Why is China producing so many export goods, anyway?
noahpinion.blog
noahpinion.blog
they make it hard to import into china but easy to export and manipulate their own currency to make manufacturing in their country cheaper than domestic so multinationals will move manufacturing to china.
now no country pushes back on anything they do because it would interrupt the flow of cheap goods. we let them take Tibet, suffocate free speech and democracy in Hong Kong, they are stealing land in Butan and India, they are invading the protected waters of their neighbors in the south china seas, and are threatening to take Taiwan. but we keep shoveling them money and appeasing them because we want cheap shit
A lot of investment options that are attractive among wealthy Westerners aren't available in China because:
1: Overseas investment is restricted for Chinese citizens.
2: The state already owns large enterprises in many sectors of the economy (mining, electrical infrastructure, nuclear power, transportation...) and it's not clear that it is possible (in terms of competition or what's allowed politically) for a private enterprise to dominate in those sectors.
3: Even in sectors where the state isn't well established, private enterprises may face rules that stymie growth (e.g. the widely remarked differences between TikTok and its closest domestic Chinese equivalent, Douyin, which are driven by Chinese content restrictions.)
Ambitious wealthy Chinese are left with fewer attractive investment options. They "over-invest" in manufacturing goods for export, despite modest returns, because it's the least-worst option.
China exported US$3.38T in 2023, but also imported US$2.55T.
In fact, their exports are only a little above the US's, which exported about US$3.053T in 2023.
I thought mercantilism went out of vogue a few centuries ago?
Tariffs seem like a very suboptimal solution. It seems highly unlikely that manufacturing at the scale needed to replace China is possible domestically. There’s simply not enough people that can run the factories required to service demand. Perhaps the manufacturing base will shift to eg India, but the de-industrialization of the US will continue.
It boggles my mind why the US is doing this. Targeted sanctions on cutting edge technologies seems fine, but Steel tariffs? Come on. American retailers are going to jack up prices, American consumers will get squeezed more than ever before and high inflation is only going to cause more instability.
The US seems intent on accelerating its demise.
1. Tariffs
2.Strategic Government Funding (e.g. Chips Act)
3. Leverage Alliances to Deny Key Components (e.g. ASML EUV lithograph)
Chinese Chip Manufacturers are going to have to spend more money to try to keep up with competing chips and even then will largely be uncompetitive in the short to mid term.
It can't be just the funny money that we print, can it?
Otherwise, what is the problem?
https://usafacts.org/articles/what-are-the-top-us-exports-to...
Does that really work? Can you enslave the world by buying other countries? Like "Ha, Italy, you work for us now because we own all your infrastructure!"? Wouldn't Italy just tell them to GFYS at some point, if China stops sending goods or US Dollar and just wants to get stuff for free?
In fact they are not even incentivized to do so as Chinese money is providing them the chance to build up modern infrastructure.
To make things more concrete, look at how long the EU was (and still is) dependent on Russian gas. Russia even used it to influence politics by shutting off supply to Ukraine. Poland, along with its non-German neighbors especially, have been working to diversify their supply to prevent that, but it basically took the war in Ukraine to push Europe in that direction (and even then, reluctantly; take Germany for example).
Or consider the case where your economic partner is much larger economically (like US in relation to Mexico). Who do you think has more weight at the negotiating table? Who has more money to influence political realities? Who can take a bigger hit? There is mutual dependence, but the relationship is not symmetrical.
It's easy to say GFYS, but often difficult to do in practice. First, there has to be an alternative, second, you have to migrate to that alternative. This can be costly if not practically impossible until a contender emerges: he'll have your back against the other, but now you're their vassal, so to speak.
Some call this phenomenon "neocolonialism"; Picketty also uses the term "foreign-owned countries". You get lodged in a web of incentives. You always are.
Right now, the China-US dependent is something like: the US needs China for cheap labor and cheap goods, but China needs the US to buy all these things to fuel its economy. The balance can eventually tip and shift, however. Indeed, that's what BRICS is about.
One can argue about how "painless" it was, but I would have thought that stopping Russian gas imports within a few months would cause a recession and a lot more havoc in the economy. And I always assumed that was what Russia was counting on, Germany's dependence and thus tacit support but I didn't see much of that.
China does not have the demographics for this.
Speaking of fixed incomes, these retirees are dependent on risky investments like real estate (collapsing) and public pension schemes (about to collapse). On top of this, retirees aren’t generally the consumers of the supply chain components that China makes. Remember, they never moved up the value chain of sophisticated goods manufacturing. They got too expensive before that.