Inside Asian Gaming

INSIDE ASIAN GAMING JANUARY 2018 38 enemies as much as China. The biggest of those enemies are Social Security, Medicaid and Medicare. In the coming years, entitlements have the potential to eat the military’s lunch. All this when America is constantly at war in so many countries around the world. So what about Japan – America’s high tech ally? Japan has been America’s ally, under the American nuclear umbrella since WWII. Japan may be part of America’s strategy for maintaining superiority over China. But in an odd way it may serve as a model for the China worriers. Although there has been some revival lately in the Japanese economy, Japan has been in a stall mode since 1990. In technology, the country has combined a high level of sophistication with a lack of innovation. For example, in the list of quotable papers cited above only six Japanese institutions managed to place in the top 500 with only one in the top 100. Nineteen Japanese institutions placed in the 500 a decade ago. The Japanese model was going to take over the world in 1990. Somehow, it didn’t. So how does this help American hegemony? For those who want America to stay on top it offers some hope. The hope is that China, with the same demographic aging problems as Japan, with the same protectionist top down economy and with the same culture that for millennia selected genes for intelligence cum Confucian obedience, will suffer the same stall. This isn’t my primary forecast. But it is a lower probability alternative. Meanwhile, Japan remains a potential source for technological transfer to China. So what is an investor to do? Technology is accelerating at an accelerating rate partly because it has become a global phenomenon. I believe any efforts by Trump or Xi to render the tech world asunder will ultimately fail. They both would wind up hurting their own consumer driven economies. And who knows? The Americans could be surprised. Chinese firms, like the Shenzhen drone firm DJI, may come to the United States and bring new tech with them. The tech flow may be in the other direction. The big Chinese tech firms like Alibaba and Tencent are trying to expand out of China, particularly in Southeast Asia and India. Just in time to compete with Amazon and Google. Baidu, the Chinese Google, is devoting new resources to AI and autonomous cars. Investors who share my view that China constitutes an exciting tech market should own some Chinese tech stocks, recognizing that there are special geopolitical and domestic political risks and that China’s glorious 5,000 year history does not include a respect for property rights. THE DISMAL OPTIMIST Chinese tech firm Alibaba is rapidly expanding out of China “The US can slow the Chinese technological advance with trade wars and petty bans on Chinese investment and the like, but it cannot stop it. Moreover, such policies would be disruptive to the US and Chinese economies alike.”