China’s Big Troubles: Its Days As Global Go-To Manufacturer May Be Coming To An End
Employees work on the assembly line of auto parts manufacturer Chongqing Sokon Industry Group in … [+] VCG via Getty Images China’s days of being the Western world’s go-to manufacturing hub may be coming to an end. This has serious ramifications for China, and the world. Depending on where you focus, this is a good thing, or a bad thing. In fact, it’s probably both. Factory orders in China fell unexpected in April, though this is likely due to China just gearing up after a disastrous Zero Covid policy that led to civil unrest and thousands of layoffs in the manufactured electronics and tech sectors, plus numerous small business closures across the country. For those with contacts in China, stories of laid off young people struggling to afford their apartments, taking on two jobs in gig economies, or becoming escorts in karaoke bars is becoming commonplace. This is not the country that the CCP once held together with promise of opportunity and quick climbs up the Chinese social ladder. This is starting to turn into America of the late 1990s-2000s, reeling for China’s take over of American tooling and steel, textiles and furniture manufacturing. Many people here know what that feels like. China’s GDP is the worst it’s been in a generation, growing just over 4%. Even though China’s Purchasing Managers Index, a measure of manufacturing demand, fell from 51.9 in March to 49.2 , it’s not an unheard of number for China and shouldn’t scare investors too much. Workers assemble wigs and hair extensions for export to the United States in Guangan, in southwest … [+] AFP via Getty Images ‘Redfall’ Reviews Are Here, And They Are A Bloodbath Apple Watch Series 9 Could Gain Long Awaited Feature New Leak Claims WWE Raw Results: Winners And Grades After 2023 WWE Draft Concludes The problem is geopolitics. That should scare China’s nnvestors more. They know the drill already. Companies are slow walking out of China because of those tensions. This includes Chinese companies investing in Southeast Asia to avoid trade tariffs, sanctions, and growing political risk. Investing Digest: Know what’s moving the financial markets and what smart money is buying with Forbes Investing Digest. You may opt out any time. By signing up for this newsletter, you agree to the Terms and Conditions and Privacy Policy To keep its business with the Americans (and to a lesser extent, the Europeans) Chinese companies are moving off the mainland. Their multinationals like Jinko Solar – one of the largest solar manufacturers in the world — are doing to China what American multinationals once did here – offshoring middle class jobs. In a country with roughly 900 million workers , many of whom are blue collar and not about to “learn to code”, these job losses tear at the social contract between the CCP and its people. Roughly 17% of Chinese people have a college degree compared to around 36% in the U.S., according to Chinese and U.S. government stats. Either China figures out a way to consume what it produces at home rather than relying on the U.S. consumer, or Beijing makes it less attractive for companies to set up shop in Vietnam. If they cannot do those things, the bloodletting will continue. If this trend goes on, it should be seen as a harbinger of worse things to come. China doesn’t do a good job protecting its people in times of trouble. It has a weak unemployment system . You can get thrown to the dogs in China. If you’re a migrant worker, those metaphorical dogs are even bigger. The factory floor of Chinese clothing manufacturer Bosideng in Jiangsu province in 2019. They used … [+] AFP via Getty Images Why are Companies Leaving China? Lots of reasons. It depends on the sector. The solar and home furnishings industry have been leaving mainland China to set up shop in Southeast Asia since at least 2013 when the U.S. government put anti-dumping and countervailing duties on a number of companies in that space. Fast forward to 2018, President Trump puts tariffs on over $300 billion worth of Chinese imports under Section 301 trade laws. He also puts tariffs on all of Chinese solar companies under Section 201 trade laws. The U.S. trade deficit with Vietnam today is bigger than our trade deficit with Germany . That’s deceiving for two reasons. One, Vietnam buys almost nothing from us. It is a poor country. Two, most of those exports are from Chinese companies. […]
