Despite a mutual loathing, the western political left and right share hostility to China - albeit in differing amounts
 Hostility towards China is about the only policy shared by the parliamentary left and right in the West, albeit in differing doses. Nonetheless, it seems sensible to brace for something like a cold war economy in the coming year or two.
To date, China has banned Facebook for not complying with Chinese censorship rules. Google mostly has largely given up as well, and Amazon announced it would close its Chinese Kindle operations.
The US Democrat's traditional distaste of totalitarian Communism has survived despite its ever-leftward march of the progressives in recent years, a stance largely shared by western socialists, while Republicans and conservatives worldwide have retained their abiding fear and loathing of the godless and now resurgent Communist Party.
Add to that, the endless talk of "decoupling", as well as the reigning talking point that "if-it-walks-like-a-duck" situation, that is hard to dismiss however much Beijing denies the regime's authoritarian if not totalitarian nature.
Which brings us to the fall-out of such a situation, which is less comforting. China's quest to escape its export-dependent economy is as long-standing as it has been unsatisfactory. Its boast of matching the economic self-sufficiency of the United States has been illusory if not delusional. It might be said that the US is also dependent on trade, but this is not so. It can make itself self-sufficient at will and re-arrange its affairs in such a way as to make imports completely unnecessary for its economic wellbeing after a period of adjustment.
But China’s economic slowdown has been spilling over to major exporting nations in Europe and East Asia on falling Chinese demand for its manufactured goods, causing Germany and South Korea to post rare trade deficits with China.
While this is an inevitable consequence of such accord between right and left in the West, it makes China, the world's second largest economy, a poor consumer.
Thus, imports of hi-tech products and mechanical and electrical goods fell eight per cent in recent months according to Chinese customs data. There doesn’t seem to be any sign of improvement, with South Korea’s exports to China falling 2.5 per cent.
"China’s role as driver of global commodity demand tends to overshadow the fact that most of its imports are manufactured products, both for its domestic market and for assembly into end goods, which are then exported. Germany and South Korea, which have run trade surpluses with China for most of the last decade, both saw unusual deficits last month, according to Chinese and Korean data," reports Bloomberg.
Much can be blamed on the lingering impact of lockdowns to prevent Covid, which hit the confidence of consumers and business, according to Trinh Nguyen, Asian emerging markets economist at Natixis. “Countries that are directly exposed to Chinese domestic demand, especially for manufactured goods, are more vulnerable,” she said.
China’s slump “comes at a bad time for these economies as they also have a widening import bill while export demand has fallen sharply for their key customer,” said Ms Nguyen.
Worse for those countries, some of China’s slowdown in imports is structural. China’s electric vehicle exports have surged this year, and the EV supply chain is more China-centred, reducing demand for auto parts from countries like South Korea, said John Gong, a professor at the University of International Business and Economics in Beijing.
“I expect the pandemic winners Korea and Taiwan to have a really rough time as China, semiconductors, and the global goods cycle all turn negative,” said Rory Green, head of Asia research at TS Lombard.
Japan’s exports to China recovered in June from declines in April and May, but the growth may be short-lived, said Craig Botham, chief China economist at Pantheon Macroeconomics. “Ordinary exports aimed at final demand have no hope given the dire situation Chinese consumers find themselves in, and intermediate goods are only useful as long as global export demand is strong - and as far as I can tell, it is fading,” he said.
Economists are lowering their expectations for the Chinese economy as the country’s coronavirus cases remain at elevated levels, suggesting more lockdowns are likely. A slump in the country’s real-estate sector has also deepened, compounding the issue. The median forecast for China’s GDP growth in 2022 fell to 3.9 per cent in a Bloomberg survey.
To be fair, most business executives who have put time, effort, and investment into developing a presence in China resist the notion of decoupling. With the Biden administration likely to take a less confrontational approach to China than Donald Trump did, CEOs might be tempted to hope that the issue will blow over.
Not only has China been following a long-term strategy of reducing its dependence on foreign technology, there is also a growing reliance on coercive social credit surveillance by a resurgent Communist Party.
Both the right and the left have sought ways to partially “decouple” the world’s two largest economies and reduce US dependence on China. For his part, Chinese President Xi Jinping, meanwhile, has tried to shun US business with his “Made in China” policy, embracing “independence and self-reliance” as the Communist Party credo.
Beijing’s harsh restrictions on information-sharing, coupled with American threats, have forced a slew of Chinese high-tech firms, including Did, Alibaba, Baidu, and electric carmakers Nio and Xpeng Motors, to face “delisting” from US capital markets. The US Securities and Exchange Commission (SEC) has identified 150 mostly China-based companies that could be delisted, with the SEC saying they are in violation of auditing rules.
There have been surveys of members of western business associations who have said their optimism about their firms' expansion in China has been dampened by these developments, but have expressed hope that their worse expectations will prove false. Even those that plan to decouple seldom say so openly, but only after the fact, and even then, mask the move with cover stories explaining the "why" of their decision in other terms so to conceal their suspected reasons for the exit.
It seems all a great shame as there is no need to decouple other than the severity of conditions imposed from above. |
