CCP Centennial: The Chinese Economic Miracle

The Chinese Communist Party (CCP) was founded one hundred years ago on July 1, 1921. The party has transformed China from a poor and backward third world country into a vibrant and prosperous industrialized economy. This rapid historic transformation has surprised everyone, including China's friends, but especially its western foes who now see the emergence of the Asian giant as a challenge to centuries-long western domination of the world. It has also earned the CCP high levels of performance legitimacy and popularity among the Chinese people. The CCP's successful response to the COVID crisis has further boosted its legitimacy and popularity in China. 

China Surpassed United States in Global Trade

Chinese Economy:

Over the last several decades, China has built a strong manufacturing base to serve as the factory to the world. This efficient industrial base is being used by all major global brand-name multi-national giants to manufacture and supply everything from Barbie dolls to iPhones. It has served as a powerful engine to drive the Chinese economy which now rivals the US economy in size. China's GDP overtook the U.S.'s in 2017 in terms of purchasing power parity, according to Nomura Securities. China has eclipsed the United States as the world's largest trading nation.

Japanese Government Projection of Future GDP Trajectories. Source: Nikkei Asia

China's Economy Slowing:

There's some evidence that China's economy is slowing after hitting a peak growth in the last decade, according to Forbes magazine.  It may sound like wishful thinking but the American magazine argues that "China’s growth has slowed in recent years, partly due to maturity. Extremely poor countries have the potential to grow rapidly. As they approach the level of developed countries, growth is harder and thus slows".  

China Economy Slowing. Source: Forbes

Digital Economy:

The United States is far ahead of China in global digital economy. But the US-China battle for future dominance of this economy is now underway. The winner of this contest will dominate the next phase of global economic competition. It will be determined by achieving mastery of computer chips and software needed to build complex systems. 

The United States and its ally Taiwan are far ahead of all other nations in building the most advanced 5 nanometer semiconductor components. But China is gearing up for it. Chinese leader Xi Jinping has appointed Liu He, his most trusted lieutenant, as the "chip czar" to lead this effort as a top national priority. 

Technology firms today make up a quarter of the global stock market and the geographic mix has become strikingly lopsided, according to The Economist magazine. America and, increasingly, China are ascendant, accounting for 76 of the world’s 100 most valuable firms. Europe’s tally has fallen from 41 in 2000 to 15 today.

China's Research Spending. Source: Nature 

Fortune Global 500: 

Until 2019, the United States had more Fortune 500 companies than any other country. In 2020, China surpassed the US.  China had 124 companies, higher than 121 US companies. This is indeed very impressive given that there were only ten Fortune 500 companies in China in 2000. In 2021, the number of top world companies ranked by revenue grew by eleven in China, while in the U.S. there was only one company more than in 2020.

Locations of Global 500 Companies. Source: Fortune Magazine

Performance Legitimacy:

The failure of  western-style "democracy" to handle the COVID crisis has raised serious questions about its legitimacy. Countries from the United States and the United Kingdom to Brazil and India miserably failed to prevent millions of deaths from the coronavirus pandemic. On the other hand,  the Communist Party in "authoritarian" China has done a remarkable job of protecting its people from the dreaded virus. 

A recent post-COVID survey conducted by the Washington Post shows that Chinese citizens’ trust in their national government has jumped to 98%. Their trust in local government also increased compared to 2018 levels — 91% of Chinese citizens surveyed now said they trust or trust completely the township-level government. Trust levels rose to 93% at the county level, 94% at the city level and 95% at the provincial level. 

An earlier 2018 World Values Survey reported that 95% of Chinese citizens said that they have a great deal or quite a lot of trust in national government. Comparatively, about 69% felt the same way about their local government. 

The Chinese Communist Party (CCP) has demonstrated that the western style elections and democracy are not the only means to earn legitimacy in the eyes of the people. It has shown that it is far better to deliver results to earn "performance legitimacy". 


As the Chinese Communist Party (CCP) celebrates its centenary, independent surveys indicate that the party has achieved well-deserved performance legitimacy in the eyes of the Chinese people. Over 90% of those surveyed have expressed strong approval of the Party's rule. The CCP has transformed China from a poor and backward third world country into a vibrant and prosperous industrialized economy. 

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Riaz Haq said…
In the movie "White Tiger", lead character Balram sarcastically compares India's democracy with China's sanitation system. “If I were in charge of India, I’d get the sewage pipes first, then the democracy.” Numerous scenes in the film illustrate poor sanitation in India by showing Balram and others squatting and defecating in the open.
Riaz Haq said…
Marking Party’s #Centennial, Xi Warns That #China Will Not Be Bullied. A century after the Communist Party’s founding, China’s leader said foreign powers would “crack their heads and spill blood” if they tried to stop its rise. #CPC100Years #UnitedStates

China’s rise is unstoppable, Xi Jinping declared. The country will not be lectured. And those who try to block its ascent will hit a “Great Wall of steel.”

Mr. Xi, the most powerful Chinese leader in generations, delivered the defiant message in a speech in Beijing on Thursday that celebrated 100 years of the Chinese Communist Party.

The speech was laden with symbols intended to show that China and its ruling party would not tolerate foreign obstruction on the country’s path to becoming a superpower. The event’s pageantry symbolized a powerful nation firmly, yet comfortably, in control: A crowd of 70,000 people waved flags, sang and cheered in unison. Troops marched and jets flew overhead in perfect formations. And each time Mr. Xi made a pugnacious comment, the crowd applauded and roared approval.

At times, Mr. Xi’s strident words seemed aimed as much at Washington as at the hundreds of millions of Chinese who watched on their televisions. The biggest applause from the handpicked, Covid-screened audience on Tiananmen Square came when he declared that China would not be pushed around.

“The Chinese people will never allow foreign forces to bully, oppress or enslave us,” he said, clad in a Mao suit. “Whoever nurses delusions of doing that will crack their heads and spill blood on the Great Wall of steel built from the flesh and blood of 1.4 billion Chinese people.”

Mr. Xi’s address was one of the most anticipated of his nearly nine years in power and was all the more significant because he seeks to extend his rule. The celebration was Mr. Xi’s chance to cement a place, at least implicitly, on a dais of era-defining Chinese leaders, above all Mao Zedong and Deng Xiaoping.

Mr. Xi has sought to portray himself as a transformative leader guiding China into a new era of global strength and rejuvenated one-party rule. And the stagecraft was focused on conveying a modern, powerful nation largely at ease while much of the world still struggles with the pandemic.

He trumpeted the party’s success in tamping down Covid-19, reducing poverty and firmly quashing dissent in Hong Kong, the former British colony. With splashes of bellicose rhetoric, he dismissed challenges from abroad, asserting that Beijing had little appetite for what it saw as sanctimonious preaching.

Riaz Haq said…
Here's #America's wishful thinking as seen in Forbes: "The China miracle is ending as economic growth slows" #CCP100 #China

The China miracle is ending. That miracle consisted of very exceptionally strong growth of the economy. By 2010, GDP per capita, adjusted for inflation, was 17 times higher than it had been in 1980. Consider that if living standards doubled in a generation, that would be pretty cool.

China’s growth has slowed in recent years, partly due to maturity. Extremely poor countries have the potential to grow rapidly. As they approach the level of developed countries, growth is harder and thus slows. See, for example, China Is Too Mature For Rapid Economic Growth.

Maturity is not the only issue. We need to delve into the source of the growth to evaluate whether it can continue.

Michael Schuman writes in the Atlantic, “China’s economic ‘miracle’ wasn’t that miraculous. The country’s high-octane ascent over the past 40 years is, in reality, a triumph of basic economic principles: As the state gave way to the market, private enterprise and trade flourished, growth quickened, and incomes soared.”


The recent efforts by Xi Jinping to control the economy more tightly will diminish future growth, according to Schuman. And he’s right.

Prior to Deng Xiaoping’s economic reforms in the early 1980’s, most Chinese lived in poor, rural communities where job opportunities were limited to very inefficient agriculture. This inefficient, small-scale, unmechanized agriculture produced very little earnings. Poverty was the norm, not the exception.

With Deng’s reforms, factories blossomed in the cities. Poor rural people moved to take jobs in cities. Incomes soared. Early success led to follow-on reforms that further grew the economy.

Economists plugged China’s progress into a basic model consisting of labor, capital and technology. Poor countries had low capital per worker, resulting in low productivity. The next wave of economic analyses of growth looked also at government performance, asking why poor countries had low capital per worker, and why the technology used in rich countries was not used in poor countries. For example, why would Chinese farmers not use tractors nearly 100 years after American farmers had started using them? If lack of capital was the problem, why did capital not flow into poor countries as it had flowed from Europe to the United States in the 1800s?

Riaz Haq said…
Debt, not demographics, will determine the future of China’s economy

In May, Beijing belatedly released its latest 10-year census data, setting off warnings in China and abroad that the country was facing a demographic crisis. But the world may be misreading the implications of China’s population changes.

How well China responds to its worsening demographics will have more to do with how China’s economy adjusts from its investment-led growth model—and, primarily, how it adjusts its reliance on debt.

This doesn’t mean there won’t be direct demographic consequences. With China’s working population declining by 0.5% to 0.6% a year over the next several years, productivity growth per worker must be higher than it has been over the past two decades to achieve the same amount of GDP growth.

This matters when we project China’s long-term growth rates. Beijing announced last year that it expected to double China’s real GDP in the next 15 years. This requires average real GDP growth of 4.7% a year. Yet a declining working population means that China’s productivity per worker must increase at a faster rate: 5.2% to 5.3%, rather than the 4.5% it would have needed when the working population was still rising.

We can perhaps see these consequences more clearly by focusing on balance sheet implications. One advantage of a growing working population is that the amount of debt that must be supported by each worker automatically declines over time.

The opposite is true with a declining working population. Total debt in China represents at least 280% of China’s GDP, according to government figures. If China’s future GDP growth requires the same level of credit growth as it has in the past, then China’s debt-to-GDP ratio must rise to somewhere between 400% and 500%: an unprecedented level of debt, especially for a developing country.

Adjusting for a declining working population makes the numbers even worse. As the working population declines by 0.5% to 0.6% a year, the amount of debt per worker rises by an additional 2% to 3% of GDP every year.

These are bad numbers, but they do not in themselves represent a crisis. This is because China’s debt trajectory was already unsustainable, and the main impact of China’s adverse demographics will be to accelerate the adjustment. That is why China’s leadership must either resolve its overreliance on debt or—like most countries that have followed a similar growth model—be forced to do so in a way likely to be economically painful.

There are broadly speaking four ways China can “resolve” its rising debt burden.

The first—long promised by government officials—is to transform the economy away from the no-longer-productive infrastructure and property sectors. Although historically hard to execute, in principle redirecting funding into high-tech and other productive sectors allows investment growth to remain high without requiring even faster growth in debt.

The second—promised by China’s more sophisticated economic policymakers—is to replace declining investment with rising consumption to drive GDP growth. This effectively means sharply shrinking the government share of GDP and redirecting it to the household sector so as to allow China to maintain growth targets without the reliance on debt that is necessary to sustain current investment levels.

The third and fourth ways involve a collapse in GDP growth. One way would be for a very sharp—and presumably short-term—contraction in GDP driven by a financial crisis, although this is still unlikely in the case of China’s highly controlled financial system. The other would be a Japanese-style “lost” decade—or more—of very low growth as China slowly rebalances and struggles with its debt.

Riaz Haq said…
How China became the big winner of the COVID era
US is buying even more goods from China than it did before the pandemic

When news first broke of the COVID lockdown in Wuhan, the initial prediction was: The virus will cripple the economy of China, which is the engine of global trade, and that will be terrible for the shipping business.

Eighteen months and 3.9 million deaths later, the pandemic has had the opposite effect. Ships are full and, ironically, the country where the outbreak began has seen the biggest and broadest economic upside.

Chinese exports are now much higher than they were before the outbreak, courtesy of pandemic-induced changes in consumer behavior and COVID-driven fiscal stimulus from the world’s governments.

The only major economy to grow in 2020 was China’s. GDP growth continued in Q1 2021. Business is at an all-time high for Chinese liner operators, shipyards and container-equipment factories.

U.S. demand for Chinese exports is increasingly urgent as sales continue to offset inventory rebuilds. Trade has revved up in the opposite direction, as well: China is buying more American soybeans, crude oil, propane and natural gas.

Pandemic boosts Chinese trade
Nerijus Poskus, vice president of global ocean at Flexport, recently told American Shipper, “Back in 2020, if you’d asked 100 economists what would happen when COVID first hit China, all of them would have probably said that economies will go down, consumption will go down and prices for shipping will fall. Well, all of them would have been wrong.”

Very wrong: China’s export value in January-May averaged $247.5 billion per month, up 29% from January-May 2019, pre-COVID, according to the country’s customs data.

As more goods are going out, supporting container-shipping demand, more raw materials and commodities are coming in, employing tankers, bulkers and gas carriers. China’s import value averaged $206.8 billion per month in January-May, up 25% from the same period in 2019.

Turning trade into even more business
When demand for ocean transport surges, so too does demand for shipbuilding, container manufacturing and global liner operations. The U.S. has virtually no presence in these sectors. China is the world leader in the first two and a major force in the third.

As of Jan. 1, 2020, pre-COVID, Chinese shipyards had commercial orders totaling 29.8 million compensated gross tons (CGT), according to U.K.-based valuation and data provider VesselsValue. At that point, China — which was already the world’s largest shipbuilding nation — accounted for 38.7% of the global orderbook.

The Chinese yards’ orderbook was 26.9 million CGT as of Thursday, according to VesselsValue. While that is down from pre-COVID (orders dropped worldwide in Q1-Q3 2020 and partially rebounded thereafter), China’s share of the global orderbook is now 40.5%, even higher than it was before the pandemic.

China’s dominance is far more extreme in container-equipment manufacturing. Over 96% of all the world’s dry containers and 100% of reefer containers are manufactured in China. Factories produced 2.66 million twenty-foot equivalent units (TEUs) of containers in the first five months of this year, according to data from U.K.-based consultancy Drewry.

“I would be surprised if the 5-million-TEU mark is not exceeded in 2021,” commented John Fossey, Drewry’s head of container equipment and leasing research. The previous record was 4.42 million TEUs in 2018. If 5 million TEUs were produced this year, it would represent a 61% increase compared to last year and a 77% increase versus 2019.

In the liner sector, China’s COSCO Group (including OOCL) is the world’s fourth-largest container player, with a fleet capacity of 3 million TEUs, according to Alphaliner. Like all ocean carriers, COSCO is reaping historic profits from COVID-era consumer demand; the shipping division of COSCO posted a profit of $2.7 billion for Q1 2021, more than it earned in all of last year.
Bei said…
A government's ultimate legitimacy is bringing their people a good life, the west tries very hard to make people believe China is a hell on earth to live in, but only we Chinese know what we had been through over the past 100 years and how we really live now in China.
Riaz Haq said…
Fareed Zakaria: "America has been the comeback nation of the last decade. I think this is still not fully appreciated and understood by many people, the fact that America's share in the global economy, contrary to all the pessimism that existed exactly a decade ago, has ended up going significantly higher over the last decade"

Joining me now is Ruchir Sharma. He is the chief global strategist at Morgan Stanley Investment Management and the author of "The 10 Rules of Successful Nations." So, Ruchir, let me start by asking you, is it fair for people to look at the -- the American economy, post-pandemic, and say, you know, it is now booming, or the boom that -- that existed pre-pandemic, you know, we're back to that -- to that? Is that really what's going on, in long historical context?

RUCHIR SHARMA, CHIEF GLOBAL STRATEGIST, MORGAN STANLEY INVESTMENT MANAGEMENT: Yeah, hi, Fareed. I think so. Because we went through the last decade, for the first time in American history, without a recession in the U.S. We had the pandemic-induced recession, which was, in many ways, artificial, and now we are back to where we were, where we left off, the only difference being that we have spent a lot of bullets in fighting this pandemic, from an economic standpoint, in terms of the deficits we are running and the debt we have been forced to tack on to (inaudible) with this pandemic.

But the main point here is this, that America has been the comeback nation of the last decade. I think this is still not fully appreciated and understood by many people, the fact that America's share in the global economy, contrary to all the pessimism that existed exactly a decade ago, has ended up going significantly higher over the last decade.

ZAKARIA: So when you think about, you know, sort of, the -- this decade, what you're saying is that, after the global financial crisis, America, sort of, got its act together, or whatever, and has basically been on a kind of long boom that has really -- you know, it's striking. Most people thought we would decline as a percentage of GDP. We've actually increased over the last 10 years.

SHARMA: Exactly. And I think that there is a further point here, that, as an economic power, America's share in the global economy has now been roughly similar for the last three to four decades. But as a financial superpower, America has never been this powerful as it is now. That is the big distinction. As a financial superpower, America's power today is unrivaled and unparalleled.

The problem with this -- and I think that this is what I'm coming to now -- that this may be as good as it gets, that a lot of people are getting very excited and optimistic about America now, but that -- the time to have been really optimistic and really excited was when everybody was pessimistic a decade ago, or much -- through that period.

But now, amidst this giddiness, I would just point to the fact that American assets today, if you look at the stock market, you look at the bond market, you look at American housing, you put it all together, America has never looked this expansive compared to the rest of the world. And -- when it's come to looking this expansive over the last 100 years, generally it has done more poorly compared to the rest of the world.

Riaz Haq said…
The White House released a report on Tuesday that offers a solemn assessment of American companies prioritizing profits over national security and long-term sustainability. “A focus on maximizing short-term capital returns has led to the private sector’s underinvestment in long-term resilience,” the 250-page report states. The United States has a competitive advantage over China in the production of semiconductor manufacturing equipment (SME), which provides a chokepoint that can limit “advanced semiconductor capabilities in countries of concern.”

The report details the findings and recommendations of the Administration’s 100-day supply chain review required by President Biden’s executive order from February that directed the review of four key industries: semiconductors, large capacity batteries, critical minerals and pharmaceuticals. The report states that the Chinese government’s “massive subsidy campaign [as much as $200 billion over the past eight years] to develop its domestic semiconductor capability” has exploited “gray areas” in international trade rules and avoided World Trade Organization (WTO) oversight. The Chinese government has propped up key tech industries, including semiconductors manufacturing and SME production, through a “novel subsidy strategy” meant to avoid “transparency requirements of the WTO subsidy regime.” Essentially, government subsidies are booked as “investments” to avoid WTO disclosure rules.

This one of many “innovation mercantilist” tactics that Chinese state has practiced for years, according to a recent report and event by the Information Technology & Innovation Foundation which details China’s deleterious impact on competitive international ecosystems for semiconductors, telecommunications equipment, biopharmaceuticals, solar photovoltaics, and high-speed rail. Co-author Stephen Ezell estimates that the US loses out on some 5000 semiconductors patents annually because of this predation.

The Chinese Communist Party has made a concerted effort to dominate the semiconductor market. The Made in China 2025 plan aims to produce 70 percent of China’s chip demand indigenously and pledges as much as $1.4 trillion of investment into China’s semiconductor industries.

Memory chips are the “most mature” of these efforts. Yangtze Memory Technologies (YMTC), which has received $24 billion in state subsidies, has emerged as a “national champion memory chip producer.” A report by James Mulvenon this year identifies ties between YMTC and the People’s Liberation Army.

“It’s not just YMTC,” cautioned Emily de La Bruyère, senior fellow at the Foundation for the Defense of Democracies, during a China Tech Threat roundtable forum this week. “Changxin Memory Technologies [CXMT] is equally propped up and potentially equally connected to the [People’s Liberation Army].” The roundtable titled "Let the Chips Fall?" explored the theme of how the next Undersecretary for the Department of Commerce’s Bureau of Industry and Security (BIS) should address semiconductor policy.

The White House report appears to be a de facto roadmap for the next BIS chief and is notable for naming leading Chinese fabs with military connections which have yet to be designated as Military End Users or on the Entity List. In no uncertain words, the bipartisan United State China Commission issued a report earlier this month, Unfinished Business: Export Control and Foreign Investment Reforms which critiqued BIS for failing to issue the lists of foundational and emerging technologies as required by the 2018 Export Reform and Control Act. Such a publication would likely trigger action against the Chinese fabs.

“While the United States no longer leads the world in semiconductor manufacturing capabilities,” it has a competitive advantage over China in semiconductor manufacturing equipment (SME), the White House report adds.
Riaz Haq said…
Countering QUAD: Is There A China-Russia-Pakistan Strategic Nexus In The Making?

By Rushali Saha,Research Associate at the Centre for Airpower Studies, New Delhi, India

Amid India-US bonhomie over QUAD, it’s interesting to watch how China is maintaining its “all-weather” friendship with Pakistan and an “unbreakable” bond with Russia.

Although it is too soon to prove the existence of a Russia-China-Pakistan ‘axis’, the growing strategic convergence between the three is a significant geopolitical development, especially given the possible formation of power blocs given the growing strategic competition between the US and China.

This convergence will most likely play out in the Indo-Pacific—the epicenter of US-China competition. The rechristening of Asia-Pacific as Indo-Pacific is largely a result of growing convergence among the four QUAD countries — India, the United States, Japan, and Australia.

China’s Opposition To QUAD
China has been vocal about its opposition to this “four-side mechanism” as it adheres to the “Cold War mentality.” Both Russia and Pakistan have displayed their ‘pro-China’ tilt on the QUAD, albeit the Russian vision for the region as a whole is more complex.

Russian foreign minister, Sergey Lavrov’s remarks at the Raisina Dialogue held in New Delhi outlined how despite supporting India’s inclusive Indo-Pacific vision, Moscow is hostile towards QUAD, essentially parroting Chinese concerns about containment.

For Pakistan, America’s growing defense relations and professed commitment to bolster India’s capabilities to counter China, have further strained relations between Islamabad and Washington.

Viewing America’s ‘Free and Open Indo-Pacific’ as a threat, Pakistan is seeking deeper security cooperation with Russia and China through joint naval exercises in the Indian Ocean, exchanging naval officials, and deepening military cooperation.

Pakistan’s PNS Zulfikar frigate is all ready to participate in the Arabian Monsoon exercise with Russian ships in the Arabian Sea after the two navies participated in the Pakistan-hosted biannual maritime multinational naval exercise Aman-2021, which included China and 45 other countries.

Beyond symbolism, these strategic moves deserve greater attention as they come at a time when Pakistan and Russia are being pushed closer together over a negotiated political settlement over Afghanistan, while cracks in the Russia-India-China strategic triangle are solidifying.
Russia-Pakistan-China Convergence
Beyond their shared criticism of QUAD, there are other areas where the strategic objectives of the three countries converge. Despite the Chinese projection of the China-Pakistan Economic Corridor (CPEC) as a purely ‘economic’ project, few would deny the strong geopolitical implications it would have—particularly in the Indian Ocean.

Gwadar Port, in Pakistan’s Balochistan province, handed over to the Chinese in 2013 for 40 years provides Beijing direct access to the Indian Ocean through the Arabian Sea. This would extend Chinese power projection well into the Western Indian Ocean, effectively counterbalancing US and Indian naval capabilities.

According to an article published by a leading Russian think tank, the “only explanation” for Russia deferring participation in CPEC is “respect for India’s sensitivities” given New Delhi’s sovereignty concerns over the nature of the project.

However, in view of the growing ties between Islamabad and Kremlin exemplified in Sergei Lavrov’s visit to Pakistan— the first by a Russian foreign minister in 9 years—has raised apprehensions about whether India can continue to deter Russian participation in the project.

Riaz Haq said…
Countering QUAD: Is There A China-Russia-Pakistan Strategic Nexus In The Making?

By Rushali Saha,Research Associate at the Centre for Airpower Studies, New Delhi, India

Russia and China’s increasing presence in the resource-rich Western Indian Ocean can be a game-changer in the ongoing geopolitical contest in the region.

Despite being a late entrant, Russia has significantly stepped up its presence in the region, striking a 25-year agreement with Sudan to establish a naval base in the country which will station four Russian ships and up to 300 personnel, although reports suggest Sudan is currently reviewing the deal.

China, which has already penetrated deep into the Indian Ocean through strengthening maritime ties with East African countries, is independently strengthening maritime cooperation with both Russia and Pakistan.

It is against this backdrop that Iran, Russia, and China held their first-ever joint naval exercise in the Northern Indian Ocean in 2019, where Iran reportedly also invited the Pakistani Navy.

Growing Military Ties
Meanwhile, the latest iteration of bilateral naval exercise between China and Pakistan—Sea Guardians 2020—reflects the growing complexity and expanding the scope of their bilateral maritime partnership.

With Pakistan and Russia committing to increasing the frequency of their joint military drills and maritime exercises to fight terrorism and piracy, the possibility of a Russia-China-Pakistan naval exercise, may not be so remote anymore.

Arguably the strongest glue holding the three countries together is a common aversion to the ‘western construct’ of a ‘rules-based order.’

Against the ‘rules-based order’, China and Russia have been parallelly pushing the narrative on ‘global governance’—premised on the centrality of United Nations—as reflected in the Lavrov-Wang joint statement following the Russian foreign minister’s visit to China earlier this year.

Meanwhile, China and Pakistan have strengthened cooperation in multilateral forums such as the United Nations, evident from the recently released joint statement where the two countries pledged to back each other’s “core interests” and “firmly safeguard multilateralism.”

In October last year, Pakistan—on behalf of 55 countries, which included Russia—made a joint statement at the UN “opposing interference in China’s internal affairs under the pretext of Hong Kong.”

The leaders of the US, Japan, India, and Australia during the first-ever QUAD summit in March this year. (via Twitter)
In the context of the evolving geo-strategic construct of Indo-Pacific and rapidly fluctuating power relations, each country will act in a manner that maximizes its national interest.

The QUAD countries are working together to defend a regional order which was largely constructed by the United States, from rivals, namely China.

China’s careful critique of Western intentions in the Indo-Pacific and representation of QUAD as an “Indo-Pacific NATO” gels well with Russian interests.

The emerging disconnect in US-Pakistan relations has paralleled closer Indo-American ties which have effectively pushed Pakistan closer to China and Russia, binding the three together by shared criticism of what they see as ‘Western hegemony.’

In the current era of strategic uncertainty, the deepening relations between Russia, Pakistan, and China is a major challenge for the QUAD countries, although they are gaining recognition for their agenda from regional and extra-regional actors.

Going forward, one of the first steps QUAD must take is to convince actors, especially Southeast Asian countries, that QUAD is indeed not an ‘Asian NATO.’ To do this, it must begin by robustly defining what it means by a ‘rules-based order’ and clarify that it is not at variance with multilateralism or ASEAN centrality.

Riaz Haq said…
Hailing #Pakistan as #China's true friend and brother, #Chinese FM Wang calls for closer ties. Pakistani FM Shah Mahmood Qureshi says the #Pakistani side is willing to deepen cooperation with China on #CPEC. #CPC100Years #UnitedStates via @cgtnofficial

Chinese State Councilor and Foreign Minister Wang Yi on Wednesday urged closer ties between China and Pakistan amid already close friendship. China and Pakistan need to step up in forging a closer community with a shared future more than ever, he said.

Wang made the remarks via a video link at the opening ceremony of a seminar commemorating the 70th anniversary since China and Pakistan established diplomatic relations.

The Chinese diplomat called for strengthening strategic communication, especially top-level official dialogues for on-time strategic guidance for the development of bilateral ties.

Pakistani Foreign Minister Shah Mahmood Qureshi also addressed the seminar, saying that the Pakistani side is willing to deepen cooperation with China under the Belt and Road Initiative and push the high-quality development of China-Pakistan Economic Corridor (CPEC).

Qureshi also expressed wishes to continue cooperating with China to hold a series of activities marking the 70th anniversary celebrations, calling for the two sides to safeguard regional and world peace and stability.

Riaz Haq said…
#China wants to buy advanced #chip machine from #Netherlands. #US says NO. It's an ASML machine called an extreme ultraviolet (EUV) lithography system that is essential to making advanced #semiconductor #microprocessors. #silicon #technology via @WSJ

Beijing has been pressuring the Dutch government to allow its companies to buy ASML Holding ASML -2.35% NV’s marquee product: a machine called an extreme ultraviolet lithography system that is essential to making advanced microprocessors.

The one-of-a-kind, 180-ton machines are used by companies including Intel Corp. INTC -1.51% , South Korea’s Samsung Electronics Co. and leading Apple Inc. supplier Taiwan Semiconductor Manufacturing Co. TSM -1.52% to make the chips in everything from cutting-edge smartphones and 5G cellular equipment to computers used for artificial intelligence.

China wants the $150-million machines for domestic chip makers, so smartphone giant Huawei Technologies Co. and other Chinese tech companies can be less reliant on foreign suppliers. But ASML hasn’t sent a single one because the Netherlands—under pressure from the U.S.—is withholding an export license to China.

The Biden administration has asked the government to restrict sales because of national-security concerns, according to U.S. officials. The stance is a holdover from the Trump White House, which first identified the strategic value of the machine and reached out to Dutch officials.

Washington has taken direct aim at Chinese companies like Huawei and has also tried to convince foreign allies to restrict the use of Huawei gear, over spying concerns that Huawei says are unfounded. The pressure aimed at ASML and the Netherlands is different, representing a form of collateral damage in a broader U.S.-China tech Cold War.

ASML Chief Executive Peter Wennink has said that export restrictions could backfire.

“When it comes to targeted, specific, national security issues, export controls are a valid tool,” he said in a statement. “However, as part of a broader national strategy on semiconductor leadership, governments need to think through how these tools, if overused, could slow down innovation in the medium term by reducing R&D.” He said in the short to medium term, it is possible that widespread use of export controls “could reduce the amount of global chip manufacturing capacity, exacerbating supply chain issues.”


That currently isn’t on the table inside the Biden White House, people familiar with the matter say. The U.S. is trying to put together alliances of Western countries to work jointly on export controls, people familiar with the matter said. The move could also have ramifications beyond ASML, further roiling semiconductor supply lines already under strain around the world.

ASML spun out of Dutch conglomerate Royal Philips NV in the 1990s. It is based in bucolic Veldhoven, near the Belgian border. It specializes in photolithography, the process of using light to print on photosensitive surfaces.

Photolithography is key to chip makers, which use light to draw a checkerboard of lines on a silicon wafer. Then they etch away those lines, like a knife carving into wood, but with chemicals. The remaining silicon squares become transistors.

The more transistors on a piece of silicon, the more powerful the chip. One of the best ways to pack more transistors into silicon is to draw thinner lines. That is ASML’s specialty: Its machines print the world’s thinnest lines.

The machines, which require three Boeing 747s to ship, use a laser and mirrors to draw lines five nanometers wide. Within a few years, that is expected to shrink to less than a nanometer wide. By comparison, a strand of human hair is 75,000 nanometers wide.
Riaz Haq said…
Deepglint, a chinese facial-recognition firm, was one of 14 companies slapped with American sanctions on July 9th for alleged links to human-rights abuses in China’s far-western region of Xinjiang. It is also a globally recognised leader in its field and has raised money from Sequoia Capital and other big American investment firms. DeepGlint’s founders, who graduated from Stanford and Brown universities in America, must now discuss with their foreign backers the prospect of decoupling from the Western commercial sphere. Many Chinese companies have been forced to hold similar talks.

China Inc appears to be on the back foot. In America President Joe Biden has picked up where Donald Trump left off, placing restrictions on Chinese companies. Last year Congress passed a bill that may eventually force Chinese firms to delist from American stock exchanges, which would affect nearly $2trn in market value. Huawei, banned from America, has struggled to sell its 5g telecoms kit elsewhere in the West. ByteDance was nearly forced to divest from its prized short-video app, TikTok, over American fears that the Chinese regime could access global users’ personal data. Tencent, another internet giant, is said to be haggling with American regulators worried about its 40% stake in Epic Games, the developer of Fortnite.
Riaz Haq said…
#China emerges as the the biggest global #trading nation, eclipsing the #UnitedStates. How will it affect the #US #currency and #American dominance of the international #financial system? #economy #trade #finance #investment


China Eclipses U.S. as Biggest Trading Nation
Bloomberg News
February 10, 2013

China surpassed the U.S. to become the world’s biggest trading nation last year as measured by the sum of exports and imports of goods, official figures from both countries show.

U.S. exports and imports of goods last year totaled $3.82 trillion, the U.S. Commerce Department said last week. China’s customs administration reported last month that the country’s trade in goods in 2012 amounted to $3.87 trillion.

China’s growing influence in global commerce threatens to disrupt regional trading blocs as it becomes the most important commercial partner for some countries. Germany may export twice as much to China by the end of the decade as it does to France, estimated Goldman Sachs Group Inc.’s Jim O’Neill.

“For so many countries around the world, China is becoming rapidly the most important bilateral trade partner,” O’Neill, chairman of Goldman Sachs’s asset management division and the economist who bound Brazil to Russia, India and China to form the BRIC investing strategy, said in a telephone interview. “At this kind of pace by the end of the decade many European countries will be doing more individual trade with China than with bilateral partners in Europe.”

U.S. Leadership
When taking into account services, U.S. total trade amounted to $4.93 trillion in 2012, according to the U.S. Bureau of Economic Analysis. The U.S. recorded a surplus in services of $195.3 billion last year and a goods deficit of more than $700 billion, according to BEA figures released Feb. 8. China’s 2012 trade surplus, measured in goods, totaled $231.1 billion.

The U.S. economy is also double the size of China’s, according to the World Bank. In 2011, the U.S. gross domestic product reached $15 trillion while China’s totaled $7.3 trillion. China’s National Bureau of Statistics reported Jan. 18 that the country’s nominal gross domestic product in 2012 totaled 51.93 trillion yuan ($8.3 trillion).

“It is remarkable that an economy that is only a fraction of the size of the U.S. economy has a larger trading volume,” Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington, said in an e-mail. The increase isn’t all the result of an undervalued yuan fueling an export boom, as Chinese imports have grown more rapidly than exports since 2007, he said.
Riaz Haq said…
Opinion: The United States and China are locked in a Cold Peace
By Fareed Zakaria

The Soviet Union barely existed on the economic map of the free world. It presided over a tightly controlled economic bloc of communist countries that had few connections — in trade or travel — with the rest of the planet. Mostly, its economy was about resources — oil, gas, nickel, copper, etc. China, by contrast, is deeply integrated into the world economy. It is now the world’s leading trading nation in goods. Twenty years ago, the vast majority of countries traded more goods with the United States than with China. Today, it has flipped. Last year, China replaced the United States as the European Union’s largest trading partner in goods.

China needs U.S. consumers for its economic growth. But conversely, many of the United States’ largest companies — from General Motors to Apple to Nike — need the Chinese market. The Walmart effect — the availability of low-priced goods of every kind to Americans — has been closely tied to sourcing from China. Even when you look at something such as the United States’ expanding green economy, you find the shadow of China behind it. Those solar panels you see everywhere have become so affordable and thus ubiquitous because many are made in China. And then there is the roughly $1 trillion worth of American debt that China holds.

The United States will need a strategy that mirrors the complexity of this relationship, one in which China is part competitor, part customer, part adversary. Some of this the Biden administration has done very well, bringing America’s allies together in a more united front against China, such as for its human rights abuses. But Biden is also confronting the reality that the United States’ allies have close economic ties with China. (In Asia, most countries have China as their largest trading partner.) They would like to have both strong trading relations with China and strong geopolitical ties with the United States. Forcing them to choose might create more problems than it solves.

Adding even more nuance, China is strong but it is not taking over the world. It faces substantial challenges ahead. It is graying quickly because of the legacy of Beijing’s one-child policy. It has still not shown that it can avoid the “middle income trap” faced by rising economies that aspire to join the ranks of rich ones. Chinese President Xi Jinping is nurturing the state sector and unleashing regulators on private companies. And China’s new, assertive foreign policy has caused a backlash from its biggest neighbors, from India to Australia to Japan. Last week, the Philippines renewed a defense agreement with the United States that it had long announced it was planning to end.

Can Washington embrace the complexity of this challenge? It is facing an economic powerhouse that, unlike Germany and Japan, is not dependent on the United States for its security. It faces a new great power that is not a democracy and has different values and beliefs, and yet has not occupied and controlled countries as Stalin’s Russia did during the 1940s (which is what triggered the Cold War).

And this is all happening in a world in which international trade has rebounded to pre-pandemic levels. It’s not a new Cold War but something much more complicated: a Cold Peace.
Riaz Haq said…
Here’s some bad news for military analysts who do not tire of cheering America’s ‘defeat’ in Afghanistan: the US has left Afghanistan; it retains its position as a hegemon by Ejaz Haider

To sum up the above, the US military remains the most powerful armed force in the world, singly and in tandem with its allies. It can win wars but not conflicts, especially in areas where it is operating among foreign populations. The latter is also true of other militaries; two, use of force has many frameworks and success and failure would depend on how force is being applied, against whom and to what end. For instance, Iran uses proxies across the greater Middle East to neutralise its asymmetrical disadvantages and its relative military weaknesses against its adversaries. Israel uses a mix of strategies to retain its dominance. The IDF, one of the most formidable armed forces, had a hard time dealing with Hezbollah in the 2006 Lebanon War. But it remains the dominant military force in operations which do not require getting bogged down on the ground against elusive adversaries.


In case the argument is still unclear, let me assume a scenario for further clarification: in the event the Taliban take control of Kabul and with that a large part of Afghanistan, and in the event that they embark on a policy that the US considers inimical to its interests, the US has the capabilities to destroy Taliban forces. How? One, as noted earlier, the US can win a war against most adversaries very easily; two, the Taliban forces and assets — elusive as an insurgent force — will be over-the-ground as an established government. It’s difficult to operate against elusive forces; it’s easy to destroy concentrated targets.

Let me now come to another issue with reference to victory and defeat, which I flagged above. The US, a western hemisphere superpower, came to these shores to achieve its geopolitical objectives. It could achieve them both in ‘victory’ and ‘defeat’. What do I mean by that? In victory, i.e., in the event it could stabilise Afghanistan and Iraq, it would have two new allies; Iraqi stabilisation could also yield positive results for it in the Middle East. That did not happen and yet it now reaps the dividends of what many consider its ‘defeat’. How? It has cut its losses and gotten out, leaving regional countries to deal with Afghanistan’s likely spillover. Two of those countries are also its geopolitical competitors: China and Russia. Russia is already doing military drills with Uzbek forces as part of CSTO (Collective Security Treaty Organisation); China is bracing up for any spillover effects in Xinjiang.

In the Middle East, if Iraq, Syria and Libya cannot be stable US allies along the lines, for instance, of the Southeast Asian states, the US and Israel can reap the benefits of continuing instability in the region. A fractured region is the second-best option if you can’t get a stable, peaceful, US-friendly region.

So, here’s some bad news for military analysts who do not tire of cheering America’s ‘defeat’ in Afghanistan: the US has left Afghanistan; it retains its position as a hegemon; it remains a nearly USD 23 trillion economy. Meanwhile, in this hour of ‘great victory’, Afghans are killing Afghans and by the looks of it, that’s not going to end anytime soon.

Hamid Dabashi, the celebrated Iranian-American author and academic recently wrote an article, “Why the US war in Afghanistan was a resounding success.” While I do not agree with many of his observations, he is spot-on when he says, “There is nothing sillier than the cliched assumption of Afghanistan as the “graveyard of empires”. The US empire did not die in Afghanistan, nor did Russian imperial designs before it. Quite the contrary: both the US and Russia are robust military and imperial machines at work from Central Asia to the Indian Ocean and beyond.”

Afghanistan is only the graveyard of Afghans. That’s called deep tragedy, not victory.
Riaz Haq said…
#India, #US to raise #military interoperability, agree to establish the Indo-US #Industrial #Security Joint Working Group. #Russia #China #Pakistan @deccanherald

(Gen Bipin) Rawat and (General) Milley discussed a range of issues, including ways to ensure regional security and their respective roles as principal military advisors to civilian leadership. They also agreed to continue cooperation in training exercises and creating opportunities to increase interoperability between the two militaries, Col. Dave Butler, a spokesperson of the US Joint Chiefs of Staff, said.

(India-US Joint) working group to expeditiously align policies and procedures allowing defence industries of the two nations to collaborate on cutting edge military technologies.
Riaz Haq said…
China tests new space capability with hypersonic missile
Launch in August of nuclear-capable rocket that circled the globe took US intelligence by surprise

Demetri Sevastopulo in Washington and Kathrin Hille in Taipei OCTOBER 16 2021

China tested a nuclear-capable hypersonic missile in August that circled the globe before speeding towards its target, demonstrating an advanced space capability that caught US intelligence by surprise.

Five people familiar with the test said the Chinese military launched a rocket that carried a hypersonic glide vehicle which flew through low-orbit space before cruising down towards its target.

The missile missed its target by about two-dozen miles, according to three people briefed on the intelligence. But two said the test showed that China had made astounding progress on hypersonic weapons and was far more advanced than US officials realised.

The test has raised new questions about why the US often underestimated China’s military modernisation.

“We have no idea how they did this,” said a fourth person.

The US, Russia and China are all developing hypersonic weapons, including glide vehicles that are launched into space on a rocket but orbit the earth under their own momentum. They fly at five times the speed of sound, slower than a ballistic missile. But they do not follow the fixed parabolic trajectory of a ballistic missile and are manoeuvrable, making them harder to track.

Taylor Fravel, an expert on Chinese nuclear weapons policy who was unaware of the test, said a hypersonic glide vehicle armed with a nuclear warhead could help China “negate” US missile defence systems which are designed to destroy incoming ballistic missiles.

“Hypersonic glide vehicles . . . fly at lower trajectories and can manoeuvre in flight, which makes them hard to track and destroy,” said Fravel, a professor at the Massachusetts Institute of Technology.

Fravel added that it would be “destabilising” if China fully developed and deployed such a weapon, but he cautioned that a test did not necessarily mean that Beijing would deploy the capability.

Mounting concern about China’s nuclear capabilities comes as Beijing continues to build up its conventional military forces and engages in increasingly assertive military activity near Taiwan.

Tensions between the US and China have risen as the Biden administration has taken a tough tack on Beijing, which has accused Washington of being overly hostile.

Michael Gallagher, a Republican member of the House armed services committee, said the test should “serve as a call to action”.

“The People’s Liberation Army now has an increasingly credible capability to undermine our missile defences and threaten the American homeland with both conventional and nuclear strikes,” said Gallagher. “Even more disturbing is the fact that American technology has contributed to the PLA’s hypersonic missile programme.”

US military officials in recent months have warned about China’s growing nuclear capabilities, particularly after the release of satellite imagery that showed it was building more than 200 intercontinental missile silos. China is not bound by any arms-control deals and has been unwilling to engage the US in talks about its nuclear arsenal and policy.
Riaz Haq said…
What the Thucydides Trap gets wrong about China

The alarming possibility of a major conflict between the US and China has been framed as a likely consequence of a pattern of great power behaviour first identified by the fifth-century BCE historian Thucydides. In his study of the Peloponnesian War, the Greek wrote: “It was the rise of Athens and the fear that this instilled in Sparta that made war inevitable.” This argument is now most associated with the Harvard academic Graham Allison, who claims to have identified 16 instances in which a dominant power has sought to suppress an emerging rival before they became too strong. He notes, disconcertingly, that 12 of these ended in war.

Allison first presented his thesis of the “Thucydides Trap” in the Atlantic in 2015, and developed it in a book, Destined for War, in 2017. Since then, Allison’s argument that the relationship between the US and China is growing increasingly volatile has gained even more credibility with tensions over trade, the South China Sea and Taiwan.

But Allison’s notion of the Thucydides Trap – the tendency towards war when a rising power threatens to displace an existing one – fails to address the risks involved in conflict and the reasons why wars occur. The story told by Thucydides is much more complicated than the “Trap” suggests. The notion of inevitable conflict between Athens and Sparta elides the fact that the Athenian leader Pericles made poor strategic calls. Different decisions would have avoided war.


The “Trap” argument is also undermined when you consider the view held by many experts that China’s power may have already peaked. The nation is facing a series of system problems that may halt its rise, including an unbalanced economy, an ageing population, environmental degradation and political dysfunction resulting from President Xi Jinping’s authoritarian turn. Indeed, recent war scares start from the assumption that the leadership in Beijing might want to invade Taiwan before China’s power wanes.

The risk of war in the Indo-Pacific region cannot usefully be understood as the result of an upstart power challenging the established global hegemon for supremacy. Issues of interest and alliances are as important as power balances, and all need to be watched carefully if conflict between the world’s preponderant forces are to be addressed and, hopefully, avoided.
Riaz Haq said…
#China celebrates record #Winter #Olympics #medals haul, beating #US. Traditionally much stronger in the Summer Games, China earned an unprecedented nine gold medals during its home-hosted winter edition after the state ploughed resources into training.

China celebrated a record gold medal haul as the Beijing Winter Olympics concluded Sunday, narrowly beating out chief geopolitical rival the United States to rank third in the medal count.

Traditionally much stronger in the Summer Games, China earned an unprecedented nine gold medals during its home-hosted winter edition after the state ploughed resources into training.

By Sunday afternoon, at least four trending hashtags related to China's best haul had received almost 200 million views on the Twitter-like platform Weibo.

Much of that commentary was as pleased about beating the United States by one place as it was China's best winter finish.

"Last year the US surpassed China by one gold medal in the Summer Olympics, this year China surpassed the US by one medal," read one comment liked more than 2,800 times.

The Chinese team won 15 medals in total -- nine golds, four silvers and two bronzes.

Figure skating duo Han Cong and Sui Wenjing secured the country's last Olympic gold -- and broke a previous world record -- in an emotional pairs event on Saturday evening.

Winter powerhouse Norway was in first place with 16 gold medals and a total of 37. Runner-up Germany received 12 golds and 27 medals in total.

Beijing sees the Winter Games as a propaganda showpiece with which to burnish its international image and project soft power abroad.

But the event has been clouded by political controversies.

The United States led a diplomatic boycott of the Games over China's human rights record, which was joined by multiple Western countries.

The Games also saw a doping scandal involving a teenage Russian athlete and growing fears of a Russian invasion of Ukraine.

However, Chinese medal-winners have been lionised as national heroes by state media, while Chinese social media has been flooded with patriotic comments.

"I am so proud of the Chinese team's achievements," 32-year-old tech worker Min Rui told AFP on Sunday as she shopped with two girlfriends near an Olympic countdown clock in one of Beijing's central districts.

"The winter sports industry is still in its infancy and many athletes were chosen from other sporting disciplines. So coming third in the medal tally, ahead of countries like the US and Canada, is a real achievement."

Beijing's investment in developing winter sports has nurtured a new generation of breakout stars.

Among them are teenage snowboarding champion Su Yiming and Chinese-American skier Eileen Gu, who is the most decorated Chinese athlete with two golds and one silver medal.

Gu switched to compete for China over the United States in 2019.

China won one gold and a total of nine medals at the 2018 Pyeongchang Winter Olympics.

It had never won more than three gold medals in Winter Games history.

Riaz Haq said…
How the West Can Win a Global Power Struggle
In an economic Cold War pitting China and Russia against the U.S. and its allies, one side holds most of the advantages. It just has to use them.

Of course the East plays a central role in the global economy. As recent market turmoil illustrates, Russia is a key supplier of not just oil and gas but metals such as palladium, used in catalytic converters, and nickel. China dominates manufacturing of countless goods whose value became abundantly clear during the pandemic, when demand for some, such as protective personal equipment, skyrocketed.

To a great extent these strengths reflect Russia’s comparative advantage in geology and China’s in factory labor. The West’s comparative advantage is in knowledge. That’s why Russia and China court Western investment. For example, to develop a complex liquefied natural gas (LNG) project in the Arctic, Russia relied on Norwegian, French and Italian contractors for essential expertise, research firm Rystad Energy notes.

Catching up with the West is no easy task, as semiconductors illustrate. Western companies dominate all the key steps in this critical and highly complex industry, from chip design (led by U.S.-based Nvidia, Intel, Qualcomm and AMD and Britain’s ARM) to the fabrication of advanced chips (led by Intel, Taiwan’s TSMC and South Korea’s Samsung ) and the sophisticated machines that etch chip designs onto wafers (produced by Applied Materials and Lam Research in the U.S., the Netherlands’ ASML Holding and Japan’s Tokyo Electron ).

Russia and China have made efforts to reduce this dependence. Russia developed locally designed microprocessors called Elbrus and Baikal to run data centers, cybersecurity operations and other applications. Though neither has achieved significant market share, they “represent the pinnacle of local design capability,” said Kostas Tigkos, principal at Jane’s, a defense intelligence provider. Russia hoped that they would eventually displace chips made by Intel and AMD, he said. “This would not only have been the foundation for diversifying their installed base, but a stepping stone for exports of those processors to other friendly nations.” But without manufacturers like TSMC to make the chips, Russia is facing “the complete disintegration of their aspirations to develop their own industry.”

China has a much bigger semiconductor industry than Russia, and its partly state-owned national champion, Semiconductor Manufacturing International Co. (SMIC), could in theory make Russia’s chips, but that would take at least a year, Mr. Tigkos said. Moreover, its efforts to catch up to its Taiwanese competitor have been set back by sanctions. In 2020 the U.S. required companies using American technology to obtain a license to sell to SMIC. This effectively limited its ability to acquire advanced equipment from Netherlands’ ASML, which is critical for “any country that wants to have a competitive semiconductor industry,” Mr. Tigkos said.

Why does all this matter to the outcome of the geopolitical contest? Over time economic weight, strength and vitality are what allow countries to sustain military capability, achieve and maintain technological superiority, and remain attractive partners for other countries.

Yet GDP does not automatically equate to strategic influence. To win a Cold War, it’s not enough for the West to hold the best economic cards, it has to know how to play them. Economic statecraft, as this is called, does not come naturally to the West: Its institutions are built on the assumption that companies are private enterprises, not instruments of the state. They do business wherever it’s profitable, regardless of their home countries’ strategic interests.

Riaz Haq said…
Semiconductor Fabrication by country:

USA 44%

South Korea 24%

Japan 9%

EU 9%

Taiwan 6%

China 5%

In 2018, about 44 percent of U.S.-headquartered firms’ front-end semiconductor wafer capacity was located in the United States. Other
leading locations for U.S. headquartered front-end semiconductor wafer fab capacity were Singapore, Taiwan, Europe, and Japan.

In 2018, roughly 81 percent of all semiconductor wafer fabrication capacity in the United States was accounted for by U.S.-headquartered
firms. Semiconductor firms headquartered in the Asia Pacific region accounted for most of the balance of capacity in the United States at
around 10 percent.
Riaz Haq said…
A total of 143 Chinese companies (vs 122 US companies) have made it to the list of world's top 500 enterprises measured by business revenue, making China top the ranking for a second consecutive year, according to the Fortune Global 500 list for 2021 released on Monday.

China's Xiaomi Group,, Alibaba Group and Tencent Holdings are among the seven internet-related companies on the list this year, while the other three are from the U.S., namely Amazon, Alphabet and Facebook.

Among the seven internet giants, Xiaomi saw the largest increase in the rankings, rising by 84 places, the list shows.

China had 133 companies on the list last year, surpassing the United States for the first time.

There are 122 U.S. companies on the list this year, up by one from last year, while Japan holds steady with 53.

Total revenue for the world's largest companies dropped by 4.8 percent to $31.7 trillion in 2021, the first decline in five years.

Due to the COVID-19 impact, cumulative sales in energy and automotive sectors fell by over 10 percent, while all six airlines on last year's list failed to make the cut this year.


Hua Chunying 华春莹

China government official
In 1989, only one Chinese company made it into the #Global500.
In 2021, the number reached 143, ranking first in the world.
Riaz Haq said…
The Fortune Global 500 is now more Chinese than American

The Fortune Global 500 list is out this morning, and you can find it here. Walmart once again tops the list, followed by three Chinese companies—Sinopec, State Grid and China National Petroleum. The big story is this: for the first time, there are more Fortune Global 500 companies based in Mainland China and Hong Kong than in the U.S.–124 vs. 121. Add in Taiwan’s companies, and the Greater China total jumps to 133.

It’s hard to overstate the significance of the change in the global economy that represents. As Fortune Editor-in-Chief Cliff Leaf points out, when the Global 500 list first came out in 1990, there were no Chinese companies on the list. In the intervening three decades, the Chinese economy has skyrocketed, powered by a global trade boom that expanded from 39% of global GDP to 59%.

So now what? That’s the question Geoff Colvin explores in his piece here. The U.S. and Chinese economies are intertwined in so many ways, it’s hard to imagine them ever truly “decoupling.” Yet powerful political forces on both sides seem to be propelling them in that direction.

It’s worth noting that the Global 500 ranking is based on revenues, and many of the Chinese companies on the list—like the three mentioned above—earned their spot not necessarily because of their business dynamism, but because they are state-supported monopolies in the world’s largest market.

And by the way, being on the list is no guarantee of profitability. The five biggest losers on this year’s list—Pemex, Schlumberger, Softbank, the U.S. Postal Service and Nissan—lost $52 billion in 2019. (Sixth and seventh in the money losers’ ranking were Deutsche Bank and General Electric, which together lost another $11 billion.) Saudi Aramco, on the other hand, netted $88 billion in profits and is Fortune Global 500’s most profitable company for the second consecutive year.

Riaz Haq said…
60% o Fortune Global 500 companies are in 3 countries:

Greater China 145

United States 124

Europe 127

Japan 47

This map-and-chart package captures one of the top business stories of the past two decades: China’s rise in the global corporate hierarchy. Greater China (including Taiwan) surpassed the U.S. for the largest number of Global 500 companies for the first time in fiscal 2018; it widened its lead in 2020, when COVID shut down much of the world and China kept humming. One striking subplot in this story is the degree of state involvement in China’s big businesses: 87 of the companies from mainland China on this year’s list are majority or entirely government-owned. (In the U.S., just three fit that description: the Postal Service and real estate finance agencies Fannie Mae and Freddie Mac.) Can state-owned companies act nimbly and stay competitive in a fragmenting global economy? That’s the next chapter.

Riaz Haq said…
#US Orders #Nvidia to Halt Sales of Top #AI Chips to #China. Nvidea says ban on its A100 & H100 chips designed to speed up machine learning could interfere with completion of developing the H100, its flagship chip it announced this year. #geopolitics

By Stephen Nellis and Jane Lanhee Lee

(Reuters) -Chip designer Nvidia Corp said on Wednesday that U.S. officials told it to stop exporting two top computing chips for artificial intelligence work to China, a move that could cripple Chinese firms' ability to carry out advanced work like image recognition and hamper Nvidia's business in the country.

The announcement signals a major escalation of the U.S. crackdown on China's technological capabilities as tensions bubble over the fate of Taiwan, where chips for Nvidia and almost every other major chip firm are manufactured.

Nvidia shares fell 6.6% after hours. The company said the ban, which affects its A100 and H100 chips designed to speed up machine learning tasks, could interfere with completion of developing the H100, the flagship chip it announced this year.

Shares of rival Advanced Micro Devices Inc fell 3.7% after hours. An AMD spokesman told Reuters it had received new license requirements that will stop its MI250 artificial intelligence chips from being exported to China but it believes its MI100 chips will not be affected. AMD said it does not believe the new rules will have a material impact on its business.

Nvidia said U.S. officials told it the new rule "will address the risk that products may be used in, or diverted to, a 'military end use' or 'military end user' in China."

The U.S. Department of Commerce would not say what new criteria it has laid out for AI chips that can no longer be shipped to China but said it is reviewing its China-related policies and practices to "keep advanced technologies out of the wrong hands.

"While we are not in a position to outline specific policy changes at this time, we are taking a comprehensive approach to implement additional actions necessary related to technologies, end-uses, and end-users to protect U.S. national security and foreign policy interests," a spokesperson told Reuters.

The Chinese foreign ministry responded on Thursday by accusing the United States of attempting to impose a "tech blockade" on China, while its commerce ministry said such actions would undermine the stability of global supply chains.

"The U.S. continues to abuse export control measures to restrict exports of semiconductor-related items to China, which China firmly opposes," commerce ministry spokesperson Shu Jieting said at a news conference.

This is not the first time the U.S. has moved to choke off Chinese firms' supply of chips. In 2020, former president Donald Trump's administration banned suppliers from selling chips made using U.S. technology to tech giant Huawei without a special license.

Without American chips from companies like Nvidia and AMD, Chinese organizations will be unable to cost-effectively carry out the kind of advanced computing used for image and speech recognition, among many other tasks.

Image recognition and natural language processing are common in consumer applications like smartphones that can answer queries and tag photos. They also have military uses such as scouring satellite imagery for weapons or bases and filtering digital communications for intelligence-gathering purposes.

Nvidia said it had booked $400 million in sales of the affected chips this quarter to China that could be lost if firms decide not to buy alternative Nvidia products. It said it plans to apply for exemptions to the rule.

Stacy Rasgon, a financial analyst with Bernstein, said the disclosure signaled that about 10% of Nvidia's data center sales were coming from China and that the hit to sales was likely "manageable" for Nvidia.
Riaz Haq said…
India’s high-stakes bid to join the global semiconductor race
Chipmaking could be fantastically lucrative but precision engineering has not been a traditional national strength

The complexity of semiconductor production and supply chains means that manufacturers in a handful of east Asian countries, led by China, Taiwan and South Korea, have been responsible for much of global supply.

That is now changing. In July, the US passed the Chips and Science Act that includes $52bn of grants to support chipmaking and research and development. Meanwhile the EU is looking to build semiconductor resilience with its own €43bn Chips Act.

While India does not yet make microchips commercially, it does contribute to the design of semiconductors because of its strong software base, says Mahinthan Joseph Mariasingham, a statistician and researcher with the Asian Development Bank.

“When it comes to manufacturing, India has lagged behind many of the other countries, partly because of its lack of facilitating infrastructure,” he says. “It was easy for them to get into the software market because it doesn’t require elaborate physical infrastructure.”


The factories outside Chennai, in India’s southern state of Tamil Nadu, are home to an array of global corporate names that lend credibility to Prime Minister Narendra Modi’s “Make in India” campaign, which aims to turn Asia’s third-largest economy into a workshop to the world.

The state’s industrial parks host international investors such as Renault-Nissan and Hyundai, which have large car factories; Dell makes computers there and Samsung produces TVs, washing machines and fridges. There are enough suppliers to Apple (including Taiwan’s Foxconn and Pegatron, and the Finnish contract manufacturer Salcomp) that people in Tamil Nadu’s business community commonly refer to the American tech group, which does not discuss its suppliers, as “the fruit company”.

Now India wants to take a step up the manufacturing value chain, with a high-stakes bid to begin making semiconductors. The Modi government has put $10bn of incentives on the table to tempt manufacturers to set up new “fabs” (semiconductor fabrication plants) and encourage investment in related sectors such as display glass. One plant is being planned in Tamil Nadu.

India’s ambition to enter the chipmaking business comes at a time of growing trade and geopolitical tension as western economies have pushed to decouple their supply chains from China, which has invested heavily to become a leader in the semiconductor industry.

The Covid-19 pandemic and Beijing’s draconian lockdowns have disrupted global chip supply and sent companies and governments on a hunt for alternative sources of production. India, which has cracked down on Chinese social media apps and phone producers against the backdrop of a long-running geopolitical dispute, is offering itself as a democratic alternative tech hub to China.

“From a geopolitics point of view, India is attractive . . . We are increasingly one of the largest consumers of semiconductors outside of the US and traditional markets,” says Rajeev Chandrasekhar, India’s minister of state for electronics and information technology.

Manufacturers are now lining up to take up the $10bn offer. Singaporean group IGSS Ventures has signed a memorandum of understanding with the Tamil Nadu state government for what its founder and chief executive Raj Kumar says will “very likely” be a wafer factory it wants to build within three years. The Israeli group ISMC, a joint venture between Israel’s Tower Semiconductor and Abu Dhabi-based Next Orbit Ventures, has signed a letter of intent with the state of Karnataka, home of India’s tech capital, Bangalore, to build a $3bn semiconductor chipmaking plant. And Foxconn has teamed up with Indian group Vedanta to build a semiconductor plant, surveying sites in the western Indian states of Gujarat and Maharashtra.

Riaz Haq said…
#Intel says it has no current plans to start #manufacturing #semiconductor #chips in #India. The comments came after India's transport minister said earlier in the day that the #chipmaker will set up a #semiconductor manufacturing plant in the country.

Riaz Haq said…
China's dominance of manufacturing is growing, not shrinking
Country gaining market share in both low- and high-tech sectors

William Bratton is author of "China's Rise, Asia's Decline." He was previously head of Asia-Pacific equity research at HSBC.

When it comes to discussions about China's manufacturing capabilities, there is an all-too-frequent disconnect between rhetoric and reality.

On the one hand, it is widely understood that Chinese producers are losing relative competitiveness. Higher labor costs, bitter trade frictions, rising geopolitical tensions and the domestic pursuit of zero-COVID are all encouraging exporters to leave the country.

China, it is thus argued, has passed "peak manufacturing" and its status as the world's manufacturer stands to be superseded by other countries in the region. By extension, this will materially impact China's economic trajectory and the region's evolving geopolitical balances.

On the other hand, there has been a lack of substantive evidence offered to support the above argument. Although anecdotes abound about certain companies relocating production out of China, the data suggests that such moves are not at the scale necessary to reverse the upward momentum of the country's manufacturing base, nor its international competitiveness.

The most obvious evidence of this is in trade flows.

It is not just that Chinese exports have remained remarkably robust despite COVID-related lockdowns. More than that, the latest numbers from the U.N. Conference on Trade and Development imply that Chinese producers have become more competitive in recent years, not less.

China's manufactured exports, for example, have been growing significantly faster than those of Germany, the U.S., Japan or South Korea. As a result, its share of global manufactured exports by value surged to a new high of 21% last year, compared to just 17% in 2017. The country is now a more important international supplier than Germany, the U.S. and Japan combined.

Furthermore, contrary to the view that supply chains are reducing their exposure to China, Chinese manufacturers have consolidated their primacy across the vast majority of sectors over recent years. In fact, what is particularly remarkable about China's evolving trade structure is that it has been able to simultaneously gain export share in both low- and high-technology industries, including those as eclectic as leather products, truck trailers and optical instruments.

Such gains are hardly indicative of an industrial base under stress. They instead highlight the hyper-competitiveness of China's producers, who increasingly dominate the East and Southeast Asian manufacturing landscape.

For all the chatter about companies leaving China and the changing geographies of supply chains, the reality is that it generated nearly half of the region's manufactured exports in 2021, compared to less than a third 15 years ago.

This competitiveness is derived from the complex and self-reinforcing interaction of multiple factors, many of which are a function of China's size. This allows the country to support far higher levels of domestic competition, innovation and specialization than its neighbors, and results in greater efficiencies and lower production costs, which regional rivals will always struggle to replicate. These scale benefits are subsequently magnified through aggressive industrial development policies that have no obvious precedent in terms of scope or ambition.

So China's manufacturing advantages must be viewed holistically, especially as it can be highly misleading, however tempting, to draw conclusions based on the trends of any specific factor.
Riaz Haq said…
China's dominance of manufacturing is growing, not shrinking
Country gaining market share in both low- and high-tech sectors

William Bratton is author of "China's Rise, Asia's Decline." He was previously head of Asia-Pacific equity research at HSBC.

The country's rapidly rising wages, for example, attract much attention. But it would be a mistake to assume that this signals the loss of competitiveness in more labor-intensive industries.

Rather, it reflects dramatic improvements in productivity and a broader structural shift into higher technology sectors. Furthermore, the use of national averages masks the diversity of China's labor force, with a substantial pool still on relatively low wages.

This is seen in the irrefutable fact that the country's manufacturers are still gaining export share across low-technology and labor-intensive industries, including textiles. In other words, their innate advantages are so substantial and so overwhelming that higher labor costs by themselves have no material impact on their competitiveness.

As such, despite all the frequently cited anecdotes, there is no real evidence that the factors underpinning China's competitiveness are being reversed. Rather, Asia's manufacturing industries will continue to concentrate in China, further entrenching its status as the core of the region's economic system.

This is the challenge for the rest of the region. No matter how hard they try, few countries, if any, will be able to replicate or match China's natural advantages. And this will have profound longer-term economic and geopolitical consequences.

Against the onslaught of highly competitive Chinese products, emerging economies will struggle to develop the manufacturing sectors they need to achieve and sustain productivity-led growth over the long-term.

But even more advanced nations are not immune from the pressures created by China, with the hollowing-out of their industrial structures a very real danger. The displacement of Japanese and South Korean manufacturers from the global telecommunications equipment and shipbuilding markets demonstrates just how quickly China can engage with its neighbors at their own games -- and win.

So for all the suggestions that China's grip on manufacturing is weakening, the reality could not be more different. It is not the Chinese producers that are losing influence, but their rivals across the region.

In fact, the natural forces driving the country's competitive advantages are now both so substantial and entrenched that the rest of Asia is seemingly engaged in an unfair trade fight -- and one it is unlikely to win. The region's slide toward a clearly defined economic core-periphery structure -- with China dominating and the rest being disadvantaged -- now looks inevitable.

In turn, this is creating dependencies which will prove evermore difficult to disentangle, no matter how strong the apparent political commitment in some countries to do so.

This is seen in how recent attempts to diversify imports away from Chinese producers have been constrained by the lack of credible alternative suppliers. It is noticeable that Australia and India, countries positioning themselves as regional rivals to China, have increased -- not reduced -- their reliance on Chinese manufactured imports over the last three years.

It is true that this manufacturing mastery may not have been developed as a deliberate geopolitical tool. But in the same way the U.S. was able to use its post-World War II industrial leadership to advance its own interests, the reliance on Chinese products will naturally give Beijing unrivaled power and influence within Asia. As such, China's future economic and political dominance of the Asian regional economy is set to be underpinned by its vibrant, dynamic and hypercompetitive manufacturing industries, whatever the country's doomsayers may claim.
Riaz Haq said…
Opinion The Checkup With Dr. Wen: What does it mean to hold China ‘accountable’ for covid?

By Leana S. Wen

whether it (COVID) is caused by laboratory accidents or animal-to-human spillover. ...

Not everyone agrees. House Foreign Affairs Committee Chair Michael McCaul (R-Tex.) told CNN on Monday that “some people need to be held accountable, whether that be in a civil context or criminal liability context.” He mentioned the possibility of sanctions against China as well as reparations “for killing millions of people across the world.”

These comments suggest an intentionality behind the spread of covid-19 that neither scientists nor intelligence experts have found any evidence for. To the contrary, as much as U.S. intelligence agencies disagree about the coronavirus’s origins, they agree on one aspect: This was not intentional. It was not an act of bioterrorism. No one intended to weaponize a virus to cause a global pandemic.

This fact bears repeating, and I hope McCaul and others who have been calling for “accountability” will be clear with Americans to distinguish between an intentional act and their preferred theory of a laboratory accident.

And they should be reminded that such a mishap could have happened in the United States, too.

In 2014, when the Food and Drug Administration conducted an office cleanup to move to a new location, it found hundreds of vials of virus samples in an unsecured storage room. Six of them turned out to be vials of the deadly smallpox virus. Astonishingly, no one knew they were there. It’s possible the vials had been there since the 1950s but were forgotten in subsequent inventories.

Also in 2014, some 75 staff members at the Centers for Disease Control and Prevention were exposed to anthrax after scientists failed to inactivate the anthrax bacterium before sending it to three labs that weren’t prepared to handle it. In a separate incident, the CDC inadvertently sent what it thought were harmless strains of flu but actually was the H5N1 avian flu.

More recently, in November 2022, poliovirus was found in the wastewater of a lab in the Netherlands that conducted research on polio. One lab employee was infected as a result of this mishap, which was described in the Eurosurveillance journal as an “unnoticed breach of containment at the facility.”

None of these incidents resulted in mass outbreaks. But they could have. If they did, what would accountability have looked like?

Certainly, mistakes should be identified and systems put into place to prevent them, as was done in the occurrences above. But if an outbreak spread beyond our shores as a result of human error, should other countries impose sanctions or require reparations? Should they go so far as to demand civil and criminal penalties for lab workers?

And what about diseases that don’t originate in the lab but could be attributed to farming practices, deforestation, climate change and other activities that bring animals — and animal pathogens — closer to humans? Should the Democratic Republic of Congo and South Sudan, where the first two outbreaks of Ebola occurred, be on the hook for costs borne to other countries from Ebola? Should the United States, where Lyme disease was first identified, be held responsible to the world for its effects?

Such blame games are not conducive to the goal of preventing pandemics. They could deter researchers from engaging in scientific investigations crucial to the development of vaccines and treatments. They could also give fodder to conspiracy theories and fuel violence against people of certain ethnic origins, as we have already seen in the rise in anti-Asian attacks. And if countries are worried about liability and retribution, it could further disincentivize global health cooperation.


But it’s not going to make the world safer to threaten punishment.
Riaz Haq said…
IMF: "China will be the top contributor to global growth over the next 5 years, with its share set to be double that of the US"

CHINA will be the top contributor to global growth over the next five years, with its share set to be double that of the US, according to the International Monetary Fund.

The nation’s slice of global gross domestic product expansion is expected to represent 22.6 per cent of total world growth through 2028, according to Bloomberg calculations using data the fund released in its World Economic Outlook released last week. India follows at 12.9 per cent, while the US will contribute 11.3 per cent.

The emergency lender sees the world economy expanding about 3 per cent over the next half decade as higher interest rates bite. The outlook over the next five years is the weakest in more than three decades, with the fund urging nations to avoid economic fragmentation caused by geopolitical tension and take steps to bolster productivity.

In total, 75 per cent of global growth is expected to be concentrated in 20 countries and over half in the top four: China, India, the US and Indonesia. While Group of Seven countries will comprise a smaller share, Germany, Japan, the United Kingdom and France are seen among the top 10 contributors.

Brazil, Russia, India and China – known by the acronym BRIC coined by Jim O’Neill, a former Goldman Sachs Group chief economist – are expected to add almost 40 per cent of the world’s growth through 2028.

The four nations established the BRIC forum in 2009 and the bloc became Brics a year later when South Africa – by far the smallest economy in the grouping – was admitted, a move O’Neill disagreed with.
Riaz Haq said…
Kissinger: Beijing “expects…to be the dominant power in Asia…The ideal solution…is a China so visibly strong that that will occur through the logic of events.”

What Mr. Kissinger sees when he looks at the world today is “disorder.” Almost all “major countries,” he says, “are asking themselves about their basic orientation. Most of them have no internal orientation, and are in the process of changing or adapting to the new circumstances”—by which he means a world riven by competition between the U.S. and China. Big countries such as India, and also a lot of “subordinate” ones, “do not have a dominant view of what they want to achieve in the world.” They wonder if they should “modify” the actions of the superpowers (a word Mr. Kissinger says he hates), or strive for “a degree of autonomy.”

Some major nations have wrestled with these choices ever since the “debacle of the Suez intervention” in 1956. While Britain chose close cooperation with the U.S. thereafter, France opted for strategic autonomy, but of a kind “that was closely linked to the U.S. on matters that affected the global equilibrium.”

The French desire to determine its own global policy gave rise to awkwardness with President Emmanuel Macron’s recent visit to Beijing. While critics say he pandered to the Chinese, Mr. Kissinger sees an example of French strategic autonomy at work: “In principle, if you have to conduct Western policy, you would like allies that only ask you about what contribution they can make to your direction. But that is not how nations have been formed, and so I’m sympathetic to the Macron approach.”

It doesn’t bother him that Mr. Macron, on his return from Beijing, called on his fellow Europeans to be more than “just America’s followers.” Mr. Kissinger doesn’t “take it literally.” Besides, “I’m not here as a defender of French policy,” and he appears to attribute Mr. Macron’s words to cultural factors. “The French approach to discussion is to convince their adversary or their opposite number of his stupidity.” The British “try to draw you into their intellectual framework and to persuade you. The French try to convince you of the inadequacy of your thinking.”

And what is the American way? “The American view of itself is righteousness,” says the man famed for his realpolitik. “We believe we are unselfish, that we have no purely national objectives, and also that our national objectives are achieved in foreign policy with such difficulty that when we expose them to modification through discussion, we get resentful of opponents.” And so “we expect that our views will carry the day, not because we think we are intellectually superior, but because we think the views in themselves should be dominant. It’s an expression of strong moral feelings coupled with great power. But it’s usually not put forward as a power position.”

Asked whether this American assertion of inherent unselfishness strikes a chord with other countries, Mr. Kissinger is quick to say: “No, of course not.” Does Xi Jinping buy it? “No, absolutely not. That is the inherent difference between us.” Mr. Xi is stronger globally than any previous Chinese leader, and he has “confronted, in the last two U.S. presidents,” men who “want to exact concessions from China and announce them as concessions.” This is quite the wrong approach, in Mr. Kissinger’s view: “I think the art is to present relations with China as a mutual concern in which agreements are made because both parties think it is best for themselves. That’s the technique of diplomacy that I favor.”

In his reckoning, Joe Biden’s China policy is no better than Donald Trump’s: “It’s been very much the same. The policy is to declare China as an adversary, and then to exact from the adversary concessions that we think will prevent it from carrying out its domineering desires.”

Riaz Haq said…
Richard D. Wolff - Why the Troubled U.S. Empire Could Quickly Fall Apart - Brave New Europe

For the first time in over a century, the United States has a real, serious, ascending global competitor. The British, German, Russian, and Japanese systems never reached that status. The People’s Republic of China now has. No settled U.S. policy vis-à-vis China has proven feasible because of internal U.S. divisions and China’s spectacular growth. Political leaders and “defence” contractors find China-bashing attractive. Denouncing China serves as popular scapegoating for many politicians in both parties and as support for an ever-increasing defense spending by the military. However, major segments of large corporate business have invested hundreds of billions in China and in global supply chains linked to China. They do not want to risk them. In addition, for decades, China has offered one of the world’s lowest-cost, better educated and trained, and most disciplined labour forces coupled with the world’s fastest-growing market for both capital and consumer goods. Competitive U.S. firms believe that global success requires their firms to be well established in that nation with the world’s largest population, among the world’s least-costly workers, and with the world’s fastest-growing market. Everything taught and learned in business schools supports that view. Thus the U.S. Chamber of Commerce opposed former President Donald Trump’s trade/tariff wars and now opposes President Joe Biden’s hyped-up programme of China-bashing.

There is no way for the United States to change China’s basic economic and political policies since those are precisely what brought China to its now globally envied position of being a competitor to a superpower like the U.S. Meanwhile, China is expected to catch up to the United States with equality of economic size before the end of this decade. The problem for the U.S. empire grows, and the United States remains stuck in divisions that preclude any significant change except perhaps armed conflict and an unthinkable nuclear war.

When empires decline, they can slip into self-reinforcing downward spirals. This downward spiral occurs when the rich and powerful respond by using their social positions to offload the costs of decline onto the mass of the population. That only worsens the inequalities and divisions that provoked the decline in the first place.

The recently released Pandora Papers offer a useful glimpse into the elaborate world of vast wealth hidden from tax-collecting governments and from public knowledge. Such hiding is partly driven by the effort to insulate the wealth of the rich from that decline. That partly explains why the 2016 exposure of the Panama Papers did nothing to stop the hiding. If the public knew about the hidden resources—their size, origins, and purposes—the public demand for access to hidden assets would become overwhelming. The hidden resources would be seen as the best possible targets for use in slowing or reversing the decline.

Decline provokes more hiding, and that in turn worsens decline. The downward spiral is engaged. Moreover, attempts to distract an increasingly anxious public—demonizing immigrants, scapegoating China, and engaging in culture wars—show diminishing returns. Empire decline proceeds but remains widely denied or ignored as if it did not matter. The old rituals of conventional politics, economics, and culture proceed. Only their tones have become those of deep social divisions, bitter recriminations, and overt internal hostilities proliferating across the landscape. These mystify as well as upset the many Americans who still need to deny that crises have beset U.S. capitalism and that its empire is in decline.
Riaz Haq said…
India can aim lower in its chip dreams

BENGALURU, July 5 (Reuters Breakingviews) - India’s semiconductor dreams are facing a harsh reality. After struggling to woo cutting-edge chipmakers like Taiwan Semiconductor Manufacturing (2330.TW) to set up operations in the country, the government may now have to settle for producing less-advanced chips instead. Yet that’s no mere consolation prize: the opportunity to grab share from China in this commoditised but vital part of the tech supply chain could pay off.

Prime Minister Narendra Modi wants to “usher in a new era of electronics manufacturing” by turning India into a chipmaking powerhouse. So far, the government has dangled $10 billion in subsidies but with little to show for it. Mining conglomerate Vedanta’s $19.5 billion joint venture with iPhone supplier Foxconn (2317.TW) has stalled; plans for a separate $3 billion manufacturing facility appear to be in limbo, Reuters reported in May. In a small win for the government, U.S.-based Micron Technology (MU.O) last week announced it will invest $825 million to build its first factory in India in Modi’s home state of Gujarat, though the facility will be used to test and package chips, rather than to manufacture them.

Even so, the Micron investment could pave the way for the country to move into the assembly, packaging and testing market for semiconductors, currently dominated by firms like Taiwan’s ASE Technology (3711.TW) and China's JCET (600584.SS). It’s not as lucrative as making or designing them but global sales are forecast to hit $50.9 billion by 2028, according to Zion Market Research.

An even bigger opportunity awaits in manufacturing what are known as trailing-edge semiconductors. Recently, New Delhi expanded fiscal incentives for companies to make these lower-end products in the country. It’s a far more commoditised part of the market but there’s much to play for. Analog chips, for example, are vital for electric cars and smartphones. Last year, sales grew by a fifth to $89 billion, per estimates from the Semiconductor Industry Association, outpacing growth for memory, logic and other types of chips.

The majority of the world’s trailing-edge semiconductors are currently made in Taiwan and China. So rising geopolitical tensions between Washington and Beijing, as well as worries of military conflict in Taiwan, will make India an attractive alternative for companies like U.S.-based GlobalFoundries (GFS.O) that specialise in this segment. Booming domestic demand is another factor: the Indian market is forecast to hit $64 billion by 2026, from just $23 billion in 2019.

Aiming lower could be just what India’s chip ambitions need.

Follow @PranavKiranBV on Twitter

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refiles to add link.)

U.S. memory chip firm Micron Technology on June 28 signed a memorandum of understanding with the Indian government to build a semiconductor assembly and testing plant, its first factory in the country.

Construction for the $2.75 billion project, which includes government support, will start in August, according to Ashwini Vaishnaw, India’s minister of electronics and information technology in an interview with the Financial Times published on July 5, with production expected by the end of 2024.

Riaz Haq said…
A new Huawei phone has defeated US chip sanctions against China

The new Kirin 9000s chip in Huawei’s latest phone uses an advanced 7-nanometer processor fabricated in China by the country’s top chipmaker, Semiconductor Manufacturing International Corp. (SMIC), according to a teardown of the phone that TechInsights conducted for Bloomberg.

Huawei’s latest smartphone, the Mate 60 Pro, offers proof that China’s homegrown semiconductor industry is advancing despite the US ban on chips and chipmaking technology.

The new Kirin 9000s chip in Huawei’s latest phone uses an advanced 7-nanometer processor fabricated in China by the country’s top chipmaker, Semiconductor Manufacturing International Corp. (SMIC), according to a teardown of the phone that TechInsightsconducted for Bloomberg

A brief recent timeline of US chip sanctions against China
August 2022: The US Congress passes the CHIPS and Science Act, a law that approves subsidies and tax breaks to help jumpstart the production of advanced semiconductors on American soil.

September 2022: The Biden administration bans federally funded US tech firms from building advanced facilities in China for a decade.

October 2022: The US commerce department bars companies from supplying advanced chips and chipmaking equipment to China, calling it an effort to curb China’s ability to produce cutting-edge chips for weapons and other defense technology, rather than a bid to cripple the country’s consumer electronics industry.

November 2022: The US bans the approval of communications equipment from Chinese companies like Huawei Technologies and ZTE, claiming that they pose “an unacceptable risk” to the country’s national security.

May 2023: Beijing bans its “operators of critical information infrastructure” from doing business with Micron Tech, an Idaho-based chipmaker.

“In the AI garden, the seeds are the AI software frameworks—which China already has access to. The plants in the garden are the AI models in use, which again are already available to Chinese AI companies. Nvidia provides the best shovels and pruning shears to tend the garden, but not the only means to tend it. So it doesn’t make sense to try to build a high wall around it...[T]o over-regulate these chips creates the risk that the US could fumble away its technology leadership. Would you rather have Chinese AI customers continue to fuel Nvidia’s growth and success? Or would you rather they spend their yuan to fuel the growth and success of Chinese suppliers?”

—Patrick Moorhead, a tech analyst, writing in Forbes in July 2023

One big number: China’s hoard of Nvidia chips
$5 billion: The value of orders that China’s tech giants have placed with Nvidia for its A800 and A100 chips, to be delivered this year, according to an August report by the Financial Times. The biggest internet giants—Baidu, ByteDance, Tencent, and Alibaba—have placed orders totalling $1 billion to buy around 100,000 A800 processors. Given that the US is mulling new export controls, Chinese companies are rushing to hoard the best chips on the market to train their AI models and run their data centers.
Riaz Haq said…
Arnaud Bertrand
Incredible, Gina Raimondo implores US industry to respect her sanctions because: "America leads the world in AI… America leads the world in advanced semiconductor design. That’s because of our private sector. No way are we going to let [China] catch up."

This is an incredible admission because the Biden administration's messaging - or shall I say propaganda - on their semiconductors sanctions has so far always been that it isn't to gain or maintain a competitive advantage over China, but solely to prevent China's military from accessing to certain technologies. See for instance what Janet Yellen said on exactly this: "[the sanctions are] tailored toward the specific national security objective of preventing the advancement of highly sensitive technologies that are critical to the next generation of military innovation and [are] not designed for us to gain a competitive economic advantage over any other country." (Src: )

Our Anthony Blinken: "One of the important things for me to do on this trip [to China] was to disabuse our Chinese hosts of the notion that we are seeking to economically contain them... However, what is clearly in our interest is making sure that certain specific technologies that China may be using to, for example: advance its very opaque nuclear weapons program, to build hypersonic missiles, to use technology that may have repressive purposes – it’s not in our interest to provide that technology to China. And I also made that very clear. So, the actions that we’re taking, that we’ve already taken, and as necessary that we’ll continue to take are narrowly focused, carefully tailored to advance and protect our national security. And I think that’s a very important distinction." (src: )

Pretty much everyone knew this was 100% bullshit and all done for the purpose of America maintaining a competitive advantage in the technologies of the future, like AI. But now we have the Secretary of Commerce, who implemented these sanctions, say exactly that.

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