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Who's preparing for China to retaliate against US tech companies?


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Just wondering who is preparing for this scenario in the board. With tech companies flying higher and higher, I wonder what happen if China blocks Tesla or Apple from selling there. How likely is it to happen? I guess it's kind of guessing whether a pandemic was going to hit in 2020 in late 2019?

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We don’t even need a chinese retaliation. If US high tech companies can’t do business any more with Chinese companies then Some tech business like semi equipment will be very vulnerable. AMAT and LRCX for examples that are pretty typical and have ~30% of their business in China. You couldn’t tell by the charts though.

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It is pretty clear to me that the differences between China and the US/West are irreconcilable:

- rule of law

- human rights

- freedom of the press

- democracy

 

As China grows in economic size and strength it will bring more and more countries into its sphere of influence.

 

It is also clear to me that the US/ the West has had its ‘ah ha’ moment. I like Druckenmiller’s line from a year or two ago: Trump will go down as the most pro China President of the ones who follow.

 

What i do not understand at all is how some companies, like Apple, continue to be so reliant on China. Apple is supposed to be a progressive company. Yet it produces most of its products in a country that is one of the most repressive regimes in the world.

 

Fortunately, China is starting to flex its muscles and this is providing everyone with a glimpse of what is to come. My guess is companies like Apple understand the predicament they are in. But it will take years to fix.

 

I will give Trump credit for identifying China as a threat. However, his strategy to deal with the threat from China has been an abject failure (like most other things during his term in office).

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It is pretty clear to me that the differences between China and the US/West are irreconcilable:

- rule of law

- human rights

- freedom of the press

- democracy

 

As China grows in economic size and strength it will bring more and more countries into its sphere of influence.

 

It is also clear to me that the US/ the West has had its ‘ah ha’ moment. I like Druckenmiller’s line from a year or two ago: Trump will go down as the most pro China President of the ones who follow.

 

What i do not understand at all is how some companies, like Apple, continue to be so reliant on China. Apple is supposed to be a progressive company. Yet it produces most of its products in a country that is one of the most repressive regimes in the world.

 

Fortunately, China is starting to flex its muscles and this is providing everyone with a glimpse of what is to come. My guess is companies like Apple understand the predicament they are in. But it will take years to fix.

 

I will give Trump credit for identifying China as a threat. However, his strategy to deal with the threat from China has been an abject failure (like most other things during his term in office).

 

Spheres of Influence  https://upload.wikimedia.org/wikipedia/commons/7/73/KCRC_China_spheres_of_influence.jpg

 

I think people in the west often say "why is China so aggressive" and the media often paints China as the culprit.  It was only a century ago when Western powers divide up China into "China Chunks" and sold opium to China when they outlawed it in Britain.  We can't sell this dope in our country, let's go find a large market and enforce our rights with our guns!  I think most westerners today will list the aggressive acts of China when their actions plunged China into a century of despair and poverty.  It only took them about a century to climb out of the hell hole.  So forgive them if they are suspicious of the US and the West. 

 

You think anyone in Iraq or Afghnistan sees US war planes flying over their head thinks "Thank God, we are being liberated." or are they thinking "Shit, we are about to bombed!"  I am generally a supporter of the US military and police because I am practical.  In an unfair world, you want the biggest guns and the mightiest military protecting you.  But I am not ignorant enough to not recognize my hypocrisy. 

 

Anyone who looks at the US/China relationship without looking at the history going back to 1850s is just being an idiot.  If you incorporate some of that history, then a lot of the political moves seems logical.   

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It is pretty clear to me that the differences between China and the US/West are irreconcilable:

- rule of law

- human rights

- freedom of the press

- democracy

 

As China grows in economic size and strength it will bring more and more countries into its sphere of influence.

 

It is also clear to me that the US/ the West has had its ‘ah ha’ moment. I like Druckenmiller’s line from a year or two ago: Trump will go down as the most pro China President of the ones who follow.

 

What i do not understand at all is how some companies, like Apple, continue to be so reliant on China. Apple is supposed to be a progressive company. Yet it produces most of its products in a country that is one of the most repressive regimes in the world.

 

Fortunately, China is starting to flex its muscles and this is providing everyone with a glimpse of what is to come. My guess is companies like Apple understand the predicament they are in. But it will take years to fix.

 

I will give Trump credit for identifying China as a threat. However, his strategy to deal with the threat from China has been an abject failure (like most other things during his term in office).

 

Spheres of Influence  https://upload.wikimedia.org/wikipedia/commons/7/73/KCRC_China_spheres_of_influence.jpg

 

I think people in the west often say "why is China so aggressive" and the media often paints China as the culprit.  It was only a century ago when Western powers divide up China into "China Chunks" and sold opium to China when they outlawed it in Britain.  We can't sell this dope in our country, let's go find a large market and enforce our rights with our guns!  I think most westerners today will list the aggressive acts of China when their actions plunged China into a century of despair and poverty.  It only took them about a century to climb out of the hell hole.  So forgive them if they are suspicious of the US and the West. 

 

You think anyone in Iraq or Afghnistan sees US war planes flying over their head thinks "Thank God, we are being liberated." or are they thinking "Shit, we are about to bombed!"  I am generally a supporter of the US military and police because I am practical.  In an unfair world, you want the biggest guns and the mightiest military protecting you.  But I am not ignorant enough to not recognize my hypocrisy. 

 

Anyone who looks at the US/China relationship without looking at the history going back to 1850s is just being an idiot.  If you incorporate some of that history, then a lot of the political moves seems logical. 

 

Regarding Apple, China is their biggest customer.  What are you going to do?  Not sell to them?  I own some multi-nationals in my portfolio such as Dupont and Corteva.  It does worry me. 

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Just wondering who is preparing for this scenario in the board. With tech companies flying higher and higher, I wonder what happen if China blocks Tesla or Apple from selling there. How likely is it to happen? I guess it's kind of guessing whether a pandemic was going to hit in 2020 in late 2019?

 

I've often wondered if China would have the balls to forcefully take over operations of the Tesla factory in China and blatantly steal their IP. I could see it happening if tensions got high enough between the western world and China.

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Lt Lu has a pretty good historical view of China/US per Bill's comments above, here:

 

https://uploads-ssl.webflow.com/5ef3c7300432b40ed865991a/5ef3c7300432b4f82e659975_Discussions%20About%20Modernization%20-%20A%20Look%20at%20the%20Future%20of%20Sino-US%20Relations.pdf

 

His basic conclusion is China needs to determine if they want to be a part of the American Order (democratic order established & grown after WWII) or tread their own path with a smaller group of countries that will always be at a disadvantage to the much larger US/Europe/Japan democratic world.

 

Packer

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It is pretty clear to me that the differences between China and the US/West are irreconcilable:

- rule of law

- human rights

- freedom of the press

- democracy

 

As China grows in economic size and strength it will bring more and more countries into its sphere of influence.

 

It is also clear to me that the US/ the West has had its ‘ah ha’ moment. I like Druckenmiller’s line from a year or two ago: Trump will go down as the most pro China President of the ones who follow.

 

What i do not understand at all is how some companies, like Apple, continue to be so reliant on China. Apple is supposed to be a progressive company. Yet it produces most of its products in a country that is one of the most repressive regimes in the world.

 

Fortunately, China is starting to flex its muscles and this is providing everyone with a glimpse of what is to come. My guess is companies like Apple understand the predicament they are in. But it will take years to fix.

 

I will give Trump credit for identifying China as a threat. However, his strategy to deal with the threat from China has been an abject failure (like most other things during his term in office).

 

Muh-knee....Its almost always, all about the Benjamins. The best companies just do a great job manipulating their imagine.

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Those who think there is another round of retaliation simply do not understand Chinese politics.

The recent Bei-Dai-River meeting has dramatically changed the landscape and China now decided to be soft with US and hard with HongKong.

 

I'm definitely one of "those". Could you please explain? I couldn't find anything googling "Bei-Dai-River meeting".

 

By the way, thanks for starting this thread Undervalued! I wouldn't be surprised if it ends up being dozens of pages long as I think the US/China relationship (not just tech) will be one of the major questions to untangle if we want to be successful investors during the next decade.

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Those who think there is another round of retaliation simply do not understand Chinese politics.

The recent Bei-Dai-River meeting has dramatically changed the landscape and China now decided to be soft with US and hard with HongKong.

 

I'm definitely one of "those". Could you please explain? I couldn't find anything googling "Bei-Dai-River meeting".

 

By the way, thanks for starting this thread Undervalued! I wouldn't be surprised if it ends up being dozens of pages long as I think the US/China relationship (not just tech) will be one of the major questions to untangle if we want to be successful investors during the next decade.

 

It is one of the most secretive meetings so I've only seen rumors coming out of that meeting so far.

In China, the most important meetings are usually kept secret from public.

This meeting invites former Chinese presidents and Premiers to comment on how the current president is doing. I think there are a lot of things that are unsatisfactory right now, and the rumor is that after discussion, they decided to adopt a new policy called "soft on 3 matters and tough on 3 other matters". They'll be soft with US and all other foreign affairs, and be tough with internal matters like Hong Kong.

I think this rumor has validity because the Chinese foreign affairs speakers suddenly changed the tone and now they kept saying that US and China relation is very important and they need to collaborate etc.

The other sign of change is that after the US sanctioned the 11 politicians in Hong Kong, China ordered 3 Chinese banks to collaborate with US to sanction these 11 politicians. That's a big irony. I feel sad for these 11 politicians because they sold their sole working for the CCP and now they are abandoned "for the greater good".

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I feel sad for these 11 politicians because they sold their sole working for the CCP and now they are abandoned "for the greater good".

 

Thanks for clarifying!

I'll take it all with a grain of salt since there's no source but super interesting.

 

Your last comment is what I keep thinking every single time the CCP does anything.

Long term they seem to be creating an army of resentful powerful people all around them : former CCP politicians getting thrown under the bus, Founders of huge companies (Alibaba) being canned, billionaires having to flee to Taiwan, the US, Australia, Canada, before they get "disappeared", top University professors and researchers and in general Tibetans, Uyghurs, Hmongs, Taiwanese, Hong-Kongers, Indians, Japanese, Koreans, Vietnamese people... They're creating their own opposition constantly both all around and inside themselves.

 

Maybe that's just another day at work for autocracies though.

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At the risk of making a political comment, the biggest competitive advantage the US has over China are its civil liberties and free society.

 

As long as those can be maintained, it will continue to draw people from repressive countries and extract the best from them. As far as I know, nobody is clamoring at the gates of China, desperate to immigrate and start a life there under the glorious CCP.

 

 

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As far as I know, nobody is clamoring at the gates of China, desperate to immigrate and start a life there under the glorious CCP.

 

You missed last 20+ years?

 

There have been tons of people going to China for jobs/money/etc. Part of is the culture/history/mystique. But part of it has been opportunities. Not that it's trivial to get in and get job visa.

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At the risk of making a political comment, the biggest competitive advantage the US has over China are its civil liberties and free society.

 

As long as those can be maintained, it will continue to draw people from repressive countries and extract the best from them. As far as I know, nobody is clamoring at the gates of China, desperate to immigrate and start a life there under the glorious CCP.

 

People on Corner gets 2.6% 30 year fixed rate mortgages and there are people facing eviction for not being able to pay their rent.  Everytime we get a crisis, the Fed lowers rates which unintentionally leads to rich people getting richer and poor people not getting ahead because they are still paying 20-25% for their credit card debt and triple digit % for their pawn loans.  There is blood in the street.  There are literal blood in the street.  People chanting that white people should give up their houses.  We can't agree on whether wearing mask.  Civil liberties?  Most white people and Asian know that we can't speak our minds.  Yes, we won't go to jail.  But we can easily lose our jobs.  This Mccarthyism.  This is the US version of the Cultural Revolution.  Anything that you said 10, 20, 30 years ago is bound to piss off someone and you risk getting cancelled for it.  There is no jail time for these things.  How free are you really? 

 

I am self aware enough to understand that I now occupy a better place in society.  But it is not lost on me that others have it bad. 

 

Americans need to get off their high horse and wake up and smell the coffee about this civil liberties and free society and China bad.  Countries are just acting in self interest and using propaganda on both sides. 

 

To Jurgis' point, yes, there has been a ton of expats looking to make it in China.  White privilege is very real there.  They literally will hire white people just to lounge around new real estate developments to look more high end.  Companies will literally just hire a white person to appear more prestigious.  I joke with my part time analyst that if we ever do an Asia trip, I'll make sure that people know he works for me.  It would be hilarious to see me bossing around a 6' 4" former college basketball player. 

 

I don't know why I engage in this.  My time is better spent doing something productive. 

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You missed last 20+ years?

 

If you're going to be cheeky, at least be correct.

 

Over the last 20 years, China's net migration rate has decreased from -0.157 in year 2000 to -0.247 per 1000 in year 2019. Since 1950, China has never had a positive migration rate.

 

For context, the net migration rate for U.S. in 2019 was 2.893 per 1000, also down over the same timeframe (but still decidedly positive).

 

The rest I won't comment on at length as it is better suited for a soon-to-be-deceased sub forum. But I will stand by my original point: A free society and civil liberties are a competitive advantage.

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You missed last 20+ years?

 

If you're going to be cheeky, at least be correct.

 

Over the last 20 years, China's net migration rate has decreased from -0.157 in year 2000 to -0.247 per 1000 in year 2019. Since 1950, China has never had a positive migration rate.

 

For context, the net migration rate for U.S. in 2019 was 2.893 per 1000, also down over the same timeframe (but still decidedly positive).

 

The rest I won't comment on at length as it is better suited for a soon-to-be-deceased sub forum. But I will stand by my original point: A free society and civil liberties are a competitive advantage.

 

You just changed the subject. "nobody is clamoring at the gates of China" is very different claim from net immigration statistics.

China has hugely restrictive immigration policy: https://en.wikipedia.org/wiki/Immigration_to_China :

 

In 2016, China issued 1,576 permanent residency cards. This was more than double what it had issued the previous year, but still roughly 750 times lower than the United States’ 1.2 million.

 

So if someone is clamoring at the gates of China, China won't let them in.

The other parts of that same Wikipedia article cover the existing examples of "clamoring" including illegal immigration and overstayed visas:

 

According to official statistics of the PRC government, the number of Africans in Guangzhou has increased by 30-40% each year, and now form the largest black community in Asia. However, as many have overstayed their visas, official figures may be understated. Estimates vary on the number of Africans living in Guangzhou: from 20,000 to over 200,000.

 

Edit: BTW, this does not mean that China is great country. It's just an attractive country for some. And IMO your world understanding would improve if you acknowledged that purely economic migration (that does not much care whether target country is free or liberal) exists.

 

But yeah, this thread should be pretty much moved to "Politics".

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You say there are “tons of people going to China”. I’m saying there are even more people leaving, and at a higher rate than 20 years ago.

 

Maybe that will change in the future but if you were to ask the marginal immigrant today whether they would rather move to America or China, I would guess America would be their preference. And I further guess that civil liberties are a large factor driving that preference.

 

 

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You say there are “tons of people going to China”. I’m saying there are even more people leaving, and at a higher rate than 20 years ago.

 

Yes, you should have used "people are leaving" argument in the first place. IMO that's much better argument for your position - although "people are leaving" is also tinged with economic and opportunities-based emigration.

 

But you made different argument. And that's how we ended up here.  ::)

 

Maybe that will change in the future but if you were to ask the marginal immigrant today whether they would rather move to America or China, I would guess America would be their preference. And I further guess that civil liberties are a large factor driving that preference.

 

Yes, they would choose America.

 

And I would claim that large factor driving that preference is the relative wealth of America. Plus America's higher openness for immigration and immigrants. Which does not fully equate with civil liberties: there's a number of countries that have civil liberties on par with US and yet are much more closed to immigration. A number of European countries are like that.

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Just wondering who is preparing for this scenario in the board. With tech companies flying higher and higher, I wonder what happen if China blocks Tesla or Apple from selling there. How likely is it to happen? I guess it's kind of guessing whether a pandemic was going to hit in 2020 in late 2019?

 

I've often wondered if China would have the balls to forcefully take over operations of the Tesla factory in China and blatantly steal their IP. I could see it happening if tensions got high enough between the western world and China.

Why would they need force?

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The reality in a communist state, is that your lifetime collection of 'assets' can be taken away from you at any time - you enjoy the benefits because the party allows it. However, too much money concentrated in too few (& the wrong) hands - creates resistance that has to periodically be stamped out; fail to act, and you get Russia's oligarchs. Housekeeping.

 

China/'The West' are just Yin/Yang in motion - separate cultures, that need each other, with influence waxing/waning as the wheel turns. Thing is, that whether you produce products or services - you will consume materials; IP, minerals, energy, etc. Maintaining IP is all about rate of innovation, either grow it yourself - or steal it from others.

 

Cultures 'breathe' by temporarily exchanging people with other cultures. Students, merchants, diplomats , etc. is peaceful interchange, conquering the other guy (Genghis Khan) - not so much. But fail to 'breathe' ...  your culture becomes irrelevant, and dies. China has been around for a very long time.

 

Today's Hong Kong is a prize, very similar to the German rocket scientists at the end of WWII.

Lot of very good (& mobile) brains, lot of people trying to grab them, hardly surprising that China is 'less than happy'.

Best China can hope for in another Taiwan ...   

 

Bet on where those people go, the support they get when they arrive, and what they do with today's technologies.

What was done with Huawei, can easily be done in 'the west' as well. People, NOT money, is the limiting factor.

 

SD

 

 

 

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