Analysis
The US and China are in an economic tussle as China dominates global supply chains. (Foreign Correspondent: Emma Machan)
The end, when it arrived, was as chaotic as the birth.
On November 9, 1989, after months of escalating protests, an East German official mistakenly announced on live television that citizens could travel unimpeded to the West, immediately.
Within hours, hordes of citizens had stormed the border checkpoints, swamping the guards who had little option but to simply open the gates.
After decades of food shortages, long lines for consumer goods and failing infrastructure, it was bookmarked as the end of the Cold War and the penultimate victory of capitalism over centrally planned economies.
Communism was pronounced dead.
Within two years, the Union of Soviet Socialist Republics was dissolved, Mikhail Gorbachev had stood aside and, with China a largely agrarian nation in the early throes of its economic transformation, Western leaders had every reason to feel triumphant.
Not so now.
In just 35 years, Beijing's leaders have plotted a course that has seen China emerge as the undisputed leader of industrial production with almost complete dominance over the refining of nearly every mineral on the planet and in manufacturing.
In a world trying to grapple with the best way to wean itself off fossil fuels, China's automotive industry is poised to blow away global competition on electric vehicles following the West's ill-conceived reliance on internal combustion engines.
Not surprisingly, it is also the dominant player in electrification. While the West endlessly argued over the science of climate change, China got on with the business of climate change.
It has the market sewn up in everything from solar panels to battery manufacturing and wind turbines.
And now, it is challenging America's commanding role in technology.
There is a very real prospect that its artificial intelligence models can operate at the same level of sophistication as those developed by the Silicon Valley giants but at a fraction of the price.
None of these developments has occurred by accident. They've been implemented and adhered to over decades, unencumbered by opposing political wills or concerns about human rights.
Deng Xiaoping, who was 87 when the Soviet Union collapsed, famously identified rare earths — something China had in abundance — as a critical industrial input that China could someday use as a strategic instrument with which to wield power.
"The Middle East has oil," he told colleagues in 1992. "China has rare earths."
The clock is ticking
Can America wrest back control of global manufacturing?
President Donald Trump thinks so.
Much of the thinking within Trump's MAGA camp is rooted in the belief that China unfairly exploited free trade rules and engaged in industrial espionage to get its foot up on the industrial ladder.
The thinking goes that the US simply needs to shut down those avenues and repatriate US firms back to the mainland through a combination of threats and incentives and by building a protective tariff wall around the US economy.
While there's little doubt China used every trick in the book, nefarious and otherwise, to advance its cause, it also cleverly formulated a complex mix of free market reforms to foster entrepreneurialism with an overarching and unwavering state plan.
The result was a rapid transformation from agrarian communism to polluting heavy industry, from family farms to factories.
Along the way, the population grew richer, which helped quell political dissent as workers shifted from the countryside to cities, new and old.
When that didn't work, the dissent was met with the kind of brute force that only a one-party state can mete out, where the interests of the state subsume the rights of individuals.
But there remains a fundamental difference between the economic trajectories of both countries.
China was forging a brave new world.
America, under Trump, is attempting to wind back the clock.
Detroit's long drive to nowhere
For generations, Detroit was the centre of global automobile excellence.
It was the textbook example of factory assembly line management and, later, automation.
In 1965, about 95 per cent of Americans drove cars made by the Detroit Three: General Motors, Ford and Chrysler. By 2015, that had dropped to 46 per cent.
Japan was the first disruptor of American car manufacturing. (AP: Paul Sancya)
It wasn't China that first drove the wrecking ball through the US car industry. It was Japan.
Beautifully designed, fuel-efficient, high-performance machines with an air of luxury, the Japanese auto invasion sent the US manufacturers on a mission, not so much to improve, but to seek protection and, eventually, bail-outs.
Clearly, it didn't work.
And now, it faces an existential threat.
As far back as 2001, as part of its 10th five-year plan, Beijing decided to pursue the development of electric vehicles.
For years, it had encouraged foreign manufacturers to set up operations in China, building conventional internal combustion engine vehicles, but decided it needed an edge, something new to compete on the global market.
It was also keen to cut back on pollution, which was becoming a social and political issue, and to simultaneously reduce demand for oil, which had to be transported from the Middle East through potentially hostile waters.
China now has a near stranglehold on EV production. It is also the world's biggest market, accounting for 65 per cent of all sales.
Alarmed, then-US President Joe Biden slapped a 100 per cent tariff on Chinese built EVs but announced a series of tax incentives and tailpipe emissions standards to encourage the US industry to build them.
Under the Trump administration, those incentives have mostly been dumped.
The Detroit Three, along with most US-based foreign manufacturers, have now either shelved or totally abandoned plans to build electric cars in the US.
In the past two years, Ford, Buick, Dodge, Jeep, Honda, Nissan and Acura have scrapped a series of US-built SUVs, pick-ups and passenger cars. Volvo junked an entire all-electric line-up.
The losses were staggering. The write-downs on the scrapped projects cost the Detroit Three close to $US50 billion.
As a result, the US now builds just 5 per cent of the world's EVs, at a time when global demand is booming following America's ill-fated war with Iran that has shut the Strait of Hormuz and highlighted the dangers of reliance on fossil fuels.
While the tariffs have removed competition and helped juice US auto makers' profits, they are now making cars the world increasingly doesn't want.
Tech wreck next
This time last week, Wall Street was shuddering after the partial release of a new AI model from a hitherto unknown start-up.
Moonshot's Kimi K3 was judged to be almost as good as the flagship models from AI heavyweights Anthropic and OpenAI.
The main difference was that it was up to 30 per cent cheaper.
This week, analysts and users will pore over the fully released technology when it becomes available to the public.
The White House and Anthropic have accused Moonshot of stealing the technology through a process called distillation, opening up a new battleground for trade disputes.
Will Moonshot’s AI bring Silicon Valley back to earth?
They've also accused it of illegally accessing the high-powered Nvidia chips, which the US has banned from Chinese tech companies.
Wall Street's tech titans are likely to spend upwards of $US1 trillion this year on AI investment, money that will be difficult to recoup if much cheaper AI versions are available.
Again, Beijing years ago prioritised technology as a key area for investment and has helped foster the development of local companies.
State sponsorship doesn't merely mean cash handouts. When it came to its minerals and refining domination, it invested in research, discovering new processing methods that gave its companies access to cheaper forms of production.
And despite government investment, it hasn't been afraid to let private entities go under.
About 30 EV manufacturers have hit the wall since 2018, and some estimate that around 400 manufacturers have exited the industry in the past two decades.
The US and the West may still have control of global finance. But when it comes to industry, it is China, a command economy, that has the reins and is extending that grip into new and important arenas.
When it comes to economic management, the jury is still out.
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