Might the public tides be turning? Surprised to find that CNBC posted my #China interview clip on YouTube. Doesn’t always happen. Came in this morning and noticed there were a fair number of comments.  This is just a small sample. Message might be getting through and off just a 90 sec clip.

China Evening Missive Well, Xi Jinping didn’t accept Trump’s invitation to the inaugural, but he has accepted Putin’s May 9th invitation to the 80th anniversary of the “Victory in the Great Patriotic War” AKA the defeat of the Nazis. Perhaps not an apples-to apples comparison, but it is also rare for a Chinese President to publicly accept any invitation months in advance of an event. No question that there’s a host of pieces on the board of the Great Game being played here at the same time. If, and it is a big IF, this gets picked up by the American press you can be assured that there’ll be a message. Rather than see this as it is, leaders of the very broad coalition against the Rules Based International Order meeting, the dangerous meeting of America’s enemies. For me, this is just a very smart geopolitical move by Moscow and Beijing. https://www.reuters.com/world/chinas-xi-accepts-invitation-attend-moscows-victory-day-may-tass-reports-2025-02-10/

The Economist never fails nor disappoints. Cover here is from 2015. The road to calling the collapse of #China is littered with more dead bodies than I can count. View quoted note →

Saying the quiet part out loud. Not that anyone in Trump World is listening.

CNBC

China has 'the upper hand' against U.S. tariffs, says consultancy

Peter Alexander, founder and managing director at Z-Ben Advisors, says "the Chinese are just extremely, extremely well prepared for what the Trump ...

Having to hit the ground running here in #China first thing on Monday. Already feel like I’ve run a marathon and haven’t even had my second coffee yet. A great week ahead to you all.

China Afternoon Missive I had mentioned in a previous Note that there are a number of pressure points China can apply in a retaliatory trade conflict with America. Specifically, I mentioned that China manufactures 50% of the world’s antibiotics. I also mentioned that China had learned its lesson during Covid and the blowback that came when limits were placed on exporting PPE to the United States. For the time being, such an approach – direct pain to the American populace – is to be eschewed. Come to find out even the minimal tariff of 10% on all Chinese imports has elicited a quick reaction from America’s medical and hospital communities. Quoting from this Reuters article “The American Hospital Association wrote in a letter to Trump on Tuesday that the tariffs will affect cancer and heart medicines as well as antibiotics like amoxicillin from China.” As we can clearly see here, China maintains a sizeable market share in various medicines and apparently nothing was done to correct this overreliance even after accounting for the PPE shortage during Covid. Now think about just how many American industries are facing the exact same issue. We aren’t talking about import bans mind you. This, right here, is only a reaction simply to the levying of a 10% tariff meaning higher prices. Seems as though profit margins are about to be squeezed hard across a number of industries, or higher prices will be passed along to consumers meaning stickier inflation. Anyway, it has been one hell of a busy week. https://www.reuters.com/world/us/trump-faces-pressure-us-industry-over-china-tariff-medicines-2025-02-06/

The War for TikTok in America - #5 This, slow rolling the sale, was expected and yet should be viewed as just one front in the war over this dominate social media platform. Leverage. It is that simple. With numerous parties vying over buying the American TikTok platform, the Chinese know the value of this platform and the role it can play in gaining a real advantage in the much larger trade conflict with America. A point that I’ve not seen mentioned in all the media coverage is that TikTok parent ByteDance is 60% owned by foreign investors. Susquehanna Capital alone owns 15% of ByteDance. There’s real money at stake and incentives, you would think, are more than a little aligned. In the end, however, any deal will need to be approved by the Beijing ministerial powers. Then there is the issue of the ByteDance “Golden Shares” A 60% ownership stake might be irrelevant at least when it comes to “control”. The Chinese government began a process three years ago whereby “critical enterprises” were required to issue Golden Shares. Essentially these are a separate form of equity, akin to Preferred Shares. The aim of these Golden Shares, typically 1% of all outstanding equity, is to provide control over key board level decisions. Basically, Golden Shares allow the Chinese government to veto any vote deemed to go against the interests of China. So, there remains a ton of moving parts, and I’ll just reiterate that China has all of the leverage. https://www.reuters.com/technology/tiktoks-chinese-owner-appears-be-slow-rolling-negotiations-sale-washington-post-2025-02-05/

China Morning Missive Very surprised to see an actual story on #China that matches with the reality on the ground. For a number of years all we’ve seen in the Western media are claims that Beijing has strangled the entire private sector. While a number of individuals have seen their wings clipped, there remains a highly vibrant community of small companies developing a host of new products and services. DeepSeek is just one of thousands of examples. Much as the author states, and a point I’ve been hammering on for quite some time (Keynes is Dead in China!!) “The Chinese economy is in the process of massive structural change and change on a scale and pace that inevitably creates dislocations”. American leadership needs to quickly learn that China isn’t in a period of decline. Beijing leadership simply recognized that the economic model driven by real estate and infrastructure wasn’t sustainable. Exiting that system and moving to a new system based on high value add manufacturing and consumption is underway. Will it be a successful shift? That remains to be seen. Still, the pain trade was needed and the pain trade is the choice that was made. @Lyn Alden @James Lavish

DeepSeek is a sign of a deep structural shift in China’s economy, especially in the data-dependent tech sector

China (very late) Evening Missive Why? This just isn’t necessary. Contrary to the US talking points, the escalation of tensions in the South China Sea centers on American forces deploying several missile batteries on the upper north tip of Luzon island in the Philippines. A short distance to Taiwan. There continues to be a policy of poking and prodding which I can only surmise is an attempt by America to have China “react”. Perhaps not exactly the same comparison, but I do find it similar to how the US played games with Russia over Ukraine. Honestly, I’ve been surprised at the relatively subdued response to all of this by China.

Newsweek

US sends bombers to South China Sea in warning to Beijing

The training involved three Philippine FA-50 fighters and drills to enhance air domain awareness and joint combat capabilities.

More evidence of a full reversal of the American “socially acceptable” pendulum swing. Hot girl Carls Jr ads are back!!

China Morning Missive This is the sort of development the Chinese had expected out of the US and why none should expect Beijing to agree to any sort of formal negotiations. It isn’t just that the US Postal Service reversed course on the decision to restrict deliveries from China and Hong Kong. The idea is that there are inconsistencies throughout the various government agencies when it comes to policy and how policy should be executed upon. This is clear signaling of dysfunction and Beijing will eat this up. Reminds me of the art of Tai Chi. Use your opponent’s energy to disarm them and take the fullest advantage. No need to exert your own energy when you can simply flow with an opposing force. https://www.reuters.com/world/us/us-postal-service-suspends-incoming-packages-china-hong-kong-2025-02-05/

Trade War with China #2 The US targets postal deliveries out of China and Hong Kong this morning and China fires back with a thinly veiled threat to probe into the Apple App Store fees. The news on Apple broke just before pre-market trade opened. The stock is down. The Chinese playbook is becoming a bit clearer. Focus retaliatory efforts on those points of leverage which (1) can have the most immediate impact and (2) not be viewed as being overly painful to the American populace. Furthermore, China is clearly unwilling to negotiate like Mexico, Canada, Panama, Colombia. There seems to be a desire to call out Trump’s threat. Cards on the table. Things could turn real ugly, real fast.

CNBC

Apple shares slide after China reportedly considers probe into App Store practices

China's market regulator is considering whether to open a formal probe into the iPhone giant's App Store fees and policies, Bloomberg reported.

Who out there remembers the original Google slogan? “Don’t be evil” And yet, here we are. The slippery slop is dangerous indeed.

CNBC

Google removes pledge to not use AI for weapons, surveillance

The company updated its 'Responsible AI' principles, which no longer includes a pledge to not use AI for weapons or surveillance.

Trade War with China #1 Seems as though I need to create a whole new series of Notes for Nostr and to start, need to give credit where credit is due. The US just announced that it will suspend all inbound postal deliveries from both China and Hong Kong. To the untrained eye this might seem odd. In fact, Temu and Shein have aggressively used the duty-free loophole (very successfully I might add) for US inbound deliveries. This move here cuts both companies off at the kneecaps. What remains to be seen, however, is how this might impact the pricing (aka inflation) of low value-added goods of which the manufacturing remains solidly in the hands of the Chinese. Clearly though, battle lines are being drawn. Now we wait to see how China might respond.

CNBC

USPS temporarily suspends some inbound packages from China, Hong Kong

The change comes after President Donald Trump announced new tariffs that also target a popular trade loophole, called "de minimis."

China Morning Missive First official workday back for us here in #China and the first item on today’s agenda is a complete about-face. First, as I noted yesterday, Trump and Xi were said to have plans to speak this week. Now Trump says he’s in no rush. No matter how this is spun, what this clearly indicates is that Xi and his team called Trump’s tariff bluff over the weekend by refusing to play the Canadian/Mexican game of engagement. China is willing to see how this plays out. The Chinese have seen this coming for a long time and have spent four years preparing. Moreover, and objectively speaking, China – as the world’s manufacturer – has greater leverage than that of the US. What I would add is that optics will play a key role in how China does respond moving forward. Make no mistake. China can inflict real pain on the American people. Thus far, targeting Google or placing an export ban on Tungsten won’t raise the ire of the general population. Cutting off access to, say antibiotics, where China controls half the global market, would illicit a populace reaction. Early days for sure. What you can be certain of is an ungodly deluge of headlines and “hot takes” by people who have no idea what they are talking about. https://www.reuters.com/world/us-tariffs-chinese-imports-take-effect-after-trump-reprieves-canada-mexico-2025-02-04/

Shout out to @James Lavish Amending you Note from last week. Trump: FA China: FO

China Afternoon Missive Now the commentariat shifts focus to #China. No deal was struck with the US, meaning that Xi Jinping was unwilling to take the Trump call, unlike Trudeau and Sheinbaum, and now the 10% tariffs are formally on. For its part, China has followed with 15% tariffs on certain US imports albeit starting next week. Expect there to be an ungodly deluge of headlines and social media commentary. Please take all the “hot takes” with a large grain of salt. The US is operating from a position of bellicosity, nothing more. Moreover, when you take a moment and actually consider all pressure points from both sides, you’ll quickly find that China is equally positioned if not the party with actual leverage. The only certainty is that there’ll be more volatility across all asset classes. Stay safe out there fam China to levy additional tariffs of up to 15% on select U.S. imports starting Feb. 10

CNBC

China retaliates with additional tariffs of up to 15% on select U.S. imports starting Feb. 10

China also announced an investigation into Alphabet's Google alleging the American technology giant had violated the country's anti-monopoly law.

China Morning Missive For all the chatter of Mexico and Canada “caving” to the demands of Trump there’s been shockingly little commentary over #China refusing to engage. It is rather obvious that the Trump team would have made attempts to hold a call with Xi like what went down with Trudeau and Sheinbaum. Those attempts failed. Technically this then means that the 10% tariffs on China are now in place. Expect this bilateral pissing match to escalate and escalate quickly. Before the end of this week. Trump and his people our outmatched, they just don’t know it yet. https://www.reuters.com/markets/trump-warns-tariffs-china-may-increase-2025-02-03/

The War for TikTok in America - #4 I need to update my spreadsheet. The number of announced American bidders is expanding and now includes, it would appear, the US Government. Once again, this is exactly what the Chinese side wants to see. The more groups there are to bid for the platform, the more China can play the game of divide and conquer to arrive at the best deal. And by best deal that doesn’t just mean the highest price. Other concessions will be sought. Areas that the Chinese view a strategically desirable. Will update later on the various groups who’ve announced plans to bid for the platform. Trump signs order to establish sovereign wealth fund he says could buy TikTok

CNBC

Trump signs order establishing a sovereign wealth fund that he says could buy TikTok

The fund would serve as an economic development tool and perhaps be used to buy TikTok.

China Afternoon Missive The Law of Unintended Consequences will play out at least with #China and the moves by Trump to levy tariffs. While America, regardless of which party is in power, projects duality of there being either friend or foe, China’s approach has always been to find transactional opportunities with all. At this juncture the threat is of “America First” quickly turning into “America Alone”. Unlike 2017, the Chinese have gamed out this exact scenario. If you watch carefully, any apparent defensive action taken by China will - in all reality - be an offensive play which will further alienate American policy across the globe.

Trump's antagonism risks pushing U.S. allies closer to China

Trump has played hardball with Canada, Colombia, Denmark, Mexico and Panama — all countries that have traditionally been strong partners with the...