China. Part 3

One thing that has always pissed me off about China is that lying is institutionalised. “We will not militarise the South China Sea”, 2 years later, bang, it’s militarised. “Peaceful Rise” – like f*ck its a peaceful rise. It is based now around coercion and threats as much as trade. But the story worked until it didn’t.

So with the world now a lot more awake to the fact that China’s open declaration (Made in China 2025) means that their industries face an existential threat, the response has started in earnest. Firstly, it is the US and tariffs. The main western industrial countries all complained about the US hitting them too, or not going via the WTO, but the US has one primary target in all of this, and down the road, the US has the option of selectively targeting its tariffs – and since China has walked all over the WTO, they would have a hard time pursuing the US through any WTO remedies. The double standards shown by the WTO if they were to entertain this sort of nonsense would probably destroy it. The Chinese will try however – they have already said so:

https://www.reuters.com/article/us-usa-trade-china-wto/us-says-the-reckoning-over-china-trade-is-too-big-for-wto-idUSKBN1K11EQ

They wont get far this time. Trump has blocked appointments to the appeals court within the WTO, meaning its ability to handle trade disputes with binding force is disappearing fast, and according to the article above, will be all but non-existent in 2019. So long WTO. Now it’s bare knuckle brawls with no referee. The Chinese national petulance will be on full display here however. They don’t like their feelings being hurt.

There’s a lot of people around the world quietly impressed by the chutzpah shown by the Chinese. Give em an inch and they will take 100 miles. Lie about basically everything and no one can tell anymore what might actually contain some thread of truth. A great example of this was Huawei in a market I used to work in. We had just swapped a bunch of old equipment out for some shiney new Huawei stuff, and lo, out of the box, with no optimisation, it was performing much better than the older gear, that had been properly tuned. Basically Huawei had lied about everything to us – the stats lied, the setup was purposfully incorrect to improve the stats (we caught them red-handed there), and our ability to monitor for ourselves was so contemptuously degraded we were forced to rely on their reporting and their engineers, and then the real cherry, when I personally challenged their figures and asked for the raw data, I was told by my side to shut it. Never once before in my professional career have I, working for a major mobile operator, been told by said operator that I am not allowed to challenge the obvious bullshit results given by a dodgy vendor. Those slimey little fuckers had it all sewn up. Challenging vendors on major installations is WHAT YOU DO. IT IS A CENTRAL PART OF YOUR JOB. Except when Huawei is the vendor it would seem. Anyway. Enough petulance of my own. Back to the story. (all the guys working with me said they thought exactly the same thing by the way…)

The mercantile approach of the Chinese is beginninng to run into serious opposition. China had been almost unopposed up until Xi came into power. I don’t think his predecessor was anywhere near as feckless as everyone suspected. “Mr Woodface” laid the groundwork for Xi to do what he’s doing now.

https://thediplomat.com/2017/10/speaking-up-for-yesterdays-man-remembering-hu-jintao/

Anyone who can say that he presided over a country that averaged 10% growth for 10 years straight is no moron, to say he was part of a process that has kept that party rolling for 30+ years is nothing short of astounding. Then Xi comes along, and all of a sudden what was flying under the radar now appears in the headlights. “Made in China 2025” “Make China Great Again” (Yeah, he said it first…) “China Dream”, these alone started to get everyone nervous, and then you had Chinese industrial espionage and outright IP theft, not to mention forced tech transfers all hitting the headlines, well, of course it meant things were going to get tougher for the Chinese. Just this week Apple is saying it had its IP stolen by Chinese workers

https://www.mercurynews.com/2018/07/11/apple-theft-case-is-the-latest-in-a-long-list-of-high-tech-shenanigans/

Happens weekly. And the Chinese scream blue murder when they get accused of basically anything.

https://www.theguardian.com/world/2018/jan/30/china-african-union-headquarters-bugging-spying

Would be maybe ok were it a sole case, but it is happening everywhere, constantly.

https://www.bloomberg.com/news/articles/2018-01-24/chinese-firm-sinovel-convicted-in-u-s-of-trade-secret-theft

– and their denials of wrongdoing in that case were epic.

https://techcrunch.com/2018/05/26/what-president-trump-doesnt-know-about-zte/

That one is just ZTE taking IP from a patent pool and then leaving just before its turn to pay. Different method, same pattern, same result.

So when you add all of this up, the picture it paints is one very fucked up mess for China. Many countries do business with it through gritted teeth. Long gone are the rosy “win-win” media statements, everyone now feels slightly stiffed by them, and its only getting worse – China isn’t backing down. Fuck no. They’ve realised they made quite a mistake with “Made in China 2025” – that put the other industrialised countries into a near panic. That annoucement along with the methods they have outlined to back national champions and heavy government subsidies are in direct contravention of WTO rules. (see the bit above where I said they about to go running to the WTO to have a cry about the US tariffs. They don’t have a lot of shame here).

I dont see the BRI going much further, I dont see any chance of Europe teaming up with China against the US, they know Trump has another 2 years and things will probably go back to normal, if they lose their industries to China, well that is generations at least, that is the calculus they work to. I do see cyber attacks quietly ramping up, I dont see AI making any major breakthroughs, and I work in that field, but I’d give China an odds on chance of leading there – simply due to the fact you need incredible amounts of data – and China has that. The quality of the research that has come out of the US far exceeds anything from China. China has a lot of thesis and patent mills that plagiarise and print garbage.

https://economics.harvard.edu/files/economics/files/long-cheryl_quality_implications_of_patent_promotion_policies_in_china_ec2342_seminar_1-25-17.pdf

That is the Harvard University School of Economics’ take on it.

This is all quetly leading to a showdown. Xi is as big a thug as Trump, just a lot more enigmatic. He wont back down. Trump, for all of his bluster wont cut and run on this – he’s made it crystal clear what his intentions are, and with guys like Pompeo, Lighthizer and Navarro (and now Bolton as well. He is living proof that there was an an attempt to cross a walrus with a politician, that met with some twisted level of success) with his ear, he started this rumble, its too late to walk away now.

Amongst many of my friends we’ve all quietly conceded that the future ain’t looking good. How bad it gets is anyone’s guess, but China has been allowed to get away its nonsense for way too long now. It’s reckoning time.

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