Chinese Economics Thread

[henrik]

so unfortunately, it's not always their choice. Apple tells luxshare to offshore to India. Luxshare can keep its place in supply chain by offshoring to India or forgetting about that prized Apple contract.

As for other businesses, they have the choice of doing JVs and get market access or not being in the market. India is an exceptionally protectionist control where gov't is controlled by the 7 richest families. Modi gov't does what those big families tell them. So if you want to access Indian market, you have to work with those families. The other option of course is to just be the supply chain for those Indian companies. That has been happening increasingly also.

luxshare can just refuse to set up in India. Just let the Indian contractors figure out how to mass produce high quality products. Apple will learn their lesson in India soon.

 

[sunnymaxi]

Money is moving out of real estate and into productive high end manufacturing. But I hope that more money is being poured into manufacturing areas that China is struggling in, like aircraft engines, robotics, biotech or high end semiconductors and not as much in areas that China already dominates like solar or EVs. It's like the massive EV rush 3-5 years back where everyone and their grandmother was trying to create a EV companies to cash in on the hype, investor money and government subsidies.

We're already seeing this with renewables technology, where lots of money is pouring in, even though the industry is already so mature that a few billion won't help much and where overcapacity is already becoming an issue , as compared to smaller niche industries where a few billion can completely change the landscape.

Shenyang Liming Engine institute earned 22 Billion RMB in 2022.. a record revenue. they were struggling exactly like 10 years ago and look at the revenue in 2022.. they are planning to spend 10 percent revenue in R&D and already established two major research base. one is the largest in Asia..

Xian Aero Engine Corporation spend 12 percent of its revenue in R&D.

AECC, The major contractor of Civilian engines in China raised 6 Billion Yuan alone in 2023 and total assets of AECC reached 30 Billion Yuan..


what you said, ''China is struggling in Turbofan engines''. this is not true. we are in 2024 and China has successfully cultivated complete ecosystem of gas turbine engines .. China also has Asia's largest and most advanced high altitude test bench facility. China right now have more Turbofan engines in development than rest of the world combined.

so Private investors doesn't need to invest in this strategic industry..
------------------------------------------------------------------------------------------------------
and please atleast visit once Semiconductor thread. you will know what's going on.. entire country and all local government supporting semiconductor equipment makers and entire ecosystem/industrial chain.

alone Guangdong province investing 74 Billion Dollars in 40 different semiconductor projects..


so for central government announced 4 different packages for semiconductor industries worth multi Billions dollars.

Shanghai government announced to provide full subsidy to 16 major semiconductor ventures this year..

Private+local government both are same.. LOL

-----------------------------------------------------------------------------------------------
my post is already too lengthy.. so for Biotech i shall post some other time.. i have more information related Biotech and high end medical equipment .. China did remarkable progress in this sector too ..

@FairAndUnbiased ..

 

[GiantPanda]

Money is moving out of real estate and into productive high end manufacturing. But I hope that more money is being poured into manufacturing areas that China is struggling in, like aircraft engines, robotics, biotech or high end semiconductors and not as much in areas that China already dominates like solar or EVs. It's like the massive EV rush 3-5 years back where everyone and their grandmother was trying to create a EV companies to cash in on the hype, investor money and government subsidies.

We're already seeing this with renewables technology, where lots of money is pouring in, even though the industry is already so mature that a few billion won't help much and where overcapacity is already becoming an issue , as compared to smaller niche industries where a few billion can completely change the landscape.

You are seeing exactly that plus increasing the lead on EVs and Solar because the upper limit has not been established in those areas like fossil fuel and ICE. When EVs are 80% of the vehicle market THEN maybe you can argue about being over-invested there.

The advancement in AC turbofans has been nothing short of amazing -- nevermind the WS-10C, WS-20, WS-15 in the mil sphere but we have the CJ-1000A in testing already on Y-20 Flying Testbed and CJ-2000 having its core ignited. The aero-engine industry in the next decade will be immensely powerful literally firing on all cyclinders with the coming of the commercial TFs.

The semicon industry? Do we need to even mention that with all the "big funds" created? Advancement here is light years faster than even the turbofans with sea change in the local industry happening within five years of the tech war.

In both these industries, aero-engines and semicon, China is among a handful of countries that can make any of this stuff. The US under Intel can fab 7nm just like SMIC. China has a bigger range of turbofans for aircraft than France -- there is no French turbofan in the class of the WS-10 or WS-15.

 

[KampfAlwin]

China does nothing, still wins lol. Surprising to see that multiple deaths from crap quality indian drugs isn't getting a huge international outcry. Imagine if it was China.

Please, Log in or Register to view URLs content!

 

[tphuang]

luxshare can just refuse to set up in India. Just let the Indian contractors figure out how to mass produce high quality products. Apple will learn their lesson in India soon.

That really depends on if luxshare wants to lose work share to Foxconn and Pegatron. Chinese suppliers are battling others in the Apple supply chain.

China is not the only game in town.

 

[Randomuser]

China does nothing, still wins lol. Surprising to see that multiple deaths from crappy quality indian drugs isn't getting a huge international outcry. Imagine if it was China.

Please, Log in or Register to view URLs content!

As someone who has seen family members lost to cancer, this really infuriates me.

 

[FairAndUnbiased]

US grand strategy is often misunderstood or underestimated. Not to say Americans are geniuses, but they're neither stupid nor incompetent. Since the end of World War 2 and especially after the fall of the Soviet Union, they've managed to basically get the world by its balls:

• First, they gradually came to dominate finance via their currency and capital markets. Using financial power, they then buy up the companies and industries of other countries, and make the best talent work for them. Don't want to sell? Then the US will sanction / isolate / topple your government, either directly if they can find an excuse, or indirectly through sabotage, infiltration, and media control.
• Despite this financial focus, however, the US never neglected its R&D - which is how you can tell they actually have a strategy and isn't just being greedy. R&D is fundamentally a loss making enterprise, especially in the short term; but the US, contrary to the stereotype of dumb Americans, spent trillions on it. This allowed them to, for decades, control 90+% of "new technology" through having the best research institutions, strong industrial-academic-military fusion, and the best venture capital environment in the world.
• This lead in "new technology" then allowed the US to create new industries that they automatically dominated - like computers, smart phones, the internet, AI, EVs, etc. - and in so doing, create an "innovation monopoly"; hence the stereotype of US companies being particularly inventive even though it actually is just their R&D spend is so much larger than other countries.
• Mature industries with lower margins were off loaded to other countries, mainly because they were a drag on profits and, as stated above, US grand strategy called for maximizing return on investment in order to dominate global finance, with which they could keep spending on R&D, buy up whatever they wanted, and support a huge military to pressure those who won't sell.
• The final arm of the strategy is "export controls" or what is more appropriately understood as a high-end technology monopoly. Since the US spent so much $$$ on R&D, it naturally wanted to control the fruits of that R&D. To do so, it made strategic investments in IP enforcement and high-end supply chains, ensuring that they were ultimately under its control either directly or through trusted allies. This is how it keeps its leash on the Europeans, the Japanese, and the South Koreans. It might have surprised many Chinese that the US was able to get those countries to readily follow its lead in technology sanctions; but it's not surprising once you realize that those countries' high-end supply chains rely on US components, IPs, and R&D institutions. EUV lithography wasn't invented by ASML or the Dutch. It was invented in US labs. TSMC would not be able to operate without US technology.

The US grand strategy is quite sensible and was obviously made by people who knew their ****. The facade of American politicians being essentially incompetent is just that - a facade. The people who are in charge of policy aren't the talking heads on TV. There is actual intelligence behind the throne.

But, intelligent and well-educated though they might be, US strategists are, at the end of the day, still just people; and people make mistakes. Their biggest mistake was believing that China could be subjugated by their financial machine, the same way other countries have been - and to be fair, for a while, it looked like China was going that way. But the rise of Xi Jinping - a guy who by all accounts was a socialist fundamentalist who "did not care about money" - was not expected. The sudden about turn by China - getting rid of entrenched capital interests, going after private power brokers, eliminating foreign agents and the deep culture of private-public corruption that had thrived before 2012 - caught them by surprise.

Although mainstream media regards Trump as the guy who did a 180 on the relationship, 2012 was the actual moment when US plans for China came crashing down and relations switched to being fundamentally antagonistic. The US grand strategy assumed that no country could look at the state of the world and think that it could take on the US; that all would recognize the futility of challenging US hegemony; and that the various examples of failures - the USSR, Japan, Germany, the EU, etc. - would sufficiently discourage any who might try.

But they were wrong.

Mostly agree but a few parts to expand on.

The big thing is the finance part, that dominates everything else. Soviets and Japan spent a ton on research too, but it ended up either bankrupting them, being taken away via forced acquisitions or just by burying the results of the R&D via market control. The finance part enables everything else. There's 1 more thing: control of standards. If the market is the game, industry standards are the rules. Whoever makes the rules gets the gold, reinvesting into the finance part, while knocking down competitors who don't make compatible products.

Despite this financial focus, however, the US never neglected its R&D - which is how you can tell they actually have a strategy and isn't just being greedy. R&D is fundamentally a loss making enterprise, especially in the short term; but the US, contrary to the stereotype of dumb Americans, spent trillions on it. This allowed them to, for decades, control 90+% of "new technology" through having the best research institutions, strong industrial-academic-military fusion, and the best venture capital environment in the world.

In the past 20 years their R&D spending has been wildly inefficient and focused on their monopoly sectors like biotech that can only survive by the largest scale transfer of capital from the people to the biotech industry in the world for basically no marginal gain in life expectancy and still suffering problems like infant and maternal mortality.

This lead in "new technology" then allowed the US to create new industries that they automatically dominated - like computers, smart phones, the internet, AI, EVs, etc. - and in so doing, create an "innovation monopoly"; hence the stereotype of US companies being particularly inventive even though it actually is just their R&D spend is so much larger than other countries.

It seems they more dominate in things where image dominates over specs. Things where looking good to ordinary customers is more important than cold hard specs that sophisticated industrial customers look for.

1st full touchscreen smartphone? Not Apple. LG Prada, 2006. Too bad LG is Korean and they don't have the slick marketing of Apple. Now LG is out of the smartphone business despite being first.

They don't dominate EVs and they never invented EVs.

Please, Log in or Register to view URLs content!

Only the Nissan Leaf was as early (sales started 2010), and was less viable.

At that time, Tesla was making the Roadster, a hobbyist sports car basically built by hand. The first Tesla equivalent to the BYD E6 was Model S that released to the public in 2012.

Please, Log in or Register to view URLs content!

To tie in to the EV failure, they also failed to control the new energy market. They thought they were going to be the ones dominating renewables and EVs, and using that to control 3rd world countries. You can see that they had the intent to do this through all their ads and R&D funding in the 2008-2016 era where there were so many ads and R&D proposals and shit based on renewable energy, batteries, etc. Look at all the news from this time, how the Obama administration was funding Solyndra, A123, etc. This is even in the popular media of the time - see Earth 2100 which was a post apocalyptic climate change docu-drama putting the blame of climate change on China lmao... Yet now all the climate change worry got quietly shelved when they realized they were losing.

So to summarize, underestimating Chinese political resolve was not their only error. They failed to capture an entire major new market trend away from fossil fuels in all aspects.

 

[chgough34]

US industry R&D is broadly distributed across a diverse range of businesses with software publishers, computer system designers, chemical firms, machinery firms, semiconductor and electronic component firms, etc, etc all making up shares. There is no specific firm sector that dominates; it’s very diffuse. See Table 4.

Please, Log in or Register to view URLs content!

 

[FairAndUnbiased]

More on the 2010's peak of western renewables R&D because they will always quit whatever they're not good at:

Decline in the EU after a 2011 peak

Please, Log in or Register to view URLs content!

Decline in the US after a 2009 peak; 2024 is a request not final spending.

Please, Log in or Register to view URLs content!

 

[Eventine]

Mostly agree but a few parts to expand on.

The big thing is the finance part, that dominates everything else. Soviets and Japan spent a ton on research too, but it ended up either bankrupting them, being taken away via forced acquisitions or just by burying the results of the R&D via market control. The finance part enables everything else. There's 1 more thing: control of standards. If the market is the game, industry standards are the rules. Whoever makes the rules gets the gold, reinvesting into the finance part, while knocking down competitors who don't make compatible products.



In the past 20 years their R&D spending has been wildly inefficient and focused on their monopoly sectors like biotech that can only survive by the largest scale transfer of capital from the people to the biotech industry in the world for basically no marginal gain in life expectancy and still suffering problems like infant and maternal mortality.


It seems they more dominate in things where image dominates over specs. Things where looking good to ordinary customers is more important than cold hard specs that sophisticated industrial customers look for.

1st full touchscreen smartphone? Not Apple. LG Prada, 2006. Too bad LG is Korean and they don't have the slick marketing of Apple. Now LG is out of the smartphone business despite being first.

They don't dominate EVs and they never invented EVs.

Please, Log in or Register to view URLs content!

Only the Nissan Leaf was as early (sales started 2010), and was less viable.

At that time, Tesla was making the Roadster, a hobbyist sports car basically built by hand. The first Tesla equivalent to the BYD E6 was Model S that released to the public in 2012.

Please, Log in or Register to view URLs content!

To tie in to the EV failure, they also failed to control the new energy market. They thought they were going to be the ones dominating renewables and EVs, and using that to control 3rd world countries. You can see that they had the intent to do this through all their ads and R&D funding in the 2008-2016 era where there were so many ads and R&D proposals and shit based on renewable energy, batteries, etc. Look at all the news from this time, how the Obama administration was funding Solyndra, A123, etc. This is even in the popular media of the time - see Earth 2100 which was a post apocalyptic climate change docu-drama putting the blame of climate change on China lmao... Yet now all the climate change worry got quietly shelved when they realized they were losing.

So to summarize, underestimating Chinese political resolve was not their only error. They failed to capture an entire major new market trend away from fossil fuels in all aspects.

To be exact, the US does not necessarily create the first product of a new technology; but what they do very well is:

• Generate the original, key research. This is due to the strength of the academic institutions & funding. If you look at the story behind most modern technologies, it was typically invented in an US lab or with the help of US universities. This makes collaboration with America research institutions very attractive and is a major step in making other countries dependent on US technology. Logically, the US then used its innovation power to enforce its IPs across the globe, ensuring compliance and reliance.
• Get enormous amounts of venture capitalist funding for new classes of products. The rise of the US software industry is a great example. The rise of Elon Musk's companies - from Tesla, to Space X, to Open AI - are other examples. Due to its financial power, the US is able to just throw cash at promising start ups; which other countries simply cannot compete with, hence their retreat to lower margin industries.
• Off load mature industries to strategic partners whose economies and politics they mostly maintain control of. This is the "Japan story" and the "South Korea story" and the "Germany story" and so on. The US recognizes it does not have the ability to maintain a complete supply chain in everything, and to its credit, it historically did NOT waste all its money on trying to do so via subsidies. Instead, it allowed industries like electronics manufacturing, chips manufacturing, and most heavy industries to go to other countries.

The third of these is where the US arguably made its greatest mistake. Where previously, the US out sourced industries to countries - like Japan, South Korea, Germany, etc. - that were effectively its vassals, with China it took a risk in out sourcing to a country that wasn't yet a vassal, but which the US, in its over confidence, thought it could effectively subjugate. But China wasn't like the other countries the US had out sourced industries to. China had a mind of its own.

Now, I agree that the EV industry is a great example of the US miscalculation, but my take on it is not a failure of the US to invest - much of the key technologies behind EV, once again came from US universities - but rather its failure to stop the momentum of Chinese manufacturing after realizing that Xi Jinping wasn't going to just follow orders.

The fact is, by the time EVs became a serious product, the US had already lost much of its automobile manufacturing capabilities - the famous Rust Belt centered around Detroit being a cultural symbol of that process. Making the US the center of EV manufacturing was never a practical goal.

But, I think, the US figured it could do the same thing it did in smart phones, which was capture most of the product value through dominating the 1) high-end branding 2) high-value components and 3) IPs & technologies, while doing the actual manufacturing in cheap Asian countries. It definitely had chance to do so with Tesla, since Tesla was, for a time, way ahead of its global competitors in branding, technology; and it was able to keep margins high and costs low by manufacturing in China, the same way Apple did.

Where it all went wrong for the US, however, was in 2) and 3). There, China proved to be far more competent than the US thought possible in its take over of batteries technology, while at the same time, subjugating China became much more difficult than the US thought it'd be. Where a Japan might have been given the Plaza treatment and forced to yield its high technology and IP to US investors, China did the exact opposite and told the US to **** off. With neither the option of manufacturing EVs itself, nor the option of subjugating the country that could do its manufacturing, the US is left with no choice but to sanction China - as China showed the cracks in the US grand strategy that is, in fact, leading to its reevaluation in the halls of power.

This is the reason why you're seeing so much talk about "bringing back manufacturing to the US"; because the powers behind the throne are witnessing, for the first time, the limits of their strategy - when a country they DON'T control refuses to be bought out, and can keep up on the R&D & marketing front. For US strategists, it's a new world.