CHINADebate

Malcolm Riddell

|

CHINADebate

Dr. Willy Shih, Harvard Business School

The U.S.-China Economic and Security Review Commission, created by and reporting to the United States Congress held an all-day hearing last week on:

  • ‘U.S.-China Competition in Global Supply Chains’

As usual the Commission brought in top experts to give testimony.

There are great descriptions of specific supply chains, such as semiconductors and rare earth.

  • But what I found especially interesting is the brief explanations of how China became crucial to so many supply chains.

In this regard, two essays stand out by  

  • Willy Shih, professor at Harvard Business School and
  • David J. Bulman, professor at Johns Hopkins School of Advanced International Studies.

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

  • Excerpts from both essays are below.  

All the essays are excellent and worth a browse to find those that fit your interest.

Part One | 'The competitiveness of China is eroding': Willy Shih, HBS

‘China was late to industrialize, relative to the U.S., Europe, and other East Asian countries.

  • ‘In that regard it had what some authors call the “late comers’ advantage.” ’

‘When it built its electric grid, its communications network, and a fair amount of its manufacturing capacity, it didn’t have a lot of existing (and older) infrastructure that was already paid for and fully depreciated, or maybe State-owned Enterprises (SOE) didn’t have to worry about concepts like depreciation schedules.’

  • ‘In either case, since it was looking to catch up, it could start fresh with the newest technologies, and this was a huge ’

‘Some of the old Mao era manufacturing legacy was pretty archaic, but firms weren’t afraid to invest in a lot of new capacity.’

  • ‘They planned for vast growth with the domestic market and increasing access to global markets.’

2 | ‘A lot of know-how embedded in those production tools’

‘In China during the 1990s and 2000s, a period of rapid industrialization, both Chinese and foreign-invested companies imported a great deal of production equipment.’

  • ‘Some of this was the result of “lift and shift” strategies in which production equipment was moved from the S. or Europe, but there were also many instances where the latest production technologies and equipment were purchased, largely from abroad.’

‘The equipment generally comes with training, as it is in the interest of the toolmakers to provide it.’

  • ‘They therefore received a lot of know-how embedded in those production tools. I have written about this phenomena in the MIT Sloan Management Review, and I am incorporating that article by reference.’
  • ‘That is something everybody in every country does, but if you are a latecomer, it helps when you don’t have to go through a lot of learning that is abstracted and presented to you.’

3 | ‘Centralized planning with experimentation’

‘Let me add that China historically engaged in a unique combination of centralized planning with experimentation.’

  • ‘In addition to its Five-Year Plans, it engages in longer-term programs as well.’

‘I would like to highlight in particular the National High-tech R&D Program, also known as the “863 Program” named for the year and month (March, 1986) when four scholars proposed a plan to accelerate the country’s high tech development.’

  • ‘It sought to boost innovation capacity in named strategic sectors like information technologies and infrastructure, biological and pharmaceutical technologies, nanomaterials and other materials, among others.’

‘China also has a fierce form of market competition, and it is driven by policymakers in provinces and cities who take plans handed down from Beijing and implement them with their own means and methods, competing fiercely with each other.’

  • ‘For those leaders who are successful, this is a path to promotion within the Chinese Communist Party.’
  • ‘Sometimes Beijing tries to tone down this hyper-competition and rationalize markets, deeming it a waste of resources. But it’s an interesting and powerful model that had delivered results.’

4 | ‘The pandemic revealed a lot of surprise dependencies.’

‘China’s position in global supply chains is much more pervasive than many people realize.’

  • ‘It has combined what seemed like (until a few years ago) a virtually unlimited low-cost workforce that had both the discipline and the ambition to get ahead.’
  • ‘Workers there were willing to do things that American workers were not, and they did it for a tenth the cost or sometimes even ’

‘While many people focus on the high profile products like lithium-ion batteries, computers, communications equipment, or pharmaceuticals, we actually have broad dependencies that run much deeper than most Americans realize.’

  • ‘Do you shop at the big box home improvement stores or retailers? All you have to do is look at who the largest importers from China are.’

‘In the midst of the supply chain crisis that we have been living through for the past two years, imports from China have posted records month after month, because we don’t have anywhere else to go to for a lot of manufacturing capacity.’

  • ‘The pandemic revealed a lot of surprise dependencies, and I guarantee there are many more.’

5 | ‘Economies of scale and process learning’

‘China’s position is durable, though not insurmountable, because they have both the capacity and the capabilities.’

  • ‘If you want to assemble 10 million iPhones in preparation for a launch weekend, there is only one place where you can marshal the labor, enjoy the labor flexibility, and do it at a reasonable cost, at scale.’

‘Chinese companies have been willing and able to apply the latest process innovations.

  • ‘They then use learning and economies of scale to cement their ’

‘Economies of scale and process learning as exemplified by the learning curve play a crucial role.’

  • ‘These effects overlap of course, but let me start with scale economies.’

6 | ‘Economies of scale’

‘Economies of scale are cost decreases that result from expanding production.’

  • ‘If the cost per unit of output rises more slowly than the costs of inputs in the same proportions, there are economies of scale (for example, if output doubles while the total cost of inputs less than doubles).’
  • ‘The simplest scale economies arise when there are high setup costs and relatively low run costs per unit of output so that spreading setup over larger run volumes improves efficiency of labor and asset utilization.’

‘Economies of scale are frequently found in industries that require large capital expenditures on plant and equipment, or the establishment of a large infrastructure prior to the ability to begin providing service.’

  • ‘High fixed costs get apportioned across the entire product volumes, so larger production volumes mean a smaller per unit allocation.’

‘China has been able to take advantage of the tradability of its output, and as a low-cost provider combine the gigantic export market with its own growing domestic market.’

  • ‘This is something that the United States was able to take advantage of during the 20th century, but the growth of the tradable sector enabled by low-cost ocean container shipping from the late 1990s has helped China immensely.’
  • ‘Thus its firms have been able to build extraordinary positions as low cost ’

7 | ‘Process learning is essential’

‘Process learning is essential.

  • ‘The experience (learning) curve originated from the work of Theodore Wright, who studied aircraft production.’
  • ‘He observed that the more times a task was repeated, the less labor time was required in each subsequent iteration’.

‘Experience curve benefits can be attributed to improvements in labor efficiency as workers’ dexterity improves, standardization, specialization and work method improvements, improved use of tools and equipment, product redesigns to improve assembly efficiency and productivity, material substitutions and more efficient use of inputs, and a shared experience effect when multiple products share usage of common resources.’

8 | “Paying my tuition”

‘One of the key benefits that I have observed Chinese manufacturers have been able to exploit is a market breadth and depth that facilitates this learning.’

  • ‘When a firm starts out making a product, it might not be as good as international competitors, but it is good enough for many buyers in its local market.’
  • ‘Thus it is able to get practice and move down the learning curve.’
  • ‘Customers pay for this learning by buying the firm’s output, and this gives the manufacturer the cash flow to keep operating and ’
  • ‘I describe this as “paying my tuition” while I learn and improve.’

‘China didn’t invent this idea – it is a feature of market economies.’

  • ‘Japan and other Asian economies leveraged this earlier, as did the S. in the 19th and 20th centuries. But a broad tradable sector with low cost shipping facilitates it.’

9 | ‘The competitiveness of China is eroding.’

‘In my opinion the competitiveness of China is eroding, and I would attribute this to several factors:’

  • ‘Increasing logistics costs and transit times, essentially eroding the tradability of many If you don’t have sufficient value density, it makes no economic sense to produce physical products that far away from where they are sold. Since 90% of global trade moves on water- borne trade lanes, the arrival of IMO 2023 regulations on shipping suggest to me that we are not going back to the days of the first 15 years of this century.’
  • ‘China’s population dividend has peaked, and demographic trends are not in its ’ China’s workforce is no longer seemingly limitless, and workers are demanding more pay. That die was cast with the country’s one-child policy, and there is no correcting that in the near term.’
  • ‘Heightened trade tensions between the U.S. and China have made manufacturing some commodities too high risk, and we have already seen the beginnings of a lot of
  • ‘China’s Zero Covid policy has made business much harder to conduct, and has injected a major degree of risk uncertainty. Manufacturers really dislike uncertainty.’
  • ‘The Chinese government’s willing to disrupt some of its own industries through policy and regulation have injected more uncertainty. Until the Party Congress later this year, this uncertainty is likely to continue.’

10 | ‘I am not prepared to write off China’s long-term capabilities.’

‘Meaningful shifts in production have already, and continue to take place. Countries like Vietnam, Malaysia, and Mexico have seen gains.’

  • ‘Having said this, I am not prepared to write off China’s long-term capabilities or its ability to react and respond to these shifts.’

Part Two | How China became dominant in global supply chains: David J. Bulman  


1 | ‘China’s deep integration into global supply chains’: four factors

‘From 1978 until the global financial crisis in 2008-2009, China transitioned from a nearly autarkic country to the world’s largest manufacturer and goods exporter.’

‘China’s deep integration into global supply chains in this period was enabled by:’

  1. ‘serendipitous timing given concurrent global developments,’
  2. ‘East Asian geography, ‘
  3. ‘natural comparative advantage, and’
  4. ‘policy choices, particularly trade and market liberalization. During this period, industrial policies to strengthen China’s position in global supply chains were limited in scope and effectiveness.’

‘Industrial sectors exhibit wide variation in terms of both central policy support and China’s level of global supply chain centrality/dominance.’

  • ‘These two dimensions combine to create a 2x2 matrix, seen in the Table above.’

2 | Timing

‘China’s entry into the global trading system from 1978 through 2008 coincided with a new wave of globalization and global value chain development driven by the information and communications technology (ICT) revolution and declining transportation costs.’

  • ‘The ICT revolution significantly lowered costs of outsourcing and related services, including financial services, computer and information services, and other business services, which could increasingly be traded internationally.’
  • ‘Technological developments in transportation led to lower costs for air and ocean ’

3 | East Asian geography

‘China’s centrality in an increasingly integrated East Asian region facilitated China’s entry into global supply chains.’

  • ‘East Asia has led the way globally in terms of explicit support for developing regional value chains, as trade policies have consistently ensured low tariffs on intermediate goods through a rapid increase in regional preferential trade agreements (PTA), which expanded from 3 in 2000 to 37 a decade later, with a further 72 under negotiation.’
  • ‘China took full advantage of these PTAs, implementing 13 PTAs with 21 individual economies and negotiating at least 10 more, including the 16-member Regional Comprehensive Economic Partnership (RCEP). And GVC complementarities have been an important factor in determining China’s choice of PTA partner.’

4 | Chinese diaspora

‘China’s geographic centrality within Asia also played an important role given the extensive regional Chinese diaspora.’

  • ‘Early foreign direct investment (FDI) into China in the 1980s and 1990s was driven by investment from Hong Kong,Taiwan, Singapore, and other Asian neighbors with large ethnic Chinese populations, constituting a “China circle.” ’
  • ‘As industrial production in the East Asian “tigers” moved up the value chain, China became the natural destination for outsourcing given these language and cultural ties.’
  • ‘In this sense, much of China’s rising GVC integration should be considered as relocated intra-Asian Asian trade.’

5 | Comparative advantage: a relatively educated low-cost workforce

‘Centrality in East Asia only mattered given China’s comparative advantages: most importantly, a large, relatively well-educated, and low-cost workforce.’

  • ‘Mao era (1949-1976) policies, despite causing economic inefficiency and human disasters, also led to considerable increases in human capital: life expectancy rose from 40 years to 68 years and literacy rose from 10% to 90%, both well above other countries at China’s level of per capita income, and the population itself grew from 540 million to nearly one billion.’
  • ‘Consequently, China entered the 1980s with a massive and relatively well-educated work force.’

‘Additionally, Mao policies restricting urbanization beginning in the late 1950s resulted in over 80% of the population remaining underemployed in rural areas, leading to a huge surplus rural labor population that could migrate for work to urban areas without driving up wage pressures.6 Along with an urban workforce with higher levels of education, China thus had an ideal combination of supervisory manpower and a vast pool of unskilled workers.’

  • ‘As a sign of the importance of low-cost labor, China’s labor-intensive exports as a share of total exports rose from 37% in 1984 to 54% in 1994.’

‘In addition to China’s well-educated yet cheap labor force, China’s huge size and relatively well-developed infrastructure (see below) also provided firms with the option to relocate production within the country.’

  • ‘This was particularly important given that GVC development and firm de- verticalization partially reshuffled global comparative advantages in trade, as GVCs required the capacity for inter-industry reallocation of inputs as well as the ability to support the operations of multinational firms.’

6 | Policy choices: trade liberalization

‘Yet the single most important factor in china's global trade dominance has been the productivity gains enabled by state-owned enterprise (SOE) reform and private sector entry in the 1990s and 2000s, and this market liberalization was itself enabled by earlier trade liberalization.’

  • ‘In this sense China’s most important policy choices were to support market-driven growth.’

‘On trade liberalization, in the 1980s China began to de-monopolize its Mao era foreign trade regime, under which the currency was entirely non-convertible, only12 foreign trade corporations (FTC) were allowed to conduct cross-border trade, and an export plan covered all of China’s exports.’

  • ‘Gradually, ministries, local governments, and special economic zones were allowed to set up FTCs, and by the late 1990s China had granted direct export/import rights to 10,000 manufacturing companies.
  • ‘By 1991, only15% of exports were covered in the plan.’

‘And from a highly overvalued currency, China in the mid-1990s moved to a market-based currency convertible on the current account.’

‘At the time, China replaced non-tariff administrative barriers to trade with high tariffs, but over the course of the 1990s these high tariffs were reduced below the developing country average to pave the way for WTO liberalization.’

7 | Policy choices: targeted support for export processing

‘Trade liberalization also included explicit policy choices to attract FDI and engage in export processing.’

  • ‘But for the most part these policies were broad-based and not targeted at the development of specific’

‘Policy makers established four SEZs in Guangdong and Fujian in 1979 – enclaves that did not threaten China’s system of domestic production—followed by 14 open cities in 1984.’

  • ‘They also created a 1986 Coastal Development Plan with explicit support for export processing that brought SEZ-type policies to China’s entire coastal region, with hundreds of millions of potential workers.’
  • ‘Export processing was exempt from duties on imported inputs, providing an important cost’
  • ‘And foreign-invested enterprises (FIE) did not have to go through FTCs to import, while also receiving special tax concessions.’
  • ‘China’s export processing trade subsequently reached as high as 56% of total exports by 1996.’

8 | Infrastructure

‘Beyond SEZs and export processing tax break policies—policies which China learned from Asia and the rest of the world - explicit attention to infrastructure development and to decentralization helped to attract FDI.’

  • ‘China spent lavishly on infrastructure, including roads, railways, ports, and telecommunications; by the mid-2000s, despite remaining a lower middle-income country, China’s infrastructure stock was similar to advanced economies, and China’s logistics performance rose well ahead of other middle income countries.’

‘Part of this infrastructure performance was driven by competition between local governments to attract investment: in the 1980s, China developed a regionally decentralized form of authoritarianism in which local officials were incentivized to attract FDI to boost economic growth and thus their career prospects.’

  • ‘Localities competed with each other by providing preferential policies including cheap land and tax breaks, and also by improving local ’
  • ‘This led to uncoordinated competition, as well as intra-national cross-border  protectionism .’
  • ‘But it also led to institutional improvements, as foreign firms were attracted to Chinese cities with more reliable contract enforcement and faster customs clearance.’

‘These policy reforms paved the way for foreign firms to help drive China’s initial export explosion.’

  • ‘The FIE share of exports rose from nothing in the late 1970s to 58% in 2005.’

9 | Reform

‘FDI helped drive China’s growth, but trade liberalization’s most important contribution was inducing international competition that forced deep reforms to China’s enterprise system, enabling  the entry of private  sector firms and the closure of inefficient SOEs.’

  • ‘During China’s most rapid period of economic growth in the early 2000s, productivity gains across manufacturing sub-sectors were systematically correlated with levels of tariff reductions; sectors with greater tariff reduction experienced more private sector entry and greater competitive pressures that resulted in improved SOE ’

‘Trade liberalization also helped to improve China’s institutions, as WTO accession spurred China to abolish, revise, or introduce more than 300 national laws and nearly 200,000 local regulations; such institutional reforms further helped to provide secure property rights for private and foreign firms.’

  • ‘Consequently, in the late 1990s and early 2000s, SOEs shed approximately 40 million workers.
  • ‘SOEs accounted for over two-thirds of China’s exports as late as 1995, but by 2016 accounted for only 10% of exports as the domestic private sector took off.’

10 | Industrial policy under Xi

‘China has increasingly relied on sector-specific industrial policies.’

  • ‘Butthesepolicies are predominantly implemented by local governments whose incentives are not aligned with the long-term growth objectives pursued by the’

‘These officials instead seek to maximize short term growth and minimize creative destruction and attendant unemployment.’

  • ‘Xi’s institutional reforms have not altered this calculus.’

‘Consequently, industrial policy as implemented is much less effective than U.S.policy makers often assume.’

  • ‘This is not to say that all of China’s industrial policies fail, but rather that their efficacy and explanatory power regarding broader industrial and exporting trends in China is overstated.’

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keep reading

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June 12, 2022

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June 5, 2022

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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'

Mr. Xi is the hero of a Resolution on the history of the Chinese Communist Party that painted his leadership as the inevitable outcome of history and all but gave him his third term. Tony Saich of the Harvard Kennedy School did a terrific analysis on this - you'll find it below, after my take.
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?

‍In case you passed over the news of AUKUS, the new strategic alliance among the U.S, the U.K., and Australia, here a few headlines to encourage a deeper look.
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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