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🙄 All the US is doing is bifurcating the global economy. China will just do business elsewhere.
I kinda think that’s the plan. The US beat the Soviets that way, they probably think they can repeat that success. Population trends imply this might well work out for the US, but then again AI and Climate Change are real economic wild cards.
I am honestly not sure how much the US would care if China did less business with them, I think lots of people would actually be happy about that after the supply chain issues seen with COVID19.
The US doesn’t want China replacing the US in other countries, though, because that still means less business for the US.
I don’t think this is going to play out the same way it did with the Soviets. The Sino-Soviet split happened specifically because China could see what the United States was doing and how it was going to win the Cold War, so they played the long game and made themselves an essential part of the global economy. I guess it all comes down to whether or not China is ready for this - and it looks like they are.
I’m just not as convinced that China is as essential going forward as they were for the last 40 years or so. There’s a bunch of reasons for that. But as to other countries wanting to do business with them there’s a lot political going on too.
- China isn’t cheap labor comparatively anymore. A lot of low skill has moved to India, Vietnam, etc.
- We saw several movements of manufacturing, I see no reason it can’t move out of China just like it did elsewhere chasing either cheaper labor or better supply chains or more amenable political systems.
- China is having all sorts of economic woes in their property and bank crisis.
- China is going to go through a demographic contraction like Japan did starting in the 90s. It’s going to be on a larger scale.
- China isn’t a better partner than the west for developing nations. It’s proven it also just exploits for raw materials and the like.
- The US and Europe after COVID see manufacturing as the strategic issue it always was again, so they want to move stuff closer or back into their countries.
That said, I think a lot of people overestimate how much the US needs China. There are plenty of countries that would step up and be happy to get any set of consumer spending from western countries IMO. I think a lot of multinationals could make it the next “offshoring” cycle to move production from China to Mexico, India, etc etc. The other thing people forget is the west can and does play dirty too.
Like I said - all that would make it seem like just assuming China has a long term plan that is going to obviously beat the US is buying their propaganda IMO. The bigger issues though are the wildcards - will LLM AI actually provide a huge productivity boost again and let China manage their shrinking population in terms of economic output? Will it do it in a way that doesn’t also advantage using the enhanced automation within Western countries vs China’s previous inherent cheaper labor due to lots and lots of people?
Will Climate Change make it more and more difficult to have a global shipping network, making it even more expensive to have a world manufacturing hub in the future? Will the US Navy keep patrolling the seas to prevent piracy?
But back to being an essential part of the global economy. China doesn’t have a lot of settlement networks outside China that third parties are using. China doesn’t even let you take Yuan out of the country in most cases, even if someone wanted to take it in payment. So China isn’t a big Finance player outside their borders. COVID already showed that we can survive if China stops shipping stuff for a while, and I think that will get more robust and diversified as time goes on.
China doesn’t even let you take Yuan out of the country in most cases, even if someone wanted to take it in payment.
Just two weeks ago China and Saudi Arabia signed a ¥50 billion currency swap agreement lol
I mean, as a normal person, I can’t earn Yuan in China and then convert to USD when I leave(at least this was the case for a long time), but the reverse isn’t true. If you can’t convert into and back out of a currency, I question how much it has to do with the global economy. A government currency swap is like swapping commodities, it isn’t doing anything for other countries.
I must be out of my depth! Yuan is traded for dollars every day and there’s a current scheme where it’s traded/invested in the CFETS basket of 24 national currencies they do business with, so I can’t make heads-or-tails of what you’re talking about.
