore American greatness after decades of decline.’
July 15, 2021

The Biden Doctrine and Its Discontents

President Biden has framed China as a threat both to the U.S. and the liberal world order.
July 15, 2021

Part 1 | 'Joe Biden is determined that China should not displace America'

‘Biden’s emerging China strategy, while still protean, sounds of a kind with Mr Doshi’s prescription for “blunting and building”.’
July 15, 2021

Didi: Xi Surprises Us Again

Beijing shocked the financial world when it pulled the rug out from under Didi days after its IPO on the New York Stock Exchange and also announced new regulations reigning in overseas IPOs and Chinese companies already listed.
July 8, 2021

The Chinese Point of View

Here are a few of my thoughts on the importance of Wang Jisi’s ‘The Plot Against China.’ Yuen Yuen Ang’s ‘The Evolution of Chinese Corruption’ speaks for itself - but note especially how Mr. Xi's anti-corruption campaign could hurt China's economy. I have now lived long enough that when a friend complains about his or her spouse, I say to myself, ‘There are no doubt two sides to this story.’
July 4, 2021

'How Corruption Powers China's Economy'

‘China has managed to sustain four decades of economic growth despite levels of corruption that even Xi has described as “grave” and “shocking.” Why does it seem to have bucked the trend?’
July 4, 2021

'How Beijing Sees U.S.-China Relations'

‘In Chinese eyes, the most significant threat to China’s sovereignty and national security has long been U.S. interference in its internal affairs aimed at changing the country’s political system and undermining the CCP.’
July 4, 2021

Five Themes that Point to Where the Chinese Communist Party & China are Heading

As the Chinese Communist Party begins its second century, it’s useful to identify enduring patterns that might aid us in understanding China today and the directions it might be heading.
July 1, 2021

From Rebel to Ruler: One Hundred Years of the Chinese Communist Party by Tony Saich

‘In our discussions, you've identified five themes that have been more or less consistent throughout the history of the party but have oscillated between different points on a continuum:’
July 1, 2021

'From Rebel to Ruler': Tony Saich on Chinese Communism at 100

‘At so many points during its century-long existence, the CCP appeared to be in its death throes, whether as a result of external attack or self-inflicted internal strife.’
July 1, 2021

'Jimmy Lai & the Death of Free Speech in Hong Kong'

Jimmy Lai’s tabloid, the Apple Daily, with its peculiar blend of scandal, gossip, and serious political reporting, was Hong Kong’s indispensable voice of free speech. Now that voice has been silenced, and Lai is in prison with others who tried to protect the right of Hong Kong’s citizens to speak and write freely, to be ruled by law, and to vote for their own autonomous government. Their politics are diverse Yet they stand together. When freedom is under siege, people cannot afford the narcissism of small differences that is tearing apart liberal politics in countries where people think democracy can be taken for granted.
June 27, 2021

'European Companies in China: Between Decoupling and Onshoring'

‘Instead of leaving the market, European companies are exploring ways to separate their China operations from their global ones.’ ‘Following the Covid-19 outbreak, European companies in China spent the first few months of 2020 solemnly appraising their investment strategies.’
June 27, 2021

'How China & America Should Compete'

‘China and the West urgently need a new framework for understanding the state of the world and their place in it. Such a framework must recognize, first and foremost, that properly regulated economic competition is not a zero-sum game.’
June 27, 2021

European Chamber in China: 'Business Confidence Survey'

A mere 9% of European companies are considering moving any current or planned investment out of China, the lowest level on record. Instead, companies are strengthening their positions in JVs, onshoring supply chains and increasing spending to secure market share. The ambition not only to stay but also to expand their China footprint is more than justcapital flooding in due to optimism about growth. Companies are taking action to secure their operations in China and mitigate exposure to geopolitical trends in order to have a better chance of navigating a future that looks to be fraught with risk, at least in the near- to medium-term.
June 27, 2021

Bitcoin’s growing energy problem: ‘It’s a dirty currency'

“Bitcoin alone consumes as much electricity as a medium-sized European country.”
June 24, 2021

The End of 'Apple Daily' - and Freedom of the Press in Hong Kong

Through arrests and freezing of assets, Beijing has forced the closing of Hong Kong’s last pro-democracy newspaper, the Apple Daily.
June 24, 2021

'Hong Kong’s Apple Daily newspaper folds under government pressure'

Apple Daily was much more than a newspaper. To its fans, it was a defender of freedoms. To its foes, it was the defiler of national sovereignty.’
June 24, 2021

'Congress on China: Then and Now'

‘With the Senate voting on June 8, 2021, to adopt the United States Innovation and Competitiveness Act, it is safe to say that this is the most comprehensive action by Congress on China policy EVER.’ ‘The language of the United States Innovation and Competitiveness Act is about a long-term competition with China as opposed to war with an enemy.’
June 24, 2021

'China steps up crackdown on bitcoin mining industry'

‘China’s latest intervention places further pressure on what was once one of the world’s most vibrant markets for trading and mining digital currencies.’ ‘It comes at a time when many governments are scrutinising the industry’s effect on the environment and determining the types of financial oversight that should be applied to cryptocurrencies.’
June 24, 2021

'Apple Daily closed, but press freedom stays in Hong Kong'

‘Freedom of the press is a good thing. The West's freedom of speech must be consistent with national interests and public security.’
June 24, 2021

‘Why do business and political leaders in the West persist in getting China so wrong?’

From that I suggested that to invest successfully in China, you have to understand – and be aware of - what those differences are.
June 20, 2021

‘Why do business and political leaders in the West persist in getting China so wrong?

‘Why do business and political leaders in the West persist in getting China so wrong?’
June 20, 2021

Part 2 | 'Is China exporting inflation?'

“Is China exporting inflation? In renminbi terms, it’s not so obvious. But in U.S. dollar terms, it starts to get more sizable.” ’
June 17, 2021

Part 1 | 'Is China exporting inflation?'

‘Beijing is moving swiftly to protect its factories and workplaces from rising costs.’ ‘Still, rising prices in China, by far the world’s biggest manufacturer and exporter, could be felt around the world.’
June 17, 2021

'Back-to-Back Rebukes of China Mark a Turning Point'

‘The one-two punch of public criticism smacks directly into Mr. Xi’s assertion that China won’t stand for lecturing by other nations, suggesting anxiety in key capitals is prompting governments to seek alignment with the U.S. over attempting to manage the relationship with Beijing on their own.’
June 17, 2021

Bernie Sanders: 'Don’t Start a New Cold War With China'

‘The pendulum of conventional wisdom in Washington has now swung from being far too optimistic about the opportunities presented by unfettered trade with China to being far too hawkish about the threats posed by the richer, stronger, more authoritarian China that has been one result of that increased trade.’
June 17, 2021

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