The Art of The New Cold War Newsletter
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Welcome readers to the very first edition of The Art of the New Cold War Newsletter.
The newsletter will focus on all aspects of the defining geopolitical event of this century: The clash between America and China. The New Cold War.
We will discuss a broad range of topics including, military, economics, foreign policy, politics, technology, and everything in between. My goal is to publish the newsletter once a week, highlighting and analyzing the important, stories, news and trends related to the New Cold War emerging each week.
And as always, for more information, please check out my book: The Art of The New Cold War
Feedback is always welcomed. Thank you for reading!
Topic 1: Didi and China’s Big Tech Crackdown
The Chinese Communist Party (CCP) continues its crackdown of Chinese Big Tech companies. Beginning in earnest in the fall of 2020 with the squashing of Chinese fintech giant Ant Group's IPO and the humbling of famed Chinese tech entrepreneur Jack Ma. The latest high profile victim of the crackdown is Chinese ride hailing company Didi.
Unlike Ant, Didi’s IPO moved forward with a listing on the New York Stock exchange, before meeting Beijing’s ire. Only days after the much heralded IPO launched, which was the largest Chinese company listing on the NY Stock exchange since Alibaba and had massive US institutional investor support, Chinese regulators suddenly informed the company that its popular ride hailing app would be indefinitely blocked in China, its largest market, while regulators evaluated alleged issues related to data sharing and data protection, putting the future of the company at risk.
Predictably, this sent Didi shares plummeting, causing many US investors to lose money. US investor and noted China Hawk Kyle Bass even opined to CNN: "The Chinese believe deeply in symbolism and numerology. Banning an IPO that just went public in the US -- with US investor money -- on our Independence Day was basically a big F-U to the United States."
There are numerous conflicting stories about the reasons for the crackdown on Didi. Some speculating that regulatory concerns were raised to the company prior to moving forward with the IPO, including concerns regarding sensitive Chinese data falling into American hands and maps on the ride hailing app showing important, and secret, government buildings. There is even a question about whether the company had Beijing’s sign off on the IPO in the first place. Despite concerns, however, the company went forward with the IPO on the NY stock exchange only days before the 100 year anniversary of the CCP’s founding, a particularly sensitive time.
If there were regulatory issues raised to Didi prior to IPO, and not disclosed to investors, expect angry investor lawsuits to be filed against Didi (and rightfully so). The situation has also caused a severe loss of US investor trust in Chinese companies (which should have happened years ago). Even famous investor, financial commentator, and unabashed China Bull Jim Cramer, who touted the Didi IPO only a week earlier and encouraged investors to buy as much of it as possible, questioned why a US investor would buy a Chinese IPO ever again after the Didi debacle. “You’re a moron if you buy a Chinese deal after this. You’re a moron. I don’t care if it pops,” Cramer said on CNBC Tuesday. “Why do you need to put your capital at risk after this?”
The CCP’s crackdown of Didi and Chinese Big Tech companies generally is also indicative of the fact that the CCP views everything through the lens of national security and control. And any Chinese tech company, or tech billionaire, that challenges the complete control and power of the CCP will be reigned in; a fact Alibaba founder Jack Ma discovered to his detriment as he was used as an example for discipline by the CCP. The CCP will simply not allow any other power centers beyond or apart from the CCP to develop in China. Something they have watched occur in America with the US Big Tech giants, and their immense powers over society and government. The CCP also fully understands the power of data, its potential uses and threats. The reason why US tech companies like Facebook and Google cannot operate in China; in contrast to the US allowing Chinese companies like TikTok to operate in America.
The Didi situation is also reflective of the CCP strongly pushing for Chinese companies to list on the Hong Kong stock exchange and not in New York, or other western exchanges. This an effort to further strengthen Hong Kong as a financial center, and part of a larger economic "decoupling" of China from the West and Western Markets, on the CCP’s own terms. The Didi situation further illustrates the fact that the CCP believes that Chinese companies are intended to benefit, serve, and strengthen China only. And if US investors are screwed in the process, even better. Never forget that the CCP are ruthless practitioners of China First.
Topic 2: China and Climate Change
Progressive and environmental groups in the United States are warning President Biden to lay off China and not engage in a New Cold War with China, for the sake of climate change. Believing that without the full cooperation of China, by far the world’s largest polluter, that global environmental and climate related issues will be impossible to address.
This line of thinking plays directly into the CCP’s hands. Indeed, the CCP understands fully how climate change can be used as a wedge to neutralize and divide opposition against China. In fact, they already openly float the idea of cooperating on climate change in exchange, of course, for America not attacking China in other areas. Though even as China says this and makes promises to decrease their emissions generally, they continue to obtain the majority of their energy from cheap coal, with no apparent signs of stopping, as they continue to economically develop.
Bottom line: China will dangle false promises of cooperation on climate change to attempt to get America to disarm against China on other fronts (economic, trade, human rights, foreign policy, tech, etc.), while China just keeps on ruthlessly advancing and pursing its interests. To believe otherwise is naïve and foolish. And for proof, one need only look at discussions throughout the years on trade or market reforms and all China’s many empty promises that never came true while they continued to cheat. As the old saying goes, fool me once…..
Topic 3: Tesla’s adventures in China
According to Bloomberg, Tesla is having a very bad go of it these days in China, despite doing just about everything possible to succeed in China and appease the CCP.
For a little while at least, everything appeared to be going very well for Elon Musk and Tesla in China. However, the brief honeymoon is now over. As Bloomberg reports: “After receiving red-carpet treatment from government officials, who granted Tesla the unprecedented concession of allowing it to wholly control its local subsidiary, the carmaker is now being forced to rethink its strategy, from customer service to public relations, in a market that’s key to Musk’s long-term ambitions.”
Tesla has now increasingly come under an unusual degree of attention from Chinese regulators, as well as a rash of negative press coverage and online criticism. And according to Bloomberg, “last month, the Chinese government ordered a recall of almost all the cars Tesla has sold in the nation — more than 285,000 in all — to address a software flaw. At the same time, the vehicles are being banned from some government facilities over concerns they could send data to the U.S., and local carmakers like Nio Inc. and Xpeng Inc. are mounting a vigorous challenge to Tesla’s dominance, winning over consumers with increasingly stylish designs.”
The story of Tesla’s troubles are an all too common one for US companies trying to do business in China. In fact, it very much fits with the usual pattern and fate eventually suffered by almost every US company in China: the US company is allowed to operate in China for a time and even make some money while their intellectual property and technology is systematically stolen, then they are squeezed out of the Chinese market by the CCP so that Chinese domestic companies can win using the US company’s own stolen technology. Rinse, dry, and repeat.
The allure of China's massive market continues to be a Siren's song that ultimately ends in misery. One it appears even the great Elon Musk cannot escape.
Topic 4: China takes over U.K.’s largest semiconductor plant
As reported by CNBC, amid the worldwide semiconductor chip shortage, Newport Wafer Fab, the U.K.'s largest chip producer, is set to be acquired by Chinese-owned semiconductor company Nexperia.
Semiconductors are critical to the global economy and national strength and are used in everything from cars and phones to advance weaponry. The COVID 19 pandemic has caused severe chip shortages and opened the eyes of the world to their strategic importance, and to the fact that the vast majority are made in Taiwan and Korea. This presents significant dependency, supply chain, and national security issues. A fact not lost on either America or China. Both nations are now attempting to various degrees to build their own domestic chip plants and capabilities.
China gaining control over the U.K.’s largest chip producer is a concerning prospect for not only the U.K., but for America and the world as well. Especially as no Chinese company is free of CCP control and influence. And by law, Chinese companies must share all technology and resources with the Chinese military under Xi Jinping’s Military-Civil Fusion strategy.
Despite calls to block the acquisition from both British and American politicians, so far PM Boris Johnson has refused to take action. This is particularly perplexing given Johnson’s previous concerns about CCP influence, for example in the U.K.’s 5G infrastructure, along with Johnson’s own push for post Brexit Britain to be a technological leader, and push for self sufficiency. This acquisition appears to be exactly the opposite, and should be blocked by Johnson. Giving the CCP control over its largest semiconductor producer, in the middle of a chip shortage, is sheer insanity.
Topic 5: US withdrawal from Afghanistan and the New Cold War
According to President Biden, the US is scheduled to end military missions and withdraw from Afghanistan on August 31st. At long last officially ending America’s longest war.
The aftermath of the US exit from Afghanistan is likely to have implications in the New Cold War, especially as Afghanistan shares a border with China. China is already positioning to take advantage of the US withdrawal, by making deals with the Taliban, and angling to construct infrastructure in Afghanistan as part of China’s grand and extremely ambitious Belt and Road Initiative (i.e. the Project of the Century). China also sees an opportunity to take advantage of (exploit) Afghanistan’s natural resources including all important rare earths.
But as much as China senses opportunities, it has serious concerns as well. Afghanistan borders China’s highly problematic Xinjiang region, where China has imprisoned millions of Muslims, known as Uighurs, and even committed a form of genocide against them. Thus, the prospect of battle hardened Muslim fighters and terrorists operating on China’s borders, without US troops to keep them busy and in check, becomes a very worrying prospect. Understandably, some of them may be rather angry about what China is doing to their fellow Muslims across the border.
This may even present another potential strategic benefit of the US getting out of Afghanistan once and for all (other than of course no longer continuing to waste massive amounts of US money and resources). And as Afghanistan becomes an increasingly unstable, hostile, & dangerous country once US forces are gone, China may be forced further into the “graveyard of empires” than it likes. Indeed, it is to America’s advantage for China to become occupied in Afghanistan, and spend some time there getting stung by that perpetual hornet's nest. America should even seek to kick the hornet’s nest from time to time to ensure that China keeps getting stung.