Research Publication – Reality Bytes – Clash of the Titans – The Panda Awakes

28th September 2021: RFM and Alavan Independent update their trade and tech war coverage to provide subscribers with an in-depth political and technical assessment situation of Chinese regulation and how it will affect the current trade/technology war between China and the USA.  

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The China/US rivalry has now become an ideological struggle which is likely to mean economic decoupling. The problem for the technology industry, fintech, Wall Street and everyone else is that China’s economy is deeply intertwined with the world meaning that economic upheaval is inevitable. We have developed a framework to understand how ideology is now impacting the technology sector and find large disparities from company to company in terms of impact and outlook. We think that, in pursuing his (primarily) domestic political agenda, President Xi Jinping is putting China’s long-term goal of technology independence at great risk.

• Ideology: Since the change of guard at the White House, the strategic rivalry has evolved into an ideological struggle, largely as a result of President Xi’s decision that everyone and everything in China must be subservient to the party.
• The Wall Street shuffle: Wall Street’s increasingly close relationship with China is now under direct assault from both sides. The result is likely to be greater decoupling which, given how intertwined economies currently are, will lead to significant economic upheaval.
• Crypto: We were not surprised to see cryptocurrencies declared illegal in China and still think that any technology that threatens state control of money will go the same way.
• The regulatory framework: To navigate the labyrinth of Chinese regulation we define a framework of three central government motivations implemented through six supervisory categories. This greatly aids both understanding and predicting the current crackdown on tech.
• The regulated. We find that every single company will be affected differently and the range is large going from almost total decimation (Ant Group, Didi etc) to virtually untouched (SMIC, Huawei. Xiaomi etc
• Silicon, AI & Quantum computing: Very little is likely to change in semiconductors where China is going to have to wait for silicon to become obsolete before it has a hope of ridding itself of its dependence on foreign technology. By contrast, it remains in a leading position with AI, autonomous driving and quantum computing and it is here where we think that China can break free of its shackles and compete head-to-head with the USA.
• Own goal: While there was a case for more regulatory oversight of the Chinese technology sector, we think that the central government is going too far for its own good. Fintech, gaming, and education technology entrepreneurs are now incentivised to start up their companies overseas. This means that China runs the risk of falling behind in the technology race as its brightest and best minds may end up contributing to the other side.