How China’s growing industrial power buffers it from the trade war : NPR
China manufactures approximately a third of everything that is made in the world, and its industrial power is still in full expansion. The economist Dan Wang talks about the implications of his growth.
Steve Inskeep, host:
Diplomats speak of a meeting this fall between the presidents of the United States and China. They want an agreement before the expiration of a truce in the trade war of President Trump. While the United States is trying to compete with China, it faces a complicating factor-the industrial power of China has spread beyond its borders. The world workshop moves its workshops. We have heard that of a Chinese economist, Dan Wang, of the Eurasia group, which is a consulting firm.
Dan Wang: The Chinese manufacturing sector represents around a third of the world total, and it is still expanding. We have continued to talk about the excess capacity that China has strengthened in the past 40 years, but now we are far from reaching the summit. Many Chinese companies are trying to move away from the prize war at home because we know that China is still experiencing deflation. It is in contrast strongly with the United States
Inskeep: I want to understand this. China makes a third of everything done in the world …
Wang: On average.
Inskeep: … according to the industry and so on. And they do so much that their consumer market cannot absorb everything.
Wang: Exactly.
Inskeep: So if China, the world workshop, has built too many workshops, effectively, they cannot find a place to sell all their belongings, what is the transition they do – companies?
Wang: They become more inventive. Other companies create their stores in the Anase countries, in particular Vietnam, Cambodia, Malaysia, then try to explore markets. The European strategy is becoming more and more important for Chinese national manufacturers. Many producers try to find a market abroad and by creating a factory abroad, they are able to go to the American-European market with lower rates. And two, they create a new market locally.
Inskeep: What are the other countries and regions where Chinese companies build factories?
Wang: Now the new front is in Thailand, Indonesia, Mongolia, Malaysia. But then, beyond Asia, there is the Middle East. Saudi Arabia, Oman has become more important. They are politically stable and very friendly with Chinese investment. And Latin America has been very important for many public companies, as it is also linked to mining – strategically important. Africa is important, but it is quite difficult to have a profitable business there.
Inskeep: Well, this leads to a number of questions. First, does this expansion of Chinese manufacturing in the rest of the world work, does it succeed?
Wang: Very successful. And in a way, it is quite frightening because it changes local culture in a way significantly. Suddenly, there are a lot of Chinese, a lot of Chinese and politically investment, local residents, local politicians that they have become nervous.
Inskeep: Ah. Should they be?
Wang: They should because it will change the local dynamics between unions and businesses and how to assess work wages and what type of industrial policy to follow.
Inskeep: What are the implications for the United States, which is in this trade war and tries to priced Chinese goods? What are the implications of the fact that China is in so many places at the same time?
Wang: It is quite similar to what happened in Japan in the 1980s, and it was then that we saw the greatest expansion abroad of Japanese companies. And over time, in the 80s and 90s, Japan actually created another Japan. Japanese companies therefore created a higher GDP than Japanese GDP within 20 years. And China …
Inskeep: wow.
Wang: … is now only at the initial stage of its global expansion of its companies.
Inskeep: If you are an American national security person and you worry about China, is China’s manufacturing base worldwide a reason to be even more afraid?
Wang: I would be. If I were an American official, I would be alert to development.
Inskeep: Dan Wang is with the Eurasia group. Thank you for coming.
Wang: Thank you very much for inviting me.
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