Taiwan election surprise, Xi-Biden, "Dictator" - Week in Review #4

I spent the most of this week in Singapore attending the annual Morgan Stanley Asia Pacific Summit and visiting clients. This is only my second time visiting Singapore, and the first time was 4 years ago at the same Summit, pre-Covid. I have also got to meet up and had wonderful chats with some subscribers of

Baiguan - China Insights, Data, Context

Taken from the window of one of BigOne Lab’s Singapore-based clients. So great to be back after 4 years!

I will not cover many events this week. Partly because I am too busy this week, but also because the following writing is already very dense.

Again, for why I write, please read here. In a nutshell, I try to provide you with a review of events that will have impact beyond news cycles, about China.

You may also visit my company’s

Baiguan - China Insights, Data, Context

. In the past week we cover interesting topics from how to invest in China without the China risk, to the insights we uncover from a visit to one of China’s richest towns, to latest data readings of the economy.

The Profound

#1 Coalition of Taiwan main opposition parties

[Robert note on Nov 19: unfortunately, the "coalition" appears broken a few days after the initial announcement. But the core of the following analysis, that Taiwan domestic politics is central to "war or peace", still largely stands]

Let me start with this statement: Taiwan is the biggest risk factor in China’s relations with the world. Whether China will invade Taiwan has been a huge time bomb ticking in the back of investors and corporate CEOs’ minds.

But this point was not so obvious until last year. The reason Taiwan risk suddenly became a much recognized risk factor in 2022 was directly because of the Ukraine War. Whoever doubts China will unilaterally, unprovokedly and militarily take over Taiwan can now points to the Ukraine War: see, I’m not warmongering. It’s real!

But this line of reasoning is illogical. It is based on the wrong assumption that Russia = China. In fact, these two countries have very different histories, cultures, economies, political system and ambitions. They also do not have a NATO-style military alliance. And if there is any real impact of Ukraine War on Taiwan, it actually works in the opposite direction: The painful way this war played out would discourage any thoughts (if any) of starting a war in this part of the world.

When you want to have objective opinions of China, whom can you turn to? Singapore of course. There are many truths that China will not be suitable to speak but Singaporeans can. I can’t summarize China’s position on Taiwan as well as Singaporean PM Lee Hsien Loong on this matter. According to Bloomberg:

“They would like Taiwan to be part of ‘one China,’” but aren’t sure how to make it happen, Prime Minister Lee Hsien Loong said Wednesday at the Bloomberg New Economy Forum in Singapore. Unless Beijing is provoked, the world isn’t “going to wake up one day and find that they’ve decided to launch D-Day,” he added.

On the practical side, War is too costly, and ruling a post-war Taiwan is too tough a thing for Chinese to wish for. On the moral side, since China sees Taiwanese as lost brothers and sisters to be “reunified”, there is this thing called "Chinese people don’t fight Chinese people 中国人不打中国人", there is always strong moral aversion to civil war. Therefore, in an unprovoked situation, there is close to zero conceivable popular support for military mobilization.

So why does China keep reiterating the threat that if provoked, China will not refrain from using force? For example, according to Reuters:

"President Xi ... underscored that this was the biggest, most potentially dangerous issue in U.S.-China relations, laid out clearly that, you know, their preference was for peaceful reunification but then moved immediately to conditions that the potential use of force could be utilized," the senior U.S. official told reporters, referring to Xi's comments on Taiwan.

This is because, China exactly means it. China will keep telling this to the world, so the world has absolutely no excuse to think otherwise, and will think twice about possible provocations, and only then can war be avoided.

As an analogy, Putin never said that if Russia was provoked, Russia would invade Ukraine. In fact as late as a few days before the war, Russians like Sergei Lavrov were still laughing at CIA’s assessment that there is an invasion coming. But Putin launched the war anyway.

I wish you can understand my point here: anyone who seriously wants to go to war will only do it quietly. Without element of surprise there is no chance of winning a war. The Japanese did not threaten Pearl Harbor before dropping bombs there. No one planning for military action will be as stupid as to broadcast their intentions all the time, at all possible occasions.

Is there a risk for escalation/provocation in Taiwan? If Taiwan continues to be ruled by DPP, that risk will dramatically increase. DPP is a political party that writes formal independence into its own constitution and independence is DPP’s reason for existing. So the combined conclusion of the above analyses is: war is only possible when Taiwan is governed by DPP.

In this regard, a KMT-TPP alliance fundamentally changes the calculus. Now the chance of a pro-status quo, anti-provocation government becomes real. And even if DPP still wins in the end, very likely it will only be a win of very small margin. The lack of a clear mandate will make DPP very cautious about making further steps toward independence, if they can win at all.

Is it a pure coincidence that this alliance was formed while Xi and Biden met in San Francisco? I don’t know. But I am pretty sure a lot of the Americans do not wish to see a DPP win as well. Ukraine, Gaza, there are just too many on the plate right now. Will US do anything to make sure KMT-TPP wins? We will see.

In the end, if the Taiwanese themselves do not wish to change status quo on this grand chess board of great powers, there is no conceivable way to provoke China into a war. In this sense, peace is ensured for a very long time.

To me this is a much more profound event than the surprise-less APEC Summit.

#2 Surprise-less APEC Summit

The good news is that there is not much "news" coming out of the Xi-Biden meeting. Fentanyl collaboration, pandas and resumption of mil-to-mil communication are great news, but not so unexpected. There are almost no accidents, apart from the D-word which I would talk about below. Most expectations are met, at least a temporary detente in mutual relations has been established.

So far, I find the comment of

Wang Xiangwei's Thought of the Day on China

to be the most succint:

Heard a witty take on the US-China summit concluded in San Francisco, leveraging a popular Chinese idiom: both sides admitted that they may not pee in the same pot but vowed to ensure they will not pee on each other.

双方承认：尿不到一个壶里，但承诺：不尿到对方身上。

The Interesting

#3 Biden talked about “Dictator”, again.

It is very interesting to me that the "Is Xi a dictator?" debate resurfaced again. Despite being a trivial side note to an otherwise successful meeting, I think this is a discussion worth having, and it’s not just an academic discussion but something with real-world implications. So bear with me here.

There are at least 3 layers to discussion.

First, on the practical side, I do not think it will have a real impact on anything at all. Biden was cornered by journalist into this question, not that he started it intentionally. Also, the full body of his answer was actually quite diplomatic, it’s the journalists who childishly seized upon the D-word made it a headline (I love this satire from

Zichen Wang

). The tortured performance of Anthony Blinken, intentionally or not, is actually helpful. Overall, the whole set-up leaves enough space for China to look sideways.

God, it’s painful

Second, there is the matter of whether it’s appropriate to use derogatory term to describe your guest/business counter-party. I think the US (including the media) should be more respectful here. Just imagine, can Xi say Joe Biden is too old? Yes it’s a fact. But can he really says it? Doesn’t it sound petty to you? Can we be better than this? There is still this thing called decency. Ultimately, it is about whether people can deal with each other on equal terms, with mutual respect, with no side taking a higher moral ground than the other party, even if both sides have different value systems.

So, this matter is both trivial and petty, but the underlying question is actually quite serious. Finally, let’s delve into the real question: Is Xi a dictator?

Let’s be clear first, a word like "dictator" is a man-made concept. It’s a conceptual, rather than factual question. It’s a different kind of question from, say, "is the earth revolving around the sun?" or "Does sea water contain more salt than fresh water?" For conceptual question, there is really no way for every one to agree on. Because it is all very subjective, and it all depends on what you believe about a concept. So it is meaningless to argue about this question.

However, what you believe about this question is reflective of your theory of what China is, and that part is worth a discussion.

A dictator, by definition, dictates. A dictator is someone whose words become law. A dictator is the only person that matters in a country, everyone else is nobody. To think Xi is a dictator implies China is a country where only one man matters, while the other 1.4 billion minions just kowtow to this one man and one man only. Dictator usually only exists in movies.

This is a bad theory of China, which shows that the outside world far under-estimates the limits on the power of China’s No.1 as well as the agency of Chinese people. In today’s China, there are simply way too many stakeholders with various interests and value systems. True, Xi is more powerful in China than Biden in the U.S. True, he has clear political aspirations, but he can’t force his way through either. He also can’t force things if the majority of people do not think is right. At most, a top Chinese leader is someone with a strong power to set agenda - deciding what to decide and when to decide - based on reading of the collective will of various stakeholders, but not someone who can simply decide everything for everyone - like a dictator.

In this regard, he is not much different than the leader of a liberal democracy. It is only that his power to set agenda and make decisions is quantitatively, but not qualitatively, stronger than a person like Biden. But still, he can never, nor will he want to, dictate something only a small minority of the population wishes for.

Why does this discussion matter? Because theory is used to do predictions. Bad theory creates bad predictions and vice versa.

For example, whenever China has an economic problem, with a bad theory, you may jump into conclusion that since everything is decided by one man, then it’s all the fault of that one man, and to fix the problem you only need to, and can only, change that man. Also you would assume the system is so efficient, any change can take place really quickly. You will not think much about the underlying forces that cause the problem, and you will fail to appreciate the pains it takes to go through any structural reform programs. This is a useless, over-simplistic theory that serious China watchers should avoid at all times.

If you subscribe to my theory however, you will start pay attention to details. What are people saying? Are business owners confident? Are farmers happy? Are young people satisfied? Are old people content with their life? Are bureaucrats motivated? Even if China does no direct elections, reading the public mood is still crucial, as that public mood sets the boundaries in which a Chinese leader’s choices will stay within.

Honorable mentions:

For this week’s honorable mentions I will recommend some articles that has provided interesting new perspectives.

First, this wonderful piece by

Kevin Xu

:

China May Stay Permanently Behind the US in Generative AI

Kevin named three factors: censorship (blocking of training dataset), Chinese online language weaknesses and over-regulation as factors that may permanently limit China from catching up on US in Generative AI. It is a very thorough and interesting read.

I do have disagreements though. I think censorship and regulation parts are only technical, but not something that can "permanently" handicap Chinese AI ventures. Anyone knows how to use VPN these days, let along AIGC companies. For regulation, which is essentially government relations management and paperwork, is manageable at least for the well-funded guys. For small guys it can be a headache, but it takes much funding to build LLMs anyway so there by its very nature will have no “small guys”.

But the point about the language, is what I think a fundamental challenge that can’t be solved at all. At least the online, written Chinese language is so low-quality compared with English language. I might write about this in more detail later.

There is also an under-rated article by

Pekingnology

:

Jiang Ming'an: Caging the Leviathan is the Dream and Pursuits of Chinese Scholars of Administrative Law

Why I like this article? Because it shows that China’s democracy (including rules, laws, values and knowledge of democracy), while still in its infancy, is still evolving. Let’s be patient and gives it enough breathing space. In time it will grow into something fit for this soil. Let’s neither crush it nor rush it.

With that I conclude this week’s correspondence.