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PaperclipPerfector  5d ago (text post)   14162 thread views

Culture War Roundup for the week of December 22, 2025

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Minor update on the US-PRC tech competition.

Culture war significance: it matters for the grand strategy understanding and the narrative of the US as the Main Character of History. Personally, I had stopped regularly engaging on this forum when it became clear that the US is, in fact, not such a Main Character (at least for the moment), but just a great power with massive momentum and cultural influence. Not being American, I mainly only care about American cultural affairs insofar as they have global spillover effects. Local legislation news and woke-MAGA strife are overwhelmingly noise for the world, unless they reach some critical volume like peak woke or BLM did. Some American tech, and related politics, is very much not noise. The chip war in particular is very high-signal, so I follow it closely.

It seems something happened behind the scenes after those events in October, when the US Department of Commerce went with the Affiliate Rule, China retaliated with REE+ export controls, and soon enough, by November 1, we've got the usual Trump style Deal. (There's also a subplot with Nexperia/Wingtech, that demonstrates Chinese supply chain power and European ineptitude again, with a similar outcome of the Western actor retreating). Suddenly, on Dec 8, we get the news about Trump permitting the sales of H200 to China (context and understandable rationalist perspective here). China reacts somewhat paradoxically, if your theory of their mind is just «they're desperate for our chips» – as per the FT, «Companies seeking to purchase the H200 would need to submit a request explaining why they cannot use domestically produced chips and undergo an approval process», in continuation of their earlier scrutiny, rejections and negative publicity directed at H20s.

10 days later Reuters breaks the news – which were not quite news for those in the know – about Chinese successes with their EUV effort. The article is somewhat confused, as almost all reporting on Chinese AI and IC tech is; from my private sources, the situation has already moved further on multiple components, like optics and metrology.

What I want to emphasize here is that it's not just trivial «industrial espionage» or IP theft. Their light source project is led by former ASML head of light source technology and «Light source competence owner for metrology in ASML research» Lin Nan. I think that he returned not just for money, nationalism or career opportunities, but because China offered him a more ambitious challenge – he seems interested in solid state lasers, which ASML, constrained by market incentives more than strategic considerations, gave up on. For sure, straightforward IP theft also happens - CXMT's DRAM/HBM progress is apparently propped up by Samsung IP which was, well, illicitly transfered by former employees. And there's very substantial domestic talent pipeline, though people are prone to dismiss their patent/paper counts; they lack brand power, «Changchun Institute of Optics» doesn't have the same zing to it as Zeiss, though you may see it in the news soon.

All in all, China is moving far faster than even I imagined. Now we get reports – straining my credulity, to be honest – that ByteDance doesn't expect Nvidia to sell move than a few hundred thousand cards in China, not because of any trade barriers from either side, but because adequate domestic competition will come online in mid-2026 already. Almost certainly it'll be worse and less power-efficient, at least. But clusters with Chinese hardware are eligible for electricity subsidies, and that may be enough to tip the scales? This logic is corroborated by the surprisingly low leaked price of H200s – just $200.000 for an 8-card module (not sure if that's before of after 25% Trump Tax, but in any case very low, maybe lower than in the US proper, at least pre-tax). Meanwhile that's 5 times more bang for the buck than H20s offered. On the other hand, for now Nvidia is selling old stock; new production is being discussed, but at this rate I don't expect the price to increase. One can reasonably ask if this makes any sense, given that the demand in the US outstrips supply. I think it does, both for complex strategic reasons (mainly ecosystem lock-in, which is in fact a big deal, as I explain here) and simply because the US AI market is becoming a very convoluted circular Ponzi scheme where Nvidia de facto subsidizes companies to buy Nvidia wares. That's more of a potential market meltdown recipe than a revenue source. H200 sales to China, for what it's worth, unambiguously pull in dollars, and both Jensen's fudiciary duty and Trump's deficit-slashing mandate (and to be blunt, likely Trump's corruption) create a strong incentive to greenlight them.

Anyway, what looked like Chinese bluffing and negging at the time the sale of H20s was debated looks more and more like genuine, coherent industrial policy. China is pretty sure it'll have sovereignty in the entire stack of AI development, soon enough, that it will even be capable enough to export its AI hardware products, and the US is acting as if that is likely true – as if the competition is about market share and revenue. They are obviously compute-constrained right now, so DeepSeek V3.2 only catches up to around GPT-5 level, with the usual complaints in the paper. They don't appear to mind this enough to bow and scrape for more American chips at any cost. A large component here is that what they need, they can often rent overseas openly –

a data center near Osaka, operated by Japanese marketing solutions firm Data Section, is effectively dedicated to Tencent. This data center houses 15,000 of Nvidia’s Blackwell (B200) GPUs. Tencent secured access to these GPUs for three years through a $1.2 billion (approximately 1.8 trillion Korean won) contract with Data Section via a third-party entity. Data Section plans to establish additional data centers in Sydney, Australia, with over 100,000 Nvidia GPUs, also primarily serving Tencent.

– but I think it's primarily about confidence in the domestic supply chain.

Long before all these events, in September, we had a debate with @aquota here, when the topic was selling China relatively worthless H20s. (For my previous take on H20s specifically see here).

He argued:

This lock-in effect is just nonsense and has not worked for literally a single firm that has sold out to china. China is not going to forego building their own echo-system and hasn't for any other sector they've found strategically important. […] Our one chance at dominance in this sector is remaining ahead in AI and reaping compound interest on that lead whether it's AGI or simply accelerated AI and chip development. If it's not enough then I just don't buy this fantasy that selling out now is going to give us a better seat in the future.

To which I've replied:

As I've said before, "China" is not omnipotent and cannot create an ecosystem solely through political will and subsidies, they've been trying for decades and it hasn't been working so long as Nvidia was the obvious superior choice. Even now, nobody wants to use CANN if afforded the chance. I think this is how Jensen views this: he's straightforwardly fighting as the CEO of American company Nvidia, not just for line going up in quarterly reports but for enduring global dominance of his stack.

… personally, I believe this [AI race theory] is all deluded and very much in the spirit of last days of Nazi Germany. Both sides will have adequate AI to increase productivity, both will have "AGI" at around the same time, you're not going to have some dramatic inflection point, you will not leave them in the dust as a military or economic power, you'll just slow down global economic growth somewhat, and in the long run end up poorer and have a smaller slice of the global market. That's all.

[…] I guess this is the crux. In your world, where unipolarity is the default trajectory, it makes perfect sense to cling to Pax Americana and play negative-sum games hoping to outlast the opposition. Like, what is the alternative, capitulation, suicide? In my world, China is basically guaranteed to not only exist in 30 years but have comprehensively stronger economy than the US plus closest allies, no matter what you sell or don't sell, buy or don't buy. And the US will have to figure out how to exist, and exist well, without boons of global strategic superiority, in a bipolar world, and hopefully remaining a hegemon in its own backyard. That figuring out has got to begin now.

It seems to me that my read on the situation from back then, both the big picture and its implications for compute strategy, is now shared by both the USG and the CPC. The former is trying to regain its position and revenue in the Chinese GPU market and slow down Huawei/Cambricon/Kunlun/etc. ecosystem development by flooding the zone with mature Nvidia chips that will be adopted by all frontier players (eg DeepSeek again – they have a deep bench of Nvidia-specific talent and aren't willing to switch to half-baked Ascend CANN). The latter is more worried about preventing the US from doing that than about gaining moar FLOPS in the short run.

In conclusion, I want to congratulate Americans again with having found a true peer, for the first time since the decline of the British empire. Germans, Japanese and my own people had failed to provide enough stimulation, so Americans have grown lonely and fat at the top.

Aquota said:

surely you understand the "equals across the sea" isn't an option on the table. That isn't what is in store if we give up all our advantages in this sector.

I do not, in fact, "understand" this. Like, that may be the case and we'll just have Pax Sinica. I'm okay with it but I'm not Sinophilic enough to expect it. Even reduced to "just a great power", the US is poised to remain a historical force.

For now the loss of the indisputable Main Character status is being processed traumatically, with anger, denial and exaggeration of the costs of that loss if it were to really happen. But as its reality sinks in, this trauma may become fertile grounds for some cultural Renaissance in the United States. Less capeshit, more self-awareness. I may even come to care about it for reasons aside from global consequences.

…Of course, we can still entertain the hypothesis that all of the above is some interesting ephemera and this final dash of the Chosen Nation towards AGI-powered Rapture and completion of history is the real story of the times. I won't completely discount it, we shall see.

I don't really understand where you think America, or any other nation, is going to fit into the picture at all if your predictions of Chinese dominance come to pass. What is China going to buy from the US in 2038 in your view? They have a long track record of having an industry come into their sphere and then replicating as much as their can of it and then push out the competitor before exporting their version to any market that will take it. What are other trade partners supposed to do with a nation that's long term goal is to not buy anything from their partners? In the mean time I understand the economist position that says this is an obvious surplus, china sends us goods for pieces of paper, why look this gift horse in the mouth? But What happens when this happens to every industry?

I don't follow Noah too closely but in this piece recently I think he's spot on.

The second problem is that Europe’s trade with China is increasingly unbalanced. Europe is not trading services for the flood of electric cars, solar panels, and so on that China is sending. Instead, Europe is writing IOUs. That’s what a trade deficit is — the writing of IOUs in exchange for imports. Robin Harding of the Financial Times recently warned about this unbalanced trade, in an eloquent article entitled “China is making trade impossible”:

There is nothing that China wants to import, nothing it does not believe it can make better and cheaper, nothing for which it wants to rely on foreigners a single day longer than it has to. For now, to be sure, China is still a customer for semiconductors, software, commercial aircraft and the most sophisticated kinds of production machinery. But it is a customer like a resident doctor is a student. China is developing all of these goods. Soon it will make them, and export them, itself…

[I]f China does not want to buy anything from us in trade, then how can we trade with China?…[W]ithout exports, we will eventually run out of ways to pay China for our imports.

With the American hegemony other nations have options. Americans are happy to let other nations lead in some industries and rely on them long term. We're happy to buy Korean appliances, Japanese cars, European fine crafted goods and Columbian cocaine. If you want to build out a niche the American empire is happy to let you have it and integrate into the global family. This is not how China acts. China doesn't tolerate this kind of interdependence. I don't really see how you think allowing them to take up the dominant position in every industry is long term sustainable. Even in your post you talk about how China is already doing industrial policy to try to make sure that nvdia's position is obsoleted as soon as possible through energy subsidies.

And I know the obvious critique. If America can't compete in semi-conductors on a level playing field or any other industry then they should lose and China should make these things cheap as the pie growing move. But this isn't a level playing field. No one does more industrial policy than China. The CCP has an autarkic goal and pursues it at the cost of many things.

They systemically suppress domestic consumption through keeping deposit rates so that households earn below inflation returns so that those savings can be pumped into industrial buildout. The Hukou system creates workforces with limited rights in their migratory cities suppressing their wages to reduce labor costs. They spend very little on social safety nets. the end result being that Chinese household consumption is something like 40% of gdp vs 65% in the states.

You can say that's just them running their economy lean and that decadent westerners should lean down their consumption to compete, but if they did then you really would run into an environment where demand is too scarce. I know you've mocked that idea in the past but it really would be a problem for industrial buildout if no one was buying the stuff China or everyone else was producing.

They spend very little on social safety nets. the end result being that Chinese household consumption is something like 40% of gdp vs 65% in the states.

I simply don't think this is even true, it's more self-serving imperial propaganda to present failures as a moral choice. Most of your consumption value is rent-seeking like high rents. Chinese consumption is not that low, read this. Even Chinese safety net is not as low as is often said, it's on par with other middle-income nations.

You're not doing anyone a favor by being corrupt.

Chinese consumption is not that low, read this.

It's paywalled. What does PPP have to do with the fraction of Chinese household income that goes to consumption?

Because those are the same issue.

In the PPP-based approach adopted, China–U.S. aggregate price differences are computed using China’s category-level shares of household cash consumption expenditure as weights. Under this weighting scheme, China’s overall price level is estimated to be approximately 66 percent lower than that of the United States.

By contrast, when China’s category-level consumption is explicitly revalued under the U.S. price system and then aggregated—as shown in Table 7—China’s per capita consumption under U.S. prices reaches USD 24,507, which is close to the earlier conservative estimate of USD 26,857. This convergence reflects substantial reweighting across consumption categories once prices are converted to the U.S. price system. For example, health is extremely expensive in the United States, and China’s health prices are approximately 94.7 percent lower. As a result, after price adjustment, China’s per capita health expenditure increases sharply from USD 340 to USD 6,443, with its expenditure share rising from 7.2 percent to 26.3 percent. A similar pattern is observed in education. In contrast, categories such as transport, clothing and footwear, and food—where China–U.S. price gaps are smaller—experience declines in their relative weights in total consumption.

In effect, if Chinese services consumed by the people provide 5-20 times more value than PPP calculations suggest, this straightforwardly means that Chinese people's "consumption" share of GDP is higher, because the volume of economic activity included in these services is larger relative to exports and government spending than it appears. We can directly estimate the value of their exports. The efficiency of their services and internally consumed goods is more opaque, so it's easy to say “oh just 2000 RMB, that's $285, adjust for PPP… $428”. It actually matters if it's more like $3000.

This feels like a misdirection. The price level of China vs the US doesn't matter for the question of how much of Chinese GDP is household consumption. In each case the ratio can be calculated in local currency without any need for PPP adjustments.

The article you linked is (apparently, based on your excerpts) discussing correct PPP factors based on household expenditures, which is really not the same question at all.

Put another way, my argument is that household consumption as % of GDP is low because a great volume of capital has been invested in making life cheap, in particular rent, healthcare, connectivity and education, via infrastructure and assorted social transfers-in-mind. The fraction of GDP that is “government spending” or “employer spending” goes towards increasing purchasing power of the average (and below-average) Chinese. Consider:

Chinese households receive benefits such as subsidised education and healthcare provided by the state. Such social transfers in kind (STIK) were about 6.2 per cent of China’s GDP in 2019 and 6.4 per cent in 2021, up from 3 per cent two decades ago.

Even so, STIK only covers the transfers and consumption provided by governments and non-profit organisations. Chinese businesses are also more likely to provide employee welfare such as subsidised lunches and staff dormitories than their foreign counterparts. These, however, count towards Chinese business expenses rather than household consumption. Thus, adding all social transfers could lift China’s consumption rate by at least 6 percentage points.

etc.

This is a separate strategy from either low-intervention market economy or “welfare socialism” with explicit gibs that boost discretionary spending. It can be criticized but it's internally coherent and it's not just “make people poor to have cheap labor to flood global markets”.

Sure, let's throw that in to the consumption number.

That brings us to 46% for China and 65% for the US based on the numbers above, once we apply the increase from the text you quoted. Still, the gap is fairly significant.

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