Monday, December 10, 2018

Zero Hedge — This is What The "Trade" War With China Is Really All About

What is really at the basis of the ongoing civilizational conflict between the US and China, a feud which many say has gradually devolved into a new cold war if few top politicians are willing to call it for what it is, are China’s ambitions to be a leader in next-generation technology, such as artificial intelligence, which rest on whether or not it can design and manufacture cutting-edge chips, and is why Xi has pledged at least $150 billion to build up the sector.
But, as the FT notes, China’s plan has alarmed the US, and chips, or semiconductors, have become the central battlefield in the trade war between the two countries.…
The risk is that an overly aggressive posture would backfire, and force China to become entirely self sufficient, because in the long term, analysts said, a US export ban would likely cement Beijing’s resolve to cultivate a wholly home grown semiconductor industry along every step, from design to fabrication to packaging.
“In the short term, US export controls can seriously set back Chinese progress on semiconductors. In the longer term, it’s hard to say if China will be permanently set back,” said Gavekal’s Wang, noting that fear of US export controls helped marshal the resources that shaped Japan’s most dominant semiconductor equipment players.
“The more tightly the US controls these goods, the more important it becomes for China to make these goods itself.”

At the end of the day, however, it is a simple question of money, because if China is willing to throw enough money at the problem, the solution will come. And as we showed back in May, China has every intention of not only matching, but surpassing total US military spending, and in light of the importance of an autonomous, self-reliant semiconductor industry, one can argue that much of this spending will go toward beating the US where it truly matters...in the technological arms race.
Because remember what Bank of America's Michael Hartnett said half a year ago: for all the talk of the escalating confrontation between the US and China, the "trade war" of 2018 should be recognized for what it really is: "the first stage of a new arms race between the US & China to reach national superiority in technology over the longer-term via Quantum Computing, Artificial Intelligence, Hypersonic Warplanes, Electronic Vehicles, Robotics, and Cyber-Security."
Which is why, at this point delaying Beijing may be the best option for the US which is slowly but surely losing its one insurmountable technological advantage. But while that may win the short-term battle, will it merely lead to an even faster victory for China in the war, both trade and, eventually, real.
Zero Hedge

2 comments:

Konrad said...

Honestly I don’t know much about the ongoing trade war, but based on what little I understand, this article seems correct to me.

The USA opposes “China’s ambitions to be a leader in next-generation technology, such as artificial intelligence.”

This is why the executive of Huwaei (a tech giant) was abducted and thrown into jail on 1 Dec 2018.

Western corporate media outlets have said little about this, which tells me that it is momentous, like the global shift of tectonic plates.

“The risk is that an overly aggressive posture would backfire, and force China to become entirely self-sufficient.”

Then China would no longer need the USA for anything to do with high tech. China would lead a BDS movement against the U.S.

BDS terrifies U.S. leaders as much as it terrifies Israel.

“China has every intention of not only matching, but surpassing total US military spending.”

The amount of military spending is a poor indicator of military strength. The USA spends more on its military than any nation in the world, yet most of that spending is siphoned off by corruption. Because of this, I doubt the USA could win a conventional war with China or Russia.

Andrew Anderson said...

Trade wars are another symptom of unethical finance since otherwise, for example, US companies would be owned much more by their workers, who would never have agreed to out-source their jobs. Or if they did agree, they would profit enough as shareholders to compensate for lost wages.