GOOD MORNING FROM LONDON
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#1 TRUMP TOUGH TALK CONCEALS BASIC WEAKNESSES
THE FINANCIAL TIMES
#2 EXCERPTS
1ST – CHINA/TAIWAN AND THE U.S.
SOUTH CHINA MORNING POST
2ND – RARE EARTHS – EUROPE FALLS BEHIND
THE FINANCIAL TIMES
#3 CHINA AND JACK PERRY – PART 18
JACK TOURS CHINA WITH DR JI CHAOTING
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#1 TRUMP TOUGH TALK CONCEALS BASIC WEAKNESS
“Hours after Donald Trump threatened Beijing with “massive” tariffs on Friday over its export controls on rare earths, he appeared to put his words into action by imposing a 100 per cent levy on imports from China.
One former US official described his response as a “mega Taco”, using the acronym for “Trump always chickens out” — a phrase that came into vogue after backing down in the face of Chinese pressure. “Xi will see it exactly for what it is: a clear indication of weakness, a lack of resolve, if not desperation,” he said.
The new Chinese controls require foreign companies that export products with rare earths from China to get approval from Beijing. Combined with Trump’s response, they obliterated the trade ceasefire between the powers.
China’s commerce ministry on Sunday said the US had “been overstretching the concept of national security” and abusing export controls in the semiconductor field. It said the US had taken punitive actions, including putting Chinese firms on a trade blacklist, since the two sides held trade talks in Madrid last month. “China’s position on the trade war is consistent: we do not want it, but we are not afraid of it,”
GRAHAM PERRY COMMENTS
“China’s position on the trade war is consistent: we do not want it, but we are not afraid of it,” – the words of China’s Ministry of Commerce
Why does China not want a trade war with the U.S.?
Because China recognises that it needs to live with the U.S. The U.S. is a fact of life. It exists. It is big. It is the largest economic power – for now. For the present it is important and it is better to jaw-jaw than to war-war. But do not read into these words that China is “up for turning”.
China is very experienced – very disciplined and very clear-headed. They have long predicted that they would be in a long-term struggle with the U.S. and that the struggle will embrace periods of confrontation as well as periods of co-operation. It will be Hot and Cold – not because they are playing games and trying to wrong foot their opponent but because they have a clear perspective about the path that lies ahead. There will be good times and there will be bad times. Throughout China will look at the short term and the long term. They will view today and also tomorrow and see, first, the overall perspective – China wants to grow prosperity at home and also contribute significantly to world development abroad.
China will also be looking at today through the prism of yesterday – the Civil War against the Kuomintang; the National Patriotic War against Japan and the struggle with the U.S. since the founding of the People’s Republic in 1949. Their universities and their think-tanks have been monitoring world affairs in detail. There is very little, if anything, that China does not know about the cause of the failure of the USSR. Their eyes are always wide open both in analysing the past and in predicting the future.
China respects Trump. They know he can be – behind his bombastic personality – tactical and aware of his responsibilities. But they also know that he possesses significant weaknesses. If you want to understand China’s attitude to Trump – read Mao, the best starting point for mapping out the way forward. See what Mao wrote about dealing with the landlord class and the capitalist class which he divided into patriotic and comprador. See what Mao wrote about the Paper Tiger as the Cold War took root in 1947 and then look at his work “On Contradiction”. In the Cultural Revolution Mao veered off course and caused serious damage to China but his Works remain a big clue to the strategy and tactics adopted by President Xi and the Party over which he presides.
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EXTRACT #1
SOUTH CHINA MORNING POST
“Liu Pei-chen, a researcher with the Taiwan Institute of Economic Research, said the US was redefining the silicon shield.
“The US argument is that without enough domestic chips, it cannot protect Taiwan even if it wants to,” Liu said. “Only by reaching some level of self-sufficiency – whether 40 per cent or 50 per cent – can Washington defend its commitments without fear of being cut off itself.”
But she said it would be difficult to duplicate Taiwan’s efficiency abroad. “The US faces far higher labour, construction and regulatory costs. Visa hurdles have already raised the price of Taiwanese engineers working in Arizona,” Liu said. “To achieve 50–50 will mean steep costs, long delays, and constant pressure on Taiwan’s own resources.”
GRAHAM PERRY COMMENTS;-
The U.S. is trying to make good its large deficiency in the production of semiconductors. Taiwan knows that and is making positive noises in the direction of the U.S. with investment to help the U.S. develop chip production in the U.S. But Taiwan is not about to shoot itself in the foot. Taiwan has no intention of weakening its leading role as the largest manufacturer of semiconductors by agreeing to transfer production from Taiwan to the U.S.
In any event, as Liu Peichen states above, the U.S. will encounter real obstacles – “steep costs and long delays” in bringing the quality of its final product to Taiwanese levels.
Now here is the irony – China is watching the situation closely especially the deteriorating relationship between the White House and the government in Taipei. China’s long-term goal is the reunification of Taiwan and China and, part of the deal, will be to allow Taiwan not only to keep its leading position as the world’s largest producer of semiconductors but to allow it to expand on all fronts.
In Taiwan there are Taiwanese keen to maintain their quasi-independent status but there are also Taiwanese – and not just the KMT party – who look with longing to the reunification with the mainland. The Taiwan semiconductor industry has a key part to play as the three way relationship – Taiwan/China/U.S. – undergoes fundamental change.
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EXTRACTS – 2
MORE ON RARE EARTHS – THIS TIME ON EUROPEAN WEAKNESSES
THE FINANCIAL TIMES“In the past 30 years, China has become the world leader in the processing of most of the 54 raw minerals that the US Geological Survey classifies as critical for US industry, including the defence sector.
Currently the Chinese can process virtually any mineral 30% more cheaply than its competitors. To compete with this, western governments would need to offer subsidies to their own industry.
China’s latest restrictions on the export of rare earths and products containing them fall into a broader framework of the US-China tech war. Both governments believe that whoever wins the race in key industries — notably AI, missile technology, quantum computing, robotics and drones — will enjoy a decisive advantage in economic and military competition over the next 30 years.
However, a group of industry and academics experts meeting at a conference on critical raw materials earlier this week in Vienna, concluded that the biggest loser in all this is neither China nor the US. It is Europe.
GRAHAM PERRY COMMENTS;-
The FT notes that while the US slowly rebuilds its rare earth industry Europe is barely at the races. Europe’s dual dependence on America’s digital services and China’s critical mineral processing industry leaves it highly vulnerable to external pressures.
The EU is at risk. The pressure is on Brussels to mobilise member states. If it fails Europe will fall significantly behind both China and the US.
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COMMENT
MUCH HAS BEEN WRITTEN RECENTLY ABOUT CHINA AND SPIES AND THIS TOPIC WILL BE ADDRESSED IN THE NEXT ISSUE OF GOOD MORNING FROM LONDON #595
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#3 CHINA AND JACK PERRY
PART 18
DR JI INVITES JACK TO SHARE A TOUR OF CHINA
PART 17 CONCLUDED AS FOLLOWS;-
“Business negotiations commenced on the 7 July 1953 and went well notwithstanding that the Chinese side was purchasing machinery and engineering items that were completely new to them. Jack’s company – London Export Corporation – had one-to-one negotiations with their Chinese counterparts and there was nothing in the exchanges that suggested that the Chinese side were either unprepared or naïve. In total the Chinese purchases amounted to £11m and the UK purchases to £7.5m.
The following evening Nan Hancheng invited the whole group to a celebration banquet. Speeches were made by Ji Chaoting and Lu Hsuchang on the Chinese side and by Mr Scott of Compton Parkinson – the Bradford based wool merchants – and Professor Joan Robinson of Cambridge University. Lu concluded with an invitation to the British mission to visit the Great Wall and other historical sites before their return to the UK.”
Jack continued;-
“Then Ji Chaoting made me an offer which, in retrospect, was to have a profound effect upon me politically, psychologically, and emotionally and forever.
Ji started by telling me that his work over the past twenty years had kept him away from participating in development in China – both politically and individually. So, he explained, he had decided to give himself the opportunity to travel around parts of China mainly to familiarise himself with the current mood of the people, both the peasantry and the city workers, under the new government. Thus, he had been given six weeks leave and he proposed to visit many Provinces, Cities and the Countryside to judge for himself how matters stood.
To my surprise, he invited me to accompany him. It was, of course, an extraordinary invitation. By this time Dr Ji was something of a celebrity. His past record had become well known and as a close friend of Premier Zhou Enlai, all doors at all levels were open to him. Furthermore, to see China with such a distinguished fellow traveller and guide would prove of inestimable value in traversing a country of which I was ignorant.”
Having been given an extended leave of absence by his wife, Doris, Jack set off on his grand tour. But who was his host? Who was Dr Ji, the high level confidant of Premier Zhou who, alongside Chairman Mao Tsetung and President Liu Shaochi, formed the triumvirate at the highest level of the Communist Party of China.
There are three sources of information about Dr Ji – Jack’s own comments; the Obituary that appeared in the New York Times following Dr Ji’s death on 9 August 1963; and extensive information that appears on Google.
Jack wrote;-
“Ji Chaoting belonged to a comfortable middle-class family in Shanxi Province which is West of Beijing. He was one of five children and showed early signs of being academic. His family sent him to the University of Beijing in 1919 when he was 19 years of age.
The Treaty of Versailles had just been signed and given Japan considerable benefits from which China was excluded. This caused wide anger in China especially among the students who formed the Fourth of May Student Group from which a protest movement developed. Ji found himself in the middle of the unrest.
Ji said “I stayed at the University for some time and developed close bonds with three friends. This was normal practice in China. My father suggested I go to the U.S. to complete my education. I went to the Chicago University for three years and studied economics. I did post graduate work and became an Associate Professor of Economics there. I stayed in the U.S. for about ten years.
During this period the Chinese Minister of Finance – H.H. Kung – visited Washington. He was also the brother of the wife of Chiang Kaishek and asked his American friends if they could recommend a Chinese economist who could be his right hand man. He needed someone who was trained in the U.S. and who understood the Western markets. They recommended me.
The person who recommended Dr Ji was Frank Coe who Ji knew was a member of the U.S. Communist Party. Coe was an Assistant Secretary at the U.S. Treasury in the Roosevelt administration and became the first Executive Secretary of the IMF – the International Monetary Fund. Coe suffered during the McCarthy period and at the request of Premier Zhou Enlai, Dr Ji invited him to China where he lived with his family until his death in 1980.
Dr Ji continued “I became the assistant to H.H. Kung and I went to China with him. Of course, I had been a member of the Communist Party of China from my time at Beijing University. Nobody knew about that as my activities in the U.S. were not involved in politics. So in fact I acted as the Assistant to the Minister of Finance of the Chiang Kaishek’s Kuomintang (KMT) Government which at that stage was involved in the civil war against the Communists and I was there in their midst undercover throughout the War – he added with a smile.”
PART 19 – CHINA AND JACK PERRY
THE STORY OF DR JI CHAOTING CONTINUES.
