Read on Twitter
This new report on how China can engage in the restructuring of global supply chains by Huang Qifan, VP of the China Centre for International Economic Exchanges is worth reading in full. A couple of interesting highlights from the piece: https://twitter.com/ChinaFinance40/status/1272753054094262272
Huang views decoupling and manufacturing relocation as "purely from the political agenda of a few politicians," saying that "China is not afraid of a handful of hostile Western political forces."
He brings up a variety of good points on how difficult it actually is to relocate supply chains, listing difficulty securing capital, U.S. restrictions on developing the manufacturing sector, and lack of U.S. infrastructure to handle increased manufacturing capacity as a few.
Another point he makes is on the quality of industrial workers. Here I would read @danwwang's great 2019 letter in which he talks at length about process knowledge, a part of the tech process that's often overlooked: https://danwang.co/2019-letter/
Huang also talks about how to deal with restructuring supply chains through vertical integration "by setting up industrial clusters in Asia, Africa, Europe or America" and walks through five opportunities for the Chinese manufacturing sector.
The fifth opportunity is what I find the most interesting: "Expand import to achieve balanced development between export and import."
In this section, Huang writes, "An export superpower is not necessarily an economic power; however, becoming the largest importer in the world will allow China to become a true global economic power."
Why? 5 reasons:
1)China will be every country's biggest potential client
2)Easier to obtain pricing powers
3)Currency of import country typically becomes pricing currency in global trade
4)Promote of cross-border settlement w/RMB
5)Drive change in domestic consumption structure
1)China will be every country's biggest potential client
2)Easier to obtain pricing powers
3)Currency of import country typically becomes pricing currency in global trade
4)Promote of cross-border settlement w/RMB
5)Drive change in domestic consumption structure
This gets to a lot of the work around what we do at @CNASdc on coercive economic measures. A lot of China's leverage comes from threatening the lack of market access to the world's second largest economy. In the wake of COVID-19, China seeks to increase its leverage.
It's important to note that Huang isn't just talking about increased economic leverage, but also increased financial leverage. U.S. control over the global financial system is the cornerstone of U.S. coercive economic tools like sanctions, which are often used for natsec/fp goals
China has long studied how the United States uses its coercive economic tools—it now wants similar access and control over these tools as well.
