Unlike the USA which offers support and aid by offering money to other countries, the Chinese loan tons of money to build infrastructure and it is so much that the small countries will not be able to pay and literally submit to the Chinese. 
 - https://www.bloomberg.com/graphics/2018-china-business-in-eu...
 - https://www.nytimes.com/2017/12/12/world/asia/sri-lanka-chin...
Wonder if they can avoid a similar fate. Maybe people are wiser on both sides, one can hope.
how is the chinese doing any different than what the USA did/might've done with foreign aid and other strings attached loans? In the end, it's a form of empire building.
(Source: my dad spent his career doing USAID work; grew up surrounded by USAID, World Bank, etc., folks.)
That sort of comparison is going to only get you into trouble. Foreign aid is very often tied to foreign policy, especially security policies like maintaining bases, to keep "friendly" regimes in power, to "tied" aid, etc.
Certainly, not everything is Machiavellian about it, and ofcource people recognize the huge benefits and impact it has had in uplifting poor people, lets also not forget that there is a whole lotta grey in there.
I haven't read the book, but de Mesquita is addressing something different, the fact that foreign aid can enable bad leaders to stay in power by giving them a flow of benefits they can use to reward cronies and placate the populace: https://www.nytimes.com/2011/06/10/opinion/10DeMesquita.html. That may well be true, but it's a criticism of foreign aid in general; note that de Mesquita is associate with the Hoover Institution, which believes that government-to-government foreign aid is inherently misguided: https://www.hoover.org/research/better-approach-foreign-aid.
De Mesquita does not contend that U.S. foreign aid is a form of "empire building" intended to make recipient countries dependent on the U.S. or confer direct economic benefits to the U.S. (Even if the U.S. is driven by the possibility of indirect benefit from having more capitalistic countries on the world stage, along with a stable world order, that is something quite different from seeking an "empire").
I know that may not be the answer you want to hear but " image " is huge in China.
On a related tangent, if you don't mind - I'm trying to test my "tone detector" - it indicated sarcasm in your comment, as if the comment to which you were replying was not just wrong but dumb - how accurate was I?
Now US Intelligence are seeing an uptick in Chinese Navy Warships patrolling the Indian Ocean and fears about Hambantota turning into a Chinese Military Port.
This is being called the String of Pearls Theory: https://en.wikipedia.org/wiki/String_of_Pearls_(Indian_Ocean...
The model has already happened in Djibouti, where a Chinese Military Port is currently operational. US Generals have voiced their concern: https://www.reuters.com/article/us-usa-china-djibouti/signif...
It's odd how some people can clearly see (and acknowledge) these things, while others seem literally unable to see them, almost as if they have some sort of a psychological filter hiding portions of the full spectrum of reality. I wonder if I suffer from the same thing, but different portions of the spectrum. I find it an interesting and useful way in which to observe the world and disagreements between people.
It depends on what you mean by that statement I suppose. It sounds like you are of the opinion that literally every single foreign aid initiative the United States of America undertakes is, at it's core, entirely (not partially, as I would suspect the case to be, but entirely) for the purposes of advancing the interests of American businesses.
Is that a more or less proper characterization of what you've said, or have I misunderstood?
And if it is proper, how might you have come to know this? I mean, for the sake of argument let's assume it's true - if this what they were really up to, I'd think most of the corresponding proof would be known only to a fairly select group of trustworthy insiders. How would you have found out these details?
This story doesn't seem to add up, but maybe I'm missing something?
> China is now doing the same thing the west/ImF/world Bank have always done.
The exact same thing, or something similar?
Similar to how the US handled Japan and South Korea instead of Latin America and the middle east.
It's not the comment that's dumb, it's the strategy. The Soviet Union used to dump tons of money into client states, and all that Russia has to show for it now is a naval base in Syria. China has hundreds of millions of peasants who are living in abject poverty. Doesn't it have better uses for that money?
Really? Based on what, the failure of the Soviet Union? If you were to look a little closer, you may discover the Chinese aren't executing an identical strategy. The world is extremely complex, using blunt comparisons like the above won't yield very accurate results. At the very least, you would probably benefit from having a more open mind.
Massively overvalued Chinese startups fueled by unsustainable shadow debt taking isn't a recipe for success.
"China’s campaign against its US$10 trillion shadow banking industry has choked off refinancing for the weaker borrowers". let that sink in......10 Trillion debt that needs to be unwound in China, mostly corporate debt.
"Chinese corporate debt to GDP ratio is already very high by international standards – at 168 per cent in 2017 – and is expected to start rising again as nominal GDP growth declines towards the 8 per cent from an unusually high rate of over 11 per cent in 2017, Fitch said. Further payment problems are likely in a market that has already seen at least 14 corporate bond defaults this year"
Also, this is happening in times of economic slowdown in China, due to trade wars, tariff from US, reshoring of manufacturing back to US, declining FDI, etc.
"China's economic growth slows to multi-decade lows across industrial, infrastructure and retail"
"Two-thirds of the 21 tech IPOs in the past year are below their issue price, with shares down an average of about 20 per cent through Friday. Leading the wipe out are online financing platforms Qudian Inc and PPDai Group Inc, which plummeted 55 per cent and 48 per cent respectively, while search engine Sogou Inc has tanked 27 per cent."
This article says for the US, $8.7 trillion, 45% of GDP https://www.cnbc.com/2017/11/20/the-debt-time-bomb-that-keep.... Compare to 168% in China above.
It may not be the cleanest or most efficient recipe for success, but whether it is or is not "a" recipe for success remains to be seen. There is more than one way to skin a cat as they say.
As for their massive debt, again that could be a problem, maybe even completely derail China and throw them back into chaos, but there's little reason to think that it must be a problem. As long as sufficient confidence can be maintained in the system and everyone keeps showing up to work each day, and trade continues flowing, how the results are divvied up at the end of the day in the short run is secondary to the longer term functionality of the overall system.
i keep hearing this term, but what does shadow debt mean?
Pointing out the historic cheating of now first world countries is fair if questionably relevant, pointing out Donald Trump's raising of tariffs as hypocrisy (I assume) is down right silly, especially in the context of this conversation.
No -- they don't need it as much, as they already climbed the lax-IP/protectionism ladder for centuries to get high.
Now they insist nobody currently lower than them should use the ladder.
How might you know this though? No one has said anything out loud even remotely comparable to this, so how might have you formed this conclusion? What information source are you using?
I'd be quite interested to hear your actual full assessment if you have the time.
Are you kidding me? The party line from western politicians, establishment media (NYT, Economist, and so on), and establishment (read "state sponsored") think tanks, are exactly that: "Do as we say, not as we did".
Let's test this theory: post the most compelling actual evidence you have that backs up the claim:
"Now they insist nobody currently lower than them should use the ladder."
Something to as yourself in private: why do you believe what you believe, with such conviction, if you are not able to defend it intellectually?
China is perfectly justified in playing a system built by the winners for the winners. Much luck to them in making the hypocrisy of the system more clearly obvious.
The US is complaining about IP theft, where:
1) they are (were? mainly?) the ones with IP assets
2) the rules have been established by the US (mainly)
3) whenever the US sees fit, it breaks its own rules (thanks Trump, finally this is obvious to everybody!)
And all the while without even mentioning:
A) the war dividends, all around the world. Whoever thinks the US is losing money with NATO is just delluded.
B) the massive rent extracting effects that the dollar has throughout the world economy.
Tell Trumpy something: if he wants "fair" trade, let's also get a fair currency for all involved.
The truth is that the deficit happens because the US consumer indulges in extra hyperconsumerism thanks to an overvalued dollar.
The arrangment suits nealy everybody. Now comes Trump and wants a new deal.
Let's get one: the US consumes less with a weaker dollar, and the deficit disappears.
You know what the US won't get: a world where the US controls the currency, the military and the economy. Maybe you haven't noticed, but the US is only 5% of world population.
It wouldn't be fair.
Peace, love and prosperity ? Or something else ?
Nothing much. There were 2 world wars that finished the old European countries, and the US took over the warmongering world leader game, and the colonialism (as neo-colonialism this time).
>And yes, immigrants in the US beat quite a few traditional industries at their own game, under rules set by people trying to sabotage them.
Not sure what you mean. Immigrants that succeeded in the US still played by US rules and laws. In fact most any immigrant that succeeded was totally Americanized - ending up like those "trying to sabotage them". Did you see any huge story where immigrants changed the underlying culture, ethics, etc?
Incumbents really don't react well to upstarts even just performing decently.
I wonder if history has ever seen anything like this before, at least on such a widespread scale.
China is taking the lead.
“All lists of private companies contain degrees of subjectivity and error, but the Wikipedia ranking of unicorn start-ups by value offers a peek into the future. For westerners, it should be disconcerting. Of the top 50 entries, 26 are Chinese and 16 are American. There are none from Europe. The Chinese also dominate the proportion of the most valuable of these companies. Of the top 20 with an estimated market value of over $10bn, 11 are Chinese, six are American and two are Indian. “
I've also heard that European investors are notoriously conservative in their strategies and don't take the risks that the US does. Japan is also faltering in this department for that reason. Without the pools of money to draw from, if you cannot gamble then you cannot win, essentially.
As odd as it sounds, my understanding is that China's Han population doesn't all speak the same language, but they (for the most part) read/write the same language. They call the variations in spoken language "dialects," but many of them are mutually unintelligible. I think the situation is the similar to a hypothetical one where the Romance countries (e.g. France, Spain, Italy, etc.) speak their respective modern languages, but continue to write exclusively in Latin.
Just a small unimportant quibble that doesn't negate your larger point.
What's standard bread&butter hustling in US is considered cringe-worthy BS in Europe.
While the music plays, there's no way business conservatism and sticking to "fundamentals" can compete with SV unicorns.
1. There is no common language so hiring is typically restricted to one country.
2. Taxes are very high, particularly social security taxes that must be paid by the employer. Firms are very reluctant to create jobs.
3. A lot of bureaucracies are old and inefficient.
4. For the same reasons, products are difficult to scale. You can go from a local product in San Francisco to a national product in the USA relatively easily. But in the EU you are dealing with multiple languages, cultures, country bureaucracies in order to make the same jump.
The best thing for the EU would be to get everyone speaking English at least as a second language. Then, to require all official forms, Government engagement etc. to be in the national language and English.
Imagine you go from working in Warsaw to Berlin. A distance of only 570km, but you need to be able to speak Polish to deal with Polish bureaucracy, English to work at the multinational firm, and German to deal with German bureaucracy.
Through innovative symbiosis between universities, business', talent, steady US defence spending, plentiful of financing and business friendly regulations it has become the preeminent tech sector only rivalled by the Chinese which was born out of protectionism. With the invention of the internet and the unprecedented level of free trade, a few companies from Silicon Valley has successfully monopolised large part of not only the US market but also the European market. And not only that, this was done in record speed, Facebook was only founded in 2004. Traditional manufacturing sectors are much more dependent on the local market than tech companies.
After the second world war Europe was destroyed and effort when in to rebuilding countries and relations. Furthermore the mindset that gave birth to Silicon Valley to combine raw capitalism with university campus' wouldn't have had a chance. Rigid universities, socialist political discourse and unions would have prevented it. Perhaps the mindset is changing, question is to what degree protectionism will be used to gain a footing in the vital tech sector.
China has ~1.38 billion people
USA- ~326 million
Rephrasing: Chinese sock market is more plump, and more crazy than American. If you are in a business peddling BS stocks, there is no better market. I'm extremely sorry for use of vulgarities there, but I know of no other words in English language to characterise that.
On other hand... China's tech scene beats the silicon valley even without any stock market backing. And it is its beauty. China is probably the last place in the world where BS "high finance" has not yet gobbled up the tech scene.
Things are still done by real men of merit, real industrialists, real Chinese Carnegies. I personally knew of people who secured cash on the table for their businesses from them with just gentleman's agreement without them bowing down to any of "high finance" gatekeepers.
>I'm actually really surprised there isn't some great, commonly available mobile OS from China commonly available here ...
Well... a big part of South Asia know no other mobile OS other than what I call "Chindroid." Something that comes with custom skin on top of Android 2.0 era forks of Cyanogen. There is a whole culture grown around that.
>Then why does nobody outside of China use Chinese tech? This is a paradox that flies in the face of all the 'great news' coming from China.
I'm totally disagreeing with you on that. China's tech is ee-ve-ry-whe-re... except for America...
What half of Africa uses? A $20 dollars white label BuBuGao phone.
What half of South Asia depends on water filtration? Cheap Chinese membrane filters.
Who makes 70% of industrial chemicals, 30% of generic medicines, and 50% of precursor chemicals?
Whose heavy equipment is used everywhere outside of developer world...
Who has a complete dominance in manufacturing machinery?
Whose white goods totally dominate every non-OECD country?
This list will span for a kilometre.
Behind all of these things stand businesses that are head above all those "unicorns" where it comes to being considered "substantial"
Nobody will blink an eye if one of those 10000 facebook.com unicorn clones will disappear tomorrow, but if something will happen the biggest maker of fertilizers in China tomorrow, the whole world will turn silent for at least a few minutes.
In HK, nobody uses Baidu, they use Google.
The article is misleading because the size of these 'new industries' like 'car sharing' is going to be a function of the size of the economy, so really, it's like measuring the size of the banking sector ... it will be a % of the economy and that's that. Since banking is protected, it will be domestically owned. In China, so many sectors (all of them?) are strongly protected in so many ways so the outcomes are all rather predictable. Ride sharing, search etc..
For AliBaba though, and situations wherein they have done things differently given the state of their economy, they can claim a separate path and it'd be rather difficult to predict outcomes.
But those things notwithstanding ... we're still not using any chips, OS, software, services or tech out of China just yet.
I'm actually really surprised there isn't some great, commonly available mobile OS from China commonly available here ...
edit: and I should add, I think they redefined the market somewhat.
I am perplexed by the lack of Chinese tech that we use and I think there must be some reasoning behind that.
Our markets are 'mostly open'.
The dark side of this leeway are demands for patronage from middle-level bureaucrats.
try via twitter link ( https://twitter.com/FT/status/1008323779360157696 ) - and open in a new incognito window.
Cast your eyes down the list of the world’s most valuable private technology companies and you might be put in mind of the 2008 Beijing Olympics. That’s when China ran away with most of the gold medals — even though the west focused on the accomplishments of the US swimmer Michael Phelps. The same trend is evident in the list of technology “unicorns” worth $1bn or more. Uber, Airbnb and SpaceX may be hogging the limelight, but the undisputed gold medal leaders are the Chinese.
All lists of private companies contain degrees of subjectivity and error, but the Wikipedia ranking of unicorn start-ups by value offers a peek into the future. For westerners, it should be disconcerting. Of the top 50 entries, 26 are Chinese and 16 are American. There are none from Europe. The Chinese also dominate the proportion of the most valuable of these companies. Of the top 20 with an estimated market value of over $10bn, 11 are Chinese, six are American and two are Indian.
Topping the list with an estimated value of $150bn is Ant Financial, the financial services spin off from Alibaba. Its value rests on the opportunities investors believe lie ahead in China and, increasingly, in south-east Asia.
Many California-based technology investment bankers — eager to haul in trophy initial public offerings — are now romancing more companies in China than at home. Smartphone maker Xiaomi has already filed to float in Hong Kong, which must be disquieting for the US exchanges. Ride-hailing app Didi Chuxing and Meituan are among the bankers’ other targets.
The growth rates of leading public technology companies underline the same trends. For the year ending March 2018, the top five US companies grew at a 26 per cent median clip, while the top five Chinese entities jumped 33 per cent.
The US companies are generally larger, but Chinese companies are narrowing the gap. As 2016 dawned, the top five Chinese companies were worth one-quarter of their US counterparts. By the end of March 2018 this had risen to one-third. Right now, Facebook, the fifth most valuable US tech group, is just ahead of Alibaba, with Tencent not far behind. No wonder that Chinese youngsters looking for role models evoke the names of Jack Ma, Pony Ma, Lei Jun (founders of Alibaba, Tencent and Xiaomi) more than they do Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg, or the late Steve Jobs of Apple.
Chinese internet companies also stand out because they are purchasing stakes in many of the more interesting, younger private technology companies. It is somewhat akin to real estate companies snapping up the best beach-front property.
Most Chinese activity is outside the US, with Tencent and Alibaba building vast constellations of satellites. Tencent has more than 600 investments, while Alibaba has around 400 — totals that almost make Japan’s SoftBank look like a penny-pinching slowpoke.
Critics of this approach may gripe that it is undisciplined, but the admirers argue that these investments are somewhat akin to Chinese premier Xi Jinping’s ambitious and far-reaching Belt and Road Initiative. The only US company that comes close is Google, which since the start of 2017 has made more than 100 investments, although they are heavily concentrated in the US. It has also purchased more than 80 companies outright since 2014.
Another transpacific difference involves the use of cash. Between 2015 and 2017, the five biggest US tech groups (especially Apple and Microsoft) spent $228bn on stock buybacks and dividends, Bloomberg data shows. During the same period, the top five Chinese tech companies spent just $10.7bn and ploughed the rest of their excess cash into investments that broaden their footprint and influence.
It’s hard to escape the view that the Chinese groups are — like all of us — creatures of their heritage. They are using their investments as one way to help fulfil the ancient Chinese definition of the Middle Kingdom — as the centre around which all else revolves.
The writer is a partner of Sequoia Capital. The views expressed are his own and he may own shares in companies mentioned
Edit: which Chinese tech companies are actually dominant? All of them are copies of American tech companies propped up by their government. Where is the market penetration into the USA? Where is the competition? There is none.
As for the part about being an uneducated factory nation, the latest PISA findings from 2015 would have China scoring higher than the US on math (10th vs. 25th) and science (6th vs. 40th), but slightly lower than the US on reading (27th vs. 24th).
but you have to also think whether he's biased in wanting to push the view that the next big tech hub is in China, because he's invested in the region. Making the hype machine so that when time comes to exit, there's plenty of doofus who will believe the hype and buy into the market.
it's very hard to know what to believe, and even more effort to do research. Most people won't be doing it, so it's an effective method to generate hype.
He puts his money where his mouth is. I made another comment here that it was refreshing as it didn't predict the collapse of China which has been peddled for the past few decades by so-called experts - they could peddle any view they want with no financial repercussion.
Secondly, even if Moritz was biased and published this article for his own gains, it's not as if we (foreigners) have easy access to invest in the region.
> it's very hard to know what to believe, and even more effort to do research. Most people won't be doing it, so it's an effective method to generate hype.
I heartily agree with you here, but you have to admit for every article like this, there are 10x more about the imminent demise of China, so I don't buy the argument that this article's hype will override 'collapse' articles which generate much more clicks.
First, that's the same argument they were making back in the day for Japan (the "uneducated factory nation", the "copy cats", the "cheap knockoffs" etc). Funny how that turned out.
Second, labor costs are not the relevant factor, so automation wont matter much to bring factory jobs back. It's all about the supply chain:
Not to mention that Chinese factories can and will also invest in automation.
Third, "uneducated factory nation"? Where does one get that information from, the John Birch Society Bulletin?
Oh, and as sibling says: "the latest PISA findings from 2015 would have China scoring higher than the US on math (10th vs. 25th) and science (6th vs. 40th), but slightly lower than the US on reading (27th vs. 24th)."
It's easy to make fun of previously underdeveloped nations that started from an uneducated and less advance point 30 and 60 years ago, but the problem is that they can catch up (like Japan and South Korea, an insignificant economic wasteland after WWII, did). Especially if their rivals are on the decline themselves. Rome didn't last forever.
They're still "the third-largest in the world by nominal GDP and the fourth-largest by purchasing power parity (PPP). and is the world's second largest developed economy".
I'd take that level of irrelevance any day.
Besides that, Japan's situation doesn't tell us much.
>Which innovative companies does China have that aren’t complete rip offs of American ones?
DJI would be a good example. They're the Apple of drones, and are doing great in the gimbal business as well. No American company comes even close.
There are others of course, and more will emerge. Already they make phones on par with the best of the Android world.
Besides, which innovative companies did Japan have before the 70s that weren't complete rip offs of American ones? And which innovative companies did the US have (before the mid-19th century) that weren't complete rip offs of European ones? And yet here we are now...
Great drones. We have google, they have cheap manufacture produced drones.
I keep hearing “China is coming”, “they will have more”, ....
It never comes to fruition. That have a massive population supported by manufacturing wages that will all lose jobs when automation takes over.
In a number of gaming sectors, it's already done. Steam is majority Chinese players, mobile gaming revenue has been from China. Steel (until the tariffs) has been dominated by cheap Chinese offerings, killing off a bunch of suppliers in the last 15 years. I dunno what you're talking about, but reality doesn't care what you think anyway.
Well, different countries use different strategies. Half of the US economy is based upon the country's military might, and (through it) imposing favorable deals, bullying, controlling oil and trade routes, IP laws and so on (plus "quantitative easing financial policies" and trillion dollar bailouts, subsidies and handouts to Detroit and co). I'll take Japan's "quantitative easing financial policies" any day...
>Great drones. We have google, they have cheap manufacture produced drones.
Well, they also have their own Google: Baidu.
Heck even Google's page-rank style concept was pioneered by a Chinese (the founder of Baidu) before Google was a thing:
"A small search engine called "RankDex" from IDD Information Services designed by Robin Li was, since 1996, already exploring a similar strategy for site-scoring and page ranking. The technology in RankDex was patented by 1999 and used later when Li founded Baidu in China. Larry Page referenced Li's work in some of his U.S. patents for PageRank." (Wikipedia)
>That have a massive population supported by manufacturing wages that will all lose jobs when automation takes over.
They have a massive internal market, 4 times the US in population, strong growth, have been the world's largest economy back before (for many centuries), have a much older and more resilient culture, have the tech and the factories, and they will own the future, as the tired Europe and US give up the spirit.
Rome didn't last forever either...
>I keep hearing “China is coming”, “they will have more”, ....
Well, I don't know for how long you "keep hearing that", but if you hear it for e.g. the last 2-3 decades, then it's also accompanied by massive Chinese growth those last 2-3 decades.
So it's not like you merely hear it without anything coming out of it. On the contrary, it's one of the most well supported statements.
If you mean why they haven't already taken over the lead, well, it took US nearly a century, plus two whole world wars that torn and beat Europe up, to get to be the world player that it has been the last 70-80 years.
The world economy is not like the tech market, to expect something to go from start to domination in a few years...
Bluntly, this is BS. A bit of the US economy, yes. Half? Not even close. But you seem to have an ax you want to grind with respect to the US, and reality would not serve you as well as hyperbole.
I'm not talking directly -- like the arms industry and the oil industry and so on. I'm talking about the cascading effect that pumps up and propels the rest.
I suppose, though, that your claim might be true of the fraction of the US economy that happens where you are...
I'm not sure we've travelled to the same China. The country is capable, talented and very driven. If you ignore the surveillance state it has a lot of same characteristics that once made America exceptional.
Even if this wasn't written by someone with the Sequoia Capital brand behind him Ive seen enough anecdotally to believe it.
That may be true, but I do find it refreshing over the thousands of articles claiming that China would collapse over the past few decades (and yet, somehow these experts failed to predict the AFC, GFC, dot-com bubble,...). Surely you consider those click-bait as well.