The dewy-eyed mentality that China is powerless in the face of our mighty consumer demand is what got us entangled in China's manufacturing sector in the first place. I think the pandemic has made it clear that what happens in China has an immense impact on the availability of goods in the USA and elsewhere. This is true whether we're talking about webcams, medical PPE, iPhones, or anything else that is made in China. If China were to shut down the exportation of ball bearings tomorrow, the entire world would notice.
If you don't consider this to be "leverage," then perhaps you can suggest another name.
China doesn't need any one country's corporations in order to survive. Even if what you're saying had been true 20 years ago, I think it's incorrect to believe that China has no leverage over corporations that do business in their massive manufacturing sector today.
China doesn't even need the West to be involved in HK, and they have acted to that effect. HK has become a much smaller contributor to their economy than it was when Britain ceded HK to China, in relative terms.
If Apple's assembly campuses in China shut down tomorrow, Apple will be unable to manufacture iPhones, but China would be able to absorb some of the redirected demand in the form of handsets from Oppo, Vivo, Huawei, Xiaomi, etc. Samsung would pick up a lot too.
If Boeing (which contrary to your zero-leverage thesis was strong-armed into opening a finishing plant in China) shuts down sales to Asia Pacific tomorrow, China will be able to take up demand in the form of aircraft sold by Comac. Even if not, a moratorium on Boeing purchases in China would tilt the Airbus-Boeing duopoly toward Airbus.
Apple generated $260B in revenue last year, and Boeing generated $77B. China's GDP was $27T (PPP). See the difference? Our companies need them, but they don't need our companies.
Even if the manufacturing sector were to disappear tomorrow, China would be a huge consumer market. Their buying power is a form of leverage. When you make them the world's factory on top of their substantial consumer activity, that gives them immense power to shape the economic behavior of foreign governments and corporations.
Why do you think that Apple acquiesces to China's government despite claiming to be pro-democracy and pro-privacy back in the States? It's not because China lacks leverage, that's for sure.
The first step to disempowering China is to accept reality; American consumption of Chinese goods has basically subsidized the growth of that country. Once we have accepted the problem, we can take steps to solve it.
Comac aircraft are barely even functional. They're death traps and which is why they're only sold in China to state-owned airline companies.
China has leverage over US companies, but that's not without consequences. China doesn't have leverage over the US though. US would be okay with some US companies losing out in China and using that as a tool to drive it's own companies out of China.
umm, no. to all of that. the mentality is that the reason we have china producing our crap vanished a long time ago, and the only reason we're still using them is because change has a high initial cost. they don't make high-tech complex things. they take our design and put up a factory to stamp it our. or they used to. now they tend to outsource it to lesser countries and collect their middle-man fee.
what you are talking about is short term pain that goes away in a year as the factory in china moves to a factory in india, and the supply cost of an iphone goes up. after that, it goes way down, because at this point, china is actually no longer cheap.
we don't need to 'disempower' china -who gives a crap about their power. we, 'the buyer' don't need to think about them, 'the seller.' we go to a different store, which results in short term supply costs, and long-term savings.
the power they have is they are a market. they can cut our companies out of that market. worked out great for the ussr. where i lived. we had 2 pulse dial phones. because no tone dial, and no call waiting. and no answering machine. in 1991. because the ussr closed that market to western companies.
let me ask you -how much do western companies care about that market, with chinese buying stuff from an american company, that was made in china? my wife is chinese. they don't buy it. they buy some local cheap fake ripoff. and the rich people who get that iphone? they'll still get it, as a status symbol, and either import it, or buy it overseas. apple still sold them one. except now it was made in india.
and short supply chains are not good. comparative advantage is good. a town that makes screws is good, and it makes them more efficiently, located near an iron mine. a town that makes glass is good -located near a lot of sand. shipping screws around from one large factory is a lot better than having to ship iron to fifty small screw factories, each of which is not running at optimal output, since demand varies. demand varies a lot less if you're making screws for 50 different industries, instead of for a microwave only. same reason mutual funds are a thing.
the reason china seems efficient is nine of the true cost is ever evident. it's all fake, it's all regulated by the government. chinese solar panels are a great example. cheap, not due to that efficient 'solar panel town.' because they lose money on each one.
instead of disempowering china, what we need is to focus on empowering ourselves for long-term cheaper stuff, and take that initial short-term hit on higher supply prices while we move production. and the tarrifs, the bans, and pissing off china with moves like in the article, so they start treating our companies like crap, is exactly the way to accomplish that. as far as our farmers selling their soybeans? demand goes down, plant something else.
If you don't consider this to be "leverage," then perhaps you can suggest another name.
China doesn't need any one country's corporations in order to survive. Even if what you're saying had been true 20 years ago, I think it's incorrect to believe that China has no leverage over corporations that do business in their massive manufacturing sector today.
China doesn't even need the West to be involved in HK, and they have acted to that effect. HK has become a much smaller contributor to their economy than it was when Britain ceded HK to China, in relative terms.
If Apple's assembly campuses in China shut down tomorrow, Apple will be unable to manufacture iPhones, but China would be able to absorb some of the redirected demand in the form of handsets from Oppo, Vivo, Huawei, Xiaomi, etc. Samsung would pick up a lot too.
If Boeing (which contrary to your zero-leverage thesis was strong-armed into opening a finishing plant in China) shuts down sales to Asia Pacific tomorrow, China will be able to take up demand in the form of aircraft sold by Comac. Even if not, a moratorium on Boeing purchases in China would tilt the Airbus-Boeing duopoly toward Airbus.
Apple generated $260B in revenue last year, and Boeing generated $77B. China's GDP was $27T (PPP). See the difference? Our companies need them, but they don't need our companies.
Even if the manufacturing sector were to disappear tomorrow, China would be a huge consumer market. Their buying power is a form of leverage. When you make them the world's factory on top of their substantial consumer activity, that gives them immense power to shape the economic behavior of foreign governments and corporations.
Why do you think that Apple acquiesces to China's government despite claiming to be pro-democracy and pro-privacy back in the States? It's not because China lacks leverage, that's for sure.
The first step to disempowering China is to accept reality; American consumption of Chinese goods has basically subsidized the growth of that country. Once we have accepted the problem, we can take steps to solve it.