Feels like this is a golden opportunity, and possibly our last chance, to re-onshore supply chains to the west. Will anyone take it, or will we just wait around until China sorts itself out and resumes its steady ascendancy?
> That is, if their government and society even survive the decade's transition as their quality of life stagnates and people begin to question the CCP.
That's about as likely as our government and society surviving the decade's transition, as our quality of life stagnates and people begin to question both Washington, their local state capital, and the mayor's office.
Youth unemployment for higher ed has been issue for years, reality is PRC scale is still generating more talent than it can absorb. QoL stagnanting like west is questionable, vast majority of PRC is still poor enough that modest income redistribution can push up their QoL for forseeable future. For example spending 90B / 10% of PRC's 900B growth from last year can double income of the 600M poor on 1000rmb per month. Realistically that will be titrated over years via various transfer programs so QoL for masses will keep ticking up. Top % of PRC human capita drives a lot of growth and education system is pumping out excess even after brain drain. The income disparity (thanks Deng) is so large enough that "common prosperity" drives should more or less maintain social stability vs west where new gens' have meaningfully degradeds QoL relative to western boomers. Meanwhile PRC also has highest savings rate in the world, parents in better position to care for themselves. Nor are there same expectation for social services from country that is poor before rich vs rich before old, i.e. Japan actually has to funnel massive state resources to take care of elderly because that's expected. Not to imply PRC will experience smooth sailing or reach western QoL standards, but income disparity and expections = PRC is structured to have sufficient talent and resources to (likely) handle the transition without stagnation. It's still going to be rough, and PRC will still be pressure cooker society, but IMO chances becoming stuck like JP is low. That's without going into how military/strategic posture benefits shedding 100s of millions of people have on import dependency while huge industrial base where 2% military spending allows effective aquisition pipeline. Bluntly, PLA military is currently massively modernizing on a budget but that's still enough to to keep accruing more favourable force balance over time since it uses comparably little resources (both funding and human capita) that it's one sector that won't stagnate. Room to even future increase in military budget is not out of the question.
You can distribute it to india,vietnam,south america but onshore isn't happening. Especially not in a pseudo-recession where you can't pass on cost to consumers like before (at least not more than what is already).
I think it is already too late. This should have been done 5 years ago, at least. There is no financial incentive to do anything in the US, and the infrastructure is worse than at any previous point in time. For this to change, the Federal government should plan and start investing enormous sums of money, at least as much as China did in the previous 20 years. I don't see this happening at least during this administration, which will make this impossible for another 3 years.
Rather than the Federal government turning to central economic planning, a better approach would be to remove the artificial barriers to domestic production.
While unemployment is indeed quite low, the labor force participation rate is extremely low; much lower than even the aftermath of the great recession[0]. There are plenty of additional workers in the US, the catch is that they aren't willing to work a demanding job for poverty wages.
If more companies were willing to treat and pay their employees well there wouldn't be a labor shortage. Corporate profits have been shattering records for decades now, so it's not like the resources aren't there. Unfortunately, many believe it's easier and more cost effective to whine about folks being lazy and wait for the Fed to crash the economy and generate a fresh supply of desperate labor.
I'm not so sure about that. I suspect the mismatch in labor participation rates pre vs. post COVID is mostly accounted for in early/normal retirements. All those boomers that they were warning were going to eventually retire just happened to do it at the same time. They won't be coming back to the labor market.
Anecdotally between my parents, aunts, and uncles I have eight relatives who retired in the past two years (between that ages of 55 - 65).
That's a good point, but the low unemployment is not a great sign for the US, unfortunately. The majority of these jobs are low wage positions. Factory jobs would be far more beneficial. Unfortunately it will not happen.
In reality, if the west views Russia as a threat, then inevitably conflict will arise. The western sanctions locked Russia out of the financial system, which Russia and China had been preparing for. So Russia switched to the Chinese financial system. At this point, Russia has tons of resources and is feeding the Chinese production. China in 2019 was producing 30% of the worlds goods[1].
With Russia locked out of the west and China looking to advance into Taiwan, I don't really see a way that long-term China doesn't cease to produce goods for the west. When they move on Taiwan, the west will sanction them and the west will be unable to produce a large number of goods. Alternatively, Taiwan will fall and be taken without a fight and the west will be subjugated by China.
> And I don’t understand why you comment so much about Russia, this is about China, no one cares about Russia
Because, as I stated, Russia and China signed a strategic partnership? They basically created an Eastern challenge to EU/NATO. They also are self-contained in that they can trade easily and can be less dependent on the West.
I do think a lot of people discount China's willingness to destroy it's economy and kill half it's population to achieve questionable goals. As you're article points out it's going to be really interesting watching China fall out of the top 10 of GDP if it really goes down this route. It was a poor country before but once the population gets a taste of success I can only imagine it ends in revolt.
This is patently absurd. That China would have a "willingness to kill half it's population" is something that only the heavily propagandized would believe.
Eh, 10 million here, 20 million there, I guess you have a point. Not such a big deal since there were 500 million more where they came from. Gotta break a few eggs, amirite.
Pushing Russia steaight into Chinese hands is a blunder of an epic scale. Now Chinese have one of the biggest raw resource and energy producers who cannot sell anywhere else but to them. Massive win for China, massive loss for the EU.
But why on Earth would China stop producing goods for sale to the West? Its a trumendous opportunity for making money
Thats the crux of it. Russia aligned with the EU would produce a superpower relationship that even China couldn't confront. This is intolerable to the USA, so: undermine the EU, it is...
I don't think that world would have any economy to speak of, in this case. That, or Taiwan would just share the fate of Hong Kong where it would be handed out.
No they won't, because fabs are long-term investments and anyone who onshores because of this crisis will be fucked over when things return to normal and their costs are suddenly many times higher than the ones of their competitors who stayed in China.
Re-onshoring requires massive, permanent subsidies from the government to be a realistic proposition, and it is far from clear that we have the will to do that.
Many fabs are not in China, and you can't just magically snap your fingers and build a chip fab.
The capital requirements are huge. You need vast quantities of ultrapure water. You need a friendly government that will look the other way to you dumping toxic waste somewhere. You need lots of highly technical staff. You need lithography machines that are some of the most complicated and expensive electromechanical devices made. And...lots and lots and lots of capital.
I'm also interested in this - is anyone working on it?
I know that in Australia we have Rode Microphones, who brought manufacturing onshore over 15 years ago and (according to this article at least) no longer import any Chinese parts except for some shockmounts. Also worth noting that since they brought production onshore, part rejection rates fell from 50% to less than 3%:
While it's nice to have microphones, it seems more critical infrastructure parts need to be made here. Apparently China completely dominates the world production of solar panels and solar parts, and I can't think of much that is more critical than power generation & supply:
I wouldn't know where to start with any of this myself (nor would I be the right person to do it), but I often think that if I changed careers, working in that area might be a direction I would look into. I love software but it is useless without the actual hardware devices it runs on.
I think you're blindsided by American media. COVID lockdowns are not nearly as big a problem as they are presented in the West. First of all, any lockdown is for at most a few weeks. Second, China has dozens of huge cities, and they are all working extra when a couple of cities are locked out due to COVID. The Chinese are doing this in a planed way that will have a minimal impact on the economy in the long run. The fall down of Chinese economy due to lockdowns is just another fantasy of US media.
As someone living in Shanghai and who experienced the lockdowns here, the US media (as biased as they may be) picture is much more closer to reality than what you are saying.
The economy is in worst shape since 1992, Food and beverage industry is expecting to lose third of it's companies, property market is collapsing and going down first time for ages, Apple moved production out of China first time ever, several Fortune 500s moved their "tech hubs" etc. out of China, smaller rural banks are going down and preventing people from getting their money out, third of European companies are considering moving production out of here etc. and all this is just tip of the ice berg.
Maybe the government will find a way out of this mess, but right now things are darkest they've been for a while and we are now hearing rumors there is going to be another massive lockdown.
To be fair, hasn't Apple dabbled with manufacturing in Vietnam and India for a while now? It would make sense for them to swap some more manufacturing out if they already have a base elsewhere. (Not trying to dismiss the rest of your comment just making an observation)
The supply chain problems in the US are caused by the lack of US infrastructure. The reason is simple: the amount of imports into the US increased a lot in the last few years, especially after COVID (check the trade balance numbers), but the infrastructure is lagging at least 10 years behind. These problems will get worse, and China cannot do anything about it.
Before any of the "data from china are fake" guy turning up, customs data can be collaborated with other country's data, do it with your U.S. or europe data to see whether imports from China have any significant change.
