China is Expansionist, India-China Border and Ghana’s Covid-19 Response

“…the vast stretches of the unknown and the unanswered and the unfinished still far outstrip our collective comprehension.”–JFK

The documentary Apollo 11 is the perfect movie for our lock-down. Tired of the four-walls of your quarantine abode? Apollo 11 shows striking new footage and sound of the mission that first brought humans to another land outside of earth, some 252,000 miles from our apartments, houses and condos. Despairing of our unambitious times focused so closely on power politics rather than on what should be the grand aspirations of the only species able to reason and analyze? Witness an eight-year mission that brought three humans to the moon, utilizing math, engineering and any number of other tools to understand the universe around us. Apollo 11 is quite simply one of the best, most important movies we’ve seen over the last ten years. At one point during the film, Buzz Aldrin turns on an old portable cassette player that plays John Stewart’s Mother Country as it tumbles end over end in zero gravity while Aldrin, Neil Armstrong and Michael Collins hurtle home towards earth, mission almost accomplished. How did NASA, America, the world accomplish this great feat? John Stewart sings, “When a century was born and a century had died; And about these ‘good old days’, the old lady replied; Why they were just a lot of people doing the best they could; Just a lot of people doing the best they could.” And we do the best we can to explain China’s new expansionist ways, the India-China border dispute and how Ghana is successfully containing Covid-19. It’s this week’s International Need to Know, shedding a tear of freedom for Hong Kong as we bring you our moonlit world.

Without further ado, here’s what you need to know.

China is an Expansionist Power

One of the themes of our upcoming book China Challenges is that China is increasingly expansionist. We expect to receive push back for this assertion since other than a few places such as the South China Sea and tiny parts of India (see below), China is not particularly so geographically. But China has become expansionist in recent years in any number of ways, including in transforming global institutions and online platforms. This week, for instance, comes news from The Verge that “YouTube is automatically deleting comments that contain certain Chinese-language phrases related to criticism of the country’s ruling Communist Party (CCP).” Youtube claims this was done in error but the problem had been raised with them as long ago as October 2019. Now that it is getting attention in the media, Youtube claims to be fixing the problem. As The Verge points out, it’s a little odd for an online platform blocked in China to be worried about criticisms of China’s authoritarian government. But China’s heavy handed tactics to get businesses to adhere to their ways, norms and messages have been effective, even on companies banned in China. China increasingly attempts to change the world to make the world safe for authoritarianism. Thus one of the reasons why we wrote China Challenges.

Last Minute Hong Kong Update: Hong Kong is one of my favorite cities in the world and what is happening there this week is sickening. What to do about Hong Kong is a difficult question to answer and there will rightly be much debate about it. But there should be no debate about Beijing’s stifling of freedom there. Arresting children, tear gassing people expressing free speech and generally terrorizing a population is wrong and every free country should plainly say so.

Apocalypse Now

We once forgot our passport on a wedding anniversary trip to Vancouver, B.C. We managed to talk our way into Canada but were given hell by U.S. authorities on our way back. India would like to do the same to China who they view as illegally entering their territory. You may remember that three years ago we alerted you to a border dispute between India and China. Until last week, all was somewhat quiet on the China-India front. But now the two nuclear-armed, most populous countries in the world are at it again with varying reports of China crossing into Indian territory. We cannot offer any special insights into what is actually happening in this disputed area but fortunately Dhuruva Jaishankar lists five questions we should ask as we read these troubling reports: 1) What is the source of the information—he says there are only three: Indian military, Chinese officials and independent geospatial imagery. 2) In what sector is the stand-off taking place? He describes the sectors and how they are being conflated in reports. 3) Is a third country involved? It gets more complicated if Myanmar, Pakistan and others are involved. 4) On whose side of the Line of Actual Control (LAC) are developments taking place in? The geography of LAC is ambiguous, Jaishankar asserts. And 5) “Is either side making changes to the territorial status quo?” There is more than enough to worry about without India and China playing games on the border, but this is 2020—we deal with the year we have, not the one we wish for.

We Need to Talk About Ghana

We’re not a fan of royalty, as any red-blooded American should be, and have always been confused by those transfixed by Kate, William, or whatever are the names of those publicly-funded gadabouts over across the pond. But we always had a soft spot for Nana, the Ghanaian tribal chief we occasionally worked with in Seattle. And we are pleased to see Ghana doing well thus far in containing Covid-19. As you see in the charts below, their deaths per million is much lower than most developed countries and they bent the curve far earlier. One of the ways they did this was by using pooled testing. You can read an interesting breakdown of how Ghana does its pooled testing here (Pooled testing appears to be how Wuhan tested 7 million people over the last 10 days). Pooled testing has allowed Ghana to test many more of its citizens than other parts of Africa: “The Africa Centers for Disease Control (Africa CDC), the lead continental agency coordinating the regional Covid-19 response, in its 23rd April situation report, gave the total number of tests conducted on the continent as 415,000, of which Ghana alone was responsible for at least a sixth.” Ghana is somewhat underrated in recent years. Its economy has grown at more than 6 percent, there have been some political reforms and now it is competently dealing with Covid-19, without the resources of developed countries. Keep an eye on Ghana during and after the pandemic.

We Need To Talk about South Asia, The Ascent of Solar, & Gait Walking Technology

The Last Dance is over and sports fans are desperate. Is college football coming back? Will the coliseum be activated with the lions salivating, the crowds roaring in front of their televisions, iPads and smartphones? Will Maximus Decimus Meridius, class of AD 180, collide with his fellow collegiate slaves this fall? We discussed whether college football will reopen with an old friend (he’s actually a month younger than me, so quite young). We posited that college football of all sports might be the most difficult to restart this fall absent a medical miracle. After all, many campuses may remain virtual fall quarter—the California colleges have already announced they will be closed. Would we really expect “student”-athletes to be the only ones to gather on campus? Is it realistic for unpaid young people–slaves of the NCAA and their member schools–to play a contact sport in which dozens of men are grunting and breathing on each other in close quarters, even as engineering students, business majors and literature freaks connect only online? Of course! Or, at least my friend convinced me that the SEC, where football is homecoming king and queen, will do everything possible to play this fall. The south and Texas may indeed resume football in September, but will the rest of the country? Our friend envisioned the SEC playing as usual but other parts of the country, including the west, waiting until January. All we want is not to go on our annual Seattle Mariner Temper Tantrum—this time not over another anguished loss during the regular season but over the entire rebuild of the team being ruined by the pandemic. As the tantrum brews, we tackle what’s happening in South Asia, throw a pass to Solar’s ascent and try to block odor recognition technology. It’s this week’s International Need to Know, passing and kicking, but never punting on important international information and data.

Without further ado, here’s what you need to know.

We Need to Talk About South Asia

We picture an epidemiologist sitting alone muttering to herself in the ratty booth of the last dark dive bar open in her city as she gazes into the glow of her tablet at the heterogeneous pandemic data around the world. When she gazes at South Asia, she downs the rest of the bottle of her cheap whiskey, breaks the flask of Hydroxychloroquine in her lap and uses the jagged glass to challenge the bartender to a fight. Everyone was worried that places like India, Pakistan and Sri Lanka, with overcrowded housing, overwhelming poverty and primitive health care infrastructure, would be devastated by Covid-19 when it reached their lands. Thus far (the two most important words of the pandemic), this has not been the case. Death per million people rates in South Asian countries are far, far lower than in Europe and the U.S., as you can see in the graph below. South Asia also fares much better using CFR–the percentage of deaths among confirmed corona-virus patients. Al Jazeera reports, “France, 15.2 percent; the United Kingdom, 14.4 percent; Italy, 14 percent; Spain, 11.9 percent and the United States, 6 percent…By contrast, in South Asian countries, those rates have been far lower. India has a CFR of 3.3 percent, Pakistan 2.2 percent, Bangladesh 1.5 percent and Sri Lanka 1 percent.” Why is this the case? Nobody knows for sure. Perhaps these countries are under reporting deaths, perhaps it has not spread far enough into the populations yet. Or, maybe, it is due to their younger populations. Or more speculatively, perhaps it is due to more exposure to other chronic infections. Grab your bottle of choice and await more data and research.

The Ascent of Solar

With the Covid-19 pandemic, Murder Hornets and the emergence of a four-foot ravenous lizard in Georgia (shouldn’t it be terrorizing Tokyo?), it’s easy to assume the world is going to hell in a hand basket. But lost amidst the terrorizing noise, is an abundance of good news, including the continued ascent of solar. One of the first articles we wrote in this space was a prediction that solar power prominence may come sooner than expected. Seattle area clean energy investor Ramez Naam recently published an update of his analysis on the future of solar power, which he has been writing for ten years. He notes his previous forecasts have all been too pessimistic on the rate of decline of solar power costs. As you see in his chart below, “solar costs dropped by a factor of 5 since 2010.” This is true globally, in China, India and in the U.S. There is no guarantee that costs will continue to drop at this rapid rate, and solar, as Naam himself points out, still needs continued advances in storage (although there are great strides being made there too). But the world is well on its way to replacing dirty energy such as coal with solar (last week came news that more energy was generated in the U.S. by renewables than coal). CO2 emissions are down but the pandemic won’t save us from climate change, technology will. We hope Greta and the New Amish* will recognize this in their efforts to fight against climate change. Yes, times are irrefutably tough right now, but there are also important improvements being made. Don’t forget them while you’re hunkered down against the pandemic.

*Too many people fighting to prevent climate change believe in degrowth—purposely stopping economic growth. It won’t work, is unfair to impoverished nations, and is an Amish-like mentality. But, Greta and the New Amish is a great name for a band.

“I Know Her By Her Gait”

Many moons ago, we wrote about China’s efforts in gait-recognition technology. In the age of pandemic-induced mask wearing, China is upping the ante on gait-recognition technology and physical recognition technology in general, according to a fascinating article in City Journal. There has been a backlash against facial recognition technology in both Europe and the U.S. And Hong Kong protesters evaded authorities using such technology by wearing masks, which now everyone is wearing (or at least should be). But the Chinese AI company Watrix has improved its gait recognition technology and it is increasingly used by the security industrial complex of China. And, according to City Journal, other physical recognition technology is in the works: “First, gait, then heartbeat patterns, and, eventually, microbiomes—every person emits about 36 million microbial cells per hour, and human microbiomes are unique—or odor biometrics.” You will be known by your smell. The corona virus is not the only unseen danger to our new world.

Globalization to the Rescue, India Takes from China, & We Need to Talk about Denmark

A few years ago, our knee aching, we hung back and perched ourselves on a stool in the laundromat while the tour continued nearby. As the dryers spun and the tour guide pointed to some 45’s on the wall, a woman folding some shirts struck up a conversation with us. For New Orleanians, conversation flows like the waters in the bend of the Mississippi river outside their doors. It turned out she was the wife of the famous jazz saxophonist Donald Harrison who, she told me, was touring in Japan. Why wouldn’t the wife of a jazz saxophonist be washing her clothes in a laundromat that once was the site of the famous Cosmio Studios, one of a few select locations in America where rock and roll was born? Some 60 years earlier, Little Richard recorded pretty much where I was sitting—wop baba loo bop, wop bam boo my heart pounded just thinking about it. Little Richard died last week at the ripe old age of 87. Probably few people under the age of 40 knew who Little Richard was when they saw the news, if they even saw the news at all. This is perhaps both a bit sobering for all of us over 40, and also a good elixir for those who think everything happening today—whether in arts, culture, politics or just about anything else–is the biggest thing ever. Eventually it all comes out in the wash and everyone of us become the equivalent of a laundromat, lost to history. Nonetheless, we do a thorough rinsing of those claiming globalization is ending, scour India’s recruiting companies out of China and fold in Denmark to the list of countries testing, tracing and isolating. It’s this week’s International Need to Know, wondering if Sam I Am can sell our soul to Huawei like Will.I.Am even as we rap out the world’s most important international information and data.

Without further ado, here’s what you need to know.

Globalization to the Rescue

We increasingly read thought pieces about the end of globalization. In some cases, the authors are fond of globalization, in others they are rooting for its end. Whether you’re for or against, we’re still skeptical that globalization is coming to an end. Yes, international trade is diminishing but even more so changing (see story about India and China below). And, of course, almost nobody is currently flying to other countries. But we’re all connected via the Internet even more than before and supply chains are still global. Plus, the great race to develop a vaccine is global as well. Companies across four continents are working to develop a vaccine. And these companies often partner with other companies from other countries. It is true that a majority of the companies (8) are headquartered in the U.S., but you can bet your bottom dollar from what’s left of your portfolio* that many of the researchers at these U.S. companies are immigrants. How much worse shape would the world be in without the free flow of ideas, talent and supply chains? A helluva lot to give a technical answer. Globalization is not dead—it may even save us.

*Why is the stock market holding up so well? We have a theory but you will have to buy us a beer (when that’s allowed) to get it.

India Taking from China

It’s not surprising that during a period when countries all over the world are closing their economies that international trade volumes would be down. But more interesting is that supply chains and trade patterns are likely to change, or at least various countries are working to make it so. Sure the U.S. and China governments are trying to decouple in a variety of ways, but other countries are working to leverage this trend. According to Bloomberg, India “reached out to more than 1,000 companies in the U.S. and through overseas missions to offer incentives for manufacturers seeking to move out of China.” We’re curious how this will work out. As I write in my upcoming book about China and the U.S, “I have not worked with India nearly as much as with China…but in my experience, it is just as difficult to do business in India as in China, but for very different reasons.” Chiefly the crazy bad bureaucracy of India. Indians themselves recognize this problem, listing bureaucracy as the biggest challenge facing startups in a recent survey. Of course, it’s not just India looking to convince companies to move to their country. We noted a month ago that Japan is subsidizing its companies to move back to Japan or to other parts of Asia. Europe is looking to protect its companies, and Vietnam is already a prime place for relocation. China is large enough that perhaps it can make it on its own, if their exports and imports diminish. But 1.3 billion Chinese at some point might bristle at the rest of the world’s strong arming their trade…or perhaps even at its own government’s iron fist.

We Need to Talk about Denmark

When pondering Sweden’s Covid-19 approach, we’ve often compared its data to Denmark’s. Denmark has far fewer deaths per million than Sweden and now is taking the next step to opening its economy—implementing a rigorous test, trace and isolate system. Earlier this week, Denmark’s Prime Minister Mette Frederiksen (don’t you dare spell it with an “o”) announced the implementation of the strategy, “Once a person has been tested and found to be infected, the authorities will this week start to track who they have been with, so they can be isolated quickly and we can break the chain of infection.” Testing and tracing Danes will be the main focus of the Danish Health Authority. Crucially, the government is also going to be renting rooms in hotels and hostels where they will house those who have been infected. The head of the Danish Health Authority said, “We will then use this to support intensive isolation of all those who present a risk of infection and in this way we are quite optimistic that we will break the chain of infection in the coming phases of reopening.” One of our Facebook friends, a former public official, recently posted criticism of Washington State Governor Jay Inslee for his not reopening the economy right away. We pointed out that testing, tracing and isolating, which Washington is working to get in place, is the way we reopen our economy. We hope to soon add great Dane data to that of Taiwan, South Korea, Vietnam and New Zealand in persuading people like this Facebook friend to accept reality.

China’s Precarious Economy, Nursing Homes & Covid-19 and Misinformation about Drugs and China

This is a love story. Thursday morning at 11 we walked onto the fairgrounds and into the Blues Tent on the first day of Jazz Fest. A guy originally from Seattle we read about in preparing for the festival, Colin Lake, sat alone on the stage, playing a lap-steel guitar. I mean really playing it—he was a great launch into three days of spectacular music. Thursdays are in some ways the best day of the festival. Mostly local musicians play, the crowds are not so large and you can easily wander from stage to stage. Thanks to Sylvester of the Backstreet Museum, we knew the secret to Jazz Fest (and no, we won’t tell you what it is–you’ve got to get it from Sylvester yourself). Over the next few years we saw Lake play on a number of occasions. His entrancing The World Alive was always a favorite. Like many of us, Lake fell in love with New Orleans on his initial visit. At Louis Armstrong International Airport, waiting on a delayed flight back to the Northwest, he pulled out his guitar and played for the other passengers. One of whom was a woman named Dawn Marie. He must have played well because he and Dawn moved to New Orleans, got married and Lake became a musical fixture in the Crescent City. Until 2017, when they sold their house, bought a sailboat and took to the sea as the world moved through choppy waters. But now he’s back, or at least his music is. And he’s released a single perfect for the moment, Extraordinary Times. So as we grapple with our third month in captivity, worrying about the lives lost, the economic carnage, and the negligent homicide of the executive branch of the U.S. federal government, perhaps we should hum Lake’s latest lyrics, “The time has passed for lookin’ out through ordinary eyes.” As we do so, we gaze upon China’s precarious economy, hold our spectacles up to nursing homes and Covid-19 and throw a skeptical eye to worries about dependency on China for drug ingredients. It’s this week’s International Need to Know, providing international data and information in extraordinary times.

Without further ado, here’s what you need to know.

China’s Precarious Economy

Our upcoming book about China asserts that fast economic growth will not return to China and notes that “it is the highest indebted emerging market economy in the world.” Of course, the Covid-19 pandemic has turned slow growth into negative growth for at least the short term. It also has made China’s debt challenges more risky. The economics editor for Bloomberg points out that “A worst-case stress test last year by Chinese authorities showed that 17 of its 30 biggest banks failed to keep capital at adequate levels with economic growth slowing to 4.15%, a situation that now looks wildly optimistic.” Yeah, China, whatever official GDP numbers they publish this year (our book will be 1017% more accurate than China data), is unlikely to achieve 4.15 percent growth. Perhaps because of their debt issues, China is not responding so far with stimulus as large as they did during the financial crisis in 2008 and 2009. Ravi Vellor in the Singapore Strait Times points out that Chinese household debt to income has risen from 40 to 140 percent the last ten years. Countries around the world are in uncharted territory due to the pandemic with world GDP expected to decrease more than 3 percent this year. But China is perhaps especially at risk with limited options to deal with economic fallout from the pandemic. Of course, China has surprised on the upside economically for 40 years so perhaps its leaders will somehow find a way to thread their economy through the current pandemic pin.

Nursing Homes and Covid-19

It seems like decades ago that Seattle was the epicenter for Covid-19 outbreaks in the U.S. Our hometown’s high death rates early on were due to one nursing home. Since then we are now but a footnote as the virus spreads and death became far more prevalent in New York and elsewhere. But are heterogeneous high death rate data explained by how many nursing homes a region/country/state has? A reader of the Marginal Revolution blog thinks so and points to WHO data to back it up. In the chart below you can see the number of nursing and elderly home beds in a variety of European countries. Interestingly Italy and Spain, which have high death rates, also have a high number of elderly home beds. Sweden, which is often compared to its Nordic neighbors unfavorably in terms of number of deaths, has many more nursing home room beds compared to Finland and Norway. Does that explain the difference in death rates more than their lockdown policies? We don’t know. After all, Germany, which has lots more nursing and elderly home beds than Spain, Italy and Sweden, also has relatively low death rates. The heterogeneity of Covid-19 data continues to challenge. And speaking of which, what explains the difference between Eastern and Western Europe (see third chart below)?

80% of Drug Ingredients Do Not Come From China

No creature craves love more than our cat, Putter, who has interrupted nearly every Zoom meeting we’ve had during lock-down, demanding to be petted and curl up on our lap. Unfortunately he also needs lots of drugs too, taking four different heart medications—he’s like an old retired man in Florida. Early in the pandemic, when we heard warnings of possible drug shortages because the U.S. sources 80 percent of drug ingredients from China, we proactively ordered more of Putter’s medicine just in case.We experienced no delay in receiving those drugs for that order or since. It turns out that’s partly because the 80 percent figure is made up. According to a well reported piece in Reason, the 80 percent figure is a misquote from a press release by Senator Chuck Grassley that continues to be passed along in a variety of mediums. No one knows the exact figure since the FDA does not track such data, though the most recent stimulus bill passed by Congress mandates they now do so. The FDA does track manufacturing facilities that export to the U.S. That data, as you can see below, shows China’s share of such facilities is only 13 percent. Maybe the small number of Chinese manufacturing facilities accounts for an out sized share of drug ingredients produced for the U.S. Whatever percentage China is responsible for, there have not yet been any drug shortages for Putter or for the rest of us. For that we are thankful, and we will now allow Putter, clamoring to do so as we write, to climb up on our lap.