CHINA SENDS HYPERSONIC MESSAGE: SPUTNIK II

The weekend showed something extraordinary. China launched a rocket in August that travelled around the earth at 21,000 mph. It was hypersonic and landed on its pinpoint target. It was unannounced. Instead of China making claims about having hypersonic missiles which the US does not have, just like 5G, they let global radar installations around the world sound the gong.

Why is this important and what does it mean?

For one thing, China has taken the lead over the US in terms of military power. Hypersonic missiles have a lot of uses other than the delivery of nuclear warheads. They buy time, they can take out a carrier group in a flash of light. They can knock incoming missiles out of the air at a long-range and fast. The US has no hypersonic missiles.

There is a price for always underestimating others and for secrecy.

The US has made a concerted effort to spend mindlessly on Defense. Here China that spends 25% of the US Defense budget, has a huge lead. In space, China is expanding its own space station. The US spent enormous sums to block China from space and rocket technology. So China worked alone in secret. And now it is the US that has no access to Chinese Technology following years of no US cooperation. How patently idiotic.

The underlying claims by the naive that China steals US technology and steals American Jobs. How mindless especially when viewing 5G, and now hypersonic or even Concert Pianos. The US has no comparable technology. US hypersonic experiments have speeds of 3800 mph. China just wowed the world with their global 21,000 mph rocket.

If China had merely said they had a rocket of this capability, the propaganda voices in the US and media would have promptly swatted it down as “FAKE” news. By letting the radar of the world pick up the rocket, the Chinese have given the US a Sputnik II wake up call. But in this case, China is further ahead, much further and the whole world knows it. But nobody but the US intelligence is in a panic. Biden’s press secretary claimed the rocket was “Competition”… perhaps like the pole vault or 100-meter backstroke?

 

Welcome Competition? You just got blown out of the water!

US intelligence missed the threat in Afghanistan and two weeks ago to put on a big show, Biden sent a US nuclear sub to the South China Seas… where it promptly hit bottom injuring US Sailors and prompting a hobbling retreat to dry dock for repairs. I guess the bully broke his ankle.

China is moving fast. In spite of their difficulties which get highly amplified in the western media, they are working hard in many directions. And yes, I expect that this year at DAVOS, I expect another year of cheap talk that China is facing a hard landing. If only wishful thinking were dollars in the bank!

Let me explain something about secrecy. It is a two-edged sword. When you block technology sales, you block your own access and your ability to participate in rulemaking and standardization. 

When you block China, you invite secrecy and block your own access to Chinese technology.

The semiconductor business prior to Trump was a global division of labour business. Trump wanted the US to have complete control. So he started blocking western technology from China. China geared up and started developing self-sufficiency in the many substrates and components to build and fab semiconductors. They used AI to catch up on semiconductor design almost overnight. The last hurdle is fab. The US doesn’t have this AI chip analysis technology. 

China will be 90% self-sufficient in early 2022. That means they will not be buying western chip technology except in narrow gated chips which are just 5% of the market. The US is blocking that Dutch EUV technology. China is now moving to develop its own lithography. So yes they are a few years behind at this point but in a few years will have no need for the Dutch Technology.

China is the largest buyer of chips so the US chip market is expected to continue to decline. So much for the Genius of Trump. Further, China has already developed ion implanters for semiconductor fab. That is extreme technology. Be aware also that at 14nm fab, 7nm is doable with two passes. Blocking Dutch EUV only hurts ASML Corporation. Sure it is annoying for China at the moment, but it is market irrelevant. Narrow gated chips are just 5% of the global market. 

The Biden plan is to give away billions in taxpayer money to build fab plants in Arizona. Fab plants require enormous amounts of water… so this is once again a political ploy with little to no chance of success. What fabless design house will be going to INTEL for fab? Nobody. Further Intel failed at the 10nm scale on their own two years ago.

Meanwhile, Apple dumped Intel and makes their own m1 and m2 chips in China to avoid US sanctions. Every US Gov impediment results in more Chinese business not less and US semiconductor firms lose their Asian markets. China is very good at exploiting slowdowns to catch up and move ahead.

The Chinese consumer market continues to expand.

China European trade continues to expand. And China-US trade continues to expand in spite of the GOV UNIONS at US ports which are in a slowdown after losing in Court over the Port of Portland. 70 ships sit off the coast of the PORT OF LA and another 50 off Long Beach. The UNION which is a gov Union has blocked all efforts at automation over the last 30 years.

The port of Shanghai which is fully automated can handle 500% more cargo than LA and Long Beach COMBINED. The average salary at Long Beach for these unskilled Gov Union jobs is $168,000 a year. Biden is now pushing time and a half to reward the UNIONS for their slowdowns and claiming UPS and Fedx and other trucking firms are the cause of the slowdowns. Does Biden think Americans are stupid?

Let’s remember that every container that comes to the US has to be examined and warehoused by US Customs now that Trump Biden Tariffs are in place. So you have another Gov bottleneck, more inflation, and utter chaos.

The Alibaba Cloud:

This year the BABA Cloud overtook Google Cloud and IBM cloud and is now third in the world with 9.5% of the global cloud market. BABA has two nodes in the US and has competing products at the same level as Amazon and Microsoft but less expensive. They are working to improve language barrier difficulties for US consumers and developing direct lines of commerce for small US businesses to get direct access to Chinese manufacturing.

In China, BABA is the undisputed cloud leader and this year put in three new server centres with 1 million nodes. At present Amazon is losing market share to both Microsoft and BABA. BABA is the faster growing.

Cloud is the window to Artificial Intelligence and massive blockchain. No matter how China sorts out their global payment systems, all of it will ride on the BABA Cloud. This is one of the many reasons why Charlie Munger at 97 just doubled down on buying Alibaba stock.

Finally and I will mention this only because I see so many unschooled posts about VIE along with the usual xenophobia on Social Media boards around the United States.

Xenophobia is racism. Racism against Asians is every inch as ugly as Americans racism against Blacks and seems to be related to the same species of ignorant bigots. It seems there is no ridding the US lexicon of racism. It is pervasive, systemic and wretched.

Every argument against the Chinese is couched in this sort of racism. Attacking the CCP or a VIE structure; it’s all the same. Colours of the same xenophobic cloth.

The VIE structure has been around for over two decades and China has never once taken down a Vie structure. A Vie structure is virtually identical to an LLC or a Limited Liability Partnership. These shield passive investors from liability but flow through profits.

These have been upheld by Chinese Courts and most recently the Chinese regulators re-affirmed the VIE structure for IPOs both on Chinese Exchanges and US exchanges. Though I personally do not believe that the Chinese should allow Chinese firms to IPO on US exchanges because of the arbitrary and capricious idea that dumb politicians can delist Chinese Stocks based on some lunacy about Uygurs or the false claim their products are of Chinese military significance. This abuse of power by dumb politicians has basically destroyed the US Exchanges. What Next, delisting Tobacco Companies or Coal Miners?

The Hypersonic Rocket… is a game-changer. That is quite clear from the relative silence of the Western media over the event.

The mindless Nancy Kerrigan Kneecapping policies to antagonize China look petty and dumb in the face of the Chinese technology surprise. It is now risky business for the US to play bully in the South China Seas.

It would be so much better to usher in a world of cooperation. But such cooperation is impossible with the punch drunk palooka blowhard bully that just got his ankles broken.

China has denied that it sent a missile around the world… They say it was a spacecraft. 

Apparently, the US was quite upset about this event and claimed that China was escalating some weapon of nuclear concern. But of course, none of this applies to the US. China said they were just testing a spacecraft and not a nuclear weapon.

Spacecraft could mean anything. But we will leave it at that. The fact remains that China launched something around the earth at 21,000 MPH in low orbit and US intelligence was stunned.

Good.

The summation is this: the more the US antagonizes China and tries to bully them in any number of ways the more nationalist and militarist China will become. The US is forcing China into confrontation. 

To China, it is a matter of self-defence. The US Congress just passed an insane military budget. What do they expect China and Russia to do? They are going to build up too and if they work together, they can avoid duplication of effort. With hypersonics which both China and Russia now have, 90% of the US Military is obsolete. Carriers are sitting ducks. The great bravado comes to a crashing halt with these weapons. 

To a great extent, this is all because of the moron Trump threatening China with a nuclear attack. My God how insane. Trump also withdrew the US from all the Reagan nuclear Salt Treaties with Russian. Trump wanted to be a big tough guy. He threatened North Korea with a nuclear war, Iran and Afghanistan. So now you have bought it. The US policy no longer looks defensive, it looks offensive. And the world now views the United States as both dangerous and reckless. 

The seeds are planted. The Great US democracy has an Achilles heel. And the world knows it. 

A lunatic in the White House could start a nuclear war and one threatened to do so. The machinery exists. If not for General Milley, it could have happened. In fact, it went so far as to terrify the Joint Chiefs. And astonishingly, Trump and his lunatic follower thought that Milley defied an order from Trump the Commander in Chief. So yes, China and Russia are fully justified in pushing the arms race into hypersonics because the United States has no machinery in place to stop a mentally ill occupant of the oval office from launching a first-strike nuclear attack. China has every right to be engrage. 

Biden decided three weeks ago to send a Nuclear sub to the South China Sea. As a show of force. This means US intelligence already knew about the Chinese hypersonic rocket. 

The sub hit bottom. The US claimed it hit an object. IT HIT BOTTOM! US Sailors were injured by this show of force and the sub had to leave for dry dock. It could have been worse. The sub could have sunk on this blowhard joy ride and a nuclear accident could have occurred. Biden’s judgment is as screwy as Trump’s. There is no yield in an activity like this. It is only harassment. The US is threatening offensive military conflict and pushing their Nancy Kerrigan Kneecapping foreign policy into the dangerous waters of Brinksmanship.