Adverts
With great fanfare, Warren Buffett paid US$230 million for a 10p stake in BYD, a Tesla rival. He went to the future, and it became China.
Now, 14 years after his initial funding of China's leading electric vehicle company, Buffett is quietly shutting it off, and its mixed performance in China is priced in, asking why.
Despite everything, this is the same man who turned a small investment in a bankrupt New England textile company called Berkshire Hathaway about 70 years ago into a fortune now estimated at around $100 billion. If Buffett is abandoning China, it's because, in his opinion, the chance/reward ratio has decisively tilted to the red.
Here is my take on what I feel the aptly named Oracle of Omaha is pondering.
In a few days, the twentieth Congress of the Chinese-speaking communist party (CCP) will open. Party leader Xi Jinping may supposedly be "elected" for a third 5-year term, but essentially he will be locking his control of China in forever.
Buffett, who is worth nearly US$100 billion, paid US$230 million for a US$100 million stake in BYD just 15 years ago. AP 
Buffett and Bill Gates take the stage to welcome BYD in Beijing in 2010; Buffett's initial funding is now worth approximately US$7.5 billion.
The 70-year-old historical dictator is, like the late Chairman Mao, whom he greatly admires, a complete communist ideologue. This ability, his decade-long strength to concentrate all his vigor on the fingers of the state – which is to reclaim its arms – will not be easier, but accelerated. The innermost sector of China, widely affected, may be exhausted, and the lethal attack on the most efficient individuals in society – Americans like Alibaba founder Jack Ma – will continue.
Just like Xi's insane Covid-Zero coverage.
After the Wuhan lab leak, Xi announced that he had become, in my opinion, overseeing the pandemic response. And the policy he established to prevent the spread of the coronavirus turned into locking down entire cities, even provinces.
Chinese leader Xi Jinping is set to further consolidate his hold on all aspects of Chinese-language finance and politics at the upcoming twentieth Congress of the Chinese Communist Party. REUTERS
Since lockdowns are so intimately recognized by Xi himself, no one in China has dared to criticize this fruitless effort to end the coronavirus, especially as it continues to wreak havoc on the financial system. Indeed, the instantaneous imposition of a strict lockdown as soon as a handful of Covid cases are detected has become almost a kind of loyalty test for communist officials, a pledge of allegiance to the new emperor of the Chinese language.
Even worse for China's financial potential, a new collection of articles in people's daily lives means that the deadly lockdowns, which likely killed more Americans than Covid, will continue for several years. The reputable press has struggled to emphasize the correctness of the Chinese response, while all the different nations of the planet have abandoned it.
Under Ji's leadership, China remains the most important nation, but under lockdown, a trend that is stifling the economic climate and further eroding civil rights. STRINGER/EPA-EFE/Shutterstock
It is largely because of these two “C’s” – communism and Covid – that China’s financial system is in crisis. Buffett is fully aware that reliable statistics show the country’s boom has been cut in half – and the exact circumstances are undoubtedly far more dire. The real estate sector is bankrupt, banks are in crisis, and Chinese buyers are tightening their belts. The Chinese economic climate is heading for a very challenging landing as political controls tighten and Covid lockdowns continue.
Even devoid of these domestic political winds, Buffett is absolutely also taking into account the recent US moves as a way to further restrict China's technological and military momentum. Under the bipartisan CHIPS Act, the US has just imposed new export controls on semiconductor chips – now not just those manufactured domestically, but those manufactured anywhere on the planet with US equipment – so you can make it much more durable for China to properly produce next-generation electric cars, cell phones or computer systems, sooner rather than later.
Due to the pandemic, China has seen its financial growth cut in half, as workers are stuck at home and unable to keep the country's factories running. ALEX PLAVEVSKI/EPA-EFE/Shutterst
One such attack on Taiwan would dramatically accelerate the decoupling of the US and Chinese economies. The result, if not Armageddon now, could be the division of the kingdom into two competing blocs, with the US and Europe on one side, dealing with an adverse China-Russia axis on the other. The value of Buffett's investments in China would plummet.
Currently, China has flexed its militia power through a series of threatening overflights across Taiwanese territory, which the government considers an inviolable part of China itself. PA
These sanctions, invisible when you consider the times of bloodless battle, carry the specter of open conflict, especially since they will also deny China the ability to import chips manufactured in Taiwan. If Xi wants chips from the island, he will have to bring state-of-the-art chip manufacturing facilities via drive. His escalating rhetoric and increasingly aggressive actions – recently sending drones and missiles over Taiwanese territory – suggest that he is simply contemplating this.
Even in the absence of an open battle, public sentiment in the West has already grown to become strongly opposed to China. It's not just that Beijing likely unleashed a virus on the kingdom, killing thousands upon thousands and causing trillions of dollars in economic damage. The genocide of the Uyghurs, the crushing of a free Hong Kong, and its assistance to the Russian invasion of Ukraine have progressively hardened attitudes of opposition to China. Around eighty-two percent of Americans now hold a tremendously negative view of East Asia, with anti-China sentiment operating even more strongly in Australia and Japan.
New US sanctions have made it much more difficult for China to import Taiwanese-made products corresponding to these semiconductor chips, which can be essential components of China's electric vehicle business. REUTERS
Large American stores may also be stocked with affordable Chinese items, but those available on the market for a high-value electric car are unlikely to want to aid a genocidal regime that blatantly opposes America. Add to that the growing anti-CCP sentiment in the US, and BYD may also find itself excluded from the American automotive market sooner or later, aided by customer boycotts, if not now by tariffs.
Warren Buffett has plenty of reasons to grab his funds and run.
And, as always, where Buffett leads, others will follow.
Steven W. Mosher is the president of the Institute for Population Analysis and author of the ebook The Politically Unsuited to Pandemics.
