Business Council proposes selling mother into Chinese slavery

Via the AFR:

A business leader blueprint for the Morrison government to repair the fractured relationship with China includes lifting investment barriers, tuning out to overly hawkish advisers, and wooing Xi Jinping with all its might.

…Mr Bradley said the government should wind back Foreign Investment Review Board changes made in the early stages of the pandemic and consider giving China most favoured nation status after bungling the crucial relationship.

“I don’t know any business leader who thinks the Australian government has handled the China relationship well over the last, I would say four years, going back to the Turnbull period,” he said.

Let’s call the Business Council what it is. An anti-democratic, greedy, oligarchic and fascistic organisation that is entirely happy to yoke itself to the world’s greatest tyranny for profit, as well as slam the door shut on the very liberalism that lifted its members to power.

Here’s another one of the same ilk, Ray Dalio at Bloomie:

“Simultaneously there’s the rapid development of the Chinese capital markets, the opening up of the markets to foreign investors, the relative attractiveness of them, and the underweightedness of global investors in them,” he said. “This is happening when the fundamentals of the U.S. and U.S. dollar are becoming more challenging, making it a relatively competitive place to move one’s capital.”

I don’t want to rain on Dalio’s China cheerleading parade but China’s magic moment is very small so far:

I would go so far as to say that between the Western awakening and the CCP heavy hand (see ANT etc), means that the only ones pouring into China are hot money, hot heads.

To make it a certainty, Western Governments should apply a Pigouvian tax sufficient to dissuade Dalio and anybody else that invests into Chinese capital markets until it liberalises its political system. That is if the threat of it does not prove to be enough.

Dennis Richardson appears at Asis Times to egg it on:

Another call for cooling the China debate came from Dennis Richardson, a former ASIO chief and head of the Defence and Foreign Affairs departments after a long diplomatic career. It was China’s fault the relationship has deteriorated since 2017, he said.

“It was China that militarized the South China Sea when it said it wouldn’t do so. It was China that broke an international commitment with respect to Hong Kong and it has been China that overstepped the mark in terms of foreign interference.”

But the political debate in Australia was not helping the situation, Richardson said. “I think at the moment, the Australia-China relationship has got too caught up with domestic politics in Australia, both inside of the Labor Party and inside the Liberal Party.”

Speaking at the launch of a new report by the Minerals Council of Australia, a mining industry lobby, about the prospects of diversifying exports away into Southeast Asian countries, Richardson also said business leaders should not be cowed by critics saying they were selling out the national interest to make profits.

“I think they should come back and say ‘too damn right I’m talking about my profits’, because profits mean jobs,” he said. “The business community should be far more robust in articulating publicly its own interest in this in a more coherent way in what they do at the moment.”

Does Dennis need a new job or something? The last thing that Western democracies need is an army of hypocritical businessmen fighting on behalf of Beijing.

As Richardson says, China brought the relationship to its knees through its imperial project in the Pacific. There is no point holding a grudge about that. But, equally, it’s insane to do any deal that brings it back or encourages it.

That is what is at stake here. The CCP imperial project has only just started not finished. Only a few weeks ago, economics and economic relationships were elevated to “Xi Jinping thought” at the Fifth Plenum. As everybody knows, “Xi Jinping thought” is all about CCP security, all of the time. The deal on offer to Australia if it breaks in this standoff is an endless series of concessions that will render it the next Hong Kong.

No Australian Government with any regard for its history, values and people can accept that (except perhaps a Labor one as it is currently constituted).

What these various CCP apologists need to prepare for is not “peace in our time”, it is war in our time. Via Gavekal:

Millennia of evolution have biased humans to focus disproportionately on scary experiences, and to remember them far more acutely than less frightening events. No doubt this bias goes back to the days when every time we left our caves, we risked being eaten by a saber-toothed tiger (or being clubbed over the head by a hostile neanderthal).

Today, such risks are remote. Nevertheless, when traumatic events happen they still leave deep scars on our collective psyche. For example, ask any investor what was the most important event of 2001, and the answer is likely to be the terrorist attacks on the World Trade Center and Pentagon. Yet with hindsight, the key event of 2001 for investors was China’s entry into the WTO.

Similarly, investors today are overwhelmingly focused on the economic impact of the Covid pandemic and the possible effects of the US presidential election. Yet something happened over the summer that although not at all traumatic by comparison, may end up having much more far-reaching consequences for world geopolitics. Yet few seemed to comment or care.

The event was a contrasting pair of corporate announcements. In July Intel, the US company that was once the unchallenged global leader in semiconductor manufacturing, announced that it will not be able to mass produce 7nm chips until 2023, some 18 months later than its original guidance. Then just weeks later, Taiwan’s TSMC, which is already producing at 7nm, confirmed that it will begin mass producing 3nm chips in 2022.

In a nutshell, this means that the once-dominant Intel has lost its technological edge over TSMC, and is unlikely to regain it before 2025 at the earliest—if ever. And if you are tempted to dismiss this as hyperbole, take a look at the left-hand chart overleaf, which shows the market capitalizations of both Intel and TSMC, and drives home the pronounced divergence that took place between them over the summer.

On the topic of divergences in market cap, the right-hand chart above compares the market capitalization of the global semiconductor sector with the market cap of the global energy sector. In essence, this weighs the key commodity of the information age against the vital commodity of the industrial age; for the first time in history, the global semiconductor industry is now larger—and meaningfully larger—than the global energy industry.

Any geopolitical analyst contemplating these two charts will be compelled to ask two key questions. Will the unstable geopolitical faultlines of the future still run through the Middle East, as they have since the 1973 oil crisis and the fall six years later of the Shah of Iran? Or will the critical global geostrategic faultline of the future instead shift dramatically to the Taiwan Strait?

Of course, Taiwan has long figured as a source of potential instability in the relationship between the United States and China. But that was at a time (i) when the US and China got along, firstly in the Henry Kissinger-Zhou Enlai era as allies arrayed against the Soviet Union, then as economic partners in the “Chimerica” era; and (ii) when in the grand scheme of things, Taiwan was nowhere near as central to the global supply chain as it is today.

But if you accept—as the market clearly does—that in the world of today, and even so more in the world of tomorrow, semiconductors matter more than oil, then it is logical to conclude that in geopolitical terms, Taiwan is now more important than Saudi Arabia.

What’s more, Taiwan threatens to be even more problematic than Saudi, given the recent deterioration in the US-China relationship and Beijing’s insistence that Taiwan not a separate country, but an integral—if wayward—part of the motherland.

Putting all this together, the “passing of the baton” of technological leadership from Intel to TSMC could hardly have happened at a worse time. The US response to this development is likely to be more weapon sales to Taiwan— indeed these are already promised—and possibly even the promise of military protection. And this, coming on top of the US restrictions on technology sales to Chinese companies including Huawei, ZTE and SMIC, will inevitably go down like a lead balloon in Beijing.

So how will China respond? The first order of business is for Beijing to continue to invest in its semiconductor industry in a bid to close the technology gap.

My colleagues Dan Wang of Gavekal Dragonomics and Matt Forney of Gavekal Fathom China have researched this in detail over the past year, and there are no reasons to believe the trend will do anything but accelerate.

The second order of business for China will be to keep on investing in its military. On this note, there are solid historical correlations between strong militaries and strong tech sectors. In today’s world, you find strong tech sectors in the US, which has the biggest defense budget in the world; in China, with the second biggest military budget; in Japan, which for years boasted the highest defense spending in Asia; and in Israel, South Korea and in Taiwan, all of which have large defense budgets relative to GDP. In contrast, countries that use to spend on their military but no longer do, such as France and the UK, have seen typically seen their tech sectors shrivel and die, with the eclipse of once proud national tech champions like Alcatel and Marconi.

The third order of business for China will be to ratchet up its cross-straits rhetoric—with the obvious consequence that companies and individuals will begin to think twice before investing more in Taiwan, and may even reassess their dependence on Taiwanese-made components.

And at the very least, these developments will mean that a generation of geopolitical analysts who have spent their entire careers scrutinizing every tiny shift in the sands of the greater Persian Gulf region will now have to refocus their telescopes on the Taiwan Strait instead.

Ahead is total proxy war. There won’t be a direct armed conflict between the US and China, with nukes sitting in the background. Instead, there will be outright strategic competition, with no part of society exempt. This will include politics, business links, personal links, trade, markets, strategic settings, technology and culture. China launched this war long ago. It is steadily turning up the heat in it. The US is equally steadily responding.

Total proxy war will be entirely hegemonic, at once everywhere and nowhere. Louis-Vincent Gave is right. The Pacific US empire is the new Middle East. It should be thought of as a network of freedom-loving stationary aircraft carriers that will have to fight for their values with US endorsement, coordination and material, not open military support.

As the Business Council of Australia makes clear, truth is already this war’s first casualty.

David Llewellyn-Smith
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Comments

  1. I suspect the reason that Intel have lost their technology lead is that science and engineering is no longer seen is a profitable and viable career in the US and many other Western countries such as Australia. If your best and brightest go into law and advertising and algorithmic trading, who is there to make the technological advances in companies like Intel? Nobody. It’s Idiocracy in action.

    The Taiwanese must be laughing like drains as the US enstupidates itself while furiously signalling its wokeness.

  2. “… Richardson also said business leaders should not be cowed by critics saying they were selling out the national interest to make profits.”

    Perish the thought! And terrific that Australia can call on its never-ending resource of enterprising ex-public servants who’ve taken their generous super and fled through the revolving door.

    When even the Canadian Conservative opposition is coming right out and demanding that the West stand up to China as new global bully that uses blackmail and hostage diplomacy, the Business Council’s “Neville Chamberlain Plan B” should not be letting mass surveillance, human rights abuses and thuggish diplomacy get in the way of them binding their daughter’s feet to please the emperor. After all, those corporations steeped in the ‘cult of the CEO’ know only too well that pleasing the master with obsequious displays of rolling over and revealing your genitals to the alpha-dog is the only way to prove that you understand how business is done. History shows us that tyrants respect those with brown noses and deaf ears who put profits first. Because, a smiling band of rent-seeking tail waggers carrying gifts would be the last thing that an unreformed hard line communist like Xi Jinping would be expecting!

    I wonder how you say “sit up and beg” in Mandarin?

    Is it just me, or is there a trend developing here? For it seems that those politicians (Keating, Gareth Evens etc) and public servants who bet the farm on China are the ones yelling the loudest that decoupling is impossible and massive suckage force necessary.

    During the 1930s Bob Menzies flogged the pig iron and those companies like IBM and Prescott Bush traded with Nazi Germany until the last moment:

    https://www.theguardian.com/world/2004/sep/25/usa.secondworldwar

    But today, history can be re-invented and troweled over with a little help from Dennis Richardson and Geoff Rabies. How blessed we are to have such people watching our backs.

  3. Makes me wonder about the timing of the FTA and other China US issues. Was this agreement inked because Biden was elected? This is my biggest worry that there will be no brakes on Chyna expansion, and we are fvcked.

    • happy valleyMEMBER

      Indeed. And perhaps Bradley and all the other BCA members with Order of Straya gongs would like to hand those back to the gubmint if they are so wedded to chin-ah sycophancy?

  4. What China is doing is basically blackmail. And business leaders just want to give in. The problem with giving in to blackmail is that it never ends. It only escalates until the person being blackmailed says no.

  5. “But if you accept—as the market clearly does—that in the world of today, and even so more in the world of tomorrow, semiconductors matter more than oil, then it is logical to conclude that in geopolitical terms, Taiwan is now more important than Saudi Arabia.”

    I’m a tech ignoramus but I’ve a hunch that although the market may know about today, it may be misguided about tomorrow, which in terms of the planet is not far off.

    On geopolitical and physical terms, oil, not semiconductors have never been more important given the mounting evidence that oil of all sorts may have peaked in 2018.

    Think every step of farming from plowing, watering and harvesting vast tracts of (increasingly degraded) land, fertilsers, pesticides, herbicides and associated machinery; transporting the produce to the far corners of the world with refrigerated trucks, planes, ships and trains; air conditioning in a rapidly warming world; every household and business accoutrement from furniture, pens, laptops, apparel etc, toys, plastics, – the list could go on for pages and includes oil rigs, pipelines, the world’s ever-expanding military capabilities, and every building, road and factory…..

    The centrality of oil (energy) in every aspect of our daily lives is as pivotal as ever and is the reason usage increases every year despite the dire necessity to reduce it – but most particularly, as it pertains to feeding a bloated and unsustainable global population on a dying planet. This must surely be obvious to even the most die-hard technocrat, but apparently not.

    https://www.zerohedge.com/energy/narrative-problem-after-peak-oil

    http://energyskeptic.com/2020/how-much-oil-left-in-america-not-much/

    http://energyskeptic.com/2020/giant-oil-field-decline-rates-and-their-influence-on-world-oil-production/

    While globalisation would struggle without the internet, mobile phones, smart energy, smart cities and autonomous driving (!) it’s just possible that oil may still be more critical than semiconductors and that we haven’t done with industrialisation yet by a long chalk– unless we wish to go back to tilling by hand, horse-driven transport and windmills.

    The market as ever, fails to factor in that it is a tiny, artificial and ephemeral subset of the planet’s extraordinary life-support system – look no further that its ludicrous and anachronistic belief in growth at all costs on a finite planet. The market is an ass.

    All the military sales and protection to Taiwan, China’s military build up, and the strongest tech centres in the world can’t happen without energy and food – the world’s Achilles heel, always has been. And lack of both leads to war, not visa versa.

    After millennia of evolution mankind still looks no further ahead than the gadgets and gewgaws of today. I’ve a hunch that when tomorrow comes semiconductors will be forgotten in favour of food and energy, and that Saudi Arabia will remain more important than Taiwan.

    • “The market” is as much about the formalisation of the herd mentality as it is a way to put capital into $ winners. Without careful regulation, by its nature, it will allocate money locust style until the resources has been stripped. The very idea of basing governance and the management of natural resources upon the wants of the market has been a profound error. All those values and services that form the very basis of survival have been consigned to the “externalities” scrap heap and made subservient to $s. This has allowed the amenity of people to be deteriorated along with their life support system. Under these conditions, basic services are taken for granted and the world is seen as a static playing field – i.e. land will always produce food and we will always put more energy into farms (hydrocarbons) than we generate from them. No value is attributes to any species until it is ‘endangered’. In the same way, no value will be seen in conserving farmland and seeking more sustainable systems until a disaster is upon us and the wheels come off. The market is a classic ‘boom and bust’ barometer that, if permitted, will not price the risk of global catastrophe until it has happened.

      We are in the middle of a global mass delusion when even The Greens are captured by ‘the market’ and in effect arguing for ‘Big Australia’. In doing so they have wandered so far from the basics of sustainability that we are sleepwalking to the cliff edge.

      From a ratio of 100:1 units of energy inwards, compared to those produced by agriculture, we have got this down to < 1:1. We in effect eat hydrocarbons.

      https://www.resilience.org/stories/2005-04-01/why-our-food-so-dependent-oil/

      Global pandemics are never costed by the market and neither are global crop failures. We are one highly pathogenic rice disease away from collapse in Asia. But ever so slowly the market sets us up for a slow decline and then a dramatic bust. For politicians to prevent it they need to be 10-20 years ahead of the market curve and planning for the next 100 years. Not our's. Australian politicians watch 'the market' and check the focus groups and polls. This is like looking backwards whilst claiming to walk forward.

      • Your writing, grasp and interpretation, a joy in a sea of despair, Clive. I hadn’t thought of the market as the formalisation of the herd mentality but of course, you’re right. Nor that we’re “one highly pathogenic rice disease away from collapse’. I was imagining we’d be waiting for oil to become scarce coincidental with heat waves 10-15 degrees above normal, aquifers depleting etc, for food to crash…..but of course, a pathogenic rice disease is as inevitable as the Irish potato famine. Perhaps it will lessen the flood of starving refugees into Europe; tragic whichever way it plays out. And beyond doubt we’re sleepwalking to the cliff edge hand in hand with the Greens and our ever backward-looking LNP/Labor 🙂

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