China

[FlyerInHi]

I was talking to my friend from Panama where China wants to build projects.

American model: In the past, private US banks lend money to developing countries at high rates (higher than to American consumers). When the poor countries default, there is local currency devaluation and economic crisis. US banks must be paid back else their stock will crash. IMF and World Bank step in to pay back US banks. Debt trap.

China model: China lends money in a vertically integrated model. They build the projects, train the locals and eventually turn over management. When/if the projects don’t generate as much income as anticipated, China extends the payback period and/or they convert debt to equity and operate the properties. China gets a lower or negative ROI in exchange for goodwill and future business opportunities.

China extends Ethiopia railway loan from 10 to 30 years. https://youtu.be/ymyipQMGaHg

[FlyerInHi]

If you watch fox business news, the USA is winning. The Chinese are really scared. they love to repeat that.

Ok. End of story. Problem solved! USA, Numero Uno!

[The-Shoveler]

Whatever

Hopefully they can make a deal where everyone wins.

The new NAFT deal looks like a win win.
.

[FlyerInHi]

I’d love so see objective metrics for what winning means. Bi lateral trade deficit numbers? Overall trade deficit?

[FlyerInHi]

I guess no new tariffs on China.
I guess the Chinese were unimpressed with USMCA which was clearly signed in Buenos Aires as a diplomatic stunt aimed at China.

https://www.bbc.com/news/world-latin-america-46413196

[FlyerInHi]

Great talk by Yukon Huang. Too bad that Americans are so misinformed.

[The-Shoveler]

On the other hand China is buying USA soy beans again.

[Myriad]

It’s hard to see how there’s going to be a deal in 90 days with all the geopolitical and technology issues.
Also, don’t travel to China if you’re an executive of a US multinational company with any prominence.

[FlyerInHi]

Yukon Huang is the most balanced China expert who has an American point of view. His views are pragmatic and realistic. As he pointed out, there is a structural problem because we have become an exporter of commodities to China so the balance of trade cannot be resolved unless we sell high value added manufactured products.

For services, American companies, if they have more access to China, will invest there. That will be good for corporate profits, but almost nothing for US employment.

On sanctions and the arrest of Huawei executive, the Chinese have long memories and what goes around, comes around. Decades later, when China is the biggest economy, they will have their own sanctions. Trump may hate international institutions because they limit US unilateral options. But without international institutions we won’t be able to “handcuff” china when they decide to act unilaterally.

[Myriad]

I think the danger here is that the world splits into two trading systems or at least for tech. Unless there’s some grand compromise, US companies will be pushed to move supply chains out of China and not purchase any Chinese tech and vice versa for China.
Then the race is on to get various countries into different blocks. Do you want to be a vassal state to China or part of the anti-China group.

[FlyerInHi]

[quote=Myriad]I think the danger here is that the world splits into two trading systems or at least for tech. Unless there’s some grand compromise, US companies will be pushed to move supply chains out of China and not purchase any Chinese tech and vice versa for China.
Then the race is on to get various countries into different blocks. Do you want to be a vassal state to China or part of the anti-China group.[/quote]

Yes that is so true. There is a race to 5G and AI right now.

We are leading in tech now… but China is leading in manufacturing and implementation. The danger for us, as the established power, is that China will build such a large user base that they set the standards — a little like Betamax vs VHS.

I am schocked at how China is able to peel away countries that were American little brothers. The diplomatic symbolism is shocking. How Xi Jinping has been received around the world should worry us. The state visit to Britain including a carriage parade with the queen. The state welcome by the king of Spain and royal heads of Europe. The state welcome in Argentina, Panama and Portugal. Trump is never received that way.

Panama and the Philippines are supposed to be American “colonies”. But the little brothers have grown up and going their own way.

I am worried that China has the manufacturing and implementation capacity that make their infrastructure projects too good to pass up.

I also worry that wherever we diversify our supply chain, those countries such as Vietnam will use the money they earn from us to buy infrastructure and consumer products from China for their hungry to consume populations. Are we able to provide an alternative?

[Myriad]

More like the Cold War where there are 2 standards. The play is for India with 1.5B people – it’s enough of a counterweight to China. If a dual system exists, then it’ll last for 50+ years.
But China is effectively blocked from implementing 5G in countries allied with the US.

[The-Shoveler]

IMO 3D printing and AI will overcome any manufacturing capacity advantage china has over USA in the next 20 years.

IMO Their main advantage at that point will be their willingness to pollute their own environment for resource advantage.

If Vietnam is manufacturing stuff for USA why would they not want to manufacture their own stuff for the local consumers?

[FlyerInHi]

India will hedge and stay neutral as India has done during the Cold War.

The China issue is very interesting. Big picture wise, it’s not about trade at all. It’s about containing the rise of China and safeguarding technological superiority, just like China (with silk production), Venice, France and England tried before.

Why do we know it’s not about trade? Simple, we know that the total trade deficit will continue to grow no matter what countries we source from.

There’s also a little problem with shifting the supply chain. Those contract manufacturers in Vietnam or Myanmar, or Africa are owned by the Chinese.

We didn’t worry much about China before because it was a given that:
1) China was not innovative and will never be.
2) China’s economic model of state control could only produce inferior products. You know, state planning is bad.
3) China’s political model would inevitably lead to inefficiencies, corruption and collapse.

This whole process of demonizing China looks so desperate to me. I think we should be intellectually honest; recognize our ideological mistakes, and formulate honest that are proven to work. We should copy what China has done well. Copying is good and produces better outcomes for humanity.

How do we have honest policies? Well, China is trying to make friends around the world and provide infrastructure and development. Can we not do better than China?

For example, Panama is turning to China for bridges, trains and highways. Panama is in our sphere of influence, politically and geographically. We should give them better deals.

Vietnam is leasing 99 year free trade zone land to Chinese manufacturers. Where are the American manufacturers?

China is building a highway in Montenegro. Why are American civil engineers?

Why is the USA not building a 5G network for Africa?

We are now well past the post colonial stage. The little brothers got education and are thinking for themselves.

We want the world to adopt our economic and political standards? Simple, provide the world American products and services.

Diplomatically, China does very well at treating the little countries are sovereign equals to win them over. China welcomes foreign dignitaries with great honor.

The Panama example again… The President of Panama was honored with a state visit to China. And one year later they are signing business deals. I mean Panamanians are culturally closer to the US and they all look up to Americans. But we treat them like shit, so they broke off relations with Taiwan to recognize China.

And Japan is on our side? Sure they are… but right during Trump’s Trade war, Shinzo Abe went on a state visit to China in October, and the 2 countries have the warmest relation in almost a decade.

Other than talk, show me business deals, or diplomatic coups where the US is winning. As Trump was signing USMCA (which might not even get ratified by Congress) in Buenos Aires, China was signing a currency swap agreement, dozens of business deals, a nuclear power plan with Argentina, the G20 host.

As the current top dog, the competition is ours to lose. We’re making lots of mistakes and we will pay the price in prosperity. Depressing to watch!

[FlyerInHi]

[quote=The-Shoveler]
3D printing and AI will overcome any manufacturing capacity advantage china has over USA in the next 20 years.
[/quote]

I don’t know about the future. But 3D is shit plastic.
You also need to buy the material to have the machine cut it.

I ordered some gold table legs from China for a kitchen counter project. I don’t think a fabricator in USA can make me one. Sure, in rustic wood o steel, but not something polished and shiny.

You can buy from Turkey too but China was cheaper.
https://www.balasagun.com.tr/

[quote=The-Shoveler]
IMO Their main advantage at that point will be their willingness to pollute their own environment for resource advantage.
[/quote]

So why even worry? And why go to war, trade or otherwise? They will kill themselves.

[quote=The-Shoveler]
If Vietnam is manufacturing stuff for USA why would they not want to manufacture their own stuff for the local consumers?
[/quote]

It will take Vietnam decades to make electric cars, solar panels, high end appliances, 5G equipment, even TVs because TCL is so efficient. They may never be able to build high speed rail or planes.

I don’t know if you’re following trade… Right now, Vietnam sells food to China and they buy all kinds of plastic consumer stuff from China. The traders cross the border daily to exchange goods. Many small traders on motorbikes and small trucks.

[Author]

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