The big news recently is the announcement from the Chinese government that all “critical infrastructure operators” in China must stop buying memory chips from Micron. Micron is the biggest US maker of memory chips, and China plus HK represents 25% of Micron’s business. Now, China is already struggling in the face of restrictions on semi-conductor sales, so why would it take the lead to make the situation worse? Maybe it’s concerns about backdoors and data leakage? Anyway, it’s another big step in the direction of decoupling. And as for Micron, it needs to work on diversifying its business and get used to the new normal. Just as Australia did.
Consumer spending is rebounding from the dire straits of last year, but the stats overall indicate that the uptick is average at best. And anecdotally, things are tough out there. With exports doing not so good, finding a way to get consumers to spend again is the big challenge facing the system. How to do it? It’s all about confidence in the future.
Apart from that, we have been mulling balancing acts. Forty years ago, Deng moved China away from the Maoist model which was in many ways a replication of that of the Soviet Union. And the question in the decade that followed was—how far down the road in the other direction, towards the Western system, do we go? The fate of the Soviet Union suggested that trying to balance off the two ends of the spectrum is next to impossible, and that a happy medium is too unstable to be long-lasting. So the question is, is it one or the other? That seems to be the dilemma at the heart of where we are.
And with that happy thought, have a great weekend.