It deserves an expletive. It’s exhausting. Magic water spigots turned on in Northern California, summary dismissal of Inspectors General watchdogs and sending uninvited military planes into the airspace of your closest Latin American ally. Of course, it could be worse as an ally – you could just be asked over an introductory phone call to give up over 95% of your sovereign territory. Perhaps, there will be a Eurovision-style poll run by Fox News to decide the future of Denmark and Greenland. I can almost see it now… say hello to the voting panel in Belgrade, or Moldova…. or Transnistria. More expletives. But, no. This week we were given a trillion dollar reminder that we are watching the wrong dictator reality show.
The trillion dollar damage to tech stock valuations inflicted by China’s unveiling of a super-cheap AI large language model, DeepSeek (with similar performance powers to ChatGPT, Gemini etc) was indeed a “wake up call” for US Big Tech according to President Trump. However, at the same time, the geopolitical machinations of China are veering into reality show territory. Thanks to the erosion of truth in the world there’s no need for James Bond-style subterfuge. Instead, it can be as brazen as hell. Chinese ships have been damaging undersea cables around Taiwan in recent months but this week marked the third severing of an undersea cable in three months…. in the Baltic Sea. The fibre-optic cable in the latest incident connected Sweden and Latvia but this time involved a China-owned ship in the sabotage operation. It would seem that Russia, as China’s “mineral colony”, has invited China to assist in infrastructure “grey-zone” conflict. Indeed, China has its own domestic reasons to ratchet up the geopolitical temperatures of distraction.
The latest economic activity data from China is looking pretty grim. January manufacturing activity actually contracted which won’t put the cheer into the upcoming New Year celebrations for 1.4 billion Chinese. This manufacturing slowdown has surprised many given recent monetary stimulus initiatives by the Beijing regime. However, we can expect further stimulus measures given Chinese government debt/GDP ratios are closer to 60% compared to US and European governments labouring under debt burdens over the 100% mark already. This monetary firepower will have knock-on effects across international markets and global economic growth. But… there is a strategic price to be paid by the rest of the world. And, it’s not just the obvious trade deficits. DeepSeek is more likely to be a temporary shock and, despite the hysterical headlines, the emergence of a better engineered cheaper way to harness computing power is a net benefit to all, including broader equity markets. However, DeepSeek highlights the growing excellence of China across multiple technologies.
According to a 2024 study by the Australian Strategic policy Institute (ASPI), China now dominates the US in 57 of 64 critical technologies, up from just three in 2007. The US, which led in 60 sectors in 2007, now leads in just seven. Rankings by the ASPI were based on cumulative innovative and high-impact research and patents. ASPI credits President Xi Jinping’s ‘Made in China 2025’ plan for the infusion of “massive direct state funding for R&D in key technology,” stating that existing strategic investments turned into a plan to achieve technological “supremacy”. The areas where China excels include…
- advanced integrated circuit design and fabrication
- high-specification machining processes
- advanced aircraft engines
- drones, swarming and collaborative robots
- electric batteries
- photovoltaics
- advanced radiofrequency communication
Oh, and did we mention nuclear fusion? Of course, you might have missed this if you’d been watching the fantasy Greenland invasion on the other show. In the past week, Chinese scientists broke the nuclear fusion record for sustained plasma at over 100 million degrees by maintaining a mix of electrons and ions in a fluid state for more than 1,000 seconds. As a reminder, nuclear fusion replicates the sun’s energy, offering limitless, carbon-free energy.
So, if you were a White House strategist you might want to curtail China’s technology advances. And, this is where things have taken a very strange turn. The Trump campaign has made lots of noise about China with tariffs being the chosen commercial weapon to rebalance US trade deficits with the Middle Kingdom. Fast forward to today and tariffs were, instead, the chosen weapon to bully Colombia. But… the US actually has a trade surplus with Colombia. More strange has been the Trump reverse-ferret on TikTok which he’d now like to see continue operating in the US (rather than enforce the ban upheld by the Supreme Court) with a US investor partner like Elon Musk or Larry Ellison. That all make sense? Now, for the really weird stuff.
Remember when Taiwan was supposed to be protected by its US ally from the increasing threat of China? Well, while we’ve all been distracted on DeepSeek news, there were some fairly seismic developments in US-Taiwan trade relations. Check out this headline about the two ‘allies’….
Trump’s 100% tariff threat on Taiwan chips raises cost, supply chain fears – Business Insider
So much for the tough talk on China. Beijing must be thrilled and President Xi will be encouraged to keep up the ‘grey zone’ infrastructure sabotage in the Baltic Sea and Straits of Taiwan. Meanwhile, the new US Defense Secretary , Pete Hegseth, fresh off the Fox & Friends chat sofa, has got to work defending the nation. First priorities….. revoking former chair of the Joint Chiefs of Staff, General Mark Milley’s security detail, removing all portraits of the general in the Pentagon and pursuing his demotion.
Anyone get the feeling the wrong ‘enemy’ is being pursued…..?