Chinese Economics Thread

[Tam]

I disagree with the article. Apple sources what component from China? The PCB? The case? It is well known most the value inside their phones isn't sourced from China at all. If you want to thank someone thank the Chinese players like Huawei, Oppo, or Xiaomi.

With regards to Tesla I think the Chinese government allowed the investment for two reasons. One is to show to US industrialists that China's market is open to them too unlike what Trump says and the other reason is to increase the market share of electric vehicles to reduce the pollution in China's main cities. Chinese manufacturers by now have had years to prepare for this so I think they can survive the entrance of a player like Tesla perfectly fine.

What is Apple outsourced to China?

Yes, the PCB, the case, the metal frame that makes up the phone; the OLED screen which is by a Chinese maker (forgot the name but its the same brand Huawei and other Chinese smartphone users use---also used with iPhone SE). The battery may or is already from China.

 

[Hadoren]

The great uncoupling: one supply chain for China, one for everywhere else

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Inside the US campaign to cut China out of the tech supply chain

https://twitter.com/i/web/status/1313593641965957128

This is a nice scare-mongering article. Several facts:

• COVID has actually caused a relative boom in Chinese trade. In fact, China's share of world trade has skyrocketed around +5% in 2020.
• I love ASEAN. 1/3 of Vietnam and Indonesia's imports are from China (and the Americans still haven't figured it out). In the future, China, China's most troublesome province, Japan, and South Korea can provide the parts; Vietnam and Indonesia can assemble. Win-win.

What would really harm China would be a shift towards parts of the world in which it truly has little role in the supply chain: Mexico and the USA, the EU and Turkey, India and Bangladesh to some extent, etc.

However, most of these places are being hammered by coronavirus. It's going to take years for Mexico and India to recover (which, unlike ASEAN, could actually lock out China from supply chains).

Right now, the PRC is doing the best in its entire history in terms of world trade. Half of China's competitors are going to be knocked out for years, and the other half are ASEAN. I'm confident that in five years, China's share of world trade will be above 2018 and 2019.

 

[Tam]

This is a nice scare-mongering article. Several facts:

• COVID has actually caused a relative boom in Chinese trade. In fact, China's share of world trade has skyrocketed around +5% in 2020.
• I love ASEAN. 1/3 of Vietnam and Indonesia's imports are from China (and the Americans still haven't figured it out). In the future, China, China's most troublesome province, Japan, and South Korea can provide the parts; Vietnam and Indonesia can assemble. Win-win.

What would really harm China would be a shift towards parts of the world in which it truly has little role in the supply chain: Mexico and the USA, the EU and Turkey, India and Bangladesh to some extent, etc.

However, most of these places are being hammered by coronavirus. It's going to take years for Mexico and India to recover (which, unlike ASEAN, could actually lock out China from supply chains).

Right now, the PRC is doing the best in its entire history in terms of world trade. Half of China's competitors are going to be knocked out for years, and the other half are ASEAN. I'm confident that in five years, China's share of world trade will be above 2018 and 2019.

A lot of the things made in Vietnam and Indonesia --- lets even include India also and its pharmecuticals --- have their raw and preprocessed materials made in China. Even the machinery.

If I were to set up a face mask factory, let's say, in the Philippines, I would have to buy the machines from China, and then import the cloth for these masks.

 

[gelgoog]

Mexico has never lived to the hype. It is a great place to put factories that sell directly to the US only, but how much of that is exported elsewhere? Next to nothing. It is the sweatshop of the NAFTA internal market basically.
Vietnam and the other Southeastern Asia countries have had investments by Chinese entrepreneurs who are moving part of the production there but still source many high value parts and machinery from China proper. China needs to continue moving up the value Chain and China 2025 is part of that. Things like electronics components, aircraft, gas turbine engines, machine tools, etc. China needs to move there.
You can already see them being a leader in tunnel boring machines and some kinds of robotics. So the path is there.

 

[hullopilllw]

But then it could also be asked why is Germany not opening her market up for China? Why ban Huawei despite no evidence to prove security risks? So far it's just the potential threat of possible future security risk if Huawei is embedded in future telecom infrastructure.

If Germany is going to create barriers for whatever Chinese enterprise, then it's unreasonable to expect China to continue acting in good faith. Looks like China's support of the western world back in 2008 was truly a thankless effort. All those empty cities and bridges to nowhere lol

at least it taught china never to help thrm unconditionally anymore.

 

[Tam]

Mexico has never lived to the hype. It is a great place to put factories that sell directly to the US only, but how much of that is exported elsewhere? Next to nothing. It is the sweatshop of the NAFTA internal market basically.
Vietnam and the other Southeastern Asia countries have had investments by Chinese entrepreneurs who are moving part of the production there but still source many high value parts and machinery from China proper. China needs to continue moving up the value Chain and China 2025 is part of that. Things like electronics components, aircraft, gas turbine engines, machine tools, etc. China needs to move there.
You can already see them being a leader in tunnel boring machines and some kinds of robotics. So the path is there.

A lot of its stuff need to manufacture is still imported from China. For example, Lenovo has factories there.

 

[vincent]

The great uncoupling: one supply chain for China, one for everywhere else

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Inside the US campaign to cut China out of the tech supply chain

https://twitter.com/i/web/status/1313593641965957128

The title should be changed to One supply chain for the Hegemon, one for everywhere else

 

[emblem21]

This is a nice scare-mongering article. Several facts:

• COVID has actually caused a relative boom in Chinese trade. In fact, China's share of world trade has skyrocketed around +5% in 2020.
• I love ASEAN. 1/3 of Vietnam and Indonesia's imports are from China (and the Americans still haven't figured it out). In the future, China, China's most troublesome province, Japan, and South Korea can provide the parts; Vietnam and Indonesia can assemble. Win-win.

What would really harm China would be a shift towards parts of the world in which it truly has little role in the supply chain: Mexico and the USA, the EU and Turkey, India and Bangladesh to some extent, etc.

However, most of these places are being hammered by coronavirus. It's going to take years for Mexico and India to recover (which, unlike ASEAN, could actually lock out China from supply chains).

Right now, the PRC is doing the best in its entire history in terms of world trade. Half of China's competitors are going to be knocked out for years, and the other half are ASEAN. I'm confident that in five years, China's share of world trade will be above 2018 and 2019.

The truly funny part is that the USA might find itself kicked out of everyone's supply chain for a number of reasons. One is that they don't really innovate anymore (China does most of that nowadays), there nation is so unstable and uninviting to foreigners now that no one in there right mind would invest in America right now (cause you might get shot dead for being Asian), especially when the dollar is worth nothing and that it needs is the confirmation that the US dollar is dead and really, the world needs China more then the worlds needs the USA given all the USA does is cause destruction around the world. If the USA doesn't get a miracle soon, those vast amount of companies that are suing the US government may have to consider either focusing on the market outside the USA for profit, or simply go bankrupt. This will in turn make any country that wants to use the USA as a manufacturing back to think twice as to whether they want the US government to dictate how they are allowed to trade.

Also, the coronavirus is going to screw the whole world because the west simply cannot contain the spread at all, hence China will become a more attractive nation for stability and nations like the USA and India will become pariahs because seriously, who wants to risk investing in a nation where the random worker can simply die at a moments notice because the government still doesn't care. All we need is to see how the election turns out but since Trump has decided to postpone the stimulus, we can expect the USA to go down in flames during the election period and the future of there economy with it.

 

[gelgoog]

A lot of its stuff need to manufacture is still imported from China. For example, Lenovo has factories there.

China has had some great successes in things like naval engines, or high-speed railroads, with highly successful tech transfers and native grown talent and products even. Even in semiconductors you have examples like display panels and solar cells which are non-trivial markets to break into. The main issue China has, like I said many times before, is they depend on foreign machine tools too much. The Chinese government needs to properly fund initiatives across the board for all types of machine tools. Germany and Japan have had industrial policies to do precisely that for yonks. That is the way you ensure you will win in the productivity and quality battle which is what matters to get into the high-end segments of the market. China has some champions in this sector but there needs to be a government strategy and mechanism for it.

 

[j17wang]

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Should China respond robustly, seek to make concessions or just wait to see if its an empty threat?

Back to Europe, I am actually interested in learning which markets Europe believes there needs to be priority access to china which they currently dont get. Are they looking to get a greater share of renewables, electric vehicles, and chip manufacturing, or is it more like luxury vehicles, luxury products, banking? I'm more of the view that chinese developments in sectors like electronics, quantum computing, 3d printing, genetic engineering, are mature enough that it could probably survive competition from Europe. China can afford to give Europe pretty unrestricted markets, I don't think individual countries like Netherlands, even with ASML, seek to exactly strangle china's economic ascendancy. Also, its easier to manage relationships with individual countries in Europe than it is with the US, so you get more benefits in diplomacy by winning over european countries, because despite the EU, most international organizations still operate under the principle of one country one vote. Basically, its harder to negotiate anything with the US than all members of EU combined, and with the EU, you still get the benefits of making quite a few countries happy.