Trouble in paradise: US plans for Pacific war

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0:57Hello and welcome to The Intelligence from The Economist. I'm Rosie Bloor. And I'm Jason Palmer. Every weekday, we provide a fresh perspective on the events shaping your world. The birth of the cleantech revolution has long been foretold and failed to deliver. But though the US administration isn't exactly keen on tackling climate change, our correspondent reckons that the future may actually be green. And few brands are so globally present as Hello Kitty. But her parent company, Sanrio, is expanding the Hello Kitty universe at a prodigious rate. Brace yourself for the IP licensing onslaught of Hello Kitty and Friends super cute adventures.

1:49But first...

1:59If you draw a curve connecting the American territory of Guam and the rest of the Mariana Islands, they form an arc that points towards Japan. They're not really in the middle of the Pacific. They're pretty far west, straight north of Melbourne, Australia, which makes them strategically really very useful to America. On one of those islands, Tinian, the world's first nuclear weapons were loaded onto the bombers that would drop them on Japan. At Tinian, 100 miles north, two more B-29 wings prepare for takeoff. Then, the war over, American forces left and let the airfield of Tinian be retaken by the jungle.

2:41Fast forward 80 years and the threat of conflict in the Western Pacific is back. That same arc of islands also points at China.

2:57That sound was the roar of an F-22 fighter jet taking off from the runway of Tinian in the Pacific. I visited the island to watch how America is preparing for a potential future war. Anton LaGuardia is our diplomatic editor. So I got to see firsthand how Tinian is being revitalized for a potential conflict with China. So why is it that U.S. forces are reclaiming this airfield? The basic geography of the Pacific is that it's enormous. People talk about the tyranny of distance. But the Chinese also have very long-range weapons that can reach as far as Alaska if they need to, or Hawaii. So the closer you get to China, the more difficult it gets.

3:42But the farther you are from China, the less you can do. So what the Air Force is looking for is a sweet spot, somewhere in between, where they can control the risk, but still operate from. So that's one reason for Tinian. The other reason is that there's a whole series of American-owned islands in the Marianas, which are American territories, so the Americans can hop and jump at will in that part of the world and try to stay one step ahead of the Chinese missiles. So when you were there, the reclamation of Tinian, what did that look like? What did you see? I saw bulldozers and lorries carrying away vegetation and burning it at the northern end of the island.

4:23They've done impressive work. They've recovered four of the runways. They still need to be dug up and resurfaced, but you can see what was there at the time and compare it to old pictures. So there's extraordinary reclamation work on this tiny island that felt like an archaeological dig almost. And there are also these pits which Americans use to load up their nuclear weapons onto the B-29s. They were in a secluded area. It was all very secret. So that place is commemorated. But really, it's not about tourism or commemoration. It's about planning for future war. At the commercial airport, there were two F-22s nestled on a corner as little propeller planes went past them.

5:04So it was a very incongruous scene. And they would take off with a deafening roar and disappear into the clouds. It was quite a spectacle.

5:16So it's clear that Tinian played a serious role in the Second World War, but war has changed a lot since then. It has indeed, Jason, but geography hasn't, and the Pacific is still extremely large, and it has very few landing places once you go east of what they call the first island chain, which is Japan, Taiwan, Philippines, and Malaysia. So the problem is, how do you fight over what is an enormous expanse of water when your planes need to land? What does the wargaming look like now then? How will Tinian be useful should the time come? Well, it will allow the Americans to have alternative airfields so they're not bunching up their planes in the same place that can be hit with Chinese missiles and also by Chinese planes carrying cruise missiles.

6:04That's part of the purpose, which is to distribute their assets across the Pacific so that any loss of one airfield doesn't do catastrophic damage. The planes I saw came in from all over the place, from Japan, from Alaska. And one of the things the Air Force wanted to do is so-called explode into theater, which is arrive very, very quickly from places like Alaska and deploy across these islands. This is all part of a doctrine that's called agile combat employment, which is the idea of scattering and regrouping and scattering and regrouping, like a murmuration of starlings to drive the Chinese crazy.

6:45And I spoke to David Alvin, the general in charge of the Air Force, about what this means. The American way of war the last 30 years has really been rooted in putting our Air Force close to where the contested environment is, but not in it. as potential adversaries have thickened their threat area and moved it further and further out, we find ourselves further and further away from the objective by the time it's time to start the fight. So this is the idea. They are constantly under threat. And if they're under some level of threat, we don't want to be static and give the adversary confidence in what they can target.

7:22So as you heard, the general, the Air Force wants to stay on the move, to hide-and-seek, to play shell games, and they need places where they can do that from. If they're all bunched up on one airfield, they're sitting ducks, so they need more places to operate from, which is why they're rebuilding places such as Tinian and other World War II airfields. So what you're suggesting here is there's quite a few places to restore, to get to the kind of operational ability that the forces now want. I mean, how's it looking? How long do they have? So a lot of these problems really come down to money. The restoration of the airfield has already taken longer than it took the U.S.

8:02to build them in the first place out of the jungle. There's a sense of time running out. Xi Jinping has told his forces to be ready to take Taiwan by 2027. And the U.S., I would argue, does not yet share that same sense of urgency. Anton, thanks very much for your time. You're welcome, Jason. Nice to talk to you.

8:47The VIX Index

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9:59Donald Trump's second term doesn't seem to be good news for tackling climate change. We will drill, baby, drill. He's embracing fossil fuels, taking America out of the UN-Paris climate agreement, and playing down the impact of rising emissions. Right now we're at the cleanest we've ever been, and that's very important to me. Federal funding has been cut for all sorts of organizations that research and monitor environmental change. But according to our energy editor Vijay Vaiteswarian, the outlook isn't entirely bleak. Given the general outlook for clean energy in America, which is not great, with a new president who's quite a climate denier, anti-wind, anti-solar, you might think that climate tech is in big trouble.

10:49Here's the surprise. The outlook for climate tech is extremely bright and getting brighter. I am indeed surprised to hear you say that, Vijay. In what sense is the outlook for clean tech improving? So if we look beyond the two particular bugbears that President Trump has for some reason, wind and solar, which are going to be affected negatively by things like the administration's policies, as well as a new law, the one big beautiful bill law, which we've covered extensively on our pages, which has anti-wind and anti-solar provisions. It turns out that there are three reasons that other kinds of technologies ranging from advanced nuclear to new kinds of geothermal to fuel cells and multiple other climate technologies are going to experience a boom.

11:38And one of them, strangely enough, is that big, beautiful law itself. So explain that one to me. Even though it's very hostile to wind and solar, many of the provisions that were contained in the Inflation Reduction Act, which was Joe Biden's signature climate law, very green law, supporting a range of technologies, advanced nuclear energy, next generation geothermal, fuel cells, carbon capture. the list goes on, with very strong Democratic support, have now been passed into law with very strong Republican support in the big, beautiful bill. So for the first time, these technologies, which have always suffered from policy uncertainty, on-again, off-again funding, now have 10 years of quite strong policy support with rock-solid bipartisan backing behind them.

12:27And that's actually bringing lots of investors into this space. For climate tech to take off, doesn't it also need the backing of America's big tech companies more generally? Here you point to the second interesting reason why climate tech looks promising now. After 20 years of really no electricity growth at all, a stagnation, just like in Europe as well, what we're finding is a huge amount of electricity demand growth in America. A big part of it is those AI data centers that we all read about and write about. And so the big tech companies behind those AI-driven demand needs are funding a variety of climate technologies with great enthusiasm because they know they're really helping solve a problem for themselves.

13:10Google has funded advanced geothermal company called Fervo, which is a unicorn and one of the most promising new technology companies that's applying the techniques of fracking from oil and gas to actually make geothermal much more of a viable option. And that was coming to market because of Google. And nobody would have suspected that 10 years ago. And like that, there are numerous examples where Microsoft, Meta, AWS, the big boys are all funding interesting financial models to help these new technologies come to market in a way that venture capital didn't in the past, because venture capital is a very narrow way of defining risk and return.

13:46These companies have both deep pockets, longer time horizons, carbon commitments, meaning They're committed to being zero carbon or net zero in the long term, but also they have a selfish need for that power. So we see an interesting convergence. Vijay, you mentioned three things and we've had the big, beautiful bill itself. We've had the big tech companies. What's the third? In a sense, I alluded to it as well, and that is the boom in demand. That is something very new. The utility industry generally in the West has been kind of flat on its back, un-innovative area. And what we're finding now is that suddenly it's a growth market.

14:21All of the companies, such as the traditional utilities, that used to be quite lazy, to be honest, or to be more generous, they were rewarded just for keeping the lights on, not for innovation, not for trying something new. We're actually finding the traditional utilities unable to meet their growth targets. And they're looking to the new companies like these innovative providers of climate tech. Just this week, the Tennessee Valley Authority, which is a storied entity created from back in the New Deal days by Franklin Delano Roosevelt, a federal entity, utility, old school Goliath, just struck a deal with an advanced nuclear company in Google to support small modular reactors, the next generation wave of technologies, which is astonishing, a power purchase agreement and investment of the kind that one would not have expected from a sleepy utility even just a few years ago.

15:09Feels like the clean tech revolution has many times been foretold. Are we finally seeing it? You're quite right to point out that, you know, we have seen this movie before. And 15 years ago, there was a great deal of enthusiasm. It was called clean tech back then. And then more recently, it became climate tech. I think the reason to think it might be real this time is the reasons why people are pushing it. It's not so much for the decarbonization or the green benefit. If anything, we're in a new era where energy security is the most important drive in many countries. Of course, we all know the push towards defense tech and security tech is a major investment, including in Europe, which is increasing defense spending and certainly in America.

15:49And what you're finding is many companies that were climate tech companies are now de-emphasizing their emissions benefits and actually emphasizing the fact that they enhance resilience on the grid, for example, or a new way to make materials and supply chain could actually help avoid Chinese critical minerals. And so you're finding a lot of rebranding and repositioning. And therefore, these companies are getting a significant amount of investment from this move towards security tech. And Vijay, how far will all these advances that you're talking about actually help us tackle climate change itself?

16:21This is the$64 ,000 question. I think if we look 10 to 20 years out, you have to have the right time horizon. If you say, look, what's going to happen in the next year? The UN meets in Brazil for a climate summit. Can we solve climate change quickly? Of course, not. Climate change, really, we have to take a much longer term horizon. And when we look out beyond the five to 10 year horizon, there is no way to make the longer cuts that any of the advocates of net zero or more aggressive action on climate change have advocated for without innovation. The International Energy Agency itself has said to achieve its targets for net zero, maybe even half of the cuts will need to come through innovation, not just deployment of what we have at hand, like wind and solar, but technologies that either are not yet invented or more likely not yet scaled up.

17:06They're in the laboratories, they're rolling out, pilots phase, but we need to deploy them over the next 10, 20, and 30 years. And the good news is, with some of the unexpected news coming out of Washington on the big, beautiful bill, and the investment in private sector interest, the security focus actually in an interesting way, helping countries invest in this area, I'm more hopeful about the future of climate tech now than I've been really anytime in the last 20 years. Vijay, great to hear all this. Thanks so much. Thank you. My pleasure. And if you want to hear more about clean technologies, do check out yesterday's episode of Drum Tower, our subscriber-only China show.

17:43It discusses the extraordinary rise of Chinese electric vehicles and their ambitions to go global.

17:59So I'm joined by Ethan Wu, our Asia business and finance editor and a co-host of Money Talks, our subscriber-only weekly show on the world of business, finance, and economics. And turning things around a bit, he has a question for me. Yes, that's right. Jason, as a former child yourself, how familiar are you with the world of Sanrio? Sanrio is the company behind Hello Kitty, I think. Yeah, that's the best-known character they have. But we're not just talking about Hello Kitty. It's Hello Kitty and her many friends. So you've got Hello Kitty, who's the best-known character and officially a British schoolgirl from the suburbs of London.

18:36I'm Hello Kitty. There's also My Melody, a cheery white bunny. I'm My Melody. Then there's Kuromi, an impish bunny outfitted in hot pink punk. Ready, Kuromi? Let's do this thing. And their show, Hello Kitty and Friends Super Cute Adventures, is not only a huge hit on YouTube, being translated in five different languages, but it's also the tip of the iceberg for a much larger IP licensing powerhouse that Sanrio has built. I gotta say, I was not aware of all of these facets of the Hello Kitty cinematic universe. Like, she's the big one though, right? Yeah, I think for most people not plugged into the Sanrio universe, definitely Hello Kitty's the way you're getting in or the one you'd be most aware of.

19:26But for fans of Sanrio characters, Hello Kitty is increasingly no longer the star. Sanrio runs an annual poll of fans' favorite characters. They have 400 or more, so it's a bit hard to keep track. And Hello Kitty has only won once in the past decade. In the poll this year, in 2025, she was only fan's fifth most beloved character. In fact, 2025's most beloved character was Pompomporen, very happy-go-lucky golden retriever. And victory in the poll for a character not called Hello Kitty is no accident. Sanrio has been on a big diversification push, and clearly, so far, it's paying off. 450 of them.

20:05It's kind of like Pokemon. Yeah, yeah, collect them all. Here's a great way to part with kids with all of their pocket money. Go on, tell me how much money all of this proliferation of hundreds of characters is bringing in. Right, so it's not just in the fan polls. Financially, too, they've been big successes. In the 2010s, Hello Kitty was responsible for 90 % of sales outside Japan. Today, that's only about half of sales, so it's really a huge change. And if you look around kind of the media landscape, you see Friends of Hello Kitty popping up everywhere. In a new Netflix series released in July, My Melody co-stars with Karomi in their own little adventure.

20:42This is all part of a bigger makeover of Senrio. The company has been on a tear since 2020, when its 92-year-old founder handed control of the company to his 31-year-old grandson. And in the intervening years, we've seen operating income rise something like 24-fold, an absolutely insane increase in the profitability of this firm. And the stock has risen 13-fold. So not only are fans loving the more diversified, cuddly characters saying Rio has to offer, but investors are too. Because as you said at the start, this is now a matter for like mass IP licensing. That's exactly right. With a more diverse cast of characters, you can do a broader range of licensing deals.

21:22And, you know, Sanrio used to be really a toy company. And I'm sure listeners have maybe seen Hello Kitty pouches or pens or pencils or... I've got my very own rucksack as it goes. Jason's recording this with a Hello Kitty themed mic cover, actually. But in fact, licensing, not toy sales, is half of total revenue for Sanrio. And that number is even higher outside Japan. Outside of Japan, licensing is 86 % of sales. And this is very helpful for the company, both in terms of having new sources of revenue, but also less volatile revenue. In 2013, the release of the movie Frozen, which was a huge hit in the toy market among kids, you know, grabbing their Elsa and their Olaf dolls, this dealt Sanrio a toy sales slump.

22:02And so the company's reimagined its strategy. They want to blanket fans with Sanrio content wherever they are to, as they put it, deliver smiles to as many people as possible for as long as possible. That means being everywhere as much as possible. They do loads of collaborations between their characters and outside intellectual property. There was a recent one with Cocomelon, which anyone who has a child will be familiar with, or Fender with Hello Kitty guitars, or Lush with Hello Kitty soaps. And the effect that all these collaborations have is to cement Sanrio's ubiquity, to build on their evocative cast of characters, and to create what you might call a world-bestriding empire of friends delivering smiles.

22:46What a warm message. So if it has this expensive cast of characters and it already has this world-bestriding empire, where next? Well, Jason, the next frontier for Sanrio, it's the West. The company feels that they are underpenetrated in North America and in Europe and have a lot further to grow in both markets. And to do that, they see new in-person experiences and video games as ways to make the intellectual property better known. One example of that is a cafe that was opened last year in California dedicated to a character called Gudetama, who's kind of a slothful egg yolk with a pronounced butt.

23:22But it's still going to be a challenge for the company. It faces stiff competition from much better entrenched IP franchises. You might think of Star Wars or another Japanese export, Pokemon. So even though Senryo has built this colorful cast of characters, it's not the only one trying to make an imprint in fans' hearts. Ethan, I have to say, slothful egg yolk with a pronounced butt really does challenge my powers of visualization. Thanks for introducing me to this slightly odd world. Jason, I challenge you to Google it after the show. But thank you so much for having me.

24:10That's all for this episode of The Intelligence. We'll see you back here tomorrow.

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