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This actually looks like the start of the disentanglement between the US economy and the Chinese economy. What will likely happens next (my best guess) is 1.)

This actually looks like the start of the disentanglement between the US economy and the Chinese economy. What will likely happens next (my best guess) is 1.) 40-60 percent of a company’s supply chain moves out of China 2.) China restricting the movement of capital/equipments out of China (similar to what happened with Korean companies last year) 3.) China growing homebrew competitors to the foreign companies leaving, part of the ‘made in 2025 in China’ strategy, via state enterprises or state spendings in startups. China will also make US companies’ operation in China very hard, either with license restrictions, or increased local ownership. 4.) China will disincentivize Chinese consumers from purchasing US (or foreign) products, via propaganda, taxes, or control (similar to what happened with Japanese and Korean products last few years). This would be hard, as Chinese consumers prefer higher quality, higher brand value, and higher perceived value foreign products. 5.) China will have to target US farmers with tariffs, as there isn’t much US imports to tax otherwise. Plus, there is also face saving. 6.) US will increase the tariff coverage to all Chinese imports, either triggered by tariffs on US farmers, or threats to US companies. 7.) China local governments will try to seize US owned corporate assets, or prevent factories from shutting down by its owners. This will escalate the urgency for US companies to move out of China. 8.) 70-100% of company’s supply line will be out of China 9.) Eventually, most direct trades between both countries shrink down to less than $50B. Down to a significant level where it starts to effect GDP for both countries (China way more than US) 10.) China will have no choice but to embrace its lost decade, ala Japan. It will tighten controls on its citizens. It will try to contain high inflation and high unemployment rate. It will try to unwind its debt for the next 10-20 years. Its gdp growth will go towards 0 or negative. Its GDP will shrink 20-30%. (posted this in another thread but didn't get any discussion)

NathanCH 8y ago
It's interesting because you can replace "China" with "The United States" and most of those bullet points are still true.
- pathseeker 8y ago
  The US doesn't implement capital controls so this replacement fails at step 2.
  - gricardo99 8y ago
    Possibly even at step 1. How many companies have 40-60% of their supply chain in the US? I would guess very few.
    - NathanCH 8y ago
      I mean, it doesn't have to be order numnuts
      - gricardo99 8y ago
        Ok, so ignore #1, and #2. What else? I actually don't see much at all on the list that is applicable in reverse. I guess you could reverse the last two, and ignore the rest, but then it seems the whole point of parent comment is lost.
      - dang 8y ago
        If you keep posting uncivil or unsubstantive comments we're going to ban you, so would you please stop? The idea here is: if you have a substantive point to make, make it thoughtfully; if you don't, please don't comment until you do. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
07d046 8y ago
I have no idea how likely that is, but that looks like an ideal scenario for the White House, and a possible existential threat for the Chinese Communist Party. People have a habit of putting up with a lot when the economy is growing dramatically and their lives are noticeably improving, but they might not be so happy with an increasingly oppressive government and a struggling economy that isn't giving any sign of future greatness.
- seanmcdirmid 8y ago
  Ya, the CCP has also taken a paternal-like responsibility for much of the economy, making guarantees about future positive economic performance and creating a lot of moral hazard in the process. This is why they are trying to avoid even a recession at all costs, or a property market bust.
- int_19h 8y ago
  Thing is, an oppressive government can deal with more discontent from the citizenry than a democracy like US. So it's not just a question of relative GDP and balances etc - purely economic issues - it's also a question of who is more resilient politically. I'm not so sure US is, if only because politicians have to chase votes, and even relatively minor economic pains among important constituencies can blow up very quickly.
  - 07d046 8y ago
    I think it goes both ways. As a democracy, America has a pressure valve if things are going poorly, and a peaceful transition of power to the other side of politics is always an election away. (It could fall as a democracy, but it's hard to see a trade war with China being a cause for that.) Maybe America might discover a lack of political will, but there's also a chance it could be wrapped up in nationalism and sold to voters, and action against China is one of the rare things that a number of strongly anti-Trump people do support. As the rulers of a one-party totalitarian state, the CCP is setting itself up to take the credit and blame for everything in China. Following the "century of humiliation", China is attempting a century of rejuvenation. It started poorly with the Cultural Revolution and tens of millions dying in famine and violence, but it has made remarkable progress since Mao. It appears that the government is well-liked today (although nobody knows anything about China [1]) and economic development is continuing. The government can easily deal with a bit of discontent if required (by, say, putting a million people in concentration camps), but if there was a genuine crisis and people realised that the government had terribly mismanaged things or economically stagnates long before it becomes truly wealthy, the CCP might find that the mandate of heaven has shifted. 1. https://foreignpolicy.com/2018/03/21/nobody-knows-anything-about-china/ https://foreignpolicy.com/2018/03/21/nobody-knows-anything-a...
davidf18 8y ago
> 5.) China will have to target US farmers with tariffs, If that raises food prices, that could destabilize society or employees might ask for raises to compensate for higher food costs which firms might pressure the government to do away with tariffs on foods. In the mid-19th century, political economist David Ricardo joined Parliament to (successfully) remove the "Corn Laws" which were tariffs on all grains imported. Workers were complaining about the high cost of foods asking for raises which pressured the profits of firms.
nbhuik 8y ago
As far as I know most of those are already happening today.
chmod775 8y ago
Even though the US are China's biggest trading partner, US trade "only" accounts for about ~18% of China's total trade. China is still trading with other countries. While it may take a hit from US companies pulling some manufacturing out of China, some of those will be replaced by other - both Chinese and foreign - companies. Especially other foreign companies operating in China will profit from reduced competition for Chinese labor / manufacturing, encouraging them to move more manufacturing there. This will blunt the impact of manufacturing for the US market disappearing. Also US companies will only withdraw in part from from China, since they can still manufacture goods intended for anywhere else in the world there - just not for the US. In the end China will take a hit, but nothing close to requiring those measures you're picturing. The US will have to bootstrap a lot of manufacturing to replace Chinese labor. This will sound good on paper and look good on some economic metrics, because it requires domestic investment. But since the American lifestyle won't be "subsidized" by cheap and exploitative Chinese labor anymore, the average American may actually find himself to have less than before. And the rest of the world will profit from having two major players intentionally cripple each other.
- joefranklinsrs 8y ago
  "The US will have to bootstrap a lot of manufacturing to replace Chinese labor." They just have to move to cheaper countries to replace Chinese labor. One time upfront asset cost, but lower expense over time. "US trade "only" accounts for about ~18% China's total trade" Once China is not part of the trade flow between US and X country (Taiwan, South Korea, Japan, etc), the total trade for China will fall even more than 18%. "they can still manufacture goods intended for anywhere else in the world there - just not for the US" US is the largest consumer market in the world. Japan is second at 1/3 of the size of US. EU consumer market is mostly fragmented. There is just not that much singular consumer demand outside of US. Plus other countries are enacting tariffs on China as well - India for example. "Especially other foreign companies operating in China will profit from reduced competition for Chinese labor / manufacturing, encouraging them to move more manufacturing there." There are lots of countries that have way cheaper labor costs than China, there's no reason for the foreign companies to go there in the face of increasing tariffs. Nike is 30% in Vietnam. Samsung is producing more of its phones in Vietnam. Uniqlo increased its presence in Vietnam by 40%. "US companies will only withdraw in part from from China, since they can still manufacture goods intended for anywhere else in the world there " Again, tariffs and cheaper labor costs elsewhere will entice companies to move out of China entirely. Not to mention the threat of Chinese government takeover of assets, or capital outflow restriction.
gumby 8y ago
> This actually looks like the start of the disentanglement between the US economy and the Chinese economy. What will likely happens next (my best guess)... I agree with your conclusion but not your map; I see China investing and stepping up ag purchases from Brazil sub-saharan Africa; increasing the militarization of oil-producing countries, and exporting cheap products to Europe, Africa, South America and their southern mining province, Australia. The US will be forced to pay more for everything and so imports will shift to trans-shipment points; US exports will be more expensive as their imports will be more expensive. This seems like a generous gift of price support from the Trump administration to the rest of the world. The US is a manufacturing powerhouse, but its production is bipolar: super cheap stuff too expensive to ship (paper, chopsticks, etc) and ultra-high-added-value stuff (extremely high precision bearings and the like). Not cars in huge volume but planes: sure! Tariffs don't address this structural issue; if anything they exacerbate it.
- joefranklinsrs 8y ago
  "The US will be forced to pay more for everything" I'm assuming your assumption is because China is taking over all of the resources/production capabilities around the world? I don't think that can even remotely happen. Again, lots of multinationals are already 30% in Vietnam, Malaysia, or India. Companies can source ag or oil from plenty of non-Chinese sources. The consumers have barely felt the supply chain shifts. "The US is a manufacturing powerhouse, but its production is bipolar" You would be surprised at how much reshoring and US factories automation have occurred in the last few years in US. It will increase in scope after this current round of tariffs.
  - gumby 8y ago
    >> "The US will be forced to pay more for everything" > I'm assuming your assumption is because China is taking over all of the resources/production capabilities around the world? No, it's because the US government is forcing US consumers (and producers) to pay more for the goods than buyers in other countries will -- that's what a tariff is. > You would be surprised at how much reshoring and US factories automation have occurred in the last few years in US. Indeed I would be surprised and until recently I bought a lot of manufactured goods. OK, I may have overdone it on the beryllium bearing example: I did see a piece of fancy firefighting equipment being built in the Central Valley for shipment to a customer in NZ. But it was exotic enough that it wasn't worth figuring out how to make in NZ, while the volume was so low (they made 3-4 of them a year, at $100K/pop) that it couldn't keep the lights on. Most of what they made was farm gear and solar mounts for sale in the valley. Another example: I bought some pressure vessels (about $60K each FOB Redwood City) made in LA: about half a dozen guys, a massive steel roller press and some excellent union welders. I could get them for much less from India, with about 50 guys feeding 2" sheet steel manually into a tiny roller press, excellent welding, also x-rayed and to the same safety standard. After shipping? About $65K. But that same factory in Amedebad is shipping tons of stuff to the oilfields of Central Asia and the Middle East -- they didn't really care if they got our businesses. While the factory in Los Angeles couldn't keep busy. So that's the low end: "not worth shipping". While $150K of high pressure steam boiler had parts falling off it in shipment from Chicago. It would have been cheaper for us to buy from Germany and have it shipped over just in terms of TCO. So yes I'm pretty familiar, as a customer, of US heavy industry.
dmoy 8y ago
> 2.) China restricting the movement of capital/equipments out of China (similar to what happened with Korean companies last year) Are companies not subject to the existing money restriction? We can't move more than like 50k per year out or something. Maybe less now. I have no idea how it works for companies, just individuals.
schuke 8y ago
The Party won't let anything that will lead to (10) happen. Growth=staying in power, this is the fundamental belief from which all their actions are derived. Facing a bad deal and losing face, they'll certainly choose a bad deal--they have a powerful propaganda machine to paint it as a good deal anyway, at least domestically.
MR4D 8y ago
Interesting analysis. Oddly, it reminds me of Venezuela’s path.
rgbrenner 8y ago
I think you went way overboard toward the end. Only 37% (and declining) of China's GDP is from trade.. and only <20% is from the US. So 20% of 37% = ~7% of GDP. Meaning, if all trade between US and China was cut off tomorrow, they would only lose 7% of GDP. So how do you get from that to 5X? Seems like you have a model of the Chinese economy from a decade ago. Fact is, China is much larger now, and much less dependent on trade today. Also keep in mind, a good portion of our imports from China consist of items that were imported into china for assembly. Look at all the items from other countries inside an iphone... yet when an iphone is assembled in China, the value gets assigned to China. If you adjust for this, it significantly reduces (but nowhere near eliminates) the trade imbalance. So the numbers above, actually overstate the impact on China's economy from cutting off trade. Edit: corrected a few of my numbers from worldbank data
- joefranklinsrs 8y ago
  I didn’t go into the 20-30% loss in GDP in detail, but it factors in loss of millions of manufacturing and management jobs, fake/wasteful GDP boosting stopped, loss of FDI, capital outflow, debt deleveraging, 20-30% further drop in Yuan, etc etc
  - rgbrenner 8y ago
    But where is that coming from? It seems to me you're just throwing out a disaster scenario that isn't backed up by the numbers. China is much larger and more diversified than you seem to be giving them credit.
- mg96226 8y ago
  If anything, GP is conservative. If gdp growth stagnates, there's a very real risk that the Chinese housing bubble will collapse and bring down the entire economy with it.
  - rgbrenner 8y ago
    What's the most alarmist position you could take here? Probably cutting off all US trade immediately. But that doesn't result in a recession in China. They're growing at 7%, about the same as exports to the US. From that 7% subtract imports from the US (which would also be cuttoff and replaced by Chinese companies), and imports for export (which don't produce value for China)... and the result is that an end to US-China trade does not produce a recession for China.. they would still be growing by a few percent (note, the US economy only grows at 2-3%). So they'll still have a growing economy... and they're still moving people from the rural areas into cities. So it's not clear to me that this collapses the housing bubble there. Possible though? Sure, maybe.
mc32 8y ago
China will try to avoid this extreme scenario lest they end up like Russia --at least Russia has natural resources to export, if nothing else. They will have learned that scaring off foreign investment is not good for their economy long-term. They don't want to squander their potential, I don't think. Still, they have serious problems to address. Issues the US and the EU and other Asian economies have with them vis a vis their unfair trade practices. If the EU and other Asian economies join up with the US and form one front on this, they will very likely come correct, if reluctantly.
- dis-sys 8y ago
  When google chose to quit from the Chinese market, many people told me that China basically cut itself off from the modern world. 8 years on, we all know full well what actually happened. Comparing China to Russia is laughable at best - China's domestic market is 10x the size of Russia, it is comparable to the entire EU but with only one language, one system plus one culture making it much easier to do marketing for whatever products you can think of. In your single sided mind, you consider foreign investment something that makes China progress, yet you failed completely to recognise the fact that many many foreign companies rely on the Chinese market to continue to justify their existence. The whole concept of US/EU/SEA countries should all team up against China is also laughable. Just look at EU, for Internet companies, mobile and AI, EU lost almost everything to the US dominance, EURUSD dropped 35% from its peak 10 years ago. You seriously believe EU has the interest to further strengthen the US?
  - mc32 8y ago
    Well see, maybe you’re right and I’m wrong. Still think the issues among East Asia, Europe and the US have enough in common in terms of unfair trade practices it behooves them to act in concert to get China to normalize their trade position.
  - dbuder 8y ago
    China has a diverse range of languages and cultures. If the USA has 92% of people who speak English, China has a lower % that speak Mandarin.
erikb 8y ago
> 1.) 40-60 percent of a [US] company’s supply chain moves out of China especially highlighting the part that I added: US company. Does anybody think this is a bad thing for China? I'd argue that this is one of China's core interest. China is now becoming a major sales power itself. It's not recognized for that yet, but especially in the mobile market it's far ahead of he western competitors, maybe also in IoT. Actually one of the core Problems China is facing is that it can't BUY the stuff it wants to buy for its own production, like chips. And what it needs to worry about is that through all the complex entanglement at one or two points its public image of the new super power might slip. And this image is very much needed for it's plans in Belt&Road as well as in Africa. So most of its concerns are not related to the US market.

NathanCH 8y ago

It's interesting because you can replace "China" with "The United States" and most of those bullet points are still true.

pathseeker 8y ago
The US doesn't implement capital controls so this replacement fails at step 2.
- gricardo99 8y ago
  Possibly even at step 1. How many companies have 40-60% of their supply chain in the US? I would guess very few.
  - NathanCH 8y ago
    I mean, it doesn't have to be order numnuts
    - gricardo99 8y ago
      Ok, so ignore #1, and #2. What else? I actually don't see much at all on the list that is applicable in reverse. I guess you could reverse the last two, and ignore the rest, but then it seems the whole point of parent comment is lost.
    - dang 8y ago
      If you keep posting uncivil or unsubstantive comments we're going to ban you, so would you please stop? The idea here is: if you have a substantive point to make, make it thoughtfully; if you don't, please don't comment until you do. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

07d046 8y ago

I have no idea how likely that is, but that looks like an ideal scenario for the White House, and a possible existential threat for the Chinese Communist Party. People have a habit of putting up with a lot when the economy is growing dramatically and their lives are noticeably improving, but they might not be so happy with an increasingly oppressive government and a struggling economy that isn't giving any sign of future greatness.

seanmcdirmid 8y ago
Ya, the CCP has also taken a paternal-like responsibility for much of the economy, making guarantees about future positive economic performance and creating a lot of moral hazard in the process. This is why they are trying to avoid even a recession at all costs, or a property market bust.
int_19h 8y ago
Thing is, an oppressive government can deal with more discontent from the citizenry than a democracy like US. So it's not just a question of relative GDP and balances etc - purely economic issues - it's also a question of who is more resilient politically. I'm not so sure US is, if only because politicians have to chase votes, and even relatively minor economic pains among important constituencies can blow up very quickly.
- 07d046 8y ago
  I think it goes both ways. As a democracy, America has a pressure valve if things are going poorly, and a peaceful transition of power to the other side of politics is always an election away. (It could fall as a democracy, but it's hard to see a trade war with China being a cause for that.) Maybe America might discover a lack of political will, but there's also a chance it could be wrapped up in nationalism and sold to voters, and action against China is one of the rare things that a number of strongly anti-Trump people do support. As the rulers of a one-party totalitarian state, the CCP is setting itself up to take the credit and blame for everything in China. Following the "century of humiliation", China is attempting a century of rejuvenation. It started poorly with the Cultural Revolution and tens of millions dying in famine and violence, but it has made remarkable progress since Mao. It appears that the government is well-liked today (although nobody knows anything about China [1]) and economic development is continuing. The government can easily deal with a bit of discontent if required (by, say, putting a million people in concentration camps), but if there was a genuine crisis and people realised that the government had terribly mismanaged things or economically stagnates long before it becomes truly wealthy, the CCP might find that the mandate of heaven has shifted. 1. https://foreignpolicy.com/2018/03/21/nobody-knows-anything-about-china/ https://foreignpolicy.com/2018/03/21/nobody-knows-anything-a...

davidf18 8y ago

> 5.) China will have to target US farmers with tariffs, If that raises food prices, that could destabilize society or employees might ask for raises to compensate for higher food costs which firms might pressure the government to do away with tariffs on foods. In the mid-19th century, political economist David Ricardo joined Parliament to (successfully) remove the "Corn Laws" which were tariffs on all grains imported. Workers were complaining about the high cost of foods asking for raises which pressured the profits of firms.

nbhuik 8y ago

As far as I know most of those are already happening today.

chmod775 8y ago

Even though the US are China's biggest trading partner, US trade "only" accounts for about ~18% of China's total trade. China is still trading with other countries. While it may take a hit from US companies pulling some manufacturing out of China, some of those will be replaced by other - both Chinese and foreign - companies. Especially other foreign companies operating in China will profit from reduced competition for Chinese labor / manufacturing, encouraging them to move more manufacturing there. This will blunt the impact of manufacturing for the US market disappearing. Also US companies will only withdraw in part from from China, since they can still manufacture goods intended for anywhere else in the world there - just not for the US. In the end China will take a hit, but nothing close to requiring those measures you're picturing. The US will have to bootstrap a lot of manufacturing to replace Chinese labor. This will sound good on paper and look good on some economic metrics, because it requires domestic investment. But since the American lifestyle won't be "subsidized" by cheap and exploitative Chinese labor anymore, the average American may actually find himself to have less than before. And the rest of the world will profit from having two major players intentionally cripple each other.

joefranklinsrs 8y ago
"The US will have to bootstrap a lot of manufacturing to replace Chinese labor." They just have to move to cheaper countries to replace Chinese labor. One time upfront asset cost, but lower expense over time. "US trade "only" accounts for about ~18% China's total trade" Once China is not part of the trade flow between US and X country (Taiwan, South Korea, Japan, etc), the total trade for China will fall even more than 18%. "they can still manufacture goods intended for anywhere else in the world there - just not for the US" US is the largest consumer market in the world. Japan is second at 1/3 of the size of US. EU consumer market is mostly fragmented. There is just not that much singular consumer demand outside of US. Plus other countries are enacting tariffs on China as well - India for example. "Especially other foreign companies operating in China will profit from reduced competition for Chinese labor / manufacturing, encouraging them to move more manufacturing there." There are lots of countries that have way cheaper labor costs than China, there's no reason for the foreign companies to go there in the face of increasing tariffs. Nike is 30% in Vietnam. Samsung is producing more of its phones in Vietnam. Uniqlo increased its presence in Vietnam by 40%. "US companies will only withdraw in part from from China, since they can still manufacture goods intended for anywhere else in the world there " Again, tariffs and cheaper labor costs elsewhere will entice companies to move out of China entirely. Not to mention the threat of Chinese government takeover of assets, or capital outflow restriction.

gumby 8y ago

> This actually looks like the start of the disentanglement between the US economy and the Chinese economy. What will likely happens next (my best guess)... I agree with your conclusion but not your map; I see China investing and stepping up ag purchases from Brazil sub-saharan Africa; increasing the militarization of oil-producing countries, and exporting cheap products to Europe, Africa, South America and their southern mining province, Australia. The US will be forced to pay more for everything and so imports will shift to trans-shipment points; US exports will be more expensive as their imports will be more expensive. This seems like a generous gift of price support from the Trump administration to the rest of the world. The US is a manufacturing powerhouse, but its production is bipolar: super cheap stuff too expensive to ship (paper, chopsticks, etc) and ultra-high-added-value stuff (extremely high precision bearings and the like). Not cars in huge volume but planes: sure! Tariffs don't address this structural issue; if anything they exacerbate it.

joefranklinsrs 8y ago
"The US will be forced to pay more for everything" I'm assuming your assumption is because China is taking over all of the resources/production capabilities around the world? I don't think that can even remotely happen. Again, lots of multinationals are already 30% in Vietnam, Malaysia, or India. Companies can source ag or oil from plenty of non-Chinese sources. The consumers have barely felt the supply chain shifts. "The US is a manufacturing powerhouse, but its production is bipolar" You would be surprised at how much reshoring and US factories automation have occurred in the last few years in US. It will increase in scope after this current round of tariffs.
- gumby 8y ago
  >> "The US will be forced to pay more for everything" > I'm assuming your assumption is because China is taking over all of the resources/production capabilities around the world? No, it's because the US government is forcing US consumers (and producers) to pay more for the goods than buyers in other countries will -- that's what a tariff is. > You would be surprised at how much reshoring and US factories automation have occurred in the last few years in US. Indeed I would be surprised and until recently I bought a lot of manufactured goods. OK, I may have overdone it on the beryllium bearing example: I did see a piece of fancy firefighting equipment being built in the Central Valley for shipment to a customer in NZ. But it was exotic enough that it wasn't worth figuring out how to make in NZ, while the volume was so low (they made 3-4 of them a year, at $100K/pop) that it couldn't keep the lights on. Most of what they made was farm gear and solar mounts for sale in the valley. Another example: I bought some pressure vessels (about $60K each FOB Redwood City) made in LA: about half a dozen guys, a massive steel roller press and some excellent union welders. I could get them for much less from India, with about 50 guys feeding 2" sheet steel manually into a tiny roller press, excellent welding, also x-rayed and to the same safety standard. After shipping? About $65K. But that same factory in Amedebad is shipping tons of stuff to the oilfields of Central Asia and the Middle East -- they didn't really care if they got our businesses. While the factory in Los Angeles couldn't keep busy. So that's the low end: "not worth shipping". While $150K of high pressure steam boiler had parts falling off it in shipment from Chicago. It would have been cheaper for us to buy from Germany and have it shipped over just in terms of TCO. So yes I'm pretty familiar, as a customer, of US heavy industry.

dmoy 8y ago

> 2.) China restricting the movement of capital/equipments out of China (similar to what happened with Korean companies last year) Are companies not subject to the existing money restriction? We can't move more than like 50k per year out or something. Maybe less now. I have no idea how it works for companies, just individuals.

schuke 8y ago

The Party won't let anything that will lead to (10) happen. Growth=staying in power, this is the fundamental belief from which all their actions are derived. Facing a bad deal and losing face, they'll certainly choose a bad deal--they have a powerful propaganda machine to paint it as a good deal anyway, at least domestically.

MR4D 8y ago

Interesting analysis. Oddly, it reminds me of Venezuela’s path.

rgbrenner 8y ago

I think you went way overboard toward the end. Only 37% (and declining) of China's GDP is from trade.. and only <20% is from the US. So 20% of 37% = ~7% of GDP. Meaning, if all trade between US and China was cut off tomorrow, they would only lose 7% of GDP. So how do you get from that to 5X? Seems like you have a model of the Chinese economy from a decade ago. Fact is, China is much larger now, and much less dependent on trade today. Also keep in mind, a good portion of our imports from China consist of items that were imported into china for assembly. Look at all the items from other countries inside an iphone... yet when an iphone is assembled in China, the value gets assigned to China. If you adjust for this, it significantly reduces (but nowhere near eliminates) the trade imbalance. So the numbers above, actually overstate the impact on China's economy from cutting off trade. Edit: corrected a few of my numbers from worldbank data

joefranklinsrs 8y ago
I didn’t go into the 20-30% loss in GDP in detail, but it factors in loss of millions of manufacturing and management jobs, fake/wasteful GDP boosting stopped, loss of FDI, capital outflow, debt deleveraging, 20-30% further drop in Yuan, etc etc
- rgbrenner 8y ago
  But where is that coming from? It seems to me you're just throwing out a disaster scenario that isn't backed up by the numbers. China is much larger and more diversified than you seem to be giving them credit.
mg96226 8y ago
If anything, GP is conservative. If gdp growth stagnates, there's a very real risk that the Chinese housing bubble will collapse and bring down the entire economy with it.
- rgbrenner 8y ago
  What's the most alarmist position you could take here? Probably cutting off all US trade immediately. But that doesn't result in a recession in China. They're growing at 7%, about the same as exports to the US. From that 7% subtract imports from the US (which would also be cuttoff and replaced by Chinese companies), and imports for export (which don't produce value for China)... and the result is that an end to US-China trade does not produce a recession for China.. they would still be growing by a few percent (note, the US economy only grows at 2-3%). So they'll still have a growing economy... and they're still moving people from the rural areas into cities. So it's not clear to me that this collapses the housing bubble there. Possible though? Sure, maybe.

mc32 8y ago

China will try to avoid this extreme scenario lest they end up like Russia --at least Russia has natural resources to export, if nothing else. They will have learned that scaring off foreign investment is not good for their economy long-term. They don't want to squander their potential, I don't think. Still, they have serious problems to address. Issues the US and the EU and other Asian economies have with them vis a vis their unfair trade practices. If the EU and other Asian economies join up with the US and form one front on this, they will very likely come correct, if reluctantly.

dis-sys 8y ago
When google chose to quit from the Chinese market, many people told me that China basically cut itself off from the modern world. 8 years on, we all know full well what actually happened. Comparing China to Russia is laughable at best - China's domestic market is 10x the size of Russia, it is comparable to the entire EU but with only one language, one system plus one culture making it much easier to do marketing for whatever products you can think of. In your single sided mind, you consider foreign investment something that makes China progress, yet you failed completely to recognise the fact that many many foreign companies rely on the Chinese market to continue to justify their existence. The whole concept of US/EU/SEA countries should all team up against China is also laughable. Just look at EU, for Internet companies, mobile and AI, EU lost almost everything to the US dominance, EURUSD dropped 35% from its peak 10 years ago. You seriously believe EU has the interest to further strengthen the US?
- mc32 8y ago
  Well see, maybe you’re right and I’m wrong. Still think the issues among East Asia, Europe and the US have enough in common in terms of unfair trade practices it behooves them to act in concert to get China to normalize their trade position.
- dbuder 8y ago
  China has a diverse range of languages and cultures. If the USA has 92% of people who speak English, China has a lower % that speak Mandarin.

erikb 8y ago

> 1.) 40-60 percent of a [US] company’s supply chain moves out of China especially highlighting the part that I added: US company. Does anybody think this is a bad thing for China? I'd argue that this is one of China's core interest. China is now becoming a major sales power itself. It's not recognized for that yet, but especially in the mobile market it's far ahead of he western competitors, maybe also in IoT. Actually one of the core Problems China is facing is that it can't BUY the stuff it wants to buy for its own production, like chips. And what it needs to worry about is that through all the complex entanglement at one or two points its public image of the new super power might slip. And this image is very much needed for it's plans in Belt&Road as well as in Africa. So most of its concerns are not related to the US market.