Drama in Central Asia | Dan Wang's annual letter

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This week:

  1. 🤼‍♂️ Kyrgyzstan and Tajikistan come to blows: what’s going on in Central Asia?

  2. 🕵️‍♂️ All things China: a review of Dan Wang’s annual letter

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🤼‍♂️ What’s going on in Kyrgyzstan and Tajikistan?

By Helen

…is a question very few people ask.

In fact, when you hear about Central Asia (aka ‘the Stans’), I bet you think of Mr. Borat Sagdiyev, his lime green mankini, and his Cultural-Learnings-of-America-to-Make-Benefit-Glorious-Nation-of-Kazakhstan.

You don’t? Err... me neither.

Either way, you probably heard that Central Asian countries were offended by Borat - especially Kazakhstan - which is actually the most economically developed of the five countries in the region. In fact, the Kazakh government was so miffed it tried to sue Sacha Baron Cohen (unsuccessfully).

But I digress. From the Mongols and Mughals in ancient times to the Russians, Chinese, and Americans today, Central Asia has always held an important strategic position.

Sorry, 'strategic' is an overused word - Central Asia has long been the luncheon meat filling in the Eastern and Western empire sandwich (I think I must be hungry).

Context: a fight over water at the border

(This actually rhymes perfectly, as long as it’s read in an Australian accent.)

Relations between Kyrgyzstan and Tajikistan are usually genteel. But last week, fighting broke out between the two countries at their remote, mountainous border:

This conflict comes at a time when Central Asia is facing one of its biggest geopolitical changes in decades, with US President Biden announcing a complete military withdrawal from nearby Afghanistan by September 2021.

Tensions are not new between the former-USSR neighbours. After all, Kyrgyzstan and Tajikistan share a ~1,000km border, one third of which remains in dispute after the collapse of the Soviet Union. Both sides have wrestled for control over natural resources such as water and territory in the past.

But in this case, fighting over territory isn't the Putin-esque: 'my annexed peninsula is bigger than your annexed peninsula', but rather all about free access to roads that lead to ethnic homelands.

(While restricted freedom of movement in disputed territories may seem like a mere inconvenience, it’s not. It has a serious impact on livelihoods and communities, as I saw with the Palestinian farmers in the West Bank during my posting in the Middle East.)

So what has actually happened?

  • 🏔 Where: The incident took place in Vorukh on the very pretty Isfara River, a lush, ethnically-Tajik enclave inside Kyrgyzstan that provides irrigation to downstream Kyrgyz villages:

  • 🎥 What: Tajik government forces installed surveillance cameras near a shared irrigation pump, which sparked angry protests by the local Kyrgyz population. (Not unlike my nosy neighbour who spies on my package deliveries through her Ring device. 👀).

  • 💥 How: First, civilians from both sides started hurling stones at each other. Then, shepherds and construction workers were kidnapped, border guards and other security forces exchanged fire, all culminating in military gunships attacking patrol posts (it really escalated quickly). So far, 49 people have been killed, dozens more injured, and over 10,000 people evacuated from the area.

It's the worst fighting the two countries have seen in years. Both sides have agreed to a complete ceasefire for now, and each president has received a slap on the wrist from their patron state, Russia.

Central Asian geopolitics is often like bickering children fighting over the last cookie, if the children were dynastically wealthy, corrupt politicians and the last cookie was the livelihoods of thousands of unsuspecting people. Oh, and if Putin was their daddy 🤢.

Zoom out: geopolitics abhors a vacuum

The key unknown is how instability caused by the US military withdrawal from Afghanistan will impact the geopolitics of Central Asia. Here’s my take:

  1. A stable Central Asia will be important for US foreign policy. Keeping Central Asian countries onside is important because the US can move military equipment out of Afghanistan over land, while avoiding the notoriously unreliable Pakistan.

  2. The US withdrawal will likely embolden the Taliban (who are still in cahoots with Al-Qaeda). It’s not unthinkable that the non-Afghanistan ‘Stans’ could become terrorist hotbeds. The Afghan Government will have a limited ability to police the illicit drugs and weapons trade that will flow through Central Asian states, raising the chances of radicalisation in these areas.

  3. As the US recedes, China will step up its presence in Central Asia. China trumpets Central Asia's importance to the historic Silk Road (the Marco Polo one, not the drug one) and its modern incarnation (the Belt and Road Initiative). Expect plenty of behind the scenes diplomatic work by the US, China, and Russia to gain influence over Central Asian governments.

Throughout history, Central Asia has been an important puzzle piece for empires intent on trying to take over the world (don't pretend you didn't read that in a Pinky and The Brain voice). Modern-day empires might look different from their ancient predecessors, but you don't have to squint too hard to see Central Asia caught in the middle yet again.

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🕵️‍♂️ All things China: a review of Dan Wang’s annual letter

By John

We’re launching our ‘Analysing an Analyst’ series. There is a lot of excellent global affairs content but most of it tends to be very long, very dense, and very hard to find. In what we hope will be an ongoing series, we’ll find the most intriguing global affairs analysis, simplify it, and en-joke-ify it for your consumption.

This week, I take a look at Dan Wang’s annual letter. Dan is a Shanghai-based ‘China watcher’ at macro research firm Gavekal Dragenomics. He is an extremely accomplished geopolitical analyst, and his letter is a deep dive on all things China.

The overall theme: China is getting better and worse

A senior diplomat with four decades of experience in China once told me:

The key to understanding modern China is the ability to hold two competing ideas in your head at the same time and not go crazy.

That’s the best advice I received during my diplomatic career, and it’s a skill required to fully understand Wang’s letter (whether I remain sane is an open question 😜).

China is getting better. Since 2017, China has professionalised its government. Regulations and approvals are now based more on rules and less on wining and dining powerful party officials. Daily life in China is getting fairer, easier, and less chaotic.

China’s pandemic response is an excellent example. According to Wang, the whole country moved quickly to contain the pandemic. Local governments promptly locked down cities and China’s private sector mobilised to produce PPE, whether it was their core competence or not.

And improved societal trust made the whole thing possible. According to my friends in China, daily life has been more or less normal since May 2020. (What an idiot you’d be if you, say, moved from Shanghai to London in late 2019 because you felt a little too restricted after four years in China 👍).

But China is also getting worse. We’ve written at length about human rights abuses in Xinjiang, and, of course, Covid-19 might have been contained had local officials in Wuhan not covered up the outbreak. And don’t forget the Chinese Communist Party (CCP) disappeared Jack Ma, and government officials regularly post idiotic and offensive tweets.

The western media has become very good at detailing China’s bad side and the negative coverage has had a significant effect:

💡 Key takeaway: Much of the world now thinks negatively of China and China does not like it. If you value facts over politics or narratives, you must hold two competing ideas in your head at the same time to understand China.

As every discussion on China grows more strident, and as every proposition about it has to be vested with sentiment, I submit that it’s all the more important to be able to see things as they are.

- Dan Wang

A few other themes…

1. The US is helping the Chinese Communist Party control China’s private sector

Contrary to popular belief, the CCP and the private sector in China are not in lockstep. The CCP understands that almost all of China’s innovation and dynamism comes from private firms and generally does not interfere.

To make the point, Wang contrasts:

  • the relative failure of Chinese industrial policy: Chinese aeronautics and semiconductors are still way behind global competitors despite huge government support, with;

  • the relative success of Chinese private firms: China leads the world in solar and 5G technology; and Alibaba, Bytedance, and Tencent are among the world’s best tech companies.

However, US sanctions against Chinese tech firms are actually helping align the private sector with CCP goals. For example:

  • the CCP has placed ‘technological self-reliance’ at the heart of its economic plans and knows that private sector innovation will be key to achieving this goal

  • the Chinese private sector is motivated to produce the best possible product, which previously meant importing and relying on world-leading technology from the west

But now that the US has prevented Chinese firms from accessing US technology, the Chinese private sector has no choice but to develop its own technology, thus aligning closely with CCP goals.

💡 Key takeaway: the history of technological advancement is diffusion. No country can monopolise technology forever and China will sooner or later catch up. Under current US policy, it will happen sooner.

Huawei, the greatest victim of US actions, is now in the position of NASA in the 1960s when it comes to chips: a cash-rich entity willing to purchase on the basis of performance, not cost.

- Dan Wang

2. China and America’s economies are complementary and ‘decoupling’ will be harder than the media suggests

The Chinese and US economies remain highly complementary:

  • China buys the things the US needs to sell (leading-edge technology)

  • China makes the things the US loves to buy (manufactured stuff)

The US is a consumption-focused economy and China is a production-focused economy. Again, their respective pandemic responses illustrate this perfectly:

  • The US focused on demand-side stimulation, handing Americans trillions of dollars in stimmy cheques to ‘buy local’ (or day-trade stonks 📈)

  • China focused on supply-side subsidies for producers to minimise damage to its economy, but provided very little support to households

The result? Supercharged spending power in the world’s biggest economy and supercharged production capacity in the world’s second largest economy.

💡 Key takeaway: Wang thinks that separating the two economies will be much harder than many suggest. There is just too much to lose for both sides.

3. The US-China relationship is a struggle between economics and politics

The future of the US-China relationship depends on more than just economics. Political attitudes in Washington and Beijing are more hawkish (aka confrontational) than at any time in recent history:

  • The US thinks China tricked it into believing that China didn’t want to challenge US power

  • China feels victimised by bad press and thinks that the world has ignored its significant development achievements and global contributions

💡 Key takeaway: neither view is entirely true and both views cannot co-exist peacefully. It’s impossible to know whether politics or economics will win, but the more entrenched the current political positions become, the harder they become to undo.

[China’s] strengths are real and improving while the government becomes more nasty towards its critics and the rest of the world.

- Dan Wang

The summary of the summary of the letter

If boiling down a ~11,000 word letter into ~800 words is still too long for you:

  • China is getting stronger, but nastier

  • China and the US remain highly complementary economically, but more and more opposed politically

  • China’s private sector is increasingly aligned with CCP goals, thanks in large part to current US policy

  • The US and China still need each other, but China will not need the US before the US doesn’t need China

  • The longer the current US-China dynamic holds, the more likely an ‘East vs West’ future becomes

If you found value in this summary and would like us to write more ‘key takeaways’ from the work of highly-respected analysts, let us know. If we hear crickets, we’ll know one was enough 😂.


➕ Extra intrigue


🔎 Intriguing recommendations

👴  John: I strongly recommend you watch this Dutch man park his car in his garage. I will say no more on the matter. Secondly, a few weeks ago I read The Spy and the Traitor by Ben McIntyre. It is an exhilarating (and true) tale of Cold War spycraft, including an exfiltration from Moscow that I still struggle to believe. Five thumbs up.

💁🏻‍♀️ Helen: On spying… fancy joining the British intelligence service? Check out their Insta, which aims to debunk myths of the job exclusively employing Martini-sipping men in fast cars 🍸. It joins a global movement of spy agencies coming online to demystify spying (including the Aussies, who launched this great game a few years ago).


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