“Kee” Points with Jim Kee, Ph.D.

  • Markets and Events
  • Interesting China Points

Markets and Events

So far stocks are up since the United States launched a limited military strike against Syria, over allegations it used poison gas on civilians. Sometimes markets react with apprehension leading up to events like this, only to resume their trend once action is taken. Actions tend to provide clarity, for example, over whether anticipated actions will be expansive or limited, and how other interested parties like Russia will respond. That seems to be the case so far, so we’ll see.

Trade tensions between China and the US continue, and I read a piece on China that I thought might interest Kee Points readers. It was a speech given by Asian Times writer David Goldman and delivered at Hillsdale College. That’s a pretty conservative venue, so I apologize for that (I really do try to avoid bias), but he has served as a consultant for the National Security Council and the Department of Defense, and the following excerpts (taken directly) I think help fill out one’s understanding of China’s importance in the world:

Interesting China Points

China is a phenomenon unlike anything in economic history. The average Chinese [person] consumes 17 times more today than in 1987.

Over the same period, China has moved approximately 600 million people from the countryside to the cities – the equivalent of moving the entire population of Europe from the Ural Mountains to the Atlantic Ocean (over 7,000 miles, more than from New York to Los Angeles and back).

To accommodate those people, it built the equivalent of a new London, plus a new Berlin, Rome, Glasgow, Helsinki, Naples, and Lyons.

China’s Communist Party is a merciless meritocracy…if you’re in Chinese leadership, you made it there by scoring high on a long series of exams, starting at age twelve – which means you haven’t met a stupid person since you were in junior high school.

The Chinese Communist party is terrified that a rebel province like Taiwan can set in motion centrifugal forces that the Party will be unable to control. So the adhesion of Taiwan to the Chinese state – the imperial center – is for the Chinese government an existential matter. They will go to war over it.

China does something Japan, Korea, and other Asian nations do – it massively subsidizes capital investment in heavy industry. From the Chinese standpoint, a steel mill or a semiconductor fabrication plant are public goods – the Chinese look at these things the way we look at highways and airports…America has been pushed out of any major capital-intensive manufacturing.

What it means in practical terms is that America can’t build a military aircraft without Chinese chips. That’s a national security issue.

China’s “One Belt, One Road” policy, announced by President Xi in 2013, is a plan to dominate industry throughout Eurasia – by both land and sea (I should mention that the State Council of the People’s Republic of China refers to this as “a bid to enhance regional connectivity and embrace a brighter future.” And indeed trade does tend to be cooperation-enhancing).

A couple of years ago, I (Goldman) visited the headquarters of Huawei, China’s telecommunications company – the biggest in the world – which hardly existed a dozen years ago. It has a campus that makes Stanford look like a swamp.

China’s share of high tech exports has risen from about five percent in 1999 to about 25 percent at present. America’s has plummeted from about 20 percent to about 7 percent…the Chinese have broadband everywhere.