In July 1989, I was at my desk at the U.S. Consulate General Shanghai when I received a call notifying me that a small group of senior officials from the Shanghai Municipal Government would be coming for a meeting that afternoon.  I was asked to make sure that the newly-arrived Consul General — Pat Wardlaw who had just replaced my first Consul General Charlie Sylvester earlier in the month — join the meeting.

A couple of things about this. First, you’ll note that a meeting wasn’t actually requested and that none of us were asked about our availability in the afternoon.  We were instead informed that the group of government officials would be coming and we were simply expected to be available when they arrived.  Second, anyone who has worked in China will notice something quite extraordinary about this phone call.  We were not summoned, as is typically the case with Chinese government officials, to go meet with them at their offices. They were coming to us. This would be the only time in my working career in China when Chinese government officials came to us rather than vice versa.

At my desk, U.S. Consulate General Shanghai, 1989

A word of context. This phone call took place in the latter half of July, a month and a half after the June 4th Tiananmen incident. Roughly a week before June 4th, my wife Grace and I had left Shanghai on a one-month Home Leave, traveling first for one week vacation with my sister’s family on Kauai and then expecting to spend the remainder of our time in Philadelphia with family and with me traveling to Washington DC on consultations. As we transited San Francisco International Airport on June 4th to catch our onward flight to Philadelphia, there was a palpable tension in the air and we soon saw the near-identical banner headlines about Tiananmen in a row of vending machines along the terminal wall as we made our way to Passport Control.

I never got my homeleave or consultations in Washington. Secretary of State Jim Baker was determined to have his thumb on the pulse of decision-making by McDonnell-Douglas, 3M, Johnson & Johnson, Coca-cola and the other top U.S. investments in Shanghai. He knew it wouldn’t be reliable to just count on what he heard from the CEOs at U.S. headquarters. He wanted to know the calculus of decision-making that was taking place on the ground by the Shanghai-based executives in charge of the major U.S. investments in Shanghai. Having just landed in Philadelphia, I was given one-day to help Grace (early in her pregnancy with our older son Todd) get settled in and was instructed to then turn around and fly back to Shanghai to start providing anything I could learn from my business contacts in Shanghai in a series of classified cables.

So back to the July meeting. The Consulate guard (not a Marine because no U.S. military presence was allowed in China at that time) notified me that the government officials had arrived. I escorted the group of four or five officials into the ground-floor meeting room where a handful of my Consulate colleagues were waiting. One of the officials was just barely managing to carry a big armful of long paper rolls. They did not wait to be seated and didn’t begin with any pleasantries. The senior official simply took the first roll of paper handed to him, unrolled it on the conference room table and announced “This will be the new Pudong. We want you to report about Pudong to your government. We want Americans to invest and help develop it. They will make a lot of money.”

¤ ¤ ¤ ¤ ¤ ¤

Today’s post falls into the TEA Collaboratives’ A-Series of content dealing with PRC government planning Ambitions. Over the weeks and months ahead, I will have a chance to share insights developed through the Masters-level course (IMPA 608) which I taught at the University of Pennsylvania in the spring semester of 2019 and 2020. The focus of that course, based on Mandarin language research, is the forty-year trajectory of China’s macro-development planning vision and execution. Domestically, the trajectory of that storyline begins with Shenzhen in the early 1980s, continues smoothly through Pudong throughout the 1990s before encountering turbulence in Tianjin in the 2000s. Following 2012, the first stage of this macro-development model gets jettisoned and the second stage ignites with the twin megalopolis projects — the Consolidated Beijing-Tianjin-Hebei Project (‘Jing-Jin-Ji’ or 京津冀) in the northeast and the Guangdong-Hong-Kong-Macao Greater Bay Area Project in the southeast. Simultaneous with the unveiling and cranking up of this pair of Version 2 domestic macro-development projects over the last decade, China has also been systematically extending its macro-development model to its 139 international partners through the Belt & Road Initiative.

I look forward to sharing the insights gleaned from this multi-year, instructor-and-student knowledge co-creation effort in the TEA Collaborative’s A-series blogposts on Fridays over the remainder of the year. Understanding the vision and values driving the momentum of this forty-years macro-development effort helps chart where China is headed in the future. I hope this small, personal anecdote about Pudong’s emergence into China’s macro-development planning process serves as an apt way to kick off our Macro-Dev series.

China Partnership of Greater Philadelphia (CPGP) has been truckin’ along the main street of U.S.-China clean energy cooperation since 2011. As seen through our eyes, it sure has been a trip. Here’s a brief history of the long, strange journey …

Timed well to the moment we’re in right now, the peer-reviewed science journal Environmental Progress & Sustainable Energy has published this month an overview article recapping CPGP’s 10-year journey and peering forward at the road ahead. You can read the article here and feel free to comment below.

Sometimes the light’s all shinin’ on me
Other times, I can barely see
Lately, it occurs to me
What a long, strange trip it’s been…

On June 8th, the Biden Administration announced immediate actions it was taking to address near-term vulnerabilities in four critical supply chains as identified by a 100-day America’s Supply Chains assessment initiated in late February.  The four critical supply chains included in this announcement are: semiconductor manufacturing and advanced packaging; large capacity batteries, like those for electric vehicles; critical minerals and materials (so-called “rare earths”) used in smart phones, electric vehicles, wind turbines and other advanced technologies; and pharmaceuticals and active pharmaceutical ingredients (APIs) used in vaccines and other applications.

Today’s post takes an initial high-level view of the critical supply chain for semiconductor manufacturing and examines the shifting fault-line of vulnerability.  Subsequent posts in the Global TECHtonics series will take a much closer look at these and related issues.


Photo: barks/Adobe Stock

What is the Fault-line?

The semiconductor supply chain fault-line runs directly under Taiwan, whose chip foundries produce 92% of the world’s most advanced microchips (which have transistors less than one-thousandth the width of a human hair).  The small island is caught between the tectonic forces of the China market (which accounts for 53% of global semiconductor consumption and the U.S. market (which accounts for the vast majority of the advanced designs on which Taiwan chip production is based).  In addition to these market forces, political dynamics add to the stresses along this fault-line.  While China claims Taiwan as an inalienable part of its territory, the U.S. has been serving as the guarantor of Taiwan’s de facto independence since 1949. In more recent years, the Trump Administration’s “Tariff War” against China has given impetus to a process of technology “de-coupling” which is forcing Taiwan companies – especially its preeminent foundry manufacturer Taiwan Semiconductor Manufacturing Company (TSMC) – to choose between the fast-growing China market (34% revenue growth since 2014) and its slower growing (4% growth) but highly strategic U.S. customers, including the U.S. military. The fact, for instance, that 14 of TSMC’s 17 foundries worldwide (and all of its foundries capable of higher-end production above the 16 nanometer level) are located in Taiwan at a distance of just 90 miles from the PRC mainland adds to the tectonic friction.

What is the Trend-line?

Subsequent posts in the Global TECHtonic series (approximately two per month) will examine a broad range of dynamics in detail to include the impact of the COVID-19 pandemic on global microchip supply chains, specific dynamics within microchip subproduct categories (logic chips, analog chips, memory chips, etc), TSMC’s strategic response to the increasing global pressure and detailed analysis of trends within the U.S. semiconductor industry.  Today’s post will limit itself to two broad brush-strokes to suggest the general trend-line: (1) the twenty-year trend-line since 2001 and (2) the one-year trend-line since 2020.

  • The accession of China and Taiwan to the World Trade Organization (WTO) in 2001 led to hopes that Information and Communications Technologies (ICT) supply chain tensions might start easing but, from 2008 at least, the opposite has proved true.  Following the Global Financial Crisis, market forces and competitive tensions increased pressures on ICT supply chains markedly and these pressures further accelerated starting in 2012 following the 18th Chinese Communist Party Congress in 2012.  (Readers interested in a deeper understanding of the ICT supply chain dynamics covering the period 2001-2008 can refer to Congressional Commission testimony I provided during the 107th, 108th and 109th Sessions of Congress as well as to my article in the edited volume Economic Integration, Democratization and National Security in East Asia (Peter Chow, Elgar Publishing) and my article in The Journal of Contemporary China (Volume 13, Number 40, 2006).
  • The past year has shown some notable shifts along this fault-line. In Taiwan, policies instituted by President Tsai Ing-wen have led to a small shift in Taiwan’s trading dependence on China and to larger shifts in the pattern of outbound and inbound investment involving China.  Specifically, the Tsai Administration’s New Southbound Policy has shifted a small portion of Taiwan’s trade in consumer electronics away from China in favor of Southeast Asian markets.  More notably, the “Invest Taiwan” program has exceeded its targets and much of the reinvestment in Taiwan comes as a result of production being repatriated from the mainland. As for outbound investment from Taiwan in ICT sectors, recent trends favor the U.S. as a destination rather than China.  In March 2020, TSMC announced that it would be building a $12 billion microchip production plant in Arizona.  Meanwhile, tighter regulations by Taiwan’s Investment Commission has led to a 60% drop in outbound investment to the mainland since 2018.

It is for these and other reasons that the New York Times recently proclaimed “pound for pound, Taiwan is the most important place in the world.”  The Strait of Hormuz may have been the world’s most dangerous fault-line in the 20th century oil economy.  In the 21st century, the tectonic pressures of the global economy now converge on the Strait of Taiwan.

President Biden’s first in-person appearance on the world stage included a tense but business-like meeting with Vladimir Putin, a NATO meeting in which NATO solidarity was vociferously reaffirmed and a meeting of G7 leaders in which the perceived threats of climate change and China both loomed large.

The final agreement announced at the conclusion of the G7 last Sunday featured two elements with direct bearing on China and, particularly, on China’s Belt & Road Initiative (BRI): a commitment to phase out coal-fired electricity generation and a revived commitment to provide $100 billion in green finance assistance to developing countries.  Both commitments were, however, long on symbolism and short on substance.

Today’s post looks at why the headlines for both announcements were printed in such large banner font, why the accompanying stories were so short in column-inch detail and why both stories serve to center on China at a meeting – involving the heads of state of the U.S., Canada, the U.K., Germany, France, Italy and Japan – where China is not represented.

The electricity generation commitment undertaken by the seven leaders was specifically that their governments would provide no new support for thermal coal power generation except in cases where carbon capture and sequestration (CCS) technology is deployed in tandem to neutralize the greenhouse gas (GHG) emissions produced by coal-firing.  This undertaking supports a previous G7 commitment to halve emissions by 2030 (against a 2010 baseline) on the way to achieving net-zero emissions by 2050.

The green finance commitment announced announced Sunday – to provide $100 billion annually to help developing countries decarbonize – was not in fact a new commitment but a reaffirmation of an earlier commitment which had lapsed during the Trump years. It was rolled out on Sunday with a new name – the Build Back Better World Initiative – but with no new funding attached.

Seen from a global perspective, both commitments are intended as a direct response to China and its Belt and Road Initiative.  China’s trajectory of domestic high-growth has resulted in it recently surpassing the GHG emissions of the entire developed world combined, according to a recent report by the Rhodium Group.  Compounding this unfavorable trend, China continues to support its Big Coal industry by encouraging exports of coal-fired power generation equipment to its less developed BRI partner countries.  The G7’s electricity generation commitment is therefore intended to draw a sharp contrast in climate change global leadership between the G7 group of democracies and the China’s competing, more authoritarian model.  Similarly, the green financing commitment is intended as an alternative pool of financing for developing countries to draw on separate from Chinese government lending and the BRI-focused Asian Infrastructure Investment Bank (AIIB).

So what accounts for the splashy headline but dearth of detail?  Two factors. The first is the very evident desire of the other six countries to welcome the U.S., post-Trump, “back into the club” by explicitly amplifying in the international arena President Biden’s domestic Build Back Better theme; and, more importantly, by presenting a show of implicit support for Biden’s “Summit of the Democracies” strategy for countering China. In short, the symbolism was more important than the actual substance for achieving this goal.

Hammering out the details of the power generation agreement and expanding on the scope of the green finance commitment eluded the G7 leaders at this meeting due to a lack of confidence, especially among the three leaders from Continental Europe, that detailed and expanded agreement will stick. There are three levels of doubt contributing to this lack of confidence.  In order of ascending importance, there is:

  • Uncertainty over how Biden and his National Security Council deputies Kurt Campbell and John Kerry are going to square heightened competition with China in the technology space with attempted renewal of cooperation with China in addressing climate change;
  • Doubt over the ability of the Administration to get its proposals through a closely-divided and highly-partisan Congress; and
  • Concern that the American public’s fling with climate science denial and Trumpian America First thinking might not be a one-time affair and could come to the fore again in the 2022 mid-term election and the 2024 Presidential election.

Given these doubts, any effort to provide substantive detail for the power generation agreement and to expand the green financing agreement would have been prone to failure and could have undercut the paramount goal of projecting renewed G7 solidarity and democratic unity.  Looked at from another angle, this result shows how much effort and hard work will be required to reestablish the global momentum toward 2050 climate goals following Trump’s decision to pull America out from the Paris Accord Conference of Parties (COP) process.

On May 27th speaking at the annual Stanford University Oksenberg Conference, Kurt Campbell, Biden’s National Security Council Coordinator for Indo-Pacific Affairs, delineated the new ‘continental divide’ in U.S.-China Relations.

The period in U.S. policy toward China that was broadly described as ‘engagement’ has come to an end, said Dr. Kurt M. Campbell, deputy assistant to the President and coordinator for Indo-Pacific affairs at the National Security Council, speaking at Shorenstein APARC’s 2021 Oksenberg Conference. “The dominant paradigm is going to be competition. Our goal is to make that a stable, peaceful competition that brings out the best of us,” he added.

This low-key pronouncement is attention-grabbing for several fundamental reasons: (1) it marks the end of a 39-year bipartisan effort to encourage China to become, through a concerted program of cooperative outreach, a “responsible stakeholder” in the post-WWII liberal democratic world order and (2) the epitapth was delivered by one of the principal architects of that cooperative program.

To back up this somewhat sweeping statement on my part, I’ll be spending the weeks ahead examining what this sea-change portends from three perspectives:

Aspirationally …

On Mondays, we’ll be looking at various aspects of what heightened competition with China will look like for the Biden Administration in the tech sphere. This will include high-level perspectives of competition in artificial intelligence and robotics; sourcing of rare earths needed for smart phones, electric vehicles and other high-tech products; 5G build-out in domestic and international markets; quantum computing competition; the Great Firewall of China as an export product to Belt & Road partners countries; and social media platforms and data privacy issues. But most saliently, we’ll be looking in-depth at global supply chains in microelectronics and the fraught issue that 40% of the world’s microchip production — and 80% of its high-performance products — are produced in Taiwan at a distance of only 90 miles from the PRC mainland.

On Wednesdays, we’ll be examining the fields of energy and environment where cooperation still rules the day under Cabinet-level John Kerry’s aegis but where cooperation is shifting from a government-to-government level to a more market-based model of comparative advantage cooperation.

On Fridays, we’ll be examining what these changes look like from the Chinese perspective. Our sources for this perspective — what cultural anthropologists call the emic (in-group) view as opposed to the etic (outside observer) view — will include macro-perspectives such as the Five Year Plans, primary-source research findings provided by my UPenn masters-level students, and also micro-perspectives such as interviews and insights gleaned from business people operating on the ground in China.

My heart-felt thanks go out to the many subscribers who have been with me on the journey to date. I look forward to welcoming hopefully many others choosing to subscribe to the blog for this next leg of the journey.

Publisher’s Note: Please see note following Dori’s Guest Blog explaining the interruption of regular blogging in Q4 of 2020 and the schedule for the resumption of regular blogging throughout the remainder of 2021,

Three Reassuring Perspectives on China

by Dori Jones Yang

These are dark times for any American who has spent years working to improve US-China relations. Some 80 percent of Americans have an unfavorable view of China, up from 47 percent just three years ago. After writing a memoir of my experiences as a BusinessWeek correspondent covering China during more hopeful times—the 1980s—I can offer three perspectives that offer some reassurance.

First, historical. As a child of the Cold War, I was taught that China had a totalitarian system where children were asked to spy on their parents. China was isolated, poor, and mired in destructive political struggles. I chose to study the Chinese language during the 1970s, and just as I completed my master’s degree in international studies, Washington and Beijing re-established diplomatic relations, setting off a decade of optimism. For eight years, I reported on Deng Xiaoping’s reform and opening, with ever more euphoric articles as Chinese people were finally given the freedom to speak up and take control of their lives.

January 14, 1985

By the time I completed my assignment, in 1990, the wheel had turned full circle. After Chinese troops suppressed the Tiananmen Square protests, US-China relations went dark again, with US sanctions over human rights violations. We reporters, we Americans, predicted a “great leap backward”—the end of Deng’s great experiment in modernization.

June 12, 1989

But we were wrong, and China embarked on a steady path of rapid growth that enabled 850 million people to rise out of poverty. Chinese cities gleamed with new subways, high-speed rail lines, skyscrapers, shopping malls, and neon advertising. Many US companies profited from China’s low-cost manufacturing and ever-expanding market. Yet I, like many, was caught unawares, again, when US-China friendship turned combative and confrontational during the Trump years.

My historical perspective is this: Americans are passionate about China. Unlike India, or Indonesia, or Brazil, China evokes strong feelings in these United States. Even people who have never set foot on the Great Wall express strong opinions about the Middle Kingdom. We love it. We hate it. Then we love it again. As John Pomfret wrote in The Beautiful Country and the Middle Kingdom, “Both sides experience rapturous enchantment begetting hope, followed by disappointment, repulsion, and disgust, only to return to fascination once again.”

Second, I view China through the lens of business. As a BusinessWeek reporter, I wrote about the early pioneers, American companies that dared to invest in China just as Beijing was starting to allow foreign trade and investment. I interviewed some of the earliest Chinese pioneers, too, entrepreneurs who defied their fears of being labeled “capitalist roaders” and started their own companies. During the 1990s and beyond, US corporations were the strongest advocates for China, pushing the US government to grant China most-favored-nation trade status and then championing China’s entry into the World Trade Organization. In recent years, some US companies turned to the Trump Administration to help pressure Beijing to remove barriers, not necessarily realizing that the result would be a decline in the overall relationship—mistrust and a push for China to become self-reliant.

Today, some of those companies regret their support of Trump’s tariff war. Those that view China as a major market and an important supplier—and the one major economy that is actually growing again—are likely to speak up again in support of better relations. Even those in industries that view China as a competitor are torn, because China is also a huge market for them. Few, if any, US companies benefited from the trade war, and business support for it is likely to fade.

Third, I have a personal perspective on China. During my years as a reporter there I met and married a Chinese man—one who had fled the Communists as a child but who later benefited from selling US equipment to China’s rapidly growing market. Through him, I came to know a wide range of individuals in China who were able to better their lives because of new opportunities. Sadly, these people-to-people contacts that I and other Americans have forged with Chinese individuals are now more difficult to maintain. The pandemic forced us to cancel plans to travel to China last year, and our Chinese relatives in the United States fled back home to safety.

Yet hundreds of thousands of Chinese have studied at US universities, and millions have traveled here as tourists—and untold millions of Americans have come to know Chinese as friends. These interpersonal ties may help to keep the two nations from flying into enmity and to moderate the negative impressions citizens on both sides have of the other’s government. They help to humanize our understanding of China, and those of us who have such links should convey that to our American friends and neighbors who feel alienated from China.

After living through several swings of the pendulum, I have learned to be both patient and persistent. Over the past forty years, the United States and China have created strong ties that may pull us out of our current “repulsion and disgust” and return us to fascination once again.

                —Dori Jones Yang is author of When the Red Gates Opened: A Memoir of China’s Reawakening.

For more information, see her website, https://dorijonesyang.com/when-the-red-gates-opened/.

For her National Committee on U.S.-China Relations webinar presentation, https://www.youtube.com/watch?v=XCbTTs6GshM&t=208s

Publisher’s Note: I offer heartfelt apologies to all followers of the TEA Collaborative Blog — and especially to Dori — for the unexpected and unexplained interruption of service which began in the 4th quarter of 2020 and continued through until today. Cryptically, all I can say at this moment is that the interruption had to do with the lead-up to the November 3rd election and then with efforts to help the new administration Build Back Better in the area of pandemic response along the NE Corridor. Hope to have more I can share in the near future. In the meanwhile, the resumption of regular blogging on our three themes — Technology, Energy/Environment, and (PRC macrodevelopment) Ambitions (spiced up occasionally with guest blog posts added as the opportunities present themselves) — will resume shortly. Again, apologies to Dori for this appearing so late after your book launch in September. Sending my wishes here for the book’s continued success!

A short forty minutes has rarely been been as consequential and historically transformative as Maestro Eugene Ormandy and the Philadelphia Orchestra’s performance of Beethoven’s Sixth Symphony proved to be in Beijing on September 16, 1973.

That performance reminded the world that music creates human connection and has the power to bridge a quarter-century-long rift dividing the globe.

Today is the 250th anniversary of Beethoven’s birthday. To help celebrate, my friends Sam Katz and Jennifer Lin — supported by many others — have pulled together the narrative and the music, along with magnificent archival film and images, to tell that story of “Beethoven in Beijing.”

China Partnership of Greater Philadelphia cordially invites you to join as our guest a special, limited audience viewing of the film to celebrate Beethoven’s 250 birthday. The film will be followed by live-streamed and interactive Q&A session with the two co-producers and the filmmaker.

Watch the Trailer

FREE Tickets Here

Website: www.beethoveninbeijing.com 

A word to the wise — don’t miss it! Hope to “see” you there.

When I lived in the Himalayas in the early 1980s, the villagers in Manang would frequently distill their harvested buckwheat into potent ‘rakshi’ (रक्सी), the Nepali word for spirits (which carries the exact same double meaning of “high-proof alcoholic beverage” and “supernatural beings” as does the English word).  An aspect of the distillation process which I gained appreciation for as I observed and sometimes lent a hand was the quantity of the grain stock needed to produce a given quantity of home-grown moonshine.  A large quantity of grain distilled down to a precious few, highly potent drops.

Thirty-eight pages of, as officially named, The Biden Plan for a Clean Energy Revolution and Environmental Justice can be distilled down to the 11 words of that title and the 33 words of its first sentence.  That first sentence reads, “From coastal towns to rural farms to urban centers, climate change poses an existential threat – not just to our environment, but to our health, our communities our national security, and our economic well-being.”

There is of course much more that could be said about what is unofficially called the Biden Climate Plan.  And I will have more to say about it in future posts.  But it seems as good a place to start as any to look at those first 44 words and savor them as a distillation of the entire plan.  The plan packs a wallop compared to Trump’s tasteless concoction while also revealing a different blend than the Green New Deal. 

The three key ideas embedded in the title are: (1) the link between the environmental crisis and a clean energy-led transformation of the economy;  (2) the scale and urgency of the transformation requiring revolutionary, not incremental, levels of response; and (3) the implication that neither the environmental nor economic response can grow fully — sustainably and with regenerative power — without a social justice tap-root.

 The first idea restates an approach to mitigating climate change initially developed in the second term of the George W Bush Administration and then substantially expanded during the eight years of the Obama Administration.  That approach was to take the U.S. National Labs model for innovation, developed after WWII, and update it to a Version 2.0 in order to foster clean energy industries for the 21st century challenge of climate change.  In both versions of the model, government leads the way with basic research and early commercial proof-of-concept work until the private-sector is motivated to take over with commercialization, applying skills in lowering costs and building consumer acceptance.  Government’s role during commercialization shifts to articulating policy so that investors have enough time-horizon certainty to deploy capital to accelerate commercialization and build out the market. The story of DARPA and the development of the Internet is the classic case study cited for this approach.

As to the “revolutionary” aspect, thoughtful conservatively-minded people – by which I mean, political conservatives who don’t deny anthropogenic (i.e., human-caused) climate change — have gravitated to an alternative approach. Their preferred approach is to keep government out of the market except to articulate an across-the-board carbon tax system  This latter approach, promoted most prominently by James Baker, George Shultz, and Hank Paulson at the Climate Leadership Council, is one that current Big Oil companies are more willing to work with.  It raises their cost of doing business but does not pose the existential challenge of a government-led ‘new economy’ transformation.  Conservatives argue that nothing will happen until the oil giants and the big utilities sign on.  An evolutionary approach. Liberals argue that the oil giants and big utilities will only sign on when a ‘new economy’ transformation forces them to.  In other words, a revolution.

The third pillar holding up the title is ‘environmental justice’ highlighting the fact, equally apparent with the COVID-19 pandemic, that climate change affects the health, livelihood and well-being of disadvantaged communities much more deeply and perniciously than it does more privileged communities.   Rather than plunge into that deep topic here, I recommend anyone who’s looking for an informative and lively toe-dip into the subject to view this three-and-a-half primer on the topic by Grist.

Moving on to the 33 words of the first sentence, three key points are being communicated here:

First, climate change is an existential threat.  Period. 

Second, it threatens every single American, wherever they live and whatever they think about it.  Like with the spread of the COVID-19 virus, if we don’t master it, it masters us. 

Third, the threat is varied and far-reaching, applying to the quality of the environment we live in, to our health and morbidity, to the strength of our communities, to our economic well-being and, importantly, to our national security.

Rather than go through each of these, I’ll close this post with just a quick look at the threat to our national security.  To outline the different dimensions of threat posed to our national security, I’ll draw directly – and with a grimace of irony —  from the Trump Administration’s own assessment, an assessment it is required by law to make even while the White House studiously ignores it.

So here goes in the Trump Administrations own words …

  • “Climate change creates new risks and exacerbates existing vulnerabilities in communities across the United States, presenting growing challenges to human health and safety, quality of life, and the rate of economic growth;”
  • “Without substantial and sustained global mitigation and regional adaptation efforts, climate change is expected to cause growing losses to American infrastructure and property and impede the rate of economic growth over this century;”
  • “The quality and quantity of water available for use by people and ecosystems across the country are being affected by climate change, increasing risks and costs to agriculture, energy production, industry, recreation and the environment;”
  • “Impacts from climate change on extreme weather and climate-related events, air quality, and the transmission of disease through insects and pests, food and water increasingly threaten the health and well-being of the American people, particularly populations that are already vulnerable;”
  • “Ecosystems and the benefits they provide to society are being altered by climate change and these impacts are projected to continue. Without substantial and sustained reductions in global greenhouse gas emissions, transformative impacts on some ecosystems will occur; some coral reef and sea ice ecosystems are already experiencing such transformational changes;”
  • “Rising temperatures, extreme heat, drought, wildfire on rangelands, and heavy downpours are expected to increasingly disrupt agricultural productivity in the United States. Expected increases in challenges to livestock health, declines in crop yields and quality, and changes in extreme events in the United States and abroad threaten rural livelihoods, sustainable food security, and price stability;”
  • “Our Nation’s aging and deteriorating infrastructure is further stressed by increases in heavy precipitation events, coastal flooding, heat, wildfire, and other extreme events, as well as changes to average precipitation and temperature. Without adaptation, climate change will continue to degrade infrastructure performance over the rest of the century, with the potential for cascading impacts that threaten our economy, national security, essential services and health and well-being.”

We’ll have occasion in the future to look into the health and morbidity impacts, the community well-being impacts, and importantly the economic impacts of climate change. But this quick inventory of some of the national security impacts, by the Trump Administration’s own reckoning, should be enough to make clear that we need to be doing more.

So, what would I tell the Biden team after taking this first sip of the Biden Climate Plan?  It’s all good as far as it goes.  But it could go farther.  Why take an either/or approach when the scale and urgency of the problem call for both/and.  A commitment to advancing the carbon tax solution in parallel with the plan’s advocacy of clean energy market transformation would make it possible to move farther and faster.  Like a climber uses two surfaces to climb an otherwise unclimbable rock-wall. 

We need to be moving up this mountain fast and skillfully. We’re currently stuck mid-way up, staring at a formidable facade, and wondering how in the world we’re going to scale it.

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 …

 

ambitions

Bear with me. I’m going to kick off today’s post with a snapshot about how we organize the blog’s content week by week in order to set the stage for then revealing the slight wrinkle with today’s post. Boring. Hang in there, though … there’s a good reason.

 

The TEA Collaborative produces three blog-posts per week: on Mondays (aspirationally, at least) we put out a tech-related post which takes care of the T in our name; on Wednesdays (ditto) an energy/environment post which covers the letter E; and on Fridays (ditto) an A post for Ambitions (by which we mean the effort to chronicle the seventy-year undertaking by the government of the People’s Republic of China to leverage their huge population, along with other assets, to confront the world with a new, ambitious model of change at vast scale and speed).

So as not to get trapped into rigidity, we have also been planning all along to fold occasionally a so-called X-factor post into this T-E-A formula.  X-series posts will generally be the contribution of an invited guest blogger who is an acknowledged Xpert (sorry, couldn’t resist) in the broad field of U.S.-China relations.

Today’s post turns out to be a bit of a hybrid between A and X.  Originally, we were lining up an X-series post which I thought might appear today but, for various reasons, that expert will need to hold off her appearance until September.  Since I did not myself have anything particularly cogent prepped for Ambitions as a fall-back, I went through much of the day yesterday mentally open, in equal measure, to either inspiration or dumb luck. Dumb luck won the day.

As a result, I am able to present here both a fortuitous hybrid — content that actually does fit the A-Series perspective but happens to be delivered by a different X-series expert.  (The wrinkle is that the X-series expert is not yet aware that he is filling in this way.  I’ve written him today to explain and to get his blessing.  Having gotten to know him in a sense after listening to more than 100 hours of his podcast series, I’m pretty sure he’ll go for it.  If not, though, I’ll have to pull this from the blogsite.  So, you might want to read fast.)

OK, here we go …

In our T(ech) post from last week, Fiddling Around with U.S.-China Tech, I asserted: “there was undoubtedly a measure of optimistic naïveté in the West in assuming China’s willingness to dutifully assume the role of a ‘responsible stakeholder’ in the post-WWII world order.  If the Chinese had conceived of their nation as only having been born in 1949, assuming the mantle of responsible Pax Americana stakeholder might have fit more comfortably. As it was, Chinese conceived the People’s Republic of China as the heir to a Chinese polity which had been the dominant economy in the world for sixteen of the previous eighteen centuries.  They weren’t predisposed to simply adopting some newcomer’s rules and norms as to how China should conduct itself on the world stage.”

Today’s post is going to put meat on the bones of that assertion.  In order to do so, I will turn to Mike Duncan — creator, author and narrator of the magisterial History of Rome podcast series.  On the occasion of the 100th episode of his series, Mike took listeners’ questions.  For the remainder of this post, I am going to take his answers to two questions from that podcast, reverse the order in which he answered them, and share his erudition here to shine a bright light on the two component parts of my assertion:  first, why would the Chinese not naturally think of themselves as heirs to something very special which pre-dated 1949 by quite a few years; and, second, why would the Chinese not naturally have some skepticism about falling in line with a new-fangled U.S.-led world order dating back to 1949.

Except for the headings, the following two points of text are entirely drawn from the 100th episode of Mike Duncan’s History of Rome podcast.

  1. China Has More Historical Continuity Than The Roman Empire (And That’s Saying Something)

Question:
What, if any, relationship existed between ancient Rome and China?

Answer:
The majority of the contact between Rome and China was indirect, but the two great bookends of the world certainly knew that the other existed. The Han Dynasty, which persists in one form or another from about 200 BC to 220 AD was rising at the same time as the Romans, and as Rome headed East, the Han headed West. And it was during this period that the links became more overt. With the stabilizing hand of the Han in place the famous Silk Road was able to knit itself together, carrying silk and other Oriental treasures from China all the way to Antioch, and from there to Rome, while, among other things, Roman glasswork made their way back to the Chinese.

In 97 AD a Chinese embassy was sent West to try to make contact with the kingdom of the Da Qin, which is what the Han called Rome. But apparently they were stopped short in Mesopotamia after the Parthians explained that the difficult crossing to Rome would take another two years at least. This bald faced lie was meant to keep the two poles of the lucrative trade routes, which Parthia controlled, from ever meeting and working out a way to bypass the Parthian middlemen.

In 166, though, a Roman embassy was sent east and was able to make contact with the Chinese emperor. Debate still swirls about how the Romans got there, whether by sea or overland, but a meeting definitely occurred and the Romans offered up all kinds of gifts from the West, including a book of Greco-Roman astronomy. Nothing concrete seems to have followed the meeting though, and thereafter the two sides continued to simply trade with one another indirectly via the Silk Road or by the sea routes around India.

For the remainder of the Empire, Chinese silk remained a highly sought after luxury item in Rome, and was a major point of contention, both for old school conservatives who found how revealing the fabric was disturbing, and proto economists who worried about how much gold was disappearing east for nothing but a few scraps of cloth.

2.   What’s the Enculturated Chinese Attitude Towards a ‘Pax Americana’ Dating Back to 1949?

Question:
“One of the earliest topics that was brought up is the purported similarities between ancient Rome and the US. What are the main similarities and differences between ancient Rome and the present and historical US?”

Answer:

Well, let’s go through the obvious list. The United States kicked out a monarch, founded a republic wildly skewed in favor of a rich aristocracy (that was self-consciously modeled on Roman institutions), dealt with violent upheavals as the lower social classes attempted to capture some power for themselves, expanded aggressively on their own continent before accidentally capturing overseas territories, and is now utterly dominant militarily, politically and economically. What else do you need to know?

Throw in the fact that if you believe the Soviet Union was Carthage and that the Cold War is our equivalent of the Punic Wars, then you can even locate us within the larger timeline right around the rise of the Gracchi brothers and, hey, look, Tea Parties.

Except that one thing that’s really been driven home to me lately is that while you can find these superficial similarities, there are much deeper differences. Every powerful nation follows its own trajectory, for its own particular reasons, towards own particular end, though usually at the height of each one’s power, they claim that they are the rebirth of the Roman empire.

For me, the biggest difference between America and Rome is that compared to Rome, the United States is a baby and could be very well proved to be merely a flash in the pan. The Roman Empire became the dominant state in the Mediterranean around 200 BC and remained as such in one form or another until the fall of Constantinople in the 1450s. I mean, we are talking about a nearly 2000 year period where you simply cannot talk about anything that occurred in North Africa, Europe, or the Middle East without talking about Rome. America, by contrast, was a pretty decent regional power for about a century, a pretty major world power for about 75 years after that, and has been living with the kind of unipolar prestige Rome enjoyed for centuries for about the last 20 years.

If the United States of America is still around in 3010, I think maybe then we can start talking about comparisons to Rome. Until then, things happen, nations rise and fall, and borders shift. I’m not saying America can’t dominate the world for a millennia. I’m just saying that it’s an awful lot to ask of anyone.

Rome was all about longevity and stability, and that is a test that no one in the West has been able to pass since.

My Personal Postscript

We live in a polarized time.  Many people who I encounter in the blogosphere will be inclined to take this post as evidence that I am somehow an apologist for the PRC.  Let me set the record straight on that possible perception:

  • My entire professional life has been dedicated to supporting U.S. Government institutions (e.g., the U.S. Foreign Service), U.S. Government programs (e.g,. the U.S.-China EcoPartnership program) and U.S.-led People-to-People cooperative programs such as The Philadelphia Orchestra’s engagement with China
  • Above and beyond my professional involvements, I personally believe that America’s multi-cultural, future-oriented perspective is the world’s best path forward, at least as far as I have so far encountered
  • I do not believe in historical determinism.  There is nothing about either Rome’s or China’s longevity which I find instructive for understanding their futures, except for the single fact that the people who grow up in that cultural tradition feel it in their bones
  • But, as I took pains to lay out in my Where I Stand post, I will never shy from seeking to understand, take into account, and respect my counterpart’s reality when grappling with a shared problem so that solutions which work for “my side” will also work for theirs.  Those are the solutions that stick.

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