Markets get stark reminder that China is a Communist dictatorship https://www.axios.com/2022/10/25/markets-china-xi-jinping-communist-dictatorship Global capital fled China en masse Monday in the aftermath of Xi Jinping's quasi-coronation as the sole power in charge of China. Why it matters: Market moves suggest investors were surprised by the extent to which Xi's elevation signaled a coming period of conflict with the West — and a backdrop that could make it increasingly difficult for investors to extricate themselves from what's been the most important growth market for decades. Investors seem to be getting out now, while the getting is good. State of play: A violent selloff hit Chinese markets Monday, as a riptide of capital rushed out of the People's Republic. Hong Kong's Hang Seng index, traditionally the venue of choice for foreign investors in Chinese equities, plunged 6.4% — its worst drop since the 2008 financial crisis. China's currency hit its weakest level against the U.S. dollar in more than 14 years, indicating a widespread withdrawal of capital from markets there. Goldman Sachs' index of Chinese ADRs — U.S.-listed securities tied to shares of some of the largest Chinese companies — collapsed by 15%. The backstory: In 1978, Chinese leader Deng Xiaoping launched China's "reform and opening" process, aimed at reversing the economic and political chaos of former Party Chairman Mao Zedong's absolutist, one-man rule over the country. As a result, China's ruling Communists shifted to a political system that relied on retirements and term limits to prevent the type of personality cult that developed around Mao, while tapping politically moderate technocrats to manage the country's economy and its links to global financial markets. The system generated enormous prosperity for China, turning the People's Republic into an engine of global economic growth — and lifting roughly 800 million Chinese out of dire poverty. Yes, but: That era effectively ended over the weekend, as Xi Jinping not only won a historic third term as party leader but removed the few remaining market-friendly technocrats that served on the powerful Politburo Standing Committee — the seven-man group that basically rules the country. "What this means is that China will face a more difficult international and domestic environment in the future, and that China and Western countries led by the US will face even greater conflict in the fields of geopolitics, high-tech, economy, and trade," wrote analysts for SGH Macro Advisors in a note to clients on Monday. Our thought bubble: Xi's centralization of control of China — along with his "no-limits" partner Vladimir Putin's brutal invasion of Ukraine — are likely to be two of the largest milestones marking the end of the era of globalization as we know it. This could also precipitate a period of pronounced pain for global investors who have poured hundreds of billions of dollars into China. The recent example of Russia — where investors are still trying to establish the scope of losses related to sanctions, expropriations and capital controls stemming from the war on Ukraine — likely sharpens for investors the potential risks of China's experiment with a single-man rule. What they're saying: "The Great Chinese Liquidation of public and private equity is in full swing," wrote hedge fund manager Kyle Bass on Twitter Monday. "Today’s 10-20% crash in Chinese shares is just the beginning of the destruction of western capital invested in Chinese companies."
China’s workers flee COVID curbs at huge iPhone factory Bloomberg News Oct 31, 2022 https://www.afr.com/world/asia/chin...-curbs-at-huge-iphone-factory-20221031-p5bu7r Hong Kong | Workers have been staging a mass exodus from Apple’s biggest iPhone factory in China, seeking to escape hastily enacted COVID-19 measures that left many of the 200,000 staff grappling with inadequate living conditions. The huge factory complex in Zhengzhou city in central Henan province is the latest manufacturing centre to be hobbled by President Xi Jinping’s strict zero-COVID policies. In this photo taken from video footage, people with suitcases and bags are seen leaving from a Foxconn compound in Zhengzhou. Apple supplier Foxconn, based in Taiwan, currently has about 200,000 workers at its Zhengzhou complex and has not disclosed the number of infected people at the factory, but said on Sunday that it would not stop workers from leaving. Videos and photos flooded Chinese social media platforms on the weekend showing people, who are apparently Foxconn workers, climbing over fences and carrying their belongings down the road. They also depicted local residents offering food and shelter to some of those leaving and on the road. The exodus came after the situation at the plant started to deteriorate, with food supplies running low and reports of workers locked in their dormitory rooms for quarantine. Tensions at the Zhengzhou plant underscore the economic and social costs of Mr Xi’s zero-COVID policy, a rigorously policed system of mass testing and quarantine lockdowns that has fostered growing resentment. It also shows the potential risk to global supply chains and products from China’s approach, which demands lockdowns, business restrictions and mass testing drives when even one COVID case emerges. Local authorities were scrambling to organise buses to bring workers, who left the factory, into centralised quarantine. The government of Dagang county has dispatched buses and officials to help ferry employees to quarantine sites for a seven-day compulsory isolation before allowing them to go home, it said in a WeChat post. At least six counties and cities in Henan province asked residents who just left Foxconn to contact local authorities before going home. Foxconn, together with local government, also arranged buses for employees choosing to return home. But Foxconn also issued three notices to its workers at the Zhengzhou plant, vowing to ensure safety, legitimate rights and income for those who are willing to stay, according to a WeChat statement posted by the Zhengzhou city government on Sunday. Food scarcity Discontent has been brewing among staff at the main factory, where the emergence of COVID-19 cases saw it go into a closed loop system. Food became a source of unrest after the Taiwanese company that makes most iPhones sold around the world shut cafeterias at the manufacturing site known as “iPhone City.” At one point, only workers on production lines were given meal boxes, with those infected or afraid to leave their company-provided dormitories given more basic fare like bread and instant noodles, Bloomberg News reported. Apple CEO Tim Cook visits the iPhone production line at the Foxconn factory in Zhengzhou in 2012. AP It’s unclear how many workers were allowed to leave Foxconn. The company hires many temporary workers from nearby regions to assemble electronics including Apple’s latest iPhone 14 devices. Foxconn and Apple didn’t immediately provide a comment outside of regular business hours. Foxconn said on Wednesday that production hadn’t been impacted by what it described as a “small” outbreak. China’s zero-tolerance approach to the pandemic has idled factories and up-ended supply chains. Closed loops enable companies to stay operational during lockdowns but take a toll on workers, whose movements are severely limited, with some even required to sleep on factory floors. Tesla used a closed loop to resume output during Shanghai’s restive lockdown earlier this year. In May, hundreds of workers clashed with security personnel at Quanta Computer’s factory in Shanghai after they were barred for months from contact with the outside world. Foxconn fallout Now, the fallout is being felt by the nation’s single biggest private sector employer, one often hailed as an example of China’s manufacturing prowess. The discontent comes at a crucial time for Apple, which launched the iPhone 14 during an unprecedented slump in global electronics demand. While faring better than other smartphone makers, it’s backed off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialise, Bloomberg has reported. Apple reported better-than-expected results Thursday but warned of a holiday slowdown. Any disruption at Zhengzhou threatens to snarl Apple’s finely orchestrated supply chain. Thousands of components from Europe to Asia are shipped into Zhengzhou, assembled manually into devices, then shuttled off to the rest of the world. Over the past few days, photos and video clips flooded social media sites such as Douyin and Weibo, purportedly taken by Foxconn workers dissatisfied with conditions in the plant. One widely shared clip zeroed in on trash piled up outside dorm rooms, while another showed people jostling for food in an apartment complex, where workers were alleged to have been sent for quarantine. Others posted pleas for help. Messages sent to users sharing these videos on Douyin went unanswered, and Bloomberg hasn’t been able to verify the authenticity of these particular clips.
This brings up another issue regarding China and Covid. The intent of lockdowns was to ensure your public health care system was not overrun before vaccines were available. Once Covid vaccines were available and a majority of the population was vaccinated -- the intent would be to eliminate lockdowns since they no longer be needed. Vaccines would ensure that your hospitals were not overrun due to severe illness. Does China not have confidence in their home-grown vaccines? Do the Chinese vaccines even work? Especially seeing that nearly every other nation on the face of the earth has stopped using Covid vaccines created in China -- finding them marginally effective. Still using lockdowns can only be taken as a sign that Chinese Covid vaccines are worthless. Obviously the vaccines (Pfizer, Moderna, etc.) have worked as intended in western countries to stop the severe illness. As a whole over the past year, the majority of those hospitalized are unvaccinated. Our hospitals in western nations are not overrun due to Covid -- thanks to effective vaccines.
No big deal, AUD & NZD not so crash hot either, and these are not 3rd world countries. Many currencies can't compete against the strong USD.
‘Terrifying’: China’s business elite are losing hope as Xi tightens grip By Li Yuan November 18, 2022 https://www.smh.com.au/business/the...hope-as-xi-tightens-grip-20221108-p5bwbz.html For decades, China’s business class had an unspoken contract with the Communist Party: Let us make money and we’ll turn a blind eye to how you use your power. Like most Chinese people, they bought into the party’s argument that its one-party rule provides more efficient governance. Xi Jinping’s crackdown on big business, along with his zero-COVID policies, have battered the Chinese economy. Credit:AP Now, the tacit agreement that entrepreneurs had come to count on is dissolving in front of their eyes. China’s leader, Xi Jinping, used an important Communist Party congress last month to establish near-absolute power and make it clear that security would trump the economy as the nation’s priority. “My last lingering hope was dashed,” said the founder of an asset management firm in the southern city of Shenzhen who contacted me hours after the congress ended. “Totally finished, completely lost control and absolutely terrifying,” a tech entrepreneur in Beijing texted me after seeing the party’s new leadership lineup, which is packed with Xi’s acolytes. Like many Chinese, they fully expected Xi to secure a third term, breaking a norm followed since the 1980s. Still, they held onto the hope that his dominance would be tempered by other power factions within the party. Xi’s sweeping victory, by pushing out perceived moderates in favour of loyalists, made it clear that it would be a one-man rule system that could last for decades. China’s last leader as powerful as Xi, 69, was Mao Zedong, who led the country into the Great Famine and the Cultural Revolution that resulted in tens of millions of deaths, social chaos and economic destruction. Last month’s party congress jolted the Chinese business world with uncertainty. It was seen publicly in the immediate market response: China’s stocks plunged and its currency, the yuan, fell in value. I am hearing it in the voices and messages of the many businesspeople I have spoken to in recent weeks who repeatedly call their reaction a “political depression.” They are not displaying their anxiety in public, unlike a young demonstrator I wrote about in my last column. All the businesspeople I interviewed for this article requested anonymity for fear of punishment by authorities. But they are expressing dissent in their own way, pledging to withhold further investment in China or even contemplating leaving their country for another that would exchange a passport for their wealth. The party, under Xi, has taken control of nearly every aspect of society, costing Chinese people agency over their destinies. Members of the business class, especially those working at the top of the technology sector who operated with relatively few restrictions until a few years ago, have taken it especially hard. China”s strict COVID-zero policies have started to ease.Credit:Bloomberg These tech entrepreneurs mostly grew up “in the age of ‘economism,’ when money making, economic principles and economic rationality trumped everything else,” said Minxin Pei, professor of government at Claremont McKenna College in California. “Now they see the regime puts politics in command,” he said. “For them, this is incomprehensible.” In the past decade, Xi’s economic thinking can be summed up like this: bigger roles for the state, and smaller roles for the market. He left the private sector largely alone in his first term, when he was busy consolidating his power within the party and the military. In his second term, which began in 2017, Xi kept private enterprises on a much tighter leash. The government cracked down on businesses, sending some of the country’s most successful business people into early retirement or self-imposed exile. China’s harsh “zero-COVID” policy has left the economy in the worst shape in decades. To Chinese in the business elite, who grew accustomed to the privilege and attention their success brought, the Big Boss, as many of them refer to Xi, doesn’t care about the economy or people like them. In his opening address at the party congress, Xi mentioned “security” 52 times, “Marxism” 15 times and “markets” three times. “There’s no question about the shift both in political rhetoric and in action and in also the appointment of the team,” said Pei, who said he believes that Xi’s leadership lineup shows that he does not value expertise in managing a market-oriented economy. “He values people who can implement his policy regardless of the economic consequences.” That makes the business community anxious. Under Xi, the ability of China’s bureaucracy to dictate to the public has increased while its ability to govern has decreased, Guoguang Wu, an adviser to former Premier Zhao Ziyang in the 1980s, told me on my Chinese language podcast. “When the ability to govern decreases, even in the absence of any particular policy from the top, the ineptitude, brutality, and ignorance of lower-level officials will brew disasters for the common people they rule over,” said Wu, who is a senior research scholar at the Stanford Centre on China’s Economy and Institutions. Many businesspeople have lost a lot of money under “zero-COVID,” which has shuttered cities and locked millions of people in their homes for weeks at a time as the government seeks to eliminate the coronavirus. “Under the leadership of this dictator, our great country is falling into an abyss,” said a hardware tech executive in Shenzhen. “But you can’t do anything about it. It pains and depresses me.” Retail investors are betting China's economic recovery will fuel corporate profits.Credit:Bloomberg Despite many conversations over the years, we never talked about politics. I was surprised when he called after the party congress to talk about his “political depression.” He said he used to be very nationalistic, believing that the Chinese were among the smartest and the most hardworking people in the world. Now, he and many of his friends spend most of their time hiking, golfing and drinking. “We’re too depressed to work,” he said. Until a year ago, his startup was doing so well that he was planning to take it public. Then he lost a big chunk of his revenues and his new hires sat idly with nothing to do when cities were locked down under the “zero-COVID” rules. He said now he has no choice but to lay off more than 100 people, sell his business and move his family to North America. “Since the dark night has descended,” he said, “I’ll deal with it the dark night way.” The tech entrepreneur from Beijing who texted me after the party congress recounted a chilling experience. In May, when there were rumours that Beijing could be locked down, he felt he could not tell his employees to leave work early and stock up on groceries. He was worried that he could be reported for spreading rumours — something that had gotten people detained by police. He told them only that they should feel free to leave early if they had things to take care of. After the party congress, most people in the investor’s circle expect that they will be forced to pay more in taxes or be expected to donate more money to universities and other state-backed charities. They are not planning to make any big investments. This successful business person is now applying to emigrate to a European country and the United States. Just like many ordinary Chinese people, the executives I spoke to said they were horrified by the video of Hu Jintao, Xi’s predecessor as China’s top leader, being abruptly led out of the closing ceremony of the party congress. They did not accept the official government explanation that Hu had to leave early because of health issues If Xi could remove his predecessor like that, several of them said, he could do anything to anyone. A well-connected investor in Beijing said that his friends who are entrepreneurs now realised they could no longer remain indifferent to politics. At social gatherings, they have started discussing which countries to seek passports from, and how to move their assets offshore. At social gatherings, hosts are asking friends to surrender their phones to be kept in a separate place for fear of surveillance. After the party congress, most people in the investor’s circle expect that they will be forced to pay more in taxes or be expected to donate more money to universities and other state-backed charities. They are not planning to make any big investments. “We’re all anxious,” he said. “We’re at a loss of what to do at this historical crossroad.” This article originally appeared in The New York Times.
Protests in Shanghai and Beijing as anger over China's COVID curbs mounts By Brenda Goh and Martin Quin Pollard REUTERS SHANGHAI/BEIJING, Nov 27 (Reuters) - Protests in China against heavy COVID-19 curbs spread to Shanghai on Sunday, with demonstrators also gathering at one of Beijing's most prestigious universities after a deadly fire in the country's far west sparked widespread anger. The wave of civil disobedience, which has included protests in Urumqi where the fire occurred as well as elsewhere in Beijing and in other cities, has reached unprecedented levels in mainland China since Xi Jinping assumed power a decade ago. In Shanghai, China's most populous city, residents gathered on Saturday night at Wulumuqi Road - which is named after Urumqi - for a candlelight vigil that turned into a protest in the early hours of Sunday. As a large group of police looked on, the crowd held up blank sheets of paper - a protest symbol against censorship. Later on, they shouted, “lift lockdown for Urumqi, lift lockdown for Xinjiang, lift lockdown for all of China!”, according to a video circulated on social media. At another point, a large group began shouting, “Down with the Chinese Communist Party, down with Xi Jinping", according to witnesses and videos, in a rare public protest against the country's leadership. The police tried at times to break up the crowd. At the campus of Beijing's Tsinghua University a large crowd gathered, according to images and videos posted on social media. Some people also held blank sheets of paper. Thursday's fire that killed 10 people in a high-rise building in Urumqi, capital of the Xinjiang region, saw crowds take to the street on Friday evening, chanting "End the lockdown!" and pumping their fists in the air, according to videos on social media. Many internet users surmised that residents were not able to escape in time because the building was partially locked down, which city officials denied. In Urumqi, a city of 4 million, some people have been locked down for as long as 100 days. ZERO-COVID China has stuck with Xi's signature zero-COVID policy even while much of the world tries to coexist with the coronavirus. While low by global standards, China's cases have hit record highs for days, with nearly 40,000 new infections on Saturday. China defends the policy as life-saving and necessary to prevent overwhelming the healthcare system. Officials have vowed to continue with it despite the growing public pushback and its mounting toll on the world's second-biggest economy. Widespread public protest is extremely rare in China, where room for dissent has been all but eliminated under Xi, forcing citizens mostly to vent on social media, where they play cat-and-mouse with censors. Frustration is boiling just over a month after Xi secured a third term at the helm of China's Communist Party. [1/3] People hold signs and light candles during a vigil held for the victims of the Urumqi fire, in Shanghai, China November 26, 2022 in this picture obtained from a social media video. Gao Ming/via REUTERS "This will put serious pressure on the party to respond. There is a good chance that one response will be repression, and they will arrest and prosecute some protesters," said Dan Mattingly, assistant professor of political science at Yale University. Still, he said, the unrest is far from that seen in 1989, when protests culminated in the bloody crackdown in Tiananmen Square. He added that as long as Xi had China's elite and the army on his side, he would not face any meaningful risk to his hold on power. This weekend, Xinjiang Communist Party Secretary Ma Xingrui called for the region to step up security maintenance and curb the "illegal violent rejection of COVID-prevention measures". Xinjiang officials have also said public transport services will gradually resume from Monday in Urumqi. 'WE DON'T WANT HEALTH CODES' Other cities that have seen public dissent include Lanzhou in the northwest where residents on Saturday upturned COVID staff tents and smashed testing booths, posts on social media showed. Protesters said they were put under lockdown even though no one had tested positive. Candlelight vigils for the Urumqi victims took place at universities in cities such as Nanjing and Beijing. Videos from Shanghai showed crowds facing police and chanting “Serve the people”, “We want freedom", and “We don’t want health codes”, a reference to the mobile phone apps that must be scanned for entry into public places across China. The Shanghai government did not immediately respond to a request for comment on Sunday. The city's 25 million people were put under lockdown for two months earlier this year, provoking anger and protests. Chinese authorities have since then sought to be more targeted in their COVID curbs, an effort that has been challenged by the surge in infections as the country faces its first winter with the highly transmissible Omicron variant. In Beijing on Saturday, some residents under lockdown were able to successfully confront and pressure local officials into lifting curbs ahead of schedule. One video shared with Reuters showed Beijing residents marching in an unidentifiable part of the capital on Saturday, shouting "End the lockdown!" The Beijing government did not immediately respond to a request for comment. Reporting by Martin Quin Pollard, Yew Lun Tian, Eduardo Baptista and Liz Lee in Beijing and by Brenda Goh in Shanghai and the Shanghai Newsroom; Writing by Tony Munroe; Editing by William Mallard, Kim Coghill and Edwina Gibbs
This issue in China gets back to the entire concept of vaccines in a Covid pandemic. The basic idea was for societies to have restrictions and lockdowns in place until vaccines were available and then start easing the restrictions as the large majority of society got vaccinated. The intent of the lockdowns was to prevent hospitals or morgues from being overwhelmed. Once vaccines were available which greatly reduce severe illness then restrictions are no longer needed. Any reduction in infection from vaccines is beneficial as well -- but not required to re-open society. Only if there is a new Covid variant surge with a lot of severe illness should restrictions be re=applied again. The leaders of China don't appear to understand this concept and have stayed with a "zero Covid" policy -- which is ludicrous once a large majority is vaccinated. Do the Chinese not trust their own vaccines? Are their vaccines totally ineffective? Why is China sticking with a "zero Covid" policy when they should be opening up.
From what I can gather, China is not using western vaccines. Also, their vaccine is something like 50% effective going from memory. The other factors, cooping citizens inside agravates the situation. Cold weather and indoors day and night possibly compounds that again.
China Is Starting to Really Regret Its Friendship With Russia https://news.yahoo.com/china-starting-really-regret-friendship-051656691.html?fr=sycsrp_catchall “The biggest surprise for China was that Russia totally misjudged its own power. We thought that Russia would win a very fast war,” the Chinese expert explained ruefully, a few weeks after the invasion. This was not the official line, which was then in the phase of intense attempts to persuade global audiences that Beijing had no idea what was coming. But it was a better reflection of Chinese foreign policy thinking than either playing innocent or repeating ad nauseam that the invasion of Ukraine was the responsibility of the United States and NATO pushing a big power against the wall. One of the main reasons behind Beijing’s resistance to such entanglements in the past was not because partners and allies weren’t useful but because the countries in question risked dragging China down with their mistakes. The “Pakistan model,” which China had been touting, was conditioned by exactly this experience: Beijing didn’t want to get stuck defending every Pakistani intervention in Kashmir or inadvertently drawn into a conflict with India, so it confined itself to providing the capabilities its friend needed and then staying above the fray. Russia was not the first Chinese partner to believe it would win a very fast war and found itself in a hole, but China wasn’t usually pulled into it with them. The problem Beijing faced in 2022 was that in crucial areas, it was still too soon to make a break with the West. China remained dependent on the U.S. dollar system. For all the speculation about renminbi internationalization, Chinese payment systems, and its new digital currency, China was barely any closer to constructing a resilient alternative financial architecture than it had been in 2014. The technology story was equally problematic: despite the massive push to build its own semiconductor industry, Chinese firms were still painfully reliant on U.S. intellectual property. This left many of its companies exposed if they continued to do business in Russia, much like any other sanctioned entity. It was Huawei’s and ZTE’s sanctions-busting dealings in Iran that had risked decimating the two firms once the United States had the legal justification to go after them with full force. Now articles entitled “Is Russia the New Huawei?” were popping up, as the United States applied the same Foreign Direct Product Rule restrictions to the entire Russian tech sector that had been the final blow for Huawei’s 5G plans in the UK. Circumvent them, and those Chinese firms could kiss goodbye to their advanced semiconductors. The net effect was that from banks to telecoms, most of the companies that might have wished to take advantage of the newly opened vacuum in the Russian market instead faced even greater limitations on their activities. China Wants Taiwan and the Clock Is Ticking Louder Every Day Almost as bad for China, the narrative about a West divided and in decline was becoming harder to sustain, to the extent that its propaganda outlets stopped trying to advance it at all. Beijing had been able to make considerable hay with Trump, COVID, Brexit, the U.S. withdrawal from Afghanistan, and much else in recent years. But now it was confronted with a different picture. The sanctions put in place by the United States, Europe, Japan, and a healthy array of other states in Asia were not the thin gruel of 2014 but far more potent in their effect—and disturbingly replicable for China too. Central bank sanctions threatened China’s $3 trillion foreign reserves war chest, prompting emergency meetings between Chinese regulators and banks to discuss how to protect China’s overseas assets from comparable measures. The new U.S.-led plurilateral grouping established on Russian export controls, comprising countries wielding more than half of the world’s GDP, could deny China critical components and technologies too. It was the first such effort on this scale since the entity that did the job during the Cold War—the Coordinating Committee for Multilateral Export Controls, more widely known as COCOM—was retired in favor of a multilateral regime in its aftermath. In addition, Beijing watched companies simply writing off tens of billions of dollars of assets in Russia as they fled for the exits, going well beyond any formal requirements by Western governments. It undercut one of China’s most important hedges: Xi had personally laid out plans to tighten international firms’ dependence on China in order to form “a powerful countermeasure and deterrent capability against foreigners.” That countermeasure and deterrent now looked a great deal less effective. Surveys of sentiment among international investors in China, which had held up during the early stages of the pandemic, weakened sharply. The combined effect of investors’ anxiety about being swept up in the Russia sanctions directly, and a repricing of risk in light of fears that China could go through a repeat of the Russia experience itself, was one factor. As the FBI director, Christopher Wray, noted in a speech: “There were a lot of Western companies that had their fingers still in that door when it slammed shut. If China does invade Taiwan, we could see the same thing again, at a much larger scale. Just as in Russia, Western investments built over years could become hostages, capital stranded, supply chains and relationships disrupted.” Xi’s continued pursuit of a zero-COVID policy, rendering global supply chains increasingly dysfunctional after two years of strict lockdowns in coastal economic hubs, had even greater immediacy for firms’ bottom line. Nearly a quarter of European companies surveyed in April 2022 said they were now considering moving out altogether. As the head of the EU Chamber of Commerce there, Jörg Wuttke, put it: Western companies are grappling with the scenario that they would have to leave China—just as they are now leaving Russia—if China tried to forcibly integrate Taiwan. And it doesn’t help, of course, that China is adopting Russia’s aggressive rhetoric. The effect is the same as from the COVID policy: foreign companies are hitting the pause button. New investments are suspended for the moment... The president has maneuvered himself into two dead ends at once: He can’t change his COVID policy, and he can’t change anything about his friendship with Vladimir Putin. The China risk was being priced differently now. The military picture was also troubling to Chinese policymakers. Backed with Western training, arms, and intelligence support, the domestic will to resist, and a public opinion climate in the West that saw the war in starkly black and white terms, Ukraine was proving far more resilient than China had anticipated, even without direct NATO military involvement. The read-across to Taiwan was not reassuring: what would already be an extremely difficult military operation for a PLA inexperienced at real warfighting—potentially involving a complex amphibious assault, and the intervention of both the United States and Japan—now looked even more daunting, especially once the wider strategic context was taken into account. As one widely circulated analysis document by a group of influential Chinese think-tankers argued: The changing nature of warfare dictates that Putin cannot win in the true sense of the word... The war is being updated in real time on social media, the impact of the war is expanding from the maritime to land to air transport and gradually affecting regional trade links; transnational capital is being withdrawn and projects are being stalled. War is no longer simply a military conflict but a broad economic war. The issue of territorial borders is no longer the most important aspect. Even if Putin wins militarily, he will not win the war. China’s bet was that the world’s liberal democracies were on the wane, incapable of collective mobilization in the face of a common challenge. Instead, Beijing was watching the country that was supposed to be its great strategic asset helping to bring about precisely the coalitions and instruments of economic warfare it had sought to prevent. Western policymakers had failed to deter Russia, surprising even themselves with the breadth of the financial measures taken. An economy based on commodity exports could always find buyers too, blunting at least the short-term effectiveness of any efforts to place Moscow under a constrictive squeeze. Yet China could not afford to be sanguine about the consequences for its own situation if the liberal democracies delivered a like-for-like response to a future case of Chinese belligerence. The factors that made Beijing vastly more capable as a strategic competitor than Moscow—the breadth, scale, and sophistication of its integration into the global economy—also made it more vulnerable if international banks, insurers, software companies, and semiconductor manufacturers suddenly cut it off. Western policymakers and firms were also starting to work backward from some of these worst-case scenarios—which would be immensely costly for them too—to look at how to mitigate their own vulnerabilities. Re-shoring, near-shoring, friend-shoring, diversification, and a host of other phrases had moved from the fringes to the mainstream and into firms’ operational planning. Even for those who wanted to keep some version of globalization alive, it no longer had China at the center. As one European policymaker remarked soon after the invasion: “Everything we had been talking about doing during COVID was still a choice; now it’s a necessity.”