In the last post “Trump, Biden Policies Shifted Trade from China, Study Shows,” voanews.com, (read again if needed) we were talking about China sneaking its parts into the US through Mexico and Vietnam. The VOA article is the same as shown on Bloomberg. As you read that post, I think you will see I had real issues with being able to sneak the same Chinese parts out of those countries and into the US. Furthermore, for either country to manufacture those parts; there is a process and a raft of procedures and processes which must be certified for automotive and other industries as well. Could it happen? Not without some people knowing these are Chinese parts. There is a huge liability if these countries are making them plus they have to tool up for
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In the last post “Trump, Biden Policies Shifted Trade from China, Study Shows,” voanews.com, (read again if needed) we were talking about China sneaking its parts into the US through Mexico and Vietnam. The VOA article is the same as shown on Bloomberg. As you read that post, I think you will see I had real issues with being able to sneak the same Chinese parts out of those countries and into the US. Furthermore, for either country to manufacture those parts; there is a process and a raft of procedures and processes which must be certified for automotive and other industries as well.
Could it happen? Not without some people knowing these are Chinese parts. There is a huge liability if these countries are making them plus they have to tool up for them. It is not as easy as it sounds. If you read “China’s economy is in desperate need of rescue” below, China appears to be having economic issues. To my knowledge, trade was its biggest money maker. There is a shadow bank issue. Banks could also be suffering due to a loss of trade too.
Something to think about.
China’s economy is in desperate need of rescue, economist.com,
The headlines keep getting worse for China. Consumer prices are falling. America is shunning exports from the country and restricting investment in it. China’s trade with its best customer and biggest rival shrank by a fifth in July compared with a year earlier. The country’s property sector, which has driven more than 20% of its GDP in recent years, is teetering. Developers, which carry debts worth about 16% of GDP, are struggling to meet their obligations. Two of them, Country Garden and Sino-Ocean, have missed bond payments. Investment products sold by Zhongrong Trust, which are probably exposed to property, have failed to pay out.
These reports have been accompanied by even scarier metaphors. China’s economy is a “ticking time-bomb”, according to America’s President Joe Biden, because of its ageing workers and unemployed young. Others think it is suffering from “long covid” because of the private sector’s “immune response” to Xi Jinping’s meddlesome rule. Many worry that China faces “Japanification”—a combination of debt, deflation and demographic decline—in the long term and a “Lehman moment” in the more immediate future, as defaults cascade through the shadow-banking system.
It is a disorientating state of affairs. For 40 years Chinese officialdom’s commitment to growth was never much in doubt. When China began its reform era in 1978, gdp per person was only $2,000 at purchasing-power parity, which adjusts for differences in the cost of living. More than 70% of the country’s workforce toiled on farms. Almost 90% suffered in abject poverty. Only 12 firms were permitted to trade across borders. The millions who worked in state-owned factories were saddled with “obsolete and dysfunctional products”, according to Thomas Rawski of the University of Pittsburgh and his co-authors, such as “transformers that failed to keep out rainwater” and “sewing machines that leaked oil onto the fabric”.
Market reforms meant managers “switched from politics to business”, as one of them put it. China’s gdp per person now exceeds $20,000, above the global average. The most wretched poverty has been eliminated. Those 12 trading firms have been succeeded by tens of millions of others, turning China into the world’s biggest exporter of goods by 2009, and perhaps its biggest exporter of cars this year. The country’s manufacturing gdp exceeds America’s and the European Union’s combined, churning out chips, ships and industrial sewing machines (60m leakless ones in the past ten years). In its combination of scale and speed, this economic revolution has no precedent.
The transformation included a remaking of China’s urban landscape. From 2010 to 2020, the country added more than 140m units of housing to its cities, according to Morgan Stanley, a bank. In just three years, it produced enough cement to turn the whole of Britain into a car park. The amount of living space per person increased from a cramped 27 square metres (like the eastern half of Europe) to a more comfortable 35 (like the western half), according to calculations by Rosealea Yao of Gavekal Dragonomics, a research firm. Chinese residential property became one of the world’s largest asset classes, worth over $30trn by the end of 2019.
China’s miracle is long over. Its economy has matured. Its workforce is shrinking. Fundamental demand for new property in China’s cities, driven by people’s aspirations for a first home or better digs, has passed its peak. For China’s leadership, the pursuit of prosperity must now compete with other goals.China’s economy is in desperate need of rescue (economist.com)
The question now is whether the next phase is moderate or malign. China’s strict “zero-covid” policy played havoc with its economy last year. Thus hopes for this year were high. China’s reopening released pent-up demand for the goods and services it was hard to enjoy when a single infection could imprison an entire city block. It also cleared a backlog of export orders and allowed a flurry of home purchases in China’s more expensive cities. Some private-sector economists raised their growth forecasts for the year to a jaunty 6%.
This bout of spending was, however, considerably briefer than hoped. And, crucially, it did not lift morale sufficiently to sustain a broader recovery of spending. In April consumer confidence fell back to last year’s lows, according to the National Bureau of Statistics, which promptly stopped releasing the figure (see chart 1). Foreign direct investment all but vanished in the second quarter, falling by 87% year-on-year to $4.9bn, as multinationals repatriated their earnings rather than reinvesting them. The Shanghai Composite, a benchmark stock index, is down by about 5% compared with a year ago, when the memory of Shanghai’s torturous lockdown was still fresh. Prices for existing properties in China’s 100 biggest cities have dropped by 14% compared with their 2021 peaks, according to Beike, a broker. In the smaller cities, where price information remains patchy, things are probably worse.
Many economists now expect growth to meet the government’s target of “around 5%” only because the word “around” gives it some wriggle room. Slowing growth has also been accompanied by declining prices and a weaker currency. The combined effect could wipe trillions off the dollar value of China’s gdp. In the past four months, for example, Goldman Sachs, a bank, has slashed its forecast for this year and next by a combined $3trn.
For some observers, there is little hope of improvement. Adam Posen of the Peterson Institute for International Economics, a think-tank, has suggested that China’s economy is suffering from something akin to “long covid”. Draconian and arbitrary lockdowns in 2020-22 ruptured people’s faith in Mr Xi’s meddlesome party. Households and entrepreneurs can no longer assume that the party will not bother them if they do not bother it, he argues. Therefore private investment is tentative, purchases of consumer durables are weak and bank deposits are unusually high, as people self-insure against an uncertain future.
Confidence has also suffered as a result of the “regulatory storm” that struck after 2020, humbling China’s online platform companies, such as Alibaba and Meituan, and all but killing the ed-tech industry. The succession of crackdowns and lockdowns left the impression that the government was newly willing to sacrifice economic growth for other ends. Whereas Mr Zhu urged China to keep growth at 8%, Mr Xi insists that it must be “high-quality”, by his own evolving definition. For entrepreneurs, that requires an uncomfortable switch from business to politics.China’s economy is in desperate need of rescue (economist.com)
Policies Shifted Trade from China? Angry Bear