4 ms·

> I wish we could have them in the US but my patriotism also tells me that would be the death of almost all US auto companies. As an American it is not clear t

by tzs 7mo ago

> I wish we could have them in the US but my patriotism also tells me that would be the death of almost all US auto companies. As an American it is not clear to me that I should care about US auto companies. I care about US auto workers but if they are working at a factory in the US owned by a non-US company making that company's cars that seems like it can take care of the workers. Toyota, Volkswagen, Hyundai, Kia, BMW, Mercedes-Benz, Honda, Nissan, Subaru, and Mazda all build cars in the US with US workers. Why not add some Chinese companies? If there is a good reason to keep the big American companies around pass a law that makes any new non-US auto plants here be a joint venture with a big American company, with the American company having a minority ownership and getting a license to make their own version in their own factories of the cars made in the joint venture factory.

epolanski 7mo ago
They will scream national security. While kidnapping foreign head of states, threatening allies and launching wars in the middle east.
jerlam 7mo ago
My Japanese Toyota has a greater US/Canada parts content percentage than an American Chevrolet, and the former is assembled in the US while the latter is assembled in Mexico. The only advantage US companies seem to have is nostalgia. The only way the US is going to get better at manufacturing is to learn/steal from the best - which is China now. It was Japan a few decades ago and we made a GM/Toyota joint factory (NUMMI).
- carefree-bob 7mo ago
  Toyota makes a lot of stuff in the US, and US automakers make a lot of stuff overseas. You can't really go by the nationality of the automaker anymore. That said, there are a lot of reasons (environmental, regulatory, govt subsidies) why US companies can't imitate Chinese companies. What a lot of people don't understand is that provincial governments in China do not have the ability to tax their citizens, but they are required to provide a host of social services. So what they do is start for profit companies, and use the profits of these companies to fund the state. This is the giant octopus of state owned companies in China. The same is also true of the central government, which does have the power to tax, but in practice is unable to collect income taxes from the vast majority of the population, which is why China's tax share of GDP is so abnormally low and the government is constantly cash-starved. Here, too, what happens is the government starts for profit companies whose revenue goes to the state. Sometimes a holding company is owned by the central government, but there are satellite ownership structures owned by provincial governments, with portions of these sold off to private investors. Of course many of these state owned companies lose money, but they are subsidized by the central government in a hidden way, which is that state owned banks lend them money which is routinely forgiven, or stealth forgiven via artificially low lending rates and constantly rolling over loans. Effectively it is impossible for these companies to go bankrupt, which is why you ocassionally get huge scandals when the government allowed some real estate companies to go bankrupt in the past. People didn't think such a thing was possible. So due to the quirks of taxation in China -- basically no one pays income tax -- the government is strongly aligned with for-profit businesses, as these are crucial to funding government operations. That could be anything from a cigarette company owned by a province to an airline, beer maker, construction companies, basically everything. Local officials sit on the board and have outsized ownership stakes, and profits go into the coffers of local and central governments as well as the personal bank accounts of officials. As it is illegal to be a member of a non-government controlled union in China, the same officials can ensure harmonious labor relations. They also don't need to worry too much about environmental regulations because when the government inspectors arrive to check on the government steel mill, there is a strong incentive to make sure that this, too, is harmonious. And the state owned banks ensure cheap credit is available without too many questions asked. This is how you can get enormous for profit companies in China that are not in any real danger from market competition, or from government regulation, or from labor strife, or from environmental regulations. Even energy consumption is subsidized. But what you don't get is high levels of efficiency or labor productivity. This is the middle income trap that China is currently in, and it's not really a model that nations in the west can follow. As a single example, let's look at China's largest steel maker, China Baowu Steel Group, since the parent brought up steel production and the need to "learn from the best". Baowu is a holding company 100% owned by the central government, but it owns child companies that are owned mostly by various provinces. In terms of labor productivity, they produce about 550 tons of steel per worker per year (130 million tons of steel and 237,000 workers). Let's compare that to, say, Nucor Steel in the US, which produces about 1000 tons of steep per worker. Or SSAB in Scandinavia which produces about 600 tons of steel per worker using non-fossil fuel processes. And both of these are under much stricter environmental regulations, and have real unions they need to deal with, and do not get the benefit of borrowing unlimited funds at interest rates that are well below the rate of inflation, and whose loans are routinely forgiven.
  - wuschel 7mo ago
    Thanks for your comment! I thought that Chinese local governments receive central government tax revenue shares and sell/develop land property as main income source. May I ask where you got some of the information from (e.g. re ownership and taxation structure in China)? Any sources?
    - carefree-bob 7mo ago
      They do not. I know, it's crazy. I am sure there are political/economic/historical reasons, but the central government does not share tax revenue with the provinces, putting the provincial government in a really tight spot. Also, the inability of the central government to collect income taxes is something people in the West can't wrap their heads around. For information about this, look at: https://china.ucsd.edu/_files/2023-report_shih_local-government-debt-dynamics-in-china.pdf https://china.ucsd.edu/_files/2023-report_shih_local-governm... https://rhg.com/research/the-myth-of-chinas-fiscal-space/ https://rhg.com/research/the-myth-of-chinas-fiscal-space/
  - ibrahimsow1 7mo ago
    Super interesting! Do you have any sources
    - carefree-bob 7mo ago
      Here is an academic paper describing China's dependence on corporate taxes: https://www.nber.org/system/files/working_papers/w28051/w28051.pdf https://www.nber.org/system/files/working_papers/w28051/w280... Here is a good explainer of the revenue issues and why China can't seem to collect taxes from households: https://www.youtube.com/watch?v=qMaWegICQHA https://www.youtube.com/watch?v=qMaWegICQHA In some sense, it's a nice problem to have -- sure you need to massively raise taxes, but you are only collecting 9% of GDP in taxes, so it's just a matter of getting up to the norm for advanced economies. It's not like your spending is out of control and you have to cut tons of social services to balance the budget. But, it's still a political problem, because people don't like paying more in taxes anymore than they like social spending cuts. However this decision to raise revenue through the corporate sector rather than taxing households introduces a host of problems by aligning the financial interests of corporations with the state. So downstream of this taxation issue are many ripples.
KingMachiavelli 7mo ago
The profits of auto manufacturing are distributed to US stock holders. The same won’t be true for foreign companies. For very large industries, this is a large amount of capital either staying or leaving the US. Also, it’s unlikely that the low prices could be maintained while also paying US labor and US safety standards. If they can then it means we’ve lost our competitive edge completely in the manufacturing sector. At that point we’d be reliant on foreign companies to operate locally here.
- Tostino 7mo ago
  I'm extremely unsympathetic to US auto manufacturers. They have fumbled every time they possible could my entire life. They deserved to go under from 2008. Let companies that actually want to innovate rise from the ashes.
- aurareturn 7mo ago
  Yes but quality of life gets better for Americans because they can get a superior product at a cheaper price. Protectionism is how you end up with a country like North Korea on the extreme end.
- piva00 7mo ago
  Allocating a large amount of capital to losing/less competitive companies is quite the antithesis of what the USA's capitalism was about. Protecting the big ones comes at the cost of unfair competition to new competitors that could take over them. Tesla is the only auto company from the US who managed it, and in a short amount of time is also falling into the same complacency trap. Why is it ok nowadays to artificially prop up these companies? It has only led to the stagnation of US auto manufacturers, as it's expected when competition is curtailed. The same can be seen happening in Germany and its auto manufacturers, they are on the same trend albeit slower, in my opinion they have one last shot to turn it around before being out-competed and requiring the state to continuously protect and sustain them as the USA has done.

by tzs 7mo ago

epolanski 7mo ago

They will scream national security. While kidnapping foreign head of states, threatening allies and launching wars in the middle east.

jerlam 7mo ago

My Japanese Toyota has a greater US/Canada parts content percentage than an American Chevrolet, and the former is assembled in the US while the latter is assembled in Mexico. The only advantage US companies seem to have is nostalgia. The only way the US is going to get better at manufacturing is to learn/steal from the best - which is China now. It was Japan a few decades ago and we made a GM/Toyota joint factory (NUMMI).

carefree-bob 7mo ago
Toyota makes a lot of stuff in the US, and US automakers make a lot of stuff overseas. You can't really go by the nationality of the automaker anymore. That said, there are a lot of reasons (environmental, regulatory, govt subsidies) why US companies can't imitate Chinese companies. What a lot of people don't understand is that provincial governments in China do not have the ability to tax their citizens, but they are required to provide a host of social services. So what they do is start for profit companies, and use the profits of these companies to fund the state. This is the giant octopus of state owned companies in China. The same is also true of the central government, which does have the power to tax, but in practice is unable to collect income taxes from the vast majority of the population, which is why China's tax share of GDP is so abnormally low and the government is constantly cash-starved. Here, too, what happens is the government starts for profit companies whose revenue goes to the state. Sometimes a holding company is owned by the central government, but there are satellite ownership structures owned by provincial governments, with portions of these sold off to private investors. Of course many of these state owned companies lose money, but they are subsidized by the central government in a hidden way, which is that state owned banks lend them money which is routinely forgiven, or stealth forgiven via artificially low lending rates and constantly rolling over loans. Effectively it is impossible for these companies to go bankrupt, which is why you ocassionally get huge scandals when the government allowed some real estate companies to go bankrupt in the past. People didn't think such a thing was possible. So due to the quirks of taxation in China -- basically no one pays income tax -- the government is strongly aligned with for-profit businesses, as these are crucial to funding government operations. That could be anything from a cigarette company owned by a province to an airline, beer maker, construction companies, basically everything. Local officials sit on the board and have outsized ownership stakes, and profits go into the coffers of local and central governments as well as the personal bank accounts of officials. As it is illegal to be a member of a non-government controlled union in China, the same officials can ensure harmonious labor relations. They also don't need to worry too much about environmental regulations because when the government inspectors arrive to check on the government steel mill, there is a strong incentive to make sure that this, too, is harmonious. And the state owned banks ensure cheap credit is available without too many questions asked. This is how you can get enormous for profit companies in China that are not in any real danger from market competition, or from government regulation, or from labor strife, or from environmental regulations. Even energy consumption is subsidized. But what you don't get is high levels of efficiency or labor productivity. This is the middle income trap that China is currently in, and it's not really a model that nations in the west can follow. As a single example, let's look at China's largest steel maker, China Baowu Steel Group, since the parent brought up steel production and the need to "learn from the best". Baowu is a holding company 100% owned by the central government, but it owns child companies that are owned mostly by various provinces. In terms of labor productivity, they produce about 550 tons of steel per worker per year (130 million tons of steel and 237,000 workers). Let's compare that to, say, Nucor Steel in the US, which produces about 1000 tons of steep per worker. Or SSAB in Scandinavia which produces about 600 tons of steel per worker using non-fossil fuel processes. And both of these are under much stricter environmental regulations, and have real unions they need to deal with, and do not get the benefit of borrowing unlimited funds at interest rates that are well below the rate of inflation, and whose loans are routinely forgiven.
- wuschel 7mo ago
  Thanks for your comment! I thought that Chinese local governments receive central government tax revenue shares and sell/develop land property as main income source. May I ask where you got some of the information from (e.g. re ownership and taxation structure in China)? Any sources?
  - carefree-bob 7mo ago
    They do not. I know, it's crazy. I am sure there are political/economic/historical reasons, but the central government does not share tax revenue with the provinces, putting the provincial government in a really tight spot. Also, the inability of the central government to collect income taxes is something people in the West can't wrap their heads around. For information about this, look at: https://china.ucsd.edu/_files/2023-report_shih_local-government-debt-dynamics-in-china.pdf https://china.ucsd.edu/_files/2023-report_shih_local-governm... https://rhg.com/research/the-myth-of-chinas-fiscal-space/ https://rhg.com/research/the-myth-of-chinas-fiscal-space/
- ibrahimsow1 7mo ago
  Super interesting! Do you have any sources
  - carefree-bob 7mo ago
    Here is an academic paper describing China's dependence on corporate taxes: https://www.nber.org/system/files/working_papers/w28051/w28051.pdf https://www.nber.org/system/files/working_papers/w28051/w280... Here is a good explainer of the revenue issues and why China can't seem to collect taxes from households: https://www.youtube.com/watch?v=qMaWegICQHA https://www.youtube.com/watch?v=qMaWegICQHA In some sense, it's a nice problem to have -- sure you need to massively raise taxes, but you are only collecting 9% of GDP in taxes, so it's just a matter of getting up to the norm for advanced economies. It's not like your spending is out of control and you have to cut tons of social services to balance the budget. But, it's still a political problem, because people don't like paying more in taxes anymore than they like social spending cuts. However this decision to raise revenue through the corporate sector rather than taxing households introduces a host of problems by aligning the financial interests of corporations with the state. So downstream of this taxation issue are many ripples.

KingMachiavelli 7mo ago

The profits of auto manufacturing are distributed to US stock holders. The same won’t be true for foreign companies. For very large industries, this is a large amount of capital either staying or leaving the US. Also, it’s unlikely that the low prices could be maintained while also paying US labor and US safety standards. If they can then it means we’ve lost our competitive edge completely in the manufacturing sector. At that point we’d be reliant on foreign companies to operate locally here.

Tostino 7mo ago
I'm extremely unsympathetic to US auto manufacturers. They have fumbled every time they possible could my entire life. They deserved to go under from 2008. Let companies that actually want to innovate rise from the ashes.
aurareturn 7mo ago
Yes but quality of life gets better for Americans because they can get a superior product at a cheaper price. Protectionism is how you end up with a country like North Korea on the extreme end.
piva00 7mo ago
Allocating a large amount of capital to losing/less competitive companies is quite the antithesis of what the USA's capitalism was about. Protecting the big ones comes at the cost of unfair competition to new competitors that could take over them. Tesla is the only auto company from the US who managed it, and in a short amount of time is also falling into the same complacency trap. Why is it ok nowadays to artificially prop up these companies? It has only led to the stagnation of US auto manufacturers, as it's expected when competition is curtailed. The same can be seen happening in Germany and its auto manufacturers, they are on the same trend albeit slower, in my opinion they have one last shot to turn it around before being out-competed and requiring the state to continuously protect and sustain them as the USA has done.