Chinese Economics Thread
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There is no winner from this, only losers, some more so than others.
Its a win because yuan will see wider usage.
But it is also a very short-term loss because the yuan is appreciating very fast and this is not good for business.
Also Chinese high tech companies will now have an exclusive market to dump their goods without competition which will allow them to grow.
Plus with EU's energy prices in shambles Chinese Industry companies will grab an even bigger world market share from EU.
Honestly, China is getting a lot of economic positives from this
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1. When I saw the headline the "yuan soars" I thought it meant there is significant appreciation. On Wednesday, February 23, the day before the invasion, according to Google the yuan traded at 6.31 to the dollar. And today it closed at 6.32. In other words, no movement.
Nikkei Asia, SCMP, and other English-language outlets have been pounding this drum about the "yuan surging" for the past year when in reality, the yuan is appreciating yes but at an extremely slow rate. A year ago on March 2 it traded at 6.47 to the dollar, whereas today it is at 6.32 to the dollar. (1/6.32)/(1/6.47) = 1.0237, so the yuan appreciated by 2.37% in the past year. However, the US inflation rate was over 7%, so if the yuan is only worth 2.37% more dollars than a year ago while the dollar itself is worth over 7% less, then the yuan is actually depreciating. (Chinese consumer inflation is only running at about 1% a year) Certainly Chinese exporters can earn more for their exports than they could a year ago in nominal terms.
I don't know why Nikkei Asia, SCMP and the like keep posting these weird and inaccurate headlines.
2. Also, the naivete from some corners is almost as bad as Russia's naivete if they thought they would be welcomed in Kiev with flowers. Chinese tech companies can't just offer Russia goods with impunity because most of them are reliant on imported Western goods themselves. For instance, even Huawei, which is the most sanctioned major Chinese tech company in existence, still has licenses from the U.S. Department of Commerce to import Intel chips and stuff that it needs for some of its business lines, such as the Huawei laptop and PC segments. Other Chinese companies are even more dependent.
The only (theoretical) Chinese tech companies for example, that could supply the Russian market without having to worry about U.S. sanctions are those using hardware manufactured from non-Western semiconductor equipment including non-Western originated lithography machines, non-Western chip design and CPU architecture, running non-Western OS, with a community of non-Western developers of non-Western software. There's no a consumer tech company in the world that meets those criteria.
Another example is the whole "Russia will escape SWIFT with CIPS". It's not that simple because even CIPS relies on its member banks and if the member banks get sanctioned by the West then they are screwed and won't work with CIPS. This includes Chinese state banks. Remember how even the Hong Kong chief executive couldn't use Chinese state banks after getting sanctioned, she had to keep cash in her home. This was a Chinese government official in China.
At the end of the day it comes down to tech monopolies (which the West still controls) and physical goods. If the West is willing to take the pain of sky high oil prices and other kinds of inflation and economic pain, it can sanction whatever it wants.
Nikkei Asia, SCMP, and other English-language outlets have been pounding this drum about the "yuan surging" for the past year when in reality, the yuan is appreciating yes but at an extremely slow rate. A year ago on March 2 it traded at 6.47 to the dollar, whereas today it is at 6.32 to the dollar. (1/6.32)/(1/6.47) = 1.0237, so the yuan appreciated by 2.37% in the past year. However, the US inflation rate was over 7%, so if the yuan is only worth 2.37% more dollars than a year ago while the dollar itself is worth over 7% less, then the yuan is actually depreciating. (Chinese consumer inflation is only running at about 1% a year) Certainly Chinese exporters can earn more for their exports than they could a year ago in nominal terms.
I don't know why Nikkei Asia, SCMP and the like keep posting these weird and inaccurate headlines.
2. Also, the naivete from some corners is almost as bad as Russia's naivete if they thought they would be welcomed in Kiev with flowers. Chinese tech companies can't just offer Russia goods with impunity because most of them are reliant on imported Western goods themselves. For instance, even Huawei, which is the most sanctioned major Chinese tech company in existence, still has licenses from the U.S. Department of Commerce to import Intel chips and stuff that it needs for some of its business lines, such as the Huawei laptop and PC segments. Other Chinese companies are even more dependent.
The only (theoretical) Chinese tech companies for example, that could supply the Russian market without having to worry about U.S. sanctions are those using hardware manufactured from non-Western semiconductor equipment including non-Western originated lithography machines, non-Western chip design and CPU architecture, running non-Western OS, with a community of non-Western developers of non-Western software. There's no a consumer tech company in the world that meets those criteria.
Another example is the whole "Russia will escape SWIFT with CIPS". It's not that simple because even CIPS relies on its member banks and if the member banks get sanctioned by the West then they are screwed and won't work with CIPS. This includes Chinese state banks. Remember how even the Hong Kong chief executive couldn't use Chinese state banks after getting sanctioned, she had to keep cash in her home. This was a Chinese government official in China.
At the end of the day it comes down to tech monopolies (which the West still controls) and physical goods. If the West is willing to take the pain of sky high oil prices and other kinds of inflation and economic pain, it can sanction whatever it wants.
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Chinese businessmen, as well as Russian ones, can be quite entrepreneurial. Russian ones have huge experience with the crazy days of the 90s when they did those crash course free market reforms. They are experts at product substitution. There is a huge cottage of small Chinese businesses who make all sorts of products totally under the radar. And there is huge gray market for chips. It will be impossible to clamp down on all of that. As long as the government doesn't step too hard on them you will see what will happen. I know in fact there is a PC market in China using all Chinese components. It isn't competitive worldwide, makes low end PCs, and you don't see its products in the West. But in a sanctioned economy with no other choices it will have a captive market. Fact is most people today just use PCs to browse the web and do remote work. You don't need high processing power for this. And for the servers, you will need so few chips, they will find ways to smuggle them. The server market also tends to focus on low power consumption. This means multi-cores and low clock speed. This can be done with older manufacturing processes. The big issue is smartphones but from what I got those aren't sanctioned. Even if they are the Russian government has long had a program to make its own smartphones. They are widely panned in Russia. But if there is no other choice. Consumers will have to buy them.
I think Russia and China should put tariffs in place where a consumer electronics product gets a higher tariff the more US content it has.
This will accelerate the removal of the US from the world electronics supply chain.
Good luck. Unlike with SWIFT they can't snoop on the transactions. And if it become a problem, because of the CIPS-SWIFT bridge trojan, just use SPFS.
The US is one of the major oil & gas producers. So they won't mind it as much as other countries. But US economy is highly dependent on gas price. Their suburbia demands low gas price. So the US working person will suffer.
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@gelgoog exactly bro, necessity is the mother of innovation and invention while import substitution is a byproduct of sanction. Russia and China had the tool to make it happen, while the Collective West need each other. It may take time BUT with the understanding being solidify, Russia have a lot of talent to offer better than the West, we may see in 3 years time in 2025 an Eurasian powerhouse.
I agree. its a win for China. why assemble Apple product with less valuable Chinese content when you can sell the entire Automobile with more Chinese content and that is not even depended on software which can have Indian content.
Automobile was associated with Japanese rise back in the days.
