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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.
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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.”
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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."
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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."
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