China, China, China
1. Here’s what happens when the West turns away from globalization:
While the United States has free-trade agreements with 11 Latin American countries, it shows no appetite for more. Uruguay’s centre-right government is negotiating an accord with China after its requests for one with the United States were rebuffed. France and others are blocking the ratification of a trade pact between the European Union (eu) and Mercosur (a five-country bloc including Brazil and Argentina) which took more than 20 years to negotiate.
2. Remember when trade barriers with China were going to reduce America’s trade deficit? As I predicted, it never happened. Here is just one of the reasons why:
The two-step is a way in which some retailers make use of a loophole in American trade rules known as the “de minimis” exemption, which means “too small to be trifled with” and allows packages worth less than $800 to enter America without facing duties. . . .
Trade through the exemption—mostly the regular import of small packages rather than any trickery—is now so large it distorts national data. Seven in ten de minimis parcels arrive from China. Shein and Temu, two large online retailers with Chinese supply chains, alone account for three in ten. Our calculations, based on China’s share of de minimis imports, suggest that America’s trade deficit in goods is 13% larger with China, and 5% larger with the world, than official numbers indicate. This may help explain a growing puzzle in Sino-American trade statistics. China says that it exports about $73bn more than America thinks it receives, and some economists believe the true gap may be more than $150bn.
3. The Economist says China is becoming a scientific superpower, but that nationalism is an issue:
Chinese collaborations are common for Western researchers. Roughly a third of papers on telecommunications by American authors involve Chinese collaborators. In imaging science, remote sensing, applied chemistry and geological engineering, the figures are between 25% and 30%. . . .
In America and Europe, political pressure is limiting collaborations with China. . . .
There are also concerns among scientists that China is turning inwards. The country has explicit aims to become self-reliant in many areas of science and technology and also shift away from international publications as a way of measuring research output. Many researchers cannot talk to the press—finding sources in China for this story was challenging. One Chinese plant scientist, who asked to remain anonymous, said that she had to seek permission a year in advance to attend overseas conferences. “It’s contradictory—on the one hand, they set restrictions so that scientists don’t have freedoms like being able to go abroad to communicate with their colleagues. But on the other hand, they don’t want China to fall behind.”
This is a central paradox of nationalism. Do you want to be strong? Or isolated from globalization?
4. But cHiNa iS the rEaL tHReaT:
Oh, and Russian TV news people are now claiming that Russia is the rightful owner of Alaska.
5. A good essay on the parallels between the pre-WWI period and today’s US/China tensions.
6. A new estimate says China’s population decline will be even worse than feared, with Pakistan likely to overtake China in less than 100 years (by extrapolation.)
7. On a more optimistic note, China is moving from being a copycat to becoming major innovator in technology:
Western R&D centres in China have been re-engineered, from places to learn about the domestic market into hotbeds of innovation whose fruits can be found in products sold everywhere.
Foreign chief executives now believe that China’s brainpower and its innovation-curious regulatory regime are crucial ingredients of their companies’ global success. Nowhere else in the world can newfangled technologies, from novel drugs to flying taxis, be tested as quickly as in China, marvels a foreign diplomat. So even as the Chinese economy slows—it grew by a surprisingly tepid 4.7% in the second quarter, year on year—and multinational businesses try to reduce their reliance on Chinese supply chains amid mounting geopolitical tension, global CEOs are desperate to protect this critical third function of their Chinese operations.
Unfortunately, every silver lining has its clouds:
Western companies would understandably hate to be shut out of this r&d paradise. Some are nonetheless bracing for such an eventuality. In June America’s Treasury department issued draft rules that would ban American firms from investing in ai, semiconductors, microelectronics and quantum computing in China. These could come into force later this year. . . .
At the same time, Mr Xi’s paranoid security apparatus is making it harder to move some intellectual property (ip) generated in China outside its borders, ignoring economically minded officials’ concomitant efforts to attract foreign investment. Exports of some ais, such as speech- and text-recognition software or even TikTok’s recommendation algorithm, now need permission from the commerce ministry. So far this has not stopped most ip from leaving the country. But this may change at any moment, says Alex Roberts of Linklaters, a law firm. “We are at a tipping point.”
8. On a lighter note, Tim Walz and I have one thing in common. We both spent our honeymoons in China, and in both cases during the first part of June, 1994.
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9. August 2024 at 19:17
China is a fascinating study in political economy. There is the amazing commercial take off (significantly generated from below during a period of CCP internal paralysis). Then there are survival demands of an Leninist ruling Party.
Xi at times seems to want to treat the 1979-to-now period as just a very long New Economic Policy which can be reversed. He in particular, and the CCP in general, is obsessed with not following the path of the Soviet Union and the CPSU. (The PRC now having lasted longer than the USSR.)
And yet, that seems to be a way harder path for Xi in the 2020s than it was for Stalin in the 1930s. While China does look like it is hovering on its own version of the 1990-3 collapse of Japanese bubble economy or the 1997 Asian crisis.
But there are so many differences between the PRC and the USSR. Including that the CCP still allows an amazing level of Western scholarly research into the operations of the CCP state and society. (There is some great recent studies, for example.)
In recent years, I have become very fond of C-dramas. (The costume dramas, I avoid the contemporary stuff.) Among their other qualities, there is often a lot of subtle critiques of PRC history and politics. Amazing country.
10. August 2024 at 03:47
China is supplying Russia with the raw materials necessary to continue its war. Turkey also is doing so, while India is sending them money for fuel. In any case, China’s leaders could decide at any minute to sanction Russia, and the war would be over because Russia would not have enough raw materials to produce enough bullets, drones, etc. to keep from being overrun by the Ukrainian military. China’s leaders are actively supporting Russia, and have so much leverage that they could end the war right now if they wanted.
10. August 2024 at 04:03
5. I think that essay doesn’t discuss that the US is obligated by treaty to defend countries like Japan and (I believe) South Korea. Or that senior diplomats from places like Japan have been telling US diplomats that if Taiwan falls to the PRC, those nations will have to acquiesce to Chinese demands and essentially will become part of a Chinese sphere of influence, and so they are willing to go to war with China to prevent them from taking Taiwan. Nor does it acknowledge that leaders in both the US and China recognize that they must prepare their countries for war. And that they are doing so, or at least trying (and failing) in the case of Biden. Nothing about a US China war seems like sleepwalking to me; it seems rather like something that leaders in both countries are assessing the risks pretty realistically, and taking rational steps, and are aware that taking those steps may increase the chances of war nonetheless.
10. August 2024 at 05:44
Lorenzo, I don’t see the USSR as a good comparison for China—the economic systems are far too different—almost opposites in many ways.
I strongly disagree with your second comment. Chinese sanctions would have only a modest effect on Russia’s ability to wage war. Sanctions are almost never effective.
Lizard, China has no intention of invading South Korea or Japan–that’s just silly. They’ve never suggested that those places are a part of China.
“and are aware that taking those steps may increase the chances of war nonetheless.”
If the steps increase the chance of war, then they obviously are not “rational”. We should be trying to reduce the chance of war.
10. August 2024 at 06:35
Sumner, what do you make of China’s alliance with North Korea (and its conflicts with India)?
10. August 2024 at 06:41
“Chinese sanctions would have only a modest effect on Russia’s ability to wage war. Sanctions are almost never effective.”
Wrong, Sumner. There is no Z War without China. Remember the Iran-Iraq War, when sanctions actually worked at degrading Iran’s ability to replenish its weapons stockpiles.
10. August 2024 at 11:03
A war on the Korean Peninsula may not be started by China, but instead by North Korea, and then China decides (like they did last time) that they need to send troops in to ensure the South doesn’t prevail. Which would entail US and Chinese forces facing off in direct combat against each other. In which case it would seem rational for China to try to take Taiwan at the same time, and to launch missiles at all US bases from Guam, to Okinawa and the Philippines. The whole situation is combustible and the only way to make it not so is for either everyone to get nuclear arms, China to relinquish its claims to Taiwan, or for the US to pull out of the region and let China do what it wants.
10. August 2024 at 16:53
Remember, economic sanctions are almost always totally ineffective, if not counterproductive.
But even minor tariffs can trigger a global recession, or depression, and a collapse in living standards.
PS…I live near Hong Kong. The CCP is ugly, and that is not a hypothetical.
11. August 2024 at 08:32
Lizard, The North developed nuclear weapons, in case you didn’t notice. Please think before you post.
11. August 2024 at 10:24
No one is thinking of blockading North Korea or invading it proactively, because they have nuclear weapons. The same logic applies to every other country in the region, of which only China, India, and Pakistan have nuclear weapons. But if China and its kind of allies can attack or blockade other countries without consequences, nuclear weapons make sense for all of the countries in the region.
Also, a war between North and South Korea still might take place. The consequences of such a war for the South are so bad that it still might make sense for the South to seek reunification. A North Korea that can kill South Koreans with impunity is probably a worse outcome than a North Korea that fires nuclear weapons at the South but that is ultimately defeated; fewer Koreans die in that scenario., South Korea has a missile shield, and conventional attacks by the North will kill millions of people anyways.
11. August 2024 at 16:46
“The consequences of such a war for the South are so bad that it still might make sense for the South to seek reunification.”
Yes, but how?
15. August 2024 at 22:37
The inimitable Stephen Kotkin on USA vs China power competition, with more on Western politics, Trump and all.
These are segments about China from three full length lectures on geopolitics given in 2017 — the fundamentals all still apply today. They’re long as all really excellent lectures are, if interested you can listen at 2x speed, in YouTube search put “Kotkin Spheres of Influence”.
He has a very interesting take on the growing import of nationalism which is a good cut above all the popular cliches, but one has to listen to the full lectures for that.
16. August 2024 at 07:33
Well, if North Korea is firing artillery and missiles and drones as the South, the two countries are already at war, and if there is a war, it is extremely likely that it is a war of choice initiated by the North. So the South would simply keep fighting until they defeated the North, instead of seeking a peace (really a ceasefire) even though the North would launch nuclear weapons at the South if the North’s regime is threatened.
All that I really want is for the US to be so strong militarily (and hence by necessity industrially) that neither North Korea nor China consider starting a war a rational option. I have almost no knowledge of North Korea’s politics, so I have no idea if that kind of deterrence is even possible. But Xi is clearly able to be deterred if it looks like failure is the most likely outcome of an attempt to establish Chinese naval superiority in Asia. But that is a question of military power, not trade, so what the US does regarding trade with China has zero impact on Xi’s decision making regarding Taiwan and using China’s navy to coerce or outright attack other countries in Asia. Trade has no value as a deterrent for China anymore, except insofar as trade can impact the balance of naval power. So the US’ trade policy with regards to China should be to do whatever most improves the relative naval power of US and its allies. Because if China can establish naval superiority in Asia, it is totally rational for its leaders to do so. And if they have naval superiority in Asia, it is also rational for them to seek global naval superiority, and being the naval hegemon, they get to call the shots, not the US.