In the US–China relationship, the only certainty for the past few years has been tension and aggression. American President Donald Trump took office in 2017 and immediately set about upending the diplomatic and economic ties between them.

America’s Moves Against China

Since then, Washington has managed to turn the world against Chinese technology giants Huawei and ZTE and to threaten Chinese social media apps WeChat and TikTok.

In short, the US approach toward China has been entirely, relentlessly opposed to all things Beijing. What began as a trade war with tariffs slung as ammunition, has devolved into a mission to cripple Beijing at every opportunity.

As the US election draws nearer, China could be hoping for a respite under a possible Biden administration. However, the presumptive Democratic nominee is more likely to continue Washington’s assault on Beijing.

Changed Mindset?

Although it was only last year that presidential candidate Joe Biden said the Chinese are “not bad folks … they’re not competition for us,” Biden has since come around to a more opposition-minded approach to China, however, as Foreign Policy reported. In a Democratic primary debate, he called Chinese President Xi Jinping a “thug.”Furthermore, an advisor said the candidate would maintain US sanctions that were leveraged as a response to Beijing’s takeover of Hong Kong.

In truth, the recent clampdown on democracy by Xi has likely altered Biden’s approach to China. Whereas Biden was a member of the first American delegation to Beijing in 1979 after the relationship was normalized, the status quo has changed considerably in the decades that have followed. 

The Fate of US Tariffs on China Under a Biden Presidency

As Trump has already taken the fall for introducing tariffs, which have been a staple of Trump’s economic policies, Biden could walk into office in January and leave them in place, Don Lee suggested for the Los Angeles Times. In doing so, the new president could use them as leverage to bring Beijing to the bargaining table. 

Biden, as a career politician and former vice president, would sport a more diplomatic tone than Trump. The change would be a welcome one for Beijing, which has been subject to the president’s bullying on issues ranging from 5G networks to the coronavirus.

“Their stylistic differences are so great. It will certainly seem different,” said James Mann, a China expert and fellow at Johns Hopkins University School of Advanced International Studies. “It will still be conflict-ridden, maybe at times confrontational, but certainly ridden with conflicts in ways that either weren’t there or were downplayed a decade ago.”

In the past, Biden has criticized Trump’s use of tariffs, complaining that they exacerbate the economic problem between the two states. However, even if he does roll them back — either in part or whole — Biden will certainly take China to task in other ways. 

One such way might be to renegotiate the Trans-Pacific Partnership. Devised by former President Barack Obama, the policy would have brought together 12 nations within the Pacific. At the time, it failed to come to fruition because Democrats wouldn’t support it. However, times are different and both parties are unilaterally opposed to Beijing on nearly every issue: security, democracy, and human rights, to name a few.

‘A Special Challenge’

In an editorial for Foreign Affairs, Biden specifically mentioned China as one of the greatest threats to the US and identified ways he would handle it.

“China represents a special challenge. I have spent many hours with its leaders, and I understand what we are up against. China is playing the long game by extending its global reach, promoting its own political model, and investing in the technologies of the future,” Biden wrote.

“The United States does need to get tough with China,” Biden noted, further adding that “if China has its way, it will keep robbing the United States and American companies of their technology and intellectual property.”

The best way to do that would be to “build a united front of US allies and partners” to take on Beijing, according to Biden. A new TPP would be a solid start in that direction. Trump has actually laid the footwork for coordinating allies against China by courting Australia and the UK to its cause. Adding global pressure to Washington’s rage could stir China to reverse its ways in terms of human rights, but economically, it will take more.

Focus on Supply Chain

While the Trump administration has been concentrated on cutting China off from the US, a Biden presidency would be more focused on building a supply chain independent of China, the Brookings Institution concluded in an analysis. That remains the missing piece from Trump’s plan for China. While some manufacturers have left China for other Asian states, there has not been a concerted effort to bring companies to the US.

Biden has made rebuilding US supply chains for critical products such as pharmaceuticals and personal protective gear a platform issue, Axios reported. While the COVID-19 pandemic has certainly highlighted the urgency for self-reliance in terms of medical products, Biden’s policy could translate to a long-term effort of shifting away from China.

Although Biden will undoubtedly reintroduce a more tactful voice to the Oval Office, his presidency would still need to maintain pressure on China. However, Biden would likely find other ways of doing that instead of tariffs and executive orders. By establishing meaningful relationships with allies and implementing domestic policies geared at increasing production, a Biden presidency could tackle the China issue more effectively than Trump.

L'articolo What Would a Biden Presidency Mean for China? proviene da InsideOver.

Japan’s refusal to continue with the Regional Comprehensive Economic Partnership (RCEP) under the possibility that India will not be a participant brought serious doubt to the whole agreement. Both China and Japan are looking to break into the Indian market. Which country will pay the largest price for this opportunity?

The text of any full version of the RCEP has not been made available to the public. Nevertheless, the comments released by country leaders point that its main direction is to decrease tariffs between signatory countries.

Japan and China are the two different manufacturing leaders of Asia. Japan, with its manufacturing know-how built in the 20th century, is competing with the fairly recently leading manufacturing prowess of China. The two manufacturing leaders of the continent are also dissimilar because of the size of their labour forces (China’s 805M  to Japan’s 66M), exports per capita ($1,696 to $5,090), and innovation (GII rank 14th to 15th).

Although dissimilar on many grounds, businesses and governments of both countries are actively searching for new and bigger export opportunities. India, and its 860M working-age consumers, are a very attractive option to both China and Japan’s exporting businesses.

Current trilateral relations between China, Japan and India are focused on increasing trade, competition for trade access; and territorial disputes. Japan-India are a natural exception, as they don’t share a border. As for China-India and China-Japan, territorial disputes have been souring the relations between countries for many years.

Alliances based on mutual non-financial benefits have been established (China’s and India’s defence, Japan’s and India’s science and technology). The alliance between Japan and India is currently the most stable and has delivered positive change to the countries including joint infrastructure and business initiatives. India’s relations with Japan and China are inevitably different because of the presence, or a lack of territorial disputes.

India’s decision to pull out of the RCEP is mostly an internal issue.

However, there is more at play here. India’s foreign relations are better with Japan than with China, and both countries are looking for better export opportunities to India. Delaying any action on the RCEP then allows India not only to appease internal opposition but also to gain bargaining power over other diplomatic disputes. Amending the agreement to suit the needs of a country of a billion, then also becomes an easier task.

Trade, and the structures of the economies of the three countries, are a major influence on the relations between China, India, and Japan.

For Japan, India offers a suitable exports destination. Some of the top exports from Japan, in 2017, have been machines (36% of all exports), metals (8.3%) and chemical products (8.3%). India’s top import categories are similar to Japan’s top exports. Out of the top 5 imports, three of them correspond directly to the three aforementioned product categories.

For China, India is a nearly perfect market. Not only the cheaper Chinese goods segment would find a large consumer base in India (an opposition to this move has already formed in India). Improving trade ties would allow China to harness more power in any diplomatic disputes.

Closer trade ties brought on by the lowering of tariffs would likely bring a better perception of both countries, in case of increasing exports. It could be an advantage in any territorial dispute talks – concerning contested territories by China and India.

Indian economy and its consumers are not the last in the list of concerns for China and Japan. Both China and Japan have similar trade and economic goals in India. Yet, the benefits offered by the Indian economy to the East Asian countries are different.

India offers the completion of these goals for China: a growing market for low-cost producers and a market for high tech exports (a good boost to “Made in China 2025”).

For Japan, better trade conditions with India could deliver the very needed boost for manufacturing output, and a surge in economic activity and new businesses.

These benefits and goal completion would occur both because of the present conditions of the Indian economy, and its future trajectory. The future growth or the direction of development of India could change. Yet, the present conditions India offers to Japan and China are already very attractive.

India disagreeing to enter the RCEP puts the whole process on hold and diminishes the benefits offered by the deal to China and Japan. Both countries already have trade agreements with the ASEAN (the original initiator of this deal). India’s decline to enter the agreement then makes the RCEP a far less useful tool to Japan and China. Better trade conditions won’t make up for the fact that the most promising market for the two East Asian countries is out of the deal.

Japan and India have signed a comprehensive agreement in 2011. On the other side, the issue of a China-India FTA was most recently raised again in 2018. China would gain more from the RCEP with India in it. For Japan, the benefits would be smaller, as it already has signed a comprehensive agreement with India. The agreement has contributed to the abolishment of the majority of tariffs previously imposed by the two countries.

Increasing trade is often a precursor to warmer relations between nations. For China, better relations with India would allow them to exploit the South Asian nation’s geographic location for trade. The Hindustan peninsula offers wide access to routes to Africa and the Middle East.

Moreover, compared to China, India’s access to the Indian Ocean, and the Arab Sea, allows ships to bypass South East Asian nations and the Strait of Malacca when travelling west. With China’s infrastructure interests directed at western locations (Nepal railway project, Belt and Road), India’s location would fit in with current infrastructure plans of China.

India’s geographic location, and opportunities offered by it, are less beneficial to Japan. 79% of Japan’s exports go to other countries in Asia (mostly East Asia), or eastwards to USA. Hence, there’s a smaller incentive to develop a better relationship with the country due to its geographic location.

The main direction of India benefiting from the competition for the access to this market is by growing its negotiating power. Whether it is in territorial, or trade negotiations, India will be able to take a stronger stance. After all, the two manufacturing superpowers are likely to try to match the demands of a growing market. Also, to work hard for the benefits lower trade barriers would offer.

The clearest direct benefit of China and Japan competing, to India, is the financial support that will be granted to the country. There’s already precedent to this: China has given $31.65B of aid in the period of 2000 – 2014, according to AidData. Japan has been providing financial assistance to India since the mid-20th century.

Japan has provided assistance to India in areas which benefit Japan strategically, as argued in Japan’s development assistance to India. If the Japanese government will perceive India not being in the RCEP as a threat to the country’s strategic interests, then more assistance could be expected.

Japan and China have many different reasons to compete for the Indian market. The two manufacturing powerhouses would flourish in the Indian market with lower trade barriers. Secondary reasons for the push for India to sign the RCEP agreement stem from benefits for foreign relations India’s entry would bring. The country that needs India’s market for immediate growth, will pay the highest price to ensure India’s signing of the Regional Comprehensive Economic Partnership.

L'articolo China, India and Japan: Who Will Pay the Largest Price? proviene da InsideOver.

Almost five years after the industry development plan was announced, growth in GDP and development are needed both for China, and investors into this country. Will “Made in China 2025” will be able to create this boost?

The capabilities of “Made in China 2025” to create a GDP boost depend on the execution of the plan. The main parts of the plan are: digitalization of manufacturing, increase of efficiency, and innovation. The main goal of “Made in China 2025” is to push all Chinese manufacturing into one, producing more technical and higher-value products.

The plan will respond to increasing worries about China’s competitiveness beyond simple manufacturing, the growing labour costs, and the competition with cheaper labour countries.

Almost five years after the reveal of the plan, the execution of it has centred around the establishment of manufacturing innovation centres, initiatives for intelligent manufacturing and quality management.

Assessment of the success of “Made in China 2025”, will only be possible a few decades into the future and only when it will be finally realised (according to the same plan). Yet, the past five years of the execution of the plan, have made it possible to analyse some parts of the plan. Particularly, the establishment of new, high tech manufacturing zones.

These zones, each focused on manufacturing a different subset of high tech products are not a new idea. Industrial zones developed with the support of governments have been used by many governments to boost manufacturing. Yet, China’s innovation centres are approaching this idea a bit differently. Promotion of “[…] cooperation and profit-sharing between centres” should boost productivity. Nonetheless, the better know-how of older manufacturing countries, and patents numbers by companies in China still trailing behind, will outweigh this different approach for a long time.

The subsets of the manufacturing industry chosen to be developed in “Made in China 2025” show a move in the right direction. Additional investment into the medical devices subset, is a fitting response to both worldwide trends in health, and trends in the medical sector. As people all over the world are living longer, more health problems are bound to appear. With this, increases on all spending in medicine are due to follow.

Spending in the medical sector shows increases fuelled not only by the increasing life expectancy; increases in spending are also partly caused by spending on medical technology – good news for a country that is working to develop this subset of an industry.

For any industry to enter a stage of growth, an adequate number of workers with the right skills, or willingness to be trained, have to be present. China’s labour force has adapted to work in factories. Yet, the stringent tertiary education admissions could block the growth of an industry, which requires more technical skills.

To meet the demands of a new direction in manufacturing, either more students will have to be accepted into tertiary education institutions, or the number of places intended for non-technical subjects will have to be lowered. The repercussions of these decisions very likely could be the lower value of university diplomas, or a shortage of workers intended for non-technical roles.

China has chosen a bit of an unconventional path to transforming the education of its workforce. By supporting the transformation of universities into applied technology universities, promoting the activities of key businesses in education institutions, and encouraging the establishment of foreign research institutions in China, PRC will largely avoid the devaluation of tertiary education.

The main possible shortcoming of this plan is its more optimistic, than realistic, view of Chinese manufacturing landscape. Movement of both foreign, and domestic manufacturing businesses away from China, because of rising wages, shows that one of the selling points of Chinese manufacturing is its labour costs.

A decision to increase China’s production of more expensive and technical products would appear, at first glance, a good solution to combat this trend. However, this will only work if Chinese businesses will be able to repeat the success that low-cost manufacturing has brought. Will this happen? Time and the ability to attract and develop original ideas will tell.

>Even with perfect execution of the plan, changes in worldwide manufacturing can decrease the probability of this plan succeeding. Manufacturing businesses moving back to developed countries, and the movement of simpler manufacturing to emerging countries, will present a challenge to new high tech manufacturing in China. Both shortly, and a few decades later.

It’s easy to fall into the trap of thinking that only the increase of manufacturing firms can deliver sustained growth. If a new factory means more jobs and even higher incomes, then more factories should be the right choice for growth. However, Brandt and Zhu in Accounting for China’s growth have found out that an increase in efficiency, rather than growth in numbers, has delivered growth in China.

It’s impossible to deny that manufacturing, even its most basic operations, has lifted out many lowest-income countries out of poverty. Moving away from agriculture, and onto manufacturing-based economy, leads to production of higher added-value products and a lower dependence on volatile commodities prices.

Following this type of thinking, a development of Chinese manufacturing onto one specialising in the production of high tech products should lead to even higher development. After all, if manufacturing is the way out of poverty, a “higher” level out of manufacturing should bring even higher incomes. This is a very likely possibility, if the role of work culture, know-how, and innovation is forgotten. Without them, a highly advanced businesses simply will struggle to succeed.

Manufacturing is often dependent on natural resources and their extraction. A movement into high tech manufacturing of machines and equipment, still hinges on world commodities prices. Especially, the prices of metals. Since metals prices are volatile even in the context of commodities, China’s sustained growth could be threatened by this volatility.

Manufacturing of high tech goods in the industries that “Made in China 2025” aims to target, has only been a temporary fix for economic growth in developed countries. Instead, many countries, or trade and economics blocks, are moving towards an even greater opening of trade.

China’s free trade potential is limited, and its FTAs are geographically oriented towards Asia. The low western penetration makes trading less geographically and economically diverse – a challenge for growth.

As any other industry, advanced manufacturing can create sustained GDP growth, if constant innovation and competition is present. Competition in this sector is high both in China and in the world. As for constant innovation, it will be a challenge at least in the next few decades. Mainly because of China having to catch up to countries with more advanced high tech manufacturing industries.

The development of the manufacturing industry has been credited with helping China to become a more prosperous and globally competitive country. A new plan for the largest industry of PRC can deliver a similar success story. Nevertheless, the skills and knowledge gap, and a labour force which would have to change, could make this plan less successful.

L'articolo Will “Made in China 2025” Create a New Economic Boost? proviene da InsideOver.