ITK Daily | February 27

Happy Monday.

Here’s today’s ITK Daily.

To be ITK, know this:

Insight | Are American multinational corporations ready for the Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party?

The Chinese marketplace is immensely important to American multinational corporations.

Take Apple.

According to Statstic, Apple's net revenues from the United States were $133.8 billion in 2021 compared to $68.4 billion from China.

After 2015 when the company generated $58.7 billion in revenues, 2021 was Apple's best year in China.

Full post?here .

Bipartisan plans to move aggressively on China face political hurdles in Congress: With budgets tight and political knives drawn, lawmakers seeking to capitalize on a bipartisan urgency to confront China are setting their sights on narrower measures.?NYT

From McDonald’s to Ralph Lauren, US companies are planning China expansions: Many firms still see the country’s huge consumer market as a promising long-term bet, though economic and geopolitical concerns linger.?WSJ

+ Starbucks plans to open 3,000 new stores by 2025.

+ American companies are also facing heavier scrutiny at home over their dealings in China, and Washington in recent years has moved to limit the activities of some business sectors there, from chip companies to apparel makers.?

+ Last month, Walt Disney Co. said Chinese censors cleared two of its Marvel movies for screening in the country, the first releases for the superhero franchise in China since 2019.?

+?McDonald’s said it had opened 700 new stores in China last year and was planning to open an additional 900 this year—more than in any other country and more than twice as many as it plans to open in the US.

+ Ralph Lauren Chief Executive Patrice Louvet told investors that most of the company’s new-store openings during its quarter ended in October were in China, and the company recently opened a new store in the southern city of Shenzhen and a flagship store in Chengdu in the southwest.?

Lab leak most likely origin of COVID-19 pandemic, Energy Department now says: WSJ reports the US agency’s revised assessment is based on new intelligence.

Lab leak most likely caused pandemic, Energy Dept. says, as spy agencies remain split: NYT reports the conclusion, which was made with “low confidence,” was based on new intelligence. The information didn’t lead other agencies to change their assessments of the origins of the coronavirus.

Desperate for babies, China races to undo an era of birth limits. Is it too late??NYT reports a number of new incentives encouraging people to have children highlight the challenges China faces in trying to boost its declining birthrate.

China’s economy is looking at a new wave of Japanification: New research suggests that Beijing’s property market is as bubbly as Tokyo’s two decades ago.?Leo Lewis

+ Japan and China also financed their growth in a similar way. Japan’s bubble era was fuelled by indirect financing provided by commercial banks, which were nudged by the authorities into funnelling soft loans towards favoured industrial sectors. Similarly, says Citigroup, China has developed a financial system mainly dependent on indirect financing. As well as the tools available to the People’s Bank of China, the government can direct the lending activities of commercial banks via a series of mechanisms.

+ These similarities may not be exact equivalents, but their overall effect could be.

+ This is Japanisation with Chinese characteristics, concludes Citi — and the risks investors should heed are those in the banking system.

Today: The Cobra Gold military exercise begins. Thailand and the US will host the longest-running military exercise in Southeast Asia, which runs to March 10 and involves 30 countries. More than 6,000 US personnel will participate, the largest contingent in decades.

Wednesday: G20 foreign ministers meeting starts. The two-day meeting of the Group of 20 foreign ministers begins in New Delhi, under India's presidency.

Kishida cabinet's approval rating climbs to 43%: Nikkei poll: The government's pick for next Bank of Japan chief backed by 48%.

South Koreans' choice of staying single gains wider acceptance: Nikkei reports some companies offering perks to employees who opt out of marriage.

Egypt FM to head to Turkey, Syria for first time in decade: AFP reports Egypt's Foreign Minister Sameh Shoukry will head to Turkey and Syria Monday morning, his office said, for the first such visit in a decade of tense relations with both countries.

Nigeria awaits results after tight election: AFP reports Nigeria began to announce early results on Sunday after a tight election for the presidency of Africa's most populous nation, as concerns grew over long delays in voting and accusations of attempts to manipulate tallies.

AP: Putin says Russia cannot ignore NATO nuclear capability

War in Ukraine has changed Europe forever: No event has transformed the continent more profoundly since the end of the Cold War, and there is no going back now.?NYT

+ The war in Ukraine has transformed Europe more profoundly than any event since the Cold War’s end in 1989.

+ “European politicians are not familiar with thinking about hard power as an instrument in foreign policy or geopolitical affairs,” said Rem Korteweg, a Dutch defense expert. “Well, they have had a crash course.”

+ Gone is discussion of the size of tomatoes or the shape of bananas acceptable in Europe; in its place, debate rages over what tanks and possibly F-16 fighter jets to give to Kyiv.

+ America has armed Ukraine with weapons and military equipment worth some $30 billion since the war began, dwarfing the European arms contribution.

+ The most powerful country in Europe, Germany has had to reimagine itself overnight, abandoning a peace culture by arming itself and Ukraine in the name of a war for European freedom.

+ “Life in Russia is boring, bad and difficult. You can start a war, but it’s not easy to finish.”

War in Ukraine: Five researchers on where the conflict could go from here: On the first anniversary of the Russian offensive in Ukraine, 'Le Monde' asked five experts about what could unfold during the second year of Russia's invasion of Ukraine.?Le Monde

+ 'The most likely hypothesis is a conflict in which neither side can win'

+ 'Neither side is capable of obtaining an outright victory'

+ 'Political collapse in Russia cannot be ruled out'

+ "The men leading Russia are veterans of the Cold War. They want to reconstitute the geopolitical whole formed by the USSR, and to destroy what they call the 'collective West,' and its hegemony, with the prospect of tilting the world's center of gravity towards Eurasia, around a new Chinese-Russian axis."

How to contain a recalcitrant Russia: At the start of the Cold War, the ‘long telegram’ set out a blueprint for the west’s policy towards the USSR. It now offers lessons on living with Vladimir Putin’s Russia.?FT

+ "It is to the Russian people that we should reach out. Putin and his regime may be pariahs, but we must avoid demonising the whole population."

+ Putin suffers from similar illusions about how western countries behave and the relationships between them. He would like to believe that western democracies are degenerate and destined for the scrap heap. He certainly does believe, true to his KGB background, that he can sow dissension among them.

+ "Putin is gambling that western resolve will crack, Ukraine fatigue will set in and that he will be able to impose a settlement that he can claim as victory."

+ “we have here a political force committed fanatically to the belief that with the US there can be no permanent modus vivendi, that it is desirable and necessary that the internal harmony of our society be disrupted, our traditional way of life be destroyed, the international authority of our state be broken . . . I cannot attempt to suggest all [the] answers here. But I would like to record my conviction that [the] problem is within our power to solve — and that without recourse to any general military conflict.”?

How the US adopted a new intelligence playbook to expose Russia’s war plans: Bolder disclosures are part of a larger effort to stymie the Kremlin’s offensive in Ukraine and align support for Kyiv’s war effort in allied countries.?NYT

+ Part of the reason the US government can disclose Moscow’s war plans is because Washington-based think tanks, like the Institute for the Study of War or the Russia Studies program at CNA, are scrutinizing various threads of information to examine Russia’s movements.

+ The surge of such open-source information, which includes images from commercial satellites as well as reports from Russian bloggers, social media posts analyzing weapons found in Ukraine and other information, has enabled the intelligence community to make more disclosures.

Watch: The full interview with CIA Director William Burns on "Face the Nation with Margaret Brennan." Click?here .

William Burns is Team Biden's MVP.

The Republican temptation on Ukraine?John Podhoretz

+ “Rommel, you magnificent bastard, I read your book!”?

+ The most disturbing aspect of the right’s response to Biden and Ukraine is that the present set of attitudes suggests the better Ukraine does and the closer it might get to victory, the more the GOP will be tempted to act as though this entirely desirable outcome would be bad news for America.

The year that redrew the energy map: Russia’s invasion of Ukraine hastened a global transformation that will surpass the 1970s shocks — and it isn’t over yet.?Clara Ferreira Marques + David Fickling

+ Moscow’s January oil and gas revenues fell 46% compared with a year earlier, a steep drop even if sanctions are not the only cause.

+ History suggests the first priority for the West must be to implement the long list of sanctions it has imposed, because targets adapt — especially large, porous ones.?

+ The USSR took advantage of OPEC’s weakness in the early 1980s to build its own exports. Saudi Arabia got its revenge in 1985, crashing the oil price and precipitating the 1989 fall of the USSR and Iraq’s 1990 invasion of Kuwait.

+ A flood of cheap money after the 2008 financial crash helped spark the rise of shale oil production, returning the US to the position of top producer.

+ The Oxford Institute for Energy Studies estimates that Russian gas output in 2022 was down 90.2 billion cubic meters, nearly 12% and the largest drop since 1990.

Russian women flock to Argentina to give birth: WSJ reports the South American country offers an easy path to citizenship and escape from Putin’s Russia and Ukraine war, new exiles say.

Bloomberg: Scholz urges more Indian IT specialists to consider Germany

+ Chancellor says looking for ways to lower immigration hurdles.

+ Scholz looks for ways to tackle Germany’s labor shortage.

Dozens dead after migrant boat breaks apart near Italian coast: WP reports a migrant boat broke apart off Italy’s southwestern Calabrian coast on Sunday, authorities said, leaving at least 59 dead and triggering a search mission in rough waters.

Nicola Sturgeon has only made Scottish independence harder: Financial failure brought Scotland into the United Kingdom. Only very broad success is likely to take them out.?Merryn Somerset Webb

+ The union between Scotland and England was partly born of catastrophic financial failure.

+ So here we are 300 years on, with what might seem an obvious question for Scotland’s current ruling party: If failure played a large part in creating the union, why would they think that more failure would break it?

+ The next first minister might like to give it a go. Financial failure took Scotland into the union. Only very obvious — and broad — success is likely to take them out.?

The Times: Rishi Sunak and Ursula von der Leyen to finish Brexit deal on Monday

AFP: Hopes for deal on N. Ireland protocol as EU's Von der Leyen to meet Sunak

The Times: Camilla expected to take Queen as formal title

Today: Independence Day in the Dominican Republic, which celebrates the first independence of the Dominican Republic from Haiti in 1844.

Bloomberg: Mexicans march nationwide against president’s electoral reform

+ Senate passed Lopez Obrador’s electoral reform on Wednesday.

+ Opposition plans to ask Supreme Court to annul reform.

Mexico’s hard-won democracy is in danger: The US should speak out against López Obrador’s assault on key institutions.?FT - Editorial

+ Mexico’s populist President Andrés Manuel López Obrador wants to turn the clock back. The leftwinger last week strong-armed legislation through congress to slash the budget of the independent National Electoral Institute (INE) and weaken its supervisory powers. This was his second attempt to neuter the institute after even more draconian legislation failed last year.

+ It is time for Mexico’s allies and friends to speak out. The EU should find its voice. But most important is the US, Mexico’s neighbour and biggest trading partner.

+ The Biden administration has been commendably robust in denouncing creeping authoritarianism in Central America yet curiously quiet about the same phenomenon in its most important Latin American ally.?

+ This must change. How can there be “friendshoring” to a country that is growing intolerant of political opposition and a free, open society?

Glenn Youngkin is no surly GOP brawler. Many might welcome that.?George Will

GOP primary candidates must agree to loyalty pledge in order to debate, RNC chair says: Politico reports, “We're saying you're not going to get on the debate stage unless you make this pledge,” Ronna McDaniel said.

How a small-town train derailment erupted into a culture battle: The East Palestine train accident is one of hundreds each year, but it’s become a significant political flashpoint.?WP

+ Donald Trump’s visit to East Palestine, OH, got the SNL treatment.

OTD: In 1951, the Twenty-second Amendment to the United States Constitution, limiting Presidents to two terms, is ratified.

ChatGPT has sparked a struggle for AI’s soul: Elon Musk’s dream of using the powerful technology for good is being dashed as a rival tycoon turns it into a money-machine.?The Times

+ “Successfully transitioning to a world with superintelligence is perhaps the most important — and hopeful, and scary project in human history.”

ChatGPT heralds an intellectual revolution: Generative artificial intelligence presents a philosophical and practical challenge on a scale not experienced since the start of the Enlightenment.?Henry Kissinger, Eric Schmidt + Daniel Huttenlocher

+ Whereas the printing press caused a profusion of modern human thought, the new technology achieves its distillation and elaboration.

+ The essential difference between the Age of Enlightenment and the Age of AI is thus not technological but cognitive.

+ The biggest of these models are expensive to train—north of $1 billion per model. Once trained, thousands of computers work 24 hours a day to operate them.?

+ Operating a pretrained model is cheap compared with the training itself, and it requires only capital, rather than capital and computing skill.

+ Computers are needed to harness growing volumes of data. But cognitive limitations may keep humans from uncovering truths buried in the world’s information.?

+ For now, we have a novel and spectacular achievement that stands as a glory to the human mind as AI. We have not yet evolved a destination for it. As we become Homo technicus, we hold an imperative to define the purpose of our species. It is up to us to provide the real answers.

Metaverse creator Neal Stephenson on the future of virtual reality: The writer who invented the metaverse concept on why he decided to get involved in building it — and the trouble with AI.?FT

+ "There won’t be a metaverse that is used by millions of people until it contains experiences that millions of people find worth having."

Bloomberg: Apple’s secret ‘XDG’ team is working on more than just a glucose monitor

Chip industry doubles down on Singapore as production hub: Nikkei reports Soitec and Applied Materials diversify supply chains to mitigate risks.

How the design of autonomous weapons is changing the rules of war: Weaponized artificial intelligence is the future of warfare, but ethical questions remain to be answered.?FC

+ Weaponized artificial intelligence is the future of warfare.

+ These weapons, which are a cross between a bomb and a drone, can hover for extended periods while waiting for a target.

+ For now, such semiautonomous missiles are generally being operated with significant human control over key decisions.

+ Campaign to Stop Killer Robots have been advocating for more than a decade to ban research and development of autonomous weapons systems.?

+ The International Committee of the Red Cross, the custodian of international humanitarian law, insists that the legal obligations of commanders and operators “cannot be transferred to a machine, algorithm, or weapon system.”

+ If and when artificially intelligent weapons are deployed on the battlefield, who should be held responsible when needless civilian deaths occur? There isn’t a clear answer to that very important question.

Today: The Mobile World Congress in Barcelona starts.

HSBC is looking for a new London office that is less than half the size of its skyscraper at Canary Wharf, as the enduring shift towards flexible working takes its toll on the capital’s office market.

Pharrell threads the needle: Why Louis Vuitton chose Williams as its new designer of men’s wear. It’s bigger than hip-hop.?NYT

+ Williams has a distinctive approach to luxury, one that begins with hip-hop’s commitment to the reappropriation of class signifiers, but also extends to Californian leisure, Japanese whimsy, European sleekness and the unbothered calm of royalty. He consistently telegraphs opulence and panache, in a manner that feels learned but not studied.

+?Williams has been living in hip-hop, and looking into the future, for more than 20 years, a valuable perspective for a luxury men's wear world that has already absorbed hip-hop and is hoping to divine what might come next.

AFP: Man Utd win League Cup to end six-year trophy drought

How much is Manchester United really worth??The club has been put up for sale with a reported target price of $6bn-$7bn. The FT’s calculations suggest the club is worth around $1.6bn.?FT

+ Lex’s own calculations suggest the club is worth around $1.6bn and even the current enterprise value of $4.5bn implied by United’s share price would require unfeasibly high growth in revenue and profit to justify.

+ The Glazers, who were among the early foreign investors in top English football clubs when they bought United’s equity for ￡790mn in 2005, have chosen to sell up now adds to the sense that this may be the top of the market for such trophy assets.

+ Old Trafford remains the biggest stadium in the Premier League with a capacity of 77,000 but it is no longer the most modern — Manchester City, Arsenal and Tottenham have all expanded their capacity and improved facilities in the 15 years since the so-called Theatre of Dreams last had a facelift.

+ England’s Premier League is the most lucrative in Europe; its clubs make up over half of the wealthiest in Europe and their spending on player transfers routinely dwarfs that of rival leagues. Among global leagues, only the US National Football League exceeds its estimated $7bn of annual revenue.

+ Applying conventional valuation techniques misses one vital but intangible factor: opportunities to own truly global sporting franchises are vanishingly rare. The final price for this storied club could well result from a game of chicken between ultra-wealthy rivals keen not to miss out on such a once-in-a-lifetime deal.

Enjoy the ride + plan accordingly.

-Marc?

Marc A. Ross | Chief Communications Strategist @ Caracal

Caracal produces ITK Daily.

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