What to say about the decoupling process? It’s a train that is picking up speed, from whatever angle you view it. The related steps being taken by both China and the US are too numerous to list out, but there is a sense of serious determination on both sides to hold to existing positions, and little room for compromise, apart from some bulk purchases of soybeans. Let’s look more closely at tech and territorial issues.
Last week we mentioned TikTok, which is a Chinese app that is insanely popular in the US and many other places. It has been banned in India, and the signs seem to suggest that the US is going to require Bytedance to hive it off and make it an “independent” American company. Would it/could it be independent? The posting of a few “red flag” photos or comments to see if they were left in place or not would answer the question quickly and conclusively. So… unlikely. The whole thing is immensely problematic. Sell it to another company? Who could afford it? Google and Facebook, almost no one else. WeChat has also been mentioned as an app under review, and that’s much less of an issue because it is hardly used at all outside of the Chinese mainland community in the US. And how about Zoom? Good question. Of course, the whole issue could be resolved easily with reciprocity. How nice it would be to use Google and Dropbox without having to fire up a VPN.
As to territorial issues, the US announced a new policy, or a clarification of its position, on the South China Sea and sent a number of naval ships through to emphasize the point that it considers most of those waters to be international. China meanwhile announced sanctions against Lockheed Martin over sales of military equipment to Taiwan. Where is all this going? The senior Republican on the US House of Representatives foreign affairs committee for Asia, Ted Yoho, would have access to quite a lot information, and he was quoted a few days ago saying he would predict a clash in a timeframe of 3 to 6 months. Coincidental or not, that is about the period from November 3 and January 20, the date of the US presidential election and the formal handover of power from one administration to another. Damn. This is already a summer of discontent, and the prospects for the winter are looking even worse.
On the domestic front, China reported GDP growth for Q2 of 3.2%, which is a solid number, but the detailed figures showed a further shift in the economic balance with SOEs up and private enterprises down in terms of investment. Plus weak household consumption data. Meanwhile, with virus stimulus funds now ricocheting through the economy, China’s stock market and property market are both bubbling away. Could there be a connection, perchance?
This really is an awful year. Have a great weekend and burn some incense for better days ahead.