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My March 30th post (Taiwan’s Historic Split Screen) was written as President Tsai Ing-wen arrived in New York in transit on her diplomatic visit to Central America. That piece promised a follow-up on the occasion of her return transit to Los Angeles — and meeting with Speaker of the House Kevin McCarthy — en route back to Taiwan. The Tsai-McCarthy meeting took place 6 days ago on April 5th but I delayed following up until today because my interview with Forbes on this topic was in the works.
That Forbes interview was published yesterday and can be found here (including 12 minute audio version). I am also reproducing that interview below to capture it in the Assessing China blog. It begins with several scene-setting paragraphs by Forbes Editor at Large Russell Flannery. The interview itself begins below the photograph of Micron headquarters in Shanghai.
(Begin article)
Micron Probe May Hurt China’s Efforts To Attract Foreign Investment
Beijing today wound down its latest large-scale military exercises in the waters around Taiwan but overall tension between the U.S. and China remains high. China’s moves followed a high-profile meeting last week between U.S. House Speaker Kevin McCarthy and Taiwan President Tsai Ing-wen in Los Angeles criticized by mainland leaders who claim sovereignty over self-governing Taiwan.
On the commercial front, the semiconductor industry remains an elevated point of stress. Beijing earlier this month announced a cybersecurity review of U.S. chipmaker Micron aimed, it said, at protecting the country’s information infrastructure and national security. The probe comes at a time when China has been seeking to boost foreign investment to accelerate its economic recovery from “zero-Covid” policies that slowed growth.
What’s next for U.S.-China ties and also for the CHIPS Act, the U.S. law enacted last year aimed at reversing the declining American share of global semiconductor production?
To learn more, I spoke on Saturday in the Philadelphia area with Terry Cooke, a senior fellow at the Foreign Policy Research Institute, a think tank focused on U.S. national security and foreign policy. Cooke, a former career U.S. senior foreign commercial service officer with postings in Shanghai, Taipei, Tokyo and Berlin, currently leads ReGen250, a non-profit that focuses on U.S.-China green energy collaboration as well as environmental regeneration initiatives in the tri-state Greater Philadelphia region.
Cooke believes China’s move against Micron will have “a chilling effect for potential foreign investors — definitely on the U.S. business community” at a time when China is trying to win new foreign investments following the end of “zero-Covid” policies at the end of last year that had harmed economic growth. Beijing high-profile efforts to pressure Taiwan militarily may also be counterproductive if Taipei successful builds itself up as “an important force” in a larger, more influential network of democracies. Edited excerpts follow.
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Flannery: What do you make of the military exercises around Taiwan this month?
Cooke: There are two ways of looking it. One is that going into the Tsai-McCarthy meeting, the decision had already been made (in Beijing) that this is the new normal, that whenever there is an uncomfortably high-level contact between the U.S. government and the Taiwanese government, we (the Chinese government) are just going to keep demonstrating our ability to militarily squeeze Taiwan through maneuvers of this sort.
There is, however, another way of thinking about it: the way the McCarthy-Tsai meeting was conducted may, in fact, have been the determinant of the maneuvers. Beijing may have been in a wait-and-see mode. They of course issued their standard and predictable verbal denunciations in advance of Tsai’s transit stops.
I think they were waiting to see how low-key the meeting in L.A. with McCarthy would prove to be. The entry through New York was very low-key. The State Department utterances for most of the trip also kept things low-key. And there was ample precedent for this given Tsai’s previous six transit visits to the U.S. so the State Department position was that there was no reason for Beijing to make an issue out of it.
But the optics of McCarthy meeting – with all the diplomatic trappings of a government-to-government meeting save for flags set up on the table – made it look very much like an official meeting. And I don’t think that went over well in Beijing. That could have triggered the decision to trot out the military.
Flannery: So what’s next?
Cooke: Just as the U.S. is maybe on its back foot with the new realities in the Middle East, I think China may be on its back foot in terms of the game of diplomatic recognition when it comes to Taiwan. Yes, Taiwan just lost Honduras on the eve of Tsai’s U.S. trip. Now, Taiwan is down from 14 to 13 countries that it has diplomatic recognition with.
But I think there’s really a more important game in town now than adding up the number of formal diplomatic allies. This new game in town probably started around February 2021 with the Biden administration moving into the White House. To many people’s and particularly Beijing’s surprise, Biden kept Trump’s tough China policy. He also introduced into his speeches and policies a clear and consistent autocracy-vs-democracy contrast.
Within the context of this U.S.-led “reframing” of the global picture, Taiwan now has the opportunity to reposition itself within the team democracy global network of supporters in a way that it’s not strictly about formal recognition and UN membership. It’s about being recognized, and in some ways, held up as an important force in this network of democracies.
Flannery: How will Taiwan’s presidential elections next year affect these three-way ties?
Cooke: From the U.S. governmental standpoint, the outcome – whether it is a victory for Tsai’s Democratic Progressive Party or the opposition KMT party – will change hardly at all. This is because the U.S. government’s official position – whether it involves the outcome of an election in Taiwan or changes to the cross-strait status quo initiated by China – is that what the 24 million people of Taiwan choose for themselves is what the U.S. government will support. I don’t think our basic diplomatic posture and our support for Taiwan would change unless there was some evidence — which I would not expect at all — of some malfeasance happening with the election.
Flannery: What do you make of China’s probe into Micron?
Cooke: We can dissect it into several elements. One is a desire for reciprocity and being seen on an equal plane. And so with Biden’s CHIPS Act, and the singling out of TikTok and a lot of different Chinese companies in U.S. security investigations, it’s to be expected that there is going to be some reciprocal action that China is going to want to take to be seen as a peer power demanding reciprocity.
That diplomatic posturing is understandable but it does have a chilling effect for potential foreign investors — definitely on the U.S. business community. Close allies in Europe and elsewhere notice it, and it doesn’t help China’s post-pandemic effort to show a welcoming face to foreign investment.
I think there is also a third element of it that is interesting: perhaps as another data-point showing a lack of coordination in Chinese policy and messaging that we see from time to time. And we’re living in a world where nobody is a paragon and the U.S. has its own challenges with coordinating its message. But in China, as we saw recently with ‘wolf-diplomacy’ and the balloon incident, people lower in the governmental hierarchy vie to please their superiors, and end up getting out in front of the intended policy and in front of what would be an optimal coordinated policy for China. And I’m wondering personally whether Micron might be an instance of that.
Flannery: Speaking about both semiconductors and Taiwan, does the U.S. rely on Taiwan too much for chips?
Cooke: It’s actually in almost everyone’s interest at this point to have a greater degree of global diversification. It’s outright dangerous to have close to 90% of production of the world’s most advanced semiconductors taking place only 90 miles away from the Chinese mainland.
Flannery: Does the CHIPS Act go far enough in striking a new balance?
Cooke: Before the CHIPS Act, Taiwan Semiconductor Manufacturing Company (TSMC) was already taking steps (to diversify from Taiwan). There are currently moves afoot in Germany for automotive chip production — not the most advanced chips in the world — but also with Japan for consumer electronics and with Arizona for an advanced generation of chips. (See related post here.) For the foreseeable future, production of ultra-advanced chips will stay in Taiwan. But I think a lot of production capacity for quite advanced chips is being pushed out of Taiwan to these other global nodes.
The CHIPS Act is to my mind pretty fascinating. As a response to China’s Made-In-China-2025 ambitions and its military upgrading, it’s a bulls-eye in my view. But, as a policy undertaking in the U.S. domestic context, it is something of a potential third rail in the sense that, as a country, we’ve never been comfortable or particularly skilled at industrial policy. And it is clearly industrial policy.
Interestingly, I think there is enough bipartisan support right now that the industrial policy-political debate on Capitol Hill is not the traditional debate of “no industrial policy” versus, let’s say, the Clinton era’s “auto industrial policy for Japan.” Nobody at this point seems to be openly challenging the need for an industrial policy response to China’s advanced technology challenge.
So the debate currently is one about “clean” industrial policy versus industrial policy with social agenda items folded into it, like childcare support for workers. (Either way) it is important as a signal to the market about U.S. government resolve.
Flannery: Is it enough? And if it’s not enough, what’s the next step?
Cooke: If, in version one, the sum had been significantly higher than $52 billion, it would have been almost setting itself up for failure, because there are so many things that can go wrong in operationalizing and implementing something like this.
By analogy in the military sphere, we have put in a very robust sanctions regime against Russia following the invasion of Ukraine. But it was kind of uncharted territory. There’s been a lot of analysis about what’s been working and what hasn’t been working. We’re groping our way forward and want to keep some powder dry.
The CHIPS Act is similar in the commercial sphere — kind of uncharted territory. One of the things it has going for is that Commerce Secretary Gina Raimondo is an astute leader of the process. In the current political environment, any sign of dropping the ball would be pounced on. What is actually more important than the amount of money is the fact that it has happened in an initial iteration. There can be subsequent iterations, but it’s important to operationalize the first iteration as well as possible and to learn from that process to inform a potential second iteration.
Flannery: There is controversy about social goals being attached to it.
Cooke: The Act was passed by Congress last year, and it went into a kind of holding period where no one knew what the process was going to be for a company to apply. When the guidelines were only recently announced, it became clear that there was quite a lot of conditionality put on the ability of a company to apply. One set of conditions has to do with an applicant limiting its China business for a 10-year period. Another quite different set has to do with an awarded company providing childcare for its employees.
I think the criticism about these conditions is a fairly predictable output from the Washington DC political meat grinder. Because these are tax-payer dollars, the back-and-forth is highly political. Placing limitations on future China business for awardees makes sense to the average American voter. However, those limitations raise serious concerns for the CEO of a sizable company that doesn’t want to decouple from the China market but does want to access CHIPS Act support. On the separate issue of childcare, this requirement is meant as an incentive to help overcome the problem of a shortage of chip production workers in the U.S but it obviously becomes a red meat talking point for politicians who position themselves as anti-woke in U.S. culture wars skirmishing.
This goes back to what we were talking about before with Micron. China is currently unable to respond in a meaningfully reciprocal way when the U.S. does things like put Chinese billionaires onto an entities list. They just don’t have a global finance tool that is anywhere near as sharp and strong as is found in the U.S. Treasury toolkit. For the U.S., putting companies on an entities list works— it catches the attention of targeted individuals and there is an important and broad public messaging dimension to it as well. Of course, to make sanctions really bite, there’s a lot of operationalization that needs to happen but doesn’t always happen.
What I personally believe is: China’s main effort now is to try to knock the dollar off its post-World War II throne. Others have tried and failed and it will be a hard thing for China to pull off. But I believe that’s this the main thrust of their effort and the primary aim of a long-term, patient strategy.
See related posts:
U.S. Businesses Look To De-Risk, Not Decouple, Their China Ties
U.S.-China Collaboration Could Cut Development Time, Cost For New Cancer Treatments
TSMC Will Triple Arizona Investment To $40 Billion, Among Largest Foreign Outlays
Taiwan’s Biggest Silicon Wafer Maker Eyes U.S. Solar Industry Investment
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I join Russell in inviting you to leave your thoughts or questions in the Comment section below. (Because of netizen ire in China, I have not always kept the Comments section open in Assessing China but it is open for this post. I would love to hear from you).
CQ Researcher asked me to argue the Pro side of the question “Should the U.S. cooperate with China in the global transition to clean energy.” That Pro/Con feature was published last week as part of the in-depth Geopolitics of Green Energy volume. Followers of Assessing China know that I have published a Wilson Center book advocating for U.S.-China cooperation in clean energy, have led a U.S. Government-awarded sub-national non-profit to advance this cooperation, and taught for three years at the Masters level at UPenn about the importance of sub-national cooperation in clean energy. Oddly, this is the first time I have argued the Pro side in a strict Pro/Con format. (The only other time I have engaged in this format was at Princeton a number of years ago when I was asked, in the spirit of rhetorical debate, to take the Con side which I tried gamely to do). Anyway, the appearance in (digital) print of this piece last Friday is very timely, appearing four days after Presidents Biden and Xi agreed face-to-face in Bali to resume binational U.S.-China climate change cooperation. The following day, the U.S. climate envoy John Kerry, sat down with his Chinese counterpart, Xie Zhenhua, as they rolled up their sleeves to resume that cooperative work (which Xi Jinping had unilaterally terminated in the wake of Speaker of the House Nancy Pelosi’s visit to Taiwan in August of this year).
Geopolitics of Green Energy
Pro/Con
Should the U.S. cooperate with China in the global transition to green energy?
The United States should continue to seek cooperation with China in the global transition to green energy for four principal reasons.
Scientifically, the knowledge basis on which the transition depends has no political boundaries. Just as an accurate understanding of human evolution requires archaeological digs in every country, as well as international scientific exchange to synthesize those findings, the scientific foundation for a global low-carbon future is strengthened by U.S.-Chinese scientific cooperation. Of course, that exchange must be conducted on the basis of stringent academic standards and strict safeguards for intellectual property. But scientists recognize that a molecule of any greenhouse gas produced anywhere is bad for our future everywhere.
Commercially, the logic for continued engagement in developing green energy products and services — through trade and investment — outweighs any arguments for decoupling. The U.S. comparative advantage is in basic research and development, technology innovation and the efficiency of our capital markets to bring breakthrough products to scale. China’s comparative advantage is in the size of its market and the market certainty fostered by its top-down political model. It is far more advantageous for the United States to be smart and vigilant in protecting its core assets from unfair trade practices than to forgo access to the world’s largest and still dynamically growing green energy market.
Politically, it is a harder call to make, but there is no reason to turn our backs on political cooperation entirely. From 2009 through 2019, there was a formal program of U.S.-Chinese cooperation on energy and the environment (read “green energy”) signed at the presidential level (and, in its early days, supported on a bipartisan basis in Washington). That framework expired several years ago and, following House Speaker Nancy Pelosi’s visit to Taiwan in August, China formally terminated all national programs of U.S.-Chinese cooperation. However, cooperation at the level of states, cities and businesses can and should proceed when it is in the interest of those entities to do so. The absence of a binational framework makes that subnational cooperation more difficult but is not a reason to forgo it.
Morally, the issue could not be clearer. Transition to a green energy future is not an option, it is a necessity. The current moment presents us — as a species — with an existential threat of our own making and forces us again to prove our species’ resilience and ability to adapt. Cooperation, not conflict, improves our odds for pulling that off.
The idea that cooperation is needed between the United States and China, the world’s largest energy consumers, to tackle global energy challenges sounds almost tautological.
The high point of such cooperation was 2014, when Presidents Xi Jinping and Barack Obama jointly announced their new climate commitments, winning support for their proposals in both countries while adding crucial momentum to the process leading up to the 2015 Paris agreement. Since then, the political dynamics in both countries have changed in a way that would make such a joint announcement politically unattractive. This was clear when China announced in 2020 that it would reach carbon neutrality in 2060 and when it pledged last year to stop building coal power plants overseas. Both announcements were unilateral.
The two countries do not need technology or financing from one another. Rather, both are keen to ensure that they have decoupled their supply chains for key strategic technologies and resources.
Xi has set low-carbon development as a strategic priority for China, for obvious reasons: China’s food security, water resources and the regional security environment — all key strategic issues — would be jeopardized by runaway climate change. Clean energy technology is thus now firmly positioned as a strategic sector for national security.
Xi’s announcement of the carbon neutrality goal triggered a dramatic expansion in domestic deployment of clean energy and manufacturing of clean energy technology, particularly solar power equipment, batteries and electric vehicles. China is positioning itself to supply the vast majority of the equipment and technology for the global green energy transition.
The best thing the United States can do is to scale up clean energy deployment and manufacturing at home and increase financing and support for clean energy in developing countries.
China’s leaders have been skeptical of the ability of the often-unruly processes in democratic countries to deliver and implement, scorning their climate pledges as “vague promises.” If Chinese leaders were to see the United States and the European Union pulling ahead with 100 percent clean electricity, smart grids, electrified transport, zero-carbon manufacturing and major financing and technology partnerships with the developing world, China would accelerate its own transition.
The United States and China do still have a shared interest in the success of international climate talks. There are opportunities for coordination and dialogue, but they need to be based on a clear-eyed appreciation of shared and conflicting interests.
Hope you enjoyed the debate. I have allowed comments on this post so please feel free to weigh in with your perspective. Would love to hear from you.
Volume 2, Number 4 in Global TECHtonics: U.S./China Fault-line series
The weekend’s big development in the technology arena is Beijing’s eleventh-hour move to alter the timing and trajectory of the sale of TikTok’s U.S. operation.
We touched on the Trump Administration’s August moves against TikTok’s parent Bytedance in the U.S./China De-Coupling: 4 Levels of Risk post two weeks ago. On August 6th, President Trump signed two executive orders which started a 45-day time-clock involving two Chinese companies with hugely popular social media apps – ByteDance (owner of TikTok) and Tencent (owner of WeChat). According to those orders, U.S. citizens and businesses would be barred, once the 45-day period expired, from any transaction involving the company and/or its products. On August 14th, the Trump Administration modified the order as far as it affected TikTok by putting a new order in place, giving TikTok 90-days within which to complete the divestiture of its U.S. operation to an approved U.S. corporate buyer.
The widely-presumed reason for this change being made so shortly after the announcement of the original order is that U.S. potential buyers interested in acquiring the U.S. operations of TikTok had pitched their interest to the White House. It is not surprising that U.S. potential acquirers would be focused on TikTok and not WeChat. The number of TikTok users in the U.S. is estimated at 80 million in comparison with 19 million for WeChat. Its growth rate in global markets is far faster and, critically, its algorithms have nearly ubiquitous applicability whereas WeChat algorithms are more geared to Chinese user behavior and are so less replicable in other world markets.
Two groups of interested buyers have emerged publicly since the August 14th announcement:
- Microsoft/Walmart: As Instagram and other social networks edge into offering shopping features, Microsoft and Walmart are looking to establish themselves at the strategic center of this opportunity with one bold acquisition move. Put simply, Walmart would provide the e-commerce component for TikTok while Microsoft would manage the crucial cloud-computing infrastructure. The deal offers competitive advantages to both firms – Walmart would become better positioned to compete with Amazon and Microsoft would gain experience with an innovative and cutting-edge set of algorithms and data-sets.
- Oracle: According to analysis by the New York Times business reporter Mike Isaac, “Oracle could use TikTok’s data about social interactions to benefit its cloud, data and advertising businesses.” Also, like Microsoft and Walmart, Oracle is interested in the opportunity the deal would afford “to offer customers a hyper-personalized experience in both content and commerce.”
Going into the weekend, the expectation was high that Bytedance’s preferred acquisition partner would become known and that negotiations would shift to a new phase of negotiation with only that chosen partner.
So, what was the development over the weekend which changed the trajectory and pace of this deal? The Chinese government announced late in the day on Friday that any sale of Bytedance’s assets would be subject to a brand-new set of restrictions affecting artificial intelligence exports. As reported in still-developing coverage in the Wall Street Journal, “the new Chinese restrictions highlight the extent to which TikTok, a breakout social-media hit—especially with younger U.S. users—has been thrust into a geopolitical contest between the U.S. and China over the future of global technology.”
I’ll limit my commentary on this development to three main points – a historical observation, a key point having to do with the present-day competition in advanced technologies between the U.S. and China, and my personal handicapping of where this deal is likely to go in the weeks ahead.
Historical Antecedent: The U.S.-Japan Trade War
While observers sometimes invoke the U.S.-Japan Trade War as a template for understanding our current tensions with China, the contrasts between the two are probably more instructive than the similarities. A future post will return to the broad comparison. For our purposes here, I will single out one important point of contrast. The U.S.-Japan Trade war became incandescently hot as a political issue in the lead-up to the 1992 U.S. Presidential election. But while that was happening, commercial developments on the ground were already in motion to begin lowering the heat. The industry sector in which the grass-roots transformation took root and started having great effect was the automotive sector. The seed for that bottom-up transformation was the fact that, post-war, Japan had developed intellectual property in their domestic market that made them more competitive than the U.S. industry in a number of vital areas of automotive manufacturing (e.g., inventory management, quality control, customer-based innovation, etc). Led by Toyota, the Japanese and U.S. industries started reaching an accommodation even before politicians in the U.S. turned up the volume on their anti-Japan megaphones. Japan would license out its intellectual property and bring its production closer to its customers in the U.S. by building factories and supplier networks in the U.S. In return, American companies would gain access to know-how in areas where its competitiveness was lagging and also gained greater access to the restricted Japanese market. At a political level, investments in new state-of-the-art production facilities in the non-unionized south brought jobs into key congressional districts. Of equal importance, auto workers, their families and their communities started having the experience of working alongside Japanese managers on U.S. soil. In the process, real-world people-to-people experiences built on collaboration replaced the one-dimensional caricatures being amplified by politicians and the media.
The Chinese have studied this experience whereby Japan lessened the political tension of the U.S.-Japan Trade War while, simultaneously expanding access to the lucrative U.S. market and affluent U.S. consumers. For various reasons, they have not been as successful in applying the model. We’ll examine the broader set of reasons in a future post but, for present purposes, one salient reason is that China, generally speaking, has not developed the portfolio of intellectual property focused in high-value industries (like, for Japan, automotive and consumer electronics) and highly sought after by U.S. companies. Except, that is, until now as China emerges with competitiveness in advanced technology fields such as artificial intelligence, robotics, and autonomous vehicles.
Looking at Both Sides Now:
The U.S. innovation ecosystem represented by Silicon Valley is, and is likely to remain for the foreseeable future, peerless in many important respects – depth of talent and experience, access to capital, connectivity to leading universities, basic research capability and innovation mindedness. In three respects, however, emerging tech competitors in China enjoy advantages which U.S. firms can’t match. First, China has been for years the biggest and fastest growing market in the world and U.S. companies can’t afford to cede that base of users entirely to their Chinese competition to monopolize. However, the ability of U.S. firms to access those consumers is highly constrained by a whole raft of protections – many non-WTO compliant and others not yet covered by WTO ground-rules — by which the Chinese government limits foreign access to its home market and by which it supports its home-grown champion companies. Second, China may enjoy a tactical advantage through its laser-focus on market applications (as opposed to research and academically-based innovation). Third, AI firms in China definitely enjoy a leg-up in algorithm development because they have direct access to the world’s largest user-base for smart phones and are less constrained by privacy protections for those users. These latter two advantages for Chinese tech firms are persuasively presented by the former President of Google China, Kaifu Lee (a Taiwanese national whose computer science PhD thesis at Carnegie Mellon gave birth to the world’s first speaker-independent, continuous speech recognition system) in his book AI Superpowers: China, Silicon Valley and the New World Order. In Lee’s view, “the United States may have been a first mover in AI but that advantage will not last forever. The AI era will reward the quantity of solid AI engineers over the quality of elite researchers. Strength will come from an army of well-trained engineers and entrepreneurs, and China is training just such an army.”
So, stepping back, there is now for the first time since normalization of U.S.-China relations a strategically-important (emerging) industry where Chinese firms hold important competititve advantages over the U.S. Unlike democratic Japan, this high-stakes competition is associated with a Communist regime with all that that entails for public attitudes in the U.S. And there is little in the of way local ties-that-bind being built quickly and effectively on a people-to-people basis. Nothing that can match the stabilizing experience with Japan investment into the U.S. in the 1990s. Together, these three factors go a long way to illuminating the huge pressures that have been building up under the U.S./China technology faultline on both sides of the U.S. political aisle.
Where’s The TikTok Deal Likely to Go?
Despite the fact that practically nothing is known yet about the details of the PRC government restrictions announced on Friday, two things can be safely said. First, the fact that the PRC government is invoking national security as a basis for governing the commercial activities of its leading artificial intelligence firms is hardly surprising. The competition between the U.S. and China is, for reasons just examined, acute. The U.S. and other countries routinely monitor and manage international commercial activity for their technologically-advanced products and services, especially those that are ‘dual-use’ in both commercial and military applications. The second point is that the timing of the announcement tends to be viewed in the U.S. as so transparently tied to the on-going negotiation involving TikTok that it will be viewed more as a political beanball, than a fair pitch. This despite the fact, as pointed out by an astute comment (see below), that these new regulations had been proposed prior to Trump’s August 6th announcement and were in a public comment process.
The Chinese government action raises the prospect that key algorithms and other vital data – everything that makes TikTok tick — may be stripped out of the sale by its Chinese parent corporation as a new requirement of Chinese law. That result would fundamentally change the value proposition for both the Microsoft/Walmart and Oracle bidding teams. It’s like the difference in value between a top-of-the-line computer and that same computer with all its electronics removed. At the very least, the PRC government action will force all parties to slow the pace of their negotiations and delay the deal being sealed until there’s greater clarity about what will ultimately be allowed.
With Friday’s move, it’s likely that the Chinese government will be satisfied with slowing the deal and changing the trajectory of its fall-out for global technology competition. Scuppering the deal entirely would risk dramatically escalating the issue with Trump and his Administration. That would go against China’s temporary strategy of muted response to the Trump Administration’s recent, pre-election flurry of jabs. The idea in Zhongnanhai in the run-up to November 3rd is to give its wolf-warriors and nationalistic netizens enough to appease their appetites but not enough to risk fanning Washington-Beijing flames out of control.
So, with the clock ticking down to 64 days before the U.S. election and with 78 days before the Trump Executive Order 90-day deadline expires on November 12th, the endgame of this global chess match is now ruled by the time-clock.
TikTok, TikTok, TikTok …
The motto of the Woodrow Wilson International Center for Scholars is ‘knowledge in the public service.’ This publication of mine from September 2012 is made available to the public free of charge here by downloadable PDF.
INTRODUCTION
At the time of my initial appointment to the Wilson Center, it struck me that something was missing from the general discussion in the United States concerning China’s embrace of clean energy and its implications for the United States. Much of what had been written embraced one of two polar positions. It seemed that the U.S.-China relationship in clean energy was either the best avenue for our cooperation or the measuring stick for our final competition. To a casual but concerned reader, the message was confusing. Newspaper “word-bites,” rather than informing discussion, lent anxiety to the existing confusion. The Woodrow Wilson Center provided me time and resources to examine the facts about clean technology (“cleantech”) and China. This was timely. Government agencies, think tanks and trade associations hoping to influence the policy debate began in February 2009 to release a spate of lengthy and in-depth policy reports, many of them technical in nature. We will learn in Chapter One how and why that gusher of information—which has thrown up literally shelf-feet of reports over the past year and a half— suddenly arose. However, for the purposes of this Introduction, it is simply worth noting that these policy tomes, for all that they did serve to provide data-based context to what had previously been “context-free” highly combustible reporting, did not offer much help to an interested non-specialist in making better sense of the main issues. At this “informed” end of the information spectrum, there was now almost too much information spread across too many specialized viewpoints. For a busy entrepreneur, investment manager, business professional, state or local government official, regional economic development analyst, scientific researcher, or engaged student—in fact, for any concerned “global citizen” wanting to understand the issues in a straightforward and streamlined way— it was famine or feast. A super-abundance of highly-specialized information provides not much more help in gaining an efficient grasp of the core issues than scattershot newspaper and media reporting had offered. Sustaining U.S.-China Clean Energy Cooperation 3 This book aims squarely at the “middle ground” of curiosity and interest in this broad topic. At the outset, I would like to be clear about three “operating assumptions” I have built in: Timeframe The three main chapters are concerned with the three-year period from mid-2008 to mid-2011. Except for one digression involving Five Year Plans which covers a 30-year period, this limitation on perspective actually helps bring the main subject matter into better focus. The bulk of the U.S. political effort to engage with China in the clean energy arena took shape during the 2008 Presidential Campaign and was further framed through policy initiatives of the Obama administration. For a new industrial ecosystem like “cleantech” or clean energy, what is relevant is defined by what has most recently happened. It is only in the Conclusion that the time-frame is pulled back to show that some of the dynamics described in preceding chapters are, in fact, related to deeper and more long-standing trends in the overall U.S.-China relationship. Structure As author, I have insisted on an organizational principle for presenting information which puts me at odds with the conventional approach of “Beltway” experts. In Washington, the tendency is to run all relevant information through what I will call the “policy blender” and to present the resulting product as a mix of policy recommendation, policy analysis, and policy refutation. I take a different approach. I believe that the policy process is best served when the three main aspects of business-relevant policy are broken down and viewed separately in their own right. These are: (a) the politics underlying the policy process; (b) the technology innovations which policy initiatives aim to support; and (c) the investment ultimately required to take any technology innovation to scale in the marketplace, thereby driving policy on a long-term and sustainable basis. Rather than jumble these perspectives, I treat them in Merritt t. Cooke 4 separate chapters and try to adopt the relevant “mind-set” of each in presenting material in the respective chapter. This may be nothing more than a reflection of my former training as a cultural anthropologist, but I believe it is useful—within the complex arena of China, the United States, and energy—in revealing underlying dynamics. For this reason, in the U.S. section of the opening chapter on Politics, I will rely heavily on the words of key political actors. Ours is a system where the president needs to persuade the electorate and what is said matters. In the section on Chinese Politics, the approach is different, relying instead on “structural analysis” of the ruling party and its interests. In each case, the attempt is to adopt a perspective particularly suited to its subject matter. Purpose The Woodrow Wilson Center’s motto is “knowledge in the public service.” Woodrow Wilson epitomized the ideal of the “practitioner scholar”—the part-time scholar who devotes some of his or her career to bringing scholarly research into the practical, socially-relevant domains of government or business or non-profit work. This is the spirit with which I have written this book. I am neither a career academic nor a professional policymaker. I have tried to make this book clear and concise, although it involves a complex, and fast-changing topic. Especially for technically inclined readers, I want to acknowledge that no sector domain in the U.S.-China clean energy field can be adequately reduced to a couple of pages. I believe this topic is an important one. If the United States and China find a way to realistically base and sustain their cooperation in clean energy, they will be addressing directly 40 percent of the world’s total carbon emissions. And if together they manage to create a replicable model of cooperation, they can indirectly help the world address the remaining 60 percent. At its core, this topic touches everyone—those who care deeply about America’s place in the world, those who are moved by China’s epochal reemergence, those who are environmentally-engaged, and those who are responsible global citizens. Students are a particularly important audience because the tectonic issue described in this book will ultimately be the felt experience of their generation. In short, I hope that this book may be found to present important issues in a balanced way and to offer something useful and readily comprehensible to anyone with enough interest to pick it up.
View the Wilson Center’s Book Launch Event here
Philadelphia was selected today to join an economic development network created by the Global Cities Initiative (GCI) , a five-year joint project of the Brookings Institution and JPMorgan Chase. Philadelphia’s application to, and participation in, the Global Cities Initiative is being co-led by the Economy League of Greater Philadelphia and the World Trade Center of Greater Philadelphia.
Launched in 2012, the Global Cities Initiative helps business and civic leaders grow their metropolitan economies by strengthening international connections and competitiveness. GCI activities include producing data and research to guide decisions, fostering practice and policy innovations, and facilitating a peer learning network. This network, the Global Cities Initiative’s Exchange, assists metropolitan areas as they develop plans to achieve sustainable growth through increased exports and foreign direct investment.
Philadelphia is one of eight metro areas accepted to the GCI Exchange’s 2015 group, the final cohort of the full 28-metro-area network. The Brookings Institution selected metro areas for the Exchange through a competitive process based on their readiness and commitment to pursue the Exchange’s global competitiveness principles.
In addition to Philadelphia, the other 7 members of the new and final cohort include Baltimore; Fresno, Calif.; Houston; Kansas City, Mo.; Salt Lake City; Seattle; and St. Louis.
The 2015 cohort joins participating municipal regions selected during the three previous years – 4 in 2012; 8 in 2013; and 8 in 2014. Those previous participating municipal regions include: Atlanta; Charleston, S.C.; Chicago; Columbus, Ohio; Des Moines, Iowa;Indianapolis; Jacksonville, Fla.; Los Angeles; Louisville-Lexington, Ky.; Minneapolis-Saint Paul; Milwaukee;Phoenix; Portland, Ore.; Sacramento, Calif.; San Antonio; San Diego; Syracuse, N.Y.; Tampa Bay, Fla.; Upstate S.C. representing the Greenville-Spartanburg-Anderson CSA; and Wichita, Kansas.
For more information on the Global Cities Initiative please visit:
www.brookings.edu/about/projects/global-cities/exchange
Happy Year of the Snake!
I have some major catching up to do so let me begin here with a link to my book which the Wilson Center launched on September 24, 2012. (Note: if you want to download the PDF of the book, just right-click and use the Save As option).
More 2012/3 updates to follow in rapid sequence.
Thanks for hanging in there,
This is the second in the 2012 series of Cooketop News commentaries and news recaps.
By reviewing the previous week’s top stories involving — broadly speaking — U.S./China clean energy, the commentary section isolates one trend/dynamic which points forward and can help illuminate news-in-the-making for the week(s) ahead. Following the commentary is a summary of the week’s top stories.
This week? We look at the headline (Cooketop News, Friday, January 13th) that, after four years, the U.S. re-took the lead from China as the front-runner in global clean energy investment.
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From 2008-10, the U.S. visibly lost pace – and, in some instances, lead position – to China as the world’s top investor in clean energy. In 2010, China – then just over one-third the size of the U.S. economy – invested twice the absolute amount in clean energy as the U.S. Yet, in 2011, the U.S. bounced back, reclaiming top-spot for the first time in four years: U.S. investment increased 33% to US$56 billion while Chinese investment remained flat at $47 billion, according to Bloomberg New Energy Finance. What does it mean? Less than the headlines might suggest.
Here are three key points to keep in mind while tracking current results – and handicapping future results – in the global clean energy arena:
(1) It’s not a sprint, it’s a marathon. The bragging-rights prize will ultimately go to the economy which manages the best combination of technological innovation, political support, and financial sustainability over many years. Germany and Spain have seen political support for their heavily subsidized systems erode with the euro. The U.S. is in near political grid-lock over how to set that balance. China’s position looks strong on the surface but is hobbled by lack of technology innovation, political accountability and financial transparency.
(2) How high’s the bounce? The U.S. resurgence is due to short-term programs due to expire soon, such as biofuel support programs and energy efficiency measures. Absent a broad national consensus, there is no strong reason to expect the U.S. “bounce” to remain strong throughout 2012, an election year.
(3) The bottom-line is this is a race is against time, not a Sputnik-type competition. For either nation’s efforts to pay off, investment will need to be scaled to a global level by investors, public and private. That won’t happen unless there is a clear middle-way between the extremes which tend to bedevil U.S.-China relations – zero-sum, highly-nationalistic competition on the one hand vs. unrealistic and unsustainable ideas of cooperation on the other.
While the metric of renewed investment vigor in the U.S. is encouraging, the real challenge for the future will be to define and align complementary ‘skill-sets’ in both the U.S. and China so that capital can be attracted and deployed on a global scale through these two massive markets accounting for 40% of the global GHG emissions problem. We’ll need a discerning eye for the different strengths which our two countries can bring as complementary partners in this effort as well as a realistic understanding of our enduringly different systems and values. Regardless of who has the momentary lead in investment level, we need to recognize that there is no path to a sustainable future for either country without clear-eyed, realistically-based and sustained cooperation between the two.
Monday, January 9, 2012
Africa & China: How it all Began
China to Tax Carbon Emissions by 2015
China Vows Backing for Firms Abroad
China Spring Festival Migration Begins
Tuesday, January 10, 2012
Hottest Solar Markets in Early 2012
12 Challenges for China in 2012
DoE Heads Off Cleantech Materials Shortages
Wednesday, January 12, 2012
China’s Export Engine Downshifts
China Pumps In $10bn to Water Project
Brand Make-Over for Philly Energy Hub
Thursday, January 12, 2012
Does the U.S. Prefer a Ma Victory in Taiwan?
The Perils of Cleantech Investing
China Braces for Turbulent Year
Friday, January 13, 2011
China’s Forex Reserves Decline
This is the first of regular weekly Cooketop News blog posts (scheduled to appear each Monday).
By reviewing the previous week’s top stories involving — broadly speaking — China clean energy, the idea is to identify and comment on a particular emerging trend/issue which points forward and can help illuminate news-in-the-making for the week(s) ahead.
By radio analogy, the commentary is meant to cut through static in the general coverage of whatever’s the issue at hand and present a clear frequency and better ‘signal-processing’ for helping to tune in on an enduring news issue.
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THIS WEEK’S COMMENTARY — HUNTSMAN, REPUBLICANS & CHINA
Last week was the Iowa caucus and Tuesday of this week the New Hampshire primary. The related questions which these contests have raised are what have Jon Huntsman’s China connections and qualifications done for his campaign effort and what are the implications for China given the current crop of Republican candidates.
Let’s start with the second question. Liz Economy from the Council of Foreign Relations has done a better job than anyone at assessing the remaining field of candidates through the lens of their public positions on China. To borrow liberally from her analysis, here’s what we’re looking at:
Mitt Romney says it’s all about the economy, stupid: Mitt Romney’s China policy is all about trade measures —keeping counterfeits out, protecting intellectual property, levying sanctions against unfair trade practices, pressing China on its currency, etc. The question for an anti-“Big Government” candidate is who does all this work if not the government.
Ron Paul wants to make love, not war: Ron Paul appears to want to “go along to get along” with China: stop intrusive surveillance, reconsider the Taiwan Relations Act, drop the idea of import tariffs in retaliation for Beijing’s currency manipulation, and mute protestations over human rights issues. As Economy has put it, there’s little doubt that “candidate Paul …would be Beijing’s pick for top dog.”
Jon Huntsman is long on experience but short on traction: No surprise that the expertise in China policy is with former U.S. Ambassador to China Jon Huntsman. Huntsman has all his facts in line. You can agree or disagree with his specific positions — opposing a China currency bill or engaging to promote political change in China—but you have to admit he knows his stuff.
Newt Gingrich jettisons balance to keep ship afloat: Gingrich’s initial positions in the campaign were balanced and reasonable, calling on the U.S. to do the right thing and take action on the home front in order to be more competitive. As his electoral options have narrowed though, his positions appear to be veering in a more extreme direction. Stay tuned for his advertising campaign in South Carolina to see if he starts demonizing China.
With Rick Santorum, the question is ‘Where’s the beef?’: Despite having a lengthy book and a Senatorial career in the public record, there’s almost nothing to go on to explain how Santorum would approach China if elected President. He did make a quote about going “to war with China” to “make America the most attractive place in the world to do business.” Huh?.
Rick Perry talks the talk but doesn’t walk the walk: “Communist China is destined for the ash heap of history because they are not a country of virtues. When you have 35,000 forced abortions a day…, when you have the cyber security that the PLA has been involved with, those are great major issues both morally and security-wise that we’ve got to deal with now.” His actions? Courting Huawei, a problematic company, to invest in Texas.
So, on to the related question, what has Jon Huntsman’s Mandarin-speaking ability and Ambassadorial command of the issues meant for his election prospects? The answer, like a Rorschach, depends entirely on who you talk to. His proponents invariably cite it as a positive (see NY Times article) and his detractors cite it as a liability (see story from last Thursday below). Where’s the traction? Answer: there’s maybe some but not much.
Fault-lines have been exposed in the body politic over these questions. There’s no question that one of Ron Paul’s supporters went way, way over the line by insinuating Huntsman was questionably ‘American’ because he and his wife keep their adoptive children from China and India exposed to cultural traditions from those two civilizations, but nonetheless ideological conservatives generally seem to view his competence with China as itself a cause for suspicion.
The first generation of Mandarin competent statesmen drew heavily from the offspring of Christian missionaries who grew up in China, people like the late Ambassador James Lilley. Huntsman represents a second wave of high-level U.S. government officials who have Mandarin-competence through their two years of Mormon service abroad. (Tim Stratford, a former Assistant U.S. Trade Representative for China, is another example of this group of experts). The third wave will come from younger Americans who, in step with China’s opening to the world, have been able to burrow deeper into language and cultural expertise. They are making their way up the ladder of the U.S. government. I can only hope that the American electorate — and the Republican Party — can find a way to value the knowledge they bring to public service. The top rank of challenges which the U.S. faces will simply not be solved without constructive and effective engagement with China — and that requires people who understand, respect, and can operate in the sphere of Chinese language, culture and values.
(Disclosure: I have worked at various points in my career for Jim Lilley, Jon Huntsman, and Tim Stratford.)
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LAST WEEK’S COOKETOP NEWS
Here’s a listing of some of the top stories covered in Cooketop News for Week 1 of 2012 (with hyperlinks):
Monday, January 2, 2012
Foxconn enters solar
Chinavasion’s High-capacity Solar Charger
Protest in China – Ripple or Wave?
Bridge construction as economic development lever
10 Predictions for Cleantech in 2012
Tuesday, January 3, 2012
Top 20 Green Building Innovations of 2011
USDOC Sec. Bryson Faces a China Challenge
Cleantech Start-ups to Watch
Is China’s Solar Industry Entering Eclipse?
Public Housing Key as Export Machine Slows
Wednesday, January 4, 2012
‘Culture Campaign’ Dents Programming
Green Cars & Clean Energy: The China Angle
Cleaner Technology in Global Arctic Oil Race
Chinese Philanthropists Join to Protect Nature
China’s IPOs Top World’s Exchanges Despite Slump
Thursday, January 5, 2011
Air Pollution Hazardous for China’s Economic Health
Drought Drying out Poyang Lake in Jiangxi Province
Rustbelt Cities Go Green to Strengthen Economies
China’s Corporate Debt Issuance Soars in 2011
Huntsman’s China Cred No Boost to his Prospects
Econ Ties to China Key Issue in Taiwan Election
Friday, January 6, 2011
10 Emerging Sustainable Cities to Watch
Solar Turbine Makers Turn to India & China
U.S. Manufacturers of Steel Wind Towers Cite China
LDK Solar Snags $64mm from PRC for U.S. Projects
China Announces Plan to Levy Carbon Tax by 2015
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That’s it for this week. I hope you find this of some value to your own pursuits. Give me a holler — either by leaving a comment below or by email — to let me know what you think, positive or negative. For anyone with a driving passion to get each day’s edition of Cooketop News (minus the summary listing and commentary that I provide in this weekly post), you can subscribe by going to the Cooketop News site at http://paper.li/mterrycooke/1324752421 and clicking on the upper-right Subscribe button. There is also an Archive feature on the site (upper-center) which allows you to look up any previous edition.
Oh, before signing off, I owe you an answer to the question in the title. Jon Huntsman’s name in Chinese? 洪博培. (And by the way, if you try searching for the name on China’s Twitter clone — Weibo — when you’re in China, you’ll likely find the name has been blocked).
______Assessing China / The TEA Collaborative______ 