Hello Interconnected Readers:

Today, I’m reconceptualizing a section of Interconnected. It used to be a weekly news summary of six stories from both English language and Chinese language sources. Now, it’s a new monthly product called, "Tomorrow's News". It will be published on the last Sunday of every month; today’s post is the first edition.

(Note: this newsletter will still publish weekly analysis from either myself or guest contributors; this monthly segment is a part of the weekly cadence.)

I’m doing this as a way to appeal to readers who like to think more long term about all the topics we address, while stripping away the temptation to comment on news of the day or week (thus monthly). The complex interconnections we explore between different disciplines -- tech, business, investing, geopolitics -- take years to play out. Most news and opinions can almost never capture that depth. And the few ones that do get lost in an ocean of media noise.

Thus, the goal of this product “relaunch” is to highlight the stories that will matter a year, three years, even ten years from now -- and explain why. It’s a tall order, and I will do my best to deliver. I will also do my best to highlight articles from both English and Chinese language sources, because that balance is important. However, I won’t place an artificial number on how many articles of this calibre I’ll highlight per edition; quality trumps quantity.

Today's inaugural edition only highlights three articles. Less is often more.


Before you read on, please check out last week's deep dive post: "SPAC-ing the Southeast Asia Story"

China’s regulatory turf wars” (English Source: Protocol)

Why this will matter: Didi’s horrific IPO debut and a broad tanking of all Chinese tech stocks are dominating headlines. But the more important thread is the increasing sophistication and assertiveness of different Chinese regulators in governing its tech industry as a means to jockey for influence. That’s why I’m highlighting this Protocol article, which succinctly captures this dynamic. The Chinese government is not a monolith, nor is the country itself. This truth is still lost on most Western investors and even top government officials. The latest regulatory actions demonstrate this complexity. As David Wertime noted in this piece:

“Chinese regulators engage in turf wars too as they jostle to expand their influence.”

This jockeying may unfold in different ways than in a Westnern democratic system, but politicians in any system are more or less motivated by the same set of instincts -- power, influence, relevance, and survival. The stock market might be a mess now for Chinese tech companies, but what hopefully will emerge in a few years is a more level headed, sophisticated understanding of China’s government on a ministry by ministry, province by province level that is long overdue. It’s time for all investors and analysts to make a list of important ministries and provincial governments, and study them just as hard as you would for companies.

Understanding China’s Governance and ‘Big Picture’ Politics from Reforming the Education and Tutoring Industry” (Chinese Source: Tuzhuxi)

Why this will matter: this commentary explains the central role that education, as both an industry and a national resource, plays in the Chinese government’s long term thinking and planning. It weaves together the logic behind how education is connected to many trendier topics -- “involution”, China’s real estate bubble, antitrust, US vs Hong Kong IPO -- in a holistic way (so called “big picture” politics or 大政治). I will likely write a deep dive post to dissect this piece later. For now, just know that education is a strategic resource, like energy and telecom, if not more so. Equal access and quality control of this education system is a major, long term challenge that China is facing. With that in mind, the recent regulations restricting the commercialization of AST (after-school tutoring) companies will no longer feel so surprising. The larger question -- one we will be revisiting for many years -- is whether executing this logic from the top is both the right way and the sustainable way. (Note: the author of this pseudonym blog is Ren Yi, who works at CICC and is the grandson of Ren Zhongyi, a communist party veteran who served as the party secretary of Guangdong  in the 1980s. Keep that in mind as you read this commentary.)

Disassembling a Honeywell Performance surveillance camera reveals that it is powered by a HiSilicon processor, manufactured by the sanctioned firm Huawei. (Source: https://theintercept.com/2021/07/20/video-surveillance-cameras-us-military-china-sanctions/)

U.S. Military Bought Cameras in Violation of America’s Own China Sanctions” (English Source: The Intercept)

Why this will matter: Regulations, no matter how high-profiled, are meaningless if unenforced. No regulations have been more high-profile than the sanctions placed on Chinese tech companies due to national security concerns. Yet, as this Intercept article exposed, the US military is still buying products from blacklisted companies, like Dahua and Hikvision, just rebranded into different names, like Amcrest. And quintessential American companies, like Honeywell, are still selling products to the US government with Huawei’s chips in them. This situation begs an important question: are Chinese products truly dangerous to national security and government agencies like the GSA are just bad at enforcement, or is the “danger” purposely overblown in order to achieve other goals in the US-China bilateral chess match? We will likely be talking about both parts of this question for years to come.

If you like what you've read, please SUBSCRIBE to the Interconnected email list. To read all previous posts, please check out the Archive section. New content will be delivered to your inbox (twice per week). Follow and interact with me on: Twitter, LinkedIn, Clubhouse (@kevinsxu).


Hello 《互联》读者们:



这么做是为了吸引更多喜欢对《互联》的话题进行更长远思考的读者,同时剥离对每天或每周的新闻进行评论的诱惑(因此每月出版)。我们探索的众多不同领域之间复杂的相互联系 --科技、商业、投资、地缘政治 -- 都需要多年的演变时间。大多数新闻和评论捕捉不到这种长远视角和深度。而为数不多可以做到的文章,常常在媒体的噪音中消失。

因此,这个产品 "重构" 的目的是突出一年、三年、甚至十年后我们都还需要思考的重要故事,并解释其中原因。这是一个很高的要求,我将尽我所能去实现。我也会尽力突出来自英文和中文两边的文章,这种平衡很重要。然而,我不会刻意规定每期要浮现多少篇这种水平的文章;质量胜于数量。




中国监管机构的地盘之争”(英文来源: Protocol)

为什么重要:滴滴赴美上市后的各种负面新闻,以及所有中国科技股的总体下跌,最近抢了很多头条。但更值得注意的,不同的政府监管机构在管理各个科技行业方面的果断和更成熟的方法,以此作为争地盘的手段。这就是为什么我想强调这篇Protocol的文章,它简洁地捕捉到了这个动态。中国政府不是一个单一的体制,整个国家也不是。大多数西方投资人,甚至政府高官仍对这一层面不够了解。最近的一系列监管行动证明了其中的复杂性。正如David Wertime在这篇文章中指出的:

"中国的监管机构也争地盘, 从而来扩大自己的影响力。"

这种争夺的具体操作方式不同于在西方民主制度内抢地盘的方法,但任何制度里的官员都差不多,都被同样几股力量驱使 -- 权力、影响力、关注度和生存。对于中概股来说,现在可能是一团糟,但几年后从中出现的希望是,外界对中国政府各部委、各省的理解更清楚、更成熟,其实早就该这样了。对所有投资人和分析师来说,现在是时候开始努力研究重要中央部门和省级政府了,就像研究公司一样。

从整顿教培产业看中国治理与行业大政治”  (中文来源: 兔主席)

为什么重要:这篇评论解刨了教育,不管是作为一个产业还是国家资源,在政府的长期思考和规划中发挥的核心作用。它以一套宏观完整的方式(所谓的 "大政治")将教育与许多更时髦的话题-- 内卷、房地产泡沫、反垄断、去美国还是去香港上市 -- 背后的逻辑串联的很清楚。我以后可能会以这篇文章写一篇长篇分析。现在需知的重点是:教育其实是一种战略资源,就像能源和电信一样,可能比这两者都更重要。老百姓怎样更平等的使用教育系统,同时还要控制质量是中国面临的一个长期的重要挑战。考虑到这一点,最近限制课外辅导及培训公司商业化的规定也就不那么令人惊讶了。更大的问题是 -- 也是我们若干年后会重新审视的问题 -- 从最高层执行这一套逻辑是否是正确的方式和可持续的方式。

Honeywell 照相机里的华为芯片 (Source: https://theintercept.com/2021/07/20/video-surveillance-cameras-us-military-china-sanctions/)

美国军方违反美国自己的制裁规定购买中国制造的相机”(英文来源: Intercept)

为什么重要:规章制裁,无论多么高调,如果不执行,就毫无意义。近年最高调的制裁莫过于出于国家安全考虑而对中国科技公司产品在美国销售的制裁。然而,正如《The Intercept》杂志的文章所揭露的,美军仍在购买被列入黑名单的中国公司的产品,如大华和海康威视,只是换了牌子而已,如Amcrest。而像Honeywell这种美国老牌公司,仍在向美国政府出售装有华为芯片的产品。这种情况引出了一个重要的问题:中国产品是否真对美国国家安全有威胁,而像GSA这种机构只是执法不力,还是为了实现中美双边关系这盘“棋”中的其他目标而故意夸大此 "威胁"?我们可能会在未来几年内一直讨论这个问题。