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
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:

Is this the start of a new world order?

  • Or is it perhaps a capstone on the glacial shift of recalcitrant nations to stand up to China?

To become a new world order, more of those countries, especially in the EU – and the EU itself – will have to get on board.

  • The current indications are that they are, however slowly.

BTW the leaders of the QUAD – the U.S., Australia, Japan, & India – will meet this week at the White House.

  • More on the QUAD later.

1 | Biden’s China Policy Muddled No More?

‘Biden's muddled China policy’ is the headline of Jonathan Swan’s piece in Axios. Mr. Swan writes:

  • ‘President Biden came into office with a plan for dealing with China that sounded great in theory but's failing in practice.’
  • Reminds me of heavyweight champ Mike Tyson’s quip: ‘Everybody has a plan until they get punched in the mouth.’

However much China may seem to have punched the U.S. in the month – and on that Mr. Swan is correct - theory and practice came together last week.

  • The theory: Bring allies into concert in the U.S. effort to confront China.
  • The practice: ANUKUS

AUKUS, as you have no doubt read, is a new Indo-Pacific security alliance among the U.S., the UK, and Australia – the anglosphere minus Canada and New Zealand.

  • The centerpiece of the new security pact: The U.S. and the UK will equip Australia with at least eight nuclear-powered submarines and transfer U.S. nuclear sub technology (the U.S. has only done that once before, to the UK in 1958).

With this, Australia will become the 7th nation to have such weapons, along with the U.S., the UK, France, India, Russian, & China.

  • (Note: Australia’s new subs will carry conventional – not nuclear – weapons, like long-range Tomahawk missiles. But experts have said that in a pinch, these could be swapped out for nukes.)

The subs won’t be delivered for at least a dozen years.

  • So more immediately, the allies will ‘deepen cooperation on a range of defense capabilities for the 21st century, including artificial intelligence, cyber, quantum technologies, and various undersea capabilities.’

To make the deal, Australia scrapped a contract with France to supply conventional subs.

  • What hurt more than that was that French president Macron was not invited to join the alliance – even the negotiations where kept secret from him.
  • Blindsided and livid, Macron protested and withdrew his ambassadors to the U.S. and Australia.

Throughout all the announcements, the three nations’ leaders never mentioned China as the target of AUKUS.

  • In fact, the three leaders were at some pains to claim: ‘China? China? Never entered our minds.’
  • Their deputies were more direct.

And China, quite rightly from its point of view, squawked.

2 | Why The Subs Are A Big Deal

‘In its previous calculations, China’s military only had to contend with possible interference from the US and Japanese navies as it sought military dominance over its near seas, especially in the waters around Taiwan,’ wrote the Financial Times:

  • Admiral Lee Hsi-ming, a former chief of the general staff of Taiwan’s armed forces, told the FT:

“Nuclear powered submarines give Australia strategic deterrence and attack capabilities for the first time.” ’

  • ‘ “They will be able to not just protect their own sea lanes of communication but deploy far from home. Add to that the Tomahawk missiles, and [Australia’s] fist will reach right to mainland China.” ’
  • ‘Lee added that “the logical area for deployment of those submarines would be the deep waters of the western Pacific [near] Taiwan”.’

‘“There is not much the People’s Liberation Army can do to counter this new capability,” he said.’

  • ‘ “Long-range anti-submarine warfare is one of the most sophisticated and risky operations, and it will take longer for the PLA to master it than it will take for Australia’s nuclear submarines to be built and deployed.” ’

Vipin Narang, a Massachusetts Institute of Technology professor who studies the use of nuclear weapons and delivery systems among major powers, told The New York Times:

  • ‘ “Attack submarines are big deal, and they send a big message,”
  • ‘ “This would be hard to imagine five years ago, and it would have been impossible 10 years ago. And that says a lot about China’s behavior in the region.” ’

Oriana Skylar Mastro, who is a fellow at the Freeman Spogli Institute for International Studies at Stanford University and at the American Enterprise Institute, told The New York Times:

  • ‘ “Nothing is more provocative to China than nuke stuff and submarine stuff." '
  • ' “China’s so weak in anti-submarine warfare in comparison to other capabilities." '
  • ‘ “To me,” said Ms. Mastro, a regular visitor to Australia, “it suggests that Australia is willing to take some real risks in its relationship to stand up to China.” ’

Here’s why Australia is willing to take those risks.

3 | What Got Into Australia?

Of the many headlines that have appeared since AUKUS was announced, one of my favorites is from The New York Times:

From that article:

  • ‘With its move to acquire heavy weaponry and top-secret technology, Australia has thrown in its lot with the United States for generations to come — a “forever partnership,” in Australian PM Morrison’s words.’
  • ‘The agreement will open the way to deeper military ties and higher expectations that Australia would join any military conflict with Beijing.’
  • ‘It’s a big strategic bet that America will prevail in its great-power competition with China and continue to be a dominant and stabilizing force in the Pacific even as the costs increase.’

So why make that bet now? I’ve watched Australia’s relations with its biggest natural resource buyer (and major mine investor), China, because of the interest in commodities of my hedge fund clients.

  • For years, I've watched as Australia has tried to balance its traditional ties with the U.S. with its dependence on China’s buying Australia’s commodity exports such as iron ore for its rapid industrialization.

In 2015, Australia and China agreed to a free-trade deal and that led to record Chinese investment in the country the following year.

  • Soon things went south. For example, Australia alleged that China was interfering in its politics and banned Huawei from its 5G rollout.

Then Australia did the unthinkable:

  • It called for an independent inquiry into the origins of the COVID pandemic.

And China went all ‘wolf warrior’ on Australia:

  • It imposed steep tariffs on Australian barley, suspended beef imports from some Australian slaughterhouses, and slapped antidumping tariffs on Australian wine, among other trade penalties.

In the face of this bullying, Australia has hung tough.

  • And now it’s had enough and is 'betting the house' on the U.S.

Speaking about China’s behavior, Peter Jennings, executive director of think tank Australian Strategic Policy Institute told the AP:

  • ‘ “China is the strategic problem in the region.” ’
  • ‘ “Australia’s decision to acquire nuclear submarines was a response to China’s increasing military might, aggressive bullying of Australia and intimidation of Japan and Taiwan.” ’

‘ “I’m sure Beijing will not like this development but what do they expect? It’s obviously going to be the case that the consequential countries in the region will seek to strengthen themselves in order to deal with a more aggressive China, and frankly that’s what happened with this announcement.” ’

  • ‘ “We should call the first submarine in this new category the ‘Xi Jinping,’ because no person is more responsible for Australia going down this track than the current leader of the Chinese Communist Party.” ’

If other Asian countries begin to stand up to China, this pretty much sums up why.

4 | What Does AUKUS Mean For China?

Here’s a view from China from Li Haidong, a professor at the Institute of International Relations of China Foreign Affairs University, who told the Global Times [a Chinese Communist publication] that AUKUS is at the core of the US alliance system to contain China with extreme hostility, and it should not be underestimated.’

  • ‘ "The US is using the same approach employed to contain Russia in Europe after the Cold War to contain China in the Asia-Pacific region. Washington is building a NATO-like alliance in the region, with AUKUS at the core, and the US-Japan and US-South Korea alliances surrounding it, and the Quad [U.S., Australia, Japan, and India] at the outermost level, because India, not an US ally, can't be trusted by the US," Li said.’
  • Below is a chart that summarizes Dr. Li’s point:


Note: Keep a sharp out for alliances and strengthening of relations among Asia countries, some with no U.S. involvement whatsoever.

  • As Dr. Li stressed: ‘These small groups of alliances can realize mutual reliance and form a big alliance led by the US to contain China. "So the threat and challenge that China is being confronted with are critical and serious," Li stressed.’

If AUKUS is the start of a new world order, the order will be inspired by but not always led by the U.S.

  • And that's a good thing if we want this new world order to be robust and inclusive.



August 24, 2023
Xi Jinping: 'The East is Rising' | Yes. Rising against China
All our careful analyses of PLA capabilities, the parsing of Mr. Xi’s and Mr. Biden’s statements, the predictions as to the year of the invasion, everything – all out the window. This is one you won’t see coming – but one you have to have prepared for.
keep reading
July 23, 2023
‘The U.S. Has Tactics, But No China Strategy’ | Bill Zarit
‘The U.S. needs national review of outward investment to China, but it has to be narrow and targeted and done in conjunction with our allies and partners.’
keep reading
July 10, 2023
‘Is Xi Coup-proof?’ (after the march on Moscow, I have to ask)
What about the guys without guns? So if Mr. Xi doesn’t face a rogue army or a military coup… How about a coup by Party elites?
keep reading
August 24, 2023
Xi Jinping: 'The East is Rising' | Yes. Rising against China
All our careful analyses of PLA capabilities, the parsing of Mr. Xi’s and Mr. Biden’s statements, the predictions as to the year of the invasion, everything – all out the window. This is one you won’t see coming – but one you have to have prepared for.
keep reading
July 23, 2023
‘The U.S. Has Tactics, But No China Strategy’ | Bill Zarit
‘The U.S. needs national review of outward investment to China, but it has to be narrow and targeted and done in conjunction with our allies and partners.’
keep reading
July 10, 2023
‘Is Xi Coup-proof?’ (after the march on Moscow, I have to ask)
What about the guys without guns? So if Mr. Xi doesn’t face a rogue army or a military coup… How about a coup by Party elites?
keep reading
April 2, 2023
Xi Jinping: 'Change unseen for a 100 years is coming.'
Time went of joint in the mid-1800s when China began its ‘Century of Humiliation.’ And Mr. Xi, with a sense of destiny, seems to feel he was born to set it right. (I very much doubt that Mr. Xi would add: ‘O cursed spite’ – he seems to relish his role and the shot it gives him to go down in history as China’s greatest ruler.)
keep reading
January 2, 2023
Xi Jinping: Bad Emperor?
Some have asked me what will be the greatest risk to China in the next five years. My answer: That Xi Jinping will overstep and enact policies that Chinese people won’t accept, especially those that have a direct impact on their lives and livelihoods.
keep reading
November 22, 2022
'Strangling with an intent to kill.’
I began to have some hope of getting our act together with Mr. Biden. He worked to rebuild relations with allies who could join the U.S. in the competition. And he understood the need for America to strengthen itself for competition. Hence, the infrastructure, CHIPS, and other acts. But whether Mr. Trump or Mr. Biden, one thing nagged me beyond all the rest. Why is America strengthening our competitor? — In the instant case: Why is America giving our competitor advanced semiconductor resources to strengthen itself to compete against us?
keep reading
October 31, 2022
Xi's China: 'less reliable, less predictable, and less efficient'
‘China’s predictability is being eroded by the frequent, erratic policy shifts that have taken place in recent months, such as the unexpected disruptions to power supplies that took place in 2021, and the sudden mass lockdowns that were imposed in an attempt to contain COVID.'
keep reading
October 18, 2022
Xi Jinping: ‘Crossing a threshold to outright dictatorship?’'
The view from inside China appears to be quite different. Yes, the Chinese people may grumble about the Zero-COVID lockdowns, and just a few days a banner critical of Mr. Xi and his regime was unveiled over an overpass in Beijing.
keep reading
October 10, 2022
The 20th Party Congress with All Eyes are on Xi Jinping
The attention to Mr. Xi is in large part because he will exit the Party Congress with even greater power, no discernible opposition, and a new five-year term (with more likely to follow). And many of the constraints that may have been in place not to jeopardize his reappointment will be gone.
keep reading
September 26, 2022
China Coup: How Worried Should Xi Be?
‘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
September 18, 2022
'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.
keep reading
September 5, 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.
keep reading
July 10, 2022
Building Biden's 'Great Wall' Around 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.
keep reading
July 1, 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.
keep reading
June 22, 2022
No. Ukraine Won't Change Xi's Plans - or Timetable - for Taiwan
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.)
keep reading
June 12, 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.’
keep reading
June 5, 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.
keep reading
May 30, 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.
keep reading
May 22, 2022
The Next U.S.-China Crisis: CEOs & Boards Are Not Ready
‘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.’
keep reading
May 14, 2022
China GDP: 'A very long period of Japan-style low growth.’
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.
keep reading
May 1, 2022
'Zero Covid' & the Shanghai lockdown
Joerg Wuttke is the president of the EU Chamber of Commerce in China - the 'official voice of European business in China.'
keep reading
April 17, 2022
Is China's Tech 'Crackdown' Really Over?
Today, I’m sharing with you a bit of Ms. Schaefer’s analysis of the tech ‘crackdown’ (but not of the AI and algorithm law). She explains why...
keep reading
April 17, 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.
keep reading
April 5, 2022
Russian Sanctions' Impact on China
In the meantime, some contend, China has a payment system, the Cross-Border Interbank Payment System or CIPS, that could make it independent of SWIFT.
keep reading
March 21, 2022
Faint Cracks
For some time now we’ve taken it for granted that Xi Jinping has so consolidated his power that his will is China policy.
keep reading
March 13, 2022
Is China in a Bind?
It wants to support Russia, but also wants to support the international order from which benefits and doesn’t want to alienate the major economies its own economy is intertwined with.
keep reading
February 19, 2022
Under Construction: Two (Opposing) World Orders
Years ago, before the so-called ‘New Cold War,’ when asked what China issue interested me most, I said, ‘China and the liberal world order.’
keep reading
February 17, 2022
'A Fateful Error'
As the 1904 cartoon from Puck magazine shows, this isn’t the first time in the past 100 or so years that Russia has shattered the peace. [Or has been defeated, as it was in 1905 by the Japanese in the Russo-Japanese War.]
keep reading
February 2, 2022
Ukraine, Taiwan, & the 'Nightmare Scenario'
This in no way diminishes the calamity of a war with China. But the ability of the U.S. to wage that war would not be diminished by having to fight Russia at the same time.
keep reading
January 18, 2022
This is Mr. Xi's Big Year - and Nothing Better Spoil It
Every politician going into an election wants a strong economy. Xi Jinping is aiming to be reelected (and all indications are he will be) to a third five-year term at the National Party Congress this autumn. So Mr. Xi will ease (and stimulate ) as much as he can without creating major headaches to deal with after his reelection - all in the name of 'stability.'
keep reading
January 5, 2022
Bachelors, Mother-in-Laws, & China's Economy
‘In the long-term, demographics is one of the most important forces that will shape the growth momentum of China for the next decades. Two demographic features that are especially worth paying attention:’
keep reading
December 30, 2021
Q&A 6 | China Reverse Its Declining Birthrate?
‘A lot of people feel like the ideal, the optimum number of children is a maximum of two children. So it's not a surprise to me that the three-child policy hasn’t had a high response in the short term. But I think in the long term it will be much better.’
keep reading
December 30, 2021
Shang-jin Wei Presentation-1 | Drivers of Growth Momentum
‘In the last year and a half we saw a spate of government actions all contributed to not just falling stock prices for companies in certain sectors but a deterioration in investor sentiment more broadly. These include:...’
keep reading
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.’
keep reading


Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.