For at least a month, there has been no doubt that Presidents Donald Trump and Xi Jinping would agree to agree at the Buenos Aires summit. The threats, remonstrations and hints of high officials were for the most part scripted. Buenos Aires was less negotiation than reality show.
When the dust settles, America and China will have a deal that allows Trump to claim victory and allows China to become the world’s dominant economy.
Two things changed to bring America and China back to negotiations.
First, Trump learned that he was in the position of the Lord High Executioner in Gilbert and Sullivan’s “Mikado,” that is, “he can’t cut off another’s head until he’s cut his own off.” Trade war with China contributed to the correction in the S&P 500, which lost 10% peak-to-trough through last Wednesday. It also produced so much uncertainty about the future of supply chains that capital investment plunged around the world, as I reported November 30.
If Trump made good on his threat to impose tariffs on all Chinese imports, including most of American purchases of consumer electronics, the impact on household budgets would have been severe. Trump wants a second term, and trade war risked a recession just before the 2020 elections.
Second, China concluded that Trump wants to look like a winner, and decided to give him what he wanted. Senior advisers to the Chinese government explained this to me last October. The new Chinese consensus holds that the world’s largest country can afford to be patient, concentrate on raising productivity and per capita income, and forego bragging rights about its growing economic power. As I wrote from Beijing:
“The United States during the 19th century did not attempt to impose its will on other countries, [one advisor] noted. Only after the Second World War did the United States act like a major power. China, he concluded, will have to take a more modest role in world affairs ‘until 2035, when it will be a much more powerful country.’”
There is a coterie of advisers in and around the Trump Administration that appeared to believe that trade war would damage China’s economy so severely as to destabilize the rule of Xi Jinping. For years, the American consensus held that China’s opening to the world economy inevitably would lead to a democratic transformation of this ancient empire. When that failed to happen, the same advisers argued that the Chinese system must collapse of its own weight because (as they believe) the American way of doing things is the only right one.
Among the president’s senior staff only National Security Adviser John Bolton takes this sort of talk seriously. Before taking office, Bolton advocated stronger support for Taiwan against the mainland. The resounding victory in Taiwan’s local elections last month of the Kuomintang, a party that eschews calls for independence and supports closer ties with the mainland, took this idea off the agenda.
It is unclear to what extent the revolt of America’s allies influenced Washington’s thinking. Beijing showed its seriousness about opening its financial industry to foreign firms last week by offering a license to the German insurance giant Allianz. There will be something of a gold rush of global firms into the Chinese market, and American companies do not want to be at the end of the queue.
What the US and China actually will negotiate during the next 90 days will include the following:
1) More US exports to China, especially LNG. China might invest in LNG facilities on the US West Coast to increase capacity.
2) An intellectual property agreement dictated by the United States. China will crack down on technology theft, at least where official institutions are concerned, and leave Apple and Qualcomm to sue each other over patent infringement.
3) Further opening of the Chinese market to US trade and investment.
4) The abandonment of the “Made in China 2025” slogan, although the same investments will proceed with less fanfare.
None of this will do America much good in the long run. Trump asked for the wrong things and Xi agreed to concede them.
According to industry experts, China is spending upwards of US$50 billion for semiconductor fabrication each year, compared to less than US$5 billion in the US. Some experts believe that the fabrication of semiconductors will come to an end in the US within five years.
Asian companies will dominate key new technologies, including 5G mobile broadband, which is critical for the so-called Internet of things. American media reported today that Apple will wait until some unspecified future date to offer handsets that use the 5G technology. China’s telecommunications giant Huawei, which now sells more handsets than Apple, is trying to position itself as the leader in the field. So is South Korea’s Samsung.
America, in short, is losing ground not only in semiconductor and other high-tech electronic production, but also in design.
When America really was great back in the 1980s, federal R&D (overwhelmingly defense and NASA) amounted to 1.2% of GDP, versus just 0.7% today. Most of the R&D budget has been diverted to things like climate change, or status-quo weapons systems like the F-35. As matters stand, nothing will prevent China from becoming the dominant world economy by 2035 except, of course, missteps by China itself.
Qiu Wei I did not say the U.S. would become dominant in semiconductors again. It will not. I said only that semiconductor manufacture will not completely disappear from the U.S. as claimed by the article. Also realize that the tool makers themselves are all U.S. companies aside from TEL, which is Japanese.
Qiu Wei I did not say the U.S. would become dominant in semiconductors again. It will not. I said only that semiconductor manufacture will not completely disappear from the U.S. as claimed by the article. Also realize that the tool makers themselves are all U.S. companies aside from TEL, which is Japanese.
Qiu Wei USSR collapse is a result of close cooperation between Bush Senior (VP for Reagan) and Deng by lowering the price of oil with OPEC, support dollar hegemony, get Russia stuck in Afganistan in return for Most Favorable Nation, etc so Bush is a real friend to China and get full red carpet treatment even after his Presidency even Trump doesn’t get. This is also the reason China helped USA to recover from the last 2009 Great Depression, or at least didn’t dump the US currency. As U know Bush passed away and they will only hold the truce for so long and there are as many hawks in China as in the USA, probably got axe to grind.
Qiu Wei USSR collapse is a result of close cooperation between Bush Senior (VP for Reagan) and Deng by lowering the price of oil with OPEC, support dollar hegemony, get Russia stuck in Afganistan in return for Most Favorable Nation, etc so Bush is a real friend to China and get full red carpet treatment even after his Presidency even Trump doesn’t get. This is also the reason China helped USA to recover from the last 2009 Great Depression, or at least didn’t dump the US currency. As U know Bush passed away and they will only hold the truce for so long and there are as many hawks in China as in the USA, probably got axe to grind.
The Chinese consumer market size is bigger than America now that means all multinationals will have to get into the Chinese market first to survive, first there to introduce products, marketing, manufacture, etc. Or go belly up like Sears…
The Chinese consumer market size is bigger than America now that means all multinationals will have to get into the Chinese market first to survive, first there to introduce products, marketing, manufacture, etc. Or go belly up like Sears…
Oh look, the cow dung flies are here!
hahahah
Oh look, the cow dung flies are here!
hahahah
Oh look, the cow dung flies are here!
hahahah
Oh look, the cow dung flies are here!
hahahah
Well Mr. Goldman I am left to wonder why China would change a winning system that is making it the overwhelming leader of the world in diplomatic, economic and military matters for a failing system like that as now exists in the USA? Why would they concede for instance the right to have their government invest in IT when every thinking person knows that that is the way for them to win that race with the USA? So they are assigning themselves to second place in IT when it comes to the competition with the USA in this field? I am sure that Xi is familiar with the Japan syndrom where the Japanese gave into US pressure to alter their economy and ended up with stagflation for the last thirty years. Is Xi going to bend over for the White Devils? I don`t think he will and I don`t think he did. He no doubt is playing the long game, but certain things can be accomplished right now, and the leadership in IT is one of them. The Chinese are not going to throw this opportunity away for short term gain in their economy.
Well Mr. Goldman I am left to wonder why China would change a winning system that is making it the overwhelming leader of the world in diplomatic, economic and military matters for a failing system like that as now exists in the USA? Why would they concede for instance the right to have their government invest in IT when every thinking person knows that that is the way for them to win that race with the USA? So they are assigning themselves to second place in IT when it comes to the competition with the USA in this field? I am sure that Xi is familiar with the Japan syndrom where the Japanese gave into US pressure to alter their economy and ended up with stagflation for the last thirty years. Is Xi going to bend over for the White Devils? I don`t think he will and I don`t think he did. He no doubt is playing the long game, but certain things can be accomplished right now, and the leadership in IT is one of them. The Chinese are not going to throw this opportunity away for short term gain in their economy.
"Further opening of the Chinese market to US trade and investment."
Token investments to make Mnuchin and company temporary happy.
Please name one Asian country that has truely opened their trade/investment markets to the US. China doesn’t need US capital or financial services expertise and will expand it’s grip futher into Asian markets as the US retreats. Greedy bankers should skip the Asian Pacific and look to develop Central and South America markets
"Further opening of the Chinese market to US trade and investment."
Token investments to make Mnuchin and company temporary happy.
Please name one Asian country that has truely opened their trade/investment markets to the US. China doesn’t need US capital or financial services expertise and will expand it’s grip futher into Asian markets as the US retreats. Greedy bankers should skip the Asian Pacific and look to develop Central and South America markets
Mark Niio Boy are you ever in denial.
Mark Niio Boy are you ever in denial.
Winston Medved Are you sure you can afford with the real US economy being whjat it is?
Winston Medved Are you sure you can afford with the real US economy being whjat it is?
Kurt Schoedel the fact is if you don’t have the scale, it become irrational to invest as much as players that has 20% marketshare and eventually you will be driven off the market because of the cost to keep up. you just don’t seem to understand that. the only reason intel is even a thing is because of the mark up for their products. like they will sell commercial grade chip for 5 to 10 time the retail price, but that market is dying as retail chip become more reliable. AMD already understood this, which is why they sold their fab to allow it to merge with other fab. else it just a money sink where you have to throw profit from elsewhere to sustain the R&D cost.
Kurt Schoedel the fact is if you don’t have the scale, it become irrational to invest as much as players that has 20% marketshare and eventually you will be driven off the market because of the cost to keep up. you just don’t seem to understand that. the only reason intel is even a thing is because of the mark up for their products. like they will sell commercial grade chip for 5 to 10 time the retail price, but that market is dying as retail chip become more reliable. AMD already understood this, which is why they sold their fab to allow it to merge with other fab. else it just a money sink where you have to throw profit from elsewhere to sustain the R&D cost.
apparently to trumptard citing fact is wumao, i guess that mean fact is on china’s side!
[ On the other hand, industries are shifting out of China to Vietnam ]
have you actually look at who is building industry in Vietnam? China own more factory in Vietnam then US does. China does not fear it neighour getting richer unlike people who lack self-confidence and want to bargain with canada like they are some kind of evil empire. it is well know that China is fearing a labour shortage, China doesn’t need more jobs, they need more marketshare. US has entirely lost the plot and is trading international marketshare for jobs…
apparently to trumptard citing fact is wumao, i guess that mean fact is on china’s side!
[ On the other hand, industries are shifting out of China to Vietnam ]
have you actually look at who is building industry in Vietnam? China own more factory in Vietnam then US does. China does not fear it neighour getting richer unlike people who lack self-confidence and want to bargain with canada like they are some kind of evil empire. it is well know that China is fearing a labour shortage, China doesn’t need more jobs, they need more marketshare. US has entirely lost the plot and is trading international marketshare for jobs…
Kurt Schoedel SOX, the Philadelphia Semi Index has lost more than half of 52wk range, individual companies such as AMAT, LRCX, KLAC MU INTEL are making new 52wk low every wk. China is their largest customer, if US/China are going to disengage as most Americans are hoping for, US semi industry shall collapse in 5 yrs due to lack of customer as China is going to be self sufficient in that time frame. Recall that US college engineering depts no longer have course on consumer electronics, haven’t produce such faculties since the 70s.
Kurt Schoedel SOX, the Philadelphia Semi Index has lost more than half of 52wk range, individual companies such as AMAT, LRCX, KLAC MU INTEL are making new 52wk low every wk. China is their largest customer, if US/China are going to disengage as most Americans are hoping for, US semi industry shall collapse in 5 yrs due to lack of customer as China is going to be self sufficient in that time frame. Recall that US college engineering depts no longer have course on consumer electronics, haven’t produce such faculties since the 70s.
WuKong Sun Comrade China owes everything to Japan, if it wasnt for the humiliations inflicted on us by Japan, when Mao ran away we would not feel small and inferior.
WuKong Sun Comrade China owes everything to Japan, if it wasnt for the humiliations inflicted on us by Japan, when Mao ran away we would not feel small and inferior.
Qiu Wei Well said comrade, we will continue to steal other peoples’ ideas.
Qiu Wei Well said comrade, we will continue to steal other peoples’ ideas.
The Chinese should have started the meeting with a prayer.
Xi: Dear Jesus… please make America Great again. Please bless white men and let us all follow their wisdom and trust their truly benevolent motives.
Trump team: amen!
Trump and his guys would have called the whole trade war off.
The Chinese should have started the meeting with a prayer.
Xi: Dear Jesus… please make America Great again. Please bless white men and let us all follow their wisdom and trust their truly benevolent motives.
Trump team: amen!
Trump and his guys would have called the whole trade war off.
Winston Medved i don’t think anyone is stealing any idea, US has not keep up in fab against asian country for the past few decade, this is not new at all, as mention, China is only 10% of the market. it isn’t China that is killing the US. it is Korea and Taiwan. if you open up your computer, you will find at least half the chip in it is made in taiwan, and if you have an SSD, korea probably made that. intel is trying to make a comeback however their memory product won’t enter the market for another 2 years.
Winston Medved i don’t think anyone is stealing any idea, US has not keep up in fab against asian country for the past few decade, this is not new at all, as mention, China is only 10% of the market. it isn’t China that is killing the US. it is Korea and Taiwan. if you open up your computer, you will find at least half the chip in it is made in taiwan, and if you have an SSD, korea probably made that. intel is trying to make a comeback however their memory product won’t enter the market for another 2 years.
It is fundamentally racist for the USA (now there’s a racist country if there ever was one) a nationof 300 million, to say that a nation of 1200 million people cannot exceed it in GDP. Even if each Chinese person only has 1/4 the wealth of an American, China will equal the US in GDP. So are they then to be condemned to poverty, though they are industrious and fiercely hard working ? How is this not racist ?
It is fundamentally racist for the USA (now there’s a racist country if there ever was one) a nationof 300 million, to say that a nation of 1200 million people cannot exceed it in GDP. Even if each Chinese person only has 1/4 the wealth of an American, China will equal the US in GDP. So are they then to be condemned to poverty, though they are industrious and fiercely hard working ? How is this not racist ?
Loads of crap from China govt departments China need to stop criminal activities and start respecting other countries sovernity. It’s time China is cut to size by Liberating Tibet and Ugers. China is the new colonial power and Asia don’t want china
Loads of crap from China govt departments China need to stop criminal activities and start respecting other countries sovernity. It’s time China is cut to size by Liberating Tibet and Ugers. China is the new colonial power and Asia don’t want china