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CONTENTS

News

What Xi told Biden“Current China-U.S. relations don't meet the fundamental interests of our two countries and their people, nor the expectations of the international community. We should jointly chart the right course for bilateral ties," adding, “History is the best textbook. We should take it as a mirror and let it guide the future…. A statesman should think about and know where to lead his country. He should also think about and know how to get along with other countries and the wider world”. Read full article →

The first face-to-face encounter since Joe Biden began his presidency comes after years of diplomatic drift, during which the US escalated the threat of open conflict, incessantly provoked the Chinese over Taiwan and the administration’s bench of incompetents making one mess after another. All the while Beijing has been consolidating an extensive range of ties with non–Western nations in the declared cause of a new world order. A great deal could have been accomplished in Bali but Biden was not up to it. What did the U.S. side propose to get done in Bali? It is all spongy, exhausted rhetoric, a continued commitment to avoid addressing the Sino–US relationship seriously. This is what I mean by paralysis. American officials have nothing to say when they speak across the Pacific, and therefore say nothing in the cotton-wool language of obfuscation. Read full article →
In Bali, Xi scolds Trudeau: “Everything we discussed was leaked to the newspapers. That’s not appropriate and that’s not the way our conversation was conducted, right? If you are being sincere, we must communicate with mutual respect. If not, I’m not so sure how it will turn out.” Trudeau responded, “In Canada, we believe in free and open and frank dialogue, and that is what we will continue to have. We will continue to look to work constructively together, but there will be things we will disagree on”. “Let’s create the conditions first,” Xi said before shaking his hand and walking away.  Read full article →

Economy

Instead of sales data, Alibaba released a “Double 11 Social Value Report” on employment creation, assistance for farmers and the elderly, and green and low-carbon ecommerce programs – more suited to the “common prosperity” agenda. Read full article →

New home prices fell most in seven years before sector rescue: New-home prices in 70 cities, excluding state-subsidised housing, fell 0.37% last month from September, a 14th straight decline. The existing-home market fared worse, down 0.47%, the steepest decline since 2014. Read full article →

Electricity consumption rose 3.8% YTD to 7.2 trillion kWh. Power consumption in the primary industry grew 9.9 percent year-on-year in the first 10 months. Consumption by secondary and tertiary industries increased 2% and 4%, respectively. Consumers' power consumption increased 13%. Read full article →

China’s economy has grown 6.6% annually for the past decade, above the global average of 2.6% and 3.7% for developing economies. It contributed 39% to world economic growth, more than the G7 countries combined. Its GDP accounts for 19% of world economic aggregate and its foreign trade, $6.9 trillion, growing 7.2% annually, is 56.8% higher. Read full article →

SOEs grew 100% faster than GDP in 2021. Total assets of Chinese state-owned enterprises  excluding the financial sector increased 15% to 308.3 trillion yuan ($43.76 trillion) in 2021, indicating steady growth despite the effects of Covid-19 on the economy. Read full article →

The regulatory policy framework allows overseas investors to invest in China’s domestic financial markets easily. Half of cross-border transactions are settled in RMB. Deposits in the major offshore RMB market are 1.5 trillion RMB, and the IMF increased RMB's weight in the SDR from 10.92% in 2016 to 12.28%, reflecting the international community's recognition of the increased free-use of RMB.Read full article →

The predominant factors affecting human productivity and standards of living are (a) successfully deployed-and-diffused ideas (about manipulating nature and cooperatively organizing humans) on the one hand and (b) resources per worker on the other. Brad DeLong.

Trade

Nio has 1,200 Battery Swap Stations (above) in China and will have 4,000 in operation by 2025 – of which 1,000 will be outside China. Read full article →

Chinese battery companies are flocking to Europe’s booming EV market. Of 22 Chinese companies that have announced listings in Europe this year, half are in the EV battery business. This year, for the first time, Chinese companies have raised more money through share sales in Europe than in the U.S. Read full article →

Yiwu made 70% of World Cup goods – footballs, flag strings, national flags, horns, trophies and medals  – sold around the world. Read full article →

Last month, Tiffany drew 1.6 million Instagram views of a sleek, 60-min black-and-white video featuring Beyoncé dripping gems and surrounded by revelers. But Tiffany's video of social media star Kate Bartlett on TikTok, talking directly to viewers while trying on Tiffany trinkets has been watched 5.3 million times. Says TikTok: “Don’t make ads, make TikToks.” TikTok is stealing business from Snap, Google and Meta. Read full article →

Trade between China and RCEP –ASEAN, China, Japan, ROK, Australia and New Zealand – was 30% of China’s total, and trade with ASEAN countries grew 20% YoY in October. Read full article →

China's sovereign wealth fund earned 14% net return on overseas investments in 2021. Its annualised, cumulative net return on overseas investment for the decade ending 2021 was 9% on $1.4 trillion of state-owned financial assets, up 7% YoY. Read full article →

Chinese display makers captured 30% of global AMOLED displays for smartphones in Q3, up 20%. Samsung still dominates the market with 60% but its shipments fell 22% YoY. Chinese display maker BOE shipped 17.5 million AMOLED units in Q3, 13% of the global market, making it the largest Chinese supplier. Read full article →

Can the US compete with Chinese PV? “To compete in a business dominated by its geopolitical rival, the U.S. needs to build a PV supply chain nearly from scratch.” Read full article →

A Quick Guide to Accounting and Audit in China 2023 walks foreign businesses through the entire annual audit and compliance process: Chinese accounting standards; Annual audit in China; Annual compliance requirements in China: for CFOs; CEOs; and Accounting Managers. Complimentary download →

Technology

Above: Hardware integration of the Solar Radio Telescope Circular Array in Sichuan is complete. Using the 313 antennas in the circular array and the 100-m-high calibration tower in the center, the telescope images and analyzes spectral observations of solar activities. Read full article →

Amazon Cloud Services (AWS) China uses a well-designed system to hide lucrative blockchain projects with unclear entanglements in virtual currencies, or crypto, which are strictly prohibited by the Chinese government. 35% of AWS China’s overall revenue last year, $2.1 billion, came from its blockchain businesses. Read full article →

The Skyboard V supply shuttle docked with the space station two hours after liftoff, breaking Russia's three hour record, and marking a breakthrough in China's remote control technology. Shorter time from launch to docking saves resources that can be applied to the crewed spacecraft, and speeds space rescue missions. Read full article →

China has 60% of world's top engineering departments. Two are in Singapore, and two are in the US.  #1 is Tsinghua University. Read full article →

Gaofen 5B Earth-observation satellite identified shale gas wells in New Mexico that emit 7-14 metric tons of methane per hour. Methane traps 80 times more heat than carbon dioxide. Read full article →

The 2140-km Baihetan-Zhejiang 800 kV ultra-high voltage transmission line is finished and will transmit 30 billion kWh of electricity a year – the output of four big nuclear reactors. Read full article →

The proportion of digital skills continued to rise in Chinese cities. Electronics and data science rank among the top five representative skills in Beijing; computer hardware skills are in first place in Nanjing; materials science and robotics rank among the top five in Suzhou... Read full article →

Virtual Reality is a “key industry” in the 14th Five-Year Plan, and now we have the Virtual Reality and Industry Application Integration Development Action Plan (2022-2026), with five key tasks for the next five years: Promoting integrated innovation of key VR technologies; Improving the supply capacity of the entire VR industry chain; Accelerating multi-industry and multi-scenario VR applications; Strengthening the construction of the industrial public VR service platform; Building an integrated VR application standards system. Read full article →

Society

Above: Nanning, Guangxi regional capital


Singles Day: livestream stars hop freely between platforms. High-profile livestream stars moved freely between different major platforms like Taobao and Douyin, highlighting newfound cross-platform freedom in China’s online retail sector, after antitrust pressure from regulators. Previously, top livestreamers were bound to their platforms.Read full article →

Common prosperity Trial Spot:  Jiashan County, Zhejiang, targets 82% middle class by 2025, vs the 35% national average. Authorities hope Jiashan county of 650,000 will be “a model of high-quality, county-level development” by 2035, and to apply its lessons nationwide by 2050. Read full article →

There are 38,000 cooperatives in China (5,000 more than 2019) with 400,000 outlets nationwide, promoting rural products and connecting producers to cities. Sales rose 19% to $400 billion in H1, thanks in part to e-commerce. Read full article →

Beijing's Integrated Communities Development Plan increases access to community services. New communities will be constructed with canteens, clinics, kindergartens, and other essential facilities, incorporating technologies that facilitate daily life; the goal is to connect communities in a "15-minute circle of life" as 70% of people expect to live in residential communities by 2035. Read full article →

Health

In 2020 basic medical insurance coverage reached 96.8%. In urban areas, it was 96.1%. In rural areas, it was 97.6%. Read full article →

FM Wang Yi listed China's Five "Firsts" in Global Covid Response: China is the first country to

  1. share infection information and exchange anti-virus experience with all parties. With an open, transparent, and responsible attitude, China has promptly informed the World Health Organization and relevant countries of the cases, publicized the genome sequencing of the virus at the first opportunity, and shared actual experience in prevention and control. 
  2. provide other countries with large batches of anti-pandemic supplies. With the virus spreading, China has launched a global emergency humanitarian campaign
  3. provide developing countries with large-scale vaccine assistance. China has already provided more than 1.1 billion doses of finished and bulk vaccines to over 100 countries worldwide.
  4. send medical expert teams to foreign countries. China has dispatched 37 groups of anti-pandemic medical experts to 34 countries on all continents.
  5. propose the building of a global community of health for all. President Xi Jinping put forward this major initiative as early as in March 2020, pointing the way forward for China's participation in global cooperation against COVID-19 and building the consensus that the international community should fight the virus in solidarity. Read full article →

Environment

There are 43 international wetland cities in the world, 13 of which are in China. Now Beijing, having spent $ 2.5 billion since 2012 on wetland conservation, is incorporating 11 million hectares of wetlands – 10% of the country's entire land area – into the national park system.  Read full article →

The subject of climate compensation was once made taboo by rich countries worried they might be on the hook for vast sums. But intense pressure from developing countries forced the issue of ‘loss and damage’ onto the formal agenda at the talks for the first time at COP27 in Africa this year. Whether there will be a deal to promote further technical work or the creation of an actual fund remains to be seen. Read full article → 

China has 90% of the world's 500,000 electric buses, in line with its 2030 and 2060 carbon neutrality programs, which aims to fully electrify its public bus fleet by 2035. At this stage 70% of China's fleet has been electrified, with some cities, like Shenzen, already at 100%, having 17,000 e-buses on the roads. Read full article →

Statistics

Governance

Chinese food delivery drivers, investigative journalists, and academics helped shape one part of the world’s first regulations on recommendation algorithms. From that process, we can learn how international actors might better predict and indirectly influence Chinese algorithm policy. Read full article →

Jin Zhongxia, PBOC DG of international affairs, explains the Global South debt crisis:

  1. Debtor country mismanagement: Certain debt-dependent countries mismanaged their borrowed funds and failed to use them productively to generate economic growth;
  2. Over-abundant money supply at the global level: The low-interest environment in the post-Financial Crisis era enticed many developing countries to borrow agressively and many international investors to enter the sovereign debt market. 
  3. Covid, war and increasing debt vulnerability: Covid-induced economic losses and war-induced inflation are eating into developing countries’ current account balances. The Federal Reserve’s continued rate hikes are leading to currency depreciations that further exacerbate an already stretched fiscal situation. Read full article →

China's modernization model differs from the West's:

  • People-centered vs. capital-centered
  • Common prosperity vs. polarization
  • Synchronization of material and spiritual development vs. endless pursuit of meaningless consumerism
  • Harmony between humanity and nature vs. exacerbation of the ecological crisis
  • Peaceful development vs. shameless exploitation and plunder by war

The people are an essential element woven throughout the characteristics of the China model, and reflect the fact that the Communist Party of China serves the people and strives to exemplify the ideal of treating people equally and seeking the common good for all humankind. Read full article →

NewsweekHong Kongers See US Bigger Threat Than China. 38% felt the US is more of a threat, 29% see it more as an ally and 21% said neither. Slightly fewer, 37%, chose the Chinese government as a threat and 34% called Beijing an ally, while 16 percent thought it was neither. An additional 37 percent of Hong Kong residents said they believed closer relations with mainland China "will best serve Hong Kong's long-term strategic interests," outweighing the 30 percent that thought stronger ties with the United States would better benefit the territory. Read full article →

The new Draft Social Credit Law attempts to address the relatively independent social credit concepts of “creditworthiness” (aka “integrity”) and financial credit reporting (征信). As each of these topics has distinct content and goals, the result is something of a ‘franken-law’ with chapters on each aspect roughly sewn together, rather than a definitive integration of the diverse elements. Ultimately, the draft overextends itself, doing justice to none of them. Hopefully, it will undergo serious revisions before it ever becomes law, meriting more in-depth analysis. Read full article →

History 

When I was young, my family made an annual trip to my grandparents’ graves. My father used to stand before their tombstones and swear to them that I’d study hard and bring them glory... Because my village elementary school only went up to the second year, I had to transfer to a school in the neighbouring village. My classmates and I would walk to school along a dirt road that would turn to mud at the first sight of rain and wade across the river between the two villages. Later, when I started middle school in the nearest township, I found shabby buildings, checked-out administrators, and bullying. My parents simply told me to buckle down. What else could I do? We had to rely on ourselves. From there, I tested into the county high school, then Beijing Normal University, where I stayed for a PhD before securing a job at a university in the eastern province of Zhejiang earlier this year. Read full article →

China can indeed claim to have 5,000 years of civilisational history. Whether or not it can be described as “uninterrupted” or “continuous” is another matter. What is clear, however, is that the Eastern core has primarily remained geographically fixed. Eastern civilisation has evolved more or less in the same place. That is why modern China can claim 5,000 years of civilisational history. Because the physical borders of China today overlap with the multiple political instantiations (e.g. its dynasties) of the Eastern core across the ages. On the other hand, the Western core has moved. It started in the Hilly Flanks, moved to Egypt and Mesopotamia, then Rome, then northeastern Europe, and then across the Atlantic to the US of today. The modern United States cannot similarly claim 5,000 years of “continuous” civilisation history because it occupies a physically different space on the map. The geography is different. But, similarly to China, the modern US is at the apex of the evolutionary processes of civilisation that can be traced back in time (Western core to 7,000 BC). It’s just that this evolution occurred across locations, peoples, and languages, which muddies the picture. Read full article →

On July 15, the Party's theoretical journal, Qiushi, Seeking Truth, published a long article by Xi Jinping, on the “Origins of Chinese Civilization Project". Western readers need to pause and consider what exactly happened: the Politburo, the highest body of the CCP, in the middle of national and international crises, took time to study the origins of Chinese civilization, and Xi Jinping himself gave the main speech. Read full article →

During the Yan’an period, Mao Zedong urged all Party members to study the history of their nation, and repeatedly observed that, if we want to look at the future, we must look at history. We are historians, and only by talking about history can we convince people–an importance Mao attached to the study of history since his youth. President Richard Nixon once said of Mao: “He was not only a completely dedicated and practical Communist, but he was also an imaginative poet with a deep appreciation for the history of the Chinese people. The Comprehensive Mirror to Aid in Governance  Zizhi Tongjian 《資治通鑒》a masterpiece of chronological historiography compiled during the Northern Song Dynasty, has a rigorous style, a clear context, a rich network of interconnected references, and a embodying thought on governance providing a valuable classic for future generations to govern the world. Mao Zedong’s study of the book continued throughout his life. He learned about ancient Chinese politics, warfare, and official governance, experienced historical experience, and summarized historical lessons from this masterpiece of history, and had unique insights into its academic characteristics. At the same time, Mao attached great importance to the influence and inspiration of the Comprehensive Mirror and gradually developed a materialistic view of history with Chinese style. Read full article →

Propaganda

US Treasury Secretary Janet Yellen hopes "China is able to roll out a more effective vaccination campaign to combat the coronavirus.”  Read full article →

France’s Ecole de Guerre Economique asked what the French intelligence services see as threats to their country’s economy? Their collective view is clear: 97% say the US is the foreign power that  “most threatens France's economic interests”. Read full article →

War criminal George W. Bush and Ukrainian President Volodymyr Zelensky will be appearing at an event on Wednesday at the George W. Bush Presidential Center, in partnership with the U.S. government-funded narrative management operations Freedom House and National Endowment for Democracy. Also appearing with Bush will be the leader who’s slated to become the face of the U.S. empire’s next proxy war, Tsai Ing-wen of Taiwan. CNN says: “Taiwan’s President Tsai Ing-wen will also take part in the event next week. She will deliver a recorded message, in which she is expected to underscore that the struggle for freedom is a global challenge.” And sure, why not. If you’re going to manufacture consent for proxy warfare against multiple powers as your empire flails around frantically scrambling to prevent the emergence of a multipolar world, you may as well save time and promote them all on the same ticket. Read full article →

Rishi Sunak is facing calls to rip out hundreds of thousands of Chinese smart meters which could be allegedly used to shut down UK power supplies. Tory leader Sir Iain Duncan Smith said Mr Sunak should not miss the chance to warn allies of the dangers China poses, urging him to take immediate action at home by halting the installation in UK houses of smart meters made by a firm linked to the Chinese state. Read full article →

Geopolitics

At the ASEAN summit in Phnom Penh, Chinese PM Li Keqiang announced approval of a $1.6 billion expressway from Phnom Penh to the Vietnamese border (first section in image above), and financial support for a rail link between Phnom Penh, Bangkok, and Vientiane–which already has a thriving high-speed rail line running into China. Both this and the rail link should be completed by early 2027, and form a vital link with Asian Highway 1, connecting China through Myanmar to Thailand, Cambodia, and Vietnam. Read full article →

US Ambassador Chas. H. Freeman: "China has had no apparent imperial or ideological agenda in the Middle East. Unlike the US today, China does not ask countries to change their political systems and values, punish them for failing to do so, or demand exclusive relationships with them. It does not make their stance on the behavior of third countries – like Russia in Ukraine – a litmus test for good relations with them. And it does not insult them or their leaders. China has been very careful to focus its policies in West Asia on trade and investment and to keep its distance from the region’s political disputes. As a result, it has been able to maintain cordial ties with every ‘Middle Eastern’ country, including Iran, Iraq, and Israel as well the member states of the GCC, Egypt, Jordan, the Palestinians, and Syria. Meanwhile, China’s Gulf partners have found Beijing’s state capitalism, deep pockets, and rapid rise to modernity appealing. They see China and its BRI as a potential contributor to their Vision 2030 and other economic development plans. There is not a single country in the Middle East that sees the quasi-war the United States has initiated with China as in its interest. From their point of view, it is an obstacle to progress accompanied by annoying American peevishness about their cooperation with China that offers no substitute or alternative to such cooperation. The current U.S. approach is not a viable means of preserving U.S. influence in the Middle East. Among other things, it shows an unseemly anxiety that erodes faith in American wisdom and self-confidence". Read full article →

The US and NATO oppose self determination for Russian speaking Donetsk and Luhansk but support self determination of Taiwan where 95% of the population are Han Chinese. Against the UN resolution that Taiwan is part of China, the US continues to “protect” Taiwan against a takeover by China, threatening military intervention if necessary. Yet the fact that they do nothing to facilitate the orderly reunification of the two parts of Chinese territory indicates that they want Taiwan to remain apart from China for their own strategic reasons. Read full article →

Most Economically Influential Countries:
1.🇨🇳 China
2.🇺🇸 US
3.🇬🇧 UK
4.🇩🇪 Germany
5.🇯🇵 Japan
6.🇷🇺 Russia
7.🇦🇪 UAE
8.🇸🇦 Saudi Arabia
9.🇫🇷 France
10.🇨🇦 Canada
15.🇶🇦 Qatar
16.🇮🇳 India
17.🇮🇹 Italy
20.🇪🇸 Spain
22.🇧🇷 Brazil
25.🇹🇷 Turkey
32.🇲🇽 Mexico. U.S. News & World Report, 2022

Defense

Ground experiments at Beijing’s JF-12 shock tunnel took a hypersonic engine to Mach 9 on low-cost kerosene jet fuel, instead of expensive hydrogen, the default fuel. Read full article →

The U.S. Navy wants new destroyers, driven by the failure of $7 billion Zumwalt Class destroyers and the advanced capabilities of China’s new, $980 million Type 055 ClassRead full article →

In 1996, a mere $2 billion of business deals were signed at the Zhuhai Airshow. This year, the amount reached $35.16 billion, including contracts for foreign and Chinese entities. Read full article →

Asian governments have taken note of Washington’s reluctance to challenge Russia directly in Ukraine. This has made Ukraine the battleground in a Russo-American proxy war in which Ukrainians, not Americans are dying. Asians have also taken note that the major burden of Washington’s sanctions against Russia has fallen on U.S. allies in Europe and Russia’s other trading partners rather than on the United States itself. Meanwhile, American economic influence in Asia has unmistakably declined. Yet Washington is ever more insistent that its Asian security partners join it in attempting to isolate and weaken Beijing. From the perspective of the countries in the region, this does not compute. Read full article →

Mao Zedong: “Chinese military men are not necessarily politicians, but most of the outstanding politicians are military men. In China, especially in the era of dynastic change, if you do not know military affairs, how can you do anything in politics? Politics, especially the key moment of politics, often relies upon military strength to impose itself. If you are not the ruler of the whole world, it enables you to conquer the world. If you are the ruler of the world, it shows how you can maintain your rule. Read full article →

LONG READS:
China in LatAm
China Is Making More Big Moves in Latin America

Nick Corbishley 
 

What happens when one of Latin America’s smaller economies, on the US doorstep, decides to throw its lot in with China? It looks like we are about to see. Two big things happened this past week in El Salvador, one of Latin America’s smallest countries. First, on Nov 7, the country’s Vice President Félix Ulloa announced that China had offered to buy up all $21 billion of El Salvador’s distressed sovereign debt.

“China has offered to buy all our debt, but we have to be careful,” Ulloa toldBloomberg on the sidelines of an event in Madrid. “We are not going to sell to the first bidder, we have to see what the conditions are like first.”

If China were to actually do this, it would represent a watershed moment for the region. As Bloomberg noted, “anything close to that by a leading sovereign creditor hasn’t happened since the late 1980s, when the US moved to bail out Latin America,” along with, as Bloomberg failed to note, many of Wall Street’s finest.*

However, shortly after Ulloa made those remarks in Madrid, they were rapidly rebutted by other Salvadorian government officials. Ulloa himself later said that his comments had been taken out of context.

But then three days later, on Nov. 10, the second big thing happened: Salvadoran President Nayib Bukele announced on Twitter that his country “will sign a free-trade agreement with China” after meeting with Beijing’s ambassador. Before making that announcement, his government cancelled a pre-existing free trade agreement with Taiwan. Shortly following the announcement, China’s Commerce Ministry said the two countries plan to conclude the agreement as swiftly as possible.

“Since the establishment of bilateral ties, the two sides have reached important consensus at the head-of-state level to promote deepening all areas of trade and the economy and obtain rich results,” said China’s Commerce Ministry on Thursday. “On this basis, to delve further into the potential of two-way cooperation … China and El Salvador wish to start processes related to free-trade talks as soon as possible and make our utmost effort to finish those processes as soon as possible.”

Close to Default

The announcement comes as El Salvador is looking to restructure its external debt to avoid falling into default. The Salvadorian government has around $670 million in bonds due on January 24. That debt is currently rated CCC+ by S&P Global Ratings, seven notches below investment grade. Fitch has already warned investors to expect some form of default in January.

The country is nursing significant losses from the government’s madcap bet on bitcoin late last year when the cryptocurrency was close to its record top. Bukele made bitcoin legal tender in September 2021, just two months before the collapse began, and invested an undisclosed sum of public funds in the cryptocurrency. Since then bitcoins have lost 67% of their value. Perhaps it’s no coincidence that Bukele announced the free trade agreement with China on the same day that FTX declared insolvency. From El País:

It is not known with certainty how much Bukele has invested in bitcoin, but based on the announcements he has made on social networks, it is estimated that the loss for public finances so far is around $70 million, says Ricardo Castaneda, economist at the Institute Central American Fiscal Studies (ICEFI). “This has a very high opportunity cost for a country like El Salvador, because it represents, for example, almost the total budget of the Ministry of Agriculture in a country where half the population suffers from food insecurity,” the economist points out, on the phone. from San Salvador. The smallest country in Central America, El Salvador, has a poverty rate of 26%, according to the World Bank.

It is against this backdrop that China has decided to enter the fray. The move will almost certainly raise hackles in the US, which is currently El Salvador’s largest trading partner and is already leery about China’s growing influence in its own “backyard”. El Salvador may be a relatively small fish, with a population of 6.5 million and a GDP of just over $30 billion, but its decision to cosy up to China could be hugely significant, for two key reasons.

1. Precisely because El Salvador is such a small country.

And what’s more, it is in the US’ direct neighborhood and its economy is totally dollarized. Yet the Bukele government still felt emboldened enough to scrap its established trade agreement with Taiwan — the US’ strategic outpost in East Asia — in order to sign a trade agreement with the US’s biggest geopolitical rival, China. There are now four countries in Central America that have scrapped their trade agreements with Taiwan in recent years, the other three being Costa Rica, Panama and Nicaragua.

Bukele may feel that he can get away with such a provocative step since he is far and away the most popular national leader on the American continent, consistently earning approval ratings of around 90%. In his fourth year in office, Bukele recently announced plans to seek reelection in 2024, despite the country’s constitution barring presidents from having consecutive terms.

Bukele’s overwhelming popularity is largely due to his government’s relentless, often brutal crackdown on the 18th Street and Mara Salvatrucha streets gangs that have made life insufferable for everyday Salvadorians and the country more or less ungovernable. Since Nayib Bukele became president in 2019, the number of homicides has more or less halved, though an explosion of violence in March this year forced the government to double down on the crackdown.

Bukele’s decision to stand for reelection set him on collision course with Washington, which already sanctioned several government officials last year. The announced free trade agreement with China is almost certain to escalate tensions. As the Salvadorian economist Luis Mondero told TheGuardian, if Bukele were to bite the bullet and accept debt financing from China, it “would represent a total realignment of El Salvadoran foreign policy” away from the US and closer to China, Russia and Turkey.

2. Because it forms part of a much broader trend that is radically changing the economic and geopolitical contours of Latin America.

China already has free trade deals with Chile, Peru and Costa Rica and is negotiating future agreements with five other Latin American states.

As I have documented in previous posts (most recently here), China has massively expanded its influence and economic footprint in the region. In the first 20 years of this century, China’s trade with Latin America and Caribbean grew 26-fold, from $12 billion to $315 billion. During that time (as the Statista maps below show) China surpassed the US as the larger trading partner of the two for most countries in Asia, Africa and South America. In the latter region only three countries — Colombia, Ecuador and Suriname — continue to trade more with the US than China.

As a trading power, the US holds complete sway over Central America, at least for now. And pound for pound, it is still Latin America and the Caribbean’s largest trading partner. But that is predominantly due to its huge trade flows with Mexico, which account for a whopping 71% of all US-LatAm trade. As Reuters reported in June, if you take Mexico out of the equation, China has already overtaken the US as Latin America’s largest trading partner. Excluding Mexico, total trade flows — i.e., imports and exports — between China and Latin America reached $247 billion last year, far in excess of the US’ $173 billion.

This has happened for a variety of reasons. As I’ve noted before, China’s rise in the region coincided almost perfectly with the Global War on Terror. As Washington shifted its attention and resources away from its immediate neighborhood to the Middle East, where it squandered trillions of dollars spreading mayhem and death and breeding a whole new generation of terrorists, China began snapping up Latin American resources, in particular food, petroleum and strategic minerals like lithium.

Governments across the region, from Brazil to Venezuela, to Ecuador and Argentina, took a leftward turn and began working together across multiple fora. The commodity supercycle was born. Since then China has become the most important trading partner for nine countries in the region (Paraguay, Brazil, Chile, Argentina, Peru, Venezuela, Cuba, Uruguay and Panama). In total, 22 of the region’s 33 countries have signed up to China’s Belt and Road Initiative, including four in Central America (Nicaragua, Costa Rica, Panama and El Salvador).

Unlike the US, China does not tend to meddle in internal politics in the region, or at least hasn’t until now. That may change if more and more countries begin to default on Chinese loans, as already happened in Ecuador in 2020. The US, apparently with zero self awareness, has made no bones about accusing China of deploying “debt trap diplomacy”. But for the moment the Chinese are happy to let the money do the talking — and so too are many Latin American governments.

And the money is talking loud and clear. In 2020, the region attracted $94 billion of Chinese investment. That is still less than half the $252 billion invested by US companies. In 2021, China’s trade volume with Latin America exploded year over year by a whopping 40%, partly because the region’s economy was rapidly recovering following the sharp fall off in activity in 2020. If anything, Beijing’s inroads into the region, including, notably, Mexico, are accelerating, according to data published earlier this month by Janes IntelTrak’s Belt & Road Monitor reveals. From Forbes:

With one crisis after the next in South America, coupled with Washington largely ostracizing it as a solution to its Asia-centric supply chain woes, Chinese capital and corporate brands are making inroads like never before. If the post-World War II era in Latin America was the era of U.S. corporate power in countries like Brazil (GM and Coca-Cola), the post-2000 era is set to be won by the Chinese (Polestars and TikTok)…

The election of Luiz Inacio Lula da Silva likely means even closer ties to China as Lula will look to drum up business and investment to get production up quickly, and inflation and interest rates down.

In the last two weeks ending October 31, Latin America saw the highest number of Belt and Road Initiative (BRI) projects. These are largely Chinese state-funded development projects in infrastructure. Over that two-week period, China dished out around $5.3 billion in fresh capital, and Mexico got almost half of it — a $2.16 billion railroad project in Guadalajara.

On October 19, a 30-year operating license was given by Mexico’s Federal Telecommunications Institute to China Unicom — a state-owned telecommunications company that was banned from doing business in the U.S. over spying concerns in January 2022. The license gives China Unicom permission to provide services in the fixed and mobile telephone markets in Mexico.

Jiangsu Lixing General Steel Ball Company, an automotive parts manufacturer, said on October 24 that it would partner with American Industries Group (AIG), a privately-owned Mexican company, to establish a precision steel ball manufacturing plant in the country.

And Shanghai Carthane Company announced on October 27 that it would establish a manufacturing plant in Mexico to produce automotive polyurethane shock-absorbing components.

Chinese companies are also funding huge infrastructure projects. A case in point is the $3 billion invested by an alliance of Chinese state-owned companies, including Cosco Shipping, in the Chancay Port in Peru. Located 50 miles north of Lima, it will be the first Latin American port managed entirely by Chinese capital and is expected to become a vital hub for trade in the South Pacific. Other projects include lithium mines in the so-called “lithium triangle” and the so-called “interoceanic” railway project which, if built, will connect Peru’s Pacific coastline with Brazil’s Atlantic seaboard.

Lastly, it would be remiss to write a post on China’s growing influence in Latin America without mentioning the BRICS. As it currently stands, the BRICS grouping accounts for over 40% of the world’s population and over 25% of global GDP. But it is about to get a lot bigger. Following the grouping’s decision earlier this year to allow new members, more than a dozen countries have applied to join, according to Russian Foreign Minister Sergei Lavrov. They include Latin America’s third largest economy, Argentina, and Nicaragua.

The newly enlarged grouping would not only have greater economic clout; it would also control an even larger slice of the world’s natural resources — including 45% of known global oil reserves and over 60% of all known global gas reserves.

This is all happening at a time that both the US and the EU are refocusing their attentions on Latin America. As I noted in August, the region is back on the grand chessboard, as the race for resources and strategic influence intensifies in the new Cold War. For the moment, that race is being won quite handily by China.

* That bailout was, in large part, an indirect rescue of Wall Street’s finest, many of which had invested heavily in the sovereign debt of LatAm economies. As even the Federal Reserve admits in its official account of the debt crisis, by the time the crisis broke, in 1982, “the nine largest US money-center banks held Latin American debt amounting to 176 percent of their capital; their total LDC debt was nearly 290 percent of capital.”  for Naked Capitalism.

Culture Block

Ukraine: A Cruise Missile Launched at China

Alastair Crooke


Washington’s real interests in Ukraine must be understood not as a war of values but rather as a cruise-missile launched at China, not Russia.

Spot the problem here: First, the EU has lost Russia as a partner, yet the EU insists to maintain trade with China. Two, China, though, must bend to our EU ‘rules’ on how it configures its economy. Thirdly, China too, must accept to be ‘castigated’ by the likes of Olaf Scholtz and Charles Michel for ‘not having put an end to Russia’s illegal war in Ukraine’. Fourth, we, the EU, anyway do not intend to depend on you. And fifth, clean up your human rights abuses!

Wow! Well, the initial reaction might be a spell back at the Academy on the art of diplomatic discourse, as being one idea. Nonetheless, the sheer number of non-sequiturs to this stance is startling. Firstly, the rest of the world is not greatly interested in EU leaders’ woke thought-code (the Chinese simply cancelled EU Chief Michel’s proposed speech to a gathering in Beijing). Europe has lost Russia; It will likely lose China. And probably, it will find itself excluded from the colossus, free-trade area unfolding in Eurasia – as the blocs differentiate into separate trading spheres.

Where does this leave that bruited EU ambition to be a global player? … Perhaps the EU’s thought-code culture might be the problem to its ambitions.

You (the EU) have not thought this through: You are now a dependent appendage of the U.S. economy – a prop to maintaining America’s exalted spot in the global system – at a time when its predatory economic model of money-printing at zero interest has been holed by an iceberg (known as accelerating inflation). American industry needs a captive market in a world that is fast seceding into two separate spheres. You have ‘elected’ to fill that role.

Containing China is America’s explicit goal. And that means blocking the European continent from moving closer to Asia to form the world’s biggest free trade zone. Washington had to stop that (i.e. sabotage Nord Stream) in order to preserve Europe as a captive market, and what remains of dollar ‘privilege’.

As an American dependency, Europe is perceived as having conceded not only economic, but political agency tooSimply put, the EU has lost its cheap-energy business model with the ‘I stand with Ukraine’ woke thought and speech codes, and now finds that it is impotent politically. Why would ‘others’ deal with the courtiers, when they can go directly to the ‘Command’ in Washington?

Furthermore, the culture block the EU adopts prevents it from bringing the Ukraine war to a political end. Rather, what it does is bake-in escalation.

Here is the problem: You bought into liberal America’s notion of a coercive process of induced government dysfunctionality – that is to stay, the state of mass psychosis that any weaponised dysfunctional state of society can produce. And it’s been a success (on its own narrow terms).

The bigger message is that ‘induced dysfunctionality’ marching in lockstep, and using culture block tactics to suppress any dissenting opinions, can and does produce a society that can be ruled over (made compliant through unpleasantness and applied pain) – without having to govern (i.e. make things actually work).

And induced compliance has proved its use for implementing all sorts of other ideological schemes that the public would otherwise never accept.

Weaponised dysfunctionality was trialled during the recent pandemic. The public was persuaded to accept systemic degradation of the economy. Western leaders regularly have expressed a pleasant surprise at the degree of public compliance achieved during the lockdowns. Of course, it was only made possible by ‘woke mobs’ on social platforms impugning the motives of anyone questioning ‘the Science’, the scale of emergency, or the long-lasting toxic effects on the real economy. Cultural roadblock was imposed.

The same process is evident today: The EU is in (another) ‘emergency’ because it made a strategic misjudgement over its Russia sanctions. The political class thought the effects of EU sanctions on Russia offered a ‘slam dunk’ outcome: Russia would fold in weeks, and all would return to how it was before. Energy would flow freely to the EU again; things would go back to ‘normal’.

Instead, Europe faces economic melt-down from astronomic fuel costs.

Yet, some leaders in Europe – zealots for the Green Transition – quietly embrace this sanctions ‘failure’ and the resulting economic mayhem caused by spiking energy prices – weaponising it as a strategic asset to accelerate Green Transition. European authorities actively encourage this pathological approach, believing that the pain incurred will force compliance on their societies to embrace de-industrialisation, accept carbon footprint monitoring and the Green Transition; and too, to bear prospective monumental Transition costs.

Yellen explicitly celebrated the financial pain (dysfunctionality) precisely as serving to accelerate ‘The Transition’ (like it or not) – even were that to push the citizen out of employment, and to the cusp of society.

Here then, is the problem: Some in the EU political class may hope for an intensification of the war on Russia, seeing in it all sorts of benefits – in extending centralised control over member-states and facilitating new means of printing money (mutualised debt instruments) ostensibly to fund Ukraine.

Sure – but there are fears for societal breakdown in Europe too. The problem? The EU cannot bring Ukraine to a deal.

The point is that the EU has framed the Ukraine conflict in absolute victim-vein terms, in line with woke cultural tropes: A revanchist Russian leader, dreaming of former empire, illegally, and without provocation has invaded and seized territory from its neighbour, whilst committing heinous war crimes in so doing. The perpetrator must face a humiliating defeat – otherwise, if he gets an inch, he will take a mile. And the global order will be ‘toast’.

The ‘online mob’ has been steered, through ‘influencers’, to insist that U.S. Realist Camp’s support for a negotiated settlement is tantamount to taking Russia’s side: rushing to denounce all voices – from Bill Burns’ (then U.S. ambassador and now CIA chief) celebrated 2008 telegram ‘Niet means Niet’ warning that any NATO takeover of Ukraine means war; to Prof Mearsheimer, Kissinger, or Elon Musk – as dangerous ‘Putin apologists’. Musk now faces a security probe.

The logic is stark: This shrinks the Overton window to only those advocating the total defeat of Russia and an end to Putin’s ‘regime’ – even if it risks WWIII. It is the ‘slash and burn’ stance, favoured by the U.S. and allied EU neo-cons.

So, we have Washington saying it has no interests, per se, in Ukraine – beyond supporting Kiev in recovering its territory. The Biden Administration says it is guided by the wishes of the Ukrainian people.

Do you still not see the problem to which this logic takes us? It is a Potemkin Village position. All façade and nothing ‘behind’ or around it. The conflict in Ukraine is not itself ‘a unique thing’, but a ‘thing’ of two leaves. At one level, Ukraine is a ‘state’ among surrounding states; and at another level, it is itself an actor. A ‘player in events’ – an owner indeed, of a certain history.

What the Potemkin ‘approach’ does is to artificially free-up some sort of abstract ‘clearing in the wood’ amidst the density of trees, in which the visible thing – Ukraine – is to be positioned, and set before the western spectator public, stripped naked of surrounding context; stripped of history and of the fact of itself being a conscient player in an extended drama.

The Realists have been culture blocked. Their motives impugned.

The title to this play – ‘America has no fundamental interests in Ukraine, and is but an innocent, called up upon the stage by an act of brutal villainy’ – is an obvious fraud. As is the corollary that the EU must therefore support the ‘war’ as Ukraine is victim.

Plainly said, the U.S. is pursuing a bi-partisan geopolitical strategy to quash China’s meteoric rise and preserve America’s dominant role in the world order. Can there be any doubt about that? No, none. For two decades U.S. foreign policy has centred around its ‘pivot to Asia’.

Washington’s real interests in Ukraine thus must be understood not as a war of values – as the EU has it – but rather as a cruise-missile launched at China, not Russia. In gist, the ‘high road’ to collapsing Beijing is perceived in DC to pass through a weakened Moscow. The NATO response to Ukraine is intended as ‘a letter’ to China, concerning Taiwan. And the comprehensive sanctions on Russia are a missive to the rest of the world to not trifle with America’s absolute primacy.

But if this latter context is absolutely ‘off the table’, through culture block and the only agenda item being the sham Potemkin Village construct, then what is there to talk about?

The matter then must inexorably be settled by events – not talk. Who has the potential for escalatory dominance? Russia has many – and various – options. Ukraine has only one. Pushing more troops at the contact line and suffering heavy losses. What does the West have: WWIII?

Can you see now why your peace efforts have come to naught? Actually, President Xi explained the situation courteously, yet pointedly, to Chancellor Scholtz during the latter’s day trip to Beijing: Having lectured Scholz on the evanescent quality of Trust in any political relationship (a quality that Xi said should be nurtured), he emphasised the need for Europe to avoid an ideological approach to relations.

Rough Translation: You (Scholz) have destroyed your relationship with Russia; you have pursued a bloc-orientated ideological policy, and this has been to your disadvantage. Do not think you can do the same with China.

(Or with the rest of the world, Xi might well have added). Strategic Culture.

BYD


BYD In Depth

BYD takes EV patent lead


Kotaro Fukuoka  


BYD has taken an overwhelming lead in global patent filings for EV technology, the arsenal of innovation fueling the company's emergence as a global player. Nikkei analyzed EV patent applications from China's four largest sellers of all-electric vehicles. BYD has 1,557 applications, double the 870 filings of its closest rival, Geely. 

Chery Automobile was in third place with 640 patent filings, while SAIC Motor took fourth with 448. When it comes to patent applications filed overseas, BYD far outpaces the other three contenders, indicating its strong ambitions for a global expansion. BYD filed 171 times in Europe, accounting for 11% of all the company's EV patent applications. It submitted 139 applications to the U.S., and 49 to Japan, making for 8.9% and 3.1% of all applications, respectively.

Meanwhile, Geely submitted 58 applications in Europe, or 6.7% of its total. The company filed 33 times in the U.S. and just eight in Japan. Chery applied just a handful of times overseas, while SAIC's applications abroad were next to none.

BYD was founded in 1995 as a battery manufacturer for electronics. The company entered the automotive business in 2003, and exited gasoline autos in March to focus on EVs and plug-in hybrids.

In China, BYD surpassed Tesla as the largest seller of new energy vehicles in the first half of this year, a category including EVs and other plug-ins.

BYD's patent applications started to grow dramatically in 2016, when it made 203 applications, or 3.5 times the number from the previous year.

In 2016, BYD hired Wolfgang Egger away from Audi to be its chief designer. Since then, BYD's patent application count has tracked an upward trajectory, with the automaker recording 349 filings in 2020.

The other three companies have trailed BYD's activities by at least a few years. Geely's patent applications did not begin to soar until it submitted 98 filings in 2018, or 3.8 times the previous year.

"Right now, BYD is the only Chinese player that can debut in the global market," said Akira Yamauchi, CEO of Intellectual Property Landscape.

Last month, BYD announced it will sell new passenger EV modelsin a number of European markets, a milestone which marked its transition into a full-fledged operation in that region. The company said it will mount a full-scale entry into the Japanese market next year. 

It is BYD's emergence as a global EV seller that prompted Nikkei's examination of the company's patents. The study also looked into how much attention it is drawing from other companies.

Toyota Motor has cited BYD patents a total of 103 times in its own patents, the most among any company. That approaches the 146 instances the Japanese automaker has cited Tesla's patents. Meanwhile, Chery only received 29 citations, while SAIC was cited by Toyota in only 9 instances.

"Even in terms of the quality of the patents, BYD dominates Chinese peers," said Yamauchi.

Toyota values BYD's technical prowess to the extent that the two are collaborating. They announced last month that they will soon roll out the bZ3 electric sedan for the Chinese market.

Intellectual Property Landscape ranked patents based on their contribution to the companies' competitiveness, based on how often they are cited and other factors. Those related to BYD's blade batteries, which use phosphates instead of expensive cobalt or nickel, came out on top.

Japanese and South Korean players have an advantage in nickel-manganese-cobalt (NMC) batteries, which have a high energy density and can easily be adjusted for better performance, like a longer range. BYD has focused on developing a thinner, smaller and safe battery, which is being used not only in its electric vehicles slated for sale in Europe and Japan, but also in the bZ3.

BYD also possesses advanced technology on charging and discharging batteries. Of related patents held by the four Chinese players and Tesla, Intellectual Property Landscape ranked five from Tesla and five from BYD among the top 10 most important.

The top spot went to a patent BYD filed in 2013. That technology allows batteries to be charged under different power supply specifications without an expensive converter, and can be used to supply power between EVs or between an EV and an external power grid. It has been cited in at least 100 other related patents filed by Audi, Ford Motor, Hyundai Motor and other companies.

Batteries operate their best at specific temperatures. A patent BYD filed in 2017 involves technology that closely monitors batteries and adjusts their temperature.

Safety has been another priority for BYD. In 2017, it filed a patent for a vehicle design that protects batteries in an accident.

A combined 955,000 EVs, plug-in hybrids and fuel-cell vehicles were sold across 14 major economies in September, according to Tokyo-based research company Marklines. They accounted for 17.8% of overall auto sales, compared with 5% in September 2020.

EV sales are only growing as more countries restrict gasoline-powered vehicles to reduce carbon emissions. BYD could become the world's largest seller of EVs in 2022 after Tesla, which so far has dominated most markets outside China, according to some forecasts. "BYD could increase its presence on the global stage, armed with technology accumulated from its original operations," said Yamauchi. Nikkei

US? Cooperate?
 
How to Build a Better Order

Limiting Great Power Rivalry in an Anarchic World

By Dani Rodrik and Stephen M. Walt.
Foreign Affairs, September/October 2022

The global order is deteriorating before our eyes. The relative decline of U.S. power and the concomitant rise of China have eroded the partially liberal, rules-based system once dominated by the United States and its allies. Repeated financial crises, rising inequality, renewed protectionism, the COVID-19 pandemic, and growing reliance on economic sanctions have brought the post-Cold War era of hyperglobalization to an end. Russia’s invasion of Ukraine may have revitalized NATO, but it has also deepened the divide between East and West and North and South. Meanwhile, shifting domestic priorities in many countries and increasingly competitive geopolitics have halted the drive for greater economic integration and blocked collective efforts to address looming global dangers.

The international order that will emerge from these developments is impossible to predict. Looking ahead, it is easy to imagine a less prosperous and more dangerous world characterized by an increasingly hostile United States and China, a remilitarized Europe, inward-oriented regional economic blocs, a digital realm divided along geopolitical lines, and the growing weaponization of economic relations for strategic ends.

But one can also envision a more benign order in which the United States, China, and other world powers compete in some areas, cooperate in others, and observe new and more flexible rules of the road designed to preserve the main elements of an open world economy and prevent armed conflict while allowing countries greater leeway to address urgent economic and social priorities at home. More optimistically, one can even imagine a world in which the leading powers actively work together to limit the effects of climate change, improve global health, reduce the threat of weapons of mass destruction, and jointly manage regional crises.

Establishing such a new and more benign order is not as hard as it might sound. Drawing on the efforts of the U.S.-China Trade Policy Working Group—a forum convened in 2019 by New York University legal scholar Jeffrey S. Lehman, Chinese economist Yang Yao, and one of us (Dani Rodrik) to map out a more constructive approach to bilateral ties—we propose a simple, four-part framework to guide relations among major powers. This framework presupposes only minimal agreement on core principles—at least at first—and acknowledges that there will be enduring disagreements about how many issues should be addressed. Rather than imposing a detailed set of prescriptive rules (as the World Trade Organization and other international regimes do), this framework would function as a “meta-regime”: a device for guiding a process through which rival states or even adversaries could seek agreement or accommodation on a host of issues. When they do not agree, as will often be the case, adopting the framework can still enhance communication among them, clarify why they disagree, and offer them incentives to avoid inflicting harm on others, even as they seek to protect their own interests.

Crucially, this framework could be put in place by the United States, China, and other major powers themselves, as they deal with a variety of contentious issues, including climate change and global security. As has already been shown on several occasions, the approach could provide what a single-minded focus on great-power competition cannot: a way for rival powers and even adversaries to find common ground to maintain the physical conditions necessary for human existence, advance economic prosperity, and minimize the risks of major war, while preserving their own security.

Incentives to compete are ever present in a world lacking a central authority, and the strongest powers will no doubt continue to eye one another warily. If any of the major powers make economic and geopolitical dominance their overriding goal, the prospects for a more benign global order are slim. But systemic pressures to compete still leave considerable room for human agency, and political leaders can still decide whether to embrace the logic of all-out rivalry or strive for something better. Human beings cannot suspend the force of gravity, but they eventually learned to overcome its effects and took to the skies. The conditions that encourage states to compete cannot be eliminated, but political leaders can still take actions to mitigate them if they wish

Fewer Rules, Better Behavior

According to many accounts, the international order that emerged in the 1990s has increasingly been eroded by the dynamics of great-power competition. Nonetheless, the deterioration of the rules-based order need not result in great-power conflict. Although the United States and China both prioritize security, that goal does not render irrelevant the national and international goals that both share. Moreover, a country that invested all its resources in military capabilities and neglected other objectives—such as an equitable and prosperous economy or the climate transition—would not be secure in the long run, even if it started out as a global power. The problem, then, is not the need for security in an uncertain world but the manner in which that goal is pursued and the tradeoffs states face when balancing security and other important goals.

It is increasingly clear that the existing, Western-oriented approach is no longer adequate to address the many forces governing international power relations. A future world order will need to accommodate non-Western powers and tolerate greater diversity in national institutional arrangements and practices. Western policy preferences will prevail less, the quest for harmonization across economies that defined the era of hyperglobalization will be attenuated, and each country will have to be granted greater leeway in managing its economy, society, and political system. International institutions such as the World Trade Organization and the International Monetary Fund will have to adapt to that reality. Rather than more conflict, however, these pressures could lead to a new and more stable order. Just as it is possible for major powers to achieve national security without seeking global primacy, it is possible and even advantageous for countries to reap the benefits of economic interdependence within looser, more permissive international rules.

In our framework, major global powers need not agree in advance on the detailed rules that would govern their interactions. Instead, as we have outlined in a working paper for the Harvard Kennedy School, they would agree only on an underlying approach to their relations in which all actions and issues would be grouped into four general categories: those that are prohibited, those in which mutual adjustments by two or more states could benefit all parties, those undertaken by a single state, and those that require multilateral involvement. This four-part approach does not assume that rival powers trust one another at the outset or even agree on which actions or issues belong in which category, but over time, successfully addressing disagreements within this framework would do much to increase trust and reduce the possibility of conflict.
 

A more stable order could rest on negotiation, not rules.

The first category—prohibited actions—would draw on norms that are already widely accepted by the United States, China, and other major powers. At a minimum, these might include commitments embodied in the UN Charter (such as the ban on acquiring territory by conquest), violations of diplomatic immunity, the use of torture, or armed attacks on another country’s ships or aircraft. States might also agree to forgo “beggar thy neighbor” economic policies in which domestic benefits come at the direct expense of harm done to others: the exercise of monopoly power in international trade, for instance, and deliberate currency manipulation. States will violate these prohibitions with some frequency, and governments will sometimes disagree on whether a particular action violates an established norm. But by recognizing this general category, they would be acknowledging that there are boundaries to acceptable actions and that crossing them has consequences.

The second category includes actions in which states stand to benefit by altering their own behavior in exchange for similar concessions by others. Obvious examples include bilateral trade accords and arms control agreements. Through mutual policy adjustments, rivals can reach agreements that benefit each other economically or eliminate specific areas of vulnerability, thereby making both countries more prosperous and secure and allowing them to shift defense spending to other needs. In theory, one could imagine the United States and China (or another major power) agreeing to limit certain military deployments or activities—such as reconnaissance operations near the other’s territory or harmful cyber-activities that could adversely affect the other’s digital infrastructure—in exchange for equivalent limitations by the other side.

When two states cannot reach a mutually beneficial bargain, the framework offers a third category, in which either side is free to take independent actions to advance specific national goals, consistent with the principle of sovereignty but subject to any previously agreed-on prohibitions. Countries frequently take independent economic actions because of differing national priorities. For example, all states set their own highway speed limits and education policies according to domestic preferences, even though higher speed limits can raise the price of oil on world markets and improving educational standards can affect international competition in skill-intensive sectors. On matters of national security, meaningful agreements among adversaries or geopolitical rivals are especially hard to reach, and independent action is the norm. Even so, the framework dictates that such actions must be well calibrated: to prevent tit-for-tat, escalatory steps that risk a destabilizing military buildup or even open conflict, remedies should be proportional to the security threat at hand and not designed to damage or punish a rival. Read the rest at Foreign Affairs.

Think Again

If You Think The United States Is Ready For A Conventional War With China,
Think Again


Larry Johnson


The General Accounting Office published a troubling study of the readiness of military aircraft that are essential to the air operations of the U.S. Army, the Navy, the Marine Corps and the Air Force:

GAO examined 49 aircraft and found that only four met their annual mission capable goal in a majority of the years from fiscal years 2011 through 2021. As shown below, 26 aircraft did not meet their annual mission capable goal in any fiscal year. The mission capable rate—the percentage of total time when the aircraft can fly and perform at least one mission—is used to assess the health and readiness of an aircraft fleet.

https://www.gao.gov/products/gao-23-106217

Think about the implications of this. The United States defense budget for FY 2022 is $715 billion. This is almost two and a half times the defense budgets of China and Russia combined:

At the fifth session of the 13th National People’s Congress in early March, the Chinese government announced a defense budget of 1.45 trillion yuan (about $229 billion) for fiscal year 2022, which is a 7.1 percent year-on-year increase from 2021 (Xinhua, March 5).

https://jamestown.org/program/chinas-2022-defense-budget-behind-the-numbers/

[Russian] defense spending from January to April totaled almost 1.6 trillion rubles ($26.4 billion), with about 500 billion rubles ($8.3 billion) of spending per month for March and April. Considering these dynamics in comparison with Moscow’s defense spending in previous years—roughly 300 billion rubles ($5 billion) per month—and the fact that the original defense budget in 2022 was 3.85 trillion rubles ($63.6 billion), the true amount for Russian defense spending in 2022 may well reach as much as 5.5 trillion rubles ($90.9 billion) by the end of the year (Budget.gov.ru, May 2022).

https://jamestown.org/program/russias-skyrocketing-defense-spending-2022-2023/

If you think that spending more money that China and Russia on outfitting the U.S. military buys greater capability, think again. Here is what the GAO says:

Comparing fiscal year 2011 to fiscal year 2021, the average mission capable rate for the selected aircraft has fallen for the Air Force, Navy, and Marine Corps, to varying degrees. The average mission capable rate for the selected Army aircraft has risen.

For fiscal year 2021, GAO found that only two of the 49 aircraft examined met the service-established mission capable goal. More specifically, for fiscal year 2021, 30 aircraft were more than 10 percentage points below the mission capable goal in fiscal year 2021; and 17 aircraft were 10 percentage points or less below the mission capable goal in fiscal year 2021.

Many of the selected aircraft are facing one or more sustainment challenges, as shown below. According to program officials, these challenges have an effect on mission capable rates.

https://www.gao.gov/products/gao-23-106217

It would be one thing if these problems were confined to just one class of aircraft. As the chart below shows, the “challenges” are pervasive and affect all key operational capabilities, from Air Refueling to long range bombers:

Let me put this into practical terms. Let us suppose the United States wants to deploy troops and equipment to Ukraine to prepare for entering the conflict to reinforce Ukriane. A key Air Force asset with that mission is the C-5M.

According to the GAO report, this aging plane (I saw one of the first ones produced as a young boy during a visit to Georgia in 1968 — the plane is 54 years old) is deficient in the following areas:

  • Unexpected replacement of parts and repairs.
  • Delays in depot maintenance.
  • Shortage of trained maintenance personnel.
  • Unscheduled maintenance.
  • Diminishing manufacturing source.
  • Parts obsolescence.
  • Parts shortage and delay.

This means potential delays in the deployment of troops, vehicles, helicopters and artillery. If China decides to move on Taiwan then the United States military commanders are likely to be faced with the dilemma of not being able to support major military engagements in Russia and China. Which geographic region receives the priority for taking control of the usable C5s?

The United States Navy currently has 296 in “battle-force ships in inventory” but only 251 active ships in commission (The number of ships active in commission includes those that are commissioned but not battle-ready, such as the USS Constitution; and excludes most combat logistics and fleet support ships.) According to data compiled and updated by the Navy, here is the current total of battle-force ships as of June 23, 2021.

Aircraft Carriers: 11

Surface Combatants: 115

Submarines: 68

Amphibious Warfare Ships: 31

Mine Warfare Ships: 8

Combat Logistics Ships: 29

Fleet Support: 33

Auxiliary Support: 1

Combatant Craft: 0

Other: 0

To put this in context — prior to the start of World War II, the United States had 790 active ships. By the end of the war, that number soared to 6084. Today’s fleet is half-the size of the U.S. fleet at the dawn of World War II. The U.S. Navy is now a carrier centered force, as I have discussed in previous posts. Its ability to project force has diminished over the last ten years as Russia and China have developed effective hypersonic missiles that can defeat the current air and missile defense systems in place ostensibly to protect the Carrier task forces from attack.

The critical difference between now and December 7, 1941 is the dramatic decline in the U.S. industrial base. After Japan’s attack on Pearl Harbor, the United States built and deployed 5,294 ships–e.g., aircraft carriers, battleships and destroyers–in three years. Think about that. The United States was producing on average 147 ships a month. Today, it takes 5 to 7 years to build and deploy an aircraft carrier. In the event of a war with Russia and/or China, the United States can no longer churn out the volume of naval craft it did in World War II. Just because the ships are loaded up with more advanced technology does not automatically translate into greater combat effectiveness and longevity.I am not trying to be a Debbie Downer. Just pointing out some uncomfortable facts that should make any officer or political leader contemplating war with Russia and China to think twice. A Son of the New American Revolution.

Review

Jaq James has done it again: she dissects the London 'Uyghur Tribunal'. Download the report.

China Leads?

 
The only book that explains all three elements of China's success: 
  1. Talent at the Top: Only the brightest, most idealistic people are are admitted to politics–a policy unchanged in 2200 years.
  2. Data in the Middle: policies are implemented, tracked, and optimized based on terabytes of data. The PRC is the world's largest consumer of public surveys.
  3. Democracy at the Bottom: ordinary people, all unpaid amateurs, assemble twice a year to check the stats and sign off on new legislation. Policies need a minimum of 66% support to become law. That's why 95% of Chinese say the country is on the right track.
The proof? There are more hungry children, more poor, homeless, drug addicted, and imprisoned people in America than in China.  

Why China Leads the World
investigates why the epidemic accelerated the change of global leadership from America to China and examines China’s bigger, steadier economy, its science leadership, stronger military, more powerful allies, and wider international support.

Crammed with charts, footnotes, and lengthy quotes, Why China Leads the World is a profoundly disturbing book that helps readers understand the tectonic shift and adapt to this new era–and even thrive in it.
***
The size of China's displacement of the world balance is such that the world must find a new balance. It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world. Lee Kuan Yew: The Future of US-China Relations. The Atlantic.  
***
The Coronavirus accelerated the pace of change of global leadership from America to China. There are now more hungry children, more poor, homeless, drug addicted, and imprisoned people in America than in China. 

Suddenly, China's larger, steadier economy, its leadership in science, its stronger military, more powerful allies, and wider international support have handed it a lead that widens every day.  Crammed with direct quotes from its movers and shakers, charts, and footnotes, Why China Leads the World tells a remarkable tale, explains a tectonic shift, and helps you adapt to this new era, and even thrive in it. 
 ***
If we could just be China for one day we could actually authorize the right decisions. Thomas L. Friedman. The New York Times  

300 pages, 27 charts and graphs. $9.99 on Amazon and in bookstores worldwide.

The ISC Report

The ISC (Needham) Report


The Report of the International Scientific Commission for the Investigation of Facts Concerning Bacteriological Warfare in Korea and China (the ISC report), published at the height of the Korean War, validated claims by North Korea and China that the US had launched bacteriological warfare (biological warfare, BW) attacks against both troops and civilian targets in those two countries over a period of several months in 1952.
   

The most vilified document of the 20th Century.

The report’s release in September, 1952, brought a withering international attack. It was roundly denounced by American and British politicians of the highest rank, ridiculed by four star generals, accused of fraud by celebrated pundits, misquoted by notable scientists, and scorned by a compliant Western press. Charges were made against the quality and truthfulness of its science. Its “unstated” political agenda was denounced. The ethics of interviewing captured US pilots was excoriated and its authors were publicly flayed as communist dupes. The report was red baited in the US halls of Congress and deemed unpatriotic to read, and therefore went unread and deliberately forgotten over the years, which has been the fate of Korean War history in general. In subsequent decades, volumes placed in American university library collections were quietly and permanently removed from circulation.
   
When the rare copy came up for auction, it was discretely purchased and disappeared from public view. This critical 67 year old truth commission document from the Korean War was slipping towards oblivion. For these very reasons, historians and truth seekers should exalt the wondrous rebirth of the ISC Report from near extinction with the publication of this new electronic edition. We welcome the sunshine that re-publication brings to a shadowy and suppressed chapter of American Cold War history. (from the introduction by Thomas Powell) 800 pages.  $9.99.

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