|Tuesday 07th of January 2020
06-JAN-2020 :: The Assassination (The Escalation of 'Shadow War')
Law & Politics
The attack on Friday authorized by U.S. President Donald Trump on
Iran’s now slain military commander Qassem Soleimani, the Iraqi
militia leader Abu Mahdi al-Muhandis and others was was a major
escalation in the “shadow war” Let me begin with a selection of
The New York Times' Rukmini Callimachi wrote the evidence suggesting
there was to be an imminent attack on American targets is “razor thin”
and that Trump was presented a menu of options for how to retaliate.
Killing Suleimani was the “far out option”
“This is more than just bloodying Iran’s nose,” Stephen Innes, chief
market strategist at AxiTrader Ltd., said in a note. “This is an
aggressive show of force and an outright provocation that could
trigger another Middle East war.”
“This is a seismic event in the region,” said Jason Bordoff, Columbia
University. “This is how U.S.-Iran tit-for-tat spirals out of control.
Iran’s response will be severe and deadly. And certainly may include
escalating attacks on energy infrastructure.”
''But a response will have to come as this is nothing short of a
declaration of war to a cornered country that has increasingly less to
lose. The risks of miscalculation are at an all-time high'' Vali Nasr.
I worked the Iran account for years at the NSC under two Presidents.
I’m honestly terrified right now that we don’t have a functioning
national security process to evaluate options and prepare for
contingencies said @Kellymagsamen
The Crisis Group's Robert Malley Told the @nytimes: “Whether
President Trump intended it or not, it is, for all practical purposes,
a declaration of war.”
The Truth is that General Soleimani along with Christian Russia and
the courageous Syrian people, KEPT 3 & 1/2 million Christians in Syria
from being slaughtered by ISIS and al Qaeda! @DrDavidDuke.
Qasem Soleimani was an iconic Figure known as The “Commander of
Hearts” and “Soleiman the Magnificent” a reader of Gabriel García
Márquez and of course the Leader of Iran’s Quds Force whom a a former
C.I.A. officer called the “most powerful operative in the Middle East
today.” @Newyorker. In an article in the New Yorker, Dexter Filkins
When Suleimani appears in public—often to speak at veterans’ events or
to meet with Khamenei—he carries himself inconspicuously and rarely
raises his voice, exhibiting a trait that Arabs call khilib, or
“He is so short, but he has this presence,” a former senior Iraqi
official told me. “There will be ten people in a room, and when
Suleimani walks in he doesn’t come and sit with you. He sits over
there on the other side of room, by himself, in a very quiet way.
Doesn’t speak, doesn’t comment, just sits and listens. And so of
course everyone is thinking only about him.”
“When I see the children of the martyrs, I want to smell their scent,
and I lose myself.”
It was Sulemaini who led the fight against Saddam As Revolutionary
Guard commanders, he belonged to a small fraternity formed during the
Sacred Defense, the name given to the Iran-Iraq War, which lasted from
1980 to 1988 and left as many as a million people dead. “This is the
Dasht-e-Abbas Road,” Suleimani said, pointing into the valley below.
“This area stood between us and the enemy.” Later, Suleimani and the
group stand on the banks of a creek, where he reads aloud the names of
fallen Iranian soldiers, his voice trembling with emotion. During a
break, he speaks with an interviewer, and describes the fighting in
near-mystical terms. “The battlefield is mankind’s lost paradise—the
paradise in which morality and human conduct are at their highest,” he
says. “One type of paradise that men imagine is about streams,
beautiful maidens, and lush landscape. But there is another kind of
The front, he said, was “the lost paradise of the human beings.”
The Supreme Leader, who usually reserves his highest praise for fallen
soldiers, has referred to Suleimani as “a living martyr of the
“In the end, he drank the sweet syrup of martyrdom.”
Qasem Soleimani resisted Saddam, he resisted the Taliban, he resisted
IS and all that is left of him is his ring. His Assassination is
''peak'' Netanyahu, Pompeo, Maryam Rajavi, Saudi ''cut off the head of
the snake'' made on the fly ''rogue''''Wag the Dog'' Foreign Policy.
We are now in an unfathomable and entirely unpredictable and non
Iran’s supreme leader, Ayatollah Ali Khamenei, vowed that “severe
retaliation” awaits the killers of Soleimani.
At the beginning of From Russia With Love (the movie not the book),
Kronsteenn is summoned to Blofeld’s lair to discuss the plot to steal
the super-secret ‘Lektor Decoder’ and kill Bond. Kronsteen outlines to
Blofeld his plan
Blofeld [read Trump]: Kronsteen, you are sure this plan is foolproof?
Kronsteen [read Pompeo]: Yes it is, because I have anticipated every
possible variation of counter-move.
Let me predict some counter moves.
Pompeo tweeted a Photo of about 20 Iraqis [I joke not] Iraqis — Iraqis
— dancing in the street for freedom; thankful that General Soleimani
is no more. @SecPompeo
I responded by asking Are you prepared for 1m Iraqis at the Embassy in
Baghdad next Friday @SecPompeo ?
What happens if Ayatollah Sistani issues a fatwa asking US troops to leave?
The first prediction is that the US Iraq misadventure is now over, the
only open question is around the timing.
The dogs of war is a phrase spoken by Mark Antony in Act 3, Scene 1,
line 273 of William Shakespeare's Julius Caesar: "Cry 'Havoc!,' and
let slip the dogs of war." The Iranians kept their Allies from Yemen
to Lebanon to the Eastern Province in Saudi Arabia to Bahrain and all
points in between on a leash. Trump released that leash.
Brent futures rose 3.5% on Friday, the highest since the attacks on
Saudi Arabia’s oil facilities in September.Brent crude for March
settlement rose $2.35 a barrel to $68.60, after rising as much 4.9%
earlier. West Texas Intermediate for February delivery added $1.87 to
settle at $63.05 a barrel, after advancing as much as 4.8%. The strike
also escalates an already tense three-way situation between the U.S.,
Iran and Iraq. The two Middle East countries combined pumped more than
6.7 million barrels a day of oil last month, according to data
compiled by Bloomberg, more than one-fifth of OPEC output. Exports
from both countries rely on the Strait of Hormuz, the narrow and
crucial oil and natural gas shipping choke-point.I expect Oil to come
off the boil this week because Iran will not react immediately but the
spike risk will remain sky high and the price will spike when the
counter move is made.
This is an Archduke Franz Ferdinand moment. Archduke Franz Ferdinand
Carl Ludwig Joseph Maria of Austria (18 December 1863 – 28 June 1914)
was the heir presumptive to the throne of Austria-Hungary. His
assassination in Sarajevo is considered the most immediate cause of
World War I.
THREAD: Over the past few days, I've spoken extensively with career U.S. government officials @rezamarashi
Law & Politics
"We have no functional national security decision-making process in
place. We have no plan for what comes next. They are woefully
unprepared for what's about to pop off, and they're too stupid to
realize it. People here are freaking out, and rightfully so."
"We're still trying to dig out from underneath the last war of choice,
and now they're trying to start a new one. I finally cracked open the
bottle of scotch you gave me that I've been keeping stashed away in my
"I'm gonna call you later tonight to talk through this so I can go
into meetings tomorrow armed with some sane talking points to insert
into this clusterfxxk."
"When did most of us find out about killing Soleimani? After it
already happened. Since then, we've been trying to cobble together
contingency planning on the fly, but these charlatans ignore most of
it, and then Trump does more stupid shit that puts us back at square
"All Trump cares about is shitting on Obama's legacy, sucking up to
donors, and distracting from impeachment. None of this is about
American interests or security. He's surrounded by ideological lunatic
sycophants like Pence and Pompeo. But they're far from the only ones."
"So many of Trump's top advisors on Iran are military vets who served
multiple tours of duty in our wars in Iraq, Afghanistan, and
elsewhere. They believe to their core that Iran is the reason why they
lost those wars, and they're dead set on payback - no matter what it
"They've been pushing to kill Soleimani for years, and they finally
baited Trump into it. They think war with Iran is long overdue, so for
them, this was a means to an end. When Iran responds, they'll tell
Trump to hit the Iranians harder. You see where this could go."
"They know the Iraqis are gonna kick them out now, so they're gonna
try to kill as many as possible on their way out. Iranians, Iraqis,
whoever. Some of them are advising Trump to tell the Iraqi government
to fxxk off and dare them to make us leave. I shit you not. Insanity."
"When I used your points about Soleimani's murder being a catalyst for
Iranians to rally around the flag, they said that was 'Obama apologist
bullshit,' and the Soviet Union forced people against their will into
public displays of support. So apparently Iran is a superpower now."
"Trump is threatening war crimes against Iran, and none of his top
advisors have the courage to publicly oppose it. Instead, they act
like cowards and go on background with journalists to express their
opposition. They should all resign. They don't deserve to serve this
"We have friends that are getting deployed into war zones, but for
what? Trump has deployed 14,000 troops over the past 6 months, and it
didn't prevent the current crisis. At what point do we start asking
whether deploying troops is part of the problem rather than the
"The scariest part is that they're just making shit up to justify
their preferred course of action. When we point out inaccuracies or
question logic, we're at best yelled at or at worst cut out of the
process. Most of the political appointees are paranoid, unqualified,
"Last year, if you would've asked me whether American institutions are
durable enough to prevent a Trump-led war with Iran, I would've said
absolutely. Today, I'm not so sure. For as bad as it looks to you all
on the outside, it's even worse when you see it from the inside."
"One of Trump's top Iran advisors got suckered into a honey trap, had
their laptop/iPhone stolen and hacked before they woke up, and the
White House refused to take precautionary measures regarding their
security clearance. Ladies and gents, I give you the Trump
In conclusion: Yes, folks. It really is that bad. I am but a humble
messenger of truth. The voice of the voiceless. That is all. You may
now return to your regularly scheduled programming.
The Future of America's Contest with China Washington is in an intensifying standoff with Beijing. Which one will fundamentally shape the twenty-first century? @NewYorker @eosnos A
Law & Politics
Last fall, to celebrate the seventieth birthday of the People’s
Republic of China, the government planned the largest military parade
and “mass pageant” in Beijing’s history.
On October 1st, more than a hundred thousand performers and soldiers
mustered downtown, forming waves of color that stretched from voguish
skyscrapers in the east to the squat pavilions of the Forbidden City.
At ten o’clock, artillery blasted a fifty-six-gun salute, as President
Xi Jinping watched from a high balcony overlooking Tiananmen Square,
known to the outside world as the site of a student-led uprising that
was crushed in 1989. (In China’s official history, the movement and
the crackdown have been reduced to a footnote.)
Xi is sixty-six years old, with a full, reddish face, neatly combed
hair, and an expression of patient immovability.
Since taking office, in 2012, he has redoubled political repression
and suspended term limits on the Presidency, so he will run the
country for as long as he chooses.
For this occasion, instead of his usual Western attire, he wore a
black Mao suit. “On this spot, seventy years ago, Comrade Mao Zedong
solemnly declared to the world the establishment of the People’s
Republic of China,” he said.
“That great event thoroughly transformed China’s tragic fate, ending
more than a century of poverty, weakness, and bullying.”
Whenever Chinese leaders stage a public spectacle, it provides a
chance to assess their self-portrait. In 2008, when Beijing hosted the
Olympics, the opening ceremony celebrated Confucius and ignored Mao;
the organizers wanted to project confidence but not brashness, a
posture that China described as “Hide your strength and bide your
Eleven years later, China no longer hides the swagger. On the balcony,
to Xi’s right, was the politburo’s reigning propagandist, Wang Huning,
a former professor who once travelled the United States and honed a
prickly theory about dealing with its people.
“The Americans pay attention to strength,” he wrote, after attending a
football game at the Naval Academy. “Football has some strategy, but
it’s not elegant; mainly, it relies on strength.”
He added, “The Americans apply that spirit to many fields, including
the military, politics, and the economy.”
In the stands around Xi, uniformed volunteers demonstrated the optimal
technique for waving a miniature flag—short, vigorous strokes—and
stressed the value of a friendly “countenance” for the camera. But
nobody needed much coaching; for many in the crowd, this was a day of
unaffected pride in China’s new wealth and power.
When I started studying Mandarin, twenty-five years ago, China’s
economy was smaller than Italy’s. It is now twenty-four times the size
it was then, ranking second only to America’s, and the share of
Chinese people in extreme poverty has shrunk to less than one per
Growth has slowed sharply, but the country still has legions of
citizens vying to enter the middle class. It is estimated that a
billion Chinese people have yet to board an airplane.
Xi’s speech gave no acknowledgment of the headlines—China’s heavily
criticized internment of Muslims in Xinjiang, protests in Hong Kong, a
grinding trade war with the United States.
In his telling, the momentum of history was beyond question. “No force
can shake the status of our great motherland,” Xi said. “No force can
stop the advance of the Chinese people and the Chinese nation.”
To a degree still difficult for outsiders to absorb, China is
preparing to shape the twenty-first century, much as the U.S. shaped
Its government is deciding which features of the global status quo to
preserve and which to reject, not only in business, culture, and
politics but also in such basic values as human rights, free speech,
In the lead-up to the anniversary, the government demonstrated its
capacity for social surveillance. At the Beijing University of
Technology, where students trained to march in the parade, the
administration extracted data from I.D. cards to see who ate what in
the dining hall, and then delivered targeted guidance for a healthy
In the final weeks, authorities narrowed the Internet connection to
the outside world, secreted dissidents out of town, and banned the
flying of drones, kites, and pet pigeons.
From the balcony, Xi presided over fifteen thousand goose-stepping
troops and phalanxes of tanks and jets—five hundred and eighty pieces
of equipment in all. For nearly a century, the U.S. has been the
dominant military power in the Pacific, as it has in much of the
world. Xi sees this as an unacceptable intrusion.
“It is for the people of Asia to run the affairs of Asia, solve the
problems of Asia, and uphold the security of Asia,” he has said.
To achieve that, China has strengthened its military to the point that
Pentagon analysts believe it could defeat U.S. forces in a
confrontation along its borders.
The most anticipated moment of the day was the début of a
state-of-the-art missile called the Dongfeng-41, which can travel at
twenty-five times the speed of sound toward targets more than nine
thousand miles away, farther than anything comparable in the American
Watching the missile roll by, Hu Xijin, the editor-in-chief of the
Global Times, a nationalistic state newspaper, tweeted, “No need to
fear it. Just respect it and respect China.”
Hu, a seasoned provocateur, added a sly jab at the travails of
democracy: above a picture of the missile, he wrote that China was
just fine forgoing the “good stuff” of electoral democracy on display
in “Haiti, Libya, Iraq and Ukraine.”
When I visited Hu that week, at his office across town, he was in a
buoyant mood. The pageant was less about military hardware, he said,
than about “self-confidence.” He offered a pitying contrast with the
“You overestimated your abilities to transform the world,” he said.
“You can’t simply write the screenplay for the future. China, India,
the rest of the world—everyone will have a hand in the script.”
He pointed to America’s pressure on China over trade. “They thought
China was going to throw up the white flag,” Hu said. “But China kept
up the fight. It appears that the ability to inflict pain on China is
not what you thought it would be.”
I lived in Beijing for eight years, starting in 2005. For the past six
years, I have lived in Washington, D.C. This fall, I went back and
forth between the two capitals, to gauge what lies ahead for a
relationship that is more dangerously unstable than it has been since
1972, when Richard Nixon clasped Mao’s hand in Beijing, setting the
course for China’s opening to the world.
I talked to those who forged the relationship, and those who would
remake it—in politics, business, security, entertainment, and
technology—and found them startled by the depth of the rupture and the
speed with which it has grown.
“The relationship is in free fall,” a senior White House official told
me. Deng Yuwen, a former top editor of a Communist Party journal who
now lives in the United States, told me that when he talks to
officials in Beijing they spare him the bluster.
“They are very, very worried that the relationship will continue to
deteriorate, that the economic impact will hurt people’s confidence
and further growth, that it could have effects beyond their grasp,” he
Some level of tension is endemic. Ever since 1784, when the first
American merchant ship landed in China to trade ginseng for tea, the
two sides have cycled through what John Pomfret, the author of “The
Beautiful Country and the Middle Kingdom,” calls “rapturous
enchantment followed by despair.”
But the union has always been derived from mutual benefit. Buyers in
Canton generated fortunes for the Astor and the Delano families;
Christian missionaries built China’s first universities and hospitals.
The Cold War pulled the countries apart—the Party feared
“Coca-Colanization”—but eventually the People’s Republic needed cash
and foreign know-how.
On December 13, 1978, Deng Xiaoping announced China’s Open Door
policy, inviting in foreign businesses and encouraging Party members
to “emancipate their minds.” Two weeks later, the first bottles of
Eight American Presidents, from Richard Nixon to Barack Obama,
employed a strategy known as “engagement,” based on the conviction
that embracing China politically and economically would eventually
make it more profitable and liberal.
Despite China’s flagrant abuses of intellectual property and human
rights, the strategy enabled the largest trading relationship between
any two countries in the world, with an estimated seventy thousand
American companies doing business in China today.
In 2005, the George W. Bush Administration loosened visa policies,
encouraging a huge influx of Chinese students, who now make up the
largest group of foreign undergrads in America.
Microsoft opened a five-hundred-person research center in Beijing, its
biggest lab outside the United States.
In speeches to Americans, Communist Party officials adopted a romantic
expression more often used in love poems: “There is some of me in
you, and some of you in me.”
Donald Trump wants none of that. He has always despised trade
deficits. In 1988, when America was flooded with imports from Japan,
he told Oprah Winfrey, “They are beating the hell out of this
In 2016, as a Presidential candidate, he adapted his talking points to
a new power in East Asia. “We can’t continue to allow China to rape
our country,” he said, at a rally in New Hampshire.
Though he occasionally rhapsodized about strongman rule (“Maybe we’ll
want to give that a shot someday”), Trump rejected the basic theory of
“You better start uncoupling from China,” he said, in 2015. “It’s
going to bring us down.”
Trump’s idea of “uncoupling”—pushing factories to leave China,
reducing the flow of students and technology—was a fringe position,
found mostly in hawkish books such as “Death by China,” by Peter
Navarro, a fiery economics professor who joined Trump’s campaign as an
But, once Trump was in office, his confrontational approach attracted
surprising bipartisan support. American businesses complained that
Chinese hackers were stealing trade secrets, that Chinese officials
were forcing them to hand over technology, and that state subsidies to
Chinese rivals were making it impossible to compete.
American politicians objected to Xi’s brazen roundups of human-rights
lawyers, activists, and ethnic minorities.
In March, 2018, with a tweet declaring that “trade wars are good, and
easy to win,” Trump announced sweeping tariffs on steel and aluminum
imported from China and other countries.
Beijing retaliated, and soon trade was yoked by billions of dollars in
new taxes. The hostilities multiplied. In September, a Chinese warship
and an American destroyer came within fifty yards of each other in the
South China Sea, the two navies’ worst near-collision on record.
Nine days later, Xu Yanjun, an employee of China’s
foreign-intelligence agency, was extradited from Belgium to the U.S.,
on charges of conspiring to steal aerospace secrets. (Xu has pleaded
In October, 2019, the U.S. blacklisted Chinese technology firms and
Party officials for their involvement in the detention of Muslims in
Xinjiang. That same month, China turned away an American congressional
“For years, the two were kicking each other under the table,” Minxin
Pei, a government professor at Claremont McKenna College, said. “Now
all the kicking is out in the open.”
Members of the Trump Administration have taken direct aim at China’s
ambitions. Last fall, Secretary of State Mike Pompeo said that America
and its allies must insure that “China retains only its proper place
in the world.”
During a visit to Europe, he said, “China wants to be the dominant
economic and military power of the world, spreading its authoritarian
vision for society and its corrupt practices worldwide.”
The Administration’s argument, in its bluntest form, frames China as a
hardened foe, too distant from American values to be susceptible to
In April, Kiron Skinner, Pompeo’s director of policy planning, said in
a public talk, “This is a fight with a really different civilization.”
She added that China represented “the first time that we will have a
great power competitor that is not Caucasian.” (The comments caused an
uproar. In August, Skinner left the State Department.)
Behind closed doors, Trump aides dismiss Skinner’s invocation of race.
But they also liken China to such sworn enemies of America as Iran and
the Soviet Union, and argue that only hard-line pressure can “crush”
Half a century after Henry Kissinger led the secret negotiations that
brought Nixon to China, he still meets with leaders in Beijing and
At the age of ninety-six, he has come to believe that the two sides
are falling into a spiral of hostile perceptions. “I’m very
concerned,” he told me, his baritone now almost a growl.
“The way the relationship has deteriorated in recent months will feed,
on both sides, the image that the other one is a permanent adversary.”
By the end of 2019, the Washington establishment had all but abandoned
engagement with China. But there was not yet a strategy to replace it.
In the void, there was a clamor to set rules for dealing with China in
business, geopolitics, and culture, all surrounding a central
question: Is the contest a new cold war?
To some in Washington, after eighteen years of unwinnable slogs in
Afghanistan and the Middle East, the prospect of reprising the Cold
War—the last major conflict that Washington won—offers the familiar
comfort of an old boot.
In March, 2019, the Committee on the Present Danger—a group, first
formed in the fifties, that encouraged an arms buildup against the
Soviets—was relaunched, with a focus on China.
Its events have featured Senator Ted Cruz, the former Trump strategist
Steve Bannon, and, notably, the former House Speaker Newt Gingrich,
Washington’s best weathervane for political opportunity.
In October, Gingrich published “Trump vs. China,” his thirtieth book
since leaving office, in 1998.
Discussing the book at the National Press Club, Gingrich told his
audience, “If you don’t want your grandchildren speaking Chinese and
obeying Beijing, then this is a topic we better have a national
He called China “the greatest threat to us since the British Empire in
the seventeen-seventies, much greater than Nazi Germany or the Soviet
For Gingrich and his allies, China is an existential menace, which
demands the kind of aggressive military expansion and broad campaign
against tyranny that thwarted the Soviet Union.
Their bluster belies the fact that the U.S. strategy in the Cold War
was largely predicated on avoiding direct conflict. In the opening
moments of the Soviet contest—what Orwell warned would be the “peace
that is no peace”—Americans faced what appeared to be a Manichaean
choice: appeasement or a world war.
The diplomat George Kennan perceived a third option, which he
described, in Foreign Affairs, as the “firm and vigilant containment
of Russian expansive tendencies.” Kennan’s theory of containment
became America’s defining strategy in the Cold War.
In September, Odd Arne Westad, a Yale historian, published an essay in
Foreign Affairs that served as a contemporary sequel to Kennan’s
missive. He, too, urged patience. “If the United States wants to
compete, it must prepare for a long campaign for influence,” he wrote.
When I spoke to him recently, he argued that containment is not an
option; China is too rich, and too intertwined with the American
economy. But he suggested that Gingrich’s idea of clashing
civilizations was also wrongheaded.
“The Soviet leaders’ position was that it was necessary to see
American power destroyed,” he said. “That’s not China’s game. I have
yet to find a single person in the leadership who actually believes
Westad is clear-eyed about the risks of China’s rise, but he is most
alarmed by alarmism itself. The leaders of the two countries are both
hasty, intransigent, and not very well informed about the other side’s
The U.S. wants to preserve its influence and to balance trade. China
seeks, above all, to expand its power in East Asia, as Germany did in
Europe more than a century ago.
“The United States is not necessarily damaged by China retaking its
historical place within eastern Asia,” Westad said. But when these
kinds of changes happen too quickly, or when the partisans overreact,
the results can be disastrous.
“It all depends on timing. That’s what the Chinese have to realize—and
haven’t, I think.” He is worried that China and the United States will
separate into two distinct blocs, increasingly mistrustful and prone
“It can happen, as we’ve seen in Europe, in ways that unleash
generations of warfare.”
When the parade wound down in Beijing, I walked east—back through
security and past Mao’s mausoleum, where farmers from distant
provinces still line up at dawn to glimpse his remains, held in a
Then I headed north, toward the lakes that once served as the
emperors’ pleasure gardens, but I discovered that police had sealed
off much of downtown. Every time I tried to turn, they waved me away.
A cop encouraged a cluster of pedestrians to keep going east.
“I don’t know where the restrictions end—I just know my area,” he
said. I shuffled on, like a mouse in a maze; twenty minutes became an
hour, then two hours.
I noticed that we were being herded along the vanished route of the
old city wall, a symbol of imperial anxiety that stood for more than
five hundred years, until the nineteen-sixties, when it was removed to
make room for modern transportation.
As I walked, I took to counting surveillance cameras; there are now an
estimated eight hundred thousand in the capital, nearly triple the
number in place a decade ago. (In Hong Kong, protesters have attacked
the cameras, as symbols of Beijing’s control.)
Every capital city prizes security, but in Xi’s Beijing it has been
elevated to a state religion. Chinese leaders, for all their
projections of confidence, see peril everywhere: a precarious economy,
an aging population, an Arab Spring-style revolt in Hong Kong, an
In a speech last year to the National People’s Congress, Premier Li
Keqiang mentioned “risk” twenty-four times, twice as many as on the
same occasion three years earlier.
In 2018, China surpassed the Soviet Union as history’s
longest-surviving Communist state, a distinction that fuels both pride
Chinese leaders have been alarmed by American support of popular
uprisings—first the “color revolutions” in the former Soviet bloc and
then the Arab Spring—and they resent America’s efforts to deepen its
influence in Asia.
In November, 2011, with wars in Iraq and Afghanistan winding down,
Hillary Clinton, who was then Secretary of State, announced a plan to
“redirect some of those investments to opportunities and obligations”
As part of the “pivot,” as it was known, Obama expanded America’s
military presence in Australia, and worked to build the Trans-Pacific
Partnership, a trade agreement among twelve nations—China not among
“To China, it was an effort to exclude,” Deng Yuwen, the former
editor, said. “All of those things appeared to be targeting China from
different perspectives—economically, geopolitically, militarily.”
Xi believes that orthodox commitment to Communism is paramount as his
country fends off Western influence. In a speech in 2013, he asked,
“Why did the Soviet Communist Party collapse?” His answer: “Their
ideals and convictions wavered.”
In Beijing, an ideological revival is in flamboyant effect. Since
June, the Party has been waging an old-fashioned dogmatic crusade,
known as a “Correct the wind” campaign.
In a modern twist, ninety million Party members have been given an app
loaded with Xi’s speeches, quizzes about his life story, and videos on
history. (The app keeps track of what they finish.)
“Xi Jinping thinks the whole place slacked off ideologically,” Geremie
Barmé, an independent historian and translator, said.
“This campaign is something the Communists have done a number of times
when they feel things are a little bit out of control.”
Instead of city walls, the Party relies on digital defenses; day by
day, censors purify the Internet of subversive ideas, and
facial-recognition technologies track people’s comings and goings.
Under Xi, market reforms have stalled, and schools have replaced books
by Western economists with tracts published by the Marxist Theory
Research and Building Project.
Some Party élites question whether Deng Xiaoping’s openness went too
far. “As the Party returns to the idea that its absolute power is the
only thing standing between China and chaos, the United States, and
the embrace of markets, is increasingly seen as an enemy,” Westad
The more Trump’s Washington questions engagement, the more Xi’s
Beijing perceives a hostile foe. The current leaders, in both places,
cast themselves as defenders against humiliation and threats from the
In both cities, it has become easier to be a hawk than a voice of moderation.
I visited Yan Xuetong, an influential foreign-affairs scholar at
Tsinghua University, who has a kindly laugh that belies the sharp edge
of his views.
He predicted the emergence of separate, competing economic and
political blocs—the polarization that Westad fears.
“We will have a two-centered world,” he said cheerfully, “like two
yolks in one egg.” I puzzled over the image, trying to make out how
such a curiosity would survive.
But Yan was pleased with his analogy, and extended it into a
distinction between the current scenario and the Cold War.
“The relationship between the U.S. and the Soviet Union was like two
eggs in one basket—they were separate economically—but this time you
have two yolks competing for support from the egg white.”
He paused and tried out a different analogy. “Maybe the right term is
a duopolistic world—like Boeing and Airbus, two companies in a
I wanted to hear Yan’s sense of the protests in Hong Kong, which had
expanded into the very kind of unrest that terrifies the government.
After four months of street demonstrations against Communist Party
control, violence was growing.
On the day of the parade in Beijing, demonstrators seeking to
overshadow events in the capital clashed with police, and, for the
first time, an officer shot a protester with live ammunition. Yan saw
no prospect that Beijing would compromise.
“Violence will become a common phenomenon,” he said. “Like the
Palestinian kids firing on Israeli police, but not as grave.”
The comparison struck me as odd, until I realized that, from Beijing’s
perspective, Israel’s sequestering of the West Bank and Gaza has led
to an agreeable scenario: a chronic but confined insurgency that does
not threaten the country’s over-all security.
Instead of running from confrontation, the Party has rallied around
it. Xi emphasizes the importance of “struggle,” and state television
has conspicuously rebroadcast old Korean war films depicting battles
with American troops.
An essay celebrating self-reliance during the starvation of the
nineteen-fifties became a viral hit, under the title “A Guide to
Eating Tree Bark.”
“The Party believes that, if you take one step backward, everything
will unravel,” Barmé said. “The struggle, not the resolution of it, is
the way of maintaining unity and primacy.”
A struggle properly controlled—in Xinjiang, Hong Kong, Washington—can
be a political asset. In internal speeches about dealing with America,
Party officials call for a precise balance: the goal should be to
“struggle but not smash” the relationship—to exploit the tension
without letting hostilities get out of control.
Thirty years after Coca-Cola symbolized the arrival of American
business in China, the company became a symbol of a darker turn in the
In early 2009, Coke was negotiating a $2.4 billion deal to buy China
Huiyuan Juice Group—the largest-ever foreign takeover of a Chinese
But, on March 15th, the F.B.I. alerted Coke executives that hackers
had broken into their system and were rummaging through e-mails about
the negotiation, recording keystrokes, and controlling their computers
Three days later, the talks were dead. Security firms eventually
traced the breach to hackers who worked from a twelve-story building
on the outskirts of Shanghai: Unit 61398 of the People’s Liberation
For as long as the American intelligence community had been online, it
had been hacking foreign governments. China did that, too, but its
hackers also plundered foreign businesses, looking for an advantage in
negotiation, for blueprints to copy, and for other commercial
In 2007, agents of the Chinese military hacked the aerospace firm
Lockheed Martin and stole tens of millions of documents related to
America’s most expensive weapons system, the F-35 Joint Strike
A notably similar Chinese plane, the J-31, appeared soon thereafter.
(China denies stealing the plans.) The Chinese hacking of American
businesses exposed a deep clash of perceptions: America was starting
to see China as a near-peer, intent on flouting rules laid down mostly
by the West.
But China still regarded itself as a scrappy latecomer, using whatever
tools it could to protect and improve the lives of a vast population.
That clash extends far beyond hacking: China has invoked its status as
a “developing country” to erect barriers against foreign competitors,
and to coerce American companies into sharing technology.
Eventually, those practices turned some American businesses from
ardent advocates for good relations into fierce critics.
When China joined the World Trade Organization, in 2001, it agreed to
a schedule for dropping tariffs and opening markets. But that schedule
ended in 2006, and so did the momentum toward opening.
Arthur Kroeber, the managing director of Gavekal Dragonomics, a
research firm in Beijing, said, “Almost immediately, I started hearing
complaints from foreign companies about how conditions had changed to
create advantages for domestic Chinese firms.”
Chinese leaders resented the idea that they should heed the West’s
demands. At a dinner hosted by the American Chamber of Commerce in
China, a rising nationalist, Bo Xilai, spoke to foreign executives.
“I’d never seen any Chinese leader be so patronizing to that crowd,”
John Holden, a former chairman of the chamber, recalled.
“He essentially said, ‘You complain a lot, but we know you’re making
money here, so just get over it.’ ” (Bo was later imprisoned on
charges of corruption and abuse of power.)
When the global financial crisis struck, in 2008, it gave Chinese
skeptics of capitalism a powerful argument against American-style
These days, the most acute standoff between the two countries is over
who will dominate the next generation of technologies. Until recently,
executives in Silicon Valley tended to belittle China’s potential in
tech, arguing that rigid controls in politics and education would
constrain radical innovation.
But that view no longer prevails. Under a plan called Made in China
2025, Beijing has directed billions in subsidies and research funds to
help Chinese companies surpass foreign competitors on such frontiers
as electric vehicles and robotics.
A Pentagon report commissioned under Obama warned that the U.S. was
losing cutting-edge technology to China, not only through theft but
also through Chinese involvement in joint ventures and tech startups.
It prompted Congress, in 2018, to tighten rules on foreign investment
and export controls.
The technology dispute escalated later that year, when the Trump
Administration expanded an attack on Huawei, the world’s largest
manufacturer of fifth-generation (5G) networking equipment, warning
that the Chinese government could use the equipment for spying and
In December, at the request of the U.S., Canadian authorities arrested
Huawei’s chief financial officer, Meng Wanzhou, as she changed planes
Meng, the daughter of the company’s billionaire founder, is known in
China as the “princess” of Huawei; when border agents detained her,
she asked incredulously, “Because of my company, you are arresting
She was charged with committing fraud to help Huawei violate sanctions
against trade with Iran. While awaiting trial, she was allowed to live
in one of the two mansions that her family owns in Vancouver, worth a
combined sixteen million dollars.
Days after Meng’s arrest, China detained two Canadians—Michael Kovrig,
a diplomat on leave, and Michael Spavor, a consultant—and accused them
of stealing state secrets. After more than a year, neither has been
permitted to see a lawyer.
In May, the Administration took its largest step yet against Huawei:
the Commerce Department blacklisted it from buying American microchips
and other technology—a blow to Huawei’s ability to make the
smartphones and networking equipment that it sells around the world.
And yet the campaign against Huawei has been hampered by the
Administration’s diplomatic isolation. The U.S. has asked sixty-one
countries to ban Huawei equipment, but only three—Australia, New
Zealand, and Japan—have agreed.
A European diplomat told me that, despite credible concern about the
use of Huawei’s products in spying, the campaign has been ham-fisted—a
demand for us-or-them loyalty at a time “when you’re slapping tariffs
on your European allies.”
Senator Mark Warner, of Virginia, the top Democrat on the Intelligence
Committee, supports efforts to stop China’s theft of trade secrets,
but he calls Trump’s broader strategy “erratic and incoherent.”
China’s gains in technology should be “a new Sputnik moment,”
triggering huge investment, he said. The U.S. does not have a 5G
alternative to compete with China’s, a failure that cannot be blamed
As a share of the economy, America’s federal investment in research
and development has fallen to its lowest point since 1955.
Warner said, “We’ve always steered away from industrial policy, but we
may need to make public-private investments, or government
investments, in ‘democracy 5G.’ ”
If America does not compete with China’s advances, it risks losing a
voice in deciding the ethics of some unsettling new technologies.
Since 2017, China has erected an unprecedented digital and physical
enclosure around Muslims in its Xinjiang region. It is estimated that
more than a million people have been interned in facilities known
officially as “vocational training centers.”
Millions more are tracked every day by facial-recognition cameras,
fingerprints, cell-phone patterns, and biometric data, collected
through a program of mandatory exams known as Physicals for All.
Multiple provinces have taken to collecting DNA samples, in order to
“improve population management and control,” as one police notice put
The prospect of China extending, or exporting, the Xinjiang model has
exposed the stakes in the future of intrusive technologies.
Warner said, “The situation that’s playing out in 5G will soon play
out in facial recognition, artificial intelligence, and quantum
When Trump first imagined “uncoupling”—or “decoupling,” as it became
known—the term evoked a divorce. But a complete decoupling is
“Total revenue of U.S. companies and affiliates in China in 2017, for
one year, is five hundred and forty-four billion dollars,” Kroeber
“What’s the chance these numbers can go down eighty or ninety per
cent? Almost no chance. We can remove a few of those tangles, but the
cost to the U.S. economy of removing them all would be unacceptably
Some companies—Nintendo, GoPro, Hasbro—have accelerated plans to build
factories in places such as India, Vietnam, and Mexico. But most
American C.E.O.s want more access to China, not less.
Amid the trade war, Starbucks announced plans to open three thousand
new Chinese stores by 2023—an average of one every fifteen hours.
Tesla opened a plant in Shanghai that will build a hundred and fifty
thousand cars a year. Elon Musk, the company’s founder, has called the
plant a “template for future growth.”
The Trump Administration’s efforts to force China into major
concessions have faltered, as U.S. negotiators bickered openly over
In February, both countries were said to be drawing up memorandums of
understanding on six major issues, including cyber theft and
But, in a meeting with Chinese officials in the Oval Office, Trump
undercut his top negotiator, Robert Lighthizer, by disputing the
legitimacy of that step.
“I don’t like M.O.U.s, because they don’t mean anything,” Trump said.
Lighthizer, flustered, said, “We’re never going to use M.O.U. again,”
drawing laughter from Chinese negotiators.
Trump’s advisers also fundamentally miscalculated the effect of their
actions. In July, 2016, Navarro, who went on to become the White House
director of trade and manufacturing policy, predicted that the mere
threat of tariffs would force China to capitulate.
“The purpose is not to impose tariffs,” he told me at the time. “The
purpose is to use the threat of tariffs as a way of getting the
attention of any trading partners that cheat, and, basically,
encouraging them to play by the rules, knowing that Trump, if they
don’t, damn well will follow through on that promise.”
A tariff program, he said, is “kind of like the military—if it’s
strong enough, then nobody messes with you.”
By October, 2019, tariffs had been in place for fifteen months,
suppressing investment and weighing on the American economy.
The Department of Agriculture had allocated twenty-eight billion
dollars in aid to farmers for lost exports—more than twice as much as
taxpayers spent to bail out the auto industry a decade earlier.
Researchers estimated that by the year’s end the tariffs would have
cost the average U.S. household thirteen hundred dollars.
With a Presidential election a year away, Trump’s trade war was
becoming a political liability. The Chinese side was in no rush to
In September, an American billionaire investor told me that he had
advised the President to show progress, if he wanted a strong economy
on Election Day.
“You have to have a deal done by the end of the year,” the investor
said. “If you get a deal in March or April, by then the economy’s
The next month, negotiators abruptly announced what they called “phase
one” of a trade deal. The terms, finalized in December, called for
both sides to cut tariffs; China also agreed to buy more farm exports,
energy, and manufactured goods from the U.S., in return for which
Trump would suspend upcoming tariffs.
On Twitter, Trump had hailed it as “the greatest and biggest deal ever
made for our Great Patriot Farmers in the history of our Country.”
But the truce did not resolve the core disputes, such as technology
transfer, and, outside the White House, it was mostly seen as the end
of a wasteful stunt.
“Trump was looking for any possible excuse not to put on the tariffs
that he had threatened,” Kroeber said, “so he got a promise from the
Chinese to buy soybeans and some other stuff, and he packaged this.”
In China, the deal was greeted warily, with no expectation that it
would relieve the standoff.
Chinese analysts have described their side’s approach as da da, tan
tan—“fight fight, talk talk”—a pointed expression that Mao used in the
nineteen-forties to describe his strategy when Americans pressured him
to stop fighting the rival Nationalist Army.
Mao always assented to their requests for talks, even as he steadily
gained ground on the battlefield. In the end, he won.
Chris Johnson, a former C.I.A. analyst who is now a senior fellow at
the Center for Strategic and International Studies, asked a group of
Chinese contacts what their government got from Trump’s push for a
deal at any price.
“Their response was ‘Time,’ ” he said. “Reading between the lines,
they meant time without new tariffs in the near term, and time to
prepare for what they presume is an inevitable larger confrontation.”
Beijing in July is an open-air sauna, windless and smothering beneath
the monsoon clouds. In the summer of 2005, when I moved there, a pale
disk of sun barely peeked through the pollution—but, for the
teen-agers at my neighborhood basketball court, the game was always
Smog, sun, rain, it didn’t matter: they were vamping, attempting to
dunk, swimming in oversized Kobe Bryant jerseys, trying out American
laji hua (trash talk).
For previous generations, showboating on the court had been so
anathema that Chinese basketball teams were barred from keeping
statistics for individual players.
But the National Basketball Association recognized the surging
potential of a China that was opening itself to outside culture.
In 2002, a giant from Shanghai named Yao Ming was the first pick in
the N.B.A. draft, and, that year, the league opened its China office,
with a single employee.
By 2005, surveys of Chinese young people showed that basketball was
edging out soccer as the most popular sport.
That fall, when I met Mark Fischer, a lanky American running the
N.B.A.’s operation in China, he told me, “The sky’s the limit for
Nearly fifteen years later, much of that prediction is true. China is
the N.B.A.’s most lucrative domain outside the U.S.; the China
operation has been valued at more than four billion dollars, and star
players earn a fortune in sneaker deals.
Klay Thompson, of the Golden State Warriors, stands to make eighty
million dollars in ten years from Anta, a Chinese brand, according to
But, last fall, the N.B.A. discovered a limit of a different kind in China.
On October 5th, Daryl Morey, the general manager of the Houston
Rockets, posted a slogan to his personal Twitter feed: “Fight for
freedom. Stand with Hong Kong.” He later deleted the tweet, but
China’s state media had already begun reporting on it, and the stories
set off a cascade of outrage.
Chinese sponsors pulled funding from the Rockets, merchandise
disappeared from e-commerce sites, and state television cancelled
broadcasts of games.
Chinese commenters flooded Morey’s Twitter account with angry notes,
including “N.M.S.L.”—Chinese slang for “Your mother is dead.”
Rather than coming to Morey’s defense, the N.B.A. issued an obsequious
statement in Chinese: “We are extremely disappointed in the
inappropriate remarks made by Houston Rockets General Manager Daryl
LeBron James—a frequent visitor to China on behalf of Nike, which
makes more than one and a half billion dollars a year there—urged his
colleagues to watch their words.
He told reporters that Morey was not “educated on the situation,” and
that his tweet risked harming people “not only financially but
physically, emotionally, spiritually.”
American fans were appalled. Online, people posted images of James’s
head photoshopped onto hundred-yuan notes.
Ultimately, the N.B.A.’s commissioner, Adam Silver, reported “fairly
dramatic” financial repercussions from lost business in China, but he
rebuffed a request to fire Morey, and emphasized the league’s
commitment to free expression.
He told an audience in New York, “These American values—we are an
American business—travel with us wherever we go.”
But the N.B.A. kerfuffle exposed a larger phenomenon: China’s market
had become so crucial to American institutions that they were blandly
accepting demands for censorship and submission.
When the Eastman School of Music, at the University of Rochester, was
preparing for a tour of China, it could not get visas for South Korean
students. It discovered that Beijing had blocked visas for South
Korean performers since 2016, as punishment for a diplomatic dispute.
Instead of postponing the tour, the school decided to leave all the
South Koreans home, fearing what the dean called “a negative impact on
Eastman’s reputation within China.” (After a public outcry, it
abandoned the tour.)
China is not exporting a state ideology in the manner of the Soviet
Union. But it wants to make the world more amenable to its ideology,
so it has demanded extraterritorial censorship, compelling outsiders
to accept limits on free speech beyond its borders.
For years, Hollywood studios have agreed to cut material from their
films to get them into China. “Bohemian Rhapsody,” the Oscar-winning
movie about the band Queen, was released in China in 2019 only after
it was reëdited to remove any mention of Freddie Mercury’s sexual
Judd Apatow, the filmmaker and comedian, told me that Americans
intended to introduce freedom to China, but instead traded it for
“I think it happened very slowly and insidiously,” he said. “You would
not see a major film company or studio make a movie that has story
lines which are critical of countries with major markets or investors.
The question becomes: what’s the result of all of this? The result is,
there are a million or more Muslims in reëducation camps in China, and
you don’t really hear much about it.”
In October, Quentin Tarantino refused to modify the Chinese version of
his film “Once Upon a Time . . . in Hollywood,” after relatives of the
late martial-arts star Bruce Lee complained about an unflattering
portrayal of him, so China cancelled its release.
Apatow said, “Quentin Tarantino is successful enough, and has the
power and final cut, but very few people are in that position of
strength. What you don’t hear about is all of the ideas that get
killed at the earliest pitch stage, at all of the studios and
networks, because people don’t even want to consider dealing with it.”
Accepting censorship for profit rests on the tempting logic that
reaching Chinese buyers with a bowdlerized portrait of the world is
better than not reaching them at all.
In fact, censored imports have helped acclimate Chinese citizens to a
parallel reality, in which Freddie Mercury was not gay, and in which
nobody in the N.B.A. cares about Hong Kong.
When Chinese consumers erupt at something like Daryl Morey’s tweet, it
indicates not a growing awareness of what the rest of the world thinks
but a growing seclusion from it.
For forty years, the two sides strained to look past their underlying
political differences, but, as their contact intensified, ignoring the
contradictions became more difficult.
By the end of 2019, a web of cracks had appeared throughout domains
that were once integrated. At least ten American colleges had closed
outposts of the Confucius Institute, a Chinese-government-funded
In Beijing, the government had issued an unprecedented order,
directing public institutions to remove all foreign computer equipment
The Future of America's Contest with China Washington is in an intensifying standoff with Beijing. Which one will fundamentally shape the twenty-first century? @NewYorker @eosnos B
Law & Politics
The C.E.O., Sundar Pichai, said, in 2018, “I think it’s important for
us, given how important the market is and how many users there are.”
(After protests by employees, Google announced that it had halted work
on the project.)
Xi Jinping promotes the view that China’s system presents an
alternative to free-market democracy—what he has called “a new option
for other countries and nations who want to speed up their development
while preserving their independence.”
He has found some fertile markets for that view, in an era when Trump
has reduced aid spending, separated children from parents at the
border, and called migrants “animals.”
And yet China’s sprint for soft power has been less successful than
one might assume. The scale and posture of its new power has aroused a
backlash, even in places where it offers the Belt and Road Initiative,
a global infrastructure push larger than the Marshall Plan.
In Malaysia, which once welcomed a surge of Chinese investment, Prime
Minister Mahathir Mohamad has grown concerned about “a new version of
Mahathir cancelled Chinese projects worth almost twenty-three billion
dollars, seeking to avoid the fate of Sri Lanka, which defaulted on
heavy Chinese loans and eventually agreed to give Beijing control of a
major seaport for ninety-nine years.
When I spoke to Jorge Guajardo, the former Mexican ambassador to
Beijing, I mentioned Westad’s prediction of a “long campaign for
Guajardo told me that, for all of Trump’s harm to the reputation of
the U.S., it has not lost the campaign in Latin America, because
Beijing’s ventures can be heavy-handed or self-serving.
Chinese investors have been criticized for importing workers for
infrastructure projects, instead of generating local jobs, and for
seeking control of large swaths of national territory.
“The Soviets were going after the hearts and minds of the local
populations,” Guajardo said. “The Chinese could care less.”
In the contest for hearts and minds, America has no better chance to
make its case than to foreign students who come for higher
education—including an estimated three hundred and seventy thousand
from China in the most recent academic year, four times as many as a
Last fall, I spent time with three Chinese undergraduates at American
University, on the lush outskirts of Washington, D.C. Xu Tong, who
grew up in Harbin, in China’s frigid northeast, was still marvelling
at how different Washington is from her home—no skyscrapers, few
people, old trees.
In China’s new cities, the trees are spindles. “Washington feels like
a garden,” she said. A generation ago, Chinese students tended to
study on scholarship, but now many subsidize the education of
Americans by paying full freight.
Xu was surprised by the thriftiness of American classmates. “Maybe
it’s because China is new to money, and everyone attaches great
importance to enjoyment, but students here seem to spend very little
money,” she said.
“When we go out, we take Uber, but they take the subway.”
Lai Ziyi, who grew up in Jiangxi, in southern China, had assumed that
the U.S. capital city would be under intense security.
“But there are shooting incidents,” she said. When she told her
parents, they freaked out, and so Lai scrambled to assure them that
her campus is near the Department of Homeland Security.
“They said, ‘O.K., fine.’ ”
More than four years had passed since Lai applied to college in
America, and the hostilities had startled her. In recent years, the
U.S. has prosecuted at least half a dozen Chinese students and
scholars for spying or for stealing scientific research.
In 2018, Ji Chaoqun, an electrical-engineering student at the Illinois
Institute of Technology, was charged with acting as an agent for
China’s Ministry of State Security, and accused of trying to recruit
spies among engineers and scientists. (Ji has pleaded not guilty.)
Christopher Wray, the director of the F.B.I., warned the Senate
Judiciary Committee that China has enlisted “nontraditional
collectors” of intelligence to “steal their way up the economic ladder
at our expense.”
Trump offers an impressionistic version of these facts. Discussing
China over dinner with C.E.O.s, he reportedly said that “almost every
student that comes over to this country is a spy.”
In 2018, the U.S. government advised university administrators to be
vigilant against the theft of biomedical secrets, and it cut the
duration of visas available to Chinese graduate students working on
Some schools believe the scrutiny is excessive. In an open letter in
June, M.I.T.’s president, L. Rafael Reif, wrote that the cases of
wrongdoing “are the exception and very far from the rule. Yet faculty
members, post-docs, research staff and students tell me that, in their
dealings with government agencies, they now feel unfairly scrutinized,
stigmatized and on edge—because of their Chinese ethnicity alone.”
Lai told me, “My dream was to be a lawyer.” But when she tried to
combine a degree in law with aerospace or chemical engineering she was
advised to look elsewhere.
“These are sensitive majors,” she said. “If you study for a master’s
degree, you would get restrictions from the American government.”
She has no regrets about coming, but the longer she stays in America,
the more she feels tempted to recede into a community of Chinese
It reminded me of some of my experiences studying in China—the tug
between loneliness and curiosity, the intensifying effect of life far
from home, which can make you more patriotic than you were when you
Watching the unrest in Hong Kong had convinced Lai that the Beijing
government was right to condemn the protesters.
“Most of them are just full of violence. And, as a Chinese person from
the mainland, I love my country, and I don’t think these things should
When Zhao Yuchen arrived in America, last August, he was the only
foreign student on his floor, and he cherished the isolation; it
helped him make friends with Americans, as well as with students from
Japan, Zimbabwe, Nigeria, and Mongolia.
At nineteen, he is tall and confident. He grew up in Taiyuan, in
China’s coal country, where his father sold mining equipment.
Neither of his parents went to college, but they supported his
decision to study in America. “My father doesn’t like the Chinese
education system,” he told me. “He thinks it can’t improve my creative
Zhao wandered the museums run by the Smithsonian, and he savored the
sudden absence of control.
“It’s free,” he said. “I can express what I want to say, and I don’t
need to fear the teacher’s reaction.”
He stayed up late scouring the uncensored Internet for facts about the
Cultural Revolution and the massacre at Tiananmen Square.
An uncle of his had taken part in the democracy demonstrations, but
they’d never talked much about it, he said.
In China, he’d asked in school about the demonstrations. “My teacher
just told me, ‘You’re wrong.’ ”
As he read—about Taiwan, about the war with Japan, about relations
with the U.S.—he began to doubt the history he was taught in high
“It can change my whole attitude toward my Party, if what the books
say is true,” he said.
When he talks with friends back home about his discoveries, they mock
him for being “brainwashed by America,” he said.
“Americans think that free speech and freedom of press is basic for
people. But in China we think the community, the country, is the first
thing we need to think about. Most ordinary Chinese people don’t
understand why democracy is so important for America.
They’ll say, ‘Yes, America brings democracy to Iraq, to Afghanistan,
to lots of countries. But these countries are getting killed now.’
They say, ‘We’re not democratic, but we live in a peaceful country. We
have a good living standard.’ ”
He feels that his countrymen are too quick to dismiss what he loves
about life outside. “They’ve lost their basic ability to think
independently, I think.”
Spending time with Zhao reminded me that, for all the failed promise
of our bicultural experiment—the train wreck of “The Great Wall,” the
nationalism that going abroad can foster—the revelations that Chinese
people can experience here are too valuable to be forsaken.
If America closes its doors to Chinese students, it will not only
deprive us of their talent and ambition; it will sacrifice the power
of our uncensored world.
In Beijing, I had lunch with Xue Qikun, a quantum physicist who is one
of China’s most decorated scientists.
An elfin figure with a warm, discursive manner (asked for a brief
summary of his work, he spoke for thirty-two minutes),
Xue worked in Japan and the U.S. before returning to teach at Tsinghua
University. He believes that Americans overlook the benefit of their
country’s reputation as a magnet for researchers.
“In addition to our learning something from the U.S. professors, the
U.S. professors learn something from us,” he said.
“We have thirty years of hard work and experience.” After the Second
World War, Xue noted, the U.S. “collected all the best people in the
Now European postdocs are coming to China to work with him. If the
U.S. squeezes out Chinese scholars, both sides will suffer, he
“We can work hard by ourselves—no problem at all—but then you’ll lose
good people,” he said. “If you cut off, you send a big signal to
everyone in the world.”
The risk of espionage on campus is real. But there is also a risk in
Trump’s exaggerated talk of spies, the F.B.I.’s warnings of
“nontraditional collectors,” and the political opportunity exploited
by Gingrich and others—a risk that Susan Shirk, the chair of the 21st
Century China Center, at the University of California, San Diego,
calls “an anti-Chinese version of the Red Scare.”
China’s state press trumpets those moves at every opportunity (“Spying
Bogey Demonizes Chinese in US,” as a headline in the Global Times put
it), because they advance the Communist Party’s argument that American
pressure is born not of reason but of anxiety over a rival that is, in
the words of Kiron Skinner, “not Caucasian.”
The closest that China and the United States have come to an actual
fight in recent decades was in 1996, in a squabble over the island of
Taiwan—the land mine at the center of the relationship.
Taiwan has resisted Communist control since 1949, and America has
pledged to defend it from attacks.
In March, 1996, Beijing, fearing that Taiwan was moving toward
independence, fired ballistic missiles into the waters off the coast.
President Clinton responded by sending in two aircraft-carrier groups,
the largest show of force in Asia since the Vietnam War. Chinese
leaders backed down—and started working to prevent such a capitulation
from ever being necessary again.
At first, progress was haphazard. In 1998, China bought the rusting
hulk of an unfinished Soviet aircraft carrier, which had been
abandoned in Ukraine at the collapse of the Soviet Union, and
announced plans to tow it to Macau and turn it into a floating casino
Instead, the Chinese Navy restored it, and in 2012 commissioned it as
the country’s first carrier. Last month, China launched a second
carrier, and it is expected to build several more in the next decade.
It has also acquired new missiles, air defenses, submarines, and cyber
weapons that can scramble the electrical grids of an opponent.
The U.S. still spends more than twice as much on defense each year,
but if a similar crisis emerged today China would not need to back
down; in war games commissioned by the Pentagon, China routinely wins
battles with America over Taiwan.
In 2018, Admiral Philip S. Davidson, the head of U.S. Indo-Pacific
Command, told Congress, “China is now capable of controlling the South
China Sea in all scenarios short of war with the United States.”
The risk is not theoretical. In January, in Xi’s first major speech
about Taiwan, he said that the island “must and will be” reunited with
China eventually, and warned that China reserves the right to use
force against any “intervention by external forces.”
As remote as a clash may seem to Americans, a certain fatalism about
the tension has crept into conversation in Beijing.
Hu Xijin, the editor of the Global Times, told me, “To some extent, it
was doomed to happen”—because, he explained, America fears a challenge
to its supremacy.
Once the trade war began, in the summer of 2018, many in Beijing
ascribed it to America’s basic unwillingness to accept China’s rise.
The People’s Daily declared, “Whichever country becomes America’s most
important competitor, America will try to contain it.”
But Shirk traces the roots of today’s conflicts to political decisions
in Beijing a decade ago, and the effect they had in Washington.
“I don’t buy that it was inevitable, and this did not begin with the
Trump Administration,” she said. “What we’re seeing today is the
result of specific choices.”
In the aughts, China’s President, Hu Jintao, had a weak hold over the
politburo; to avoid a repeat of Mao’s dictatorship, the Party
practiced “collective leadership,” in which top bosses divvied up
powers, from intelligence-gathering to propaganda to the manufacturing
Over time, each sector became an aggressive fiefdom, taking greater
risks to win resources and advance China’s ambitions. “Nobody checked
anybody,” Shirk said.
Parts of China’s vast government “started overreaching to the point
that policies have snapped back and harmed the country.”
Chinese hackers, for instance, at the behest of various
agencies—military, intelligence—roamed farther and wider.
In 2014, they stole the private records of twenty-two million U.S.
government employees and their relatives from a server at the Office
of Personnel Management.
It was more alarming than the usual breach; foreign spy agencies could
use those records to identify people who work covertly as U.S.
employees, or have secrets that would make them vulnerable to
The following year, Xi promised Obama to curtail hacking, and it
briefly died down, but China’s cyberattacks have since resumed,
including “widespread operations to target engineering,
telecommunications, and aerospace industries,” according to a 2018
report by the U.S. intelligence community.
A similar dynamic has played out on China’s coast. For years, Beijing
coveted control of the South China Sea, for natural resources and
In 2012, it seized a reef near the Philippines called Scarborough
Shoal—China’s boldest use of force in the area. The Administration
considered it a minor diplomatic dispute, and did not want to risk
violence in order to push China back.
Some national-security officials contend that this leniency encouraged
China to make further forays into disputed territory. “
‘No-drama Obama’ didn’t want any messiness,” a former U.S. official
said. “Today the Chinese say, ‘We can’t believe you didn’t react.’ ”
In 2014, China started building artificial islands atop seven reefs
in the South China Sea, as markers of territory and staging grounds
Obama pressured Xi to stop, and, in the Rose Garden, Xi said that
China had “no intention to militarize” the islands.
But the military construction never ceased; China calls the islands
“necessary defense facilities.”
China’s maneuvers radicalized members of America’s national-security
community, in a cycle that Shirk calls “overreach and overreaction.”
Paul Haenle, a retired Army officer and an Asia adviser to Bush and
Obama, said, “If you talk to folks in the Pentagon, they say they’re
no longer debating whether or not China is an enemy. They’re planning
Haenle, who now directs the Carnegie-Tsinghua Center for Global
Policy, continued, “That really worries me. It’s a change. If you talk
about coöperation, you’re ‘naïve.’
Eventually the pendulum has got to swing back, because the key
question is: how can we be both a strategic competitor with China and
a strategic coöperator?”
The most dangerous frontier between Chinese and American power today
is the contested terrain of the Western Pacific: Taiwan, the South
China Sea, and a series of shoals and islands that are unfamiliar to
the American public.
In the South China Sea, the U.S. protests China’s claims by deploying
warships and jets close to the artificial islands, while Chinese
vessels and planes try to scare them off, a game of chicken that has
produced, by the Pentagon’s count, at least eighteen unsafe encounters
since 2016—near-collisions at sea or in the air that could have killed
Adding to the risk, the U.S. and Chinese militaries have abandoned
some lines of communication, and failed to agree on sufficient rules
of conduct at sea, the kinds of measures that prevented minor
incidents from escalating into catastrophe during the Cold War.
Johnson, the former C.I.A. analyst, said the United States must make
realistic decisions about where it is prepared to deter China’s
expansion and where it is not.
“If we think we can maintain the same dominance we have had since
1945, well, that train has left the station,” he told me.
“We should start by racking and stacking China’s global ambitions and
determining what we can’t accommodate and what we can, then
communicate that to the Chinese at the highest levels, and
operationalize them through red lines we will enforce. We’re not doing
that. Instead, what we’re doing are things that masquerade as a
strategy but, in fact, amount to just kicking them in the balls.”
By the end of 2019, nearly two years into the new era of
confrontation, China and America were moving steadily toward a
separation that is less economic than political and psychological.
Each side had embraced a form of “fight fight, talk talk,” steeling
for a “peace that is no peace,” as Orwell had it.
But Henry Kissinger considers America’s contest with China to be both
less dire and more complex than the Soviet struggle.
“We were dealing with a bipolar world,” he told me. “Now we’re dealing
with a multipolar world. The components of an international system are
so much more varied, and the lineups are much more difficult to
For that reason, Kissinger says, the more relevant and disturbing
analogy is to the First World War.
In that view, the trade war is an ominous signal; economic
polarization, of the kind that pitted Britain against Germany before
1914, has often been a prelude to real war.
“If it freezes into a permanent conflict, and you have two big blocs
confronting each other, then the danger of a pre-World War I situation
is huge,” Kissinger said.
“Look at history: none of the leaders that started World War I would
have done so if they had known what the world would look like at the
end. That is the situation we must avoid.”
Westad agrees. “The pre-1914 parallel is, of course, not just the
growth in German power,” he said.
“What we, I think, need to focus on is what actually led to war. What
led to war was the German fear of being in a position where their
power would not strengthen in the future, where they were, as they put
it in the summer of 1914, at the maximum moment.”
On each side, the greatest risk is blindness born of ignorance,
hubris, or ideology. If the Trump Administration were to gamble on
national security the way that Navarro did with his botched
predictions on trade, the consequences would be grave; if Xi embraces
a caricature of America determined to exclude China from prosperity,
he could misperceive this as his “maximum moment.”
The most viable path ahead is an uneasy coexistence, founded on a
mutual desire to “struggle but not smash” the relationship.
Coexistence is neither decoupling nor appeasement; it requires, above
all, deterrence and candor—a constant reckoning with what kind of
change America will, and will not, accept.
Success hinges not on abstract historical momentum but on hard,
specific day-to-day decisions—what the political scientist Richard
Rosecrance, in his study of the First World War, called the “tyranny
of small things.”
To avoid catastrophe, both sides will have to accept truths that so
far they have not: China must acknowledge the outrage caused by its
overreaching bids for control, and America must adjust to China’s
presence, without selling honor for profit.
The ascendant view in Washington holds that the competition is
us-or-them; in fact, the reality of this century will be us-and-them.
It is naïve to imagine wrestling China back to the past. The project,
now, is to contest its moral vision of the future. ♦
07-OCT-2019 :: China turns 70
Law & Politics
Xi Jinping and the party were seeking to project national power and
confidence on a grand scale.
They have “stood up.” Xi’s model is one of technocratic
authoritarianism and a recent addition to his book shelf include The
Master Algorithm by Pedro Domingos.
Xi is building an Algorithmic Society.
But Xi has taken the propagation of ideology and the cult of
personality to extremes not seen since the days of Chairman Mao.
The World in the 21st century exhibits viral, wildfire and exponential
characteristics and feedback loops which only become obvious in hind-
I would venture that Xi’s high water mark is behind him.
27-MAY-2019 :: China vs. US War Ballistic
Law & Politics
In the US, there is clearly a consensus baseline for a full-on toe to
toe slugfest as it were. In China, however, there is only one decider
who was pronounced as much by Xinhua in a historical announcement in
The Central Committee of the Communist Party of China “propo- sed to
remove the expression that ‘the president and vice-president of the
people’s republic of China shall serve no more than two consecutive
terms’ from the country’s constitu- tion.”
In one fell swoop, President Xi Jin- ping was president for life.
President Jinping is on a Pedestal and is faced with the Strong Man
Conundrum. The Political Brand will not permit a retreat let alone a
Friedrich Wu, a professor at Nanyang Technological University in
Singapore sums up the feelings of many when he describes them as “a
list of surrender demands for China to acquiesce to”. [FT]“If there is
a decoupling between the two economies, so be it. The Chinese people
can endure more pain than the spoi- led and hubristic Americans.”
05-MAR-2018 :: China has unveiled a Digital Panopticon in Xinjiang
Law & Politics
Dissent is measured and snuffed out very quickly in China. China has
unveiled a Digital Panopticon in Xinjiang where a combination of data
from video surveillance, face and license plate recognition, mobile
device locations, and official records to identify targets for
detention. Xinjiang is surely a precursor for how the CCCP will manage
dissent. The actions in Xinjiang are part of the regional authorities’
ongoing “strike-hard” campaign, and
of Xi’s “stability maintenance” and “enduring peace” drive in the
region. Authorities say the campaign targets “terrorist elements,” but
it is in practice far broader, and encompasses anyone suspected of
09-JUL-2018 :: Tariff wars, who blinks first?
Law & Politics
James Dean was an iconic American actor, who tapped into the universal
yearning and angst of nearly every adolescent human being with a raw
connection that has surely not been surpassed since. In one of his
most consequential films, Rebel without a Cause, two players (read,
teenage boys) decide to settle a dispute (read, teenage girl) by way
of near-death experiences.
Each speeds an automobile towards a cliff. A simple rule governs the
challenge: the first to jump out of his automobile is the chicken and,
by univer- sally accepted social convention, concedes the object in
dispute. The second to jump is victorious, and, depending on context,
becomes gang leader, prom king, etc.
Buzz, the leader of a local gang, agrees to a “Chickie Run.” Both race
stolen cars towards the edge of a cliff. The first to eject out of his
car is branded a “chickie.” Seconds into the race, Buzz discovers that
his jacket is stuck on the door handle, making jumping out of the car
somewhat difficult. Jimmie jumps out an instant before the cars reach
the edge of the cliff.
Buzz, still unable to free his jacket from the door handle, fails to
escape. While he won’t be branded a “chic- kie,” he suffers a worse
Bulls in arabica coffee, coming off its best year in five, will be watching developments in Brazil, the top producer and exporter. @business
After 2019’s harvest was marred by irregular weather and poor quality,
the country’s green bean stockpiles are set to drop to the lowest in
more than five decades, and any signs of more production issues may
exacerbate the tight supply scenario.
In addition to a forecast world deficit in 2019-2020 technical
indicators are strong, with the beans favored by Starbucks Corp.
moving above 50- 100- and 200-day moving averages.
While traders will be looking for signs of increased output, many
growers are still under financial distress, and that may limit
resumption of farm investments.
Meantime, a further depreciation in the Brazilian real could raise
prospects for increased supplies in the years to come.
Billionaire dos Santos' suitability as shareholder in question after asset freeze - Bank of Portugal @ReutersAfrica
The Bank of Portugal is evaluating Angolan billionaire businesswoman
Isabel dos Santos’ suitability as a shareholder of Portuguese banks,
it told Reuters on Thursday, after an Angolan court ordered that her
assets in the country be frozen earlier this week.
A Luandan court document dated Dec. 23 ordered an asset freeze of the
personal bank accounts of dos Santos, her husband Sindika Dokolo and
Mario da Silva in Angola as well as stakes they hold in nine Angolan
firms after the government accused them of causing the state losses of
over $1 billion.
Dos Santos and her husband have denied the allegations, calling them
“politically motivated”. Da Silva, chairman of Banco de Fomento Angola
(BFA), has not publicly commented.
Dos Santos holds significant stakes in several important Portuguese
firms, including a 42.5% stake in Eurobic bank and shares in telecoms
company NOS, and engineering company Efacec.
She is also a stakeholder in oil and gas company Galp Energia, whose
largest shareholder Amorim Group is partly owned by a holding company
jointly controlled by Angolan state oil company Sonangol and a firm
called Exem Energy, of which dos Santos, Dokolo and da Silva are
In an email to Reuters, the Bank of Portugal said it is “considering
all the newly available information which could be relevant for the
evaluation of her suitability as a shareholder of the institutions we
Dos Santos is not on the board of any entity subject to their
supervision but holds 42.5% of Eurobic bank. She does not currently
hold shares in any other Portuguese banks.
Portugal’s market regulator CMVM also said they are “following the
implications of the court’s decision” in relation to possible
consequences for the companies in which dos Santos holds shares.
Nigeria Faces Challenges of Politicking, Rising Debt in 2020 @bpolitics
Nigerian President Muhammadu Buhari is due to complete his second and
final four-year term in 2023 and the battle over who will succeed him
is already heating up, placing further pressure on an already strained
Buhari has thus far shied away from endorsing his deputy, Yemi
Osinbajo, for the position, twice slighting him by opting not to
transfer power to him while traveling abroad. That may diminish his
chances of securing the top job.
The front-runners for the post include Bola Ahmed Tinubu, a senior
leader of the ruling All Progressives Congress, and Atiku Abubakar,
who stood as the main opposition Peoples Democratic Party’s
presidential candidate in 2019.
“The year 2020 will be a year of limited governance and more focus on
politicking as various groups within the ruling APC will try and
position themselves in anticipation of the 2023 elections,” said Cheta
Nwanze, head of research at Lagos-based SBM Intelligence.
“We expect that the president’s close allies will fall out with one
another in 2020.”
Under an informal agreement between Nigeria’s rulers, the presidency
has rotated between the mainly Christian south and Muslim north. While
it has no legal standing, any attempt to violate it could stoke
The wrangling is but one of the challenges confronting Africa’s
largest oil producer. Below are some of the other key issues:
The government will need to fund its 10.6 trillion naira ($29 billion)
spending plans at a time when economic growth is faltering. Revenue
has fallen short of target by at least 45% every year since 2015 and
shortfalls have been funded through increased borrowing.
In its latest credit report on the country, Moody’s Investors Service
warned that the state is likely to take on even more debt and the
budget deficit is set to widen further.
“One of our concerns is the authorities seeking central bank financing
to fund part of the deficit,” Yvonne Mhango, an economist at
Renaissance Capital, said in an emailed response to questions. “That
would add to inflationary pressures.”
Inflation reached a 19-month high in November and increases in the
minimum wage and power tariffs are adding to price pressures.
The west African country has also shut its land borders since August
to stem smuggling of items like rice and frozen products, causing food
prices to rise by 15% from a year earlier.
The risk that the naira will have to be devalued is mounting. The
central bank has sought to maintain high yields as an incentive to
foreigners to invest in debt denominated in the local currency,
attracting large dollar inflows in the process.
While the naira remained relatively stable in 2019, the country’s
external reserves are down to a year-low of $38 billion.
Yields on naira-denominated debt dropped to an average of 13% at the
end of last year, from a peak of 18% in 2017, diminishing their
attractiveness to fund managers who are concerned about a possible
“The Central Bank of Nigeria’s de-facto naira peg will likely continue
to be under pressure in the near term due to widening imbalance in the
current account, which has increased external financing needs amid
weaker portfolio inflows,” Omotola Abimbola, an analyst with
Lagos-based Chapel Hill Denham Securities Ltd., said by email.
“We believe the CBN may be forced to review the market structure in
the second half of 2020 to address investor concern.”
Banks in Africa’s most populous nation ramped up lending in response
to pressure from the central bank to raise their minimum
loan-to-deposit ratios to 65% by the end of last year, increasing the
risk of defaults.
And the problem could get even worse if the regulator follows through
with plans to increase the minimum ratio requirement to 70%, Abimbola
A high proportion of loans have already been restructured, masking the
real levels of problematic debt within the banking system, according
Kenya arrests three men for trying to breach British army camp @ReutersAfrica
Kenyan police arrested three men suspected of trying to break into a
British army camp in Laikipia in central Kenya on the same day
Islamist insurgents attacked another base used by U.S. and Kenyan
forces, according to a police report seen by Reuters.
The failed break-in at Laikipia, where the British army trains about
10,000 troops a year, was captured on a security camera.
Three men were subsequently arrested at about 5 p.m. (1400 GMT) on
Sunday and are being questioned by anti-terrorism officers, the police
It’s not clear whether the attempt to break into the British base was
connected to the attack on the base in Manda Bay that killed three
Somali Islamist insurgent group al Shabaab claimed responsibility for
the attack early on Sunday and posted pictures of fighters posing next
to planes in flames.
The deadly attack came only days after the United States said it was
tightening security at its bases following threats from Iran to
retaliate for a U.S. airstrike that killed its most prominent military
Al Shabaab contacted media organisations, including Reuters, to stress
that Sunday’s attack was not connected to Iran.
“This Kenya attack has no connection with the Middle East attack. It
is a fight between us and the U.S.,” said Abdiasis Abu Musab, al
Shabaab’s spokesman for military operations.
The insurgent group, which wants to oust Somalia’s U.N.-backed
government, is now seeking to broaden its regional reach and reaffirm
ties with al Qaeda, which it first pledged allegiance to in 2012,
analysts said on Monday.
Al Shabaab has been recruiting Kenyans and other East Africans in a
bid to launch more attacks beyond Somali borders, said Matt Bryden,
the founder of Nairobi-based think-tank Sahan Research.
“We heard chatter three months ago that al Shabaab was planning
intensive cross-border operations and had identified commanders to
lead those operations,” Bryden said.
Al Shabaab used the phrase “Jerusalem will never be Judaized” when
announcing Sunday’s attack on the Simba base in Lamu on the Indian
Ocean coast and during an attack a year ago on the upscale Riverside
hotel and office complex in Nairobi.
“That is likely a signal of continuing loyalty to al Qaeda,” said Bryden.
Kenyan security forces killed five attackers and arrested five
following the early morning attack on Sunday, the military spokesman
and Lamu county commissioner said on Monday.
Photographs circulating among security specialists and seen by Reuters
showed five dead men in fatigues with military-standard boots sprawled
on a concrete slab next to the insurgency’s trademark black flag and
an assortment of weapons that included grenades and a machinegun.
The attackers managed to damage six planes and breach the perimeter of
the base before being repulsed, U.S. Africa Command said in a
statement late on Sunday.
They killed a U.S. serviceman, two American contractors and wounded
two Americans working for the Department of Defense, the statement
The Kenyan military does not typically release details of its casualties.
Tom Munyalo, an artist who has a workshop about 350 meters form the
Simba base, told Reuters there had been an unusual power cut in his
area that night.
He went outside at about 4 a.m. after hearing two vehicles
approaching. They stopped briefly near his water tank to release a man
who took off, running away from the base, he said.
Moments later, he heard gunfire and shouts of “Takbir! Takbir!” an
Arabic expression for “God is great!”.
Kenyan Lender Urges Tougher Bank Rules to Force More Deals @business
A Kenyan lender formed out of a takeover last year is urging the
central bank to increase safety buffers to drive more takeovers in
East Africa’s biggest economy.
Raising minimum capital requirements as much as tenfold to 10 billion
shillings ($99 million) will “force marriages” between lenders too
afraid of the risks that come with mergers and acquisitions, said NCBA
Group Plc Chief Executive Officer John Gachora.
With over 40 commercial banks servicing 47 million people, there
should be no more than 15 institutions, including specialized banks,
“It starts to force real sizable banks that can compete both on scale,
coverage, reach, as well as pricing,” he said in an interview in the
“It’s hard to get the banks to play their rightful role if every day
all you’re doing is competing on the margins.”
NCBA Group became Kenya’s third-largest bank following the combination
of Commercial Bank of Africa Ltd. and NIC Group Plc, setting off at
least three other deals in the industry.
The central bank and Kenyan lawmakers have resisted efforts from the
National Treasury to boost the amount of capital lenders need to set
aside for potential shocks since 2015, fearing the rules may squeeze
smaller banks and slow lending.
Even increasing core capital levels to 5 billion shillings won’t be
enough to strengthen the industry, said Gachora, who is also vice
chairman of the banking lobby group.
The country’s nine biggest banks account for 85% of the sector’s
profit before tax, according to central bank data.
The largest banks can be compelled to “assist” with the
recapitalization of smaller institutions, he said.
Another option is to get small lenders to merge with financial support
from bigger companies, which would resolve challenges of scale,