This is interesting and could effect trading decisions after the Nov US Elections.
Background: Kevin Rudd was PM in Australia a number of years back, he is today the President of the Asia Society Policy Institute in New York. He is also fluent in Mandarin, which is important for anyone interpreting events in China esp since as PM he dealt with them first hand.
He was recently interviewed (by ZHedge but dont hold that against this post). If he is right, this will be impacting on trade decisions, esp tech, after the US election. Some relevant quotes below from Mr Rudd...
"Had Hillary Clinton won in 2016, her response would have been very robust. Trump has for the most part been superficially robust, principally on trade and technology. He was only triggered into more comprehensive robustness by the Covid-19 crisis threatening his reelection. If the next President of the U.S. is a Democrat, my judgement would be that the new Administration will be equally but more systematically hard-line in their reaction to China."
"The current conflict between the U.S. and China on the other hand is characterised by two things: One, an economic decoupling in areas such as trade, supply chains, foreign direct investment, capital markets, technology, and talent. At the same time, it is also an increasingly sharp ideological war on values. The Chinese authoritarian capitalist model has asserted itself beyond China and challenges America."
"Whoever wins the election, America will resolve in decoupling in a number of defined areas.
- First and foremost in those global supply chains where the products are of too crucial importance to the U.S. to depend on Chinese supply. Think medical supplies or pharmaceuticals.
- The second area is in defined critical technologies. The Splinternet is not just a term, it’s becoming a reality.
- Thirdly, you will see a partial decoupling on the global supply of semiconductors to China. Not just those relevant to 5G and Artificial Intelligence, but semiconductors in general. The centrality of microchips to computing power for all purposes, and the spectrum of application in the civilian and military economy is huge.
- Fourth, I think foreign direct investment in both directions will shrink to zero.
- The fifth area of decoupling is happening in talent markets. The hostility towards Chinese students in the U.S. is reaching ridiculous proportions."
"Despite their acts to buy, borrow or steal intellectual property, they constantly remain three to seven years behind the U.S., Taiwan and South Korea, i.e. behind the likes of Intel, TSMC and Samsung. It’s obviously hard to reverse engineer semiconductors"
"There is an argument that 50% of the profits of the US semiconductor industry come from their clients in China. That money funds their R&D in order to keep three to seven years ahead of China. The U.S. Department of Defense knows that, what’s why the Pentagon doesn’t necessarily side with the anti China hawks on this issue."
"Financial market collaboration between the Chinese and American financial systems in terms of investment flows for Treasuries, bonds and equities is a $5 trillion per year business. This is not small. I presume the reason we have only seen two rather small warning shots so far is that the Administration is deeply sensitive to Wall Street interests, led by Secretary of the Treasury Steven Mnuchin. Make no mistake: Given the serious Dollars at stake in financial markets, an escalation there will make the trade war look like child’s play."
" There are three things that China still fears about America. The US military, its semiconductor industry, and the Dollar."
"American political elites, Republicans and Democrats, have concluded that Xi Jinping’s China is not a status quo power, but that it wishes to replace the U.S. in its position of global leadership."
Q: Do you really see the danger of a hot war?
"I don’t mean to be alarmist, not at all. But I was talking to too many people both in Washington and Beijing that were engaged in scenario planning, to believe that this was any longer just theoretical. My simple thesis is this: These things can happen pretty easily once you have whipped up nationalist narratives on both sides and then have a major incident that goes wrong. A conflict is easy to start, but history tells us they are bloody hard to stop."
(I would also encourage anyone interested in the dynamics to watch the John Pilger "A Coming War On China" video which is long and a bit bloated but reveals the pressure China us under from the US Military with nukes surrounding their country and gunships in their waters ready to block off trade on a whim).
EDIT: Not sure if I can post ZHedge links so if you want the full interview search the title of the article on ZH - "China Still Fears Three Things About America. The Dollar Is One Of Them"
Submitted October 05, 2020 at 07:20PM by Au_contraire_zippy https://ift.tt/3jzoEF7
