Disruption (Page 30)

At a recent hearing in the US Senate, Senator Tom Cotton of Arkansas apparently had trouble understanding that a citizen of Singapore can look like a Chinese, talk like a Chinese and yet not be a member of the Communist Party of China. In Cotton’s questioning of Chew Shou Zi, the chief executive of TikTok, even the fact that Chew’s wife and children are American citizens seemed suspicious to him. 

This was all serious stuff for Cotton and his fellow senators as they probed in the name of safeguarding America’s national security against the looming threat of China. Apparently, Cotton’s Harvard education did not tell him that Singapore is thousands of kilometers from Beijing and is a sovereign nation independent of China. Or maybe he was just grandstanding to cater to the lowbrow mindset of his constituents.

At around the same time, the South China Morning Post reported that Chinese scientists had developed a “game-changing military surveillance device for electronic warfare.” In effect, the paper said, their breakthrough will enable the People’s Liberation Army to find and pinpoint the quadrants of a military target in real time with no place to hide.

This is the latest of a series of technological advances China has made in military arms that indicate it has either caught up with or surpassed the US in weapons development. Others include hypersonic missiles, stealth fighters and drones, advanced launch system on aircraft carriers, and the capacity to build many more naval vessels than the US.

While the US has been busy hunting for spies from the “whole of China” under every bed, China has been investing in hardware and software developments to neutralize American military superiority.

Each time, as China develops a counter to America’s advanced weaponry, this simply feeds US paranoia about China’s threat and causes the Pentagon gnomes to go scurrying for more budget allocations to develop the next-generation killing machine. Thus, you top me and then I will top you for topping me, and the vicious circle goes on.

The strategists and planners in Washington are also very good at creating likely scenarios based on the projection of what the Chinese would do “if I were them.” Some Pentagon generals speculate that the PLA will be ready to invade Taiwan by 2027. Suddenly, the mainland’s intent to invade becomes fact, and alarm bells ring and war preparations are begun. 

Portraying China as a menace is good for business

Of course, positioning China as a menacing threat is good for America’s protection business. Any country that believes in China as a threat becomes a client of the US security protection. The US has more than 800 military bases around the world and needs reasons for having them. 

On the other hand, the world is awakening to the realization that China is not posing a threat to anyone. It brokered a peace agreement between Saudi Arabia and Iran and has have established its Belt and Road Initiative with 150 countries. Beijing does not have any military presence outside of China to speak of, unless you count a supply base in Djibouti, and it adheres to non-interference in other countries’ domestic affairs.

Even the US is rumored to have asked China to intercede on America’s behalf with Iran and the Houthis in Yemen. The Houthis have been firing missiles at American and Israeli shipping in the Red Sea, forcing the rerouting of ships around the Horn of Africa instead of going through the Suez Canal, causing significant economic disruption. 

Despite its bases around the world, the mighty American military is virtually helpless against the Houthi rebels of Yemen and has no influence on Iran. The Houthis, by taking on the Americans in sympathy with the Gaza Palestinians, have gained worldwide prestige and recognition. China was unable to offer the US any remedy other than that President Joe Biden must persuade Israel to enact an immediate ceasefire.

When the tiny island nation of Nauru switched diplomatic relations from Republic of China (aka Taiwan) to the People’s Republic of China, US Secretary of State Antony Blinken flew to visit other island states in the South Pacific asking them to hold the line and not switch their diplomatic ties. In return, he promised billions of dollars to help out the governments.

‘White man can’t be trusted’

Blinken came and left, and no money followed from Washington. The heads of Palau and the Marshall Islands got impatient and wrote to Washington, first in the form of a private communication and then by public letter telling the world that the American word of honor isn’t worth very much.

At this point, the world sees the heretofore hegemon helpless before a ragtag band of rebels, hopeless in being able to stop Israel’s genocidal actions in Gaza, and offering checks to tiny island nations that can’t be cashed.

What about the US economic competition with China begun by then-president Donald Trump as he tried to “make America great again,” which was continued and even accentuated by his successor, President Joe Biden?

First of all, Trump’s assertion that tariffs imposed on imports from China were “free” money for the US Treasury is, to anyone that took Economics 101, as ludicrous as it sounds. Yet Biden continued the tariff policy because he was afraid of offending those American voters dumb enough to believe in Trump’s free money. (Explaining that import tariffs actually hurt the taxpayer’s pocketbook is much more challenging.)

Biden also doubled down by providing incentives to bring back manufacturing to the US, or at least “nearshoring” it out of China to friendlier countries. To his credit, the US enjoyed a modest return of manufacturing that can be highly automated and does not depend on skilled production workers who are no longer found in America.

Indeed, a good portion of manufacturing of low-value goods did leave China, a popular destination being Vietnam. The work ethic of the Vietnamese is comparable to that in China and thus enjoyed some degree of success. But these operations depend on the supply chains well established in China, and many, in fact, are actually owned by Chinese companies that relocated to Vietnam. 

Recent trade data show that while China’s direct export to the US has declined, its export to Vietnam and Mexico has significantly increased, in step with the latter increase in exports to the US. In other words, the supply chain lengthened, and became less efficient in direct response to American trade policy.

China’s production of electric vehicles is taking over the world by storm, becoming the No 1 exporter of cars, having surpassed Japan, Germany and South Korea. To keep Chinese EVs from the American market, Biden has added a 25% import tariff on them. China’s answer is to build an assembly plant in Mexico.

Biden’s strategy to bring back semiconductor manufacturing has also been significantly underwhelming, for a number of reasons. 

As Taiwan Semiconductor Manufacturing Company (TSMC) discovered, when it acceded to US pressure and moved an advanced production line to Phoenix, Arizona, the skilled workers needed to build and run the technologically challenging plant were lacking. The startup date for the inaugural operation has been pushed back by at least a year.

TSMC was promised billions of dollars in subsidy for the relocated fab and it is still waiting for the money. Meanwhile, American born and bred Intel, with a much less advanced new fab to be built in the US, is slated to get its billions in a timely manner. The likelihood of TSMC being left holding the bag should surprise no one.

China’s ‘collapse’ contrary to reality

Pundits in the mainstream media chortled in delight as they witnessed the recent bankruptcy of China’s major real-estate holding companies. They extrapolated and predicted negative growth for China’s economy, even a total collapse – again. See, for instance, a particularly incisive dissection of such buffoonery.  

Yet a paper published this year by the Switzerland-based Center for Economic Policy Research declared that “China is now the world’s sole manufacturing superpower. Its industrial production exceeds that of the nine next largest manufacturers combined,” three times as bit as the US and six times as bit as Japan. 

As the world’s manufacturing superpower, it’s no wonder that China can easily surpass the US in the making of weapons of war as well as industrial goods.

If Western observers hadn’t been so busy belittling China’s efforts, attributing progress to IP theft and copycat, they might have realized that China’s dominance in EVs, ship building, infrastructure building and high-speed train development were inevitable, as China responded to demands of a huge and growing domestic market.

Another response to competing with China is for the Biden White House to impose sanctions and export restrictions on high technology to China, in particular restrictions on access to semiconductor technology and chips for artificial intelligence.

Based on America’s prior experience with Russia, wherein economic sanctions and embargoes backfired and gave Russia a great boost in export to the world not aligned with the US and strengthened the value of ruble to new highs, Biden surely should have considered that China is too big for any effective stranglehold.

Indeed, last September Huawei surprised the US by introducing a smartphone that rivaled the latest Apple iPhone in function using its own chip design and made by a Semiconductor Manufacturing International Corp (SMIC) fab inside China. Huawei was denied access to the fab services of TSMC for three years but found a way around the restrictions.

Where there’s a will, there’s a way around

Finding ways around American sanctions and embargoes is inevitable and a matter of time.

China has a population four times that of the US, generates six times as many science, technology, engineering and mathematics (STEM) graduates every year, and has a middle-class consumer market larger than the total population of the US.

With industrial capability three times that of the US and a workforce that is technologically up to date, why should America resent being surpassed economically?

In the meantime, other than arguing about building the wall on the southern border to keep out the illegal immigrants, I haven’t seen much accomplished in rebuilding the infrastructure in America. Laughing out loud, the only story I saw reported early this year was the restoration of the Hamilton Bridge across the East River in New York City.

This was actually completed in 2013 and done by a Chinese construction company based in nearby New Jersey during friendlier times.

The US is running out of munitions to send to Ukraine, and the Houthis by the Red Sea are annoying as hell, like a gnat that couldn’t be swatted. Washington is not going to have much luck persuading the Taipei government to provoke the dragon across the Taiwan Strait, and is facing diminishing prestige around the world by the day.

Asia Times’ David Goldman writes about “Saving America’s future from the blob.” I see the “blob” as a more graphic term for the neocons running amok in Washington raising tensions everywhere in the world in the name of protecting national security. The more tension they caused, the more orders for next generation weapons are placed with the military industrial complex.

Americans pay for the weapons by raising the national debt and printing more money. The day will come when everybody in the world recognizes the steadily declining value of the dollar and decides not to hold on to the greenback any more. Backed by the dubious full faith and credit of a fading America, the US will be in a world of hurt.

Goldman concludes that “we cannot stop the rise of China, but we can rise faster.” Wow, we can? 

$500 million for China-bashing

What I have seen this month is a congressional allocation of $500 million for “negative news coverage of China.” I guess one way to stop the rise is to turn every rise into a story of China’s collapse. We are the most powerful propaganda machine in the world and we can (and have) portray every story just opposite to what is actually true.

Taking more than 700 million people out of poverty can be reported as human-rights atrocity. Re-education of Uighur young people to steer them away for terrorism can be seen as slave labor. The violent destruction of property and killing of innocent bystanders by Hong Kong protesters can be described, according to Nancy Pelosi, as a “beautiful” fight for democracy and freedom.

Pulling the wool over its own eyes is how America will fly into a mountain waiting in its flightpath.

George Koo retired from a global advisory services firm where he advised clients on their China strategies and business operations. Educated at MIT, Stevens Institute and Santa Clara University, he is the founder and former managing director of International Strategic Alliances.

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