The US and China Want a Divorce, but Neither Can Afford One
Three months into the international coronavirus pandemic, there are growing indications that the long marriage between China and the US– indeed between China and the industrialized world– is splitting up. The virus shut Chinese factories in January and February; then it exposed how reliant the US and Europe had ended up being on China for whatever from drugs to medical devices. That’s triggered “a rethink of just how much any country wishes to be reliant on any other country,” in the words of Elizabeth Economy of the Council on Foreign Relations. As another commentator put it pithily,” Sorry, Davos Man. Your China-led globalization is heading out of design like bell bottoms. “From Washington to Tokyo to Silicon Valley, policymakers and business executives are advising a divorce. Larry Kudlow, director of President Trump’s National Economic Council, recommended the United States” pay the moving expenses” of business to leave China. The Japanese federal government unveiled a$2 billion program to assist makers do simply that. Even before coronavirus appeared, more than 50 US companies prepared to move some production out of China, according to reports in 2015. HP and Dell stated they were aiming to shift 30 percent of their production somewhere else, and Apple directed its providers to see what might be moved to other countries. There’s a problem with these prognostications: money.
Cold difficult cash. Wanting, and even preparing, to relocate production, isn’t the like doing so. It would take trillions of dollars to relocate all those supply chains– cash that governments and business don’t have as the pandemic attacks their incomes. Rather, China and the United States are now like a couple who prepared on a divorce as a New Year’s resolution and now find themselves in a house they can’t offer, cohabiting with the barest of civility, attempting to gauge how long they can live under the exact same roofing system without going bananas. Sealed by twenty years and trillions of dollars of investment in building supply chains that run through China– producing whatever from T-shirts to high-end technology parts– the marital relationship has been checked over the past few years by growing stress over copyright defense and constraints on Western business doing service in China. Include to that the tariffs imposed by the Trump administration, the rising expense of doing service in China, and the federal government’s renewed hostility to outsiders. The imbroglio over Huawei– the Chinese telecom leviathan with an edge in 5G cordless devices and alleged links to the Communist Party– has been significant. It’s simply one piece of a multifaceted movement by both Western companies and federal governments to detach from China– and of China to remove itself from the West. And yet, here we are. As a current report by A. T. Kearney detailed, American manufacturing imports from China fell 17 percent in 2015. Figures from the US Census Bureau reveal an even steeper drop in January and February of this year, though last year’s numbers may be a better gauge of the brand-new normal. Still, that left those imports roughly at the level of 2016 or 2017, even as Chinese manufacturing exports to the rest of the world increased. The previous months have just strengthened the desire of business and nations to decrease their dependence on China, offered the vulnerabilities of disturbance and concentration that the pandemic acutely exposed.
The desire is clearly there. However not the cash. Foxconn, the Taiwanese electronic devices huge that builds most iPhones, in 2015 unsuccessfully looked for a buyer for its display-panel factory in Guangzhou. The rate? $8.8 billion. For one factory, making one product. The huge iPhone factory in Zhengzhou expense extra billions, and required more than$ 10 billion in local government initiatives to enhance the airport, transport links, and real estate. Suddenly, the$2 billion Japanese fund looks little. Relative to the scale of these supply chains, it is nearly absolutely nothing.
Even before coronavirus appeared, more than 50 US companies planned to move some production out of China, according to reports last year. Rather, China and the US are now like a couple who prepared on a divorce as a New Year’s resolution and now find themselves in a house they can’t sell, cohabiting with the barest of civility, attempting to evaluate how long they can live under the very same roofing without going insane. Sealed by 2 decades and trillions of dollars of investment in building supply chains that run through China– producing everything from T-shirts to high-end innovation parts– the marital relationship has actually been tested over the past few years by growing stress over intellectual home defense and restrictions on Western business doing business in China. It’s just one piece of a diverse motion by both Western companies and governments to remove from China– and of China to remove itself from the West., American production imports from China fell 17 percent last year.