The days when China, the Western world’s flagship production hub, would possibly be coming to an end. This has serious ramifications for China and the world. Depending on where you focus, this is either a smart thing or a bad thing. it’s probably both.
Factory orders in China fell rapidly in April, although this is likely because China prepared just after a disastrous Zero Covid policy that has led to civil unrest and thousands of layoffs in the production generation and electronics sectors. as well as the closure of small businesses across the country.
For those with contacts in China, stories of laid-off young people struggling to pay for their apartments, working two jobs in concerted economies or seeking escorts in karaoke bars are commonplace. This is not the country that once held the CCP with the promise of immediate opportunities and ascents up China’s social ladder. This began in the United States in the late 1990s and 2000s, reeling from China’s acquisition of American production of equipment and steel, textiles and furniture. Many other people here know what he is doing.
China’s GDP is the worst in a generation, with a development of more than 4%.
Although China’s purchasing managers’ index, a measure of production demand, rose to 49. 2 from 51. 9 in March, it’s not an unfamiliar number for China and shouldn’t scare investors too much.
Workers gather wigs and hair extensions for export to the United States in Guangan, in southwestern Array. Where do all those other people go? (Photo via FREDERIC J. BROWN/AFP Getty Images)
The challenge is geopolitical. This scares Chinese investors more. You know the exercise. Companies are slow to leave China because of those tensions. This includes Chinese corporations investing in Southeast Asia to avoid industry tariffs, sanctions and the development of political risks.
To keep doing with the Americans (and to a lesser extent with the Europeans), Chinese corporations are leaving the continent. Multinationals like Jinko Solar — one of the world’s largest solar panel brands — are doing to China what U. S. multinationals once did here: offshoring middle-class jobs.
In a country with around 900 million employees, many of whom are manual workers and unwilling to “learn to code,” such job losses destroy the social contract between the CCP and its people. About 17% of Chinese have a school degree. , to about 36% in the United States, according to Chinese and U. S. government statistics.
Either China discovers a way to consume what it produces at home instead of relying on the American consumer, or Beijing makes it less exciting for corporations to set up shop in Vietnam. If they can’t do those things, the bloodshed will continue. If this trend continues, it deserves to be noted as a harbinger of worse things to come.
China is not doing a smart job of protecting its other people in times of crisis. It has a low unemployment system. You can be thrown to dogs in China. If you’re a migrant worker, those metaphorical dogs are even bigger.
The factory of Chinese clothing manufacturer Bosideng in Jiangsu province in 2019. They used Array. [ ] to make all our clothes. Those days are over. Can the Chinese locate new markets, adding at home? (Photo via STR/AFP Getty Images)
Many reasons. It’s about the sector. The furniture and solar energy industry has moved from mainland China to Southeast Asia since at least 2013, when the U. S. government has moved from mainland China to the U. S. government. The U. S. imposed countervailing and anti-dumping duties on several corporations in that space.
Fast forward to 2018, President Trump is enforcing price lists on more than $300 billion in Chinese imports under Section 301 of the industry laws. It also imposes price lists on all Chinese solar corporations under Section 201 of the industry laws.
The deficit of American industry with Vietnam is greater than the deficit of our industry with Germany. This is misleading for two reasons. First, Vietnam buys almost nothing from us. It is a deficient country. Second, the bulk of those exports come from Chinese companies.
Then came President Biden. Il imposed restrictions on the export of computer devices destined for China. He enacted the Uighur Law on the Prevention of Forced Labor, which complicates the importation of goods from Xinjiang province, the giant Western state where the Chinese edition of the “war on terror” has imprisoned millions of Muslims and forced many of them to work, adding programs of unpaid hard work. as the United Nations reported last year.
China made all our clothes. No more. These are job losses for China.
Fortunately for some sewing and sewing factories, they have Shein and Temu to save them. These fast fashion corporations rely on outside partners, many of whom are young moms and runaway dads, to sell duty-free clothing in the United States. Unfortunately for them, most of Shein and Temu’s market is here, not in China, and that puts those other people at the whims of Congress.
Rep. Earl Blumenauer (D-OR) needs to close the so-called “de minimis” loophole that allows duty-free shipments to the U. S. UU. si the value is less than $800. Si is the law, and depending on the decline in that value, it would be a blow to either company.
According to the International Trade Commission, the United States has imported Array. [ ] toys manufactured in China worth approximately $12 billion in the closing year of 2020. That’s less than 2017 grades of $12. 6 billion and less than 2013 grades of $17. 6 billion. Money lost to Chinese manufacturers. (Photo via Feng Li/Getty Images)
U. S. imports of Chinese-made clothing rose from about $25 billion in 2018 to about $17 billion in 2021, according to a March 2023 report by the International Trade Commission (ITC).
Imports of those products from China decreased, but imports from the rest of the world increased by 25. 2%. The ITC estimated a significant drop in China’s apparel imports of 40% between 2020 and 2021, while US production rose to 6. 3% in 2021 in response. .
ITC covered 10 other sectors. In all 10 countries, Chinese exports to the United States fell. China’s computer hardware fell about 7%; furniture imports fell by 25%; Imports of electronic devices fell by 40%. Auto parts imports fell 50%, according to the ITC.
An overall decrease of 13% in the price of US imports from China was estimated in all sectors affected by the Section 301 tariffs.
Chinese corporations are making a cash investment to maintain their market share while the U. S. government is taking action. The U. S. is trying to pull U. S. supply chains out. of the continent.
China accounted for 0. 2% of foreign direct investment in Mexico, on average, between 1999 and 2022, according to the Mexican government’s Ministry of Economy. China/Hong Kong/Taiwan in total accounted for 2% in 2022. and 2021.
Chinese and Hong Kong investment in Mexico increased sixfold, from $117. 1 million in 2015 to nearly $700 million in 2022, according to the Mexican government.
China’s production expansion would likely have peaked.
China’s long-term expanding industries can regain some of this workforce, but very little. Robotics will be smart for China’s blue-collar workers, but biotechnology, pharmacy and AI won’t be, because going from seamstress to scientist is overkill. The same goes for Chinese solar panel manufacturer AI encoders. It is also unlikely that lower-skilled jobs will be able to take over the blue-collar workforce that is wasted by outsourcing.
For some, this is an improvement: a “welcome to our global China” after at least 23 years of U. S. production in China. It took from the global in terms of production and production capacity. He was very unlikely to compete. Because of this, there is possibly not much loss of love here. But we understand what you’re going through, Chinese worker. We too have lost jobs and have been forced to save on concerts or sell door-to-door vacuum cleaners and solar panels made in China.
Now take a look at believing a global where China curbs its capacity. They are almost paralyzed to continue. They may have to build more ghost towns and bridges to nowhere just to keep other people employed.
Perhaps that’s why Temu spends so much here, and Shein is now targeting emerging markets, such as Brazil.
Possibly it would also be the proliferation of promotional classified ads on social media for cool devices like metal brushcutters and zipper repair units, all no doubt manufactured and shipped directly to Americans from China.
A woman poses as she prepares to take a selfie at the Bund prom along the Huangpu River. [ ] at sunset, Shanghai, on July 29, 2020. (Photo by Hector RETAMAL/AFP) (Photo by HECTOR RETAMAL/AFP Getty Images)
China is not a dying production power. Europe would be in worse shape, that’s for sure. China can back down, but if it does so at America’s expense, it will be totally unsustainable.
But China’s days as a manufacturer of almost everything in his home and garden shed seem to be over. That’s a lot of staff whose long-term is for the first time in a generation.
For Washington, bringing production back to the United States, or at least protecting production that is here now, is considered essential. He is also a vote collector. No Democrat or Republican will ever benefit from talking about the wonders of globalization and lax industry with the reasonable (and low-income) labor-intensive states of Asia-Pacific.
If China’s market share in production declines and Chinese corporations move into Mexico and Southeast Asia, what will happen to all those Chinese?They cannot elect their leaders. Instead, they will protest. They will close factories. The CCP will be heavily involved in any breach of this social contract. That’s probably what helps keep them in power.
All this is good, wherever you focus.
Trade diversion is smart for emerging markets in Southeast Asia that Chinese (and Western) capital builds factories and rents premises.
The relocation of production components is smart for the U. S. productive sector, which hires blue-collar workers, many of whom have fallen victim to U. S. industrial policies that favor offshoring.
But there is bad news, and not just for the Chinese.
There are more Chinese—the Hundred Ancient Names, as they are called—than there are members of the CCP. If their lives are in danger, they will grow back. They have the numbers on their side.
If that happens, one has to wonder whether Beijing will regard such uprisings as something provoked by the Americans. The Chinese government is not in favor of foreign intervention. Would they pass after Taiwan, especially if the United States laughed at them?I don’t think they did it in Taiwan, but I shouldn’t be surprised if they did. Such a resolution would be an apparent disaster. Most likely, sanctions alone will lead to disruption of global supply chains, making Covid disruptions negligible.
In other words, the bad news is that the erosion of China’s role as a benchmark manufacturer is likely to be a matter of life and death for industries, companies, and some people. Ray Dalio warned last week that geopolitical tensions had brought both sides “to the breaking point of war. “It’s bad for everyone.
Macro investors will want to be aware of those adjustments in the coming years. They will have to assess how temporarily and how well China is turning inward, build their own customer market, and keep their friends in emerging markets as the U. S. moves forward. UU. se away.