AI; Chips; Taiwan; PLAN down under; Capital outflows
Summary of today’s top items:
1. Li Qiang inspects the big three telcos - Premier Li, in an inspection a week before he delivers the government work report at the opening of the National People’s Congress, “visited enterprises affiliated with China Telecom, China Unicom, and China Mobile to research scientific and technological innovation work”. Perhaps presaging some of key themes of the upcoming “Two Session”, the Premier told a symposium with leadership of the three SOEs that “it is important to actively seize opportunities, vigorously develop a new generation of information and communication technologies, deeply promote "AI+", advance the digital transformation of manufacturing, and empower thousands of industries. Continuous breakthroughs must be achieved by focusing on shortcomings and weaknesses, increasing investment, accelerating the implementation of key tasks, and achieving more substantive progress as soon as possible”.
2. AI fever - The lead report on the February 25th CCTV Evening News is “Innovation Accelerates China's Industrial Transformation and Upgrading 人工智能创新加速我国产业转型升级”. It is all about the need to accelerate the “development of a new generation artificial intelligence…a crucial strategic resource for promoting the leapfrog development of our technology, optimizing industrial upgrades, and significantly enhancing productivity.” The report concludes by saying that “this year, the state will introduce measures focusing on three major categories: AI core foundation, intelligent products, and public support, organizing AI industry innovation tasks in 18 core directions. It will accelerate ecosystem cultivation, support the construction of national AI innovation application pilot zones in 11 places, including Shanghai and Beijing, and deeply carry out the "AI+" action, leveraging China's industrial system advantages to promote the deep integration of AI and manufacturing, continuously providing new momentum for high-quality economic development.” If you are interested in this subject I encourage you to read my translation of the February 24th People’s Daily article “Seizing the Historic Opportunity for the Development of Artificial Intelligence” by Gao Wen of Pengcheng Labs.
3. Chip controls - Bloomberg reports that the Trump Administration is considering new measures to tighten chip-related export controls to the PRC and that officials recently met with counterparts from Japan and the Netherlands to discuss “restricting Tokyo Electron Ltd. and ASML Holding NV engineers from maintaining semiconductor gear in China”. The Biden Administration had similar conversations that were unsuccessful, so how would the Trump Administration convince the Dutch and Japanese to go along? Ben Thompson of Stratechery has a long, free article today talking about Taiwan and the chip controls, fleshing out some of the discussion we had on our podcast last week. He argues in part that the US should drop all the controls on sales of chips to the PRC and allow PRC firms to fab chips at TSMC up to the latest process node, but at the same time significantly tighten the export controls on semiconductor equipment to the PRC. I started a chat on the article, feel free to weigh in with your thoughts.
4. Another undersea cable cut near Taiwan - A PRC-owned freighter was caught damaging an undersea telecom cable near Tainan. The Taiwan coast guard detained and boarded the ship and is investigating whether it was intentional or an accident.
5. PLAN down under - The PLAN flotilla in international waters around Australia and New Zealand has caused a bit of of ruckus, both because the live fire notification does not appear to have been timely but even more because of what it says about the PLAN's ability to project power. The PRC is back to buying Australian lobsters and other goods as the PRC-Australia relationship has improved, but this deployment, even though in international waters, is clearly meant to signal to Australia and New Zealand that it can operate just off their coastlines.
6. Capital outflow concerns - Bloomberg reports that authorities are raising “scrutiny of outflows via Hong Kong listings, foreign deals”. They would only do that if they are more concerned about capital leaving the country than they have let on publicly.
Thanks for reading.
1. Li Qiang inspects the big three telcos
Xinhua - Li Qiang Emphasizes During Research at Enterprises Affiliated with China Telecom, China Unicom, and China Mobile: Intensify Scientific and Technological Innovation in Frontier and Emerging Fields to Better Cultivate New Quality Productive Forces and Promote High-Quality Development - 李强在中国电信中国联通中国移动所属企业调研时强调 加力推进前沿新兴领域科技创新 更好培育新质生产力推动高质量发展-新华网