The supply chain dispute is the new focus of China US game!

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Author: Ming Shuyuan official account: Ming shuzatan wechat id:laomingdashu

Recently, the Biden administration has put forward a key word – “supply chain” in almost all multilateral occasions dominated by the United States.

According to the narrative made by the United States, the United States should enhance the “security” and “resilience” of the supply chain.

At first glance, it sounds “harmless to humans and animals”, but it actually contains the Biden administration’s new tricks against China.

From trump to Biden, they all realized that in the Sino US game, the United States should try its best to combat China’s dominant position in the global supply chain and “reindustrialize” the United States as much as possible.

Trump chose an extremely simple and brutal way, that is to fight a trade war against China. Trump’s calculation is that by imposing high tariffs on Chinese products exported to the United States, the global industrial chain will move out of China and back to the United States.

However, man is not as good as nature.

More than four years have passed since trump unilaterally announced to launch a trade war against China on march18,2018, and this policy of the trump government has completely failed.

From the most intuitive US trade deficit data with China, the trade war launched by trump has not achieved the goal of significantly reducing the US trade deficit with China. According to us data, the US trade deficit with China in 2018 was US $418.2 billion. It has decreased after 2019, but there is no fundamental change. In 2019, the US trade deficit with China was 345.6 billion US dollars. In 2020 and 2021, the US trade deficit with China was US $310.3 billion and US $355.3 billion respectively. The data changes were also affected by the epidemic.

Not only did the trade war not significantly reduce the U.S. trade deficit with China, but also increased the inflationary pressure facing the United States.

Mainstream U.S. economists have repeatedly stressed that the tariffs imposed by trump are mainly paid by U.S. importers, which actually increases the pressure of rising prices in the United States.

This is also an important reason why the Biden administration has recently been giving the wind to abolish some tariffs imposed by trump on Chinese products exported to the United States.

Facts have proved that the trade war unilaterally launched by the US government against China does not work, and it is in line with the old Chinese saying, “lift a rock and drop it on your own feet”.

However, from trump to Biden, their China strategy has obvious continuity. The Biden administration still regards China as the largest strategic competitor of the United States. The strategic goal of the United States to crack down on China’s economy and revitalize its manufacturing industry has not changed.

But when Biden came here, since the trade war did not work, he put forward a new term – “supply chain”.

The Biden administration’s goals are very clear:

First, the Biden administration believes that, in view of the current situation of China US relations, the United States must reduce its dependence on China’s supply chain, so that when China and the United States have to “showdown” because of the Taiwan issue or other reasons in the future, it can reduce the costs and pains faced by the United States;

Second, China has a huge trade surplus with the United States every year, which is objectively beneficial to China’s economy. The United States should use its huge market potential to transfer this part of the supply chain from China to other countries, so as to achieve the purpose of weakening China’s economy;

Third, the United States needs to increase its domestic investment and work with its allies to finally establish an industrial chain that does not depend on China, so as to enhance its economic strength and enhance its national security.

Therefore, when the Biden administration proposed the so-called “supply chain security and resilience”, the United States still thought about how to accurately decouple from China, so as to achieve the effect of “killing two birds with one stone” – not only to hit China’s economy, but also to enhance the U.S. manufacturing strength and national security.

As far as I know, many people in China are full of anxiety about this. I have a reader who is engaged in manufacturing export business in Guangdong. His company has expanded its product line in recent years, and its business is very prosperous. However, his Chinese friends in the United States have repeatedly told him about the chain of response, saying that the United States wants to attack China and punish China, which makes him uneasy.

I think the situation faced by this reader has certain universality. In the final analysis, it is still that some people in China, when the United States continues to contain, suppress, contain and slander China, seem to lack confidence and worry that the United States will bring China down, destroy and mess up.

Can the United States really beat China in the Sino US game by hyping supply chain issues?

To answer this question, the key is to find out how China’s dominant position in the global supply chain is formed and whether it will be easily disintegrated by the United States.

In the current global economy, due to the substantial improvement of infrastructure such as transportation and informatization, many multinational enterprises have been able to allocate resources on a global scale. For example, an American company needs 10000 parts to produce a product, and these 10000 parts may be provided by 200 suppliers worldwide, including 50 from China. In this way, under the leadership of this American enterprise, global enterprises have formed a very fine and professional industrial division across continents around the products of this American enterprise. All these enterprises, together, constitute the long chain of product design, manufacturing and sales in the United States, and each plays an indispensable part in it. This is the essence of the supply chain.

There are many core elements that determine a country’s competitiveness in the global industrial chain, including product quality, production and transportation efficiency, cost, etc., which are determined by a country’s education level, labor scale and quality, enterprise management level, wage level, infrastructure quality, and the concentration of the relative geographical location of each enterprise in the industrial chain.

Why can China occupy a dominant position in the global industrial chain? Precisely because China has the strongest comprehensive competitiveness among the above-mentioned multiple factor combinations.

Since the reform and opening up, China’s domestic market has been gradually cultivated, and the labor cost is relatively low. Many foreign capital can invest and set up factories in China, not only by taking advantage of China’s comprehensive cost advantages to reduce their own costs, but also by entering the Chinese market nearby to make profits.

The preferential policies for investment promotion implemented throughout China, the ability of the government to serve enterprises, the infrastructure such as roads, railways, ports and communication networks continuously built throughout China, the huge scale of China’s labor force and the skills they have, have gradually established China’s dominant position in the global industrial chain.

In recent years, although China’s labor costs have been rising, China’s huge domestic market, stable social environment, enterprises’ ability to perform and deliver efficiently, together with more and more “created in China”, “designed in China” and “speed in China”, have ensured that China’s dominant position in the global industrial chain is comprehensive, highly competitive and irreplaceable in a certain sense.

Of course, we cannot be complacent. Manufacturing is the foundation of a country’s economy and an important foundation for attracting employment, improving people’s living standards and reducing the gap between the rich and the poor. We should cherish China’s competitiveness in the global industrial chain as we cherish our own eyes. In the future, we should continue to provide fertile ground for Chinese local enterprises and enterprises from around the world to start businesses and develop according to the direction of marketization and rule of law, attract them to participate in building a more robust Chinese economy, and let them gain tangible development benefits in the process.

In my opinion, it is not so easy for the Biden administration to attack China’s dominant position in the global industrial chain.

Take apple of the United States as an example. In 2020, Apple had 200 major suppliers around the world, providing 98% of its parts, manufacturing and assembly services. Among them, the number of suppliers from mainland China and Hong Kong reached 48, and the number of suppliers from Taiwan, China also reached 48. It can be said that enterprises in “Greater China” occupy nearly half of the supply chain in the United States. If apple leaves these suppliers, it will be difficult to successfully produce iPhone, iPad and IMAC.

Taking Tesla as an example, the company built a “super factory” in Shanghai at an unprecedented “China speed”. In 2021, Tesla’s Shanghai plant delivered 480000 vehicles, accounting for half of Tesla’s global production. At present, China has become the most important production base of Tesla in the world. It is very interesting that although Tesla is an American automobile brand, almost all of its suppliers of “super factory” in Shanghai come from China. Almost all of Tesla’s battery packs, battery management systems, car bodies, central control, electric drives and other components are covered by Chinese enterprises.

This is the charm of China’s supply chain!

You can regard the current Sino US supply chain dispute as a new round of trade war against China launched by the Biden administration, or as version 2.0 of the US trade war against China. However, like the trade war launched by the trump administration, the United States is still bound to lose.

The reason is very simple. The basic economic laws are at work behind the division and layout of the global industrial chain. Trump and Biden both want to destroy China’s dominant position in the global industrial chain through non market means. There are few tools and the effect is limited.

Especially under the background of the intensification of domestic contradictions and the rising anti globalization and anti free trade voices in the United States, it is impossible for the United States to offer real money to help other countries. The United States only wants other countries to cooperate with its national interests and join the United States in containing and attacking China.

Isn’t this “white wolf with empty hands”? In the final analysis, it is a kind of whimsical thing.

Therefore, in the face of various new terms and concepts created by the Biden administration, the Chinese people should pay attention to them tactically, but maintain contempt strategically.

As long as China does its own thing in a down-to-earth manner, maintains sustained economic growth, maintains long-term social stability, and constantly promotes scientific and technological progress and industrial upgrading, China has nothing to worry about.

China, of course, cannot sleep on the “credit book” of the past.

We must see that there is still a certain gap between China and the United States, Japan, Europe and even South Korea in terms of core products and equipment such as chips and lithography machines, as well as key parts and raw materials.

In the future, China also needs to catch up, promote industrial upgrading through scientific and technological progress, and enable China to occupy an increasing share in the global medium and high-end industrial chain, supply chain and value chain. This is also an inevitable requirement for China to successfully cross the middle-income trap, create more high-income employment opportunities, and realize the continuous development of China’s economy.

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