I will say this on that wsj article. American official may push for decoupling, but it's not working out in real practice despite tariffs, threats and everything else. The reality is that many American consumers and products depend on Chinese manufacturing and supply chain. If you are not going to use Chinese supply chain, then there has to be reasonable alternatives. In many cases like Solar, there just aren't alternatives. As such, Chinese companies will simply move production to ASEAN countries or Mexico and get assembly done there, but it will still rely on the much cheaper Chinese supply chain and technology (may not all be produced in China itself). So while China's export to America has remained flat for a few years, there is quite an increase in China -> 3rd country -> America. As BRI continues to make China -> 3rd country more efficient, they can do more of this offshoring of production/assembly without increasing cost too much.
The more recent example of this is IRA. A hugely complex bill signed to avoid the dominant Chinese battery supply chain. Guess what, the nickel processing plant was set up in a JV in Indonesia to comply with the bill and still use Chinese management/tech. CATL is setting up a very complex ownership structure with Ford to manufacture batteries in America. Through all of this, Chinese company is still in control of the product and getting paid. Companies will always seek out the best product for themselves. The only way American gov't can decouple from China completely is if there are viable alternatives or if Chinese gov't actively sanctions its own company the way America did with semiconductor. China will not do that.
And then there are the arguments of offshoring production from China. For example, Chinese companies have been pushing production to Vietnam to take advantage of the cheaper labor there. People talk about this as a problem. But why is this a problem if China is moving up in value chain and getting out of the low end manufacturing. Why would china continue to manufacture furnitures, when it can manufacture cars? As salaries continue to go up, they will have to move to higher and higher valued manufacturing.
But I would say this. Western economies are likely to be in decline. Energy and resources are more important than ever. China's trade with US and EU are likely to be flat for a while. Same with Japan and SK. However, China's trade with ASEAN countries and the rest of global south is likely to continue to increase at high rate. China will help more of these countries to transition their economy to digital economies and industry 4.0. All of which will bring in growth. China's trade with Russia is getting close to $200 billion this year and will likely hit $250 billion next year and go over $300 billion by the second half of this decade as oil/gas pipelines get redirected from Europe to China. There is still a lot to grow in China's trades with ASEAN countries. I see that over 3 million new cars are sold in ASEAN countries a year. If Chinese companies can capture 1/3 of that, then it can make $40 billion in just auto export. And then you add in battery export, renewables, digital economy and industrial/power chips. There is a whole lot of trade growth left in the tank. Between China and Latin America, trade was already up over $425 billion last year. As BRI/free trade agreements conclude and auto exports increase, this number will also continue to bloom over time. This is no longer 2008 when China depended on exporting to US and Europe for its economic growth.
The more recent example of this is IRA. A hugely complex bill signed to avoid the dominant Chinese battery supply chain. Guess what, the nickel processing plant was set up in a JV in Indonesia to comply with the bill and still use Chinese management/tech. CATL is setting up a very complex ownership structure with Ford to manufacture batteries in America. Through all of this, Chinese company is still in control of the product and getting paid. Companies will always seek out the best product for themselves. The only way American gov't can decouple from China completely is if there are viable alternatives or if Chinese gov't actively sanctions its own company the way America did with semiconductor. China will not do that.
And then there are the arguments of offshoring production from China. For example, Chinese companies have been pushing production to Vietnam to take advantage of the cheaper labor there. People talk about this as a problem. But why is this a problem if China is moving up in value chain and getting out of the low end manufacturing. Why would china continue to manufacture furnitures, when it can manufacture cars? As salaries continue to go up, they will have to move to higher and higher valued manufacturing.
But I would say this. Western economies are likely to be in decline. Energy and resources are more important than ever. China's trade with US and EU are likely to be flat for a while. Same with Japan and SK. However, China's trade with ASEAN countries and the rest of global south is likely to continue to increase at high rate. China will help more of these countries to transition their economy to digital economies and industry 4.0. All of which will bring in growth. China's trade with Russia is getting close to $200 billion this year and will likely hit $250 billion next year and go over $300 billion by the second half of this decade as oil/gas pipelines get redirected from Europe to China. There is still a lot to grow in China's trades with ASEAN countries. I see that over 3 million new cars are sold in ASEAN countries a year. If Chinese companies can capture 1/3 of that, then it can make $40 billion in just auto export. And then you add in battery export, renewables, digital economy and industrial/power chips. There is a whole lot of trade growth left in the tank. Between China and Latin America, trade was already up over $425 billion last year. As BRI/free trade agreements conclude and auto exports increase, this number will also continue to bloom over time. This is no longer 2008 when China depended on exporting to US and Europe for its economic growth.
