Chess and Go are both games of strategy and risk and sometimes the play develops slowly and sometimes there are sudden developments which redefine the whole board. This week includes three plays which are pretty much in the redefinition category. First, the US Senate passed a bill providing more than $250 billion to ensure the US has a competitive edge over China, particularly in areas such as artificial intelligence, quantum computing and semiconductors. And it was a pretty bi-partisan vote, too. Baby steps, perhaps, compared to the centrally-planned strategies of China, but a solid start. Next comes the meeting of G7 leaders which is currently in progress, at which one of the most important topics will be the extent to which the US and Europe will be able to coordinate their approaches to both Russia and to China. It’s too early to say how that plays out—after the Trump years, it is understandable that the Europeans are skeptical. But on the other hand, the meeting members are presumably also considering the consequences of failure to achieve a united front. Third? The Chinese government is making progress with legislation which will allow for retaliation against foreign sanctions, or “discriminatory measures by a foreign country in accordance with the law,” as Xinhua put it. That has the potential to push decoupling forward quite a few steps.
In other news, the threat of a US ban on TikTok and WeChat was removed in a way which leaves open the possibility that they are both subject to controls and supervision. As all apps should be, of course. especially Facebook, in our view.
The world is changing, ladies and gentlemen. Hold on to your hats and enjoy the coming long weekend.