![China-U.S. relations appear to be past the point of no return after President Biden reaffirmed America would defend Taiwan.](https://san.com/wp-content/uploads/2022/09/China-balancing-floundering-Russia-angry-Americans-1.png?w=1920)
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Hey everybody. Peter Zeihan here coming to you from just below the glaciers that feed into Lake Louise in Alberta, Canada. The other big news that happened today is that there is now an official trade block from the United States on …airframe sales to China. In the aftermath of the Chinese little snit fit when speaker Pelosi went to Taiwan and they basically started threatening everybody, the Defense Department decided that that is a step too far.
And that civilian aviation transfer technologies should no longer be allowed to the Chinese. And so today, the Chinese are throwing sanctions on Boeing. Boeing has a number of planes that they already made for the Chinese that were kind of in abeyance, that are no longer going to China anymore. And we are at the start of a firm technological split between China and the United States.
Now some version of this was already in progress in other sectors, specifically semiconductors. Because of new regulations that have been sketched out by the Biden Administration that are basically taking Trump’s texts and making them into permanent policy. The Chinese can no longer import any of the equipment that is necessary to make high and medium-quality chips and they can’t import the high-quality chips at all. Or more to the point, American sellers of this stuff…you can either sell to the Chinese government or you can sell to the U.S. government. You can’t do both anymore. And so for American companies, that’s kind of the same as a ban.
The debate going on, not just in Washington but in the Netherlands and in Britain and Japan, as to how far down to go on this scale. So can you still sell medium-quality chips to the Chinese? Can you still sell the gear that’s necessary to make the low-quality chips? All of this is now on the table and I expect we’re gonna see stricter and stricter restrictions. And the Chinese have proven over and over and over again that they can’t manufacture any of this stuff on their own. Yes, yes, yes. One guy did manage to develop a seven nanometer chip and good for him, but that’s kinda like Aristotle. So you have one dude.
Translating that into the overall system is something the Chinese have proven over and over and over again, that it is just beyond them. They can’t even make the gear for the low-end chip manufacturer. So just as we’re having a divorce economically between the Germans and the Russians, we are now past the point of no return between the Chinese and the Americans. So I’ve been warning a lot of my clients for a couple years now, that this was coming and it’s time to get your people out and your technology out and cash out however you can.
At this point because the Chinese are doing counter-sanctions, it’s probably too late for anyone who has remained. And it’s time to start writing down all of your assets in the People’s Republic to zero. I mean, you might be able to get a little bit out, but you should count on the entire corporate relationship collapsing over the course of the next year or three.
We’re…at that point now. That’s the bad news for the Chinese. There’s some good news. There was a summit yesterday in Kazakhstan between the Russians, the Chinese and a handful of other countries that really don’t matter to the strategic equation, in which Putin basically caved to everything the Chinese ever wanted. Russia is so bereft for friends because of the Ukraine War, China’s really all that’s left that matters. And so China’s been able to exact in a very, very heavy price for very, very few concessions. In essence, on live television Putin was forced to read Chinese talking points on everything that the Chinese care about. Whether it’s technology or the United States or naval issues or Taiwan and to read it in the Chinese syntax.
So basically from a diplomatic point of view, this is the public equivalent of being down on your knees, licking boots, and Putin had to do it all. And at the end of it, the Chinese didn’t even really give anything back. There will be no tech transfer. There will be no weapons transfer. There will be no troops. Putin actually asked for troops, and all that the Russians are going to have is the right to sell raw commodities to the Chinese at a horrific discount…probably in most cases, more than 30 or 40 percent.
So the Chinese have basically turned Russia into a more loyal satropee than North Korea has been. And that will absolutely have strategic consequences for both countries down the line. But the Chinese realize that while nationalism is a fun tool, you do not muck with the United States when national security is an issue, because they’re already seeing that on semiconductors and aerospace and very soon energy and agriculture and automotive.
So, the Russians didn’t get anything that they were asking for except for diplomatic support. Okay. That’s it from me. I’ll send you something from the glacier, take care.
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We know it is important to hear from a diverse range of observers on the complex topics we face and believe our commentary partners will help you reach your own conclusions.
The commentaries published in this section are solely those of the contributors and do not reflect the views of Straight Arrow News.
Peter Zeihan
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