The Decoupling of The US and China Keeps On Going

In October 2021, American political scientist Ian Bremmer published an article in Foreign Affairs titled “The Technopolar Moment“, where he pointed to the growing power of corporations in the field of information and computer technologies. At the same time, he spoke about the digital power that is now being distributed between the United States and China, and that “the globalists need stability to succeed over the coming decade. Their worst fear is that the United States and China will continue to decouple, forcing them to choose sides in an economic war that will raise barriers to their attempts to globalize their businesses. Their fortunes would improve if Washington and Beijing decided that overregulation risks undercutting the innovation that drives their economies. In the case of Washington, that means pulling back from an industrial policy designed to convince companies that they can thrive as national champions; for Beijing, it means preserving the independence and autonomy of the private sector.”

Ultimately, Bremmer repeated Brzezinski‘s call for the creation of the Big Two of the United States and China. Because now increasing competition and conflicts are leading to volatility in markets, supply chains (current problems with semiconductors) and other costs that Washington would like to avoid.

But over the next few years, despite the fact that the globalist Democrats were in power in the United States, the confrontation with Beijing only intensified.

New presidential decrees and laws passed by the US Congress were restrictive in relation to China in the field of critical technologies.

Now it has come to the point that the Biden administration, faced with China‘s opposition in the “chip war,“ has informed its allies, Japan and the Netherlands, that it is considering the possibility of applying the toughest trade restrictions if companies such as Tokyo Electron Ltd. and ASML Holding NV continue to provide China with access to advanced semiconductor technologies.

In fact, it is openly stated that the United States is considering whether to impose a measure called the foreign direct product rule, or FDPR. The rule lets the country impose controls on foreign-made products that use even the tiniest amount of American technology.. Thus, Washington is looking for leverage on its partners, who are already suffering losses.

As expected, the US sanctions have triggered the domino effect (at the same time, the US itself had previously spoken about the threats of breaking supply chains and the need to preserve the established structure of international relations). Shares in Tokyo Electron fell 7.5%, leading a drop in Japan’s Nikkei 225 Stock Average. Fellow chip gear providers including Lasertec Corp. and Screen Holdings Co. also ranked among the market’s biggest decliners. ASML shares plunged 11% in Amsterdam to €870.90 even as the company reported better-than-expected second-quarter bookings, wiping out €42.7 billion ($46.7 billion) of market value. That was the biggest decline since March 2020. Shares of Applied Materials Inc., Lam Research Corp. and KLA Corp. — the three biggest American makers of chip equipment — also tumbled last week.

US companies feel that restrictions on exports to China have unfairly punished them and are pushing for changes. Allies, meanwhile, see little reason to alter their policies when the US presidential election is just a few months away. However, if Donald Trump comes to power, even tougher measures will be taken against China, which will increase the volatility of stock markets.

But there is more to come. There is evidence that the Chinese venture capital industry is undergoing a sea change, as the two-decade marriage between US investors and mainland start-ups comes to an end. Foreign capital in China’s venture capital industry plunged 60 per cent year on year to US$3.7 billion in 2023, just 10 per cent of the peak in 2021, according to research firm Dealogic.

The “cycle is broken” and the bifurcation of US funds and China tech start-ups is set to widen, says Winston Ma, a law professor at New York University.

American investors reaped big returns when Chinese start-ups pursued their initial public offering (IPO) in the US, but the channels for cashing out have significantly narrowed in recent years due to the US sanctions and China‘s retaliatory sanctions.

Meanwhile, Washington is increasing its scrutiny of US investments in certain Chinese sectors, including semiconductors, artificial intelligence and quantum computing. US investment houses GGV Capital, GSR Ventures, Qualcomm Ventures and Walden International were subject to a probe by a US Congressional committee last year over their deals in China in sensitive technology areas.

The South China Morning Post newspaper reported in July that tech giant Shein‘s pursuit of an initial public offering (IPO) in London, after the company was turned away by New York regulators, has hit regulatory roadblocks in that country as well.

TikTok owner ByteDance also faces problems. On the whole, international investors in China’s most successful unicorns (the term means a startup that has made a huge profit) are still waiting to cash out, as their IPO plans remain up in the air. And this means the flight of the dollar and, accordingly, its perception as a toxic currency, since the outflow of venture capital leads to the formation of a vacuum that is filled by Chinese state funds. And while external investors are discussing the future of the Chinese market, transformations are taking place there, which are clearly not in favor of the United States and globalists.

The 20th Central Committee of the Communist Party of China at its third plenary session in Beijing from July 15 to 18, 2024, approved a decision on further comprehensive deepening of reforms and promotion of China’s high-quality development , which should contribute to the construction of a socialist modernized strong state.

And this means further narrowing down for the maneuvers of globalists, even those in China. Therefore, decoupling (from English decoupling – separation) will increase due to further changes in the Chinese economic model, as well as due to different perceptions by China and the United States of the world order.

The Decoupling of The US and China Keeps On Going