China is Watching

Brit Ryle

Posted July 21, 2023

My dog Maxie had a boyfriend named Ace. They played together twice a day for nearly a year at this field just above Baltimore’s waterfront Fells Point neighborhood. Ace was a very handsome Samoyed-looking dog, though his mom swore he wasn’t a Sammy…

Ace’s mom and I would chat while Maxie and Ace wrestled and ran. One day she was telling me about how had started dating a Chinese national in college and then she started getting emails and banner ads about joining some kind of Chinese government youth organization.

She thought the CCP – the Chinese Communist Party – was spying on her boyfriend, and her, and maybe even trying to recruit her. 

This was a couple years ago, before I fled the big city for semi-retirement here on the southern coast of Georgia.

So I was thinking about this episode when I was reading recent comments from Transportation Secretary Buttigieg about how there’s concern that Chinese autonomous vehicle (AV) testing in the U.S. could also be an effort to spy on the U.S. And also that the House Ways and Means Committee is asking Ford (NYSE: F)) about its partnership with Chinese battery maker CATL (something I’ve written about before)…

It appears China mostly tries to get Chinese students studying in the U.S. planted in some tech company. But every once in a while, China seems to actually get an American citizen to flip. And I found this this little nugget from a 2018 issue of Wired

Glenn Duffie Shriver, a student from outside Richmond, Virginia, had become intrigued with China during a 45-day summer study abroad program in 2001. He later returned for his junior year abroad, becoming fluent in Chinese, and moved to Shanghai, where he acted in Chinese films and commercials. Around 2004, he responded to a newspaper ad asking for someone to write a white paper about trade relations between the US, North Korea, and Taiwan; the woman who hired him, calling herself “Amanda,” paid him $120 for the essay. She told him she liked the work and asked if he’d be interested in more—and then introduced him to two men, “Mr. Wu” and “Mr. Tang.”

OMG, Mr. Wu and Mr. Tang!  My ribs hurt. I’m laughing so hard! Who says research isn’t rewarding!!

Baidu AV Testing

It seems a few Congresspeople wrote Buttigieg with the following: “Technology used by AVs, LiDAR, RADAR, cameras, AI and other advanced sensors and semiconductors can all be used to collect data on the American people and infrastructure that could be shared back to China and ultimately to the Chinese Communist Party (CCP)…”

As it happens, 7 Chinese companies have been testing autonomous vehicles in California, including China tech giant Baidu (NASDAQ: BIDU).

Now I get that everybody spying on each other is kind of the way it goes. Even that ridiculous spy balloon didn’t get more than a few gruff comments out of the U.S. So while I don’t like the idea of Chinese companies operating in the U.S. and sending data back to the Chinese government, what I really want to be sure of is that the U.S. is doing a better job of spying on China than China is doing spying on us. 

I guess if that bush-league balloon is the best they can do, it should make me feel better…

Quid Pro Quo, Clarice

I also get that there is a certain quid pro quo going on. Even though China will plunder any corporate secrets it can from U.S companies operating in China, it’s still a pretty good gig.

Tesla (NASDAQ: TSLA) gets about half its total revenue from China. For chip-maker Qualcomm (NASDAQ: QCOM), it’s more like 60% – at least it was before the U.S. moved to cut China off from high end semiconductors. 

Virtually all of Starbucks growth comes from China, and the Chinese people reportedly love some KFC.

So I wonder how this all plays out. Is there any real point to griping about Ford’s partnership with CATL? Are we gonna kick Baidu and its autonomous cars out of California?

At this point, the U.S. has been much more aggressive about its restrictions on China than vice versa. And with good reason. China is much more dependent on the U.S., than vice versa. 

Ocean going shipping rates have been plummeting lately and you know why? Because the reshoring of supply chains and manufacturing to the U.S. is really putting a hurt on Chinese exports.  

And a hit to its exports means China’s economy will struggle – is struggling now. 

Obviously it would suck for U.S. investors if Tesla or Starbucks got kicked out of China. But it wouldn’t be devastating – all those jobs are in China anyway. The insular economy the U.S. is building won’t lack for much in a couple years. We won’t need China’s refined lithium or rare earth minerals. 

Treasury Secretary Yellen just went to China to smooth relations. Secretary of State Blinken went a few weeks ago. China is running out of time to give up on its weird alliance with the idiot Putin. The prudent move is to step up and reforge the alliance with the most powerful economy on earth. 

Maybe China will send Mr. Wu and Mr. Tang to work things out. 

That’s it for me this week. Take care, have a great weekend, and I’ll talk to you Monday. 

 Briton Ryle

Chief Investment Strategist
Pro Trader Today