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China’s technocrats have, to date, demonstrated competence in managing the economy’s imbalances.

we think China’s underlying growth story is coming to an end as the country’s economic imbalances become unsustainable and global decoupling picks up steam. The volatility and low valuations, on the other hand, are likely here to stay. 

“On balance,” Adam sums up, “If you want to be part of history-making economic transformation, China is still the place to be.”

The third point is where we disagree. We just don’t see China as having any good options for maintaining strong growth. 

Mainland China has delivered significant extra returns -- 87 basis points a year more than the mighty S&P -- for anyone willing to hack the wild volatility

Replace bad investment with domestic consumption. 

What imbalances are we talking about? In crude summary, China’s growth has been driven by debt-funded investment, especially in property and infrastructure. The problem is that the returns on these investments are in fast decline, even as debt continues to build up.

This can’t go on forever. Eventually, you have all the bridges, trains, airports and apartment blocks you need, and the return on new ones falls below zero (How do you know that you have arrived at that point? When you have a financial crisis).

The problem is that without a healthy consumer, China’s only real options to create growth are investment and exports -- and at the same time as return on internal investments are declining, the rest of the world, led by the US, are increasingly wary of dependence on Chinese exports. 

What are China’s policy options? Broadly, there are five, as Micheal Pettis explained to us:

Stay with the current model.

Beijing has policy options.

Replace bad investment in things like infrastructure and real estate with good investment in things like tech and healthcare.

Replace bad investment with (even) move exports and a wider current account surplus.

Just quit it with the bad investment. 

we think that options 1 and 5 are not really options at all. The current model will lead to a financial crisis as return on investment falls further and further behind the costs of debt. Simply ceasing to overinvest in infrastructure and real estate, without changing anything else, will simply kill growth. 

Option 2 might be summed up -- as Jason Hsu of Ralient Global Advisors summed it up to us -- as China becoming more like Germany.

The idea is that China would steer more and more money away from real estate and towards high value-add sectors from biotech to chip manufacturing. 

The problem with option 2 is that investment is such a huge part of the Chinese economy that it is difficult to see how that the capital could be efficiently allocated to the country's tech-heavy, high value-add sectors, which are comparatively small

The most promising Chinese firms are swimming in capital as it is. And developing productive capacity isn't just about capital. It takes things the state can't rapidly deploy, like knowhow and intellectual property.

Option 3 is more promising. China could start, as Adam suggests, by building up a proper welfare safety net. But it is reasonable to expect pretty serious social and institutional resistance to this sort of mass redistribution.

why hasn’t China increased its welfare state until now? Longtime China watcher and friend of Unhedged George Magnus suggests it is because of a deep bias in the Chinese policy establishment. “It’s how Leninist systems operate: they think production and supply are everything … if you see a demand problem as a supply problem, you get the wrong answers.”

Option 4, increasing exports’ share of China’s economy even further, may be in the abstract the most appealing. But it runs directly into the fact that both China and the US and its allies have reasons to reduce mutual dependence on their economies.

The emergence of geopolitical divisions between the west, on the one hand, and Russia and China, on the other, will put globalisation at risk. The autocracies will try to reduce their dependence on western currencies and financial markets. Both they and the west will try to reduce their reliance on trade with adversaries. Supply chains will shorten and regionalise… 

Russia must remain a pariah so long as this vile regime survives. But we will also have to devise a new relationship with China. We must still co-operate. Yet we can no longer rely upon this rising giant for essential goods. We are in a new world. Economic decoupling will now surely become deep and irreversible.

In all, the most likely scenario is that China’s growth just keeps slowing. That does not mean that investors in China will necessarily lose money. But it does suggest that generic China exposure -- simply owning Chinese equity or credit indices -- is going to be a losing proposition in the long-term

With consumers buying so little, at least relative to the Chinese economy’s productive capacity, how can the nation generate enough demand to keep that capacity in use? The main answer, as Michael Pettis points out, has been to promote extremely high rates of investment, more than 40 percent of G.D.P. The trouble is that it’s hard to invest that much money without running into severely diminishing returns.

financial repression — paying low interest on savings and making cheap loans to favored borrowers — that holds down household income and diverts it to government-controlled investment, a weak social safety net that causes families to accumulate savings to deal with possible emergencies, and more.

Part of the answer is bad leadership. President Xi Jinping is starting to look like a poor economic manager, whose propensity for arbitrary interventions — which is something autocrats tend to do — has stifled private initiative.

But China’s working-age population peaked around 2010 and has been declining ever since. While China has shown impressive technological capacity in some areas, its overall productivity also appears to be stagnating.

very high rates of investment may be sustainable if, like China in the early 2000s, you have a rapidly growing work force and high productivity growth as you catch up with Western economies

This, in short, isn’t a nation that can productively invest 40 percent of G.D.P. Something has to give.

the government was able to mask the problem of inadequate consumer spending for a number of years by promoting a gigantic real estate bubble. In fact, China’s real estate sector became insanely large by international standards.

what China must do seems straightforward: end financial repression and allow more of the economy’s income to flow through to households, and strengthen the social safety net so that consumers don’t feel the need to hoard cash. And as it does this it can ramp down its unsustainable investment spending.

But there are powerful players, especially state-owned enterprises, that benefit from financial repression

And when it comes to strengthening the safety net, the leader of this supposedly communist regime sounds a bit like the governor of Mississippi, denouncing “welfarism” that creates “lazy people.”

Japan ended up managing its downshifting well. It avoided mass unemployment, it never lost social and political cohesion, and real G.D.P. per working-age adult actually rose 50 percent over the next three decades, not far short of growth in the United States.

My great concern is that China may not respond nearly as well. How cohesive will China be in the face of economic trouble? Will it try to prop up its economy with an export surge that will run headlong into Western efforts to promote green technologies? Scariest of all, will it try to distract from domestic difficulties by engaging in military adventurism?

On Sunday, Trump noted indignantly on Twitter that China had never asked U.S. permission to devalue its currency, tax U.S. imports, and construct military installations in the South China Sea. In other words, it’s getting harder for Chinese leaders to minimize Trump’s provocations as inadvertent breaches of etiquette.

Shen’s anger and ambivalence about Trump’s call speak to broader anxiety in China right now about what to make of the U.S. president-elect and the trajectory of relations between the two countries. When I asked Shen whether he was concerned about a Trump presidency destabilizing international affairs, he told me disorder was already upon us. When I asked him whether he thought America, under Trump, would remain the most powerful nation on the planet, he answered without hesitation: “No.

Meanwhile, in a likely indication of the frictions between Washington and Beijing, Trump has yet to speak to his Chinese counterpart, Xi Jinping, despite having held conversations with at least 18 world leaders since his inauguration.

Last month, the China’s foreign ministry urged the US president’s team to “speak and act cautiously” after the White House press secretary, Sean Spicer, vowed the US would foil Chinese efforts to “take over” the South China Sea.

In a diplomatically worded editorial published on page three of the People’s Daily domestic edition on Monday, the voice of the Communist party said both countries should strive to avoid confrontation, conflict, misunderstandings and miscalculations.

Differences of opinion were inevitable due to the historical, cultural, economic and social differences between the US and China, the article said, “but wise men should seek common ground”. The article was printed under the byline “Zhong Sheng”, a homonym for “Voice of China”.

“The Chinese have not let themselves be bated … They understand that they are dealing with a different American leader who operates in different ways. They want to manage it carefully so it doesn’t needlessly escalate,” said Medeiros, who is now the managing director for Asia at the political risk consultancy Eurasia Group.

However, attitudes had shifted from nervousness about the US president’s erratic tweeting to resignation that the two countries were entering a “difficult period”. “The possibilities for an escalation of tensions are growing because distrust is high,” the article said.

Susan Shirk, the head of the 21st Century China Centre at the University of California, San Diego, said China specialists were “flummoxed” at Trump’s apparent determination to take on Beijing and said such moves came at an unfortunate time.

“As a person who sees a very strong connection between Chinese domestic politics and its foreign policy, I see the Trump statements as resonating through Chinese foreign policy in a way that could really be dangerous,” said Shirk, the author of China: Fragile Superpower

The Philippines, a longtime U.S. ally, used to challenge Chinese claims to the South China Sea. Since coming to power in 2016, however, President Rodrigo Duterte has taken a softer line with Beijing. 

“We have reached a point where we have independent foreign relations, and a problem of America is no longer a problem of the Philippines,” he said. 

Jay L. Batongbacal, director of the University of the Philippines’ Institute for Maritime Affairs and Law of the Sea, said the Duterte government’s response could help China and hinder the U.S. by lending credence to Beijing’s claims.  

Noah Barkin, a China expert in Berlin with the Rhodium Group, called the investment agreement in particular “a geopolitical coup for China.”

He said China could serve as a model and as a partner in cooperation, and suggested that Europe could play a moderating role between China and the United States.

“The values we all cherish in our Sunday sermons must be adhered to if we are not to fall victim to a new systemic rival,” said Reinhard Bütikofer, a German member of the European Parliament who has spoken out against the European investment agreement with China.

China’s overtures will not end the anger over its repressive policies, including its documented use of forced labor.

The Europeans finalized the investment agreement, for example, a day after the European Union publicly criticized the harsh prison sentence handed down to a Chinese lawyer who reported on the initial coronavirus outbreak in the city of Wuhan.

Over the long term, it remains to be seen how significantly China’s pacts and pledges will improve its international image, which plummeted this past year because of its obfuscation over the coronavirus outbreak in Wuhan.

A survey by the Pew Research Center in October found that in 14 economically advanced countries, unfavorable attitudes toward China had reached their highest levels in more than a decade. A median of 78 percent of those surveyed said they had little or no confidence that Mr. Xi would do the right thing in world affairs. (One upside for Mr. Xi: 89 percent felt the same way about Mr. Trump.)

Mr. Xi’s pledges to accelerate China’s reduction of carbon emissions, which he began making in September, have won international plaudits, even if the government has yet to detail how it will wean itself from coal and other heavily polluting industries.

Mr. Trump showed disdain for America’s traditional allies in Europe and Asia, but Mr. Biden has pledged to galvanize a coalition to confront the economic, diplomatic and military challenges that China poses.

Mr. Biden’s incoming national security adviser, Jake Sullivan, took to Twitter to hint strongly that Europe should first wait for consultations with the new administration — to no avail.

They said the agreement failed to do enough to address China’s abuses of human rights, including labor rights.

the scope of emigration has been highly variable over time. For most of the early 2000s around half a million residents, on net, were leaving every year according to United Nations data. But after 2008 that number fell sharply—probably in part due to China’s strong recovery from the global financial crisis while the U.S. and other major economies struggled. The early 2010s, a period of strong Chinese growth, also coincided with the slow erosion of China’s working-age labor force, creating opportunities for both ambitious Chinese citizens and foreigners willing to relocate there.

by the late 2010s, this trend had begun to reverse. Net emigration from China, which had fallen as low as 125,000 in 2012 according to U.N. data, had rebounded to nearly 300,000 by 2018

net emigration in 2022 at over 300,000 again, after a net drain of about 200,000 in 2021.

Net outflows of high net-worth individuals (with more than $1 million in assets) from China were steady at around 9,000 a year for most of the early 2010s. But in the late 2010s, that number started rocketing up: In 2017, net emigration by the wealthy was over 11,000 individuals, and by 2019 it was more than 15,000.

Higher numbers of wealthy individuals leaving could indicate faster wealth creation itself—and ambitious emigrants can help facilitate flows of capital and technology back to China.

this latest emigration wave is also taking place at a time of weakening growth and an increased populist tilt by Beijing. It is also happening during a fast rise in postsecondary education that is creating a growing supply of credentialed workers. Those same workers are facing anemic job growth in the service sectors where many of them would find employment

Since 2017, average annual service-sector employment growth has been just 0.4%, according to figures from data provider CEIC. Excluding 2022, when much of the economy was shut due to Covid-19 lockdowns, only moves that average up to 1.4%. In the five years through 2017 on the other hand, service jobs grew an average of 4.4% a year.

Rising net emigration also mirrors much smaller influxes of foreign talent in recent years—another trend that threatens to slow China’s climb up the technological ladder. Foreign residents of Shanghai and Beijing numbered just 163,954 and 62,812 in 2020, according to official data, down 21% and 42%, respectively, since 2010.

For much of the new millennium, China has been a place where the ambitious, hardworking and lucky could often get ahead. But in today’s China—more focused on security and control, less on growth—it is no longer clear how true that really is.

maybe most controversially, the Biden team added a “foreign direct product rule” that, as The Financial Times noted, “was first used by the administration of Donald Trump against Chinese technology group Huawei” and “in effect bars any U.S. or non-U.S. company from supplying targeted Chinese entities with hardware or software whose supply chain contains American technology.”

This last rule is huge, because the most advanced semiconductors are made by what I call “a complex adaptive coalition” of companies from America to Europe to Asia

The more we push the boundaries of physics and materials science to cram more transistors onto a chip to get more processing power to continue to advance artificial intelligence, the less likely it is that any one company, or country, can excel at all the parts of the design and manufacturing process. You need the whole coalition

The reason Taiwan Semiconductor Manufacturing Company, known as TSMC, is considered the premier chip manufacturer in the world is that every member of this coalition trusts TSMC with its most intimate trade secrets, which it then melds and leverages for the benefit of the whole.

“We do not make in the U.S. any of the chips we need for artificial intelligence, for our military, for our satellites, for our space programs” — not to mention myriad nonmilitary applications that power our economy. The recent CHIPS Act, she said, was our “offensive initiative” to strengthen our whole innovation ecosystem so more of the most advanced chips will be made in the U.S.

It managed to pilfer a certain amount of chip technology, including 28 nanometer technology from TSMC back in 2017.

Because China is not trusted by the coalition partners not to steal their intellectual property, Beijing is left trying to replicate the world’s all-star manufacturing chip stack on its own with old technologies

China can’t mass produce these chips with precision without ASML’s latest technology — which is now banned from the country.

Raimondo rejects the idea that the new regulations are tantamount to an act of war.

“The U.S. was in an untenable position,” she told me in her office. “Today we are purchasing 100 percent of our advanced logic chips from abroad — 90 percent from TSMC in Taiwan and 10 percent from Samsung in Korea.” (That IS pretty crazy, but it IS true.)

Until recently, China’s premier chip maker, Semiconductor Manufacturing International Company, had been thought to be stuck at mostly this chip level,

Imposing on China the new export controls on advanced chip-making technologies, she said, “was our defensive strategy. China has a strategy of military-civil fusion,” and Beijing has made clear “that it intends to become totally self-sufficient in the most advanced technologies” to dominate both the civilian commercial markets and the 21st century battlefield. “We cannot ignore China’s intentions.”

So, to protect ourselves and our allies — and all the technologies we have invented individually and collectively — she added, “what we did was the next logical step, to prevent China from getting to the next step.” The U.S. and its allies design and manufacture “the most advanced supercomputing chips, and we don’t want them in China’s hands and be used for military purposes.”

Our main focus, concluded Raimondo, “is playing offense — to innovate faster than the Chinese. But at the same time, we are going to meet the increasing threat they are presenting by protecting what we need to. It is important that we de-escalate where we can and do business where we can. We don’t want a conflict. But we have to protect ourselves with eyes wide open.”

China’s state-directed newspaper Global Times editorialized that the ban would only “strengthen China’s will and ability to stand on its own in science and technology.” Bloomberg quoted an unidentified Chinese analyst as saying “there is no possibility of reconciliation.”

The statements of cooperation released separately by the United States and China do not include a promise by China to phase out its heavy use of coal, the dirtiest fossil fuel, or to stop permitting and building new coal plants

both countries agreed to “pursue efforts to triple renewable energy capacity globally by 2030.” That growth should reach levels high enough “so as to accelerate the substitution for coal, oil and gas generation,” the agreement says. Both countries anticipate “meaningful absolute power sector emission reduction” in this decade, it says. That appears to be the first time China has agreed to cut emissions in any part of its economy.

both countries agreed to “pursue efforts to triple renewable energy capacity globally by 2030.” That growth should reach levels high enough “so as to accelerate the substitution for coal, oil and gas generation,” the agreement says

Both countries anticipate “meaningful absolute power sector emission reduction” in this decade, it says

That appears to be the first time China has agreed to specific emissions targets in any part of its economy

As part of the deal, China agreed to set reduction targets for all greenhouse gas emissions. That is significant because the current Chinese climate goal addresses only carbon dioxide, leaving out methane, nitrous oxide and other gases that are acting as a blanket around the planet.

The United States and China also agreed that in the next set of climate pledges — which nations are supposed to put forward in 2025 — China will set emissions reduction targets across its economy. Its current pledge calls for carbon dioxide emissions to peak before 2030 but does not specify how high they might go before the curve begins to bend or specify by how much it might slash emissions.

Manish Bapna, president of the Natural Resources Defense Council, an environmental group, praised the U.S.-China agreement and called it “a foundation of ambition” ahead of the U.N. climate summit in Dubai.

The two argued that democracy “can be realized in multiple ways” and isn’t the prerogative of any one country or group of countries. It called China “a whole-process, socialist democracy” and said democracy was the fundamental principle of Russia’s “democratic federative law-governed state.”

The Feb. 4 joint statement said both countries “have profound democratic traditions rooted in a thousand years of development,

It was Beijing that suggested including that the two countries’ friendship has “no limits”—wording read with apprehension in the West—according to the officials and advisers. The intention was less a declaration China would stand by Russia in case of war than a strong message to the U.S. about the resolve the two have in confronting what they see as increased American threats, the people said.

“China’s eagerness to present a strong alignment with Russia to counter the U.S. caused it to miss all the signs and to go in a dangerous direction,” said Yun Sun, director of the China program at the Stimson Center, a Washington think tank focused on promoting peace and security.

“It’s undeniable that right now, China is occupying an awkward nexus in which they’re trying to sustain their deep and fundamental relationship with Russia,”

“We believe they chose not to weigh in in advance.”

Beijing has refrained from coming to Moscow’s aid in a significant way. China is taking steps to buy Russian farm and energy products. But it is complying with the more damaging financial sanctions the U.S. has imposed on Russia, for fear of losing access to the dollar-dominated global trading system, say some Chinese bankers. They say their default position is to comply with the sanctions unless higher-ups tell them otherwise.

China’s ambiguous stance on the Russia-Ukraine war will likely speed up moves by countries from the U.K. and Australia to Japan to guard against Beijing,

a planned summit between China and the EU for April, if it isn’t canceled, is now likely to be dominated by discussions of China’s position on Ukraine.

Beijing’s most difficult contortions are on territorial sovereignty. China has built its foreign policy around the principle that a country’s territory is inviolable and its internal affairs should be free from interference by others.

China’s commitment to that principle seemingly would force it to condemn Russia’s invasion of Ukraine, something it has refrained from doing. Its policy statements have called for dialogue to resolve the crisis, avoiding the word invasion. Meanwhile, Western officials worry that Russia’s actions based on the argument that Ukraine is historically a part of Russia could embolden China to step up its own long-stated goal to bring Taiwan into its fold.

Since rising to power in late 2012, Mr. Xi has made himself the dominant force in China’s foreign policy and put emphasis on what he calls “big-power diplomacy”—a marked change from the relatively unassuming foreign-policy agendas of previous Chinese leaders that featured compromise and focused on building up ties with the U.S.

Today, despite Chinese state media’s pro-Russia rhetoric, some advisers privately question whether the partnership could cut China off from Western technologies and other resources and hurt its development, according to the foreign-policy advisers. After all, they have noted in private discussions, it is China’s opening to the U.S. and its allies that has propelled enormous Chinese growth in the past four decades.

China and Russia’s shared interest in confronting the U.S. has helped drive their relationship to its closest point since early in the Cold War. Part of that is due to the personal ties between Messrs. Xi and Putin, authoritarians who have visions of restoring their countries to past glory, even if in China’s case that past was centuries ago.

Sergey Radchenko, an international-relations professor at Johns Hopkins School of Advanced International Studies, pointed to instances where Mr. Putin would be deliberately late for meetings with foreign dignitaries. On one occasion, he brought out his dog to a meeting with then-German Chancellor Angela Merkel who, Mr. Putin knew, was terrified of dogs.

“He would never let himself do anything like that to Xi,” Mr. Radchenko said. “He’s extremely respectful to Xi because he sees a close relationship with China as one of Russia’s most valuable political assets.”

Until recently, the people said, Meta executives viewed the company’s reliance on China to make Oculus virtual reality headsets as a relatively minor concern because the company’s core focus was its social media and messaging apps.

All that has changed now that Meta has rebranded itself as a hardware company

“Meta is building a complicated hardware product. You can’t just turn on a dime and make it elsewhere,”

Facebook’s public criticism of China began in 2019 when Zuckerberg warned, in a speech at Georgetown University, that China was exporting a dangerous vision for the internet to the rest of the world — and noted that Facebook was abandoning its efforts to break into that country’s market.

The anti-China stance has since extended into a full-blown corporate strategy. Nick Clegg, the company’s president, wrote an op-ed attacking China in The Washington Post in 2020, the same year Zuckerberg attacked China in a congressional antitrust hearing.

At the antitrust hearing in Congress in 2020, Zuckerberg used his opening remarks to attack China in terms that went much further than his industry peers. He said it was “well-documented that the Chinese government steals technology from American companies,” and repeated that the country was “building its own version of the internet” that went against American values. He described Facebook as a “proudly American” company and noted that TikTok was the company’s fastest-growing rival.

“They were trying to find things that [Zuckerberg] could agree with Trump on, and it’s a pretty slim list,” said one of the people, describing how the company landed on its anti-China strategy. “If you’re not going to try to be in this country anyway, you might as well use it to your political advantage by contrasting yourself with Apple and TikTok.”

Today, China’s economy is roughly five times the size of India’s. The average citizen of China has an economic output of almost $13,000 a year, while the average Indian’s is less than $2,500

In human-development indicators, the contrast is even sharper, with infant mortality rates much higher in India, life expectancy lower and access to sanitation less prevalent.

The divergence, analysts say, comes down largely to China’s central consolidation of policy power, an earlier start in opening up its economy to market forces starting in the late 1970s, and its single-minded focus on export-led growth.

China took the first-mover advantage and then compounded its dominance as it pursued its plans relentlessly.

India started opening its quasi-socialist economy nearly a decade later. Its approach remained piecemeal, constrained by tricky coalition politics and the competing interests of industrialists, unions, farmers and factions across its social spectrum.

“There is that element where China is a natural role model — not for its politics, but for the sheer efficiency,”

The world now has a radically different power structure than it did in 1990. China has already made itself the world’s factory, all but closing off any path India could take to competitive dominance in export-driven manufacturing.

A “Make in India” campaign, inaugurated by Mr. Modi in 2014, has been stuttering ever since. Wage costs are lower in India than in China, but much of the work force is poorly educated, and the country has struggled to attract private investment with its restrictive labor laws and other impediments to business, including lingering protectionism.

service-sector growth can go only so far in reaping India’s promise of a demographic dividend, or blunt the peril of an unemployment crisis. Hundreds of millions of people can’t find jobs or are underemployed in work that pays too little.

the employment entrance exams at government agencies. These jobs are still coveted as private sector work remains limited and less stable.

650,000 students will apply for just 600 or 700 jobs in the national civil service this year.

The civil service is a tiny part of the work force, but it is prestigious — in part because it comes with job security for life. Most applicants spend years, and a big chunk of their family’s savings, and still fail to make the cut.

“Here there is no enterprise, no companies,” Mr. Kumar said. For any young person, “the question comes, ‘What next? What can I do?’”

The lessons Mr. Modi is taking from China are most apparent in his push for infrastructure development, investing heavily in highways, railways and airports to improve supply chains and connectivity.

India has quintupled its annual spending on roads and railways during Mr. Modi’s nine years in power

As Mr. Modi has boxed in opponents, cowed the press and overwhelmed independent elements of civil society, his government has lashed out at expressions of concern from abroad as evidence of a colonial plot to undermine India or a lack of understanding of India’s “civilizational” approach — both elements that diplomats had long heard in China’s own defensiveness.

All the while, the increasing militancy of his Hindu nationalist supporters, as arms of the state hang back and give perpetrators a free pass, exacerbates India’s religious fault lines and clashes that threaten to disrupt India’s rise.

Even as India tries to align its growing technological and economic capacity to capitalize on the Western tensions with China, it is determined to stick to its neutrality and maintain a balancing act between the United States and Russia. There is also the question of whether the West’s shift from China, the linchpin of the global economy, is a temporary recalibration or a more fundamental one.

“China took advantage of a favorable geopolitical moment to really transform itself by having access to technology, to capital, to markets led by the United States. It took advantage of that to build itself up,” Mr. Saran said. “This could be that moment for India.”

“Because China’s SSBNs [nuclear missile submarines] are in the South China Sea, the US navy will try to send spy ships in there and get close to the SSBNs. China’s navy hates that and will try to push them away,” Wu said.

Warheads and missiles would be put together and handed over to the navy, allowing a nuclear weapon to be launched much faster if such a decision was taken. The start of Chinese missile patrols could further destabilise the already tense strategic standoff with the US in the South China Sea.

China has been working on ballistic missile submarine technology for more than three decades, but actual deployment has been put off by technical failures, institutional rivalry and policy d

The decision to deploy Thaad anti-ballistic interceptors in South Korea was taken after North Korea’s fourth nuclear test, and the stated mission of the truck-launched interceptors is to shield the south from missile attack.

Behind the ominous warnings is growing concern in the People’s Liberation army that China’s relatively small nuclear arsenal (estimated at 260 warheads compared with 7,000 each for the US and Russia), made up mostly of land-based missiles, is increasingly vulnerable to a devastating first strike, by either nuclear or conventional weapon

China is developing a similar missile but officials in Beijing fear that the Chinese nuclear arsenal is so small it could be almost completely wiped out without notice, with the few missiles launched in reprisal being destroyed in mid-air by US missile defences.

There seems to have been some discussion of moving to a “launch on warning” policy, to fire Chinese weapons before incoming missiles land and destroy them. That appears to be a minority view, however

The core aim is to have a second strike capacity that is “survivable” and “penetrative”. Submarines, on patrol in the ocean depths, fulfil the first requirement, they say.

Partly to help penetrate US missile defences, China has in recent months also started putting multiple warheads on its largest missile, the DF-5, another development that has set alarm bells ringing in the Pentagon, where some analysts view it as the first step towards a massive nuclear armament drive aimed at obliterating the US arsenal.

Evidence for China’s more “relaxed” approach is the length of time it took to deploy multiple warheads, two decades after developing the necessary technology. China has similarly taken decades to deploy nuclear missile submarines.

The slow pace has not just been for practical reasons. China’s guiding principle has been to have a capacity for “minimum means of reprisal” while minimising the chance of accidental or unauthorised launch.

However, to follow the British Royal Navy model – in which each Trident submarine commander has a signed letter from the prime minister in his safe, to open in the event of a strike on London – would entail a huge leap in the alert status of the Chinese nuclear arsenal, and a similarly huge delegation of responsibility to one of the armed forces.

in radio shows Bannon hosted for Breitbart he makes plain the two largest threats to America: China and Islam.

Bannon’s sentiments and his position in Trump’s inner circle add to fears of a military confrontation with China, after secretary of state Rex Tillerson said that the US would deny China access to the seven artificial islands. Experts warned any blockade would lead to war.

“You have an expansionist Islam and you have an expansionist China. Right? They are motivated. They’re arrogant. They’re on the march. And they think the Judeo-Christian west is on the retreat,” Bannon said during a February 2016 radio show.

China’s military warned that war between the two countries was a real possibility. “A ‘war within the president’s term’ or ‘war breaking out tonight’ are not just slogans, they are becoming a practical reality,” an official wrote on the website of the People’s Liberation Army.

Bannon focused heavily on China’s oppression of Christian groups. “The one thing the Chinese fear more than America … they fear Christianity more than anything,” he said.

“Some of these situations may get a little unpleasant,” Bannon said in November 2015. “But you know what, we’re in a war. We’re clearly going into, I think, a major shooting war in the Middle East again.”

The four-page UN Genocide Convention was approved by the United Nations General Assembly in December 1948 and has a clear definition of what constitutes "genocide." China is a signatory to the convention, along with 151 other countries.

However any establishment of an International Criminal Tribunal would require the approval of the UN Security Council, of which China is a permanent member with veto power, making any hearing on the allegations of genocide in Xinjiang unlikely.

According to the report, between 1 million and 2 million people have allegedly been detained in as many as 1,400 extrajudicial internment facilities across Xinjiang by the Chinese government since 2014, when it launched a campaign ostensibly targeting Islamic extremism.Beijing has claimed the crackdown was necessary after a series of deadly attacks across Xinjiang and other parts of China, which China has categorized as terrorism.

The report also attributed a dramatic drop in the Uyghur birth rate across the region -- down about 33% between 2017 and 2018 -- to the alleged implementation of an official Chinese government program of sterilizations, abortions and birth control, which in some cases was forced upon the women without their consent.

"The genocide allegation is the lie of the century, concocted by extremely anti-China forces. It is a preposterous farce aiming to smear and vilify China," Foreign Ministry spokesman Wang Wenbin said at a news conference on February 4.

The answer comes in a second report, which is set to be released on Wednesday by the International Federation of Journalists, a Brussels-based union of journalism unions whose mission gives it a global bird's-eye view into news media almost everywhere. The group, which shared a copy with me, hired an author of the first report, Louisa Lim, to canvass journalists in 54 countries

The interviews “reveal an activation of the existing media infrastructure China has put in place globally,” Ms. Lim, a former NPR bureau chief in Beijing who is now a senior lecturer at the University of Melbourne, wrote in the report. “As the pandemic started to spread, Beijing used its media infrastructure globally to seed positive narratives about China in national media, as well as mobilizing more novel tactics such as disinformation.”

China is fighting what is in some ways an uphill battle

“The accusation on China is what the U.S. has been doing all along,”

The report found that a new media push accompanied the intense round of Chinese diplomacy in the pandemic, providing protective equipment initially and then vaccines to countries around the world, all the while scrambling to ensure that things as varied as the pandemic’s origin and China’s diplomacy was portrayed in the best possible light.

Both the media and vaccine campaigns are intertwined with China’s “Belt and Road” global investment campaign, in which Chinese support comes with strings attached, including debt and expectations of support in key votes at the United Nations.

Instead, the cultural power represented by companies like Netflix and Disney — vastly more powerful and better funded than any government effort — has been doing the work.

Its growing authoritarianism, its treatment of the Uyghurs and its crackdown on dissent in Hong Kong damaged global views of China, according to other surveys, even before the pandemic began in Wuhan.

it is less the exposure of a secret plot than it is documentation of a continuing global power shift. China’s media strategy is no secret, and the Chinese government says its campaign is no different from what powerful global players have done for more than a century.

I spoke to journalists on five continents who participated in the report. Their attitudes ranged from alarm at overt Chinese government pressure to confidence that they could handle what amounted to one more interest group in a messy and complex media landscape.

the general secretary of the International Federation of Journalists, Anthony Bellanger, said in an email that his view of the report is that while “China is a growing force in the information war, it is also vital to resist such pressures exerted by the U.S., Russia and other governments around the world.”

there’s little question of which government is more committed to this campaign right now. A report last year by Sarah Cook for the Freedom House, an American nonprofit group that advocates political freedom, found that Beijing was spending “hundreds of millions of dollars a year to spread their messages to audiences around the world.”

The United States may have pioneered the tools of covert and overt influence during the Cold War, but the government’s official channels have withered

Trump sought to turn those outlets into blunter propaganda tools, and Democrats and their own journalists resisted. That lack of an American domestic consensus on how to use its own media outlets has left the American government unable to project much of anything.

much of China’s diplomacy is focused on places that, while they may not have the cultural or financial power of European countries, do have a vote at the U.N. And while they appear often to be improvisational and run out of local embassies, China’s efforts are having a global impact.

Erin Baggott Carter, an assistant professor of political science at the University of Southern California, said her research has found that American news organizations whose journalists accepted official trips to China subsequently “made a pivot from covering military competition to covering economic cooperation.”

In talking to journalists around the world last week about Chinese influence, I was also struck by what they didn’t talk about: the United States. Here, when we write and talk about Chinese influence, it’s often in the context of an imagined titanic global struggle between two great nations and two systems of government

from Indonesia to Peru to Kenya, journalists described something much more one-sided: a determined Chinese effort to build influence and tell China’s story.

“Americans are quite insular and always think everything is about the U.S.,” Ms. Lim said. “Americans and the Western world are often not looking at what is happening in other languages outside English, and tend to believe that these Western-centric values apply everywhere.”

The Cold War was fought and won pretty much exclusively on military and cultural terms. The economic side was relevant only because the Soviets' doomed model inhibited any real competition. We were neither competitors nor partners in the economic space. A new Cold War between the United States and China would be something else entirely. It is difficult to see how it could be fought effectively, not to mention successfully.

This is by no means to question the need to respond to increasingly aggressive behavior by China. But the U.S. response must be coherent, disciplined and sophisticated. It must balance capabilities and objectives

Reverting to a Cold War mentality will drive us toward belligerent posturing that has little or no chance of changing Chinese behavior and could, on the contrary, provoke overreactions and dangerous miscalculations on both sides.

Above all, we must create a deliberate strategy that is aimed at managing this great-power conflict rather than vanquishing a foe.

This is very hard work, requiring patience, conviction and broad political support. It also requires the full participation of our allies, both in the region and elsewhere. We must undertake these efforts with the imperative of preventing a downward spiral toward armed conflict.

the Chinese are clearly pursuing their foreign policy goals according to a carefully calculated long-term strategy.

China’s strategy also aims to encircle the West technologically, dominating all the advanced systems of data collection and manipulation, including artificial intelligence, robotics, aerospace and quantum computing, always taking into account potential military applications

China has recognized, far earlier and far more clearly than any of the rest of us, that technology is the determining factor in the decisive battle of this moment in history. Beijing is working hard to create an overwhelming Chinese advantage in this battle.

Nearly spontaneous and seemingly unconnected irritations such as closing a consulate, imposing sanctions on a few officials, tweaking tariffs or sanctioning individual companies merely provoke countermeasures that will inhibit real management of this immense and complicated problem.

It comes four days after Wang sidestepped questions from CNN on when China would congratulate the US President-elect on his win

Chinese state-run media has so far been cautious in its handling of Biden's win in comparison to its increasingly strident tone towards the Trump administration, amid an ongoing deterioration in bilateral relations.

China is one of the last major nations to offer its congratulations to President-elect Biden and his team on their win

In 2016, Chinese President Xi Jinping offered his congratulations to then-President-elect Trump just one day after he had been declared the winner.

"We will handle the issue of the statement (of congratulations) in accordance with international practice," Wang said

In an editorial on Thursday, state-run newspaper China Daily said that the "eagerness of foreign leaders" to congratulate Biden showed they wanted to "turn their backs on the current administration and its divisive policies."

"China is always ready to work with the US to manage their differences. Whoever is in the White House should look at the regional situation objectively," the editorial said.

Global Times described Biden as an "old friend" of China's

"China must become a country the US cannot suppress or destabilize, and make it that cooperation with China is the best option for the US to realize its national interests. 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Here’s the story you may have heard: In the late 1980s Japan experienced a monstrous stock and real estate bubble, which eventually burst. Even now, the Nikkei stock average is significantly below the peak it reached in 1989. When the bubble burst, it left behind troubled banks and an overhang of corporate debt, which led to a generation of economic stagnation.

There’s some truth to aspects of this story, but it misses the most important factor in Japan’s relative decline: demography. Thanks to low fertility and unwillingness to accept immigrants, Japan’s working-age population has been declining quite rapidly since the mid-1990s.

The only way Japan could have avoided a relative decline in the size of its economy would have been to achieve much faster growth in output per worker than other major economies, which it didn’t.

Adjusted for demography, Japan has achieved significant growth: It has seen a 45 percent rise in real income per relevant capita. The United States has done even better, but this hardly fits the narrative of Japanese stagnation.

there’s more. Managing an economy with a declining working-age population is difficult, because low population growth tends to lead to weak investment. This observation is at the heart of the secular stagnation hypothesis, which says that nations with weak population growth tend to have persistent difficulty in maintaining full employment.

Yet Japan has, in fact, managed to avoid mass unemployment, or indeed mass suffering of any kind. Here’s one indicator, the employed percentage of men in their prime working years:

This percentage has remained high in Japan; indeed, consistently higher than that of the United States.

What about young people? Japan did see a rise in youth unemployment (ages 15-24) in the 1990s, but that rise has since been reversed. Here, via the World Bank, are International Labor Organization estimates of youth unemployment in Japan and, since the subject is attracting attention, China:

So Japan’s economic performance since the days when everyone thought it would rule the world has actually been pretty good. It’s true that employment has been sustained in part through large deficit spending, and Japanese debt has shot up:

But people have been predicting a Japanese debt crisis for decades, and it hasn’t materialized. In some ways, Japan, rather than being a cautionary tale, is a kind of role model — an example of how to manage difficult demography while remaining prosperous and socially stable.

while this is hard to quantify, lots of people I’ve talked to say that Japanese society is far more dynamic and culturally creative than many outsiders realize. The economist and blogger Noah Smith, who knows the country well, says that Tokyo is the new Paris

having been taken around Tokyo by locals, I can confirm that the city has a lot of vitality.

True, that same language barrier means that Tokyo likely can’t play the same role in global culture that Paris once did. But the Japanese are clearly having great success with sophisticated urbanism; if you think of Japan as a tired, stagnant society, you’re getting it wrong.

Will China be the next Japan?

There are some obvious similarities between China now and Japan in 1990. China has a wildly unbalanced economy, with too little consumer demand, kept afloat only by a hypertrophied real estate sector, and its working-age population is declining

there are growing concerns that China may have fallen into the “middle-income trap” that seems to afflict many emerging economies, which grow rapidly but only up to a point, then stall out.

if China is headed for an economic slowdown, the interesting question is whether it can replicate Japan’s social cohesion — its ability to manage slower growth without mass suffering or social instability

is there any indication that China, especially under an erratic authoritarian regime, is capable of pulling this off? Note that China already has much higher youth unemployment than Japan ever did.

From Papua New Guinea to Palau, the countries of the region have jurisdiction over an area of ocean three times as large as the continental United States, stretching from just south of Hawaii to exclusive economic zones butting up against Australia, Japan and the Philippines.

Chinese fishing fleets already dominate the seas between the area’s roughly 30,000 islands, seizing huge hauls of tuna while occasionally sharing intelligence on the movements of the U.S. Navy. If China can add ports, airports and outposts for satellite communications — all of which are edging closer to reality in some Pacific Island nations — it could help in intercepting communications, blocking shipping lanes and engaging in space combat.

Mr. Wang signed several new agreements, including a security deal that gives China the power to send security forces to quell unrest or protect Chinese investments, and possibly to build a port for commercial and military use.

Chinese officials deny that’s the plan. But the deal — along with others in the Solomons and Kiribati whose details have not been disclosed — has been made possible because of something else that’s visible and much-discussed in the Pacific: a longstanding lack of American urgency, innovation and resources.

“There’s a lot of talk,” said Sandra Tarte, the head of the government and international affairs department at the University of the South Pacific in Suva. “And not much real substance.”

The Yanks, it is often said, used to be more productive. Many of the airports and hospitals still in use across the Pacific were built by the United States and its allies during World War II.

“The United States doesn’t have a significant presence in the Pacific at all,” said Anna Powles, a senior lecturer in security studies at Massey University in New Zealand. “I’m always shocked that in Washington they think they have a significant presence when they just don’t.”

American officials point out that the United States does have big military bases in Guam, along with close ties to countries like the Marshall Islands. And in February, Antony J. Blinken became the first secretary of state in 36 years to visit Fiji, where he announced that the United States would reopen an embassy in the Solomon Islands and engage more on issues like illegal fishing and climate change.

Mr. Blinken said last week that “China is the only country with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military and technological power to do it.” He promised that the United States would “shape the strategic environment around Beijing to advance our vision for an open and inclusive international system.”

The start-up embassy in the Solomons also looks less impressive on closer inspection. Replacing an embassy that closed in the 1990s during America’s post-Cold War withdrawal, the outpost will begin in leased office space with two U.S. staff members and five local hires.

The American Embassy, by contrast, sits on a hillside far from downtown Suva in a heavily fortified compound. It covers five nations (Fiji, Kiribati, Nauru, Tonga and Tuvalu), doesn’t have a full-time ambassador — President Biden nominated someone only last week — and is known for being understaffed.

Joseph Veramu, a former U.N. consultant who runs Integrity Fiji, which focuses on values like transparency, said in an interview in Suva that he had invited U.S. embassy officials to events five or six times in recent years. Only once did someone come — without saying much, and refusing to allow photos.

But what they do want, and what China seems better at providing right now, is consistent engagement and capacity building.

While the United States has shown off Coast Guard vessels it is using to police illegal fishing, China is planning to build maritime transportation hubs and high-tech law enforcement centers where Chinese officers can provide expertise and equipment.

“China has always maintained that big and small countries are all equals,” Mr. Xi, the Chinese leader, said in a written message to Pacific foreign ministers on Monday. “No matter how international circumstances fluctuate, China will always be a good friend.”

Clearly, China intends to keep emphasizing that friendship means building stuff and offering promises of prosperity, while expecting news censorship, resource access and security opportunities in exchange.

The pressing question in this part of the world is: What does friendship mean to America?