Opinion | The US two-tier plan to crush China's development
By Tom Fowdy
On Thursday the BBC ran a feature piece on the decline of China's manufacturing in the city of Dongguan, Guangdong province. Now while of course the BBC has frequently sought to depict China pessimistically wherever possible, the article raised some interesting points. It presented the argument that the country's "low-end" manufacturing is losing business to South East Asia, a shift triggered by rising costs, as well as US tariffs, but more importantly that the center of China's industrial base and exports are shifting to "high-end" manufacturing in the form of technology components, cars and similar goods, ultimately leaving unskilled workers behind.
This is, as I have described before, China's economic transition. As the country moves up the value chain, wages grow and manufacturing costs increase, it is logical that China ultimately loses its competitiveness for the cheapest of goods and businesses see more opportunity in places such as India and Vietnam, thus leading to offshoring in these more simplistic industries. Many decades ago, this role once belonged to Japan, South Korea, and Taiwan, until they matured into "high-tech" economies and thus low-end manufacturing became the onus of China. However, there is one critical difference between Beijing and these examples, is that the rise of the former countries as high-tech powerhouses was ultimately enabled by the United States, whereas with China, the goal is to prevent it from doing so.
To this end, the United States has initiated a multipronged economic offensive against China over the past few years. First, as seen through the Trump-era tariffs covering what was some $300 billion worth of goods, is to undermine China as a base for supply chains and low-end manufacturing. While we must acknowledge that the transition of such industries away from China is inevitable, the US has sought to accelerate it by geopolitical means. The tariffs act as a disincentive for low-cost goods manufacturers to base their operations in China, simply by making their products too expensive to import into the US to market competitively. Why would you manufacture a cheap t-shirt in China, with rising costs, and then a 20% additional tariff, when you can do the same thing in Vietnam?
In addition to that, the US and its proxy groups have actively weaponized allegations of human rights abuses in order to accelerate this supply chain shift. I stand by my assertion that allegations of "forced labor" in China's Xinjiang autonomous region, and the subsequent ban on them imposed in the US, was a deliberately opportunistic and cynical ploy to undermine supply chain credibility in China by massively amplifying legal and moral risks. Deliberately given a vague and broad criterion, the ban operates on insinuations, as opposed to empirical proof, and duly punishes businesses in order to push these political goals, such as for example seizing an entire shipment of Volkswagen cars recently just because they contained one component which "might" have been made with forced labor. It is clear-cut, bad-faith politics.
While the US has launched an assault on China's low-end exports via the above means, its next and most objective is to try and block China's ascension up the market value chain by utilizing policies designed to try and stifle its advances in high-end components and technologies. To this end, the US has blacklisted thousands of Chinese technology companies in a policy that it describes as a "small yard, high fence" and has likewise imposed growing, extraterritorial restrictions on the exporting of semiconductor manufacturing equipment to China, coercing 3rd party countries such as the Netherlands to agree, which is home to the key chipmaking equipment firm ASML. This has for reference, severely damaged Netherlands exports to China by 32%.
Likewise, all allies are forced to veto any Chinese acquisition of semiconductor-related firms. In high-end industries where China already has the advantage, such as renewable energy goods or electric cars, the US generates a narrative that Beijing is "operating at overcapacity" and flooding global markets with "low-cost goods." It seems an absolute certainty that the US will ban or tariff such cars, most likely on the premise of a bogus politically motivated national security threat. The EU, now being steered by the fanatically pro-US Ursula Von Der Leyden, is also seemingly taking action. There is no appetite to allow China to capture global markets in the most critical industries.
Nonetheless, it seems clear that the US's economic strategy against China is two-pronged. One, undermine the country in low-end manufacturing and business, weaponizing human rights rhetoric, tariffs, amongst other things. Then two, attempting to block China's rise into a high-tech economy by cutting away the ladder and attempting to isolate it from these most advanced industries. In doing so, it is hoped China's traditional industrial economy will stagnate while its ability to progress will stutter. However, it seems highly unlikely that the US will succeed on the count of high-end technology, with even companies such as Huawei having heavily defied expectations over the years.
The author is a well-seasoned writer and analyst with a large portfolio related to China topics, especially in the field of politics, international relations and more. He graduated with an Msc. in Chinese Studies from Oxford University in 2018.
The views do not necessarily reflect those of DotDotNews.
Read more articles by Tom Fowdy:
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