Welcome to the 212th edition of Trade War.
Taiwan gets a new president with the inauguration of Lai Ching-te and China carries out military drills. CCTV shows mock video of Chinese missiles destroying Taiwanese cities. And despite the growing frequency of PRC military activity, Taiwanese are worrying more but not panicking.
While Apple recently gave up on creating an electric vehicle, a Chinese smartphone maker has just successfully started producing and selling one. EV graveyards of unsellable older models appear. And while China’s overcapacity threatens industries around the world, Chinese innovation is also shaking up global companies.
China’s factories are producing at record rates even as consumers aren’t buying. And the $42 billion housing rescue package announced earlier this month is too small to save China’s property sector.
Notable/In depth
Heavy-handed Communist Party control and a dearth of reform has created a “dead-end Chinese economy of weak domestic consumer demand and slowing growth,” writes J Capital Research’s Anne Stevenson-Yang.
“There is deep class anxiety at every level in China,” says Yuan Yang, author of new book Private Revolutions.
And America’s attempts to get China to stop supporting Russia are doomed to failure.
Lai assumes office, China military drills
Lai Ching-te, a former doctor, became Taiwan’s newest president on May 20, replacing outgoing President Tsai Ying-wen.
Given his reputation as a politician who supports more autonomy for Taiwan, Beijing responded predictably. A spokesperson for China’s State Council Taiwan Affairs Office criticized Lai’s inaugural address, saying it had “sent a dangerous signal,” of seeking “Taiwan independence,” and China launched extensive military exercises around Taiwan.
“This is almost certainly an intentional blockade simulation,” says Jennifer Welch, chief geoeconomics analyst at Bloomberg Economics, referring to the large-scale military drills. “A real blockade that cut Taiwan off from the world would choke off a significant portion of global semiconductor supplies—costing the world economy about $5 trillion,” Welch and her colleague Gerard DiPippo estimate.
One comment in the speech that raised the ire of Beijing: when President Lai stated that “the Republic of China and the People's Republic of China are not subordinate to each other,” referring to Taiwan and China respectively, suggesting Taiwan is not a part of Chinese territory.
Check out the full text of President Lai Ching-te’s speech. And here is an article from the official Xinhua News Agency with the response from Chen Binhua, spokesperson for the State Council Taiwan Affairs Office.
“Giant fireballs explode”
”Giant fireballs explode into the air following an attack on Taiwan in this graphic on China Central Television (CCTV) which just went to air in a story about the People’s Liberation Army exercises over the last two days,” writes the BBC’s Stephen McDonell.
Watch the disturbing video here in this link.
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