Top U.S. government officials are studying China’s increased diplomatic bravado and growing military assertiveness with all the intensity of elite athletes pouring over game films of their most resourceful rival.
From the CIA to the White House, and from the Pentagon to Foggy Bottom, what these officials are reporting is a far greater willingness by China to go on the offensive in the first 100 days of the Biden administration. The Chinese are readier to push back against real and imagined slights from the United States and its allies, even as they escalate warnings and military activities around Taiwan.
The new messaging from Beijing has been consistent: the Biden administration, in trying to undermine China’s rise, is promoting a false and dangerous narrative of competition between democratic and autocratic systems. Thus, countries around the world must decide whether to follow the divisive but declining United States or embrace a rising, unifying, and nonjudgmental China.
Between the lines, Chinese President Xi Jinping is saying that human rights violations and democratic failings are internal matters beyond debate. Going beyond that, Chinese officials are ready to publicly attack the U.S. record on racism and democracy, as did Beijing’s top diplomat Yang Jiechi in an unprecedented 16-minute diatribe to open the first high-level U.S.-Chinese talks of the Biden administration on March 18 in Anchorage, Alaska.
“Recently, there has been this tendency to compare China and the United States to ‘democracy versus authoritarianism,’ seek(ing) to … pin labels on countries,” said Wang Yi, the Chinese foreign minister, building on the Alaska message last week at the Council on Foreign Relations. “But democracy is not Coca-Cola which, with the syrup produced by the United States, tastes the same across the world.”
Said Wang, “using democracy and human rights to conduct value-oriented diplomacy, meddle in other countries’ internal affairs or stoke confrontation will only lead to turmoil or even disaster.”
His use of the term “disaster” caught his listeners’ attention, and he made clear what he meant by that.
“The Taiwan question is the most important and sensitive issue in China-U.S. relations,” he said, arguing that it should also be in the U.S. interest to oppose Taiwan independence and separatist instincts. “Playing the ‘Taiwan card’ is a dangerous move, like playing with fire.”
Such rhetorical and potentially strategic shifts do not happen by accident in (yes) authoritarian China. So, it’s both urgent and necessary to understand their meaning and respond appropriately. That will not be easy, given the contradictory mix of hubris and insecurity in the latest Chinese moves and measures.
On the one hand, President Xi Jinping is projecting a growing national confidence that this is China’s historic moment. Xi hopes to build on what he sees as game-changing momentum in this centennial anniversary year of the Chinese Community Party, having emerged from the pandemic and having declared the end of absolute poverty in the country.
At the same time, Xi is responding to new challenges from the Biden administration, which itself is escaping rapidly from Covid-19 through impressive vaccine distribution and by pumping $4 trillion and counting of stimulus and infrastructure development into the economy. U.S. growth could match or be greater than that of China this year at a remarkable 6.5%.
Where the two countries’ leaders appear to agree is on the fact that “we are at an inflection point in history,” as President Biden told a joint session of Congress this week. “We’re in a competition with China and other countries to win the 21st century.”
President Xi framed it differently earlier this year, speaking to a Communist Party school session: “The world is undergoing profound changes unseen in a century, but time and the situation are in our favor. This is where our determination and confidence are coming from.”
In Biden, however, Xi sees a more methodical and coherent leader than was his predecessor, one more willing to work within institutions and alongside allies.
Biden on March 12 convened the first leader-level summit of the Quadrilateral Security Dialogue, or Quad, bringing together Japanese, Australian, and Indian leaders. Japanese Prime Minister Yoshihide Suga then on April 16 was the first foreign leader to visit the White House since Biden took office, and the two leaders issued the first joint statement in support of Taiwan since 1969.
Chinese leaders also were caught off guard on March 22 when the United States, the European Union, Britain, and Canada imposed sanctions on Chinese officials for human rights abuses against the Uighur minority in Xinjiang. Beijing’s response was immediate, and seemingly counterproductive, slapping punitive measures against EU individuals that were broader. The price of its tough message is that the European Parliament has put on ice the recently announced Chinese-EU investment agreement.
There seem to be three immediate targets for China’s current approach: the domestic audience, U.S. partners and allies, and the developing world.
Any authoritarian leader’s priority is political survival. President Xi’s appears to have strengthened his hand within the Chinese Community Party, and weakened potential rivals, through nationalist rallying around Hong Kong and Taiwan and through portraying the United States as a power determined to reverse China’s rise.
The second target for Chinese bravado is a pre-emptive effort to reach U.S. allies and partners before the Biden administration has had sufficient time to galvanize greater common cause. Wherever necessary, it wants to demonstrate there will be a steep price for those who embrace Washington at Beijing’s expense.
One U.S. official quotes a Chinese saying to explain this strategy: “kill a chicken to scare the monkey.” President Xi’s third target is the developing world, where Chinese inroads have been greatest. The aim here is to portray China as a more reliable and consistent partner for their development, with its own inspiring track record of modernization and commitment to stay out of other countries’ internal affairs (and, indeed, supply fellow authoritarians with the surveillance tools to remain in power).
At the same time, of course, China is also testing the Biden administration. The aim is not to win over Washington, where the consensus about the Chinese challenge has been growing. Rather, it is to test the willingness of the Biden administration to act on any number of issues—ranging from technology controls to human rights—but most significantly regarding Taiwan.
Beijing is wagering, from previous experience, that President Biden’s bark will be worse than his bite. If convinced of that, count on even more Chinese bravado and assertiveness over the next four years.
Frederick Kempe is a best-selling author, prize-winning journalist and president & CEO of the Atlantic Council, one of the United States’ most influential think tanks on global affairs. He worked at The Wall Street Journal for more than 25 years as a foreign correspondent, assistant managing editor and as the longest-serving editor of the paper’s European edition. His latest book – “Berlin 1961: Kennedy, Khrushchev, and the Most Dangerous Place on Earth” – was a New York Times best-seller and has been published in more than a dozen languages. Follow him on Twitter @FredKempe and subscribe here to Inflection Points, his look each Saturday at the past week’s top stories and trends.
For more insight from CNBC contributors, follow @CNBCopinion on Twitter.
GameStop shares jump after the company raises over $1B in stock sale
A GameStop store is pictured in New York, January 29, 2021.
Carlo AllegriI | Reuters
GameStop shares climbed after the video game retailer said it sold 5 million additional shares, raising $1.13 billion in capital to accelerate growth.
The original Reddit-favorite meme stock jumped 10.6% at one point Tuesday morning after the company announced the completion of its at-the-market equity offering program that was initially disclosed on June 9. By late morning, the daily gain was about 6%. GameStop said it will use the proceeds for general corporate purposes as well as for investing in growth initiatives and maintaining a strong balance sheet.
This is the second stock sale that GameStop has conducted since the company became a star on Reddit’s WallStreetBets forum, where retail traders aimed to push stock prices higher and squeeze out short-selling hedge funds. GameStop sold 3.5 million additional shares in April and raised $551 million.
Investors have been encouraged by the moves and looked past the dilution of their stakes as GameStop took advantage of its monstrous rally this year — more than 1,000% — to speed up its e-commerce transformation.
White Square Capital, a London-based hedge fund, is closing its main fund and returning capital after suffering losses from betting against GameStop, the Financial Times reported Tuesday.
Earlier this month, GameStop named former Amazon executive Matt Furlong as its new CEO. The company also hired several other former Amazon executives, including Jenna Owens, its new chief operating officer; Matt Francis, its first chief technology officer; and Elliott Wilke, its chief growth officer.
For its fiscal first quarter, GameStop reported narrower-than-expected losses per share and revenue that topped Wall Street estimates. As of May 1, GameStop said, it had paid off its long-term debt and no longer had any borrowings under its asset-based revolving credit facility.
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Gen Z investing in cryptocurrency BTC, ETH and meme stocks AMC, GME
The next generation of investors are super online — instead of traditional investments, many Gen Z and young millennial investors, from teens to those in their early 20s, are bullish on cryptocurrency and the technology that surrounds it.
Some have spent the bulk of their savings on these type of investments: Nearly half of millennial millionaires have at least 25% of their wealth in cryptocurrencies, according to a new CNBC Millionaire Survey. More than a third of millennial millionaires have at least half their wealth in crypto and about half own NFTs.
Young investors have also taken part in recent meme stock rallies, which occur when retail investors buy up shares of stocks shorted by Wall Street hedge funds, like GameStop and AMC Entertainment. In part, the investors hope to force hedge funds to pay, overcoming what they see to be an inefficient system.
One reason young people have turned to alternative investments like crypto is simple: Many just don’t trust traditional investment institutions, as Allison Reichel, 23, tells CNBC Make It. They prefer to rely on their own research rather than use insights from traditional institutions, like financial advisors from legacy firms.
That includes Reichel herself. While working on her PhD in economics, Reichel is also a senior editor at crypto news site Blockworks in Washington, D.C. She started to invest “heavily” in crypto this year, and her crypto holdings account for most of her portfolio, she says. Reichel plans to hold her bitcoin and ethereum long-term.
But this distrust isn’t the only thing driving young people to invest in cryptocurrencies and meme stocks. First, many have a genuinely positive outlook on blockchain technology. And second, at the same time that they feel disconnected from traditional investments, many are finding community, and sometimes fun, in the crypto space. They want to invest in what they connect with, whether it be stocks, coins or digital assets.
CNBC Make It talked to several Gen Z and young millennial investors, like Reichel, about how these factors impact where they choose to put their money, and why they’re still investing with caution.
“In any crypto, you have those super strong network effects where people believe in it so much that they’re like, ‘I’m never selling because I believe it’s the future of finance,'” Reichel says. “I see the long-term applicability and use of crypto,” she says of her own plans to hold.
That’s true of many young investors, who believe in the technology itself.
While doing research for her PhD, Reichel was inspired by how bitcoin was being used to help those in need in different countries. In Venezuela, for example, crypto was a way that families could still receive money from relatives in the U.S. during a time when the president wasn’t allowing humanitarian aid.
Similar reasons led 23-year-old Kyla Scanlon to begin investing in bitcoin and ethereum during college in 2016. “I really liked the application that [bitcoin] has for people who are unbanked. My whole life thesis is, ‘How do we create financial accessibility and equality for everybody?’ I think crypto is one step in allowing people who don’t have access to traditional methods like banks to do so,” she says.
Scanlon first started trading options in high school and began working in asset management after graduating from college, which has boosted her confidence in her personal investment decisions, she says. Her core cryptocurrency holdings still consist of bitcoin and ethereum, and she also owns stock in companies like Roblox, Facebook and Etsy.
Scanlon is also bullish on blockchain technology, which is a decentralized digital ledger that documents cryptocurrency transactions and other information. “I don’t know if bitcoin will ever be like a currency, but I’m big on the technology,” she says.
Kayla Kilbride, a 24-year-old known on financial TikTok as @girlstalkstocks with over 108,000 followers, has “a growing confidence in bitcoin and ethereum specifically,” due to the capabilities of each blockchain.
Kilbride began investing in bitcoin and ethereum earlier this year, starting with small amounts here and there. She has just a few hundred dollars invested in cryptocurrency, but plans to continue to grow her holdings. In lieu of a full-time job, she currently day trades and sells NFTs of her social media content to earn income.
“As I began to understand the blockchain and the technology behind it, that is when I felt comfortable saying ‘OK, even if I invested when bitcoin was priced at $60,000 and it drops down to, let’s say, $20,000 or even lower, I can still support it, even if I lose money in the endeavor,'” Kilbride says. “The risk was worth it because I liked the technology.”
But this doesn’t worry Reichel, Scanlon and Kilbride much, in part because they’re intentional with their investments.
Reichel is extremely bullish on bitcoin’s future value, but only invests what she can afford to lose. “I’m comfortable losing it because I make sure that I have all my bills paid,” she says. “Obviously it’s great when the gains come, but for me, [bitcoin is] truly something that I believe has the potential to revolutionize monetary regimes throughout the world.”
Of course, many Gen Z and young millennial investors initially turned to cryptocurrency as a way to avoid traditional financial institutions, but still build wealth.
Reichel, Scanlon and Kilbride, who all research on their own and invest without the help of financial advisors, say part of their distrust stems from witnessing inequitable and inefficient financial systems.
The younger generation worries about their wealth and retirement, Reichel says. They don’t want to rely on the same traditional systems that their parents did. “I think a lot of people see inefficiencies and really want to change it,” she says.
Scanlon agrees. She also believes concerns over inflation are driving some interest in cryptocurrency among young people.
And with crypto, the barrier to entry is often low.
“It’s about accessibility,” says Cooper Turley, a crypto strategist at ethereum-based streaming app Audius. “With most tokens, there is no IPO. Retail investors have the same opportunities to contribute to and earn value from early stage [crypto] projects the same way venture capitalists do.”
Turley, 25, invested in bitcoin and ethereum in 2017 while in college, and now, he says those investments have made him a millionaire. Turley is an angel investor in the space, he says, and also acts as an advisor for Variant Fund, a crypto venture firm.
“This paradigm shift of democratized ownership paired with 24/7 trading and always-on exchanges is far more native to an internet-savvy generation than using a brokerage,” he says.
Still, it’s important to note that there are significant downsides to crypto. Experts warn investors to be cautious when putting money into cryptocurrency; it can be extremely volatile and it’s possible to lose your entire investment.
Many young investors also choose to have fun with their investments by buying meme coins, like dogecoin, and meme stocks, like GameStop and AMC Entertainment.
“Crypto and meme stocks are more memorable to young investors than traditional companies,” Turley says. “Young investors care far less about the bottom line of a corporation and far more about a meme or narrative they can collectively share with their friends.”
Dogecoin, for example, launched in 2013 based on the “Doge” meme, which portrays a shiba inu dog. Its creators didn’t intend for dogecoin to be taken seriously, but it is now one of the top 10 cryptocurrencies my market cap, with a market value of over $22 billion.
Kilbride sees dogecoin as a way to introduce people to crypto. “Dogecoin, being very cheap, is affordable. It’s easy to understand,” Kilbride says, which is part the reason she bought it too. “I’ve invested more in bitcoin and ethereum because of dogecoin [gains].”
“Meme stocks take away those super scary aspects of finance,” Reichel says. “When you think about the stock market, the typical picture is all of these older guys in suits who have been running it for years.” That’s not true for something like dogecoin.
There’s also the feeling that seemingly everyone is getting in on the action. Though many meme coins are entirely speculative, very risky and sometimes fraudulent, it can be difficult to not jump in on the trades. “It can be hard with all the FOMO (fear of missing out), because you see all these coins taking off,” Reichel explains.
For Turley, “the best example of a meme coin I’ve invested in is unisocks, or $SOCKS, a digital token representing a claim on a physical pair of socks,” he says.
But sometimes, it’s about more than fun. For many, the rallies of meme stocks like GameStop and AMC symbolized standing up to big-name Wall Street hedge funds, a desire that stems from a feeling of “a lack of access for the ‘little man,'” Kilbride says.
To Scanlon, “there’s this underlying resentment because our parents were able to have a 60/40 stock/bond portfolio and be fine and retire with no worries at all. But that’s not the case for this generation.”
Yet despite putting money into “fun” investments, these young investors still aim to be somewhat careful.
For Kilbride, that means avoiding any coins that seem sketchy. “When there’s so much hype … a lot of people are getting tricked, a lot of other people think it’s funny, but when you don’t have so much [money] where you can just lose, it’s too dangerous,” she says.
While traditional investments feel inaccessible to the next generation of investors, many are finding a sense of community in alternatives like cryptocurrency and meme stocks.
“I say the C in AMC stands for community, because I think that’s what [the frenzy] is about,” Scanlon says. “Post-pandemic, I think there’s a sense of loneliness. People are finding community within the stock market, in the Discord servers, in Reddit. People are just craving community because we don’t have that in the same way that we used to.”
Buying into things like GameStop and AMC is partially about being a small part of the movement, Kilbride says.
“When GameStop first rallied back in January, I invested as part of the community. I did not invest very much and I invested near the top, just to hold the line. I was like, ‘I want to purchase to be able to print it out and frame it on my wall,'” she explains.
The same was true for Reichel. “I invested a little bit just because I was like, ‘Oh this is fun,'” she says. “Companies that maybe never perform that well were having this crazy moment. I was like, ‘I want to be part of this.'”
For some, the community aspect is at the core of their motivation to invest.
That includes Turley, who always considers the community that surrounds a coin before investing. In fact, “I base my investments around the strength of the community,” he says.
YouTube secures a big win in the EU over copyright
YouTube’s logo is seen against the flag of the European Union.
Omar Marques | SOPA Images | LightRocket | Getty Images
LONDON — The European Union’s top court on Tuesday ruled that Google’s YouTube and other online platforms should not be held liable for copyright-infringing uploads in certain situations.
As things stand, online platforms “do not, in principle, themselves make a communication to the public of copyright-protected content illegally posted online by users of those platforms,” the European Court of Justice said.
However, YouTube and other platforms could still be held liable if it “has specific knowledge that protected content is available illegally on its platform and refrains from expeditiously deleting it or blocking access to it,” the ECJ added.
The EU recently introduced copyright reforms aimed at making its rules fit for the digital age. One part of the law which drew significant controversy at the time meant that YouTube, Facebook and other platforms would have to install filters to block users from sharing copyrighted material.
Tuesday’s ruling focuses on old copyright rules in the bloc. The case arose from a lawsuit from music producer Frank Peterson against YouTube over the uploading of recordings in 2008 over which he claimed to hold the rights.
The news marks a win for YouTube and other content-sharing sites, which have long tussled with artists and musicians over how to compensate them fairly for work that gets distributed on the web.
YouTube has clamped down on copyright violations over the years, a move that has drawn the ire of some popular creators on the platform. Tensions over YouTube copyright action escalated in 2020 as the company increasingly automated content moderation due to coronavirus lockdown restrictions.
A YouTube spokesperson said the company paid over $4 billion to the music industry over the past 12 months, with 30% of that sum coming from monetized videos.
“YouTube is a leader in copyright and supports rights holders being paid their fair share,” the spokesperson said Tuesday. “That’s why we’ve invested in state of the art copyright tools which have created an entirely new revenue stream for the industry.”
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