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This analysis in the South China Morning Post says the current phase of U.S. China trade relations is more than a trade war, it is about changing the whole economic and industrial approach of China. In the same way that Japan changed after the talks during the Reagan administration and moved in a new direction. Robert Lighthizer was Deputy Trade representative at that time, he is the U.S. Trade Representative today.

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The increase in surveillance capabilities over LAC in Ladakh and other areas on the Chinese border with the use of new Heron drones leased from Israel. The improvement in defense capabilities with purchases using a new 500 crore emergency financial fund for the Indian armed forces in the confrontation with China.

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Tsai Ing-Wen is elected president of Taiwan by a landslide in the Jan. 2016 election. Tsai, leader of the Democratic Progressive Party (DPP) was elected with 56 percent of the vote, compared to 31 percent for the Koumintang candidate Eric Chu. The DPP won 68 seats out of 113 in Taiwan's parliament. Tsai told a news conference about Taiwan- China relations - "I also want to emphasize that both sides have a responsibility to find mutually acceptable means of interaction that are based on dignity and reciprocity."

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New pictures from China's moon mission Chang'e-4.

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"To Invest (at home), To Align (with allies), To Compete (with the world)" sums up the approach of president Biden with China. It also sums up the approach at home and overseas. Biden senior adviser, Jake Sullivan at Council of Foreign Relations sets out the framework and path for managing US-China relations into the future for many decades. Here at the Council of Foreign Relations he shows how- through careful study of the relationship's history, the changes in the relationship, and where it is today in 2024. Having participated in previous administrations Jake understood how it has evolved, where mistakes were made by both China and the US, where misperceptions took hold and need for clarification, for action. The old Strategic Dialogue followed by Paulsen under Bush 2000-2008 allowed the relationship to be guided by business interests, -without any clear strategy or idea where it was going except maximizing interests of business on both sides- was continued by Kerry under Obama 2008-2016. Sullivan, Blinken and Biden have built a Strategic Economic Cooperation Framework that has clear goals on the American side and goals on the Chinese side, and work between the two presidents and their cabinet ministers. Trump 2016-2020 rejected the earlier Strategic Dialogue but was not able to set up a sound framework that would guide future relations for decades. Sullivan helped set up a new framework around three principles- To Invest, To Align, and To Compete.   Here he describes how the plan to invest trillions in infrastructure in the US was part of this plan's principle To Invest. On Align it was to derisk not decouple by reducing the excessive concentration of supply chains in China, that was revealed as a problem in the pandemic years. Building up manufacturing at home and in India, Vietnam and Japan. Align also was to have allies Japan, South Korea and India to be aligned with the US policy. It also meant that all three countries would follow the same framework for their economies To Invest, To Align, To Compete.  By combining the strengths of the 2 largest economic centers Seoul/Tokyo with New Delhi/Sydney in Indo-Pacific the leveraging effect of US strength could be felt to support its position. And third to compete on level field so that America retained control of its technologies and implementing exports controls. And sharing this in  open communication with China that the US was protecting its technology and interests the way China has done in the past for its interests. The benefit of open communication even where there are differences had the advantage of not turning this into open rhetoric that damaged relations as had happened under previous administrations. Wang Yi on China's side having seen and approached it with careful study and reflection had similar goals to stabilize and put the relationship on a sound footing. Sullivan met extensively with Wang Yi in meetings in several locations around the world. Ministers Yellen, Raimondo, Blinken, Kerry, were sent to China for extensive discussions as part of this strategy in 2023 leading to remarkable change in the mood and confidence in US- China relations after tumult in 2016-2020 and uncertainty in previous administrations. Much credit goes to president Biden and Jake Sullivan, Anthony Blinken, and also to Wang Yi and Jinping in no way diminishing their own initiative, so that for the first time in decades the US China relationship is now on a stable footing. Both countries faced common challenges around counter narcotics, around climate change, and other issues. These are being addressed. Competition is managed carefully and no rhetoric is taking place so that the largest two economies and about 1.7 billion in US and China and 2 billion people who are allies in India/Indonesia/Vietnam/ Korea/Japan living on the same planet earth can have economic and other cooperation  with different cultures, economic structures and systems of government. The result of such a framework also gives the basis for cooperation with America's allies to invest in Africa and Latin America and in the people of these two continents as another level of alignment and investment for a safer better world. ...

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U.S. strategy has shifted to keeping tariffs on Chinese imports intact as an enforcement mechanism to make sure China keeps to its commitments made in negotiations, says WSJ. U.S. trade negotiator Mr. Lighthizer sees the latest tariffs as leverage, and that tariffs would be removed only when China keeps its commitments made to the U.S. Initially Lighthizer opposed the move for additional tariffs imposed on September 1. Now he accepts the strategy to use tariffs as leverage. Mr. Trump told the Economic Club of New York that if no deal is reached in phase one then the U.S. will "substantially raise those tariffs, they are going to be raised very substantially." Because China is seen as not willing to provide written commitments with enforcement provisions the U.S. strategy has shifted to making the tariff removal an enforcement mechanism. President Trump has committed on the campaign trail to correct misalignment in trade with China. He makes the final decision in negotiations and use his negotiating style.  China sees making commitments on stopping all subsidies as affecting its sovereignty and its industrial model of state sponsored capitalism since opening in the 1990's to trade with the world. Both sides are looking for ways to gain the maximum concessions in Phase 1 of the trade deal as it is very uncertain whether any further progress can be made given the positions on each side, say experts. ...

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China's exports to all countries surged in November by 21% from a year earlier. Chinese made consumer goods and electronic goods were the main products with increased exports. According to WSJ calculations November exports were up 10% to the U.S. and 46% to Asian nations in ASEAN trade group of countries. Some of the exports to ASEAN including Vietnam and Malaysia find their way to the U.S. New tariffs by U.S. on China lead to some products diverted to Asian destinations and reexported to the U.S. China's imports of goods from the U.S. were up 33% from a year earlier but imports of farm, energy and other products and services were below what was expected under trade deals. Experts say Chinese imports of goods covered in the agreement were 55% of the year to date targets. The Biden administration will leave the tariffs on $370 billion in Chinese goods in place. China is not expected to make up the gap by the end of 2020. Experts also say the exports of Chinese goods has accelerated during the pandemic in 2020 and with the size of the second wave in the U.S. In 2021 U.S. imports from China should slow as the U.S. manufacturing recovers following the vaccination effort.  Also expect increased focus on the trade gap as U.S. trade policy continues to focus on closing the trade gap and continuing policy of the Trump administration. ...

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S. Jaishankar, Indian Foreign Minister speaks at the University of Delhi on his chapter in the new book Modi@20 Dreams meet Delivery. He also discusses the war in Ukraine, the Indian view on people and shortages created by the war of energy and food, and India's approach to Pakistan and China.

 

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GM's joint venture with Luizhou Wuling Motors has produced a win-win situation for both companies. Wuling was a small, regional manufacturer when the joint venture started. Now Wuling has more than 1 million in unit sales. And GM has benefitted from the rapidly growing sales. Year over year sales were 29% in 2010, and were slowing to 10% in 2011, with the end of government incentives. Wuling vans can now be sold under the GM brand in India, using lower cost manufacturing in China. Looking back this was good for GM. The future however has some twists and turns and could turn out to be different. Wuling joint venture will produce cars at a lower price point under the Baojun brand. These cars were shown at the Shanghai Auto Show, and will be marketed to customers who are looking for affordable cars in the second and third tier cities in China. The Baojun brand joint venture will have one difference. This brand involves intellectual property being held in common with Wuling Motors. This is part of China's new plan for American and European manufacturers in China- the price of access to the Chinese market is greater technology sharing with Chinese partners. In the long run this should enable Chinese manufacturers to be dominant inside China. This process is already underway. According to J.D. Powers, Chinese brands had 32% of the domestic passenger vehicles market in 2010, up from 18% in 2000. Something similiar happened with Japan, where Nissan was making Britain's Austin A40 series in the mid-1950's. By the 1960's the foreign tieups were replaced by Japanese manufacturers dominant in the home market and exporting their own models. ...

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The South China Morning Post provides a look a the property prices, real estate bubble in Hong Kong, in this series. The central government in Beijing sees the lack of affordable housing and people cramped in small cramped housing not able to get a decent flat, as a cause of the discontent in Hong Kong. Seventeen weeks of protests, as the 70th anniversary of the Communist Party of China comes up is causing China to rethink how the Hong Kong model has worked. 
The city depends on land sales at high prices for its revenue, the tycoons who control the limited land supply are not releasing enough land to build affordable housing. China depended on Hong Kong as a financial centre, and let these simmering problems continue as the Hong Kong model was seen as a success. The mass demonstrations for the 17th week are calling for new thinking on the way Hong Kong's economy can benefit all its citizens.

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China has used the quarantine and strict measures to contain the coronavirus. After being taken by surprise in the way the coronavirus developed in Wuhan region China shifted to large scale containment and quarantine. To do this China used technology, mobile carrier information, volunteers going from door to door and enforced quarantine action. Other countries in Europe, including Italy, are adopting measures such as quarantine and appeals to the public for cooperative behaviours.

The entire approach is new yet shows how government and citizens can work together to contain epidemics of this kind in the modern world of urbanized areas and close contact in subways, streets, and stadiums. The approach in democratic countries may vary from China yet essentially strong bold action has proved to be the way to go, not vacillating and acting one step at a time till things are out of control. 

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Scientific American says 8-11% impact larger emissions under the One Big Beautiful Act than the 61%-66% emissions cut under Biden IRA in 2035 over 2005. What is the reasoning behind DJT Republicans approach? 

Remember that the wealthiest House districts are now in the Democratic party and the working class, rural and poorer districts are now in the Republican party as shown in the recent WSJ analysis.  In this situation after  30-40 increase in the price of groceries, new and used cars, and housing costs 2019-2024 the argument is that American working families need relief. Another factor was the grasp of the fact that for climate change action to work China could not be allowed to build one coal plant a week (95GW of coal electricity capacity in 2024). In 2024 US represented only 12% of global emissions and EU only 6%, China, Russia, India, Brazil etc emitting the rest of 82%. 

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The foreign lobbying by Pakistan and then India in Washington DC for access to the White House using lobbyist firms in the US. This enabled leaders from Pakistan to visit the White House in the US soon after conflict between Pakistan and India erupted over terrorist incident. Terrorist incidents happened in New Delhi and Islamabad in November 2025. The DJT administration may have gained support from Pakistan/Turkey for the Hamas settlement through this lobbying effort. The DJT administration inadvertently put itself in a position of being influenced by lobbying in this case for access to the White House. Following that event China's president Xi Jinping tightened restrictions on rare earths in trade negotiations with the US for a temporary agreement that gives access to the US market. This leaves the issue of illegal fentanyl flows from China and Mexico to the US, important to the US, and of restructuring world trade, also important to the US, major goals of this Republican administration in abeyance.   ...

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Easwar Prasad, Cornell University economist, and a former head of the IMF's China division, says the new report by the World Bank and the Development Reform Commission (DRC), is part of an effort by government officials in China to push the agenda for change forward during the transition to a new leadership. This includes Premier Wen. There is pushback from large state enterprises. The DRC and the World Bank had called for a change from the current situation to allow more private sector involvement in the economy, which means restricting the growth of the large state owned companies and letting the private sector operate in more parts of the economy. The alternative is to see growth slowing quickly and -some economists- say suddenly without warning. The role of Zhu Rongji, a former prime minister during the period Jiang Zemin was president, in pushing for changes appropriate to the period, is also cited. The last decade under prime minister Wen Biao is seen as one in which China relentlessly pursued its currrent export led model of development with large state run companies and state run banks dominating the economy. This has made change even harder to achieve because of the pushback to preserve the status quo....

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Britain will offer a pathway to citizenship to 3 million Chinese in Hong Kong, British Foreign Secretary, Dominic Raab confirmed an earlier statement. This applies to British National Overseas status (BNO) and their dependents upto 3 million. He stated that the new security law to control protests in Hong Kong were a "flagrant" violation of the agreement made with China 23 years ago.  He called it a "clear and serious breach of the joint declaration" of the two countries in 1997. The new arrivals from Hong Kong and their dependents will be given 5 years limited leave to stay and work in the country, at that point they can apply for settled status and after 1 year of settled status they can apply for British citizenship. The Foreign Office expressed alarm at one provision article 38 of the security law that seeks jurisdiction over anyone who criticizes China wherever they are in the world, putting them at risk if they travel to Hong Kong or China. ...

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BRICS is becoming an obsolete concept as Brazil, India and South Africa are essentially looking for ways in which they can increase opportunities for growth. It was a concept started by a Goldman Sachs investment banker Mr. O'Neill at a different time in 2010. The world has gone through the 2009 financial crisis, the pandemic, and the supply chain crisis with overconcentration of EU and US supply chain in China. These events are leading to a shift under the Biden administration to bring India  into the G7 into a new G8 that includes India. Only Russia, China and South Africa remain from the original BRICS. Russia because of the war in Ukraine now depends on Chinese support and trade. Brazil will gradually shift back to its position as part of the US alliance in Latin America with Mexico, Argentina and Chile. India with its plans for rapid growth to build the modern third largest economy by 2040 seeks supply chain integration with the US and EU in the position that China holds today.   ...

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About one third of cars in China will be electric cars by the end of 2023 from one fourth today. Compare this with 6% of cars being electric in the US. EU, US and Japan are far behind. Toyota has only now ramped up EV's with a new CEO. In the domestic Chinese market 80% of EV's are made by Chinese auto manufacturers, And this could go up to 90%.  This means the share of the Chinese market for German and US manufacturers is actually shrinking. Chinese buyers now prefer Chinese brands over foreign brands. Over 4 decades says Keith Bradsher in NYT the US and European auto manufacturers trained a whole generation of Chinese auto engineers who now work for Chinese electric auto makers. This is one market in which China has built a formidable capacity. This is also a big contribution to cutting emissions from fossil fuel powered cars after China's massive use of fossil fuels over two decades worsening climate change.

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How globalization which for over a long period since China and India and other emerging nations joined the global trading system helped bring disinflation and lower prices to the developed countries is now closing that chapter. And starting a new one in which the rapid development of these developing countries is strengthening their currencies and the growth of the middle class and increasing demand for commodities, food and energy, in this way driving up prices. China wants to move up to manufacturing more sophisticated products and is no longer interested in the kind of development where workers wages suffered so that domestic consumption suffered, where lax environmental protection caused serious damage to the environment and where the fous was on production of low value added products in textile, toys, shoes, furniture. This means a lot of factories from this era will close and those that operate will raise prices to reflect increased costs to meet new laws and loss of rebates for low value added products. All this means the disinflationary impact of production and export from China is over. Meanwhile a number of trends have gone to raise prices of food products and commodities. Its astonishing but the price of rice has gone up by 147% over the last 12 months. The World Bank estimates that food prices have gone up by 83% over the last 3 years. This adds to the distress of communities across the developing world. And iron ore producer Vale of Brazil pushed through price increase of iron ore by 65%. This will be reflected in price increases in everything made of steel like Caterpillar tractors and so on. Baosteel in China has raised prices by 17-20% recently. Countries with pegs to the dollar and exporters of commodities like the Middle Eastern countries are seeing inflation from both the peg as the dollar loses value and everything costs more and from the boom fueled by government spending....

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The idea that the food contamination can come from the very soil in which it is grown is huge in its impact. Its mind boggling and quite shocking that soil contamination after years of rampant development and pollution could lead to this.

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The Nixon Mao meeting of 1972 now seems a very long time ago. Little is mentioned here in this WSJ report on what was happening inside China in 1972. The Great Proletarian Cultural Revolution had severely divided the Communist Party. This was followed by the Lin Piao episode in which the defense minister clashed with Mao leading to a complete loss of confidence in the stability of the leadership. China sought the meeting and Chou-en-lai, premier and Mao's minister for foreign relations, was eager to seek a new relationship with the US. The period 1960-1970 had pushed China back 10-20 years in its effort to develop an industrial economy.  The event is presented as one in which the two countries were meeting at the same level after the Korean War, which was not the case. This report says it was the $3 trillion in US and foreign investment that helped an economy the size of India in 1972 to emerge into what it is today, much larger than India. This report goes on to cite Foreign Affairs and other authors who write that Mr. Kissinger and Mr Nixon saw this as a self-promotional event in contrast to the situation Chou-en-lai, the Chinese premier faced during that difficult time in China's history. ...

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Senators in the US Congress, Rubio and Schumer, have asked the US government to look into Apple's plans to work with Chinese semiconductor company YMTC. As a result the Commerce Department has placed export restrictions on YMTC. This NYT report looks at the two decade long rise of China and of Apple after Steve Jobs returned to Apple in 1997 and shifted manufacturing to China. When Jobs returned to Apple he found major quality issues at Apple's manufacturing facilities, a demoralized workforce, and financial losses, with CEO Michael Spindler running the company into the ground. Jobs had to start with afresh model for Apple and decided to shift manufacturing to China under the engineering leadership of Tim Cook. Alabama native Cook went to Auburn University for his engineering degree and Duke for his business degree. Cook joined Jobs in 1998 at Apple and for ten years till 2007 the two cut costs, shifted to contract manufacturers and rebuilt Apple with new products, iPod, iPad and the iphone. By not manufacturing Apple avoided quality control issues, and the costs of maintaining inventory. It was Tim Cook who ran operations worldwide, and he gradually built up the manufacturing relationships in China with Foxconn, which makes most of Apple's products in sprawling Chinese factories that employ 20 years later about 3 million Chinese workers. Foxconn was chosen by Apple in 2000 to manufacture the Apple Mac laptop. Before that it was a parts supplier to Apple. Increasingly Apple relied on Foxconn to make its new products including the iPhone. Both companies growth relied on the manufacturing of Foxconn to the point where Apple was dependent on Foxconn and had intertwined its operations with Foxconn in China. Today the whole relationship is being called into question after two decades in which American workers suffered the effects of the outshoring of manufacturing jobs. It should be noted that though Mr. Trump raised the issue of manufacturing exclusively in China with Apple, the Trump administration did little to change the practices of the company that pioneered this type of massive manufacturing role for China. That surrendered the entire supply chain to foreign suppliers in the interest of cutting costs and maintaining huge profit margins, with which it financed an array of new products and reached $1 trillion in sales from $10 billion, hundredfold increase over 2 decades. American workers and families for the first time in American history got very little from this Cook-Jobs project. American infrastructure in communities that would have been supported by American factories including the services and infrastructure in communities financed through local taxes, a practice throughout the Industrial Revolution in the US, was sharply disrupted over 2 decades. It caused a rupture in social relations and increased inequality in the US, and defunded infrastructure that comes with manufacturing.  It is the task of the Biden administration to now correct what Mr. Trump simply talked about but never induced or required Apple to do- lead the resurgence of American manufacturing, and make its major investments in the US, invest in its workers and families, invest in America. ...

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Nouriel Roubini has proven correct on global financial issues. He said in an interview on the sidelines of a symposium in Malaysia, that China needs to revalue its currency for its own sake. China will see a growth collapse in the next 2-3 years if it fails to do so. His point is that China can still maintain growth by shifting to domestic consumption and less infrastructure spending and exports. In his view growth should not be affected if China exports less and consumes more. He points to the decrease in consumption as a share of GDP from 45% to 36% in the last ten years- this ratio is 70% in the USA. A cheap yuan keeps foreign goods unaffordable and protects state owned companies which also get cheap credit, as keeping the yuan low requires China to keep interest rates artificially low. What this does is make a massive transfer of income from the household sector to the state owned companies, just at the time when China needs to do the very opposite of this. And compounding the problem is that the 25% of China's GDP that is made up of retained earnings of mostly state owned companies, goes into real estate and production facilities. See the link to David Barboza in the New York Times who points to the wasteful spending and real estate speculation by state owned companies. Roubini cites the automobile sector where capacity has doubled in the last year to 20 million, when the domestic market increased by 50% to 10 million vehicles. The stimulus only increased the effect of surplus capacity and misallocation of investment, with highways to nowhere and brand new airports that are three quarters empty. The Chinese leadership is beginning to grasp this, but the state owned companies and other interests who benefit fromm the old model, may make it difficult to reverse the trends. A lot is at stake in this, as it affects the U.S., as well as countries dependent on China's imports such as Australia, Canada, Brazil and Germany. ...