CHINAMacroReporter

August 24, 2023
Xi Jinping: 'The East is Rising' | Yes. Rising against China
All our careful analyses of PLA capabilities, the parsing of Mr. Xi’s and Mr. Biden’s statements, the predictions as to the year of the invasion, everything – all out the window. This is one you won’t see coming – but one you have to have prepared for.
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July 23, 2023
‘The U.S. Has Tactics, But No China Strategy’ | Bill Zarit
‘The U.S. needs national review of outward investment to China, but it has to be narrow and targeted and done in conjunction with our allies and partners.’
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July 10, 2023
‘Is Xi Coup-proof?’ (after the march on Moscow, I have to ask)
What about the guys without guns? So if Mr. Xi doesn’t face a rogue army or a military coup… How about a coup by Party elites?
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April 2, 2023
Xi Jinping: 'Change unseen for a 100 years is coming.'
Time went of joint in the mid-1800s when China began its ‘Century of Humiliation.’ And Mr. Xi, with a sense of destiny, seems to feel he was born to set it right. (I very much doubt that Mr. Xi would add: ‘O cursed spite’ – he seems to relish his role and the shot it gives him to go down in history as China’s greatest ruler.)
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January 2, 2023
Xi Jinping: Bad Emperor?
Some have asked me what will be the greatest risk to China in the next five years. My answer: That Xi Jinping will overstep and enact policies that Chinese people won’t accept, especially those that have a direct impact on their lives and livelihoods.
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November 22, 2022
'Strangling with an intent to kill.’
I began to have some hope of getting our act together with Mr. Biden. He worked to rebuild relations with allies who could join the U.S. in the competition. And he understood the need for America to strengthen itself for competition. Hence, the infrastructure, CHIPS, and other acts. But whether Mr. Trump or Mr. Biden, one thing nagged me beyond all the rest. Why is America strengthening our competitor? — In the instant case: Why is America giving our competitor advanced semiconductor resources to strengthen itself to compete against us?
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October 31, 2022
Xi's China: 'less reliable, less predictable, and less efficient'
‘China’s predictability is being eroded by the frequent, erratic policy shifts that have taken place in recent months, such as the unexpected disruptions to power supplies that took place in 2021, and the sudden mass lockdowns that were imposed in an attempt to contain COVID.'
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October 18, 2022
Xi Jinping: ‘Crossing a threshold to outright dictatorship?’'
The view from inside China appears to be quite different. Yes, the Chinese people may grumble about the Zero-COVID lockdowns, and just a few days a banner critical of Mr. Xi and his regime was unveiled over an overpass in Beijing.
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October 10, 2022
The 20th Party Congress with All Eyes are on Xi Jinping
The attention to Mr. Xi is in large part because he will exit the Party Congress with even greater power, no discernible opposition, and a new five-year term (with more likely to follow). And many of the constraints that may have been in place not to jeopardize his reappointment will be gone.
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September 26, 2022
China Coup: How Worried Should Xi Be?
‘Xi and the phrase #ChinaCoup trended on social media after tens of thousands of users spread unconfirmed rumors that the president was detained and overthrown by the China's People's Liberation Army.’
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September 18, 2022
'How do you spy on China?'
Many of you have asked about my own take on the issues I analyze in these pages and about my background. Today is some of both.I am honored to have been interviewed by the terrific Jeremy Goldkorn, editor-in-chief of The China Project. Below is part of that interview.
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September 5, 2022
Xi’s Dangerous Radical Secrecy
In a world of political hardball, investigative reporting, and tabloids, we know a lot (if not always accurate or unspun) about world leaders, especially those in functioning democracies. Not so with Xi Jinping.
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July 10, 2022
Building Biden's 'Great Wall' Around China
Whether you view it as an aggressive adversary or a nation asserting itself in ways commensurate with its rising status, China is creating risks – some subtle, some obvious - that, along with reactions of the U.S. and its allies, have to be factored, into every related business, investment, and policy strategy.
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July 1, 2022
A Debt Crisis of its Own Making
Ever since Xi Jinping announced ‘One Belt, One Road’ in 2013, I watched it expand China’s economic and geopolitical influence and lay the foundation for projecting its military power – and become by many accounts an exploiter of the developing world itself.
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June 22, 2022
No. Ukraine Won't Change Xi's Plans - or Timetable - for Taiwan
Ukraine won't speed up or delay Mr. Xi's timetable. (But it may cause him to work harder to strengthen China's military and insulate its economy from external pressure.)
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June 12, 2022
'The competitiveness of China is eroding.'
Understanding the drivers of China’s rise to supply chain prominence gives (me anyway) insights to help analyze the changes – or not – of ‘decoupling.’
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June 5, 2022
U.S.-China Relations: A Chinese Perspective
Wang Jisi notes that the views are his own, and certainly we don’t know how closely, if at all, they reflect the thinking of anyone in the leadership. But given his straightforward and thorough analysis, free of canned arguments and slogans, I hope they do. I also hope the Biden administration pays heed.
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May 30, 2022
Is Xi Jinping China's Biggest Problem?
And while the impact of Zero Covid may be relatively short-lived, the impact of Mr. Xi’s return to the socialist path will be felt for a very long time, both in China and the world. So the impact will no doubt be felt as long as Mr. Xi leads China.
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May 22, 2022
The Next U.S.-China Crisis: CEOs & Boards Are Not Ready
‘The bad news is that very few corporations engaged in China have contingency plans or long-term strategies to hedge against the downside risks of growing geopolitical competition.’
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May 14, 2022
China GDP: 'A very long period of Japan-style low growth.’
Here are some of the insights from ‘The Only Five Paths China’s Economy Can Follow’ by Peking University’s Michael Pettis. This excellent analysis of China’s economy is worth a careful reading.
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May 1, 2022
'Zero Covid' & the Shanghai lockdown
Joerg Wuttke is the president of the EU Chamber of Commerce in China - the 'official voice of European business in China.'
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April 17, 2022
Is China's Tech 'Crackdown' Really Over?
Today, I’m sharing with you a bit of Ms. Schaefer’s analysis of the tech ‘crackdown’ (but not of the AI and algorithm law). She explains why...
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April 17, 2022
China: 'Sleep Walking into Sanctions?'
A looming risk is Russia-like sanctions on China. The sanctions on Russia are causing plenty of disruptions. But those disruptions would be nothing compared to the catastrophe of Russia-like sanctions on China. The good news is that if China does violate the sanctions, the violations would likely be narrow and specific - even unintentional. So secondary sanctions - if they come at all - likely won't hit China’s economy and financial system deeply – or (fingers crossed) U.S.-China relations.
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April 5, 2022
Russian Sanctions' Impact on China
In the meantime, some contend, China has a payment system, the Cross-Border Interbank Payment System or CIPS, that could make it independent of SWIFT.
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March 21, 2022
Faint Cracks
For some time now we’ve taken it for granted that Xi Jinping has so consolidated his power that his will is China policy.
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March 13, 2022
Is China in a Bind?
It wants to support Russia, but also wants to support the international order from which benefits and doesn’t want to alienate the major economies its own economy is intertwined with.
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February 19, 2022
Under Construction: Two (Opposing) World Orders
Years ago, before the so-called ‘New Cold War,’ when asked what China issue interested me most, I said, ‘China and the liberal world order.’
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February 17, 2022
'A Fateful Error'
As the 1904 cartoon from Puck magazine shows, this isn’t the first time in the past 100 or so years that Russia has shattered the peace. [Or has been defeated, as it was in 1905 by the Japanese in the Russo-Japanese War.]
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February 2, 2022
Ukraine, Taiwan, & the 'Nightmare Scenario'
This in no way diminishes the calamity of a war with China. But the ability of the U.S. to wage that war would not be diminished by having to fight Russia at the same time.
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January 18, 2022
This is Mr. Xi's Big Year - and Nothing Better Spoil It
Every politician going into an election wants a strong economy. Xi Jinping is aiming to be reelected (and all indications are he will be) to a third five-year term at the National Party Congress this autumn. So Mr. Xi will ease (and stimulate ) as much as he can without creating major headaches to deal with after his reelection - all in the name of 'stability.'
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January 5, 2022
Bachelors, Mother-in-Laws, & China's Economy
‘In the long-term, demographics is one of the most important forces that will shape the growth momentum of China for the next decades. Two demographic features that are especially worth paying attention:’
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December 30, 2021
Q&A 6 | China Reverse Its Declining Birthrate?
‘A lot of people feel like the ideal, the optimum number of children is a maximum of two children. So it's not a surprise to me that the three-child policy hasn’t had a high response in the short term. But I think in the long term it will be much better.’
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December 30, 2021
Shang-jin Wei Presentation-1 | Drivers of Growth Momentum
‘In the last year and a half we saw a spate of government actions all contributed to not just falling stock prices for companies in certain sectors but a deterioration in investor sentiment more broadly. These include:...’
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December 30, 2021
Q&A 1 | How Much Does the Gender Imbalance Contribute to China’s Rising Housing Prices?
‘Gender imbalance accounts for about one-third of the increase in China’s housing prices in the last two decades or so.’
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December 30, 2021
Q&A 4 | Is China Exporting Inflation?
'‘China has its own issues. If you look at the CPI inflation, it looks more moderate. ‘If you look at the producer price inflation, it looks more severe.’
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December 30, 2021
Q&A 2 | Will the Gender Imbalance Keep Housing Prices Firm in the Medium Term?
‘The part of housing prices caused by gender-ratio imbalance is not going to go away in the medium term. But the government has ways to create volatility in the housing market.’
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December 30, 2021
Q&A 3 | Property 2022: Stabilization or Growth?
‘The goal is to stabilize housing prices while having housing sector grow.’
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December 30, 2021
Shang-jin Wei Presentation-3 | Analyzing the Gender Imbalance Data
‘Compare these with graph showing the impact of the same factors on rental prices...'
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December 30, 2021
Shang-jin Wei Presentation-2 | Gender Imbalance as a Driver of Housing Prices
‘Why does gender imbalance have such an outsize impact on China’s housing prices?'
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December 30, 2021
Q&A 5 | Will Xi Continue to Favor the State Over the Private Sector?
‘He wants to see a bigger role for the state in the economy. But in the last two years, he has done some course correction. For example, after talking up the role of state-owned firms and building stronger, bigger state-owned firms, he is talking about the equal importance for the private sector.’
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December 30, 2021
Q&A 7 | Why Did Beijing Ban Online Tutoring?
‘Each policy in isolation – whether its banning online tutoring or protecting data or enforcing anti-monopoly regulations or any other - has its rationale.’
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December 30, 2021
What Are Your Top of Mind Concerns?
I asked the participants what are their top of mind concerns about China.
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December 7, 2021
Getting (Xi Jingping's) Priorities Straight
How do you make investment or business decisions in the face of the uncertainties created by Xi Jinping's reshaping China's economy? In this issue, I'll give you a few different ideas on how you might deal with that uncertainty.
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December 7, 2021
Look Through the Rights Lenses
Getting down more to the nitty-gritty, if you’re evaluating a sector or a company, get your lenses right to get the details right.. Stonehorn’s Sam Le Cornu gives a good example of this in a Bloomberg interview.
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December 7, 2021
Sometimes You Just Have to Roll the Dice
Telling someone to align him or herself with Beijing's priorities still is generally good advice.And, when I tell you what those priorities are, I know I am right - until I'm not.
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December 7, 2021
Watch What Beijing Says - and Does
Besides listening to Xi Jinping, you can discern Beijing’s priorities and its likely actions through its big policies - and this is my point here.
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November 23, 2021
'Biden Has a Summit With Xi, but No Strategy for China'
‘Neither Taiwan nor strategic arms are a hot campaign topic, and China is not yet at the forefront of public consciousness. To ensure America’s eventual strategy is workable, political leaders need to debate the challenges so citizens can appreciate the implications of the choices they will have to make.’
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November 23, 2021
Xi Jinping's Leadership: 'The Inevitable Outcome of History'
Mr. Xi is the hero of a Resolution on the history of the Chinese Communist Party that painted his leadership as the inevitable outcome of history and all but gave him his third term. Tony Saich of the Harvard Kennedy School did a terrific analysis on this - you'll find it below, after my take.
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November 23, 2021
'Xi Jinping has made sure history is now officially on his side'
‘While there are murmurs of opposition, the historic plenary session would suggest that the future is in Xi’s hands. However, when politics is so deeply personalised and centralised, there is only one person to blame if things go wrong. Unless, of course, we get a new resolution on history that tells us who led the party astray, despite Xi’s earnest attempts to keep policy on the straight and narrow.’
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November 9, 2021
'America's China Plan: A Proposal' by Clyde Prestowitz
Outcompeting China and avoiding global extension of its authoritarian and coercive policies and practices is not really about China. It’s about America.
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October 27, 2021
Why China Won't Invade Taiwan - Yet
Forget Evergrande and the energy crunch. After the recent flurry of alarming headlines, here’s the question I get most often these days from CEO’s and institutional investors: Will China invade Taiwan in the next few years?
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October 17, 2021
An Energy Crunch. China's Latest Crisis. They Just Keep Piling Up.
‍‘Over the next six months or more, the energy crunch in China will be an even bigger challenge than Evergrande. Will make the Evergrande problem look tiny and has huge global implications. The lights go out in China!’ one experienced and very well-respected reader of long residence in China wrote to me in response the last issue on Evergrande.
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October 7, 2021
Just How Contagious is Evergrande?
Just as a personal crisis can lead you to dig deeper into yourself, so the rapid-fire events in China - with trillions of dollars of business and investment on the line - have led us to (finally) go deeper into how China works – and to come to grips with uncertainties caused by Xi Jinping’s recent moves to reshape the Chinese economy and the Party’s social contract with the Chinese people.
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September 27, 2021
'This Time Feels Different'
Just when we thought we were getting used to Xi Jinping’s tech reforms and social-engineering regulations, the Evergrande crisis heats up.
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September 19, 2021
AUKUS: A New World Order?
‍In case you passed over the news of AUKUS, the new strategic alliance among the U.S, the U.K., and Australia, here a few headlines to encourage a deeper look.
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September 7, 2021
Xi Jinping: Today, video games. Tomorrow, well ... just be good.
Today's issue is a heads up on what may be Xi Jinping's efforts to reshape Chinese society.
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August 28, 2021
The Taliban: 'China's Perfect Partner'?
Breaking through the blow-by-blow reporting that started when the Taliban began its sweep to victory are the geopolitical analyses of who gains and who loses in Afghanistan.
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August 15, 2021
'Xi’s Dictatorship Threatens the Chinese State'
‘Mr. Xi is determined to bring the creators of wealth under the control of the one-party state.’
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August 15, 2021
'Are you tired of losing yet, America?'
As I write this, Taliban forces have entered Kabul and are reportedly occupying the Presidential Palace.
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August 15, 2021
China Economy: Industrial Production Down, Demand Resilient
China’s industrial production down 10%. Demand resilient.
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August 15, 2021
'China Signals More Regulation for Businesses in Coming Years'
‘The State Council’s statement provides a guiding context to interpret current regulatory thrusts. The blueprint as an attempt by Chinese authorities to help investors understand the motives behind the regulatory push.’
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August 5, 2021
‘Global investors shocked to have discovered that China is run by Communists.’
‘Global investors are shocked to have discovered that China is run by Communists.’
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August 5, 2021
'Shocked Investors Scour Xi’s Old Speeches to Find Next Target'
‘While China’s policy moves can feel ad hoc particularly to foreign investors, the changes are quite targeted on certain sectors.’
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August 5, 2021
Don't Say Xi Jinping Didn't Warn You
‘Global investors are shocked to have discovered that China is run by Communists.’
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August 5, 2021
'China Wants Manufacturing—Not the Internet—to Lead the Economy'
‘Social media, e-commerce and other consumer internet companies are nice to have. But in his view national greatness doesn’t depend on having the world’s finest group chats or ride-sharing.’
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August 1, 2021
'Stock Market: China Doesn’t Care How Much Money Investors Lose'
‘Does Beijing not care how much money foreign investors have lost? Does the government really want to close China Inc.’s access to the deep pool of global capital? The short answer is, no, the government doesn’t care.
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August 1, 2021
'Xi's Four Pillars of Regulation'
‘Broadly, Beijing is concerned about four pillars of stability: banking, anti-trust regulation, data security and social equality. All of Beijing’s major interventions reflect these concerns.’
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August 1, 2021
China's Tech Crackdown: 'Nobody Saw It Coming.' — Huh?
‘Carnage in China's financial markets signals the beginning of a new era as the government puts socialism before shareholders, and regulatory changes rip apart the old playbook,’ writes Reuters’ Tom Westbrook.
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August 1, 2021
'Why China Is Cracking Down on Its Technology Giants'
‘Why, you may ask, is China crushing some of its most innovative unicorns? We’re in a new era led by President Xi Jinping, and politics are in command.’
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August 1, 2021
'The most significant philosophical shift since Deng'
‘Carnage in China's financial markets signals the beginning of a new era as the government puts socialism before shareholders and regulatory changes rip apart the old playbook. According to some analysts, it is the most significant philosophical shift since former leader Deng Xiaoping set development as the ultimate priority 40 years ago.’
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July 25, 2021
How China's Middle-Class China is Transforming China and the World
‘Among the many forces shaping China's domestic transformation and its role on the world stage, none may prove more significant than the rapid emergence and explosive growth of the Chinese middle-class.’
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July 22, 2021
Part 2 | The DiDi VIE (as an example)
‘The prospectus has a diagram, above, of the corporate structure, which looks almost normal. But everything below the double arrow — the actual ride-hailing business, etc. — is slightly askew.’
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July 22, 2021
Part 1 | 'Owning Chinese Companies Is Complicated'
‘ “Variable interest entities”(VIEs): The problem with this is that it sort of sounds like you’re kidding. But this is a standard method for mainland Chinese internet companies to go public, and the market has come to accept it.’
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July 22, 2021
Part 3 | Revising the Rules
‘The Chinese government could declare “all these VIE contracts are actually a disguised form of foreign ownership, which is not allowed by the rules, so they are all void and your Didi and Alibaba shares are worthless.” ’
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July 22, 2021
China: Signals Blinking Red & Oops, We Missed the Risks
I had intended to make this issue all about ‘Variable Interest Entities’ (VIEs) and the emerging risks to about $1.8 trillion dollars’ worth of Chinese shares listed on U.S. exchanges – that is, 4% of the capitalization of the U.S. stock markets.
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July 22, 2021
'Crackdown on US listings: Will China close $1.6tn VIE loophole?'
‘If Chinese authorities start to question “Variable interest entities”(VIEs), amid the crackdown that has already battered ride-hailing company Didi Global -- another VIE user -- the resulting loss of investor trust could send shock waves through global financial markets.’
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July 18, 2021
Why the U.S. Lacks Leverage over China
During the celebration of the Chinese Communist Party’s Centennial celebration, Mr. Xi stood in the same place on the balcony facing Tiananmen Square where Mao Zedong stood when he announced the founding of the PRC; Mr. Xi wore a gray Mao suit, among a sea of blue western suits; and he centered himself right above the portrait of Mao, who is similarly attired.
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July 18, 2021
'I will aim for Mao's Status.'
‘There on the gate was Xi Jinping, Chinese president and party general secretary, in a gray Mao suit. Just below his feet was the portrait of Mao Zedong, also dressed in a gray Mao suit.’
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July 18, 2021
'US warns companies of risk of doing business in Hong Kong'
“In the face of Beijing’s decisions over the past year that have stifled the democratic aspirations of people in Hong Kong, we are taking action,” said Antony Blinken, US secretary of state. “Today we send a clear message that the US resolutely stands with Hong Kongers.”
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July 18, 2021
'Biden’s Warning on Hong Kong'
‘The pretense of Chinese and Hong Kong authorities is that their crackdown on the rule of law and dissent will have no effect on Hong Kong’s viability as an international center for trade and finance.’
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July 18, 2021
'China Plans to Exempt H.K. IPOs From Cybersecurity Reviews'
‘China plans to exempt companies going public in Hong Kong from first seeking the approval of the country’s cybersecurity regulator, removing one hurdle for businesses that list in the Asian financial hub instead of the U.S.’
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July 18, 2021
Hong Kong and the Limits of Decoupling
‘The United States’ inability to make China regret—much less reverse—its transgressions in Hong Kong suggests that financial separation, sanctions, and economic barriers are less reliable tools than many in Washington believe.’
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July 15, 2021
Part 1 | 'Joe Biden is determined that China should not displace America'
‘Biden’s emerging China strategy, while still protean, sounds of a kind with Mr Doshi’s prescription for “blunting and building”.’
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July 15, 2021
The Biden Doctrine and Its Discontents
President Biden has framed China as a threat both to the U.S. and the liberal world order.
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July 15, 2021
Part 2 | Joe Biden is determined that China should not displace America
‘Mr Biden’s aides invariably start any discussion of China strategy with the need to restore American greatness after decades of decline.’
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July 15, 2021
'What's Wrong with Biden’s new China doctrine'
‘Mr Biden’s aides invariably start any discussion of China strategy with the need to restore American greatness after decades of decline.’
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July 8, 2021
Didi: Xi Surprises Us Again
Beijing shocked the financial world when it pulled the rug out from under Didi days after its IPO on the New York Stock Exchange and also announced new regulations reigning in overseas IPOs and Chinese companies already listed.
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July 4, 2021
The Chinese Point of View
Here are a few of my thoughts on the importance of Wang Jisi’s ‘The Plot Against China.’ Yuen Yuen Ang’s ‘The Evolution of Chinese Corruption’ speaks for itself - but note especially how Mr. Xi's anti-corruption campaign could hurt China's economy. I have now lived long enough that when a friend complains about his or her spouse, I say to myself, ‘There are no doubt two sides to this story.’
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July 4, 2021
'How Corruption Powers China's Economy'
‘China has managed to sustain four decades of economic growth despite levels of corruption that even Xi has described as “grave” and “shocking.” Why does it seem to have bucked the trend?’
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July 4, 2021
'How Beijing Sees U.S.-China Relations'
‘In Chinese eyes, the most significant threat to China’s sovereignty and national security has long been U.S. interference in its internal affairs aimed at changing the country’s political system and undermining the CCP.’
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July 1, 2021
Five Themes that Point to Where the Chinese Communist Party & China are Heading
As the Chinese Communist Party begins its second century, it’s useful to identify enduring patterns that might aid us in understanding China today and the directions it might be heading.
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July 1, 2021
From Rebel to Ruler: One Hundred Years of the Chinese Communist Party by Tony Saich
‘In our discussions, you've identified five themes that have been more or less consistent throughout the history of the party but have oscillated between different points on a continuum:’
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July 1, 2021
'From Rebel to Ruler': Tony Saich on Chinese Communism at 100
‘At so many points during its century-long existence, the CCP appeared to be in its death throes, whether as a result of external attack or self-inflicted internal strife.’
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June 27, 2021
European Chamber in China: 'Business Confidence Survey'
A mere 9% of European companies are considering moving any current or planned investment out of China, the lowest level on record. Instead, companies are strengthening their positions in JVs, onshoring supply chains and increasing spending to secure market share. The ambition not only to stay but also to expand their China footprint is more than justcapital flooding in due to optimism about growth. Companies are taking action to secure their operations in China and mitigate exposure to geopolitical trends in order to have a better chance of navigating a future that looks to be fraught with risk, at least in the near- to medium-term.
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June 27, 2021
'How China & America Should Compete'
‘China and the West urgently need a new framework for understanding the state of the world and their place in it. Such a framework must recognize, first and foremost, that properly regulated economic competition is not a zero-sum game.’
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June 27, 2021
'Jimmy Lai & the Death of Free Speech in Hong Kong'
Jimmy Lai’s tabloid, the Apple Daily, with its peculiar blend of scandal, gossip, and serious political reporting, was Hong Kong’s indispensable voice of free speech. Now that voice has been silenced, and Lai is in prison with others who tried to protect the right of Hong Kong’s citizens to speak and write freely, to be ruled by law, and to vote for their own autonomous government. Their politics are diverse Yet they stand together. When freedom is under siege, people cannot afford the narcissism of small differences that is tearing apart liberal politics in countries where people think democracy can be taken for granted.
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June 27, 2021
'European Companies in China: Between Decoupling and Onshoring'
‘Instead of leaving the market, European companies are exploring ways to separate their China operations from their global ones.’ ‘Following the Covid-19 outbreak, European companies in China spent the first few months of 2020 solemnly appraising their investment strategies.’
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June 24, 2021
'Apple Daily closed, but press freedom stays in Hong Kong'
‘Freedom of the press is a good thing. The West's freedom of speech must be consistent with national interests and public security.’
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June 24, 2021
Bitcoin’s growing energy problem: ‘It’s a dirty currency'
“Bitcoin alone consumes as much electricity as a medium-sized European country.”
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‘The U.S. Has Tactics, But No China Strategy’ | Bill Zarit

‘The U.S. needs national review of outward investment to China, but it has to be narrow and targeted and done in conjunction with our allies and partners.’
by

Malcolm Riddell

|

CHINADebate

July 23, 2023
‘The U.S. Has Tactics, But No China Strategy’ | Bill Zarit
The Honorable William Zarit

Here's a break from hearing my views.

This issue highlights the insights of China expert, Bill Zarit:

  • Career Minister, U.S. Foreign Service (retired)
  • former Chairman, AmCham China
  • Now, Senior Counselor at The Cohen Group, a consultancy founded by former Secretary of Defense William Cohen.

Fascinating and useful insights from a leading China expert from on the ground in Beijing and Washington.

  • You will find the edited transcript of our conversation, below.

‘US, China Dig In Despite Hopes for Thaw’ reads a headline from Voice of America.

  • ‘The United States and China appear no closer to easing mounting tensions despite a recent flurry of diplomatic activity by high-profile U.S. officials to the Indo-Pacific region.’

Still, as Bill Zarit pointed out to me:

  • ‘U.S.-China government-to-government communication - is resuming.’

‘And the direction is for more and better communication.’

  • ‘This is one of the critical points of getting the relationship back on track.’

‘Though I don’t see much changing from the Chinese side during its present administration,’

  • ‘We can still communicate.’
  • ‘We can also find common ground to help lower the temperature and avoid serious conflict.’

One reason the Biden administration isn’t making much headway with communication is China’s appraisal of the U.S. side of the relationship.

  • ‘In so many of the meetings I have had in China,’ Bill says, ‘Chinese officials and former officials, with only one exception, blame the U.S. entirely for the deteriorating relationship.’

‘From these meetings, as well as my own observations, I don't see that much is going to change with the way China is looking at the US during the current Chinese administration.’

  • ‘With continuity of leadership in China, we're going to have a similar trajectory.’

That trajectory might change if U.S. communication were to include full U.S. responsibility for scuttling the relationship and promises to meet China ‘halfway.’

  • Since that isn’t going to happen, I don’t have much hope for progress.

Instead the Biden administration is signaling it wants to communicate but only as it strengthens itself.

  • ‘"Deterrence today is real, and deterrence is strong," Ely Ratner, U.S. assistant secretary of defense for Indo-Pacific security affairs, told lawmakers Thursday during a hearing focused on Washington’s China policy,’ reports VOA.

‘Speaking alongside Ratner, Daniel Kritenbrink, assistant secretary of state for East Asian and Pacific affairs, told lawmakers:’

  • ‘ "Intense competition requires intense diplomacy," he said. "We are committed to managing this competition responsibly and to maintaining open lines of communication with the PRC.” ’

Communication, like deterrence, can be seen as a tactic.

  • Tactics to deal with China the Biden administration has – a strategy, not so much.

‘From what I've seen, the U.S. doesn't seem to have a China strategy,’ says Bill.

  • ‘Now, we've got tactics.'
  • ‘But we really don't have an end game.’

He contrasts this with China.

  • ‘The Chinese, on the other hand, certainly have a strategy, and they're putting all of their efforts into realizing the goals of the strategy: modernization, becoming a major power in the world, and “common prosperity” ’ - to name just three.

These are a few of the many insights Bill Zarit shared with me during two long conversations.

  • Bill Zarit is more formally the ‘Honorable William Zarit,’ having retired from the U.S. Foreign Service with the rank of ‘Career Minister’ (the equivalent of the U.S. Army/Marine rank of lieutenant general).
  • Today, he is Senior Counselor at The Cohen Group, a consultancy founded by former Secretary of Defense William Cohen, ‘where Zarit advises western multinationals working in the Chinese commercial market.’
  • From long experience living and working in China, he is among the most astute observers of China today.
  • (You can find Bill’s bio here.)

Bill's latest insights derive from three recent activities:

  • He has just returned from five months in China (where he had lived for many years previously and now splits his time between there and the U.S.). While in China, he met with senior Chinese officials and heads of foreign businesses.
  • As a former Chairman of AmCham China, he participated in AmCham China’s annual weeklong ‘Washington Doorknock,’ where he met with senior administration officials, and legislators, and think tanks to gage the contours of U.S. policy toward China and to provide input from those on the ground in China.
  • He spoke at and took part in the U.S. Chamber / AmCham China – ‘Annual China Business Conference’ (a conference, Bill believes is the best of its kind), sharing observations and absorbing the thoughts of other experts on the beleaguered relationship.

He has consolidated his thoughts from these three events into ‘Eight Points.’

  • Bill agreed to let me share them here on condition that I make clear: He is speaking for himself and not for AmCham China or The Cohen Group.

Before I get to the Eight Points, I realized as Bill and spoke that sprinkled throughout his comments were phrases such as:

  • ‘For me, goal number one is what is in the interest – short, medium, and long term - of the United States.’
  • ‘To stay competitive globally and to the benefit of the country, U.S. companies need to be in China.’
  • ‘The point is: How do we work with China in the interests of the United States?’

Taken together, I sum all these up into a touchstone:

  • ‘Does it benefit the U.S.?’

This is a deceptively powerful way to frame discussion of an issue.

  • The question doesn’t suggest an answer.
  • But it sets up a useful starting point for analysis of policy and action.
  • And it narrows the path for the sides to talk past each other.

An analysis that begins with Bill’s question - ‘Does it benefit the U.S.?’ – changes the focus and tenor of the discussion.

  • It moves away from the all too common and not very useful (except politically) China-bashing to a more dispassionate consideration of the issues.
  • May not feel as good but should lead to better policies.

Next time you read about a new policy toward China or a comment from an official or legislator – or are just thinking about a China policy – ask Bill’s question:

  • ‘Does it benefit the U.S.?’ - and see if you don't arrive at a sharper understanding.

On to Bill Zarit’s Eight Points:

Point 1 | China blames the U.S.

‘In so many of the meetings I have had in China,’ Bill says, ‘Chinese officials and former officials, with only one exception, blame the U.S. entirely for the deteriorating relationship.’

  • ‘Most of them really believe that the U.S. that is responsible for the deterioration of this relationship.’
  • ‘Propaganda plays a role, but certainly also divergent historical and cultural viewpoints.'

‘In the US, we tend to blame China for the disputes.’

  • ‘But I think we are more clear-eyed, and realize that it is both sides who are involved in the deterioration of the relationship.’

‘And the fact is, both sides are responsible.’

  • ‘And both sides have to approach the problems looking at it that way.’

‘From these meetings, as well as my own observations, I don't see that much is going to change with the way China is looking at the US during the current Chinese administration.’

  • ‘With continuity of leadership in China, we're going to have a similar trajectory.’

Point 2 | ‘The U.S. has tactics but doesn’t seem to have a China strategy.’

‘From what I've seen, the US doesn't seem to have a China strategy.’

  • ‘Now, we've got tactics.’
  • ‘And some of those tactics are competing in areas where we need to compete, aligning where we should be able to cooperate.’
  • ‘But we really don't have an end game.’

‘The Chinese, on the other hand, certainly have a strategy, and they're putting all of their efforts into realizing the goals of the strategy.’

  • ‘Modernization, becoming a modern society and a modern economy by 2049.
  • ‘Becoming a major power in the world. The regional power for Asia at least and even more influential throughout the world.’
  • ‘The “common prosperity” effort - which frankly is hard to fault as a concept - to continue to bring people out of poverty and to have the majority of the people in the country living a reasonably good life.’
  • ‘This is all fairly clear.’

‘With all this in mind, I know that with such rapid changes taking place in China, plus an aggressive leadership there, it's difficult to have a clear strategy.’

  • ‘But isn’t that when strategy is needed even more?’
  • ‘We need to get clear on where the US wants to be in five, ten years vis-à-vis China, and the rest of the world for that matter.'
  • ‘And don’t we need to focus on America’s long-term interests in this world that at times seems to be upside down.’

‘Do we know how to deal with a China that is increasingly strong and influential - and to deal with it in a way that's going to benefit the United States?’

  • ‘Because for me priority number one is the interest of the United States, the long-term interests of the United States.’

Point 3 | ‘The presence of U.S. businesses in China is in the interest of the U.S.’

‘The U.S. business presence in China is in the interests of the U.S.’

  • ‘To stay competitive globally and to the benefit of the country, U.S. companies need to be in China.’
  • ‘I think this is an important point that we need to stress with the Hill and the administration.’

‘That said, we hear certain US officials claim that our companies are supporting the Chinese Communist Party and that these firms need to get out of China.’

  • ‘U.S. businesses that have been in China for 20 or 30 years are now under attack by some of our own political leadership.’

‘How is it that U.S. companies are supporting the Chinese Communist Party?’

  • ‘Some say since our companies are doing business in China, they are paying taxes, employing people, transferring technology, all of which benefits the Chinese economy.’

‘Those who are critical of U.S. business in China will make the argument that, by extension, we are also supporting the Chinese Communist Party.’

  • ‘But I feel that the benefits far outweigh the risk.’

‘To stay competitive - and again to the benefit of our country - U.S. companies need to be in China.’

  • ‘And that’s what we need to stress with the Hill and even with the administration.’

‘Here there are two of the main benefits to the U.S.:’

  1. ‘China is a “stress test” or “fitness center” for U.S. companies (an idea I stole from Joerg Wuttke, who just stepped down as long-time president of the EU Chamber of Commerce in China).’
  2. ‘U.S. companies influence China through the way we manage our companies, including our democratic values, labor rights, environmental protection, rule of law, intellectual property protection, and anti-corruption.’

‘Let me first explain the idea of China as a “stress test” or a “fitness center” for U.S. companies operating there.’

  • ‘China is becoming one of the most competitive markets in the world.’
  • ‘At the same time, China’s marketplace is becoming more discerning.’
  • And, in response, the Chinese are producing increasingly competitive products and technologies.’

‘Because of these realities, operating in China focuses and sharpens U.S. companies.’

  • ‘If you're competing successfully in China you will have a much better chance of competing globally.’
  • ‘And without that competitive edge, it's going to be very difficult for our companies to compete globally.’

‘Second, U.S. companies encourage the adoption of U.S. values in China.’

  • ‘We run our companies with democratic values, including labor rights and a sense of rule of law.’
  • ‘We also operate with respect for intellectual property and environmental protection, and with a definite respect for anti-corruption.’
  • ‘And the more U.S. companies influence China to adopt these values, the greater the benefit to the U.S.’

Point 4 | ‘We are witnessing cognitive dissonance in China. China is in the midst of a charm offensive to attract foreign investment and foreign technology; at the same, we are seeing raids on companies.’

‘We seem to be getting some cognitive dissonance out of China.’

‘On the one hand, coming from the top in China is a charm offensive targeting foreign business.’

  • ‘The Chinese leadership has realized that for economic and development reasons, foreign investment and foreign technology need to continue to come into China.’
  • ‘So you hear, for example, the leadership promoting foreign investment in China.’

‘Then on the other hand, China is passing laws - anti-espionage laws, national security laws, cyber security laws - that are very restrictive to data sharing, data flows.’

  • ‘Now it seems that economic data of all kinds is such a sensitive national security issue that China is restricting them.’

'Based on these laws, the Chinese are investigating and raiding U.S. companies that provide data and other information to businesses, and taking Chinese employees into custody, all without explaining what's going on.’

  • ‘Research and consulting companies in China are the eyes and the ears of foreign investors.’

‘For investment to come into China - for Western companies or foreign companies to feel comfortable and to want to continue working in China - they need to access to data.’

  • ‘Investors just want to know what's going on in China economically.’
  • ‘This is normal. This is not espionage.’

‘Frankly, I haven't heard anything from the China side that would help explain this cognitive dissonance.’

  • ‘I'm not sure where this is coming from. Could it be China’s security people are not talking with the economic people?’

‘We do know, of course, that for the present Chinese administration, national security is job number one.’

  • ‘The economy is still important, but it seems to be secondary now to political and security considerations.’

‘The bottom line is that national security really trumps everything else.'

  • ‘And again, this is antithetical to what China is trying to do on the economic development side.’

Point 5 | ‘Communication is critical.’

‘During the weeklong AmCham China ‘Doorknock’ in Washington, there was little good news about the U.S.-China relationship from the administration, the Hill, or think tanks.’

  • ‘That said, communication – U.S.-China government-to-government communication - is resuming.’

‘And the direction is for more and better communication.’

  • ‘This is one of the critical points of getting the relationship back on track.’

‘Though I don’t see much changing from the Chinese side during its present administration,'

  • 'We can still communicate.’
  • ‘We can also find common ground to help lower the temperature and avoid serious conflict.’ 

Point 6 | ‘Moderate U.S. Congress members agree to keeping the trade lanes open with certain parameters, having better communications with China, and working with allies in dealing with China.’

‘The AmCham China ‘Doorknock’ team had meetings on the Hill with a number of thoughtful, moderate, reasonable legislators and staff members.’

  • ‘The response was better than I had expected.’
  • ‘In a word, I was encouraged.’

‘That’s because what we heard in most of the meetings was very much in agreement with what we were thinking:’

  • ‘Keep the trade lanes open with certain parameters - because keeping those trade lanes open benefits our country;’
  • ‘Have more communication at all levels of the government. And we seem to be going in that direction;’
  • ‘Work with allies and partners - something that this administration certainly has done successfully; and’
  • ‘Restart people-to-people engagement with China.’

‘Moderate U.S. Congress members met with us, as did some others who are tougher on China, yet reasonable.’ 

  • ‘But unfortunately few people who are really hawkish on China did (would?) meet with us.

‘A note regarding the risk of war, my sense is that we're not going to go to war.’

  • ‘I don't see how going to war is in the interest of anybody.’
  • ‘And I would assume that most of our policymakers agree with that.’

‘But from the rhetoric we have heard on the Hill and elsewhere in Washington, I don't think we can totally assume that everyone wants to avoid that.’

  • ‘There is talk about going to war with China – though it seems to me that much of it is just performative.’

‘Performative or not, when the Chinese hear it, they're alarmed.’

Point 7 | ‘The House Select Committee on the Chinese Communist Party seems to be anti-China, believing that everything China does is bad.’

‘The  Select Committee on the Chinese Communist Party appears to be dominated by anti-China folks.’

  • ‘The Committee seems to be anti-China, believing that everything China does is bad.’
  • ‘And I'm not so sure that that's going to be all that constructive.’

‘We met with the leadership of the Select Committee on the Chinese Communist Party.’

  • ‘My take on the Select Committee - having watched the initial hearing – is how one-sided it seemed to me.’

‘The folks in Congress and especially the folks on the Select Committee are saying that it's bipartisan, and I agree.’

  • ‘Also there is room within the committee for members to have differences of opinion, some more hawkish, some less hawkish.’

‘But while bipartisan, I don't think it's unbiased.’

  • ‘This is based on the witnesses called for the first hearing: They were all China Hawks.’

‘Yes, I agree with much of what the China Hawk witnesses said. There is usually at least a kernel of truth.’

  • ‘But by just inviting China Hawks as witnesses, it looks as if everything China does is bad.’
  • ‘And that is not necessarily true. I don't think that's true.’
  • ‘Going forward, I hope the Select Committee will be more evenhanded.’

‘I mentioned to some Select Committee folks that it seems very anti-China.’

  • ‘And there was pushback.’

‘In defense of the Committee leadership and the people who are speaking for the committee, the committee is inviting companies and other folks to later hearings.’

‘I would hope that they would also listen to folks who are on the ground in China.’

  • ‘It's not that we are biased in favor of China - that's not the point.’

‘The point is:’

  • ‘How do we work with China to the benefit of the United States?’

Point 8 | ‘The U.S. needs national review of outward investment to China, but it has to be narrow and targeted and done in conjunction with our allies and partners.’

‘I agree that there is a need for the U.S. to have certain outbound investment controls.’

  • ‘I know that that flies in the face of free investment flows and so forth.’

‘But I think under the present circumstances that we do need to protect our technology.'

  • ‘And this is one way to do it.’

‘The folks who are making policy and implementing policy on a national review of outward investment understand that it needs to be targeted and narrow.’

  • ‘And that we need to work in conjunction with our allies and partners.’

‘So I was encouraged to hear - from the administration and from people very intimately involved with putting these policies together - that that's how this investment review is going to go.’