Summaries and Links to This Week’s Curated Strategy Articles
March 4 - 8, 2024
ASIAN PACIFIC
The World Is in for Another China Shock
China is flooding foreign markets with cheap goods again.
This time it isn’t buying much in return.
By Jason Douglas
Wall Street Journal - March 3, 2024
Summary:
The article describes a new phase of China's economic impact on the global market, similar yet distinct from the "China shock" experienced in the late 1990s and early 2000s. During that period, the influx of inexpensive Chinese-made goods into the U.S. and global markets kept inflation low but also led to the loss of local manufacturing jobs. Currently, China is ramping up its export activities as a strategy to boost its economic growth, producing more cars, machinery, and consumer electronics than its domestic market can consume. These products are being pushed into foreign markets with the aid of state-supported cheap loans, leading to an over-saturation of goods outside China.
China's approach is marked by its focus on increasing exports without a corresponding interest in importing goods from other countries. This is reflected in the country's diminished demand for imports such as iron ore, coal, and other commodities, which previously balanced the deflationary effect of cheap Chinese goods. The situation is exacerbated by China's slowing economy, which contrasts with its earlier phase of rapid growth. Additionally, China now plays a much larger role in global manufacturing, accounting for 31% of the world's output and 14% of all goods exports in 2022, up from less than 10% and less than 5%, respectively, two decades ago.
The U.S., Europe, and Japan are taking measures to protect their industries from the impact of cheap Chinese imports by investing in and safeguarding strategic sectors, imposing tariffs, and providing financial support. Despite these efforts, the fundamental concerns remain, especially as China begins to compete in high-value industries like automotive, semiconductors, and complex machinery.
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Bottom Line:
China's strategy focuses on exporting its surplus production to maintain its manufacturing dominance and stimulate economic growth, while not actively seeking imports from other countries. This approach risks further saturating global markets with manufactured goods, potentially leading to deflationary pressures and challenging fledgling industries in other nations. It will also likely create some anti-Chinese sentiment in nations around the world.
MIDDLE EAST
Inside America’s Shadow War With Iran
Thomas L. Friedman
The New York Times - March 5, 2024
Summary:
This article provides an overview of the ongoing conflict between the United States and Iran, focusing on the strategies the U.S. employs to counter Iranian aggression across the Middle East. This is a shadow war that involves Iran and its proxies, including Hezbollah, the Houthis, and Shiite militias in Iraq, who are engaged in confrontations against U.S. forces located in Syria, Jordan, and Iraq, as well as the U.S. naval presence in the Red Sea and Gulf of Aden. However, if one of these Iranian proxies were to strike a U.S. warship or one of the U.S. bases in Jordan or Syria, resulting in a mass casualty event similar to the 1983 Marine Corps barracks bombing in Beirut, the U.S.-Iran conflict would likely escalate into a direct shooting war in the region that is most critical to global oil supply.
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Bottom Line:
The United States is employing sophisticated technology across its bases and ships that have been largely successful at repelling Iranian attacks. The Joint Force is taking offensive action through air and missile strikes and High-Value Target killings. A rapid “Kill Chain” system is in place to defend forces and eliminate threats. While the large U.S. military presence has a deterrent effect, it is also a target, and the Biden Administration should be cautious to avoid getting into a conventional conflict directly with Iran.
MIDDLE EAST
The White House tries to steer Israel back onto a two-way street
By David Ignatius
The Washington Post – March 6, 2024
Summary:
As concerns mount about the lack of a credible plan to ensure the safety and support of those taking shelter in Rafah, Israeli Prime Minister Benjamin Netanyahu's recent statements on the matter are being scrutinized. There are growing concerns that Israel is not doing enough to address the humanitarian plight of Palestinian civilians. In a significant shift in the long-standing relationship between the US and Israel, the possibility of limiting US arms supplies to Israel is being considered. This decision reflects President Biden's broader desire for Israel to act as a responsible ally, considering both American interests and the well-being of Palestinian civilians amidst the ongoing conflict.
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Bottom Line:
The Biden administration is exploring various strategies to de-escalate the situation, including a hostage release plan aimed at pausing the fighting before Ramadan, and unilateral moves to increase humanitarian assistance to Gaza. However, failing to secure a cease-fire or meaningful concessions from Hamas complicates these efforts. The administration's contemplation of pressuring interlocutors like Egypt and Qatar to influence Hamas, alongside plans to ensure the delivery of humanitarian aid, underscores the complex challenges faced in resolving the crisis. The article also touches on the broader strategic calculations, including attempts to foster normalization between Saudi Arabia and Israel and to advance the prospect of a Palestinian state, which are seen as increasingly unlikely in the current context of the conflict.
ASIA PACIFIC
Beijing’s Post-Election Plan for Taiwan
Expect China to double down on political warfare.
Foreign Policy - February 27, 2024
Summary:
The recent elections in Taiwan revealed a significant political divide within the country. Despite the Democratic Progressive Party's (DPP) victory being a resistance against China's efforts to unite Taiwan, the election results showed that a considerable portion of the electorate prefer parties that support communication and dialogue with China. Beijing will likely take advantage of Taiwan's internal divisions and use tactics such as disinformation campaigns, economic incentives, and military intimidation to weaken the DPP's support and promote pro-unification sentiments.
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Bottom Line:
Beijing will likely leverage Taiwan's internal divisions and employ strategies, including disinformation campaigns, economic incentives, and military intimidation to undermine the DPP's support and bolster pro-unification sentiments. The election did not grant Lai strong legislative backing, which could complicate his administration's ability to implement defense and policy measures against Chinese aggression. China's nuanced approach following the election aims to exploit the political landscape to gradually weaken opposition to unification, without initiating direct military confrontation.
EUROPE
Time Is Running Out in Ukraine
Kyiv Cannot Capitalize on Russian Military Weakness Without U.S. Aid
Foreign Affairs - March 8, 2024
Summary:
The article calls for urgent Western support to prevent Russian forces from overwhelming Ukrainian forces. Immediate actions, including ramping up ammunition and manpower support, are suggested to prevent a dire scenario. The article highlights the need for Kyiv to make difficult decisions to bolster its military strength and emphasizes the importance of Western aid in sustaining Ukraine's defense capabilities.
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Bottom Line:
Without immediate actions to prevent Russian forces from making significant advances, Ukraine's situation will become dire. It highlights the importance of Western aid, particularly American aid, in sustaining Ukraine's defense capabilities, including ramping up ammunition and manpower support for Ukraine. Kyiv will also need support to make difficult decisions to bolster its military strength. Time is of the essence, and without swift action, Ukraine's ability to resist could be critically compromised.
You are most welcome.
Thanks for summarizing the top stories of this period - that is very helpful. MM