What We’re Reading (Week Ending 26 September 2021) - 26 Sep 2021
Reading helps us learn about the world and it is a really important aspect of investing. The legendary Charlie Munger even goes so far as to say that “I don’t think you can get to be a really good investor over a broad range without doing a massive amount of reading.” We (the co-founders of Compounder Fund) read widely across a range of topics, including investing, business, technology, and the world in general. We want to regularly share the best articles we’ve come across recently. Here they are (for the week ending 26 September 2021):
1. What Does Evergrande Meltdown Mean for China? – Michael Pettis
Policymakers in Beijing are in a tough position on what to do about Evergrande, the Chinese property developer whose slow collapse has transfixed the markets. Evergrande is the most-indebted property developer in the world. Its on-balance-sheet liabilities amount to nearly 2 percent of China’s annual GDP, and its off-balance-sheet obligations add up to as much as another 1 percent.
This wouldn’t be as much of a problem if Chinese property developers, state-owned enterprises, local governments, and even ordinary households did not all have excessively high debt levels. But because the Chinese economy has long been plagued by debt problems and moral hazard, the situation will be much more difficult for regulators to sort out…
…It is easy to understand why policymakers have been so worried about real estate debt—and debt in general. China’s official debt-to-GDP ratio has soared by nearly 45 percentage points in the past five years, leaving it with among the highest debt ratios for any developing country in history. The property sector is notorious for its addiction to debt. This addiction has expressed itself not just in borrowing from banks and bond markets but in a variety of other ways. Property developers regularly presold apartments to homebuyers many months or even years in advance, for which they received the full price or at least a substantial deposit. They paid off contractors and suppliers with commercial paper and receivables instead of cash. Their financing arms even sold credit products known as wealth management products to retail investors—mainly, it seems, to employees of the borrowing companies, their banks, and their suppliers.
All this borrowing has enabled the property sector to become one of the main engines of economic activity for the Chinese economy, accounting for as much as 25 percent of the country’s GDP (considerably higher than is typical in other countries). But this borrowing spree has also helped stoke a substantial real estate bubble in a country in which housing prices are several times higher, relative to household income, than they are in the United States or other major economies. Perhaps worse, the property bubble has resulted in a lot of empty homes and apartments—between one-fifth and one-quarter of the total housing stock, especially in more desirable cities—owned by speculative buyers who have no interest in either moving in or renting out. Empty housing creates no economic value, even if it incurs a significant economic cost.
By clamping down on leverage among property developers, Beijing was hoping to accomplish at least two things. First, this measure was intended directly to address surging debt among one of the most indebted sectors in China’s economy. Second, the hope was it would help stabilize the housing market by constraining what regulators believed was one of the sources of speculative frenzy, the debt-fueled competition among developers to scoop up as much land as possible.
Borrowing for large Chinese companies like Evergrande had never been a problem in the past. It was widely assumed they would never be allowed to default on their obligations. Local governments and regulators were expected always to step in at the last minute to restructure liabilities and recapitalize the borrower if necessary. As a result, there was very little credit differentiation in the lending markets. Banks, insurance companies, and bond funds fell over each other to lend to large, systemically important borrowers. Moral hazard, in other words, underpinned the entire credit market.
That is why Chinese regulators have decided to have a showdown with creditors over Evergrande. By convincing lenders that they will no longer stand behind large Chinese borrowers, they are trying to transform the country’s financial system by making Chinese lenders more reluctant to fund nonproductive investment projects. These projects generate what Chinese leader Xi Jinping, in an important recent essay for Qiushi (the leading official theoretical journal of the Chinese Communist Party) disparaged as “fictional growth,” in contrast to the “genuine growth” he called for.
2. Aleksander Larsen, Stephen McKeon – Sky Mavis: The Builders behind Axie Infinity – Patrick O’Shaughnessy, Aleksander Larsen, and Stephen McKeon
Patrick: [00:04:01] I think I have to ask very early on the big and important question, which is just around the simple model of the game itself. The term that we’re probably going to use a bunch is play to earn, and that’s very different than past business models around video games, so we’ll keep it pretty simple there. Can you just describe how you think about what play to earn means very specifically, how it means money flows through the Axie Infinity ecosystem?
Aleksander: [00:04:26] When we think about gaming and how that works, generally the game studio has captured all of the value inside of these digital ecosystems that have being created. In Axie Infinity, we see things a little bit differently, thus the term play to earn, where we are rewarding players for the time spent inside of the game and for the value that they add to the ecosystem. So when you play Axie, you can farm various resources and then you can sell them on an open marketplace on Ethereum. As long as there is demand for that assets, well, then you can basically turn your time into money like that.
Patrick: [00:05:02] Could you describe, just probably almost everyone listening will probably have a kid or a nephew or niece or something that plays some game that probably is similar enough to how Axie actually works to understand what’s happening here. Maybe Pokemon is the right analogy or something. Just describe the actual interaction of the game being played, because at the end of the day, people are playing a game here. That’s the reason that we’re here. So just describe kind of how it works and how it feels.
Aleksander: [00:05:24] At a very high level, you have your cute Axie game characters that can be used in different games. Some of the games we create as a core team. That would be the one that’s most popular right now is the Axie Infinity battle game, where you have a team of three Axies and you battle against either an opponent in a player versus player environment, or you can go travel on adventures and be various creatures and then advance like that, so a player versus enemy environment.
As you go deeper, you realize what makes this valuable is actually the connection with how the entire economy works. So for example, when you want to buy a new Axie character, that’s not something that we as a main game studio is selling. You actually have to buy from other players, and then we, as a game studio, we make money whenever there’s a transaction that’s happening on our marketplace.
Another way for us to make money is whenever a new Axie is being generated or bred into existence, in that transaction, there is a two part thing that’s happening. The first one would be that the players have to use a resource that they can only find inside the game, and on the other side, you have what they have to pay to the game studio, which is our take rates. And I think that’s a theme that we probably are going to go a little bit deeper into into this conversation because it’s very related to how the play to earn ecosystems will develop over time.
So in our take rate, what we take from the economy on the marketplace side, that’s about 4.25%, and whenever an Axie is being bred right now, it’s about 80% that we get. So that’s why you get these massive amounts of revenue. So some more numbers here, in January, we had about $100,000 in revenue. In July, it was $196 million, and in August, it was about $370 million. So, so far, in September, it’s generated a little bit over $70 million…
…Patrick: [01:01:08] You did my job for me, the perfect transition to the investor’s perspective with Stephen. I think Stephen, the most interesting thing from my perspective, thinking back to the original investment is for you to just outline how you think the world is changing that makes companies like this and assets like this interesting in the first place. And I’ll let you lead us here. Whether it’s the notion of ownership, the notion of the metaverse, the notion of where people spend their time, what are the big, important aspects that made you interested in the first place and keep you interested in other opportunities like this one?
Stephen: [01:01:38] The key feature to understand here is just this idea that the assets live independently or exist independently from the interface. And it’s sort of like a huge theme in crypto. So let me draw an analogy to equities. Let’s say I have 100 shares of Tesla and I hold those at Merrill Lynch. Well, I can’t decide this afternoon that I actually want to interact with those assets through Robin Hood or Schwab or some other interface. They are cost to be by Merrill Lynch. There’s of course a big process to move them over to a different interface.
That’s not true in crypto. So if I have a wallet, I could interact with it using Metamask, which is one interface on my desktop. And then five minutes later, I could interact with those same assets in my wallet using Rainbow, like a Rainbow app on my phone. And so this idea that the assets are custody by the user and can exist independently, you can interact with those through different interfaces. It’s just this really powerful concept.
And so if you take it to gaming, it’s even worse because not only can you not interact with those assets using say different games, you don’t even own those assets. We realized that that was just this enormous opportunity that if you think of the big picture as like same assets, different interfaces, where the assets are not tied to the interface that problem was most extreme within gaming, because the end game assets are almost always tied to the interface. So they’re not portable. You don’t have custody of the assets, you don’t own the assets. So if I spend a bunch of money on skins and a character in Fortnite, I can now take that character and sell it or I can’t take it and play it somewhere else.
So I think this is where NFT games like Axie are so revolutionary. The asset, as we’ve discussed is owned by the user, and sort of exists independently from the game. So as Alex mentioned, there are new games that could spin up that could use those same characters, which is then going to drive further demand for Axie. Those games could be developed by Sky Mavis. They could potentially be developed by others, maybe on land in Lunacia. And so it really does start to look more like an ecosystem where the players are invested literally by owning the characters, which then might have applications through multiple interfaces or multiple games. And so I think that was the piece that was sort of most exciting to us.
3. History’s Seductive Beliefs – Morgan Housel
An assumption that your view of the world is the view of the world, and a belief that what you’ve seen and experienced are the sights and experiences that explain how the world works.
Harry Truman once said:
The next generation never learns anything from the previous one until it’s brought home with a hammer … I’ve wondered why the next generation can’t profit from the generation before, but they never do until they get knocked in the head by experience.
Here’s at least one reason why: No lesson is more persuasive than the one you’ve personally experienced.
You can try to be empathetic and open-minded to other people’s lives, but when you’re trying to figure out how the world works nothing makes more sense than the unique circumstances of what you’ve lived through firsthand.
And the idea that you’ve never seen or experienced 99.999% of what’s happened in the world is hard to swallow because it’s intimidating to admit how little you know.
A more comforting story is convincing yourself that what you’ve experienced is the story of how the world works. This is how your career went, so that’s how economics works. These policies benefited you, so this is how politics works. You think what you’ve seen is a reflection of how the world works. What could be more seductive? Yet given how oblivious everyone is to the majority of experiences, what could be more wrong?
So everyone goes through life a little blind to the lessons that have already been learned by other people.
And it goes well beyond generations: There are massive experience gaps between different nations, socioeconomic classes, races, industries, religions, educations, on and on.
The person who grew up in poverty thinks about risk and reward in ways the child of a wealthy banker cannot fathom if he tried.
The person who grew up when inflation was high is scared in a way the person who grew up with stable prices isn’t.
The stockbroker who lost everything during the Great Depression experienced something the tech worker basking in the glory of the late 1990s can’t imagine.
The Australian who went 30 years without a recession has experienced something no American ever has.
It leads to all kinds of issues.
One is that we’re constantly surprised by events that have been happening forever.
Another is that it’s hard to distinguish people who have experienced something you haven’t from people who aren’t smart enough to understand your experiences.
A third is that topics like risk, greed, and fear are not the kinds of things that we can learn about and master as a society, like we did with, say, agriculture. As Michael Batnick says, “some lessons have to be experienced before they can be understood.” Every generation has to learn on its own, over and over.
The question, “Why don’t you agree with me?” can have infinite answers.
But usually a better question is, “What have you experienced that I haven’t that would make you believe what you do? And would I think about the world like you do if I experienced what you have?”
4. Toast Memo – Bessemer Venture Partners
We recommend a $17.5M investment in the $24M first institutional round of Toast, a Boston based company selling restaurant point of sale (POS) software. Our $17.5M will purchase 14.3% FD ownership and will see a 2X return at a $150M exit and a 2.5X return at a $210M exit. Our hope, of course, is that Toast will use what we believe is a meaningful product advantage to grab a large share of the 1M restaurants who will transition to cloud based POS in the coming decade. The benefit of a massive market is that with a little more than 1% market penetration Toast could be a $100M revenue company…
…Toast offers a cloud-based system to quick serve (QSRs) and full service restaurants (FSRs), with a modular all-in-one restaurant management platform encompassing POS, payments, operations management, online ordering, self-serve kiosk ordering and checkout, inventory management, loyalty program management, gifting and myriad other restaurant needs (much of this is live today, although there may be a >5 year roadmap with endless product features ahead). Toast’s Android tablet-based cloud solution is beating out other new systems head to head and more impressively attacking on prem proprietary hardware incumbents Micros and NCR, who together make up 50% of the market.
While there are a handful of “next gen” players attacking this market, we believe that Toast has a significant early advantage. First off, the sheer amount of software the team has built in a short span is impressive – feature for feature they are already much more in the class of the >20 year old enterprise systems than the next gen “Bistro” players, and so for restaurants with any level of sophisticated feature requirements they win easily. But beyond just being very good at building good product quickly, the company also made two smart choices that sets them apart from the other players.
First, while competitors have almost all built on iPads/iOS, Toast’s Android-based architecture allows restaurants to be much more flexible in their hardware choices (iPads are simply not enterprise grade and come in far fewer form factors than Android), has fewer software versioning issues than iOS and the upfront hardware costs are cheaper.
Second, Toast also did real work to build out transaction processing capability, which lets them subsidize their fees by operating as a transaction processor (they simply match current restaurant rates and almost always win the transaction business without objection.) This allows Toast to price competitively and earn a much higher margin than competitors head-to-head.Despite what we think is an early lead, Toast’s product is still very immature, and every day they roll out new features like online ordering and inventory management (a $75 / mo upsell they introduced in October to 10% immediate adoption.)
5. Cover Story: How Evergrande Could Turn Into ‘China’s Lehman Brothers’ – Wang Jing, Chen Bo, Yu Ning, Zhu Liangtao, Wang Juanjuan, Zhou Wenmin and Denise Jia
From paint suppliers to decoration and construction companies, Evergrande owes more than 800 billion yuan ($124 billion) due within one year, while it has only a 10th of that amount of cash on hand.
As of the end of June, Evergrande had nearly 2 trillion yuan ($309 billion) of liabilities on its books, plus an unknown amount of off-books debt. The property giant is on the verge of a dramatic debt restructuring or even bankruptcy, many institutions believe…
…Its liabilities are equivalent to about 2% of China’s GDP. It has more than 200,000 employees, who themselves and many of their families have invested billions of yuan in the company’s WMPs. The company has more than 800 projects under construction, more than half of them halted due to its cash crunch. There are thousands of upstream and downstream companies that rely on Evergrande for business, creating more than 3.8 million jobs every year.
Like many of China’s “too big to fail” conglomerates, Evergrande’s crisis has fueled speculation over whether the government will step in for a rescue. Several state-owned enterprises, including Shenzhen Talents Housing Group Co. Ltd. and Shenzhen Investment Ltd., both controlled by the Shenzhen State-owned Assets Supervision and Administration Commission (SASAC), are in talks with Evergrande on its Shenzhen projects, according to people close to the talks. But so far, no deals have been reached…
…In 2018, Evergrande reported record profit of 72 billion yuan, more than double the previous year’s net. But behind that, it spent more than 100 billion yuan a year on interest.
Even in good years, the company usually had negative operating cash flow, with not enough cash on hand to cover short-term loans due within a year with and presale revenue not enough to pay suppliers. In addition to borrowing from banks, Evergrande also borrows from executives and employees.
When developers seek funds from banks, lenders often require personal investments from the developers’ executives as a risk-control measure, a former employee at Evergrande’s asset management department told Caixin.
“At times like this, Evergrande would have an internal fund-raising campaign,” the manager said. “Either the executives would pay out of their own pockets, or they would set a goal for each division.”
One crowdfunding product issued to executives was called “Chaoshoubao,” which means “super return treasure.” In 2017, Evergrande tried to obtain project financing from state-owned China Citic Bank in Shenzhen, which required personal investment from Evergrande’s executives. The company then issued Chaoshoubao to employees, promising 25% annual interest and redemption of principal and interest within two years. The minimum investment was 3 million yuan. China Citic Bank eventually agreed to provide 40 billion yuan of acquisition funds to Evergrande.
In 2020, Chen Xuying, former vice president of China Citic Bank and head of the bank’s Shenzhen branch from 2012 to 2018, was sentenced to 12 years in prison for accepting bribes after issuing loans.
A senior executive at Evergrande said he personally invested 1.5 million yuan and mobilized his subordinates to invest 1.5 million yuan into Chaoshoubao. Some employees would even borrow money to invest in the product because the 25% return was much higher than loan rates.
When the Chaoshoubao was due for redemption in 2019, the company asked employees who bought the product to agree to a one-year extension for repayment. Then in 2020, the company asked for another one-year extension. One investor said buyers received an annualized return of 4% to 5% in the last four years, far below the 25% promised return…
…In August, the construction company that was contracted to build Evergrande’s Taicang cultural tourism city in Nantong, Jiangsu province, announced the halt of the project due to bills unpaid by Evergrande. The company, Jiangsu Nantong Sanjian Construction Group Co. Ltd., said it put 500 million yuan of its own funds into the project and Evergrande paid it less than 290 million yuan.
Sanjian has other construction contracts with Evergrande and its subsidiaries. As of September, Evergrande owes the Nantong company about 20 billion yuan.
As of August 2020, Evergrande had 8,441 upstream and downstream companies it was working with. If the flow of Evergrande cash stops, the normal operation of these companies will be disrupted, and some would even face the risk of bankruptcy…
…Evergrande relies heavily on commercial paper to pay construction partners and suppliers. Among payments it made to Sanjian, only 8% was in cash and the rest in commercial paper.
Initially, the commercial paper borrowings were mostly six-month notes with annualized interest rates of 15%–16%. Now most carry interest rates of more than 20%. Holders of such commercial paper can sell the notes at a discount to raise cash. In 2017–18, the discount rate on Evergrande paper could reach 15%–20%. Since May 2021, the few Evergrande notes that could still be sold have been discounted as much as 55%, according to a person familiar with such transactions.
For small and medium-sized suppliers, holding a large amount of overdue Evergrande notes is a burden too heavy to bear. In recent months, a number of suppliers sued Evergrande for breach of contract but often settled the cases. A lawyer who represented Evergrande in related cases told Caixin that many plaintiffs chose to negotiate with Evergrande while fighting in court.
Evergrande also offered a “property for debt” option to its commercial paper holders. The company said it’s in talks with suppliers and construction contractors to delay payment or offset debt with properties. From July 1 to Aug. 27, Evergrande sold properties to suppliers and contractors to offset a total of 25 billion yuan of debt…
…As of the end of June, Evergrande had total assets of 2.38 trillion yuan and total liabilities of 1.97 trillion yuan. Of the nearly 2 trillion yuan of debt, interest-bearing debt was 571.7 billion yuan, down about 145 billion yuan from the end of 2020. The decrease in interest-bearing debt was mostly achieved by deferred payables to suppliers.
In addition to the 571.7 billion yuan of interest-bearing debt on its books, it’s not a secret that developers like Evergrande have huge off-balance sheet debt. But the amount at Evergrande is not known.
In the early stage of projects, developers need to invest a lot of money, which could significantly increase the debt on the balance sheet. Companies often place these debts off their balance sheet through a variety of means. After the pre-sale of the project, or even after the cash flow of the project turns positive, these debts would be consolidated into the balance sheet in the form of equity transfer, according to a property industry insider.
For example, 40 billion yuan of acquisition funds Evergrande obtained from China Citic Bank were invested in multiple projects. Among them, 10.7 billion yuan was used by Shenzhen Liangyang Industrial Co. Ltd. to acquire Shenzhen Duoji Investment Co. Ltd. As Evergrande doesn’t have an equity relationship with the two companies, this item was not required to be consolidated into Evergrande’s financial statement. Evergrande used leveraged funds to acquire equities in 10 projects, and none of them were included in its financial statement, the prospectus of its Chaoshoubao shows.
Evergrande has sold equity in subsidiaries to strategic investors and promised to buy back the stakes if certain milestones can’t be reached in the future. Such equity sales are actually a form of borrowing, too. In March, Evergrande sold a stake in its online home and car sales platform Fangchebao for HK$16.4 billion ($2.1 billion) in advance of a planned U.S. share sale by the unit. If the online sales unit doesn’t complete an initial public offering on Nasdaq or any other stock exchange within 12 months after the completion of the stake sale, the unit is required to repurchase the shares at a 15% premium.
6. 5 Big Ideas For Making Fusion Power A Reality – Tom Clynes
Unlike nuclear fission, in which a large, unstable nucleus is split into smaller elements, a fusion reaction occurs when the nuclei of a lightweight element, typically hydrogen, collide with enough force to fuse and form a heavier element. In the process, some of the mass is released and converted into energy, as laid out in Albert Einstein’s famous formula: E = mc2.
There’s an abundance of fusion energy in our universe—the sun and other stable stars are powered by thermonuclear fusion—but the task of triggering and controlling a self-sustaining fusion reaction and harnessing its power is arguably the most difficult engineering challenge humans have ever attempted.
To fuse hydrogen nuclei, earthbound reactor designers need to find ways to overcome the positively charged ions’ mutual repulsion—the Coulomb force—and get them close enough to bind via what’s known as the strong nuclear force. Most methods involve temperatures that are so high—several orders of magnitude hotter than the sun’s core temperature of 15 million °C—that matter can exist only in the plasma state, in which electrons break free of their atomic nuclei and circulate freely in gaslike clouds.
But a high-energy-density plasma is notoriously unstable and difficult to control. It wriggles and writhes and attempts to break free, migrating to the edges of the field that contains it, where it quickly cools and dissipates. Most of the challenges surrounding fusion energy center around plasma: how to heat it, how to contain it, how to shape it and control it. The two mainstream approaches are magnetic confinement and inertial confinement. Magnetic-confinement reactors such as ITER attempt to hold the plasma steady within a tokamak, by means of powerful magnetic fields. Inertial-confinement approaches, such as NIF’s, generally use lasers to compress and implode the plasma so quickly that it’s held in place long enough for the reaction to get going…
…Some promising startups, though, aren’t content to accept the conventional wisdom, and they’re tackling the underlying physics of fusion in new ways. One of the more radical approaches is that of First Light Fusion. The British company intends to produce fusion using an inertial-confinement reactor design inspired by a very noisy crustacean.
The pistol shrimp’s defining feature is its oversize pistol-like claw, which it uses to stun prey. After drawing back the “hammer” part of its claw, the shrimp snaps it against the opposite side of the claw, creating a rapid pressure change that produces vapor-filled voids in the water called cavitation bubbles. As these bubbles collapse, shock waves pulse through the water at 25 meters per second, enough to take out small marine animals.
“The shrimp just wants to use the pressure wave to stun its prey,” says Nicholas Hawker, First Light’s cofounder and CEO. “It doesn’t care that as the cavity implodes, the vapor inside is compressed so forcefully that it causes plasma to form—or that it has created the Earth’s only example of inertial-confinement fusion.” The plasma reaches temperatures of over 4,700 °C, and it creates a 218-decibel bang.
Hawker focused on the pistol shrimp’s extraordinary claw in his doctoral dissertation at the University of Oxford, and he began studying whether it might be possible to mimic and scale up the shrimp’s physiology to spark a fusion reaction that could produce electricity.
After raising £25 million (about $33 million) and teaming up with international engineering group Mott MacDonald, First Light is building an ICF reactor in which the “claw” consists of a metal disk-shaped projectile and a cube with a cavity filled with deuterium-tritium fuel. The projectile’s impact creates shock waves, which produce cavitation bubbles in the fuel. As the bubbles collapse, the fuel within them is compressed long enough and forcefully enough to fuse.
Hawker says First Light hopes to initiate its first fusion reaction this year and to demonstrate net energy gain by 2024. But he acknowledges that those achievements won’t be enough. “Fusion energy doesn’t just need to be scientifically feasible,” he says. “It needs to be commercially viable.”
7. China, Semiconductors, and the Push for Independence – Part 1 – Jordan Nel
China imports more chips than it does oil.
As we’ll see later, they have also made it evident that they are looking to lead the world in AI and industrial automation. This makes semiconductors not just their biggest chokepoint should international tensions exacerbate, but also their biggest constraint in achieving their tech growth goals.
Because of this, semiconductor manufacturing has become a national priority. The number of firms registering as semiconductor companies have grown by more than 700% in the last decade (Figure 12). Both state and private bodies are funnelling money into building out this capability. This is not just a CCP-driven, executive order. After Washington banned Huawei from using Cadence & Synopsys’ EDA platforms, there is also considerable private concerns within Chinese companies around who else the US might ban.
So, what would incentivize the CCP to pour $73 billion into a single industry? Partially the same reason that would incentivize TSMC to invest ~$100 billion over three years to increase research and capacity. It’s because there’s an immense demand. However, in China’s case, it’s partially also because it’s strategic policy.
China creating a large amount of hype around a particular industry is not entirely novel. The combination of easy funding, national interest, local interest, and market demand all creates an energising buzz around a particular industry. In the far past, it’s been entrepreneurship and urbanisation. In the last couple of years, it’s AI and big data. Today it is semiconductors…
…So yes, China looking for tech independence is a bid for national power. It is also something that has played out nation by nation over millennia of varying empires. I realize it’s a little grandiose to frame a discussion on semiconductors in the context of world history. However, given how essential chips are to our world’s future, it is probably the most important framing one can have around this industry. Semiconductor manufacturing is not like automotive manufacturing. It is far more winner-take-all, and far harder to replace the winners once they’re entrenched.
China’s bid for power needs to be further framed given how concentrated the industry is in America today. Looking at Figure 15, it’s easy to see how China views an internal semiconductor capability and a secured supply as intrinsically linked to their economic and national security. This is not without reason: in recent years US policy has increasingly taken aim at Chinese supply chain vulnerabilities. This is a chicken-and-egg situation. China looks to internalise because America wants to prevent China’s growing power. America wants to prevent China from internalising because it makes China more powerful.
Disclaimer: None of the information or analysis presented is intended to form the basis for any offer or recommendation. Of all the companies mentioned, we currently have a vested interest in Tesla. Holdings are subject to change at any time.
