Submitted by Eric Peters, CIO of One River Asset Management
“Now is the exact opposite time to go wobbly,” said the US Secretary of State, quoting Margaret Thatcher. He was pressing the British to follow our lead in banning Huawei from supplying 5G network infrastructure to the world’s allied democracies. The Iron Lady used the phrase to encourage Bush to send troops to Kuwait after Saddam’s 1990 invasion. And it worked. “Would Thatcher allow China to control the internet of the future?” asked Pompeo.
The answer is obviously no. But it’s no longer that simple. Back in 1990, the Cold War had just ended, the sense of solidarity between its victors was rather different from today. In the three decades since the Berlin Wall fell, America led the world. Our military dominance ensured unimpeded movement of goods and people, global trade, prosperity. And we served as the world’s buyer of last resort, importing whatever others sought to sell.
As mercantilist nations rushed to expand their export capacity, America neglected its own manufacturing and its factory workers. This could have carried on for decades more but for one simple fact – the nation that used this system to its greatest advantage, slipping through its every loophole, bending rules and breaking them, then chose to use its economic surplus to build aircraft carriers of its own. Hypersonic missiles. Stealth fighters. Nuclear submarines. It militarized islands in the waters of our allies, while imprisoning 1 million Uighurs in re-education camps.
It then published China 2025; a plan to dominate every global industry of the future. But China is now so well integrated into the global system that America’s companies and our allies are going “wobbly,” struggling to come to terms with the inevitable consequences of what has just happened. Which is that in 2016, Americans voted to reengineer our relationship with the world. And this marked the dawn of a new Cold War.
Three Steps
The satellite photos appear conclusive. Beijing’s is building a 3rd aircraft carrier that will complete their transition from an adapted Soviet model to a modern Western-style fleet. The new design represents a major leap forward in China’s capabilities. Military analysts see their standard pattern of copying, adaptation and innovation. Leaked drawings suggest their navy is developing a stealth fighter for the new carriers that closely resembles the US Navy’s E-2 Hawkeye. How they’ll adapt it, and innovate, is unknown. As the Cold War advances.
Proxy
The worst combat since the 2014 war left 4 Israelis and 22 Palestinians dead last week. The latter launched missiles from Gaza into Israel. The former retaliated. One is supported politically/financially by China. The other by America. Of course, it all unfolded in the run up to the latest Beijing/US trade negotiations. On cue, Iran threatened US forces in response to our sanctions against a nation that supplies oil to China. And China’s North Korean pawn tested new nuclear-capable missiles, seemingly impervious to the south’s Patriot and THAAD defenses.
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