COVID: What Really Happened in Wuhan?

In early 2020, reports of a virus sweeping across the globe hit the headlines. But where did it come from? How did it start? This week’s news is that the Department of Energy released a low-confidence statement that COVID originated from a lab leak within the Chinese System.

Was there a breakthrough in the evidence? Did they find the smoking gun everyone has been looking for? No. And much of the scientific community still believes this was a Mother Nature special and just jumped from a different species to humans.

So without any concrete evidence, why has a chest-thumping-contest broken out in the American political system over who hates China the most? Regardless of the origins of COVID, the Chinese knew there was a breakout in Wuhan. They shut down all domestic flights in and out of the region, but you know what they didn’t stop…International flights. They intentionally let the virus spread across the globe.

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And then there’s you.
 
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TRANSCIPT

Hey everybody. Hello from California. I just want to take a couple of minutes real quick to talk about the news this week. We’ve got a number of folks in the United States government who are taking a firmer stance on China, on COVID related history. Specifically, the Department of Energy is now saying with low confidence that it believes that COVID originated in a lab leak out of the Chinese system. And the director of the FBI concurred with the general statement that this is the bureau’s standing position.

Couple of things real quick. First, don’t blow it out of proportion. Low confidence means that there’s actually no smoking gun or firm evidence of any kind. It just means that this is the opinion of the agency and there’s a lot of circumstantial evidence that points in that general direction. There’s no new breakthrough. There’s been no information brought to light that indicates that the lab leak is indeed where COVID came from. And as a rule, about two thirds of the American intelligence community officially is on the position that this is a 100% Mother Nature special, that jumped from one species to humans, somewhere in the Wuhan area. So there’s really no movement in terms of policy here or in terms of information.

I will outline two things. Number one, the Department of Energy in the FBI are as a rule, not known for medical expertise. So when they come out and say things like this, you should take it. Not so much with a grain of salt. Just put it in the context. Second, no one has any information or smoking gun or evidence pointing to it not being a lab leak. So while the general position of the scientific community is, it would probably jump from animal to human, that doesn’t mean that we know that that is what happened. It could be either way.

Now, a couple of things here. First of all, politics. There is now a competition across the American political spectrum as to who is going to be more anti-Chinese. And so there are resolution after law after amendment across Congress to prove that the Republicans or the Democrats happened to be the ones that hate China the most. Gone are the days that the business community was even part of this conversation, and now it’s all political and everyone is competing to see who can beat their chest the most. That should be your first big take away that relations with the Chinese. On the American side of the equation are breaking down because they no longer have a defender, they only have attackers. So whether you like Trump or Biden or hate Trump or Biden, everyone has decided that they don’t like the Chinese very much. That’s number one. What’s number two?

Oh, yeah. There’s plenty of reasons why we should still be mad about the Chinese, even if it’s not a lab leak. So the lab leak theory is based on the idea that either through carelessness, negligence or accident, it leaked out. So accidental being the key word there. And obviously, if the Chinese did allow it to escape from a lab and hushed up, that is bad. But that is ultimately accidental. What we know for sure, what there is no dispute of what have been the Chinese admit publicly is that for the two weeks after the Chinese realized they were dealing with a respiratory pathogen in Wuhan, they banned domestic flights to and from Wuhan, but they allowed international flights to continue to and spread the virus worldwide.

The lab leak would be embarrassing, but what we know for certain was that the Chinese intentionally allowed the virus to spread globally. And from my point of view, that means it’s perfectly reasonable for the Democrats and Republicans to compete as to who is more anti-Chinese these days. Alright. That’s it for me. Until next time.

Demographics Part 7: The Northeast Asian Crash

Today we’re talking about another region of the world competing for the title of “worst demographics” – and that, of course, is none other than Northeast Asia.

China is its own beast, and for those of you that have followed me for a while, you know where they stand…to summarize, yikes.

Japan is one of the few countries that has been able to look at this situation from a long-term view, allowing them to prepare for this (far) better than their neighbors.

South Korea is the poster child for all of the issues at hand, but if there’s a country that can somehow find a strategy to get itself out of this situation…it would be them. (and hopefully, they share it with the rest of us)

Taiwan has been able to delay the demographic problems that these other countries are facing, but that doesn’t mean they get off scot-free. They just have some time to think about what’s coming.

I know that was a lot of doom and gloom, but at least you have Southeast Asia to look forward to.

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Is India the Next China?

When I get the question – “Is India the next China?” – to the surprise of many, I respond with a resounding NO! And the Indians should be extremely happy about that. When most people look at India, they see a ton of people and cheap labor. But once you dive a little deeper, the stark differences between India and China start to appear.

Thanks to globalization, China became the manufacturing powerhouse it is today; India missed the globalization train. So India will probably be just fine when the rug gets pulled out from under the global system.

China’s economy owes much of its success to hyper-financialization due to the government flooding projects with loans and capital. Great for the appearance of economic growth, but wildly inefficient and unproductive. In India, capital availability is low, so the projects that get funding are actually productive.

And finally, my favorite topic, demographics. China is a mess; just go watch my videos on that. India is just now industrializing, so their demography has shifted into the chimney we often see (having the same amount of people in their 40s, 30s, 20s and so on). However, this has happened much later and is proceeding much slower than their peers.

On top of all that, India is geographically blessed with access to food and energy right around the corner. Don’t get me wrong, India has its own set of issues, but they are all on a magnitude lower than what China’s got going on.

Prefer to read the transcript of the video? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TRANSCIPT

Hey everybody. Peter Zeihan here coming to you from the great golf course wilds of Ojai, California. Today, I wanted to do something that a lot of folks have been asking for a while and talk about India. So this is kind of like half in the demographic series, half on its own.

Lots of folks are always wondering if India is going to be the next China because it’s a big country. It has more people now. It has a faster growth rate. And, you know, it’s a legitimate question, but I have to give it a resounding no. And that is something the Indians should be very happy about. Chinese success to this point has been based on three factors. First of all, the strategic largesse of the United States in creating the globalized system, to allow the import and the export of everything on a global basis without having to first secure territory or sea lanes militarily. This came about as a result of not just the American globalization push after the Second World War, but when Nixon went to see Mao in China and to engineer the Soviet Sino split, which ultimately made China an ally of the United States in the later years of the Cold War. That is what created the manufacturing powerhouse that we know as China today.

Now, the United States have lost interest in that, and the United States sees China as a rival. So the continued existence of the Chinese economic model is dependent upon the ongoing strategic largesse of the United States, which is a very bad plan. And we’re seeing the United States hack out bit after bit after bit. It’s already happened in agriculture and energy, in manufacturing, especially in semiconductors. And the United States has the ability to kill any of this overnight if it should choose to. So the economic future of China is, one, without exports and imports and market access. And I don’t know how they can square that circle.

In the case of India. India never joined the system. India was pro-Soviet during the Cold War, and even when the Soviet system went away, the Indians kind of reflexively remained a degree pro-Russian in the years since. So their system is never internationalized. Now that means they missed out on the big growth push that the Chinese had in the eighties, 19, 20 and 2010s. And that’s why the Indian economy is so much smaller. But it also means that when the rug gets pulled out, India really doesn’t suffer all that much.

The second big piece of China’s success is hyper financialization. The idea that the state confiscates the bank deposits and the savings of the population and just floods would be projects without money, making sure that everybody has a bottomless supply of 0% loans so that everyone can have a job. Now you will get economic growth with this, but it will be wildly inefficient and in many cases flat out nonproductive. The closest comparison we have in the United States is Enron and subprime. We know how that went. Now, imagine doing that for every single economic subsector throughout the entire economic structure, which means when it goes down. And it will go down. You don’t just have a financial and a housing crisis. You have an everything crisis. And the economic sector that has been most exposed, that is most dependent to this capital is agriculture. So you can toss a famine on top of that. This isn’t a problem in India.

Now, the Indians system is capital poor, no navigable waterways of note, very high population per person capital availability in India is among the lowest in the world, lower than most of sub-Saharan Africa. But that means that the Indians actually treat capital like money. It’s an economic good as it should be, as opposed to a political good as it is in China, which can be thrown at whatever you want. So again, you don’t get the growth, but you also don’t get the instability.

The third big factor is demographics. Now, we’ve already talked about China at length in terms of just the hollowing out of the entire system. This simply hasn’t happened in India at all. Now, India has, like everybody else, started to industrialize. And so India has, like everyone else, slowly transition to kind of that chimney demography where they have as many people in their forties as the thirties of their twenties. Those are teens. But the process started a lot later than it did in China, and it’s proceeding a lot slower. And so while India is in the midst of rapid aging, it’s from a very late start, at a relatively slow speed compared to a lot of other countries in their peer group, much less the Chinese, which really are in a category all their own. Which means that India today has plenty of people under age 40 to do consuming and even still have kids. If they can find a way to reverse some of these trends. And that means in 10, 20, 30, 40 years, India is going to have a lot of people aged 40 to 65 who are going to be capital rich and high value add and in a system with one and a half billion people, even if that’s only 10% of the population, and it’s more, that’s still a whole lot going on.

Now, in the worst case scenario, where birthrates continue to shrink and the Indian population continues to age, we are still talking about it still being the world’s largest population for at least another half a century. And they won’t be in a European style crunch for their demographic within 40 years. So even if they do everything wrong, even if everything turns against them, the future of India looks pretty good. And they’ve got one other thing going for them that the Chinese don’t. They’re a lot closer to the things that they need. Australia is a much more friendly nation to the Indians than it is to China, and so there’s always going to be some extra food supply or mineral supply that’s available. And India, the subcontinent is the first stop out of the Persian Gulf.

So India is one of the last countries in the world that you should expect to ever have an energy crisis. Whereas China, is the last country on a very, very long easy to disrupt chain. So all of the normal issues that we think about when we think of India inefficiency, women’s rights issues, what that means for their economic growth, the fact that Pakistan is right there. Now, these are all relevant along with corruption. These are things we should worry about. But they’re an order of magnitude less than the problems that are plaguing China now, and they’re all survivable.

There are solutions that the Indians can come up, and even if they can’t, they can cope with these as they continue to grow. Whereas China, we are very close to the end. Alright. That’s it for me. See you guys next time.

It’s a Bird, It’s a Plane, It’s a Chinese Spy Balloon…

Unfortunately for the Chinese, their balloon didn’t make it in time for the Macy’s Thanksgiving Day Parade…however, it’s made a much bigger splash than the rest of this year’s balloons.

Now I’m no balloon expert, but it seems to me that a “spy balloon” is a little outdated for 2023; especially when an open-source satellite could have given them the same intel.

The effect of this balloon is two-fold. First, it’s shown the world that the disconnect within the Chinese government has reached an all-time high. Second, diplomatic relations between the US and China have grown colder than ever and will likely be strained even further.

Prefer to read the transcript of the video? Click here

This Friday, Feb. 17th, join me for the webinar – Global Outlook: One Year into the Ukraine War.

We’ll dive into the global impacts the war has had on supply chains, agriculture, and much more. After my presentation we’ll have a Q&A portion to answer all those burning questions.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TRANSCIPT

Hey Everybody. Peter Zeihan coming to you from another exciting hotel room today. Today’s Balloon Day. Now, I realize it’s been quite a while since the balloon was first sighted and brought down. But, you know, part of being a generalist is knowing when to keep your mouth shut because you don’t want to just talk about things you don’t know much about. And balloons have never made my top, you know, thousand list of things I consider myself a semi expert in. So I had to go out and speak to a few people.

Let’s start with what the Chinese were technically trying to do. They were doing overflight of a lot of our military bases, specifically our ICBM launch facilities, because the Chinese are new to having a nuclear deterrent and the idea of having reinforced bunkers and silos. And so everything from the type of fuel – solid versus liquid to the type of reinforcements to the type of launch to capabilities to the staging of the rockets. They’re all relatively new to all of this, certainly to doing it at scale. Remember that as early as the 1970s, the United States had over 30,000 nuclear weapons, about one third of which would have been deployed by missile. Now, with arms control treaties and the post-Cold War environment, we have slimmed that down to just a few hundred. But the United States has a deep bench of experience in building and maintaining these things, and the Chinese simply don’t. Until very recently, their entire deterrent was just about 100 or so missiles. And they’re trying to beef it up. Part of the general effort to get into great power competition, and they have a very long way to go. So any little peek that they can get would be great from their point of view. Obviously, from the American point of view, we have a slightly different view of that.

Now, when it first came out, like, a lot of people didn’t really know what was going on. And so my first thought was like, you know, why would the Chinese, I mean, the balloons are big, they’re slow moving. You can’t maneuver them very well. They’re obvious. And so it’s like, you know, I haven’t thought very much of the leadership of Xi Jinping of late or making mistakes in energy and agriculture and finance and economic development and trade. I mean, manufacturing, you name it. We’re seeing catastrophic failures across the Chinese system in decision making because Xi has basically gotten rid of anyone who might tell him no or might tell him yes…but. He’s surrounded himself with yes men. And so we’re just seeing a general breakdown of the bureaucracy and the decision making apparatus. But even with that in mind, it was like, you know, Xi isn’t just stupid. Why would he throw a surveillance platform that would just gently float across the United States? Want to be obvious. It would be seen that obviously would torpedo relations. I just never occurred to me that they could be that dumb. Well, turns out the rampant stupidity that is taking over decision making and Chinese policy has now reached a bit of a break point.

We now know from the responses to the crisis that the Chinese have lost the ability to coordinate within their own system. So normally if you can do something that’s a little provocative, you’re going to coordinate with your diplomatic personnel and your executives in order that nothing else that you’re working on gets ruined. But the day that the balloon, like, floated into northern Idaho, Blinken was supposed to be on a plane going to China, and he had to cancel.

And then over the course of the next week, the Americans were reaching out to the Chinese, and the Chinese refused to take the call because they didn’t know what to say because they couldn’t get direction. And then once it was shot down over the waters of South Carolina, they refused to pick up the phone because they said, oh, no, you don’t understand.

You’re using military force, take out a civilian aircraft. I mean, the just the abject refusal to deal with the situation is the only you only see that when the bureaucracy is seized up, she has so intimidated and purged the bureaucracy that there’s really only two types of people left, those who will do nothing unless they are explicitly instructed to do something, or those who are true believers, the zealots, and those are the folks who will go out on the runways and sterilize them for COVID, or apparently will try to get a balloon over the United States, not even thinking that it might have a problem for relations, which U.S. Chinese relations are the coldest they

have ever been. And with incidents like this, any effort to warm them is not working. So that’s kind of the diplomatic and the political side. This is this is really bad for China and really exposes just a big, hollow emptiness in their policymaking capacity, which I’m sure no one’s going to take advantage of at all. So let’s talk about what the Chinese might have gotten and what the United States might have lost or gotten, because there’s a clear winner here and it’s not probably who you think it is now, the missile silos that the Chinese are so interested in, you know, news flash, you don’t leave those open to the elements.

And so once it was obvious that a balloon was going over them, they just button up, they get their emissions under control. And all the doors are closed. So there was nothing that the balloons could gather that could not also be gathered by satellite. So they basically floated all over the United States and got nothing better than typical open source information.

The whole time U.S. Hardware was tracking that balloon, tracking its emissions, taking digital renderings of the entirety of the structure and. Oh, yeah, yeah. Just just so we’re clear, this was not a weather balloon. This thing was 300 feet wide. That’s a big ass balloon. That’s like an order of magnitude bigger than weather balloons. And I don’t know if you guys know what an embassy airplane is, though.

Those little Barbie dream jets that sometimes you’re on a connecting flight for, they only take about 70, 80 people. The equipment that was hanging from the bottom of the balloon, the payload was bigger than an embassy air and there were long range antennas and listening devices and computing capacity and solar panels on this thing, along with some propellers.

So, you know, the idea that this was a weather balloon was like only if it was planning on monitoring the weather on Venus because it had that sort of range. So the Chinese position, again, and the diplomatic system seized up because the truth was so obvious. But the Chinese diplomatic corps had no idea that this was going on.

It’s part of that whole disconnect anyway. They got very little, if any, information from this effort. But the whole time the Americans were trapped in what was a fairly sophisticated spy platform, and then we shot it down on it over South Carolina, we started fishing for the parts. Now, I like a lot of people, apparently like President Biden, my first instinct was to shoot it down the second across the border.

But as it was explained to me, if you shoot down something of that size, when it’s ten miles up, the debris field is going to cover a couple of square miles in a line. That’s something like six or seven miles long who nobody wants. £200 of Chinese spyware falling through the roof. You people probably would have died even over like the vast empties of Montana.

So they waited for it to be over water. Also, they did detect it when it was over Alaska. But if they had shot it down over Alaskan waters, some of those waters are three miles deep and they wanted to recover it. So the waters over or off the shelf of South Carolina are 30 to 60 feet deep, something you can just do as a commercial dove.

So pieces that are being recovered and we’re getting a better look at spy equipment out of China and their capabilities and their emissions and how they handle information and what they’re looking for as a result of this incident. Then normally you would have gotten after a one or two year probing effort with using more traditional methods. So it’s kind of like the Chinese flew a canary into our cage and we just quietly locked the door behind it.

And this is turning into the intelligence bonanza of the decade. So that’s what happened after a couple of weeks of me poking into this. It’s a really intriguing story. But the bottom line is just the sheer level of stupidity and dysfunction of the Chinese national security experts, if that’s the right word, really has reached a foreign, mentally new low.

And, you know, Congress is going to be stirred up like a band of hornets. And I have no problem with that because this is going to have consequences for the relationship. There’s no way there’s nothing out of this that the Chinese are walking out of smelling. Good. All right. That’s it for me. I’ll see you guys next time.

China’s Competitive Edge: Solar Exports

As the US attempts to reshore many previously outsourced industries, the Chinese are looking for any opportunity to retain their competitive edge…so let’s talk about solar panels.

China isn’t known for its grand technology or innovation, but through a mix of labor, security and scale, they have emerged as the dominant manufacturer of solar panels.

China’s not letting go of the reins anytime soon. So what will happen next…Industrial espionage? Technology theft? One way or another, the US is bringing solar home.

Prefer to read the transcript of the video? Click here

February is here and that means the Webinar is only 17 days away!

Join me on Feb. 17th for the webinar – Global Outlook: One Year into the Ukraine War. We’ll dive into the global impacts the war has had on supply chains, agriculture, and much more. After my presentation we’ll have a Q&A portion to answer all those burning questions.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

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TRANSCIPT

Hey Everybody. Peter Zeihan here coming at you from fairly windy and noisy Miami. I hope the sound on this one’s okay. The news that you can use this week is that the Chinese government is considering putting export bans on certain types of solar panel manufacturing, specifically the ability to make the wafers and silicon ingots that go into certain types of solar panels.

Some people are saying that this is a retaliation to things that the United States has done recently with semiconductors. But I don’t think there’s a direct link here. A couple of things. First of all, when you think of technology and you think of China, those two words only go together in the word manufacturing. The Chinese do not have a history and really any industry or subsector of being the innovators. They’ve got the manufacturing plant because it used a mix of labor and security and scale in order to become the dominant player in a lot of sectors…solar panels are one of those. But they don’t do much innovation at all. In fact, we were kind of racking our brains over this in the offices when what items out there were the Chinese the pioneers at, that they hold the technological edge, and there’s still a demand for it outside in the rest of the world. There is really nothing.

What’s going on here is that the Chinese have discovered that the United States is starting to build on an industrial policy and lots of other countries in the world are going with it. And once you marry state power to the efficiencies that you get from the American workforce and capital markets and market size, well, the Chinese just aren’t nearly as important in that sort of world.

So in those rare places where they do have a technical edge, they would like to keep it. This brings us to the solar panels. The Chinese dominated this space years ago and drove out most of the competition completely and then were left as the only ones in the space. Something like 80% of the global total and the assembly of solar panels requires a lot of fingers and eyes, something the Chinese dominate because of the size of the labor force. And that means they have made certain technological advances. The one that they’re talking about at the moment, the most important one by far, is that the Chinese and only the Chinese can make the wafers for the PV panels larger and thinner than anyone else. It’s an edge they would like to keep. But with the United States now mandating that a certain percentage or rising percentage of solar panels have to be manufactured in the United States. This technology is going to move there, whether it’s the U.S. having to develop it or not. So the question comes down to what kind of time frame are we talking about? 

If the Americans started from a naked start, this would probably be a 5 to 8 year process, which for the Biden administration is just not fast enough. And so that brings us to the question of espionage. Now, the Americans, as a rule, are not great at industrial espionage, and it’s because our economy is too large and the government tends to be too hands off. So let’s say, for example, that the CIA did have the capacity to steal the plans for the next transmission that the Germans were able to put together. Who do you give it to? Ford? Chevy? Doesn’t work that way here because we would have to choose sides on everything. Our economy is too big. There just aren’t a lot of sectors where we only have one significant firm. But that’s not the case in most other systems where you have national champions, in part because of technology theft. 

The three countries that would be most likely to go after this are three countries that after China are the biggest thieves of technology in the world, and that would be France, South Korea and Israel. And of those three, the South Koreans are definitely the ones to watch because they now have a fairly robust history of building industrial plants within the United States in order to meet whatever requirements the US government demands. So I can absolutely see a future where either the Biden administration breaks with longstanding policy and actually gets intelligence professionals involved in technology transfer against the wishes of the home country.

Or more likely, the South Koreans have already stolen stuff and they’re already negotiating with the Biden administration on how to build stuff on our side of the border in order to get the Koreans concessions and other economic sectors, which is something they would dearly love anyway.

One way or another, this is going to happen. The Biden administration has already put out the money. The demand is there. Solar panels are getting more efficient every year. They’re making more sense and more parts of the country. But most of all, most importantly, the political will for the general population to play hardball with the Chinese is there.

So all the pieces are in place and Chinese leadership in this sector, its days are numbered. And even if that proves to be false, if the Chinese refuse to export the tech to the United States, then the United States will have no choice but to build the stuff itself. One way or another solar panels are coming home. 

Alright. That’s it for me. Take care, everyone.

Semiconductors: China’s the Odd Man Out

Photo of a semiconductor

An American, a Dutch, and a Japanese guy all walk into a bar…sounds like the beginning of a bad joke, right? Unfortunately for the Chinese, their semiconductors are on the shit end of this joke.

As the Japanese and Dutch join the US sanctions against Chinese Semiconductors, we find ourselves at a precarious crossroads. The semiconductor industry has long been the personification of globalization, with dozens of products crossing countless borders and supply chains longer than the DMV line. But what happens now?

China’s demography is collapsing, and its semiconductor industry isn’t far behind. So someone else will have to step up and start producing these semiconductors; all eyes are on the US, the Netherlands, and Japan. Although, we may have to put up with middle-of-the-road semiconductors for a while.

Prefer to read the transcript of the video? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TRANSCIPT

Hey everyone. Peter Zeihan coming to you for a very, very chilly Colorado. It’s a balmy negative seven degrees Fahrenheit right now. It’s the 30th of January and the big news internationally is that the Dutch and the Japanese have decided to join the American sanctions package against China for high end semiconductors. Now, there has been a lot of talk about how when the United States goes alone, it’s a problem with semiconductors, it just encourages other people to build alternatives and use alternatives.

That is hideously wrong for two reasons. First of all, the nature of the semiconductor industry is more of an ecosystem. There’s very few places that, without significant industrial buildout, could even pretend to do more than two or three steps of it, much less the dozen or so steps that are necessary to make sorry it is really cold. Are going to go down another layer here.

For example, the lithography, the wafer, manufacturing, the design, these are all done in different places and the hardware is built in different places and it all has to be brought together. Semiconductors are globalization given physical form. The idea that you can shuttle multiple products among multiple borders at any time and have long involved technical supply chains operating without interruption, and that’s computing in general. But for semiconductors specifically, all of the hardware needs to get to the same location and order than build the semiconductors. So you need lithography machines, which are fancy lasers that come from the Netherlands. You need lenses from Germany, you need optics from California, need designs from Silicon Valley and Salt Lake City. And you need wafer systems that come from Japan and so on.

So you remove one country from this ecosystem and the whole thing falls apart. So that means that the United States, should it choose to go it alone, really can stick to the Chinese or anyone for that matter. But so can the Dutch. And so can the Japanese. And so can the Koreans. And so can the Taiwanese. It takes the family. So that’s kinda piece one. Piece Two, is there was really never any doubt that the Japanese and especially the Dutch were going to join in the sanctions. And I know, I know, I know people are like, oh, their bottom line comes from China and corporations are not the same as governments. Well, I’m sorry, but it’s just not that clean.

The issue is you have to look at the locations of these countries and what they need to be independent, much less to thrive. In the case of the Netherlands, they’re the runt in the neighborhood. They may be a powerful economy. They may be very high valuated and technologically advanced, but they’re sandwiched between the Germans, the French and the Brits. And while the Dutch have a reputation for being brusque and abrupt, everyone in Europe would rather deal with them than the Germans or the French or the Brits. And so they become the middlemen of the European system. That is a very awkward place to be from a security point of view, because you never know when someone’s going to throw a war and you might get inadvertently invited.

So the Dutch have always tried to find a friend who’s not on the continent in the short term. That has always been the Brits, but they prefer a bigger friend who is even further afield, who cares less about the minutia of European affairs and just tries to keep the war from happening in the first place. That since World War Two has always been the United States.

And you can argue that. I could argue I do argue, that the Dutch are among the top five most loyal nations to American security interests because the Dutch know they’re going to need the help back home. So as soon as the Biden administration announced their semiconductor sanctions back in October, talks started with not just the Dutch government, but ASML, which is the company that does the lithography. And they were cordial and they were cooperative. And we now have an agreement that very soon the Dutch will formally be joining the sanctions system against the Chinese.

Now, the Japanese are a slightly different story because Japan used to be a great power not all that long ago. If you remember World War Two. But as their demographics have decayed, more and more industry from Japan has offshored to other places, most notably the United States. They want to have the production in a place with a strong enough demography to actually consume the stuff that they build. That’s changed the nature of the relationship. It’s far more co-mingled now than we have ever had with the Japanese and the Japanese have ever had with anyone. And so under a previous government, the Shinzo Abe government, a trade negotiators were dispatched to Washington to basically seek a deal with the Trump administration.

And the deal they ended up getting was humiliating. But they realized that was the price of a strategic partnership that could stick. And then when Biden became president, all other trade deals that were struck by the Trump team, other countries tried to back out, most notably Canada. Mexico tried out to get away from some of the terms of NAFTA to the Japanese, made it very clear to the Biden administration that they were not going to be on that list. They were happy with the deal as it was. And the Japanese are now the only country that has been able to strike deals on trade and on security with both the Trump and the Biden administration’s. Same terms, which means that Japan’s already made its bed. It has already decided that it has to be part of the American network. And so when the sanctions came up against semiconductors to China in October, honestly, it didn’t take much arm twisting at all.

So the Chinese, when it comes to the mid to high end chips, are just out of the game now. They can’t make any of this work. They’re going to be buying as many chips as they can for as long as they can, but they’re just not going to be able to advance past where they are right now.

The only country that’s kind of on the outs that has not agreed to join the sanctions in any meaningful way at this point is Korea. And it’s easy to see why they’re in a tough spot. They’ve got Japan on one side, which has colonized them many times. They’ve got the Chinese on the other side, which is a huge neighbor. And their relationships are, in a word, complicated. And, of course, there’s the North Korean question. In many ways, South Korea today is a bit like the Europeans of the last 30 years, desperate for security issues, to not figure into trade relations because they know they’re in a tough neighborhood. And when things crack, it all goes to hell very quickly.

So now the United States really only has one country to focus on. And so all its diplomatic heft is going to be going and looking at the Koreans to try to get them on board as well. And they’re the last ones I would expect for them to join the system later this year as well. 

Now, the nature of making semiconductors, so there’s dozens of different types, but you can kind of put them to three big buckets. Your top tier, the best ones. These are ten nanometer and smaller. This is typically what’s in your cell phone or in your high end computers and servers. Those about 80% of them are actually fabricated in Taiwan, with another 20% in South Korea. But again, you need the whole ecosystem to make it work or move one country. The whole thing falls apart. In the middle, you’ve got everything that goes from climate control systems to automotive to aerospace to machinery. Those are made in a host of places the United States, Taiwan, Korea, Japan, China, the Netherlands, a little bit in Britain and Germany as well. This still requires the ecosystem, but you could probably lose one player, probably not more than one player. And then you get your low end, your 90 nano meters and up. These are chips that are basically analog processors. They can do one little yes no equation, not much more than that. This is the Internet of Things. And this, for the most part, is centered in the Chinese system. Now, the Chinese are the only country that makes the 90 nanometer chips. And this is a low tech enough chip that the Chinese don’t need substantial help from the rest of the world in order to do it.

So we’re going into a really interesting phase here. I would argue that for reasons of energy and agriculture and security and trade and personality and politics, that the Chinese system is in its final years. It’s going to collapse this decade. And I would argue that the globalized system that allows the great good chips, the ten nanometer and better to exist, that perfect situation of trade with no friction that that’s going away.

What’s in the middle that is a little bit more forgiving in terms of supply chain. That’s what’s probably going to last. So we’re going to lose the really good chips and the really bad chips. And what’s in the middle is just what we’re going to have to make do with until we can have a significant industrial buildout in the countries that already have most of the remaining steps. And the Japanese, the Americans and the Dutch are going to be the center of all of that effort.

Alright. That’s it for me. I’m going to go warm up. Take care.

WEBINAR—Global Outlook: One Year Into the Ukraine War

One of the most commonly asked questions I get is “How can I attend one of your speaking engagements?” So here’s your chance. On February 17th at 2:00 pm CST, I’ll be hosting a Webinar to discuss the Global Outlook One Year into the Ukraine War. We’ll dive into the global impacts the war has had on supply chains, agriculture, and much more. After my presentation we’ll have a Q&A portion to answer all those burning questions.

Those who attend the webinar will have *exclusive access* to a recording of the event, as well as all of my slides, charts and graphs used throughout the presentation.

Can’t make it to the live presentation? No problem! All paid registrants will receive access to the recorded webinar and presentation materials to review at their own convenience.

How Not To Handle COVID: Chinese Edition

With any infectious disease, there are two main factors to consider: the average number of people an infected person will infect and lethality. Even with accurate data and reporting, these take time to figure out. But if a country (ahem, China) decides to just STOP collecting the data…well then…oh boy.

Until now, the Chinese have been <<ok-ish>> at collecting COVID data but horrible at reporting it. Throw in nearly a billion people who have been exposed, and China’s new COVID policy is to simply stop collecting the data. Brilliant.

Now, this could have devastating impacts not only on the Chinese but on the rest of the world. OR it could be nothing…I guess we’ll have to wait and see.

Prefer to read the transcript of the video? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

Hello from Sunny Calgary. I just wanted to take the opportunity today to a quick update on what’s going on with COVID in China. I think the biggest thing to underline is we really don’t know what’s going on. China has always been an information control space, but they have always been pretty good at collecting data, just not necessarily reporting it.

Yes, there have been problems with the data collection, but what they share with the world just doesn’t match what they see internally. And that’s one of the reasons why a lot of folks like me just don’t trust the data at all. But what they’ve done with this opening due to COVID, this is change the policy completely. Instead of collecting data and lying about it, they’re just not collecting it.

So, you know, supposedly only a few dozen people have died in total from COVID the last couple of years. They were reporting officially back in December that they had a few thousand new cases. But we know now that the new case tally is in excess of a couple of million a day. Some independent estimates say it’s in over 20 or 30 million.

We also don’t know much about the virus and this is where things get a little scary. COVID, it changes relatively rapidly. We’ve been seeing new variants every few months. But in China, now that we have over a billion people who have been exposed all at once, it’s a different sort of scenario. So you can certainly argue that very few countries in the world got it right when it comes to managing COVID. I mean, we’ve all kind of been making this up as we go along because the goalposts keep moving. And whether you believe in natural immunity or vaccinated immunity, most people who are willing to, you know, not be morons about it will admit that people on the other side have a point that is worth considering. This hasn’t been in play in China.

The Chinese vaccines have been proven over and over and over again by almost every country that has tried to use them to be broadly ineffective at preventing COVID. And so most countries that originally started using the Chinese formulas have switched to other formulas that come from different countries. India does their own. Obviously, the Western countries have their own, the Russians have their own. And, you know, some of these are better than others, but the Chinese are definitely at the bottom of the barrel. And so they’ve pretty much vanished from global use. The Chinese also aren’t going to have an mrna formula for at least a couple of years, or at least not one that’s probably ready for primetime. So that’s an issue for another day rather than the outbreaks that we’re seeing in China right now, which means what’s going on in China is something that’s very difficult to predict.

There are two factors when it comes to cover to really any pathogen. First of all, you need to know it’s R0 and that’s the number of people on average that each infected person will then contaminate. And then the second thing, of course, is lethality. What’s your chance of actually dying from this thing? Now, it takes time to figure that out because you first have to wait for the virus to mutate and then you have to wait for it to get into a general population.

And then you have to collect the data and then you have to wait to see if people are going to die. You collect that data, too. So on average, from the point that a new variant emerges to the point that we have a decent grip on how communicable and how lethal it is, it’s usually around six months. And that’s one of the reasons why policy across the world has been so schizophrenic.

Because policymakers are attempting to figure out what to do for health policy before they have the data. And if you wait until after you have the data, you know, you may have lost a few hundred thousand people already. And we’ve seen that time and time again around the world. Now, the Chinese are struggling with this at the moment, just like everybody else, just on a much grander scale, because so few people in the country have any sort of real resistance.

Until recently, no one’s had COVID. And then, of course, the vaccines are not all that great. But for the rest of us, China choosing to not share data, but China choosing to not even collect data means that we can have literally millions of deaths in China and the rest of the world doesn’t know what to get ready for.

We can’t even begin the process of understanding what the new variants that are circulating in China are going to mean for the rest of us. So we know there are at least seven different variants. We knew that back in December. We also knew that at least two of those variants didn’t exist 2 to 3 months previous. So the only data that has existed was back in December, before this all blew up, when the Chinese were still lying about everything.

Now they’re not even collecting the data, so we are not going to have a good idea of what we’re going to be struggling with until six months after this virus breaks out of the Chinese population and into the global commons. 

So it could be nothing. Maybe this is the most mild variant yet. Could be horrible. This could be the most lethal variant yet. We just don’t know. And we won’t know for months. Blehhh.

Demographics Part 5: The Chinese Collapse

The latest batch of Chinese demographic data has set off ALL the alarm bells, and for good reason. With official figures putting the average birth rate at slightly over one birth per woman and the population peaking last year, the alarm bells should have been sounded years ago.

You haven’t even heard the worst part yet…all of that data is wrong…and the reality is far worse.

To put it nicely, China is screwed. The only thing that could save a country in this situation would be massive political or economic change…and not the kind of change that China has in store.

We apologize for the sound quality. A replacement microphone has already been ordered, and it has even arrived at Peter’s home…but Peter won’t be back to pick it up until Friday. So thanks for bearing with us until then!

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Changing Tides in the Chinese System

Prefer to read the transcript of the video? Click here

If we were to take the age-old saying of “s*** hitting the fan” and apply it to China…we would need a wind turbine and a few acres of cattle pastures.

To put it nicely, China’s outlook is…grim. They’re facing demographic dissolution, a dying tech industry and a risk exposed energy sector, and we’re barely scratching the surface. They are the single-most internationally exposed country in our collapsing world.

So how does a country like that continue on? The short answer is CHANGE and perhaps a little collaboration with the USA. To that tune, President Xi may have just given us a sign that he gets it.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

Hey, everybody. Peter Zeihan here. Coming to you from my parents backyard in Marshalltown, Iowa. Today, we’re going to talk about some of the things that are in motion, apparently in the Chinese system. Now, for those of you who have been following me for a while, you know that I am not very bullish on China. It’s facing, not demographic collapse. It’s far faster than that is complete demographic dissolution and economic collapse that goes along with that within the decade, assuming that there are no other problems.

The United States is put in a series of technological restrictions that basically kill the entire tech sector. Their energy sector is completely dependent upon the ability to access the Middle East, which is an area they can’t reach in force. Their trade system and their economic structures and their employment structures are utterly dependent upon the U.S. Navy, making it safe for their civilian vessels to hit the world over. They are arguably the most internationally exposed country in the world. And on top of that, their financial sector and their agricultural sectors are absolute messes. Things that make Enron look really well run.

This is a country that is not going to last a whole lot longer. And in that environment, the question is, how do the Chinese prepare for the economic and if they want to politically continue to this point, their solution has been absolutely rabid, foaming at the mouth nationalism, convincing their people that it doesn’t matter if you can feed your kids. It doesn’t matter if you have your job. You’re Han Chinese and Chairman Xi is your leader. And that’s enough. And to that end, Chinese propaganda has gone from the aggressive to the absolutely hateful, the person who has probably played the biggest role from an international point of view in this is a guy by the name of Zhao Lijian, who has been the spokesman for the Ministry of Foreign Affairs.

And he is kind of the the poster child for what the Chinese call warrior wolf diplomacy, which is an unapologetic ultra nationalist, very hate and invective filled approach to dealing with the rest of the world. So this is the guy who was popularized art that shows Australian soldiers with their knees on Third World children. This is the guy who insists that COVID started at Fort Detrick in the United States and was then spread to the world as a way to wipe out nonwhite people, that sort of thing. He’s a real piece of work and he’s a general asshat.

Anyway, as long as he was at the Ministry of Foreign Affairs, he was the voice of China on the International stage. Welllll in the first week of January, he was transferred very quietly away from the MFA and he is now a small-whig at the Department of Boundary and Ocean Affairs, which is about like getting taken from being the spokesman of God and all of a sudden now you’re responsible for what would be a great example here…You’re in charge of Border Patrol in northern Idaho. It’s difficult to imagine someone falling so far so fast. Now, the challenge we have in interpreting this is that no one really knows what Xi is thinking because Xi is in such a tight cult of personality that he doesn’t really confide in anyone.

And it’s very difficult for Intel to penetrate that sort of environment. But we know that Zhao was one of Xi’s favorites. And so for Xi to be not just demoted, but put into a complete cubbyhole in the middle of nowhere in terms of the bureaucracy is an indication that Xi knows that this strategy has utterly failed. There is no version of China that survives this unless it finds a way to work with the United States in a constructive way and one that basically gives the United States everything from a strategic point of view that it wants.

The United States is the only country that even theoretically has the tools that could help China survive what’s coming. And having somebody whose job it is to throw gravel into the gears of the diplomatic relationship, obviously is not helping at all. But to have him so dramatically demoted indicates that perhaps, just perhaps, just maybe kind of sorta Xi is realizing that the end is approaching and he really needs to change diplomatic gears if there’s any hope for China surviving the rest of this decade.

So it’s very perspective at this point. But if there was one person who needed to move in order to make a new approach happen, it was Zhao. And now he’s gone. Okay, that’s it for me. Until next time.