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> “we must recognize the fundamental importance of the real economy… and never deindustrialize.” This hasn't been really put to the test yet, has it? What's th

> “we must recognize the fundamental importance of the real economy… and never deindustrialize.” This hasn't been really put to the test yet, has it? What's the cost of labor delta compared to the places where outsourcing from China would be attractive currently?

Theodores 5y ago
In the West the accounting means you can't invest in robots that take years to pay for themselves. It is therefore more profitable to outsource and not have the capital investment on the books. The Germans do it differently and can get a better return investing in themselves. In China they have invested heavily in the robots that make the robots. Sure they are playing catch up in some areas, for instance, chips where they don't have a TSMC yet. Even farming, where do those green and yellow tractors go? Cotton picking in China. Some China tech is way ahead of the rest of the world. The difficulty of competing is getting really hard hence sanctions against Huawei. They had got 5G and The West didn't even know what it was for. We have seen it before, Japan was way ahead with electronics and commodity cars. But China has a vast internal market and can proceed without making cheap goods for the West. If Western companies want to outsource to Burkina Faso then fine. Also into the mix is that Chinese brands are desirable in China and increasingly abroad. China has barely got started.
- walshemj 5y ago
  Not in the experience of Harrods and Burberry in the UK
- fennecfoxy 5y ago
  Sanctions against Huawei were for malware + ties to the CCP, not because the west "couldn't compete".
  - p_l 5y ago
    If you think the part where they blitzed 5G so hard that a) you could build 5G network using only Huawei b) it was effectively impossible to build 5G network without Huawei, didn't have impact on USA push to sanction Huawei... I have few bridges in Brooklyn to sell, good price.
    - mensetmanusman 5y ago
      Building a next gen communications infrastructure on top of a CCP backbone just didn’t seem like a good idea for many.
adventured 5y ago
> This hasn't been really put to the test yet, has it? Yes. Their textile industry has been gradually leaving for much of the past decade, as cheaper production exists in several other countries at this point. Textile dominance by China peaked around 10-15 years ago. They will lose labor cost sensitive industries to their cheaper competitors as their economy continues to climb, as labor costs continue to climb. It took many decades for the US textile industry - the world's largest for a while in the 20th century - to be worn down by this same process. During the first 2/3 of the 20th century the US was often a leader in inventing new textile technology and manufacturing processes. Toward the waning days many US textile makers tried to modernize and or consolidate their domestic operations as a competitive advantage, it didn't stop the process. Most sent their manufacturing overseas ultimately. China is currently attempting to modernize, reduce labor in the manufacturing process, and that also won't stop the industry from leaving. Textiles are one of the first major industries that tend to leave due to being particularly labor cost sensitivity. China is still the world's largest textile exporter, and may retain that crown for a long time yet given their size. A large chunk of their market share is going to be gradually dispersed across two dozen other nations. Vietnam for example became the largest textile exporter to the US in 2019 (pre pandemic), overtaking China. Vietnam's GDP per capita is $3,600 versus $11,800 for China. Vietnam is in the position that China was 15 years ago in that regard. China will struggle to compete with labor that costs 1/2 or 1/3 what theirs does.
- deleted 5y ago
  [deleted]
- pasabagi 5y ago
  Isn't that just the plan of every developing country? You start with textiles, then move up the value chain until you're a developed country and can pay for socialism or aircraft carriers or whatever you want.
  - adventured 5y ago
    It's not the plan, it is probably an inevitability. If you could automate your textiles, with 1/100th the labor, while retaining it all, you'd still want to keep it even at a reduced labor benefit, rather than see it go to China or elsewhere. China would rather keep all of their textile industry and hyper automate it, than see it leave to countries like Vietnam. Keeping industry like that internally has vast benefits, in terms of profit/savings, capital, technology and economic eco-system, leverage, influence, and so on. If the US could automate low-value manufacturing through robotics and get a significant cost advantage over China and pull back much of the low-value manufacturing that it lost, while getting very little labor benefit in the process, it would still be ideal for numerous reason to achieve that outcome (tax base, deprive China of that value, onshore capital and technology investment, some construction & maintenance value, wider economic ecosystem, and so on). China's big problem with this process is of course that they have 1.4 billion people. High-value replacement jobs for so many of their low-value manufacturing workers is something beyond difficult (you don't need 100 million software developers to build China's tech infrastructure; you don't need 10x the workers to build as many planes as Boeing or Airbus do). High-value manufacturing for example doesn't absorb labor like low-value manufacturing does. Their social welfare costs over the next 30-40 years will be extraordinary as their demographics rapidly shift toward being an older society. They're already into a workforce decline demographically, those aging & retiring workers begin to shift more to the liability column in terms of cost. They need their workforce employed and pumping tax dollars into the system. Automation is not China's friend, even if they're the ones doing it to themselves (if they had a critical national labor shortage, that would be a different matter). If China were to take over all of Germany's auto manufacturing (obviously we're talking a huge share of the global auto market), how many jobs is that worth to China and how does that scope to their 1.4 billion context (Germany has a mere 83m people)? What does something like that do for their context. That's the essential China labor and automation problem going forward. They could conquer a lot of high value manufacturing and be worse off overall than they are now, unless they can somehow keep all of their people employed, keep most of their low-value manufacturing employment simultaneously. And if China did use 4x the labor to build the equivalent of Germany's auto output (say they absorb their labor oversupply that way), that then caps the ability for that labor to rise economically, the margins won't be there to support far higher incomes, which has serious social consequences in terms of stability in China long-term. China would probably need to own all high-value manufacturing globally to both keep their people employed and keep incomes rising like they have been.
lasagnaphil 5y ago
I think that's the hubris China is currently having: as they've grown stricly because of the reliance of export-led growth, they are now dependent on the global economic order as much as the US is (for its import-led growth). And the ones that initially built the factories in China, can always pack up and move to a different country. So global corporations are now kind of "cycling through" a list of alternate underdeveloped countries to build factories in, and keep going until the options are all exhausted. Some countries are quite receptive to this (like Vietnam, which is undergoing a similar transformation like South Korea and China had in the past), but some countries are not (like India, due to its complex cultural/political legacy it's hard for foreign companies to navigate through).
- tablespoon 5y ago
  > I think that's the hubris China is currently having: as they've grown stricly because of the reliance of export-led growth, they are now dependent on the global economic order as much as the US is (for its import-led growth). Honestly, I think the PRC's hubris is more than matched by the US's (and Western world's). They're still overconfident from the collapse of the Soviet Union, and seem to think the chips will inevitably fall on their side, so they still engage with a large amount of wishful thinking. > And the ones that initially built the factories in China, can always pack up and move to a different country. So global corporations are now kind of "cycling through" a list of alternate underdeveloped countries to build factories in, and keep going until the options are all exhausted. I'm not so sure... 1) I think it's ultimately the PRC's goal to have domestic champions replace those global corporations in the global economy (e.g. Apple declines as Huawei ascends) 2) I don't think the PRC is as stupid as the US was, and will not allow those companies to "pack up and move" to the degree it's disruptive to their ability to provide an unmatched manufacturing supply chain.
  - lasagnaphil 5y ago
    > Honestly, I think the PRC's hubris is more than matched by the US's (and Western world's). Yes, I still definitely agree with that one. US’s hubris is the undeniably the largest in the world. > I think it's ultimately the PRC's goal to have domestic champions replace those global corporations in the global economy (e.g. Apple declines as Huawei ascends) Maybe, maybe not? We’ll see if this goes well as planed. Easier said than done. > I don't think the PRC is as stupid as the US was, and will not allow those companies to "pack up and move" to the degree it's disruptive to their ability to provide an unmatched manufacturing supply chain. The point is, companies are already doing this. You’ll be surprised how much conglomerates like Samsung has already taken production out of China.

Theodores 5y ago

In the West the accounting means you can't invest in robots that take years to pay for themselves. It is therefore more profitable to outsource and not have the capital investment on the books. The Germans do it differently and can get a better return investing in themselves. In China they have invested heavily in the robots that make the robots. Sure they are playing catch up in some areas, for instance, chips where they don't have a TSMC yet. Even farming, where do those green and yellow tractors go? Cotton picking in China. Some China tech is way ahead of the rest of the world. The difficulty of competing is getting really hard hence sanctions against Huawei. They had got 5G and The West didn't even know what it was for. We have seen it before, Japan was way ahead with electronics and commodity cars. But China has a vast internal market and can proceed without making cheap goods for the West. If Western companies want to outsource to Burkina Faso then fine. Also into the mix is that Chinese brands are desirable in China and increasingly abroad. China has barely got started.

walshemj 5y ago
Not in the experience of Harrods and Burberry in the UK
fennecfoxy 5y ago
Sanctions against Huawei were for malware + ties to the CCP, not because the west "couldn't compete".
- p_l 5y ago
  If you think the part where they blitzed 5G so hard that a) you could build 5G network using only Huawei b) it was effectively impossible to build 5G network without Huawei, didn't have impact on USA push to sanction Huawei... I have few bridges in Brooklyn to sell, good price.
  - mensetmanusman 5y ago
    Building a next gen communications infrastructure on top of a CCP backbone just didn’t seem like a good idea for many.

adventured 5y ago

> This hasn't been really put to the test yet, has it? Yes. Their textile industry has been gradually leaving for much of the past decade, as cheaper production exists in several other countries at this point. Textile dominance by China peaked around 10-15 years ago. They will lose labor cost sensitive industries to their cheaper competitors as their economy continues to climb, as labor costs continue to climb. It took many decades for the US textile industry - the world's largest for a while in the 20th century - to be worn down by this same process. During the first 2/3 of the 20th century the US was often a leader in inventing new textile technology and manufacturing processes. Toward the waning days many US textile makers tried to modernize and or consolidate their domestic operations as a competitive advantage, it didn't stop the process. Most sent their manufacturing overseas ultimately. China is currently attempting to modernize, reduce labor in the manufacturing process, and that also won't stop the industry from leaving. Textiles are one of the first major industries that tend to leave due to being particularly labor cost sensitivity. China is still the world's largest textile exporter, and may retain that crown for a long time yet given their size. A large chunk of their market share is going to be gradually dispersed across two dozen other nations. Vietnam for example became the largest textile exporter to the US in 2019 (pre pandemic), overtaking China. Vietnam's GDP per capita is $3,600 versus $11,800 for China. Vietnam is in the position that China was 15 years ago in that regard. China will struggle to compete with labor that costs 1/2 or 1/3 what theirs does.

deleted 5y ago
[deleted]
pasabagi 5y ago
Isn't that just the plan of every developing country? You start with textiles, then move up the value chain until you're a developed country and can pay for socialism or aircraft carriers or whatever you want.
- adventured 5y ago
  It's not the plan, it is probably an inevitability. If you could automate your textiles, with 1/100th the labor, while retaining it all, you'd still want to keep it even at a reduced labor benefit, rather than see it go to China or elsewhere. China would rather keep all of their textile industry and hyper automate it, than see it leave to countries like Vietnam. Keeping industry like that internally has vast benefits, in terms of profit/savings, capital, technology and economic eco-system, leverage, influence, and so on. If the US could automate low-value manufacturing through robotics and get a significant cost advantage over China and pull back much of the low-value manufacturing that it lost, while getting very little labor benefit in the process, it would still be ideal for numerous reason to achieve that outcome (tax base, deprive China of that value, onshore capital and technology investment, some construction & maintenance value, wider economic ecosystem, and so on). China's big problem with this process is of course that they have 1.4 billion people. High-value replacement jobs for so many of their low-value manufacturing workers is something beyond difficult (you don't need 100 million software developers to build China's tech infrastructure; you don't need 10x the workers to build as many planes as Boeing or Airbus do). High-value manufacturing for example doesn't absorb labor like low-value manufacturing does. Their social welfare costs over the next 30-40 years will be extraordinary as their demographics rapidly shift toward being an older society. They're already into a workforce decline demographically, those aging & retiring workers begin to shift more to the liability column in terms of cost. They need their workforce employed and pumping tax dollars into the system. Automation is not China's friend, even if they're the ones doing it to themselves (if they had a critical national labor shortage, that would be a different matter). If China were to take over all of Germany's auto manufacturing (obviously we're talking a huge share of the global auto market), how many jobs is that worth to China and how does that scope to their 1.4 billion context (Germany has a mere 83m people)? What does something like that do for their context. That's the essential China labor and automation problem going forward. They could conquer a lot of high value manufacturing and be worse off overall than they are now, unless they can somehow keep all of their people employed, keep most of their low-value manufacturing employment simultaneously. And if China did use 4x the labor to build the equivalent of Germany's auto output (say they absorb their labor oversupply that way), that then caps the ability for that labor to rise economically, the margins won't be there to support far higher incomes, which has serious social consequences in terms of stability in China long-term. China would probably need to own all high-value manufacturing globally to both keep their people employed and keep incomes rising like they have been.

lasagnaphil 5y ago

I think that's the hubris China is currently having: as they've grown stricly because of the reliance of export-led growth, they are now dependent on the global economic order as much as the US is (for its import-led growth). And the ones that initially built the factories in China, can always pack up and move to a different country. So global corporations are now kind of "cycling through" a list of alternate underdeveloped countries to build factories in, and keep going until the options are all exhausted. Some countries are quite receptive to this (like Vietnam, which is undergoing a similar transformation like South Korea and China had in the past), but some countries are not (like India, due to its complex cultural/political legacy it's hard for foreign companies to navigate through).

tablespoon 5y ago
> I think that's the hubris China is currently having: as they've grown stricly because of the reliance of export-led growth, they are now dependent on the global economic order as much as the US is (for its import-led growth). Honestly, I think the PRC's hubris is more than matched by the US's (and Western world's). They're still overconfident from the collapse of the Soviet Union, and seem to think the chips will inevitably fall on their side, so they still engage with a large amount of wishful thinking. > And the ones that initially built the factories in China, can always pack up and move to a different country. So global corporations are now kind of "cycling through" a list of alternate underdeveloped countries to build factories in, and keep going until the options are all exhausted. I'm not so sure... 1) I think it's ultimately the PRC's goal to have domestic champions replace those global corporations in the global economy (e.g. Apple declines as Huawei ascends) 2) I don't think the PRC is as stupid as the US was, and will not allow those companies to "pack up and move" to the degree it's disruptive to their ability to provide an unmatched manufacturing supply chain.
- lasagnaphil 5y ago
  > Honestly, I think the PRC's hubris is more than matched by the US's (and Western world's). Yes, I still definitely agree with that one. US’s hubris is the undeniably the largest in the world. > I think it's ultimately the PRC's goal to have domestic champions replace those global corporations in the global economy (e.g. Apple declines as Huawei ascends) Maybe, maybe not? We’ll see if this goes well as planed. Easier said than done. > I don't think the PRC is as stupid as the US was, and will not allow those companies to "pack up and move" to the degree it's disruptive to their ability to provide an unmatched manufacturing supply chain. The point is, companies are already doing this. You’ll be surprised how much conglomerates like Samsung has already taken production out of China.