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Wednesday, April 24, 2024

MEDIA COMMENT ON CHINA ISSUE #501

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Graham Perry
Graham Perry
Experienced Arbitration Lawyer | China & Chinese Business Affairs | Public Speaker/Lecturer.

#1    MALAYSIAN PRIME MINISTER DEFENDS IMPROVING LINKS WITH CHINA

#2   CHINA AND NATO

#3  US FEARS CHINA “OLDER GENERATION” CHIPS ARE GRIPPING US MARKET.

#1     MALAYSIAN PM ON LINKS WITH CHINA

         FINANCIAL TIMES

Malaysia’s prime minister has condemned a rising tide of “China-phobia” in the west, as south-east Asian countries navigate the challenges and benefits of tensions between Washington and Beijing. Anwar Ibrahim questioned why Malaysia would “pick a quarrel” with China, its largest trading partner, in response to US criticisms of his country’s ties with Beijing. “Why must I be tied to one interest? I don’t buy into this strong prejudice against China, this China-phobia,” he said in an interview with the Financial Times in Penang, his birthplace in northern Malaysia.

The Malaysian leader’s comments underscored how the superpower rivalry has created a predicament for governments in south-east Asia, a region of 700mn on China’s doorstep that is also strategically important to the US Indo-Pacific strategy. But the friction has also created opportunities for countries such as Malaysia, Indonesia, Vietnam and the Philippines to leverage their economic, security and political ties with the US and China.

Malaysia, which is officially neutral, seeks to maintain “good stable relations with the US [while] looking at China as an important ally”, said Anwar. He added that any claim he was leaning towards Beijing, as he said US vice-president Kamala Harris suggested at the Asean summit in Jakarta in September, was “not right and grossly unfair”. Anwar, Malaysia’s sixth prime minister in five years, took office in November 2022 following a long journey to the political leadership. He helped steer the country through the Asian financial crisis as deputy prime minister, but was jailed twice by his mentor-turned-rival Mahathir Mohamad on politically motivated corruption and sodomy charges. He returned to public life in 2018 following a royal pardon.

As premier, Anwar has focused on resuscitating the economy after years of mismanagement and instability. As part of that effort Anwar has prioritised boosting Malaysia’s manufacturing, energy and industrial sectors, often with the help of record foreign investment pledges. China’s President Xi Jinping committed an estimated RM170.1bn ($35.6bn) to Malaysia after Anwar travelled to Beijing and the Boao Forum in Hainan last year.

Weeks later, Anwar significantly changed Malaysia’s 5G network plan, paving the way for greater participation by Huawei, the Chinese telecommunications giant. Malaysia’s semiconductor industry has capitalised on companies shifting supply chains to protect against geopolitical risk, a strategy known as “China plus one”. Malaysia has set up a task force focused on moving up the semiconductor value chain, and Anwar said his government was “heavily focused” on strengthening its front end wafer manufacturing capacity.

Chinese chip groups have also been increasing their presence in Penang, where domiciling or striking joint ventures allows them to avoid US tariffs and maintain relationships with western suppliers, according to analysts.

Anwar said he did not anticipate conflict from the convergence of US and Chinese companies in Penang, although he added his government was advising local companies to ensure they understood relevant US policies and regulations. Washington has for years worked to restrict China’s development of semiconductor technology, including export bans on advanced chipmaking components and equipment. “We are a small country struggling to survive in a complex world,” Anwar said he told Harris. “I want to focus on what is best for us.”

GRAHAM PERRY  COMMENTS;-

There is an historical parallel at work here. Today the US seeks to increase its power and influence over Asian countries by pointing to the supposed military threat from China. In 1945 the US sought to increase its power and influence over European countries by pointing to the supposed military threat from the USSR.

There is no China threat today and there was no USSR threat yesterday – a point confirmed by the late Andrew Alexander who in a book on US Imperialism in 1945 concluded there was no military challenge from the USSR. The same is true today – there is no  military threat from China but the US talks up the supposed threat to try to keep Asian countries in an anti-China orbit.

But those countries are not falling into line. They want to deal with China at the same time as they want to deal with the US. For these countries there is no pending China military take over and this is the frustration for Biden and  Washington. The above cited example makes the point as Premier Anwar of Malaysia said; “Why must I be tied to one interest? I don’t buy into this strong prejudice against China, this China-phobia,” he said in an interview with the Financial Times in Penang, his birthplace in northern Malaysia.

The US faces an uphill battle. History is not on their side as China develops links with all countries in the Far East. Problems remain with some countries in the region about boundaries and territorial limits but that is as far as it goes. China is not, as the US claims, seeking to overrun South East Asia as part of its alleged long-term plan to control the region. “S-E Asia Today. The World Tomorrow.” This is the US approach. But it is failing to win over the countries in the region.

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#2    CHINA AND NATO

        SOUTH CHINA MORNING POST

China has criticised “indiscriminate” sanctions against Chinese companies and taken aim at Nato as the war in Ukraine enters its third year.

Zhang Jun, China’s permanent representative to the United Nations, said on Friday that Beijing “firmly opposed” the “unlawful sanctions” imposed on Chinese companies by the United States, Britain and the European Union, “using the Ukraine issue as an excuse”.

Zhang said the situation Europe was facing today was closely related to the eastward expansion of Nato since the end of the Cold War and, without naming Secretary General Jens Stoltenberg directly, also attacked the “head of Nato”.

He also said China wanted to play a constructive role and was working towards a political settlement.

“We encourage Nato to do some soul-searching, come out of the cage of Cold War mentality, and refrain from acting as an agent of trouble instigating bloc confrontation,” Zhang said in his most blunt criticism of the alliance yet.

“We urge the head of Nato to look at the world through an objective lens, stop sabre-rattling, and do things that are genuinely conducive to world peace.

“China played no part in the creation of the Ukraine crisis, nor is China a party to the crisis itself. We have not been watching the fire from across the river, much less cashing in on the crisis.”

Recently, Stoltenberg, who will step down from the role shortly, has made several comments that China was closely watching the war in Ukraine, drawing parallels with Taiwan that Beijing has fiercely resisted.

In one such comment he told Reuters: “Today it is Ukraine, tomorrow it can be in Taiwan. So Beijing, China is watching closely what’s going on in Ukraine.”

Beijing views Taiwan as a breakaway province to be reunified with the mainland, by force if necessary. Most countries, including the US and European Union members, do not recognise Taiwan as an independent state, but oppose any attempt to take the island by force.

Zhang also criticised the sanctions, telling a meeting of the Security Council: “Certain countries, using the Ukraine crisis as a pretext, have indiscriminately imposed unilateral sanctions and long-arm jurisdiction and exerted unjustified pressure on the businesses of other countries, which has adversely impacted the global industrial and supply chains and disrupted the order of global trade.

“China will continue to take necessary measures to safeguard the legitimate rights and interests of Chinese enterprises and citizens.”

GRAHAM PERRY COMMENTS;-

There are two possible explanations for the current Ukraine crisis, First, Russia is expansive, imperialist  and hell-bent on expanding its military control over Europe – Ukraine Today. The Baltic States and Scandanavia tomorrow and then onward to Berlin, Paris and London.

The alternative explanation is that Russia has watched with growing anxiety – since the fall of the USSR in 1990 –  the increasing NATO encirclement of Russia from 7 NATO countries in 1990 to 17 in 2024.

The NATO Knot has been tightening around the Russian neck. Time to respond.

Napoleon invaded Russia and failed. The US, UK and its allies invaded Russia in 1919 to support the Cossacks/White Russian’s attempt to over throw the new USSR and failed. Hitler invaded the USSR in 1941 and failed. Russia viewed the 2014 coup d’etat in Kyiv as the beginning of the next Western attempt to subjugate Russia.

The danger today is that NATO is gripped by a fundamentally flawed policy of pre-emptive moves against a Russia that has no designs on Western Europe. With the Ukraine war effort faltering, the West has to decide whether to throw German, French and UK troops into the fray. The tension increases as eyeball-to-eyeball confrontations take effect. Russia will not be able to standby and allow a West European military build up as a prelude to widening the war against Russia.

And it is all a mistake. The Ukraine War was avoidable. The West has – intentionally or mistakenly – misread Russian intentions. As in 1945 when the USSR had no capacity for any invasion of the West, so today Russia has no capacity for any invasion of the West. Russia wants its sphere of interest with Ukraine as a buffer state but a change in 2014 in the leadership in Ukraine rang warning bells in Moscow and the simultaneous growth of countries joining NATO underlines Russian fears.

The main US opponent in the world today is China not Russia. China challenges the US across the world – a consequence of its natural economic development. The US is very stretched if it seeks to take on Russia today and China tomorrow – as its Joints of Chief in Washington are predicting they will have to do by 2030.

There are always peaceful solutions. They require sane heads to prevail as the crisis approaches. Can you detect sane heads in the US political hierarchy today ? – a task made more difficult if Trump wins.

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#3  OLDER GENERATION SEMICONDUCTORS ARE SO IMPORTANT TO THE US

        NIKKEI ASIA

The U.S. is attempting to reduce its reliance on older-generation semiconductors from China, adding another layer of defense after months of attempting to restrict China’s access to advanced chip technology.

The older-generation chips pale in comparison to the most cutting-edge models but are still widely used in everything from dishwashers to electric vehicles.

Rep. Mike Gallagher, the Republican chairman of the House Select Committee on the Chinese Communist Party, and Rep. Raja Krishnamoorthi, a Democrat and the committee’s ranking member, jointly sent a letter to Commerce Secretary Gina Raimondo and Trade Representative Katherine Tai calling for urgent action to stem U.S. reliance on China’s less advanced chips by using all means, including potential tariffs.

“We are concerned that [China] is on track to flood the United States and global markets with foundational semiconductors,” the lawmakers wrote. Compared to high-performance chips, “far less attention” has been given to the risk that a surge of Chinese-made foundational chips poses to U.S. economic security, the lawmakers said.

While the most advanced chips — those 8 nanometers or smaller — that go into smartphones, supercomputers and data centers are mostly produced in Taiwan and South Korea, China is building up its capacity for foundational chips, otherwise known as “mature” or “legacy” chips, which are 28 nm or larger. These chips leverage technology from 10 to 20 years ago but are still used in a broad range of goods, including some military equipment.

A Rhodium Group report in April of last year noted that China and Taiwan together could account for close to 80% of 20- to 45-nm foundry capacity globally over the next three to five years. In the 50-to-180 nm range, China currently controls around 30% and within a decade could control around 46% of global capacity, the group said.

The Commerce Department last month also announced it will launch a survey to identify how U.S. companies are sourcing legacy chips.

The department said the survey, which begins this month, aims to “reduce national security risks posed by” China and will focus on the use and sourcing of Chinese-manufactured legacy chips in the supply chains of critical U.S. industries.

Jimmy Goodrich, a semiconductor expert and senior advisor to the RAND Corp. on tech issues, told Nikkei Asia that data indicates China is poised to become the dominant global producer of legacy chips before the end of this decade with a relatively self-sufficient supply chain.

“China’s looming dominance of the legacy chip market will create new national security and economic vulnerabilities for the U.S., but can only be addressed effectively through close collaboration with allies,” he said, noting that Washington and its allies need to jointly address the issue.

Megan Hogan, a research analyst at the Peterson Institute for International Economics, wrote on the War on the Rocks website last month that “Winning the chip war with China requires retaining dominance in advanced semiconductors and reducing dependencies on Chinese legacy chips.”

Legacy chips underpin everything from dishwashers to military weapons systems,” Hogan wrote. “Just as it did with solar, China could box out foreign competitors through dumping, rendering the United States — and the rest of the world — dependent on China for mature chips.”

The Ukraine war may have fuelled China’s determination to build up its legacy chip capacity, in that Beijing heeded the example of how the Biden administration has focused its Russia sanctions on semiconductors, which Moscow cannot produce itself.

“China is studying very closely the sanctions playbook and the effect on the Russian economy. They’re hoping that they’ll have a more robust buffer against sanctions,” one analyst said.

On Monday, Chinese Foreign Ministry spokesperson Mao Ning called U.S. tightening of curbs on China’s semiconductor companies “out-and-out economic bullying.”

She said the measures the U.S. has taken go beyond the realm of national security. “The U.S. behavior is taking a serious toll on the stability of the global industrial and supply chains. It poisons the atmosphere for international cooperation and fuels division and confrontation,” she said.

GRAHAM PERRY COMMENTS

This Column has maintained a watching brief over developments in semiconductors and readers will be familiar with the US biggest concern that an outbreak of hostilities over Taiwan would, at a stroke, bring to a sudden and complete halt the exports to the US of essential Taiwanese semiconductors – and with it the US economy.

Aside from Taiwan, there is an associated older generation problem of “legacy” semiconductors. They are needed and in large numbers. The breakthrough in the production of state of the art technology does not mean a wave of the hand transfer from older technology to newer technology – from legacy semiconductors to up-to-date technologies. It takes time – lots of time and while the change from the old to the new takes place it leaves China as a major producer of older semiconductor technology in a dominant supply position and it is this issue that worries the White House – the idea that the US could become increasingly dependent on China in a key issue of production of cars, batteries and construction generally.

The US tries to “de-risk” just as its dependence on China increases. It is part of the ongoing process of adjustment of the declining power of the US to the rising power of China. In a sane world there is room for the US and China to live together but not if the US is determined “to take China out”. Policy makers in Washington need to canvass the academic world and speak to Jeffrey Sachs, John Meersheimer and Professor Allison and understand the reality of the geo-political changes now underway. They are of enormous significance and it is our luck to be alive and able to witness the global changes now underway. The 21st Century will be seen by subsequent generations as the 100 years that really changed the world.

GRAHAM PERRY

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