If there is one thing in common that unites two US presidents in opposition to Donald Trump and his successor, Joe Biden, it is their warnings about the strategic threat of China. Both leaders have sought ways to partially “decouple” the world’s two largest economies and reduce America’s dependence on China. Chinese President Xi Jinping, meanwhile, has sought to prevent American business with his “Made in China” policy, embracing “independence and self-reliance” as the creed of the Communist Party.
And there has been a significant separation in the high-tech and social media sectors, thanks in large part to China’s strict censorship policies. Facebook has been banned in mainland China since 2009 for failing to comply with Chinese censorship regulations. Google has also mostly given up, and Amazon recently announced that it would shut down its Kindle operations in China. Beijing’s tough restrictions on information sharing, coupled with threats from the US, have forced a host of Chinese high-tech companies, including Didi, Alibaba, Baidu, and electric carmakers Nio and Xpeng Motors. , to face the possibility of being “excluded” from the US capital. markets. As of June, the US Securities and Exchange Commission (SEC) identified 150 companies, mostly based in China, that could be delisted, with the SEC saying they violate auditing rules of USA
But in terms of overall trade in goods and services between the US and China, the decoupling is not yet happening in any significant way, far from it. And it is not likely to do so, despite the trade war initiated by Trump and supported, to some extent, by Biden.
From agricultural products, for which China has been the United States’ largest market, to a variety of raw materials and components for manufacturing, the economic relationship remains deep and is deepening in many sectors. In May, the US Department of Agriculture reported that agricultural exports to China alone were forecast to hit a record $36 billion this fiscal year, more than double the $17 billion in fiscal 2020.
On paper, the US trade deficit with China has narrowed significantly, falling $8.5 billion to $34.9 billion in April, according to US Commerce Department data released this month. But it’s a bit of a pipe dream. Trade experts and economists say that partly reflects China’s decision to divert its US exports through other nations, especially East Asian economies like Vietnam, Malaysia, Indonesia and Taiwan, where Chinese-owned companies are dominant. . And in general, the US trade deficit has skyrocketed in the last two years, particularly with those countries to which Beijing has diverted its operations, as well as others closer, such as Mexico, which have received a boom in Chinese business investment. in recent years. Reuters reported this month that China had overtaken the United States in trade with Latin America.
Meanwhile, US companies continue to invest heavily in China, and are becoming more open about their intention to continue doing so. In a speech in Washington this month, Evan Greenberg, a former president of the US-China Business Council, called decoupling an “economic impossibility” and urged US companies to redouble their efforts to enter the Chinese market. Decoupling, Greenberg said, will only “feed China’s worst instincts” while also undermining America’s global competitiveness.
“The less China relies on US-produced technology, the less leverage the US will have in influencing how China pursues its interests over time,” he said. According to a new survey conducted by the American Chamber of Commerce in Shanghai of more than 300 American companies in China, 60% reported an increase in investment compared to 2020.
The notorious “China shock” caused by the rush of American producers abroad may have led to the loss of millions of American jobs, especially in manufacturing, in recent decades, helping to trigger the rise of anti-China populism. -China. But many economists say a strict decoupling, or complete separation of the two economies, would be devastating for both nations.
“Economically speaking, it is a win-win scenario for both China and the West,” write Allen J. Morrison and J. Stewart Black, two trade experts, in an upcoming book, Enterprise China. “While not the same as mutually assured destruction in a nuclear war, strict decoupling is an outcome that few rational people would want.”
However, the real bottom line for continuing US-China trade is profit, executives say. “Why would we want to disassociate ourselves from this gravy train?” said Doug Barry, a spokesman for the US-China Business Council, a nonprofit organization that lobbies for US companies in China. The result is a lot of financial sleight of hand. “US executives will tell you off the record how much money they’re making, how good the Chinese market is,” Morrison said in an interview. “But they bury this data in their financial reports. They call them ‘Asia-Pacific’ revenues. They move profits, they obfuscate what’s going on, because it’s not politically correct.”
The mixed fortunes of Alibaba, the Chinese-owned digital giant, are evidence of how complex the problem is. While it may be under pressure from Beijing to separate its stock listings from US financial markets, Alibaba is still selling record amounts of US goods to the Chinese market on its e-commerce platforms, and in the wake of the COVID pandemic -19 and other trends, digital retail is becoming the trend of the future.
“In e-commerce, we don’t see much evidence of decoupling,” said Eric Pelletier, Alibaba’s head of international government affairs. Overall, US goods exports to China reached an all-time high in 2021. According to a recent study by NDP Analytics (and partially funded by Alibaba), US companies generated around $40 billion in revenue from products sold to Chinese consumers, primarily electronics, apparel, leather goods, and personal care items, through Alibaba in 2020.
Most of the ongoing trade relationship is driven by the rising dollar, which will only make it harder to disengage, said Robert Scott, a longtime expert on US-China trade at the progressive Economic Policy Institute. Thanks to the tightening of the US Federal Reserve and the large-scale purchase of US financial assets as a safe haven, it has become much more expensive in recent months to sell US goods abroad and, once Plus, buying Chinese products is cheaper.
“The fundamental problem that we haven’t faced is the fact that the US dollar is now 25 to 30 percent overvalued,” Scott said. “This has continued to be driven by capital flight to the United States during the pandemic and also by the legacy of currency manipulation by China. That has made it cheaper for US companies to import from the rest of the world, and at the same time, the pandemic has decimated US domestic retail chains. This is why so many malls in the US are closing.”
This trend, in turn, will further fuel the dominance of online shopping giants like Amazon and Walmart, which rely on cheap goods from China and other low-wage nations.
With the support of the Biden administration, Congress has sought to promote some decoupling with bipartisan legislation. But the House and Senate have different bills. What began more than a year ago as a bill to help US semiconductor makers build in-house capacity with government funding has spiraled into a jumble over whether other industries should be supported as well, and whether Washington must create a controversial industrial policy.
The retreat from the business sector is at least moderating the debate in Washington. “For the most part, in recent years, the business community has really ceded the debate to the China hawks in Washington,” said William Reinsch, a former US deputy secretary of commerce and an expert on China trade. “The result is that the inmates control the asylum as far as the public interest is concerned.”
Under inflationary pressures, the Biden administration has begun to tone down its rhetoric against Beijing slightly and is considering lifting some of the tariffs on China imposed by Trump. “The United States does not want to separate China’s economy from ours or from the global economy, although Beijing, despite its rhetoric, is seeking asymmetric decoupling, trying to make China less dependent on the world and the world more dependent on China. China,” said the U.S. Secretary of State Antony Blinken said in a major speech at the end of May.
Biden has also begun to address the problems created by dramatically conflicting agendas: Having made climate change a top priority, he wants to convert the US economy to renewable energy, but at the same time refused for most of his 17 months. in office to lift tariffs on solar technology, which China dominates. Finally, in early June, Biden declared a 24-month tariff exemption for solar panel products from Southeast Asian nations, even though many of the panels are made in China.
US executives still want government money to support decoupling. This month, more than 100 chief executives, including those of Alphabet, Amazon and Microsoft, urged Congress in a joint letter to pass legislation aimed at boosting US competitiveness against China, including in semiconductor manufacturing.
But with Chinese growth slowing dramatically under Xi’s hard-line policies, there are some signs that China is also rethinking its own approach. Restrictions on financial disclosures that would have forced Alibaba and other companies off Wall Street are reportedly being eased. The world’s largest property and casualty insurer, Chubb, of which Greenberg is CEO, will soon become the first foreign company to insure majority ownership of a Chinese insurance partner, Huatai Insurance Group, increasing its stake to 86 percent this year.
However, some degree of broader decoupling is also starting to show up in the trade numbers. Despite the slowdown from the COVID-19 pandemic, which dramatically increased demand for cheap consumer goods, US goods trade with China remained below its 2018 peak in 2021. “Given the explosion in demand for durable and other consumer goods in the wake of the pandemic, I would have bet my house that US-China trade in goods would have hit a new record in 2021 if it weren’t for tariffs and restrictions.” said Nicolas Lamp, a former World Trade Organization dispute resolution lawyer.
Some experts believe much more decoupling will come slowly on its own, particularly as human rights concerns begin to affect consumer decisions. Even Walmart, the world’s largest retailer, which once forced US producers to relocate to China and other low-wage economies to ensure rock-bottom prices for its American customers, has been embarrassed in recent weeks when it tried to ban exports. of Xinjiang in compliance with a new US law that seeks to punish China for brutally oppressing the Uyghur minority. Chinese social media erupted in anger at reports that Walmart had stopped stocking Xinjiang products at its China-based Walmart and Sam’s Club stores.
“What you are seeing is an acceleration of at least a 10-year trend of companies thinking about shortening their supply chains due to increased political risk [and] volatility in shipping costs due in large part to energy costs. Reinsch, who is now with the Center for Strategic and International Studies, said in an interview. “But those are pressures that are going to grow. Consumers, in their own way, are ‘waking up’. But we’re talking about sand escaping from the bag, not a sudden and measurable move out of China.”
“Decoupling is not just about reducing current trade and investment, but also future trade and investment,” Lamp said in an email. “Some of the toughest restrictions,” he said, are about things that haven’t happened and won’t happen, like China’s Huawei being included in US 5G cellular networks.
Yet even there, American companies are looking for alternative solutions to staying in China. Facebook has continued to “raise revenue through advertising from Chinese companies,” Business Insider reported in December 2021, adding that 40 percent of Apple’s net sales came from China the previous quarter. Major online search providers, including Google, still sell billions of dollars a year worth of ads to companies based in China.
And there are dangers for US policy if the push to disengage goes too far, too fast. So far, there is no clear strategy from Washington, experts say. “The US technology base, critical to national well-being and power, is completely entangled with China in a larger technology web that spans the globe,” Jon Bateman of the Carnegie Endowment for International Peace concluded in a new study. . “Without a clear strategy, the US government risks doing too little or, more likely, too much to curb technological interdependence with China. In particular, Washington may accidentally set in motion a chaotic and uncontrolled decoupling that it cannot predict or control.”
As Greenberg noted in his speech, “We’ve done this experiment before. Previously, the United States unilaterally prohibited the sale of satellite technology to China. The result: American companies lost revenue, European competitors filled the gap and made a profit, and China got the capabilities it was looking for.” Indeed, a generation ago, during an earlier period of toughness on China, US lawmakers did permanent damage to the satellite industry when they banned sales to China. Two years after Congress placed new restrictions on commercial satellite sales, the US share of this global market had shrunk from 75 percent to 45 percent.
Similar risks exist in the semiconductor sector, which is made up of complicated supply chains that stretch from Beijing to the heartland of the United States and add value to innovation in the field from both the United States and China. What happened to satellites could happen to semiconductors. A 2020 study by the Boston Consulting Group found that a serious decoupling could hand the lead in semiconductors to South Korea in the near term, and to China in the future.
Breaking up, it turns out, is hard to do.
What is decoupling in procurement?
Decoupled production is when a company separates production from ideation and media buying. On the same subject : FSU joins the celebration of pioneering North Florida Innovation Labs.
What is the decoupling process? Inventory decoupling involves separating inventory within a manufacturing process so that inventory associated with one stage of a manufacturing process does not delay other parts of the process. In simple terms, decoupled inventory is a kind of safety inventory.
What is an example of decoupling?
Therefore, decoupling occurs when different asset classes that normally rise and fall together start moving in opposite directions, such as one rising and the other falling. An example could be seen with the prices of oil and natural gas, which normally rise and fall together.
What is decoupling in supply chain?
Decoupled inventory, also known as decoupled stock, refers to the process of separating inventory within a manufacturing process to prevent one manufacturing stage from slowing down another manufacturing stage. Read also : Why dealing with it will hurt your business.
What is decoupling in simple terms?
Definition of transitive verb uncouple. Read also : 10 epic Chinese video games that are not ‘gendered effect’ you should try. : remove the interrelation of : separate.
What is the decoupling event?
In cosmology, decoupling refers to a period in the development of the universe when different types of particles lose thermal equilibrium with each other. This occurs as a result of the expansion of the universe, as their interaction rates decrease (and mean free paths increase) up to this critical point.
When did the decoupling occur? Neutrino decoupling took place about a second after the Big Bang, when the temperature of the universe was about 10 billion kelvins, or 1 MeV.
What is the era of decoupling?
The time, some 300,000 years after the Big Bang, when matter and radiation, which had previously been tightly coupled, virtually stopped interacting, electrons were able to bond with nuclei and form atoms, and photons were able to spread freely.
What was released during the decoupling stage?
The only photons (electromagnetic radiation or “light”) in the universe were those released during decoupling (visible today as the cosmic microwave background) and the 21-cm radio emissions emitted occasionally by hydrogen atoms.
What country buys the most from China?
The percentage of total Chinese exports for each importing country is also shown.
- United States: US$521 billion (17.2% of China’s total exports)
- Hong Kong: $313.1 billion (10.3%)
- Japan: $151.3 billion (5%)
- South Korea: $135.1 billion (4.5%)
- Vietnam: $125.8 billion (4.2%)
- Germany: $103 billion (3.4%)
Who imports more from China?
What are China’s biggest exports?
In 2020, China’s main export products were automatic data processing machines and components, followed by textiles, clothing and clothing accessories, mobile phones and integrated circuits.
Who is the largest buyer of Chinese goods?
At $20.49 trillion, the United States boasts the world’s largest economy and is China’s largest trading partner. Last year, the total value of bilateral trade between the two countries was $737.1 billion, with US imports from China valued at $557.9 billion and US exports to China valued at $179.3 billion.
