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The Other $23.6 Trillion: What Decoupling Would Cost China
The Financial Times recently reported an EY-Parthenon estimate that the US, Europe and the UK would need to invest $23.6 trillion over the next 25 years to eliminate their dependence on China in critical industries.
Wow. Big number. Wow. Very costly.
But presenting only one side of the ledger is disingenuous. It creates the impression that decoupling would impose enormous costs on the West while costing China almost nothing.
The obvious follow-up question is:
What would decoupling cost China?
No equivalent study appears to exist, but the answer is likely to be at least comparable—and potentially greater.
The commonly cited figure that roughly 30% of Chinese exports go directly to the US, EU and UK significantly understates China’s true exposure. It excludes the vast amount of Chinese machinery, components and intermediate goods shipped to countries such as Vietnam, Mexico, Malaysia, Thailand and India, where they are processed or assembled before ultimately being sold to Western consumers.
The relevant question is therefore not simply where China ships its goods.
It is where the final demand comes from.
Once these indirect supply chains are included, it is plausible that 40–50% of Chinese export production is ultimately dependent on Western final demand, either directly or through third countries.
China is also far more exposed to the consequences of lost industrial demand. It has built its economic model around manufacturing on an unprecedented scale. Manufacturing accounts for about 30% of Chinese GDP—while it’s only 10-11% in the United States.
A substantial loss of Western demand would therefore ripple far beyond the export sector. It would leave factories underutilised, depress corporate profits, destroy employment, weaken local-government revenues, increase bad debts in the banking system and strand enormous amounts of industrial capital.
On that basis, a genuine and sustained decoupling by the US, Europe and the UK could plausibly impose $15–25 trillion in cumulative economic costs on China over the next 25 years. The total could be considerably higher once slower productivity growth, reduced access to technology and the loss of foreign investment are included.
The asymmetry is important.
The West’s $23.6 trillion is largely investment. It would create new factories, infrastructure, research capacity, software and supply chains—productive assets that the West would continue to own.
China’s cost would take a very different form: lost demand, idle factories, stranded assets, unemployment and permanently slower growth.
One side pays to build a new industrial base.
The other pays by losing the customers that made its existing industrial base so powerful.
Financial Times@FT
The huge investment needed to replace Chinese financing in critical industries highlights the scale of the challenge facing the US and Europe as they seek to reduce Beijing’s grip on strategic supply chains. Can they really afford to decouple from China? ft.trib.al/KeZP3A3
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'Investors pile into income ETFs to shelter from tax changes'
'Australian investors are on the hunt for income and are piling into exchange-traded funds that are focused on dividends, bonds and cash amid higher interest rates and looming changes to capital gains tax.' #ausbiz
afr.com/markets/equity…
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Every week we discover something more about the #CGT mess this government is creating.
So, any Australian who has bought an investment property, likely with a view to coming home, now pays 47% for the entire time they own it, even if they are resident overseas for a fraction of that time.
We are telling our best and brightest young Australians working overseas to sell their connection to Australia and not to come home. How stupid!
Add this to my list of the seven terrible consequences of this unnecessary and destructive change to CGT for startups and business more broadly.
@kate_cornick
@GeoffWilsonWAM
Budget’s nasty CGT surprise for Australians doing a stint overseas afr.com/wealth/persona…
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@bryan_johnson You’re kind of weird and interesting, I wish you well, but I hope I’m not being conned here somehow
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The world wants me to die.
My incurable disease diagnosis became global news. It was omnipresent on social media and 1,900 articles were written in a matter of days.
Many were saddened.
However, joy dominated the commentary.
People pointed to schadenfreude, the pleasure of another's failure. Yes, there’s that. There is a special place in people’s hearts that loves to see others fail, especially when that person’s presence threatens their own psychological stability in some way or helps them feel better about themselves.
But, if you look over the social media commentary about me, you’ll see that pattern:
“he deserved it.”
I deserved it because I challenged death. The crowd was running a deeply rooted psychological script that represents the oldest, most deeply embedded stories of human culture.
This was the first story ever written down, 4,000 years ago. Gilgamesh sought eternal life after losing someone he loved, only to have the plant of youth stolen by a serpent as he bathed. Leaving him to accept his mortality.
Asclepius became so skilled at rejuvenation that he raised the dead. As punishment, Zeus struck him down with a thunderbolt to enforce life and death authority.
This is the story of Jesus. Pontius Pilate offered a choice between a thief and the immortalist, and the crowd demanded the execution.
People need this story conclusion to keep themselves sane. The challenger must lose and the loss must appear deserved. It’s a shield of self preservation.
For if death is inevitable, their existence and that of their loved ones is justified and unavoidable. If death is not inevitable, nothing about their reality is safe.
I occupy the same philosophical and archetypal position as Gilgamesh, Asclepius and Jesus.
This statement will draw outrage and accusations of blasphemy, hubris and narcissism. Nevertheless, it’s the pattern that has repeated itself for thousands of years.
Death has been the omnipresent concern of the human race. It encapsulates our greatest fears, joy and curiosities. The discourse around it changes over time; however, the fundamentals remain unchanged.
What’s different about this moment, that is unlike any other moment, is that physical death may no longer be inevitable.
What if I didn’t deserve it?
And what if I am your ally, and not a threat?
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Facing threats from China and Russia, Japan is building a new intelligence agency with help from the West.
nyti.ms/4gvAl07
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Stephen, as your bio tells us you are a big player in Federal treasury, can you please explain how treasury modelling, which I assume you were involved with, told Jim Chalmers that rents would only go up $2 a week after pre election commitments were revealed to be blatant lies?
Stephen Koukoulas@TheKouk
From yesterday: Gross govt debt fell to $973.9 billion. Next week the govt will borrow $3.8 billion - no maturities. If debt was the same share of GDP as in the US, Australian debt would be around $3.6 trillion
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I've never seen an entire industry and profession destroyed quicker than what is currently going on in SaaS.
The value destruction is insane.
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So as I usually do on Fridays, I went to the pub to meet my two best mates - both 2nd generation Australians of Indian descent.
Immediately they start talking about the Modi visit.
Their interpretation? Subservience and distraction.
‘Wrong’, ‘weak, ‘pathetic’ - I was admittedly hysterical listening to two Indian-Australian mates who aren’t politically engaged tearing apart our cucked political leaders.
One of them spoke about how his parents came here and built a small business without any support - but the recent wave of Indian migrants bring their whole family over.
The other said he used to have to move country towns because his dad was a doctor at a time Australia demanded skilled migrants actually fill critical shortages.
Both of them hold the view that assimilation is critical to our shared success and the bar has been set way too low.
We talked about dilution of standards - no matter what happens with crime, Indians are happy here because it’s better than where they’ve come from, so politicians lower the standard rather than addressing the problem.
We talked about how growing up in multi-ethnic environments forced us to assimilate - insults were softened into jokes and ultimately we became friends by giving back harder than we got.
When I went to order a round of pale ales, the darkest skinned of all three of us demanded a bitter - and I jokingly made the point he’s the most assimilated of all of us.
Australia is rapidly changing and not for the better - and I couldn’t ask for a better couple of mates to keep me based.
Anybody who’s actually lived here for a few decades can see this - and those who choose to pretend otherwise are the ones betraying this country.
Marko Matvikov@MarkoMatvikov
“Most people we’ve spoken to today say they’re just delighted to be here because Mr Modi makes them proud of their Indian heritage - and that’s a message that we’ve got time and time again.” When our PM visits foreign nations, he’s welcomed with the host country’s traditions and culture. Yet when India’s PM visits Australia, he’s welcomed with Indian traditions and a stadium rally. The irony of this is that Modi’s popularity is built on promoting Indian nationalism around the world. While our PM seems far more comfortable celebrating other cultures than promoting our own.
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@David_McMahon75 MRE or SMSF, otherwise don’t bother, just spend it on anything, maybe on a ticket to elsewhere
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One aspect of the new CGT that hasn’t gotten enough attention is how punitive it is on turnover for share investors.
As we now know, Treasury apparently assumed in its modeling that share investors only own one asset like a single ETF. Ridiculous assumption. But not only that, they also assumed the investor basically buys and holds that asset forever. This is also not how it works back on planet Earth.
People who own shares often sell their winners and reinvest the profits.
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The part that was cut off in major news outlet after they caught the rocket.
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scam on scam smackdown!
Sam Altman@sama
homeboy you're the one sellling public market investors on short-term space datacenters
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Cool.
Okay I've read more of your past writing now and don't want to just rehash previous debates you've had.
It sounds like we both agree on:
- AIs will need to deal with some kind of empirical interactions
- at this point, we should expect the first solidly "smarter than human all around" AI to appear in a world where other slightly-less-but-jaggedly smart AIs already exist and are used widely.
The thing I don't have a very good handle on is your "life isn't chess." Clearly, life isn't a perfectly predictable thing. But also clearly (I assume you agree?) intelligence is able to make predictions and game plans even for chaotic situations full of unknown unknowns, to some degree.
I'd like to find a question that gets more specific about "exactly _how much_ will AI be bottlenecked on new knowledge they can't get, when it comes to strategic outmanuevering and/or inventing novel science" as opposed to "world = chess, yes/no?"
...
But, first, quick concrete question:
> I don't have a strong view about this but 31 years per second seems like a stretch.
> I'm absolutely willing to accept the premise that in the future there are AI models that can devote a lot more raw "brain power" to a problem in a shorter amount of time than any human can manage.
I'd prefer to stay in realms you find plausible so we're only having one Big Intractable Debate at a time. In terms of "just thinking faster" (and otherwise qualitatively similar to a human, except being able to call up subagents and make internet API requests etc), what's the upper range you find plausible?
i.e. is it more like 10x faster, 1000x, 100,000x, 1,000,000x? (I think different speeds here open pretty massively different possibility spaces on how to leverage the thinking. I realize your take is that this number doesn't matter. I think it does, but I want to check if we're talking about a zone that falls inside your upper/lower bound of "yep seems pretty plausible")
(and to be clear this is not talking about modern LLMs, or about timelines, just, "what's possible
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I struggle with what to say about the new AI 2040: Plan A website. It all seems so implausible to me that I'm not sure where to start. There's an epistemic chasm between those who think superintelligence implies near-omnipotence and those (like me) who don't.
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@jimstewartson Oracle is too big and important to fail but hopefully it will be broken up
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As I may have mentioned, Oracle is fucked. Larry contracted AI psychosis and bet the farm on chatbots.
The question is whether this will affect David Ellison’s plans to acquire the entire media ecosystem and hand it to Bari Weiss.
Kakashii@kakashiii111
S&P downgraded Oracle's long-term issuer credit rating to 'BBB-' from 'BBB', citing exploding capex. The ratings agency now projects Oracle's fiscal 2027 capital expenditures to rocket to $90 billion to $95 billion, a massive leap from its previous $60 billion forecast, driven by soaring AI chip costs and new data center builds. That's exactly what I said: with each Nvidia generation, data center cost keeps rising, and that's excluding other rising components. Now add memory and storage, turbines, cooling, and so on, all rising too. At some point, projects will start getting cancelled, scaling planned capacity down (say from 5 GW to 1 GW), and we'll even see abandoned projects selling for pennies. That scenario could bring us the great write off period.
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@MarkoMatvikov His family will love Singapore too, it’s nice there, very comfortable for Aussies, you can get vegemite and everything, it’s like being in north Mosman
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A mate of mine makes mega bucks working for a US company in Australia.
He moved back here to be closer to his family a few years ago - and while he can make it work flying overseas most weeks, it’s very far from ideal.
His plan is to retire early - his job is high pressure, high risk, high reward, and he invests most of what he earns so he doesn’t have to work for more than another decade or so.
He’s always been furious at the tax he pays here - which is more than most people’s gross income - but as living costs keep increasing and his local investment opportunities keep dwindling, he’s reached the end of his tether.
He’s now likely to move to Singapore and fly back fortnightly to see his family here - maybe just for a while, maybe longer as it’ll just be too hard to justify coming back to Australia.
At the end of his career, he’ll sell the many millions in equity he holds in the company he works for - but of course he won’t be a tax resident in Australia when he does that.
He’s aware of the ins and outs of the rules - including how he has to navigate changes in tax residency - and while he’ll still have to pay a lot in Australia, he’ll still save even more by moving.
Australia didn’t create his job. An Australian company doesn’t pay his salary. He spends most of his time working overseas. Him being a tax resident in Australia is all upside for Australia.
But it’s just so demoralising for him to work that hard, be further from where he needs to be to make work easier and get taxed more each year on the bonuses he works his ass off to earn.
So now Australia is likely to lose one of its highest taxpayers because the burden of being high performer is just too great in this country.
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@AvidCommentator What Minns and Scully are doing to the fabric of Sydney sucks
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"Moral posturing is no substitute for planning, and accusations of prejudice are no answer to math."
Well said.
This approach is one of the most damaging things they could possibly do.
🇦🇺Craig Tindale@ctindale
Minns is determined to turn a question of public administration into a test of moral virtue. It is an old trick. Once every discussion of immigration is recast as a contest between enlightened multicultural inclusiveness and snarling racial prejudice, his government is relieved of the obligation to account for overcrowded schools, unaffordable housing, inadequate childcare, congested transport, precarious employment and the dwindling prospects of our young folk . To ask whether population growth has outrun infrastructure is not to denounce the people who arrive. It is to question the competence of those in charge. Yet this distinction must be blurred, because clarity would be politically inconvenient. Better to accuse the questioner of moral failure than to answer the questions or meet the challenges we face . Meanwhile, new housing is produced with all the vision of a prison architect: fewer trees, negligible gardens, cramped streets, inadequate parks and nowhere for children to play. This is then presented as progress, provided everyone uses his approved vocabulary while living with the deteriorating result. It pure gutless incompetence hiding behind multicultural ideology The issue is not really about cultural inclusion. If we did this properly , competently & slowly many of the cultural issues would dissipate . It is whether a government has matched population growth with homes, schools, transport, jobs , health care and humane public spaces. Moral posturing is no substitute for planning, and accusations of prejudice are no answer to math.
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Minns is determined to turn a question of public administration into a test of moral virtue.
It is an old trick. Once every discussion of immigration is recast as a contest between enlightened multicultural inclusiveness and snarling racial prejudice, his government is relieved of the obligation to account for overcrowded schools, unaffordable housing, inadequate childcare, congested transport, precarious employment and the dwindling prospects of our young folk .
To ask whether population growth has outrun infrastructure is not to denounce the people who arrive.
It is to question the competence of those in charge. Yet this distinction must be blurred, because clarity would be politically inconvenient. Better to accuse the questioner of moral failure than to answer the questions or meet the challenges we face .
Meanwhile, new housing is produced with all the vision of a prison architect: fewer trees, negligible gardens, cramped streets, inadequate parks and nowhere for children to play. This is then presented as progress, provided everyone uses his approved vocabulary while living with the deteriorating result.
It pure gutless incompetence hiding behind multicultural ideology
The issue is not really about cultural inclusion.
If we did this properly , competently & slowly many of the cultural issues would dissipate .
It is whether a government has matched population growth with homes, schools, transport, jobs , health care and humane public spaces.
Moral posturing is no substitute for planning, and accusations of prejudice are no answer to math.
Anthony Khallouf@ausvstheagenda
NSW Premier Chris Minns says multiculturalism is a vital part of “modern Australia” because it teaches us to tolerate people from different cultures. He says anyone who disagrees is pandering to the right.
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@MarkoMatvikov ON are racists and became famous when Pauline was in her fish and chip shop objecting to getting swamped by Asians. You don’t have to be racist to think immigration should slow down and benefit the country. So, vote for the racists or the pinkos??
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Angus Taylor says electing One Nation "would cause an eternity of pain".
The LNP lost the last election in a landslide and has continuously been sliding in the polls ever since.
They've fired shots at One Nation - and kept sliding in the polls, mostly to One Nation's benefit.
Their biggest issues can be distilled to an identity crisis, disunity and distrust.
One Nation's rise within the last year has coincided with major shifts from the LNP - whether they want to admit it or not.
Maybe they're comforted by polling in Victoria - but surely they're not stupid enough to think this has more to do with the LNP doing something right than the ALP here doing a lot wrong.
They shouldn’t morph into One Nation or pledge their allegiance to them - that doesn’t mean they have to fire shots at them when there’s a target rich environment over the fence.
Forming government in Australia is heavily and increasingly reliant on preferences - Labor, the Greens and others play this very well.
Maybe they're reserved to carving out enough market share for long term minor party status.
I'm really struggling to see the strategy here.
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@kamilkazani I just watched my kid study English Lit at a quite high level, it is very very technical these days, much more fun when I was studying it
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German name is right, Irish name is wrong
Kids don't need any kind of 'analysis'. What they need is joy, and, love of reading, which in time translates into the basic erudition
Dumb, stupid, arrogant asses with their dick envy of STEM, are killing both education and culture
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@clairlemon Individual liberty, national pride and family values are virtues not something shameful
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For the second day in a row, everyone has been laughing at this video.
Yesterday, Putin, dressed in military uniform, allegedly made a rare visit to the front line, to one of the auxiliary command posts. In reality, it was a film set inside a bunker. As we can see, they have a lot of props in that bunker:
😅 A camouflage net was hung inside the building.
😅 The flooring, lighting, and acoustics all look like those of a studio.
I wonder how many times they rehearsed it?
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