Friends,
Close game last night for my Green Bay Packers as they battled in the playoffs against San Francisco. Aaron Jones’ huge run in the 4th Quarter made it look like Green Bay was headed to the NFC Championship game. But the missed field goal and too much time left on the clock let the Niners’ McCaffrey score another running touchdown. We’ll find out today if San Francisco will face the Detroit Lions or the Tampa Bay Buccaneers.
While I’m disappointed with the game last night, I’m feeling pretty happy about the season for three reasons:
1) the Packers were the youngest team to go to the playoffs in NFL history, so the future looks bright;
2) Jordan Love looks solid, calm, and cool under pressure. Can Green Bay fans hope for a third franchise quarterback in a row?... I hope so (between 1992 and today, the Packers have had just three quarterbacks: Favre, Rodgers, Love with five Super Bowls appearances and two wins); and
3) they crushed the Dallas Cowboys in Arlington, Texas last week in the Wild Card game. Any season where that happens, I consider it a success.
Back to the ‘main thing’…
I spent last week in the Swiss Alps at the World Economic Forum and as usual, it was a fascinating look into geopolitics and the issues that are driving events.
According to media reports, the Chinese Communist Party returned in full force to Davos last week (and here). Alongside Premier Li Qiang, Beijing supposedly sent 10 state ministers. We were to believe that Chinese business leaders and investors were everywhere.
But that was not the vibe I got last week at all.
While Klaus Schwab (self-appointed leader of globalization and holder of 17 honorary doctorates) gave Premier Li the plum speaking slot on the schedule, introduced him in glowing terms, and served up some softball questions, Li’s speech and answers fell flat on conference goers and was immediately rebutted by the President of the European Commission, Ursula von der Leyen. A lot has changed since Xi Jinping came to Davos in January 2017 and presented the PRC as the guardian of free trade and globalization.
I saw just a handful of Chinese at other events, suggesting that if they were there in force, as the reporting suggested, they were just talking to themselves or holed up in their apartments and hotel rooms. Just like the last two WEFs, Indian companies and Indian government officials were there in force and setting the agenda for growth, development, and progress. One wonders whether Klaus will ever show the kind of respect and deference to Delhi, as he has spent the last quarter century heaping on Beijing (Prime Minister Modi gave the WEF address in January 2022, but it was the virtual event).
My advice to the WEF organizers is: instead of holding the next “Summer Davos” in Dalian or Tianjin, hold it in Bengaluru, Hyderabad, Mumbai, or Chennai. These are the places where the “New Champions” are arising.
As the organizers of WEF tried to center this year’s event on “Rebuilding Trust,” giving Beijing a forum to present their economy in as positive a light as possible, and generally pretending that everything was fine, an alternative theme emerged.
Issues of war and peace were center stage and our 30-year vacation from history appeared over. My own CEO, Alex Karp, made this point emphatically during his interview with CNBC. The lack of acknowledgement by WEF of the horrendous massacre of Israelis on October 7th was jarring. I suspect that numerous attendees to WEF had to take circuitous routes given the multiple war zones that dot the Middle East and Eurasia (we even had Iran and Pakistan lob missiles at one another last week). JPMorgan’s CEO Jamie Dimon also focused on the issues of war and peace during his interview, suggesting that that both funding Ukraine and controlling the U.S. southern border are absolutely necessary. These are not the issues that WEF organizers want to address.
In the idealized world of the WEF agenda setters, rivalry, conflict, and war are obsolete and humanity can concentrate on Win-Win outcomes (the exception has been the Ukraine War for the last two years, though even that seemed to have much less focus this year). In this idealized world, everyone agrees on the objectives and goals, and no one loses (this is why Xi Jinping’s rhetoric of “building a community of common destiny for Mankind” has such sway with the WEF team). From the organizer’s perspective, capital, technology, ideas, and people should flow freely across borders and that doing so has no real drawbacks. In essence, the nation-state is obsolete. Of course, Beijing only agrees with this concept if the direction of flow is to their advantage… if not, the Chinese Communist Party imposes the most draconian of controls on capital, technology, ideas, and people, an inconvenient truth that Klaus and his ilk are loath to acknowledge.
But my impression is that the participants and organizations attending WEF increasingly reject the agenda-setting from the Congress Centre because those participants and organizations are not blind to reality. While there were plenty of signs and slogans around preventing climate change and compelling an energy transition, fewer and fewer attendees seemed to be taking those topics seriously.
To get a sense of the alternative agenda taking place at WEF, please watch the discussion I set up between Australian Ambassador Kevin Rudd and the Wall Street Journal’s Greg Ip on Thursday in the Palantir Pavilion at Davos… as well as the conversation I moderated between Kono Taro, the Japanese Digital Minister, and Professor Chris Miller, author of the book Chip War: The Fight for the World’s Most Critical Technology.
On X(Twitter) here.
Thanks for reading!
Matt
MUST READ
1. How 2023 marked the death of anonymity online in China
Zeyi Yang, MIT Technology Review, December 22, 2023
As Chinese social media platforms move toward requiring users to disclose more information about their real identities, will we lose what made us want to be online in the first place?
If you think about it, there are so many people we meet on the internet daily whose real names we will never know. The TikTok teen who learned the trendy new dance, the anime artist who uploaded a new painting, the random commenter who posted under a YouTube video you just watched. That’s the internet we are familiar with. At the end of the day, nobody knows whether they are really interacting online with a person or, say, a dog.
But in China, the dogs are losing their cover, as the government gradually makes it more and more difficult to remain anonymous online.
In reality, it’s already impossible to be fully anonymous online in China. Over the years, to implement a stricter regime of online censorship, the country has built a sophisticated system that requires identity verification to use any online service. In many cases, posting politically sensitive content leads to account removal, calls from the police, or even detention.
But that didn’t necessarily mean everyone else knew who you were. In fact, I’ve always felt there were corners of the Chinese internet in which I could remain obscure, where I could present a different face to the world. I used to discuss the latest pop music and cultural phenomena on the forum Baidu Tieba; I started a burner blog to process a bad breakup and write diaries; I still use Xiaohongshu, the latest trendy platform similar to Instagram, to share and learn cat-care tips. I never tell people my real name, occupation, or location on any of those platforms, and I think that’s fine—good, even.
But lately, even this last bit of anonymity is slipping away.
2. New U.S. Solar and Electric Car Factories Face Familiar Challenge: China
Ana Swanson and Jim Tankersley, New York Times, January 15, 2024
Worries are growing in Washington that a flood of Chinese products could put new American investments in clean energy and high-tech factories at risk.
The Biden administration has begun pumping more than $2 trillion into U.S. factories and infrastructure, investing huge sums to try to strengthen American industry and fight climate change.
But the effort is facing a familiar threat: a surge of low-priced products from China. That is drawing the attention of President Biden and his aides, who are considering new protectionist measures to make sure American industry can compete against Beijing.
As U.S. factories spin up to produce electric vehicles, semiconductors and solar panels, China is flooding the market with similar goods, often at significantly lower prices than American competitors. A similar influx is also hitting the European market.
American executives and officials argue that China’s actions violate global trade rules. The concerns are spurring new calls in America and Europe for higher tariffs on Chinese imports, potentially escalating what is already a contentious economic relationship between China and the West.
3. Chinese Lab Mapped Deadly Coronavirus Two Weeks Before Beijing Told the World, Documents Show
Warren P. Strobel, Wall Street Journal, January 17, 2024
Chinese researchers isolated and mapped the virus that causes Covid-19 in late December 2019, at least two weeks before Beijing revealed details of the deadly virus to the world, congressional investigators said, raising questions anew about what China knew in the pandemic’s crucial early days.
Documents obtained from the U.S. Department of Health and Human Services by a House committee and reviewed by The Wall Street Journal show that a Chinese researcher in Beijing uploaded a nearly complete sequence of the virus’s structure to a U.S. government-run database on Dec. 28, 2019.
COMMENT – Yet more evidence that Beijing withheld critical information about COVID-19 in December 2019. This likely made the pandemic far worse as the WHO, and other countries, were not as well prepared as they could have been had the PRC fulfilled its international obligations to share health information openly.
4. Hyundai Sells China Plant for Half Price
Kwanwoo Jun and Jiahui Huang, Wall Street Journal, January 17, 2024
The South Korean carmaker’s China-based joint venture sold its Chongqing plant to Yufu Industrial Complex Construction, a local government-backed entity, for 1.62 billion yuan ($225.9 million). It had sought CNY3.68 billion for the factory, according to Hyundai officials in Seoul on Wednesday.
“Beijing Hyundai Motor sold its plant in Chongqing, China, late last year as part of its continued efforts to optimize operations in China,” Hyundai Motor said in an email statement.
Yufu officials weren’t immediately available for comment.
The latest sale brings the number of Hyundai Motor factories in China to three from five.
The Chongqing plant, which began operating in August 2017, is the second Hyundai Motor-invested factory sold in China. Hyundai sold one of its plants in Beijing in 2021.
The South Korean auto manufacturer has recently suffered from sluggish vehicle sales in China.
COMMENT – I suspect that the local government made Hyundai “an offer it couldn’t refuse.”
Just let it sink in what happened to Hyundai.
Six years ago, the South Korean automaker invested significant capital from its shareholders in Chongqing to build a factory and to do so, had to enter into a number of agreements with the local government. As Chinese Communist Party officials made their economy less and less welcoming to foreign companies by imposing regulatory changes and discrimination, Hyundai found itself under considerable pressure. As this pressure was becoming unbearable, lo and behold, Hyundai was presented with a way out: sell the factory, at a loss, to someone who just happened to be there to help. Of course, this buyer was the same local Chinese government which held all the leverage in applying the regulatory pressures which made the operation of the factory less profitable and which imposed measures that discriminate against Hyundai.
In less diplomatic language, we would call this action the “nationalization” of a foreign asset by the PRC.
All other foreign multinationals operating in the PRC should take note (in particular, Musk’s incredibly valuable Tesla assets and the suppliers to Apple). The PRC is fully capable of applying pressure to force foreigners to “voluntarily” sell their assets at a loss.
Shareholders of companies exposed to these risks should be asking some really probing questions of their management… and stock analysts of these multinationals should be very critical of the valuations of companies that depend on supply chains and manufacturing in the PRC.
5. Dimon Says China Risk-Reward Equation Has ‘Changed Dramatically’
Hannah Levitt, Bloomberg, January 17, 2024
China has been “very consistent” in opening up to financial-services companies, but calculating the potential upside for US firms has become more complicated, according to Jamie Dimon.
Investors considering making a move into the world’s second-largest economy have to be “a little worried” because “the risk-reward has changed dramatically,” the longtime JPMorgan Chase & Co. chief executive officer said Wednesday in a CNBC interview from the World Economic Forum in Davos.
COMMENT – When Beijing starts losing folks like Jamie Dimon, it is time to start looking for the exits if you’re a multinational in the China market.
6. Back on Track?
Bob Davis, The Wire China, January 15, 2024
After declining during the Trump years and the pandemic, U.S.-China track-two dialogues are back. But can they really help Beijing and Washington stabilize relations?
COMMENT – Great piece by Bob Davis on the proliferation of “Track 2” dialogues and what if anything they accomplish.
7. Canada names 100 Chinese, Russian, Iranian research institutions it says pose a threat to national security
Catharine Tunney, CBC, January 16, 2024
Canadian universities and researchers studying advanced and emerging technologies, including artificial intelligence, will soon be ineligible for federal grants if they're affiliated with foreign institutions the government says pose a threat to national security.
On Tuesday the federal government named more than 100 institutions in China, Russia and Iran which it says represent the "highest risk to Canada's national security." The government says the listed institutions are connected to those countries' militaries and state security agencies.
The federal government also released what it called a list of "sensitive" research areas — including advanced weapons, quantum technologies, robotics, aerospace, space and satellite technology and medical and health-care technology.
Researchers seeking federal grants to study in any of those fields will need to attest that they aren't working with or receiving money from any of the foreign organizations and institutions cited by Ottawa as threats to national security.
The new policy is set to come into effect sometime this spring, but the government said it can take research affiliations into account immediately if it sees a risk.
The announcement comes at a time of heightened concern about foreign actors stealing Canadian research and intellectual property. Just last month, the head of Canada's spy agency warned in a speech that no one should underestimate China's efforts to steal Canadian research and meddle in its domestic affairs.
"While Canadian-led research is defined by its excellence and collaborative nature, its openness can make it a target for foreign influence, increasing the potential risks for research and development efforts to be misappropriated to the detriment of national security," said Innovation Minister François-Philippe Champagne, Public Safety Minister Dominic LeBlanc and Health Minister Mark Holland in a joint statement Tuesday.
COMMENT – Great move by Ottawa.
8. Delayed U.S. Weapons Raise Taiwan’s Vulnerability to Invasion
Alastair Gale, Wall Street Journal, January 16, 2024
Taiwan has ordered some $19 billion in American missiles, rocket launchers and other weapons to help it defend itself against threats from Beijing. The only problem: U.S. delivery on many of those orders is years away.
The delays increase Taiwan’s vulnerability to a Chinese invasion or blockade, say military analysts and former Taiwanese defense officials, since the island’s own weapons industry remains small.
9. Admiral Hu to the Helm: China’s New Navy Commander Brings Operational Expertise
Andrew S. Erickson and Christopher Sharman, China Maritime Studies Institute, January 9, 2024
China’s Navy, the world’s largest by number of ships, has a new leader. In late December, Xi promoted Vice Admiral Hu Zhongming to Admiral and appointed him Commander of the People’s Liberation Army Navy (PLAN). Hu’s predecessor Admiral Dong Jun attended the promotion ceremony, suggesting this is an orderly and expected transition—unlike recent removals of the PLA Defense Minister and the former Commander of China’s Strategic Rocket Forces.
COMMENT - The team at the Naval War College’s China Maritime Studies Institute do a superb job at keeping an eye on this topics.
Authoritarianism
10. Xi Jinping's ambition to unify Taiwan motivates military purges
Katsuji Nakazawa, Nikkei Asia, January 11, 2024
11. Beijing Won’t Allow Taiwan’s Democracy to Survive
Michael Schuman, The Atlantic, January 10, 2024
12. Why China’s government is hushing up court rulings
The Economist, January 15, 2024
13. China report lists top 5 global risks, with US responsible for most of them
Orange Wang, South China Morning Post, January 12, 2024
14. Xi’s Taiwan Strategy in Tatters After Winnable Vote Slips Away
Samson Ellis and Cindy Wang, Bloomberg, January 14, 2024
15. Xi’s Chief of Staff Is Quietly Amassing Even More Power in China
Bloomberg, January 10, 2024
16. China Tells Colleges to Look into Retractions of Academic Papers
Xu Luyi, Li Zixuan, and Wang Xintong, Caixin, January 10, 2024
17. China’s Messaging to the U.S.: Don’t Rock the Boat
James T. Areddy, Wall Street Journal, January 10, 2024
18. China’s Population Decline Accelerates as Women Resist Pressure to Have Babies
Liyan Qi, Wall Street Journal, January 17, 2024
19. Beijing tells some investors not to sell as Chinese stock rout resumes
Hudson Lockett and Joe Leahy, Financial Times, January 15, 2024
Environmental Harms
20. China's record CO2 emissions fuel doubt on 2060 net-zero commitment
Xu Yihe, Upstream, January 15, 2024
In 2023, China saw a 3.8% rise in carbon dioxide emissions from the previous year.
The persistent surge in fossil fuel consumption and production propelled China's CO2 emissions to unprecedented levels in 2023, raising scepticism about the nation's commitment to achieving net-zero targets by 2060.
According to a report from the China National Offshore Oil Corporation, China registered a 3.8% increase in carbon dioxide emissions in 2023, reaching 10.95 billion tonnes.
21. The Belt and Road Initiative: A Decade of Economic Progress and Ecological Pitfalls
Ayushi Saini, Australian Institute of International Affairs, January 17, 2024
22. Chinese Nickel Plants Driving Pollution, Land Grabs in Indonesia: Report
Cobus van Staden, China and the Global South Project, January 18, 2024
Foreign Interference and Coercion
23. A big Chinese delegation unnerves U.S. diplomats in Davos
Nahal Toosi, Politico, January 15, 2024
24. China bombards Taiwan with fake news ahead of election
Stuart Lau, Politico, January 10, 2024
25. 'Frozen Garlic!' Taiwan Likes Its Democracy Loud and Proud
Chris Buckley and Amy Chang Chien, New York Times, January 11, 2024
26. VIDEO – Taiwan Fights Onslaught of Chinese Disinformation Ahead of Key Election
Wall Street Journal, January 10, 2024
27. China Failed to Sway Taiwan’s Election. What Happens Now?
Damien Cave, New York Times, January 13, 2024
28. How Taiwan's Election Fits into the Island's Past, and Its Future
New York Times, January 14, 2024
29. Here’s how Taiwan’s election could upend US-China relations
Phelim Kine, Politico, January 10, 2024
30. Laos' ASEAN chairmanship faces Chinese reality check
Marwaan Macan-Markar, Nikkei Asia, January 16, 2024
31. America Can’t Surpass China’s Power in Asia
Kelly A. Grieco and Jennifer Kavanagh, Foreign Affairs, January 16, 2024
32. Russia now 'dependent' on China, EU chief says
Karen Gilchrist, CNBC, January 16, 2024
33. Surveying the Seas: China’s Dual-Use Research Operations in the Indian Ocean
Matthew P. Funaiole, Brian Hart, and Aidan Powers-Riggs, CSIS, January 10, 2024
34. Belgium opens criminal probe into suspected Chinese spy
Laura Dubois, Financial Times, January 10, 2024
35. Taiwan Loses Another Diplomatic Partner in Wake of Presidential Vote
Joyu Wang and Chun Han Won, Wall Street Journal, January 15, 2024
Human Rights and Religious Persecution
36. Hong Kong police raid family home of exiled activist Simon Cheng
Pak Yiu, Nikkei Asia, January 11, 2024
37. National security trial of tycoon Jimmy Lai: what's happened so far
Jessie Pang and Edward Cho, Reuters, January 16, 2024
38. ‘It’s difficult to survive’: China’s LGBTQ+ advocates face jail and forced confession
Jessie Lau, The Guardian, January 15, 2024
39. How an underground industry is helping people illegally cross the border
Yong Xiong, Simone McCarthy, and David Culver, CNN, January 8, 2024
Industrial Policies and Economic Espionage
40. Huawei Ends US Lobbying Operations After Years of Fighting Ban
Todd Shields and Emily Birnbaum, Bloomberg, January 10, 2024
Huawei Technologies Co., the Chinese wireless equipment maker that spent tens of millions of dollars trying to win over US policymakers only to eventually be blacklisted, has shuttered its in-house lobbying operations in Washington.
Huawei’s last two registered lobbyists there — Jeff Hogg and Donald Morrissey — left in recent months, Bloomberg News found. The Shenzhen, China-based firm didn’t respond to multiple requests for comment.
COMMENT – This article isn’t entirely accurate.
While it is true that Huawei may have ended its formal lobbying, Huawei’s U.S. subsidiary, Futurewei Technologies, continues to lobby.
41. Taiwan-mainland China investment hits 22-year valley as relations sour
Ralph Jennings, South China Morning Post, January 15, 2024
42. Apple to Offer Rare Discount on iPhones in China
Alexandra Stevenson, New York Times, January 15, 2024
43. China Cobalt Buyers Use Global Glut to Challenge Pricing
Annie Lee, William Clowes, and Jack Farchy, Bloomberg, January 16, 2024
44. Xi Wants Strong Yuan in Push to Make China a ‘Financial Power’
Bloomberg, January 16, 2024
45. US tariffs on Chinese imports might increase in 2024, analysts say
Ji Siqi, South China Morning Post, January 17, 2024
46. China Produces a Record 30 Million Cars and Exports Soar
Linda Lew, Bloomberg, January 10, 2024
47. China set to lose crown as top U.S. exporter after 17 years
Rintaro Tobita and Iori Kawate, Nikkei Asia, January 11, 2024
China was likely knocked off the perch as the top exporter to the U.S. for the first time since 2006 last year, outpaced by Mexico as tensions between the world's two largest economies reshape supply chains.
American goods imports from China dropped more than 20% on the year for the January-November period, according to U.S. Commerce Department data released this week. China accounted for 13.9% of total U.S. imports, the smallest share since 2004, after peaking at more than 21% around 2017. U.S. exports to China have stayed roughly flat on the year.
48. Hunt for Critical Minerals Draws World Powers to Saudi Arabia
Julie Steinberg and Stephen Kalin, Wall Street Journal, January 12, 2024
49. Peace and Prosperity in the Taiwan Strait Still Have a Chance
Nathaniel Taplin, Wall Street Journal, January 15, 2024
50. A Potential Mega-IPO Is in U.S.-China Crosshairs
Shen Lu, Corrie Driebusch, and Rebecca Feng, Wall Street Journal, January 12, 2024
51. Chinese Leader Gives Early Estimate of Economic Growth
Keith Bradsher, New York Times, January 16, 2024
52. China’s Growth Slows to Three-Decade Low Excluding Pandemic
Stella Yifan Xie, Wall Street Journal, January 17, 2024
53. Tesla Price Cuts Send European, Chinese Auto Stocks Lower
Sherry Qin and David Sachs, Wall Street Journal, January 18, 2024
54. Hong Kong Stocks Sink as China’s Economy Scares Investors
Alexandra Stevenson, New York Times, January 17, 2024
Pessimism among investors was most pronounced in Hong Kong, where stocks have plunged by 10 percent so far this year.
China’s No. 2 leader, Li Qiang, traveled to Switzerland with a message for the titans of the business world gathered for the World Economic Forum.
“Choosing the Chinese market is not a risk, but an opportunity,” Mr. Li, China’s premier, told an audience in Davos on Tuesday.
But there’s a different sentiment about China playing out in the stock market, and it’s not so optimistic. The worries over China’s economy have been visible for months in Hong Kong, where stocks plunged 14 percent last year, the fourth consecutive annual decline.
The new year hasn’t offered any relief, either, and economic data released by China on Wednesday prompted another sell-off.
In Hong Kong, where many of China’s biggest companies trade, stocks fell 3.7 percent on Wednesday. So far this year, the market has lost one-tenth of its value. In China’s financial capital of Shanghai, stocks dropped 2.1 percent, extending this year’s decline to nearly 5 percent.
Even as China said its economy grew by 5.2 percent in 2023, which is high by most standards, it is undergoing significant change. China’s leaders are trying to wean the country off property and construction, which have long been pillars of growth, while also reducing reliance on borrowed money.
An anticipated boom in consumption after China reversed its “zero Covid” policy in late 2022 hasn’t played out, either.
A shrinking population and aging work force are adding to the headwinds. China on Wednesday also said its population had shrunk by two million people and was aging rapidly, putting further strain on its already weak health care system and underfunded state pension.
While China’s economy has shown some slight improvement recently, “the recovery clearly remains shaky,” economists at Capital Economics wrote in a report.
55. China’s Youth Unemployment Rate Is Back, and Better
Claire Fu, New York Times, January 17, 2024
The government stopped releasing the jobless rate for young workers when it was soaring. It says its “optimized” new method is more accurate.
After suspending the public release of youth unemployment rates last year, China started distributing the information again on Wednesday, using different measurement criteria that lowered the figure significantly.
China’s National Bureau of Statistics stopped announcing the jobless rate among 16- to 24-year-olds after the figure climbed for six consecutive months to 21.3 percent in June, a record high. The government said when it suspended the numbers for July that the collection of the information needed to be “further improved and optimized.”
The growing number of unemployed young people had become an inconvenient data point that seemed to rebut Beijing’s assertion that the country’s economy was recovering after the lifting of pandemic restrictions.
The government agency said the revamped jobless figures now exclude students in school. After adjusting its calculation methods, the bureau said jobless rates among 16- to 24-year-olds stood at 14.9 percent in December.
Kang Yi, director of the National Bureau of Statistics, said at a news conference that this methodology produced “a more accurate monitor of youth unemployment” because it separated young people looking for part-time jobs while in school from those looking for full-time jobs after graduation. He noted that graduates needed to find work, but that the main task of students was “to study, not to work part time.”
He Yafu, an independent demographer based in the southern city of Zhanjiang in Guangdong Province, said he believed the change in measurement had helped to lower the main figure, although he thinks just as many young people are jobless.
COMMENT – Totally surprising that the Chinese Government has been able to “fix” the statistics to show that youth unemployment isn’t as bad as we thought.
Perhaps this was how Chinese officials were able to “discover” that the Chinese economy grew by 5.2% last year just in time for Li Qiang to announce it in Davos last week.
Cyber & Information Technology
56. Baidu Dives Most Since 2022 After Report Links AI to China’s PLA
Sarah Zheng, Jeanny Yu, and Zheping Huang, Bloomberg, January 15, 2024
57. China Chip Imports Suffer Steepest Drop on Record After US Curbs
Debby Wu and Ailing Tan, Bloomberg, January 15, 2024
58. Huawei secures JD.com as HarmonyOS partner as home-grown software emerges as alternative for Apple iOS, Android in China
Iris Deng, South China Morning Post, January 11, 2024
59. Chinese chip-tool giant Naura forecasts surge in 2023 sales on strong local demand amid US export controls
Che Pan, South China Morning Post, January 16, 2024
60. Tech firm Baidu denies report that its Ernie AI chatbot is linked to Chinese military research
Zen Soo, Associated Press, January 15, 2024
61. China’s Chip Production Capacity Reportedly Set to Grow 60% in 3 Years, Doubling in 5 Years
Trendforce, January 15, 2024
62. Russia and China successfully test quantum communication over satellite — 3,800-kilometer test explores possible encrypted networks for BRICS countries
Christopher Harper, Tom’s Hardware, January 4, 2024
63. US companies and Chinese experts engaged in secret diplomacy on AI safety
Madhumita Murgia, Financial Times, January 11, 2024
64. Research in Graphene Shows New Potential for Its Use in Chips
Belle Lin, Wall Street Journal, January 12, 2024
65. Chip Wars Boost Europe’s Top Tech Company—for Now
Stephen Wilmot, Wall Street Journal, January 15, 2024
Military and Security Threats
66. Why China Would Struggle to Invade Taiwan
David Sacks, Council on Foreign Relations, January 10, 2024
67. Welcome to the new era of global sea power
The Economist, January 11, 2024
The oceans matter in geopolitics once more. In the Middle East the Houthi rebel group is menacing shipping in the Red Sea, disrupting global trade. On January 12th America and Britain launched strikes on over 60 Houthi targets in Yemen. The allies strikes are an attempt to reassert freedom of navigation in a crucial artery of world trade but also dramatically expand the geographic scope of the Middle East conflict.
Taiwan stands on the cusp of an election that could shape its future. A fight over the island would involve an intense Sino-American naval war stretching well beyond the Pacific. And in Europe the war in Ukraine may turn on the maritime contest for the Black Sea and Crimea. Sea power is back.
COMMENT – I agree with The Economist’s headline, we are in a new era of global sea power.
But to be a global sea power, one must have a shipbuilding industry.
Over the past quarter century, the shipbuilding industries in the United States and Europe have been almost completely dismantled because government and business leaders assumed that we would never again face the kinds of geopolitical tensions that would require sea power.
In 1999, the PRC’s shipbuilding industry made up less than 4% of global capacity, while the United States had nearly a quarter. By 2015, those figures had more than reversed: Beijing stood at nearly 40% of global capacity, while the United States dropped to less than 3%. That remains how things generally stand today with South Korea and Japan splitting the other half of global shipbuilding capacity.
It will require a major reinvestment of capital to reverse these trends even modestly.
One option, which members of Congress and their constituents won’t like, is to rely on Japanese and Korean shipyards to both handle the backlog of maintenance on the U.S. Navy (it appears that the Navy is already moving forward on this) AND to build more Navy ships. Those two allies have both the facilities and workforce that could address the Navy’s shortfalls in the near to medium term. It would require an increase to the defense budget, changing of procurement rules, and acceptance by Congress and the American people that their tax dollars would go directly to Japanese and Korean jobs. That last point will likely kill this option.
Another option is to massively increase the U.S. defense budget (quadrupling or more the shipbuilding budget), implementing changes to procurement rules, and the lifting of environmental and other regulatory obstacles. This could incentivize new companies, investors, and entrepreneurs to enter the shipbuilding industry (just as Henry Kaiser shifted from road construction to shipbuilding in the late 1930s and early 1940s and made Liberty ships and Victory ships for the war). This would reintroduce competition into the market and incentivize the construction of new shipyards, building out of expanded domestic supply chains, training of an expanded workforce, and new business models. The downside of this option is twofold:
1) it will cost more, a lot more, given that there is almost no commercial market for this excess shipbuilding capacity… the world has a glut of ships as the PRC has been overproducing them for the last 20 years to gain market share and to drive down the cost of ocean-born transport which has fueled their rise as a manufacturing superpower; and
2) it will likely take longer, a lot longer. The U.S. Navy depends on high quality, high technology ships which requires a highly skilled workforce not only at shipyards but within a vast array of component manufacturers and systems integrators. In such a tight labor market, it is difficult to see how or why significant numbers of individuals with the necessary skills would move from their jobs today (in sectors that require these same skills, like the construction of RVs) into new jobs in a shipbuilding sector unless pay was significantly higher, which goes back to point #1. Individuals will also judge for themselves whether these jobs are sustainable, i.e. can the U.S. continue to produce ships at an elevated level for 20-30 years, which would justify a career change.
68. Moscow imports a third of battlefield tech from western companies
Chris Cook, Financial Times, January 11, 2024
69. PLAN Submarine Training in the "New Era"
Christopher Sharman and Terry Hess, China Maritime Studies Institute, January 10, 2024
70. Admiral Dong Jun Engages Friends and Foes: China’s First Naval Defense Minister Brings Joint Operational Experience
Andrew S. Erickson and Christopher Sharman, China Maritime Studies Institute, January 9, 2024
One Belt, One Road Strategy
71. Maldives calls for withdrawal of Indian troops by March 15
Mohamed Junayd, Reuters, January 14, 2024
72. Hedging ‘Light’: Italy’s Intermezzo with China’s Belt and Road Initiative
Elisabetta Nadalutti and Jürgen Rüland, The Diplomat, January 13, 2024
73. China is still investing in Italy after Rome ditched the Belt and Road Initiative
Mary Hui, Quartz, January 16, 2024
Italy formally pulled out of a flagship Chinese trade and infrastructure project in December. But is it as much of a blow to Beijing’s geopolitical ambitions, and a marker of cooler Italy-China ties, as headlines may suggest?
Even as Rome has withdrawn from Chinese leader Xi Jinping’s transcontinental Belt and Road Initiative (BRI), Chinese industry views the Italian commercial arena as one ripe with opportunity. And indeed, even Italian prime minister Giorgia Meloni had earlier acknowledged that good relations are possible with China without the BRI.
Case in point: China’s COSCO last week purchased Italian integrated logistics company Trasgo. The acquisition was made via COSCOS, a joint venture between the Chinese state-owned shipping giant and Italy’s Fratelli Cosulich Group.
“It’s the latest demonstration that Beijing’s companies keep investing – and seeking control – in Italy, even though Rome dropped out of China’s flagship Belt and Road Initiative in December,” writes Decode39, an Italy-based geopolitical news outlet.
COMMENT – Proof that no one needs to join the BRI?
Richard Carney, The Conversation, December 13, 2023
Opinion Pieces
75. China needs to prove working groups can do more than talk
Michael Laha, Nikkei Asia, January 11, 2024
76. Taiwan can still avoid Ukraine’s fate
Gideon Rachman, Financial Times, January 15, 2024
Xi Jinping thinks that history is moving his way. Visiting Vladimir Putin in Moscow last March, China’s leader told the Russian president: “Right now, we’re seeing a change unseen in 100 years and we’re driving this change together.”
That exchange was heard around the world. Xi’s words were seen as a clear endorsement of Russia’s invasion of Ukraine — and a suggestion that China, too, will soon play its part in “driving this change”. The implications for Taiwan were chilling, given China’s longstanding threats to invade the island.
Those invasion threats are, inevitably, back on the global agenda in the wake of this weekend’s Taiwanese presidential election. In the run-up to Saturday’s vote, the Chinese Communist party warned Taiwan’s voters to make the “right choice” between peace and war. But Taiwan made the “wrong” choice, as Beijing sees it — electing Lai Ching-te of the Democratic Progressive party, who Beijing sees as a dangerous separatist.
There are some clear similarities between Taiwan’s perilous position and that of Ukraine before 2022.
The first is that both Putin and Xi regard Ukraine and Taiwan, respectively, as territory that rightfully belongs to their nation. Putin’s rhetorical acceptance of an independent Ukraine was insincere. And the drive to “reunify” Taiwan with the mainland is longstanding Chinese policy.
The second link is that both Putin and Xi argue Ukraine and Taiwan lack any real autonomy, and are being used as tools of a hegemonic and aggressive America. So reclaiming Ukraine/Taiwan for the motherland would serve a double purpose. It would fulfil the historic destiny of Russia/China. And successful invasions would strike a massive blow against US global power in two key theatres: Europe and Asia. Hence the changes “unseen in 100 years”.
The chance to be a world-historical figure is surely alluring for a strongman leader. And Putin and Xi fit that strongman mould. The Russian and Chinese leaders have both changed their country’s constitutions to extend their periods in power, probably for life. Both men have also encouraged a cult of personality and instilled fear in those around them.
Putin enjoys intimidating his closest acolytes on camera and has imprisoned, killed or driven into exile his most dangerous opponents. Xi has conducted repeated purges of China’s top leadership. The longer they are in power, the more the two leaders are liable to dwell on their own place in history.
That preoccupation with history has led both leaders to focus on the second world war. Putin has fetishised Russian victory in the “great patriotic war” against the Nazis. Xi, like Putin, claims a key role for China and the Communist party in defeating fascism.
Even as they insist that history is moving in their direction, both Putin and Xi betray some anxiety that events may actually be moving against them. The Russian leader’s decision to launch a full-scale invasion of Ukraine in 2022 was probably driven, in part, by a fear that Ukraine was slipping irrevocably out of Russia’s grasp. If he did not act quickly, he risked going down as the tsar who “lost Ukraine”.
There is a clear danger that Xi will come to the same conclusion about Taiwan. After eight years of a DPP presidency under Tsai Ing-wen, China hoped the recent election would see the pendulum swing back to the more pro-Beijing Kuomintang. Lai’s victory suggests that, on the contrary, the DPP is now Taiwan’s natural party of government.
That has grim long-term implications for China’s aspirations. The growing number of Taiwanese who identify primarily as Taiwanese, not Chinese, is also a concerning trend for Beijing. Once again, there are obvious parallels with Ukraine, where an increasing stress on Ukrainian culture offended and alarmed Russian nationalists.
But does that mean Xi will eventually decide that he has to follow Putin’s example and use force to achieve his personal and national ambitions?
The catastrophic costs that Russia has paid for its ill-fated invasion will surely give Xi pause. Chinese officials sometimes argue that their own forces are larger and more formidable than those of Russia. But Putin had a battle-hardened military at his disposal — which he had used successfully in Syria, Georgia and Chechnya. China has not gone to war since 1979 — and the top leadership of its military has been repeatedly purged for alleged corruption.
There is also a crucial difference in the position of America. The US government supported Ukraine’s independence, but President Joe Biden made it clear that the US would not go to war to defend the country. With Taiwan, the positions are reversed. America does not recognise Taiwanese independence and reiterated that position after this weekend’s election. But Biden has said repeatedly that the US would fight to defend Taiwan.
And then there is geography. Russia was able to invade Ukraine across a land border and still got bogged down. China would have to attempt an amphibious invasion, which is much harder.
Nonetheless, the US believes that Xi has told his forces to be ready to invade Taiwan by 2027. The task of Taiwan and America is to make sure — when that date rolls around — Xi decides that it is still too risky to invade. The Chinese leader may never see the “changes unseen for a century” that he dreams of.
77. A roadmap for a US-China AI dialogue
Graham Webster and Ryan Hass, Brookings, January 11, 2024
When President Joe Biden and General Secretary Xi Jinping met in California in November 2023, their governments announced a new bilateral channel for consultation on artificial intelligence (AI). If both governments scope this effort wisely and focus on several concrete, tractable issues, they may have an opportunity to make lasting progress in reducing risks and building consensus around the governance of emerging technologies. If they fail to coalesce around common objectives, though, they risk creating another forum for ritual airing of grievances. This window of opportunity may be fleeting, so they must use it purposively.
What makes it so challenging for the two governments to, as Biden put it, “get our experts together to discuss risk and safety issues associated with artificial intelligence” is that the specific problem at hand is not widely agreed on between or even within the two countries. Indeed, while the White House readout said Biden and Xi “affirmed the need to address the risks of advanced AI systems and improve AI safety through U.S.-China government talks,” China’s official Xinhua News Agency was more circumspect, writing that “establishing a dialogue between governments on artificial intelligence” was one area in which the two leaders agreed to enhance cooperation.
Scoping an AI dialogue is difficult because, in many U.S.-China engagements on the topic, “AI” does not mean anything specific. It means everything from self-driving cars and autonomous weapons to facial recognition, face-swapping apps, ChatGPT, and a potential robot apocalypse. What’s at issue in this dialogue, then, depends on which present and future technologies and applications are on the agenda. AI might remain an umbrella term, but to make progress, officials will need to select specific topics and problems where the United States and China could reduce risk and capture benefits while setting aside intractable issues and nebulous concerns.
COMMENT – Like the authors, I see almost no reason to be sanguine about a Sino-American AI dialogue and the Administration should not have put it on the agenda.
The field is not mature enough to build guardrails around and it appears that Beijing’s interest in participating is the belief that they can negotiate the watering down of U.S. export controls in the near term for the “promise” that they will comply with ethical and safety concerns in the future that animate folks in the U.S. and Europe.
In my opinion, we appear to be holding a “dialogue” with Beijing solely for the sake of having a dialogue. This is the kind of poorly-defined “diplomacy by talking points” that has us start a negotiation without an understanding of where we want to go, what are interests are, and what our rival wants to achieve.
Washington should instead hold dialogues with its partners and allies to build a consensus position that favors the interests and values of open democracies. Only once this has been accomplished should we then present Beijing with a common position.
Washington should also take strong measures to end what appears to be secret negotiations between U.S. artificial intelligence companies and the PRC Government.
78. A Peaceful Solution on Taiwan Is Slipping Away
Michael Beckley, New York Times, January 17, 2024
79. America’s Longtime Sources of Power Have Turned Weak
Niall Ferguson, Bloomberg, January 14, 2024
80. New Zealand's new PM isn't going back to old ways on China
Derek Grossman, Nikkei Asia, January 15, 2024