Covid exit wave over?; Balloon fallout grows; AI bubble pops for some; SOE investment areas
PRC officials sound very confident that the worst of the Covid exit wave has passed and that any next wave will not be nearly as bad. That would be good news if true.
That is about it for positive news today.
The ballon incident keeps expanding, between anger in the US Congress to the Biden Administration campaign to brief broadly on the PRC balloon program and the findings from the wreckage so far. The Biden team looks to be using this incursion in part as a lever to convince allies to shift views towards the PRC even more.
Last week, before the balloon became public, some people were talking about the possibility of putting a floor in the US-China relationship, or at least maybe arresting the declining trajectory ever so slightly.
After the events of the last week I think the odds of a free fall or avalanche 雪崩 - like downturn in the relationship in the near-term are now much higher.
Next week is likely to see more stresses in the US-China relationship as I am hearing, but have not confirmed, that the increased licensing restrictions on tech sales to Huawei may drop as early as Monday. And if the ballon bits recovered from the ocean include any US technology, then do not surprised to see even more tech restrictions.
Earlier today I published this week’s episode of the Sharp China podcast. We did discuss the balloon. Here are the show notes:
On today’s show Andrew and Bill begin with a few reactions to Joe Biden’s comments about China in Tuesday’s State of the Union address. From there: several days of outsized reaction around Washington, mounting calls for even stronger American responses to China’s ambitions, and stress-testing the theory that last week’s balloon mess was initiated by rogue PLA agents hoping to sabotage diplomatic talks. At the end: A question about Xi’s conflicting priorities, a close reading of Xi’s comments on “Chinese-style modernization”; travel policies for PRC nationals, a simpler explanation for the state visit to Russia, and another note on extraterrestrial exploration.
You can listen to it here, or in the Substack app, which also doubles as a podcast player: