Tech superpower? Moi?

China seems to be realizing that not all publicity is good publicity, at least when it comes to technological advances:

China is fooling only itself if it thinks it will soon overtake the United States as a world leader in science and technology, according to the boss of a state-owned publication dedicated to the subject.

With the world’s two largest economies embroiled in an escalating trade dispute, the comments made by Liu Yadong, editor-in-chief of Science and Technology Daily, which comes under the supervision of the Ministry of Science and Technology, were unexpected.

“The large gap in science and technology between China and developed countries in the West, including the US, should be common knowledge, and not a problem.” Liu said.

“But it became problematic when the people who hype [China’s achievements] … fooled the leadership, the public and even themselves.”

On the one hand, it’s definitely true that China has sometimes oversold its achievements:

One example of the “hype” to which Liu was referring is an article by Xinhua that was widely circulated last autumn hailing China’s “four new great inventions”, namely high-speed rail, electronic payments, bike sharing and online shopping – even though none of them actually originated in the country.

See also here.

On the other hand, I don’t find it altogether persuasive that China is lagging far behind the US. In fact, China has already surpassed the US in at least one crucial area, as David Goldman noted more than a year ago:

For the first time, China has demonstrated that it is far ahead of the United States in a critical new technology, namely quantum communications. A Chinese satellite succeeded in transmitting so-called entangled photons to earth stations. […]

China has the world’s fast supercomputers built entirely out of Chinese components. It has the world’s largest radio telescope. It has thousands of surface-to-ship missiles that can hail down on American aircraft carriers from the stratosphere, and it has ultra-quiet diesel electric submarines that can lurk on battery power for weeks. It has satellite killer missiles. China might spend barely over $1,000 to equip foot soldiers, about 1/100th of what America spends, but it has invested massively in high-tech defense.

Does the US have the overall edge in science/tech? Yes. Could that change sooner than most people think? I believe so.

Deng Xiaoping was fond of saying that the country should hide its strength and bide its time. It appears China is starting to worry that its much-vaunted progress is attracting the wrong kind of attention from the US, and is toggling back to “hide” mode.

Bannon’s dark valley

Former White House chief strategist Steve Bannon offers a perspective on the great geopolitical issue of our time:

But what he really wanted to discuss what how the obsession with Russia was a giant red herring from the bigger looming threat of China’s economic dominance. He pointed to Australia as ‘an object lesson to Great Britain and the United States’ for what happens to a country when it lets itself be dominated by China’s economic might.

He said: ‘The people in Australia thought they were playing by the rules, and what they found out ten years later is that the Chinese had gone in and bought minority stakes in companies and bought natural resource companies – next thing you know, with the investments they made in real estate and real assets et cetera, they took control of companies. Next thing you know they’ve got political power – they’re being politicians. And now Australia is in a situation of creeping control by an independent Republic like China – it’s dangerous. That’s happening in the United States and it’s happening in Britain.’ […]

But Russia, he argued, is distraction from the great evisceration of America, Britain and Europe’s power, which is down to the ‘axis of the 21st century’– China, Persia, Turkey, or ‘the Asian landmass’ and China’s one belt one road.

Is it too late for the west, though? Has China’s economic power now grown so great, and our economies so weak, that the Chinese takeover is inevitable?

‘Up until Donald Trump came on the scene, we were told by everybody in the city of London and on Wall Street that the inexorable rise of China is the second law of thermodynamics. It is the physics of the universe.’

But Trump, he insisted, through the threat of tariffs, and the aggressive limiting of Chinese investments in western countries, can reverse the advance of China’s economic advance: ‘If we were to go full on, and pull the trigger on that, you bring ‘em to their knees.’

What are the chances of America actually doing that, even with Trump? ‘Low,’ he says, ‘but the stakes are too great not to try.

‘We are going through a dark valley. People say I’m apocalyptic – I just look at facts, and I’ve been saying this for years and now it’s all coming to fruition. That’s why with Russia, the kleptocracy are not good guys, but eventually, we have to end the Cold War and we have to bring Russia into some sort of alliance or rapprochement with the west.’

If the west allows Russia to partner ‘with this [China-led] axis, the 21st century will be quite different.’

Even if you’re not inclined to agree with Bannon, it’s a fascinating interview and I recommend listening to the whole thing.

End of the road?

Just a bump in the road, or is China’s global infrastructure drive really turning out to be a highway to nowhere? Only time will tell:

CHINA is facing growing controversy surrounding the debts associated with Belt and Road projects. Pakistani politicians are warning that if they are forced to go to the International Monetary Fund for assistance, the financing arrangements of the China Pakistan Economic Corridor will have to be fully disclosed.

At the same time Malaysia’s new Prime Minister Mahathir Mohamad has ordered a temporary halt to construction work on the East Coast Rail Link (ECRL), and wants to use a planned official visit to China in August to renegotiate some of the terms of the deal.

Meanwhile China has hit back at US media articles on the so called “debt trap” that it has allegedly created in Sri Lanka, with Foreign Ministry spokesperson Lu Kang saying that the reports are “a gross distortion of facts”, and are “either irresponsible or engineered by people with ulterior motives”.

These controversies are mirrored by similar concerns across Africa about the build-up of debt associated with the Belt and Road. Nonetheless, many countries still see the Belt and Road Initiative as an opportunity to spur economic development. China clearly views some of the hostile media coverage as something that has to be viewed in the context of the deteriorating relationship with the United States on trade issues.

China aims to overtake “slower vehicle” US

China has big plans for enhancing its military power around the globe, is bracing for increased frictions with Japan and other neighbors, and sees the US as a power in decline, according to a leaked document:

China’s military reforms are aimed at expanding its military might from the traditional focus on land territories to maritime influence to protect the nation’s strategic interests in a new era, according to an internal reader of China’s Central Military Commission obtained by Kyodo News.

If the reforms progress, the reader points to intensifying friction with neighboring countries, including Japan, in the East and South China Seas and elsewhere. It also suggests the willingness of China to overtake the United States in military strength. […]

“The lessons of history teach us that strong military might is important for a country to grow from being big to being strong,” it said. “A strong military is the way to avoid the ‘Thucydides Trap’ and escape the obsession that war is unavoidable between an emerging power and a ruling hegemony.”

A Thucydides Trap is a phrase used to refer to when a rising power causes fear in an established power that escalates toward war.

Military reforms are therefore a significant “turning point” for any given emerging country to “overtake a slower vehicle on a curve,” it said, suggesting that the United States is in its decline.

Stepping back from the brink?

The economic dispute between the US and China is heating up:

Chinese officials are warning that they are prepared not only for trade war, but for financial, diplomatic and limited military confrontation with the United States, in response to American demands for fundamental changes in Chinese economic policy.

The dispute between the world’s two largest economies has moved beyond narrow issues of trade or specific areas of prospective conflict: Washington now views China’s technologically-focused economic strategy as a challenge to America’s world position, and China views Washington’s demands on China as the equivalent of a “new Opium War,” as a senior Chinese official told Asia Times last week.

Helped along by the US Senate’s torpedoing of a carefully crafted agreement with telecom giant ZTE:

A critical turning point was the Commerce Department’s ban on sales of American chips to power ZTE’s mobile handsets, sourced mainly from the American semiconductor giant Qualcomm. ZTE had violated sanctions on sales of high technology to Iran and North Korea. China’s President Xi Jinping intervened personally with President Trump to rescind the decision. Trump’s Commerce Department negotiated an unprecedented $1.9 billion fine as well as direct American controls over ZTE management, only to have the US Senate vote to reinstate the crippling ban on chip purchases. Trump’s Republican opponents united with Senate Democrats to embarrass the US President. The Chinese official commented, “That is Trump’s problem, not our problem.”

Thanks guys!

The US needs to address any Chinese trade abuses. But no amount of punitive trade actions will save the US economy from corkscrewing into irrelevance, if America does not launch its own “technologically-focused economic strategy,” rather than trying to somehow shut down China’s.

Goldman has some suggestions:

First, do what the Eisenhower administration did in 1957 – shift federal resources toward science and technology and starve the universities of all other forms of aid, including student loans.

Second, restore federal R&D spending to the levels of the Reagan years (when we spent 1.3% of GDP on basic R&D vs. about 0.7% now).

Third, begin Manhattan Project-style programs under the aegis of the Defense Department to force breakthroughs in critical technologies: quantum computing, semiconductor manufacturing, drone technology, artificial intelligence, missile defense (including space-based systems), and anti-submarine warfare to start.

Fourth, as I noted above. organize a brain drain out of China: Identify and recruit their most inventive and creative tech people.

Fifth, get together with the Japanese and organize an alternative to China’s One Belt, One Road program. The fulcrum of this program is the 600 million people of Southeast Asia, most of whom would welcome an alternative to Chinese dominance.

Foreigners banned from hotels in China?

Wade Shepard says it happens a lot:

An old blog post of a situation that seems to have gotten way worse. Hotels in China are still segregated by ethnicity and national origin. Imagine if you went to a hotel in the USA and they refused to let you stay just because you were from China?

And here is the 2012 blog post in question. Sample:

Imagine this: You travel to a new city, scour the streets looking for a good, cheap place to sleep, and when you finally find one you’re told you can’t stay just because you’re a foreigner. Now play this story out over and over again for 90% of the hotels you try to stay in and you have an idea of what it’s like to travel in China.

Technically, Chinese hotels are suppose to have a special permit before they can admit foreign guests. To get this permit they first must have the proper surveillance equipment installed — meaning a computerized registration system — and, or so it is my impression, be up to snuff and project the image of China that the government wants the outside world to see, which is to say: modern, developed, new, clean, and expensive.

These rules are nothing new, but, from my previous travels through China, I don’t remember them ever being enforced very readily. It has been my experience that one out of every two or three inns that didn’t have a foreigner’s permit would let you stay anyway. Like so, travel in this country was not that much of a hassle: when denied at one inn you’d just walk over to another until you found one that didn’t give a shit. But now this seems to be getting more difficult, for the first time in all my travels in China I was defeated when trying to find accommodation. […]

It wasn’t happening. I couldn’t stay in this inn. My foreign face and accent gave me away, and the inn would not give me a room no matter how much I pleaded. No problem, I’ll just walk on to the next one. I asked the lady at the reception desk if she knew of another cheap inn 旅馆 that I could stay at. She told me to go to a hotel 宾馆. The difference between the two is one little character, but the impact is colossal: it means the difference between spending $5 and $30.

Fact check: I cannot confirm the 90% figure, but the idea that many Chinese hotels refuse to accept foreigners is ABSOLUTELY TRUE. Exhibit A: An expat colleague and I were turned away by a hotel in the city of Wuxi in 2010 for precisely this reason. Exhibit B: In 2016, an American friend living in Shanghai’s Yangpu district was told by virtually all of the 10 or so hotels within walking distance of his university that they couldn’t accommodate his foreign friends. Again, this was in a central district of Shanghai, not some backwater town. This friend has had similar experiences in Beijing and elsewhere in China.

Now, I should make it clear that I’m not complaining at all. China is a sovereign country and has the right to subject foreign nationals to this treatment for whatever reason it wants, or for no reason at all — and it’s completely pointless to gripe about it.

Also, I can’t speak for anyone else but if I were travelling to a new city I would very happily pay $30, as opposed to $5, for the privilege of staying in an actual hotel rather than a guest inn or hostel. That’s just me though.

The comments below Shepard’s recent post, however, are fascinating as a cross-section of the types of responses that any criticism of any aspect of China inevitably elicits. Let’s take a look at some:

PERSON A: Exaggerated.

Wade Shepard: Go out of a big city and try it.

PERSON A: Simple research will point foreigners to several hotels in smaller cities. Article’s title is very misleading.

Wade Shepard: Research will lead you to tourist hotels. I’m talking about the cheap local inns. Not places you can find online. Anyway, the point is that accommodation is segregated based on nationality not whether you can find a place to stay somewhere from looking online.

Then there’s this guy, who took the opportunity to offer some insider “tips and tricks” that might be helpful to a theoretical person not named Wade Shepard:

PERSON B: The alternative is to make friends with the owner of the establishment, then walk with them down to the police dispatch to register temporary residence (24 hrs for urban areas/ 72 hrs for rural areas), perfectly acceptable if one has a residence permit and not a tourist visa. One can then give their new friend a 200 kuai hongbao as a thank you. The same can technically be done on a tourist visa provided one declares precise details of their travel schedule in advance. Mandarin skills are ultimately the key to getting anything at the local price.

Well, hokay — no problem then! Shepard’s reply is impressively patient:

Wade Shepard: Hello Connor, I had a residence permit then and I speak Mandarin. 200 kuai hongbao!?! haha I’m talking about 50 kuai per night rooms here 🙂

Then there’s this guy who appears to think that China is a market economy — totally missing the point that the foreigner registration system is imposed on hotel owners by the government:

PERSON C: Any entrepreneur, including hotel owners, should have full choice on who to serve. The customers then have the corresponding right to select which firms they support and carry their money to. That’s called a market economy.
Honestly, it’s rather embarrassing to witness Westerners trying to impose their culturally biased views about equality on other cultures. I was under the impression that modern Western culture is pretty much all about respecting the rights of others and especially those from other cultures. Well, live and learn.

And no discussion of this type would be complete without the guy who interjects his own irrelevant and misleading personal anecdote:

PERSON D: Really? I have never had a problem when travelling with a Chinese companion- maybe it’s more of a language thing.

Freedom of speech is important, but so is freedom *from* speech — i.e. the freedom to tune out other people’s ignorant yammering. Seriously, some people just need to STFU when those with actual knowledge and experience are trying to make a point.

UPDATE: It seems I’ve unleashed the dogs of war. I sent the link to Shepard’s post to my friend Antonio Graceffo and, well… hilarity ensued:

But they can’t innovate…

Nano lab Suzhou China

Vacuum Interconnected Nano-X Research Facility in Suzhou, China (Source: News Agency of Nigeria)

The complacent, self-satisfied conventional wisdom that China is incapable of matching, let alone surpassing, the West on innovation takes another body blow:

Most European firms operating in China think that their local counterparts are on the same level or even better in innovation for the first time, according to a survey co-collected by the European Union’s commerce chamber in China.

Some 61 percent of the respondents from 532 firms answered that Chinese companies are equally competitive in creating goods and services or even superior, which is double the number from a year ago, according to the survey done by the EUCCC and German consultancy firm Roland Berger. This marks the 12th year that the study has been executed.


OPM: The other shoe drops

I was wondering when we would start hearing about the consequences of the massive Office of Personnel Management data breach back in 2014. Well, that particular shoe now appears to be dropping:

Some current and former federal government employees are taking a look at their credit activity after the Justice Department said this week that data stolen by suspected Chinese hackers in 2014 cyberattacks at the Office of Personnel Management may have been used to commit identity fraud.

Federal prosecutors on Monday said a Maryland couple had pleaded guilty to using information stolen in the OPM breach to set up fraudulent car-loan applications with a Newport News, Va., credit union.

Disclosure of the car-loan scheme, which took place in 2015 and 2016, has prompted new worries of potential identity theft for the more than 21 million current and former federal employees and contractors affected by the breach, which exposed Social Security numbers, addresses and other sensitive information, in addition to 5.6 million fingerprints. […]

Current and former U.S. officials familiar with the OPM breach said it wasn’t clear how the hacked files would have ended up in the hands of people in Maryland seeking to commit identity fraud. China has denied any involvement in the hack.

“This fraud case makes no sense,” said one former federal investigator who worked on the OPM investigation.

The use of stolen data to wreak havoc on individuals’ lives could become a very “disruptive” form of cross-border psychological warfare.


Count on somebody who scores high on intellectual integrity and low on agreeableness to stand up to the grubby demands of a censorious printing company when, apparently, most authors would not:

The writer Nassim Nicholas Taleb has blasted Chinese printers with accusations of censorship, after the manuscript for a US edition of his 2012 book Antifragile was returned with the instruction to replace mentions of Taiwan with “China, Taiwan”.

The Lebanese-American author of bestseller The Black Swan, which predicted the 2008 global economic crash, posted on Twitter: “Printer of ‪#Antifragile in China asked me to replace ‘Taiwan’ w/‘China, Taiwan’. I (angrily) said ‘No censorship!’”

Taleb claimed he was not alone in being pressurised. “Most authors, I was told, complied. I assume hundreds kept their mouth shut. Not me,” he added.

And a more recent comment by Taleb:

Nassim Nicholas Taleb

Note that my problem with Chinese printers was resolved amicably (they accepted) but I am SHOCKED that no other author had the guts to stand up to the weirdness Chinese censorship of a US book by a US author. …
8:34 PM – Jun 22, 2018

Nassim Nicholas Taleb

2) People here aren’t getting the aberration:

+Book written in US; author in US; publisher in US; readers (of US edition) in US.
+Printed in China <=> Chinese censorship.
+Publishers & Authors find this NORMAL.

This is one side of Globalism Globalists need to explain.

10:32 PM – Jun 22, 2018

Note that the company in question is not a publisher, but rather, a printer. A printer’s job is to print, not make helpful edits to the content of what is printed. Apparently, the content of English-language books printed in China and intended for export falls under the purview of China’s censors.

Also, there is no such place as “China, Taiwan,” any more than there is a place called “US, New York.”

Breaking free of Chinese suppliers could take “months”

Nobody said a breakup would be painless, but it may be a lot easier for the US to cut its dependency on Chinese suppliers than is generally assumed. From the blog of trade expert Alan Tonelson (emphasis mine):

Throwaway lines are among my favorite aspects of opinion writing, largely because in a simple, usually brief, and almost by definition understated sentence or two they can thoroughly debunk or at least gravely weaken shibboleths that have reigned virtually unchallenged for decades. And Financial Times columnist Rana Foroohar had a doozy yesterday.

As is well known by anyone who’s been closely following the development of President Trump’s trade policies and the uproar they’ve triggered, some of the biggest fears surrounding the prospect of the “trade wars” they’re deemed all too likely to ignite concern the impact on global supply chains. As explained this morning by Nobel Prize-winning economist and New York Times columnist Paul Krugman;

“[C]orporations have invested trillions based on the assumption that an open world trading system, permitting value-added chains that sprawl across national borders, was going to be a permanent fixture of the environment. A trade war would disrupt all these investments, stranding a lot of capital.” […]

Just how fast they took place, and can still take place, is where Foroohar’s column comes in. In yesterday’s column, she echoed my point about supply chain movements that are either already underway or being contemplated:

“Over the long term, China and the US are headed towards regional supply chains for high-growth technologies of the future.” She continued – consistent with the conventional wisdom, “But in the short term, the interdependencies will be difficult to untangle.”

Then, however, came the kicker – which received no special emphasis from the author at all:

“Several executives who supply Fortune 500 companies have told me it would take months if not years for the biggest US companies to break completely free of Chinese components.”

To repeat: Months – and at the outside years – for many companies to marginalize China’s role in particular in global supply chains. And then remember the reward: Greatly diminishing China’s still-burgeoning influence over the American economy and over the broader global economy, and in the process blunting the growing threat it poses to U.S. security interests both in the Asia-Pacific region and around the world.