Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: China Page 4 of 11

China Has A Huge Lead In Patents

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On May 16, 2023

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Larger than I realized:

Now, per capita, it’s actually South Korea, Japan, USA, China and I wouldn’t say that doesn’t matter: it’s why Japan and South Korea stay prosperous (though life in South Korea, I gather, is rather nasty for workers.) Still, the bulk matters more: who’s in the lead.

The common rebuttal is that Chinese patents are low quality. So, let’s say that half of Chinese patents suck. They’d still be slightly in the lead.

It’s also interesting that Japan gets almost as many patents as the US. You don’t hear about Japan much these days (unlike the 80s when everyone was terrified) but they haven’t lost their game.

This chart echoes what I’ve been saying for years: the tech lead moves to where the manufacturing floor is. And that’s in China. Happened when it moved to the US from Britain and the US is not immune to the rule.

TechxManufacturing=Power in the modern world. If the US wants to change this, they have to re-shore industry, not just make half-hearted “friend-shoring” moves.

It’s also interesting how bad Europe does here. Germany+France+Britain=5%, which is half of South Korea. Europe is living off its legacy, and that means its decline is damn near certain if they don’t reverse this. Given the US is now poaching European industry, and Europe is letting it out of fear of Russia, well, the future doesn’t look bright.

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Europe Needs To Re-evaluate Its Importance And Its American Vassalization

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On May 10, 2023

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Europe lives in a delusion:

What Europe thinks about China matters little. China needs Russia, which supplies food, fuel and minerals far more than it needs Europe. Further, Europe cannot be a reliable partner to China, because European countries are American satrapies. They don’t actually have independent foreign policy if the US puts pressure on, and the Ukraine war has tied them far closer to America. At the same time Europe is losing chunks of its industrial base to America due to increased input costs due to the cut-off from Russian resources.

Europe is an important trading partner for China, particular a buyer of Chinese exports, but the lesson of Russia/Ukraine is that such ties are not reliable. As the US puts more and more sanctions on China (who has invaded nobody) and Europe cooperates such ties become clear sunk costs: nice to have, but nothing to count on.

The US is treating China as its main threat, and girding for war, while trying to “friend-shore” industry away from China. They are arming Taiwan, and sending senior politicians to Taiwan. Sanctions proliferate. Europe does not stand against this.

So, Europe cannot be relied on, they cooperated with sanctions even before the Ukraine war. Russia, on the other hand, can be relied on because they need China as much or more than China needs them.

Further, the reason the US hasn’t gone full trade war with China is simple: the results for America would be disastrous. Many important items are now made entirely or predominantly in China. China would hurt from losing its second biggest customer (after ASEAN)  but the US would be crippled overnight. This applies as well to the EU. Shipping basic industry to someone you then decide to treat as an enemy is like handing someone your gun, then saying “I hate you and I want to kill you.”

Not smart.

China has the US and Europe over a barrel. Decoupling is not possible right now without catastrophe. Either the decoupling efforts succeed over a period of years (ten to fifteen at a minimum) or they don’t work, but China either gets time or if decoupling happens before that, it starts with the advantage of actually having physical plant and with its enemies crippled.

But Europe will have no real sway with China for as long as it is clearly a bunch of American vassal states. There is no way to make a deal with Europe which will be kept, because Europe does not have autonomy. Everyone knows that if America shoves hard, the Europeans will side with the US.

In any case, China has become the world’s premier auto exporter. Its first commercial jets are now rolling out. It is catching up in semiconductor manufacture. It is expanding trade with Africa and South America and now trades more than the US or Europe on both continents. It has made friends with both Iran and Saudi Arabia. Europe is losing exports and losing its technological advantage. Soon there Europe will mostly a customer, not a necessary supplier and in any case Europe, cooperating with American sanctions on China has already shown it is not a reliable supplier.

Given all this, European politicians, acting as if it is still 1970 or 2000, can croak and threaten and scold all they want. More sanctions are coming, China needs Russia and if China abandoned Russia, Europe would not be a reliable ally anyway.

This being the case, the odds of China abandoning Russia are essentially zero.

As for the Europeans, they need to understand that if they act as American vassals they will be treated as American vassals, which means no one who the US considers an enemy, and the US definitely considers China an enemy, can ever trust any deal with them.

Europe has made its bed. It had chances over the last twenty years to become its own power bloc, to declare itself free of American domination. It chose not to. It rises and falls with America, except that America has already shown it will cannibalize European industry and concerns whenever there is benefit to America.This is not the post-war “shared prosperity” period for the Western powers, it is dog-eat-dog and Europeans are living in a fantasy world. Even within Europe nations are acting against group interest.

The European garden is set to be filled with weeds and Europeans need to figure out a way to do more than manage decline. They might start by realizing that their interests and America’s interests are significantly different, and they might wish to stop with the ridiculous sanctimonious speeches to the Chinese. The Chinese are not abandoning a reliable ally who provides what they can’t make themselves for a few more years of not-very good relations with a Europe who obeys their enemy.

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China Is Winning The Electric Vehicle Race. Why And What Does It Show?

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On April 24, 2023

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Not precisely a surprise, or it shouldn’t be.

China, already the world’s biggest market for EV, is set to knock Japan from top spot for global car export volume this year after overtaking Germany in 2022

Price on the low end is pretty good, too, though it may only be available in China:

This is the new BYD Seagull and with a price tag starting at just 78,000 yuan ($11,300), it is one of the most compelling new electric vehicles from China launched in quite some time.

Of course, it helps that China is the largest market, though some European countries are hard-charging in terms of buying electric vehicles.

For a long time the US had a huge advantage: it had the consumers. It was rich, it was high population, there were no high population countries with larger markets than the USA. Now China is only a middle income country, but it is a 1.4 billion population middle income country.

Further, China uses industrial policy. It does not have a floating currency, but one that it manages. It provides huge subsidies to important industrial markets and it supplies a domestic market which is huge.

It should be understood, clearly, that with almost no exceptions, every country industrialized under protectionist policies. The only exceptions I am aware of are city states, Finland, and the USSR. Every country which moved to laissez-faire policies then saw a decline in their industrial power. In almost all cases they also had a sponsor: for Japan and the US, for example, the initial sponsor was Britain. That sponsor helped them with the initial technology transfer and provided an external market.

The country which did that for China was the United States.

However, as was the case with Britain aiding the US, this was a clear geopolitical mistake (though in the Chinese case a humanitarian plus). China’s population size and geographical extent meant that they eventually created a large internal market capable of providing a substantial market and, since they were and are the lower cost producer (a large part of why America moved production there in the first place), they have been able to easily take over export markets from the US and its allies: their products are about as good, or good enough, and a lot cheaper. So the West went from being the primary exporter of goods to South America, Africa and most of the rest of Asia to second place.

At this point China has a large internal market and more of the world market than the US does.

This is not to say that the American and European markets aren’t important, they are. But they are no longer determinative: they are no longer the only game in town.

Add to this that China is surging technologically, and the Western lead is evaporating. The speed of that evaporation is accelerating. China now has a domestic passenger jet industry, for example. The jets aren’t as good as Airbus or older Boeing planes (Boeing appears unable to make good new planes) but it’s good enough, and the next generation will be better. Chip manufacturing and design continues to improve and all the serious technological bottlenecks will be broken, I’d guess in ten to fifteen years. Most solar panels are made in China and it is also the world’s largest market for solar.

As I have pointed out before, the tech lead moves to where the manufacturing floor is. There is lag time, in the case of Britain and the US it was about 20 years, but it happens.

There are jokers in the pack, of course: climate change, demographic issues, ecological collapse, the possibility of war and blockade and so on, but the smart money is on China.

China was the world’s largest and most important economy for most of the last 2,000 years and the most technologically advanced (before that it was India.) It will return to that position if climate change or war does not stop it.

All absolute advantages are time-bounded. You can extend them with careful policy, but at some point other people learn how to do what you can do. If a smaller nation wants to dominate it needs an absolute advantage in production or the military. Sometimes that is in production, sometimes it is cultural/technological (think the Mongols or the Macedonian Greeks).

The West’s time is done. This is going to be particularly hard on the Europeans if they keep bungling their decline (they should be disentangling from the US and forming a third pole). The US, if it does not disintegrate into civil war, faces an ugly period as well. The dollar hegemony is collapsing, to the extent that even the Financial Times is writing about it, their tech leads is disintegrating and they are set to be the leader of the lesser bloc in a cold war. That didn’t work out well for the USSR and it isn’t going to work out well for the US.

Now, everyone has problems and I wouldn’t be surprised if in 50 years China breaks up under the hammer blows of climate change and ecological collapse. But then, I wouldn’t be surprises if the US does. For now, the normal dynamics of historical change and the rise and fall of hegemonic powers are in play and the smart money is on China.

 

 

China Helps Bring An End To Yemen War

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On April 10, 2023

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So, back on March 16th I wrote an article about the Chinese brokered Iran-Saudi Arabia peace deal. At the end of the article I wrote:

I am most interested to see if this will mean some sort of peace can be worked out in Yemen, or if it means the Iranians will abandon the Houthis, which would be sad.

Turns out peace with Yemen was almost certainly part of the deal:

Saudi Arabia has decided to end the war in Yemen . A Saudi delegation will travel to Sana’a next week to conclude an agreement with Yemen, Reuters reported

I suppose it’s a little early to be sure the war will end, but it seems very likely and this wouldn’t have happened without China. The US helped Saudi Arabia bomb the hell out of Yemen and cause a massive famine: China helped bring peace.

This is part of a massive realignment happening right now.

The number of states that are planning to join BRICS and Shanghai Cooperation Organization (SCO) increased significantly last year, about 20 countries want to join…

…

Among them are Turkey, Mexico, Indonesia, Argentina, Saudi Arabia, the UAE, Egypt and a number of other African countries.

China will now be the most important member of the most important economic organizations in the world, other than the WTO and perhaps the IMF, though the IMF is going to be increasingly sidelined, because loans from the IMF always come with horrible conditions and more and more there will be other alternatives.

China is the biggest trade partner for almost every nation in Africa and South America already, so this realignment only makes sense. Those expecting the US to remain the center of the economic world when it was no longer the most important economy in the world were always fools.

I suspect a some of this is also due to freeing up Russian gas and oil for sale to non-European buyers. Again, the locus moves away from the West to the non-West.

China may not be the most important country in the world yet, but it’s only a matter of time absent war or some catastrophe stopping them. None of the countries joining ever liked America and China just offers a better deal on almost everything from loans to goods to IP.

The sun is near the horizon for the American Empire as world hegemon and the opposing bloc in the new bipolar world will be economically stronger than America’s bloc.

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China Leads A Successful Middle East Summit

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On March 16, 2023

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Something which has slipped past most people’s radar is that China recently acted as the intermediary for peace talks between Iran and Saudi Arabia. The two countries have been at each other’s throats for decades, funding and running operations and proxies against each other. Elijah Manjier has a decent summary (part is behind a subscriber wall) from a pro-Iranian point of view.

It’s also interesting that in this conference no English was used!

Now it’s obvious why the US couldn’t be involved: it hates Iran and doesn’t intend to change that any time soon. But that China was reached out to indicates that it has good relationships with Iran and Saudi Arabia and that it’s considered powerful and prestigious enough to be involved a region far from its core.

On the Saudi side this shows the continued movement away from being a US ally. It suggests continued movement towards China, and that the petro-dollar really is under significant threat.

For Iran, it suggests that the days of the US being able to coordinate sanctions over it are likely numbered. If the Sauds break out of the US bloc, one can expect the Gulf States to follow if Iran is also in the Chinese bloc: these are the regional and cultural great powers. As Chinese/Russian payments expand and with petrochemicals priced in Yuan or Rubles, and with the most important Middle Eastern powers friendly to China, the US is reduced to its core allies. These are important countries, no doubt—Europe, Japan, South Korean, Taiwan and so on, but it is a minority of the world and is filled with countries terrified of US sanctions, looking for a way out under the potential hammerlock.

I don’t want to over-state how important this mediation by China was, but it was important and it’s one of those milestone moments. It wasn’t the US or Europe who the Sauds and Iranians went to, and just as importantly, they didn’t feel they needed US approval. Saudi Arabia using China, whom the US has declared an enemy, to move towards peace with a country the US has been hostile to for about 45 years is an earthquake.

Whether the peace will really happen is more dubious, but if movement, even hesitant 2 steps forward, one step backwards movement continues, it will be worthwhile. I am most interested to see if this will mean some sort of peace can be worked out in Yemen, or if it means the Iranians will abandon the Houthis, which would be sad.

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The Death Throes Of The World Europe Made

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On January 18, 2023

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Most people don’t really get just how extensive European conquest of the world was.

The map’s a bit inaccurate over in Russia: most of Russia is “not Europe” and was conquered — most of it should be green, like North America. Likewise, Japan was conquered by the US, which is a European colony. Leaving aside their brutal war crimes, they were stupid to pick a fight with an industrialized continental power: there was never any chance of winning against the US, as Admiral Yamamoto told them.

But the point is fairly simple: Europeans made the modern world. Wiped out almost all the natives in North America; conqured all of Africa and South America, and almost all of Asia. We went around and imposed our form of capitalism. We destroyed local industry, as in India (which was at least as industrialized as England before the conquests) and forced the natives to trade with us on negative terms, the most famous example being the two Opium wars to make China allow the Opium trade, since England had almost nothing else the Chinese wanted to buy.

World War I and II were a competition between the European powers (which include the US, who had by then essentially completely wiped out the natives) and the US and USSR, the peripheral continental powers won the war, divided Europe between them, “de-colonized” and then ruled the world between them till the USSR collapsed, at which point the US got to tell almost everyone what to do and how to do it for a good twenty-plus years.

A few nations managed to sort of resist: Cuba, Venezuela, Iran and North Korea, but they were made to suffer vastly for their defiance.

The era ended, I would argue, when Russia sent troops to Syria. They defied the US directly, and fought, and the US backed down. One could argue for Georgia, but it was on Russia’s border. Syria was an assertion that the US could not overthrow any government it wanted and that it didn’t control the Middle East minus Iran.

But Russia, important as it is, is now a junior ally to China. They have the nukes, but they don’t have the economy to stand up to the West and NATO without China’s support, and they know it. The competition is not really between Russia and NATO or Russia and the Ukraine, but China and the US, even though neither side has anything more than observers on the ground.

The Russians have chosen their side: chosen not to be Europeans but to be Asians. They say this frequently, it’s a deliberate choice. If this century is to be the Asian one, Russia will be Asian. This change from looking to Europe and being essentially European is massive, and it’s what makes it possible for China to win. Losing Russia, with its vast resources and land ties to China makes it nearly impossible to use American sea-power to “choke out” China thru trade interdiction.

The coming cold war, and possible hot war (or a series of proxy wars) with China is about whether a non-European power will be allowed to remake the world Europe made. Everyone recognized that the US was Britain’s heir, ruling indirectly, but ruling nonetheless. It is about a different, non-EuroAmerican elite being powerful: people who don’t believe in exactly the same things as the trans-Atlantic rulers.

It is an existential threat to European rule, and it is being treated as such. The “yellow peril” has arrived.

In 30 years, will Mandarin be the the new English? The new lingua-Franca? The language everyone has to know and that you can, if clumsily, get by on almost everywhere?

Absent a major war, likely nuclear, or civilization collapse, I find it hard to see a scenario where China doesn’t become the most important global power. Oh, they have problems–but so does everyone.  Cries of how they can’t do it because of culture seem weak to me: China was the civilization leader for most of the last 2,000 years, the idea that Chinese culture can’t produce science, music, arts and all the other flowers of civilization is absurd and they’ve certainly been able to adopt our innovations, just as we previously adopted gunpowder and the printing press from them.

Everything ends. We Europeans had our day in the sun (though my Irish ancestors missed most of it) and now the sun sets, as it always does.

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China’s Trade Surplus Grows, Including With the US

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On January 17, 2023

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There’s a lot of talk about friend-shoring and bringing industry back to the US and its allies, but the reality is quite different.

The bottom line, right now, is that if the US went to war with China, the American (and Western) economies would virtually collapse.

The US is making serious preparations for war: they are fortifying allied countries in Asia in a similar fashion to how they did Ukraine after 2014, although obviously with less of an eye to ground invasion. Japan has doubled its military budget and stated that it will no longer obey the “peace” constitution but will participate in offensive operations with America.  US bases are popping up around China wherever they are allowed.

But to fight a non-nuclear war with China, the West has to genuinely re-shore its critical industries, and it isn’t doing that beyond a few steps with regards to semiconductors. A vast swathe of basic industrial goods are made by China, and not by the West, or not in sufficient quantities.

However, to seriously repatriate industry requires reducing the cost-structure: and that means reducing housing costs, and in the US, health-care and tuition costs, so that Western industry is cost-competitive. Right now the US is grabbing a swathe of energy price sensitive industry from Europe, and especially Germany, but that doesn’t help much in an general war: they’re taking from their allies, not their enemies.

Genuine oligarchic plutocracies, which is what most of the West is, including the US, are generally very bad at industry and war, though there are exceptions (Venice, at various points. But being merchants concentrated their minds on naval power.)

The steps required for America and the West to rise to the challenge of China require Western elites to make painful choices they so far are avoiding: they simply have to give a better deal to their populations, and not concentrate on keeping wage increases under inflation increases (which is what has happened in the US.)

America’s elites can be absurdly filthy rich or they can just filthy rich and have a chance of retaining their global pre-eminence. It’s unlikely they can do both, though I suppose they could bet on ruling a post-nuclear wasteland, if they’ve gone fully insane.

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America Will Lose Its Scientific Ascendance To China & When Disruptive Science Will Recover

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On January 11, 2023

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And thinking otherwise is tiresome and delusional. From Nature:

Young Chinese scientists who got their PhDs overseas and returned to China as part of a state-run talent drive published more papers after their return than did their peers who stayed abroad. The productivity bump can be explained by returnees’ access to greater funding and an abundant research workforce, according to the authors of an analysis published in Science1. The findings come as geopolitical competition between the United States and China mounts.

The only things which could derail this are a major war which China loses (though no one’s likely to “win”), or being disproportionately effected by climate change and ecological collapse and unable to handle it.

As regular readers are probably tired of me saying, this happened before with the UK and the US. The research center moves to the manufacturing base.

Meanwhile, a study found that “disruptive science” has declined.

The number of science and technology research papers published has skyrocketed over the past few decades — but the ‘disruptiveness’ of those papers has dropped, according to an analysis of how radically papers depart from the previous literature1.

Data from millions of manuscripts show that, compared with mid-twentieth-century research, that done in the 2000s was much more likely to push science forward incrementally than to veer off in a new direction and render previous work obsolete. Analysis of patents from 1976 to 2010 showed the same trend.

A chart is instructive:

 

Study authors suggest the following:

The trend might stem in part from changes in the scientific enterprise. For example, there are now many more researchers than in the 1940s, which has created a more competitive environment and raised the stakes to publish research and seek patents. That, in turn, has changed the incentives for how researchers go about their work. Large research teams, for example, have become more common, and Wang and his colleagues have found3 that big teams are more likely to produce incremental than disruptive science.

Finding an explanation for the decline won’t be easy, Walsh says. Although the proportion of disruptive research dropped significantly between 1945 and 2010, the number of highly disruptive studies has remained about the same.

David Graeber had another (partial) explanation:

“There was a time when academia was society’s refuge for the eccentric, brilliant, and impractical. No longer. It is now the domain of professional self-marketers”

I’m fairly sure this is a matter of institutionalization and the wrong style of professionalization. Institutions stifle creativity in most cases. Exceptions like Bell Labs are rare; unicorns in modern parlance.

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The old German academic system which took over the world was extremely productive: to become a “doctor” you had to produce new knowledge. It worked fine until the massive expansion of  universities after the war. I’m not an academic insider, but I’m virtually certain that the current system would be unrecognizable to those professors and scientists from the 19th and early 20th centuries: similar to the Roman Empire keeping for the forms of the Republic and pretending the Senate mattered and so on.

The other issue is that “disruptive” isn’t the same as “paradigm changing”, it’s one step down, and I’m guessing that paradigm changing discoveries have genuinely declined. We are mining the same coal seams, and have been for a long time. Quantum mechanics was discovered pre-war, the structure of DNA briefly after the war, Von Neuman and Turing Machines date from the same period. The basis of semiconductors were discovered in 47/48, and so on.

We’re mostly living off the legacy of a past civilization now (because yes, the civilization of the late 19th and early to mid 20th centuries are dead). We haven’t made a lot of fundamental discoveries since, or if we have they haven’t been followed up. Even really fantastic stuff like quantum computing is mining that same vein discovered a century ago.

Further, we have refused to really change our physical plant, beyond the widespread telecom/computer revolution. If time-traveled to the present from 1960, once you learned how to use smartphones/computers/payment systems, you’d be fine and fit in. Oh, there are plenty of small changes, I remember the 70s well enough to know that, but the basic structure is the same.

Physical plant changes demand new solutions, but we’re still running on hydrocarbons and even our “alternative energy” is old. Solar panels were invented in 1883. Windmills are ancient and windmills producing electricity are essentially as old as electricity itself. Our advances in batteries are impressive, but they are extensions.

We don’t really want to change anything fundamental. Computers and telecom were adopted wholesale not because they improve productivity (it doesn’t show up in the macro data), but because they allowed people in charge more control. But in the face of known catastrophes we have done essentially nothing.

When we decide to make fundamental changes to our physical plant and to our institutions (including universities) then there will be a massive upsurge in “disruptive science” and there will be new paradigmatic changes and discoveries, assuming we don’t wind up in a Dark Age.

That will happen when civilization collapse makes maintaining the shell of a 70 year old way of life impossible.

 

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