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U.S. President Joe Biden told Chinese President Xi Jinping following his meeting with Russia’s Vladimir Putin to “be careful” because Beijing relies on Western investment.
And the West relies on Chinese manufacturing. All the scare mongering surrounding China, the US already would have pulled investment if they actually were the ones in control. The West has hitched its wagon to China at this point. They have no real alternative to turn towards.
There are plenty of alternatives (e.g. Vietnam or Mexico), but China still offers enough advantages to make it the preferred option. This article explains it well: https://www.china-briefing.com/news/reshoring-from-china-to-mexico-how-prevalent-is-it-really/
If you look at various economic indicators, it seems likely that we have reached the peak of China’s production.
Exports peaked in Dec '21: https://www.ceicdata.com/en/indicator/china/total-exports
Population - declining: https://www.ceicdata.com/en/indicator/china/population
Labour force participation rate - declining: https://www.ceicdata.com/en/indicator/china/labour-force-participation-rate
Employed persons - declining: https://www.ceicdata.com/en/indicator/china/employed-persons
Manufacturing wages - doubled in the past 10 years: https://tradingeconomics.com/china/wages-in-manufacturing
There are huge differences between China and countries like Vietnam and Mexico.
Vietnam is significantly poorer with poor infrastructure. They don’t have the capacity to move enough finished products onto modern container ships today. Their electricity infrastructure is unreliable, their local freight rail is poor, and their roads are awful. Chinese wages are much higher than Vietnam now, but because of economies of scale, China can invest in the best industrial infrastructure in the world to help keep prices down for manufactures in every other part of the business process. Vietnam could catch up one day, but they are far behind. India is also in this same position.
Mexico has wages that are just as high as China, but also has terrible infrastructure and and a failing government. No one in China is worried their products will be held hostage by drug gangs, or that their engineers inspecting their factories will get kidnapped.
China is doing so well because they have planned ahead. They created world class manufacturing infrastructure around Shanghai and Shenzhen that have laid the groundwork for modernizing the entire country. They have done a very good job building their “moat” to discourage manufacturers from moving elsewhere, there are just too many potential savings to keep manufacturing in China rather than take a risk moving elsewhere. Despite the US pushing “derisking” so hard, it will have only a slow impact on pushing companies to leave, because the US cannot actually offer them a better deal to move somewhere else.
There’s a very simple way to measure the migration of manufacturing out of China.
get a list of the top ten cargo ports in the world. count how many are mainland China?
7 or 8 right?
okay let’s go down the list until we get Vietnam or India or someplace where’d you’d expect the manufacturing to go to.
aight… now compare all the cargo capacity for that entire country to one of the eight ports in China? tell you what, let’s include India, and Rotterdam, and LA… just add them all together. How many of 8 does it take to keep up with that 2 or 3 ?
so, cargo shipping capacity… big difference right? day light.
Vietnam wants to make iPhones. you gotta ship 110% of the various bits into Vietnam and then ship out 99% of the finished goods.
all those ports come with piles and piles of back end infrastructure. roads. trucking. rail. skilled workers…
there are infinite alternatives to China. but it will take 40 years to develop any of them to that level.
Are there alternatives though? Apple moved some production to Vietnam, for example. Do you know who’s their partner in Vietnam? Hon Hai Precision Industry Co., better known as Foxconn. Yeah, China, again.
Wouldn’t this be more of a double implication though? Without China to manufacture goods, the West is out of goods, but without the West to purchase said goods, China just gets stuck with a huge amount of goods it can only sell at a discount to other nations, thereby reducing their profit margins. Surely if other places were willing to pay just as much as the West for goods, they would be sold there as well, to not have all eggs in the same basket.
Sort of like what I read on a lunch place - “Eat here, or we both starve”.
Not trying to start a pro-/anti-anything discussion, genuinely curious about the mechanics at play here, global economics, game theory and all that.
Absolutely! Doesn’t change the fact that Biden’s warning is toothless bluster. If he actually tried to end US investment in China it would collapse the world economy. It’s a M.A.D. world
@queermunist @SpiderShoeCult Well said.
That’s exactly his point though. It’s more a reminder, less a threat. It actually sort of touched on it in the article, China’s relationship to Putin vs the West.
It’s sort of going "we see you eyeing off Taiwan, and chumming up to Russia… Please remember that there IS in fact a red line. We’ve told you where it is and if you cross it, you’ll likely destroy us both. Please don’t go thinking that you’ll be fine, because your economy relies heavily on ours, the same as ours does yours. "
The U.S. has been taking steps to change this, particularly in light of the supply chain issues that have popped up along with everything Taiwan. The process is slow, however, and possibly even slower than economic growth.