"Xi explicitly told delegates that the "Thucydides Trap" is not inevitable."
This is a very weak statement— possibly even counterproductive. Because when you say something is not inevitable, you are still viewing it as possible.
I think it would be more helpful and more accurate for both China and the United States to state that the vast majority of their peoples and both governments do not wish to enter into violent conflict with each other. And that it is fervently hoped that this atmosphere of goodwill will never be abandoned. That would be a statement that would greatly reassure the vast majority of people and nations in the world.
Robert, I agree with your point that the Chinese EV space is becoming too crowded with strong competition.
Are there any Chinese ADRs that you are considering as picks and shovels plays on the EV transition? Maybe renewable energy infrastructure or battery providers for the China market?
That's a big question that requires a long answer.
"picks and shovels" wise I don't see many. At least not in the China ADR space. On A-share there is CATL, consistently 35%-40% of global ev battery and more than 50% of China EV battery market share. In Hong Kong there is LK Technology (0558.HK), which owns Idra, which supplies gigapress machines to Tesla as well as a whole bunch of Chinese EVs.
But, when a market becomes over-competitive and there is serious over-capacity, the whole supply chain feels the chill. So you can see that stock performance for both CATL and LK are not good for the past 1-2 years.
I know many hedge funds are doing pair trades in China EVs, long the stronger ones (BYD, Li Auto, and now possibly Xiaomi also) and short the weaker ones (Nio, Xiaopeng). But this kind of trade is too much of a headache for regular investor.
If one is looking for peace of mind, here are things that I am personally comfortable with: 1) Auto semis, Infineon, Onsemi, NXP, STM etc... smart EVs have way more "semi content" than traditional cars, and right now I don't see serious Chinese competitors to the incumbents in this industry, yet. A lot of Chinese EVs have Infineon chips in side, especially around the power components
2) Copper. I think this is the most certain beneficiary of EV revolution, way more certain than lithium, cobalt, nickel, etc. No matter how battery technologies evolve, you are bound to use copper. More EV, more electrification, more copper demand. On the other hand, copper is notoriously in short supply and will be even shorter. My personal favorite is an ETF called COPX, which is a whole bunch of copper miners globally, and Zijin Mining (2899.hk) which is not only the largest copper miner in China but also a major gold miner, while gold has its own big secular trend (anti-inflation, same as bitcoin) going on right now. (Actually a lot of copper miners are also gold miners, copper and gold belong to Group 11 on the periodic tables and are common to be found together.)
No investment advice!! Just my personal taste and takes.
Wish I had more time and stillness of mind currently as there is a lot to build on in this group. There is something about queue (and queue cutting) mentality. Huawei investing in EV took me for a flip when I thought their natural move would be to flex off of their telecom technology to look at low earth orbit, drone extreme altitude, etc. Particularly as part of the starlink story in this link makes the point there is so much to gain. https://simplicius76.substack.com/p/future-of-the-smo-russian-army-think
I don’t think China is so desperate for foreign capital the way you seem to suggest. It’s not the capital per se which China is short of. Perhaps you really mean China wants the technology and know how that comes with foreign investment?
Anyway, my own reading of President Xi meeting US CEOs (apparently only US CEOs were invited to meet the President) is he knows in the US political system, it’s the “capitalist class” that to a large degree determine US government policy. (Of course there are other influences too, like the security establishment.) If China wants to build good relations with the US, the best channel is the US CEOs.
It’s unlikely even the US business interest can overcome the adversarial influence of the US security establishment. But President Xi should at least lay the ground for a future when the security establishment is finally discredited.
Your first paragraph hits one of the points I'd come to comment on. I will only add that Robert indirectly adds to this issue of "technology" with creative/venture deficit in his comment inside the (2) Xiaomi car item. China has been a relatively easy market/base from which to make money, much of the investment was driven by local government landbanks investing land and infrastructure either in enterprise partnership or as a build it and they will come venture with developers like Singapore in Suzhou: ie very conservative, using Guanxi to make it rain. In a market where safe bets make significant profit, there is a disincentive to take risk on the unknown/untested. Therefore the hope is that China can use it's manufacturing prowess and excess USD deposits to exchange with Foreigners who are more creative in their risk taking. Creativities taking risk is the raw material China can source domestically, but only if market conditions change. This is going to require significant law reform, cultural reform, and social services reform to help develop.
Google confirms that this is not an English idiom.
"threw everyone for a loop" is an American expression that means "it made everyone feel overwhelmed and confused." Perhaps you are remembering a hip expression that I am not aware of.
Good catch for the no-show, I will correct it. For the “table”, I admit I didn’t realize it’s not an English idiom, but please allow some creative liberty here :D I just love the imagery here. As if it’s a card game and all the rest of players were knocked out.
Dear Robert: I don't want to try to tell you what parts of your summaries to leave out— every bit of what you write is bound to be useful to someone. Second guessing yourself is not good for your emotional health.
I love your writing. I especially love that you want the Chinese to inspire the world with novel, delightful products
This is sometimes more the realm of science fiction, but since it’s your space, let me ask you: what would you like? What delightful new product would you like, ideally born in China?
1) health and well-ness. A lot in Traditional Chinese medicine is good but needs more scientific rigour. Also I love the concept of being healthy so you don’t need to find doctors most of the time 2) agriculture. China is serious about feeding its people, so there should be innovation going on their. Feeding more people with less energy input 3) Green hydrogen? With so much excess solar and wind, maybe we are closer to hydrogen economy than anyone else … just something on the top of my head
There’s already a precedent for this. Tu Youyou won the 2015 Nobel prize for identifying the key molecule in wormwood that was effective against malaria (artemisin). Someone like her ought to inspire a generation of Chinese scientists.
Xi started decoupling China from the rest of the world when authoring Document No. 9 of the Central Committee in 2012. The Decision of the 3rd Plenum of the 18th Central Committee in 2013 was essentially devolution of previous market reforms, by postulating dominance of state-ownership of enterprises in all relevant markets. Foreign investors looked at it with disbelief and did not realise what the consequences will be. While it took the rest of the world 5 full years to realise what was going on, the anti-China trend of the recent years has become a big problem for the Chinese economy and thereby for the Chinese government. Just one day after Xi meeting the CEO's, his Ministry of State Security again fanned xenophobia in China with a pointedly anti-foreign online media post. This incoherent behaviour of the highly centralised government under Xi is destructive, to say it mildly.
"Xi explicitly told delegates that the "Thucydides Trap" is not inevitable."
This is a very weak statement— possibly even counterproductive. Because when you say something is not inevitable, you are still viewing it as possible.
I think it would be more helpful and more accurate for both China and the United States to state that the vast majority of their peoples and both governments do not wish to enter into violent conflict with each other. And that it is fervently hoped that this atmosphere of goodwill will never be abandoned. That would be a statement that would greatly reassure the vast majority of people and nations in the world.
Robert, I agree with your point that the Chinese EV space is becoming too crowded with strong competition.
Are there any Chinese ADRs that you are considering as picks and shovels plays on the EV transition? Maybe renewable energy infrastructure or battery providers for the China market?
That's a big question that requires a long answer.
"picks and shovels" wise I don't see many. At least not in the China ADR space. On A-share there is CATL, consistently 35%-40% of global ev battery and more than 50% of China EV battery market share. In Hong Kong there is LK Technology (0558.HK), which owns Idra, which supplies gigapress machines to Tesla as well as a whole bunch of Chinese EVs.
But, when a market becomes over-competitive and there is serious over-capacity, the whole supply chain feels the chill. So you can see that stock performance for both CATL and LK are not good for the past 1-2 years.
I know many hedge funds are doing pair trades in China EVs, long the stronger ones (BYD, Li Auto, and now possibly Xiaomi also) and short the weaker ones (Nio, Xiaopeng). But this kind of trade is too much of a headache for regular investor.
If one is looking for peace of mind, here are things that I am personally comfortable with: 1) Auto semis, Infineon, Onsemi, NXP, STM etc... smart EVs have way more "semi content" than traditional cars, and right now I don't see serious Chinese competitors to the incumbents in this industry, yet. A lot of Chinese EVs have Infineon chips in side, especially around the power components
2) Copper. I think this is the most certain beneficiary of EV revolution, way more certain than lithium, cobalt, nickel, etc. No matter how battery technologies evolve, you are bound to use copper. More EV, more electrification, more copper demand. On the other hand, copper is notoriously in short supply and will be even shorter. My personal favorite is an ETF called COPX, which is a whole bunch of copper miners globally, and Zijin Mining (2899.hk) which is not only the largest copper miner in China but also a major gold miner, while gold has its own big secular trend (anti-inflation, same as bitcoin) going on right now. (Actually a lot of copper miners are also gold miners, copper and gold belong to Group 11 on the periodic tables and are common to be found together.)
No investment advice!! Just my personal taste and takes.
Wish I had more time and stillness of mind currently as there is a lot to build on in this group. There is something about queue (and queue cutting) mentality. Huawei investing in EV took me for a flip when I thought their natural move would be to flex off of their telecom technology to look at low earth orbit, drone extreme altitude, etc. Particularly as part of the starlink story in this link makes the point there is so much to gain. https://simplicius76.substack.com/p/future-of-the-smo-russian-army-think
I don’t think China is so desperate for foreign capital the way you seem to suggest. It’s not the capital per se which China is short of. Perhaps you really mean China wants the technology and know how that comes with foreign investment?
Anyway, my own reading of President Xi meeting US CEOs (apparently only US CEOs were invited to meet the President) is he knows in the US political system, it’s the “capitalist class” that to a large degree determine US government policy. (Of course there are other influences too, like the security establishment.) If China wants to build good relations with the US, the best channel is the US CEOs.
It’s unlikely even the US business interest can overcome the adversarial influence of the US security establishment. But President Xi should at least lay the ground for a future when the security establishment is finally discredited.
Your first paragraph hits one of the points I'd come to comment on. I will only add that Robert indirectly adds to this issue of "technology" with creative/venture deficit in his comment inside the (2) Xiaomi car item. China has been a relatively easy market/base from which to make money, much of the investment was driven by local government landbanks investing land and infrastructure either in enterprise partnership or as a build it and they will come venture with developers like Singapore in Suzhou: ie very conservative, using Guanxi to make it rain. In a market where safe bets make significant profit, there is a disincentive to take risk on the unknown/untested. Therefore the hope is that China can use it's manufacturing prowess and excess USD deposits to exchange with Foreigners who are more creative in their risk taking. Creativities taking risk is the raw material China can source domestically, but only if market conditions change. This is going to require significant law reform, cultural reform, and social services reform to help develop.
This note comes from Auntie Proofreader.
"threw everyone off the table"
Google confirms that this is not an English idiom.
"threw everyone for a loop" is an American expression that means "it made everyone feel overwhelmed and confused." Perhaps you are remembering a hip expression that I am not aware of.
#4 The Dubai sheik’s now-show letdown
TYPO—should be no show.
Good catch for the no-show, I will correct it. For the “table”, I admit I didn’t realize it’s not an English idiom, but please allow some creative liberty here :D I just love the imagery here. As if it’s a card game and all the rest of players were knocked out.
Dear Robert: I don't want to try to tell you what parts of your summaries to leave out— every bit of what you write is bound to be useful to someone. Second guessing yourself is not good for your emotional health.
Good point!
I love your writing. I especially love that you want the Chinese to inspire the world with novel, delightful products
This is sometimes more the realm of science fiction, but since it’s your space, let me ask you: what would you like? What delightful new product would you like, ideally born in China?
1) health and well-ness. A lot in Traditional Chinese medicine is good but needs more scientific rigour. Also I love the concept of being healthy so you don’t need to find doctors most of the time 2) agriculture. China is serious about feeding its people, so there should be innovation going on their. Feeding more people with less energy input 3) Green hydrogen? With so much excess solar and wind, maybe we are closer to hydrogen economy than anyone else … just something on the top of my head
There’s already a precedent for this. Tu Youyou won the 2015 Nobel prize for identifying the key molecule in wormwood that was effective against malaria (artemisin). Someone like her ought to inspire a generation of Chinese scientists.
Xi started decoupling China from the rest of the world when authoring Document No. 9 of the Central Committee in 2012. The Decision of the 3rd Plenum of the 18th Central Committee in 2013 was essentially devolution of previous market reforms, by postulating dominance of state-ownership of enterprises in all relevant markets. Foreign investors looked at it with disbelief and did not realise what the consequences will be. While it took the rest of the world 5 full years to realise what was going on, the anti-China trend of the recent years has become a big problem for the Chinese economy and thereby for the Chinese government. Just one day after Xi meeting the CEO's, his Ministry of State Security again fanned xenophobia in China with a pointedly anti-foreign online media post. This incoherent behaviour of the highly centralised government under Xi is destructive, to say it mildly.
That is a nice looking car.