The Economist: "China has become a scientific superpower"
Rare for me - maybe even unprecedented - to praise the Economist but this might be the seminal article on the current status of China's scientific might.
Firstly, surprising that The Economist would publish this, given how much they've pushed the "China collapse" narrative over the years, and how negative they've always been about the country.
Maybe they figured that at some point they could only get away with so much...
So what proves that China has now become the world's foremost scientific power?
Firstly, China has now overtaken both the US and entire EU in number of high-impact scientific papers produced each year, including in the Nature Index which is virtually impossible to game.
China's rise in that dimension was insanely fast: "In 2003 America produced 20 times more of these high-impact papers than China... By 2013 America produced about 4 times the number of top papers and, in the most recent release of data, which examines papers from 2022 China had surpassed both America and the entire European Union"
Looking at Chinese universities in terms of scientific research output, "there are now six Chinese universities or institutions in the world top ten [according to the Leiden Ranking], and seven according to the Nature Index"
Again, this was done in a single generation.
Looking by discipline, China leads 8 out of the 14 main scientific disciplines, including maths and physics.
In some disciplines like materials science, chemistry or engineering, it completely dominates the discipline with 70% to 80% of all high-impact papers published.
China also now spends more money on university and government research that the US, and spending is growing at an awesome rate: "China’s spending on R&D has grown 16-fold since 2000" and doesn't show any sign of stopping, when US spending has all but stalled.
Looking at people and education, two crucial points:
1) Contrary to popular belief, China is a net importer of scientists: "since the late 2000s, more scientists have been returning to the country than leaving"
2) China is training way more scientists. For instance in 2020 Chinese universities awarded 7 times (!) more engineering degrees than the US. And by 2025, Chinese universities are expected to produce nearly twice as many phd graduates in science and technology as the US.
The Economist points out - correctly - that it's high time the West takes notice of this new reality. Today Western scientists cite Chinese peers far less than vice-versa, and very few Western scientists visit, work or study in China, to learn from China in the way Chinese scientists have done in the West.
The paper concludes with a citation of S. Marginson, a professor of higher education at Oxford University: “I think it’d be very unwise to call limits on the Chinese miracle, because it has had no limits up until now.”
A sharp contrast to The Economist editorial line to date 😅
My personal take is that it's crystal clear that China is now the foremost scientific power in the world, and it's only the beginning.
We often hear the expression "x is not 10 foot tall". Well, China actually IS 10 foot tall: they've achieved all of this in one generation and they're literally just getting started. In July they'll hold the Third Plenum to decide on the country's direction for the next 10 years and everything points to the fact that they'll double down on science and technology. This means we might be looking at a future where China's scientific prowess exceeds the rest of the world, combined.
So at this stage the West has 2 options.
The "Qing dynasty" option, rooted in arrogance, fear and paranoia where it seeks to decouple and insulate itself from Chinese science and technology, which is what China's Qing dynasty did at a time when the West's scientific and technological might exceeded the rest of the world combined. How did that work out? China rapidly fell behind and thereby followed its "century of humiliation". Worryingly, this seems to be the current path followed by the US...
The "swallow our pride" option, where the West instead of demonizing China, refusing to understand it and learn from it instead does enormous work on itself to understand the country with intellectual honesty and to keep pace with its progress. For instance it is absolutely amazing to me that there are more people learning Korean and Japanese than Chinese (), which makes just about zero sense... Also amazing is the fact that the US State Department currently has level 3 "reconsider travel" advisory on China (), literally telling its citizens not to travel there, even though it's far and away one of the safest countries in the world to travel to (when you look at facts instead of propaganda)...
I have to say, there's something immensely ironic about the Dalai Lama arguing his reincarnation should be determined by a tax-exempt Swiss foundation incorporated in Zurich (dalailamafoundation.org/who-we-are/the…), while Beijing insists on maintaining the traditional centuries-old Golden Urn selection process.
And the even bigger irony is that everyone will doubtlessly denounce China for "destroying Tibetan traditions and culture" for doing so.
To illustrate just how nonsensically these tariffs were calculated, take the example of Lesotho, one of the poorest countries in Africa with just $2.4 billion in annual GDP, which is being struck with a 50% tariff rate under the Trump plan, the highest rate among all countries on the list.
Why? Does Lesotho apply extortionate tariffs on U.S. products and the U.S. is merely being "reciprocal" here? Not at all, despite what Trump is saying, it's NOT the way these tariffs are defined.
As a matter of fact Lesotho, as a member of the Southern African Customs Union (SACU), applies the common external tariff structure established by this regional trade bloc.
Which means it applies the same tariffs on U.S. products as South Africa does, as well as the 3 other members of the bloc: Namibia, Eswatini and Botswana.
So since the tariffs charged by these 5 countries on U.S. products are exactly the same, they must all be struck with a 50% tariff rate by the U.S., right? Not at all: South Africa is getting 30%, Namibia 21%, Botswana 37% and Eswatini just 10%, the lowest rate possible among all countries.
So what gives? Again, the way these tariffs are calculated has absolutely zero relationship with actual tariffs imposed by these countries on U.S. products. Instead, they appear to be simply derived from trade deficit calculations.
Looking at Lesotho specifically, every year the U.S. imports approximately $236 million in goods from Lesotho (primarily diamonds, textiles and apparel) while exporting only about $7 million worth of goods to Lesotho (wits.worldbank.org/CountryProfile…).
Why do they export so little? Again this is an extremely poor country where 56.2% of the population lives with less than $3.65 a day (databankfiles.worldbank.org/public/ddpext_…), i.e. $1,300 a year. They simply can't afford U.S. products, no-one is going to buy an iPhone or a Tesla on that sort of income...
The way the tariffs are ACTUALLY calculated appears to be based on a simplistic and economically senseless formula: you take the trade deficit the U.S. has with a country, divide it by that country's exports to the U.S and declare this - falsely - "the tariff they charge on the U.S."
And then as Trump did in his speech last night, you magnanimously declare that you'll only "reciprocate" by charging half that "tariff" on them.
As such, for Lesotho, the calculation goes like this: ($236M - $7M)/$235M = 97%. That's the "tariff" Lesotho is deemed to charge this U.S. and half of that, i.e. roughly 50% is what the U.S. "reciprocates" with.
It's extremely easy to see why this makes no sense at all.
First of all, there's nothing Lesotho can do about it: they can't change tariffs they allegedly charge the U.S. to reduce the tariff rate the U.S. "reciprocates" with because, again, it's NOT based on any tariff that they charge.
Similarly they can't do much about reducing the trade deficit they have with the U.S. because, again, they simply don't have enough money to buy U.S. products.
Also the main rational Trump gave for the tariffs is to get production back to the U.S., to "bring manufacturing back". 47.3% of Lesotho's exports are diamonds: how do you bring the "manufacturing" of that "back to the U.S."? Anyone can see it makes just about zero sense.
The Lesotho example exposes the fundamental economic incoherence of these tariffs. Rather than addressing actual trade barriers, they punish countries based on trade deficits that arise from structural economic realities. All the more countries like Lesotho which pose zero competitive threat to American industry.
Worse yet, these tariffs will likely make these structural realities even worse: the U.S. is Lesotho's second most important export destination so it's a fair bet that applying 50% tariffs on their products will make people in Lesotho even poorer, and therefore even LESS able to afford U.S. products.
But perhaps the most unfair and detrimental aspect of all this is that these tariffs represent a complete reversal of longstanding U.S. development policy, and therefore a betrayal of countries - like Lesotho - who chose to follow U.S. advice in the past.
For decades the U.S. has used preferential trade access to encourage economic development in the world's poorest nations, recognizing that trade, not just aid, could get them out of poverty and ultimately put them in a position where they too could afford iPhones or Tesla.
They're now effectively penalizing countries for following previous U.S. policy, a lesson which I bet they won't forget anytime soon.
So all in all the irony is painful: in the name of fighting unfair trade, America has just demonstrated what truly unfair trade looks like.
This isn't something designed to address genuine trade issues, but simply a mechanism based on arbitrary math to punish countries for the affront of selling more to the United States than they buy.
The arbitrary math used to define the tariffs (which has nothing to do with tariffs charged on the U.S.) was just unwittingly confirmed by Deputy White House Press Secretary Kush Desai, in a way that shows he himself doesn't understand it 👇😅
This could potentially be quite transformational for peace in Ukraine and for Europe generally: welt.de/politik/auslan…
German newspaper Welt Am Sonntag, citing "EU diplomatic sources familiar with the matter", reports that "China proposed to the EU to participate in the 'Coalition of the Willing'" so as to "increase Russia's acceptance of peacekeeping forces in Ukraine."
Russia has so far vehemently rejected the idea of European peacekeeping troops in Ukraine but could indeed potentially be swayed if China were to be part of the coalition.
Such a move would also of course have the potential to fundamentally change the nature of EU-China relations and mark a huge shift in the continent's security architecture, where China would be an alternative security partner to the US in European affairs.
It would also strategically position Europe in a much more enviable position were it wouldn't be at the mercy of Washington's every whims, and could leverage competition between Beijing and Washington in a way that'd enhance its sovereignty and bargaining position.
All that being said, given the EU's proven history of diplomatic incompetence and strategic inertia, this scenario is more likely than not to remain theoretical.
Some people reply that this could be fake news because this is inconsistent with China's historical position BUT it isn't: China was already one of the guarantor states in the 2022 draft "Treaty on Permanent Neutrality and Security Guarantees for Ukraine" negotiated in Istanbul (see screenshot, from here static01.nyt.com/newsgraphics/d…).
2022 treaty on which Lavrov said a peace deal must be based ("Our approach to the potential settlement has not changed: we are ready for dialogue on the basis of the 2022 agreements", mid.ru/en/foreign_pol…) 🤷
Retired PLA Senior Colonel Zhou Bo had also recently said on the sidelines of the Munich Security Conference that "China could also be part of security guarantees, alongside other powers," depending on the conditions. scmp.com/news/china/dip…
This "China is depleting the oceans with its huge fishing fleets" story is yet another utterly shameless piece of propaganda when China actually proportionally fishes much less than the rest of the world, since - unlike others - it gets the immense majority of its fish supply from aquaculture 👇 (src: openknowledge.fao.org/items/06690fd0…)
The worst culprit when it comes to depleting the oceans is actually Europe, relative to its population size. They fish about 33kg of fish per person per year compared with 10kg for China, a crazy 230% more!
Actually if you read the report it's 13 million tones for China x.com/realSandkraken… Which corresponds to 14.3% of global captures of aquatic animals, which is less than Europe with 15.2 million tones or 16.7% of global captures. This is of course despite China having twice Europe's population...
In other words, Europe has 9% of the world's population but fishes 16.7% of the fishes while China has 18% of the world's population but fishes 14.3% of the fishes.
Now you tell me who is overfishing and who isn't...
Can you even read a graph? China is fishing only about a third the amount of the rest of Asia (13 million tones for China vs 30 million tones for the rest of Asia) 🤷♂️
If anyone wonders how to constitute the China allocation of their portfolio, these tickers, based on seating arrangements, are probably not a bad place to start.
That was actually the basic strategy of a friend of mine, very successful investor in China: he simply studied policy statements very deeply as well as signals like this meeting 👇 to understand what were China's strategic economic objectives and which companies would benefit from this. Just like the US has a "don't fight the fed" investment principle, China has in some way a "don't fight the government" equivalent.