May 4, 2018  |  New Orleans

What's Next: The US-China Long Game: Some of the brightest minds I talk to in tech believe we are headed toward a bipolar future where the United States and China close their tech markets to one another and fight for conquest of the rest of the world, like a game of Risk. There will be an American and a Chinese version of everything -- an Amazon and an Alibaba; a Google and a Baidu; an Uber and a Didi Chuxing -- and each pair will compete for rights to Asia, Africa, Latin America and Europe. The Big Picture: Tech dominance will be how the US and China establish political and economic influence over the rest of the world. The lines of the new geopolitical map will be drawn by tech companies, on a country-by-country basis. Longstanding political and military alliances will shift due to new economic considerations. PACIFIC Today's Agenda Good morning. The US-China trade talks have ended without a deal. In the last 10 days we've met with lawmakers in Washington, business leaders in Beverly Hills and VCs and tech executives in New Orleans. Guess what they all want to talk about? China. China. China. China. The issue is also likely to be a key focus at Warren Buffett's annual Berkshire Hathaway shareholders summit in Omaha this weekend. China's rise as a technological power is, to me, the most important story of our time. As General David Petraeus said earlier this week at the Milken Global Conference, "There’s a new dialectic, a new competition of ideas." "Our political model is being contested," said Tony Blair, on stage with Petraeus. “We have to understand our position in the world is going to be challenged not just economically but politically.” Rise of China Xi Jinping on offense President Trump's effort to slow China’s technological rise, including the threat of an executive order that would ban Huawei and ZTE from the US, has only emboldened China's support of its tech and telecom firms. The Latest, via Bloomberg: • "President Xi Jinping has responded ... by vowing to pour even more resources into research and achieve home-grown breakthroughs. He urged China last week to 'cast aside illusions' it could rely on others for help." • During the trade talks, the US delegation asked China to stop subsidizing its technology companies. "The hosts said their technological advancement goal isn’t on the table." • "'The more pressure the U.S. puts on China, the more urgently the country has to develop its own high-tech products to reduce reliance on the U.S.,' said Xu Jianwei, a senior economist for greater China at Natixis SA in Hong Kong." The Big Picture: China is committed to a $300 billion Made in China 2025 development plan that would make it a global leader in ten categories, including robotics, biotech and aerospace. It is also committed to becoming "the world’s premier artificial intelligence innovation center" by 2030. US threats are highly unlikely to curb those ambitions. What's Next: "Investors are preparing for a blockbuster year of Chinese tech IPOs," per CNNMoney's Sherisse Pham: "Smartphone maker Xiaomi filed this week to go public in Hong Kong ... It is one of several major Chinese tech companies that could make their stock exchange debuts this year." Trade Talks China seeks ZTE change So... how 'bout those trade talks?  NYT's Keith Bradsher in Beijing: "Senior Chinese and American officials concluded two days of negotiations late Friday afternoon with no deal and no date set for further talks ..." China asked the US to amend its seven-year ban on ZTE's sale of parts and software to American companies, per Reuters: • "Chinese negotiators asked the U.S. side to listen to ZTE’s appeal, take into account the company’s efforts to improve its compliance and amend the ban." • "China’s Ministry of Commerce said ... U.S. officials, for their part, said they “attach importance to China’s representations and will report China’s stance to the U.S. president.'" The Big Picture Bloomberg's Michael McDonough says "the potential bankruptcy of ZTE Corp ... could turn out to be the shot that triggers the war": • "China would likely respond with a strong reprisal against U.S. companies operating on the mainland." • "Resulting government actions and reactions could escalate to the point where irreparable damage is done to relations between the two countries." • "China’s economic future is widely thought to depend on its technology sector -- and it will not stand idly by as the U.S. decimates some of its most important firms."