China, Near-And Long-Term

Many Westerners’ eyes have recently been focused on the Shanghai, Shenzhen and Hong Kong stock exchanges and the moves that Beijing is employing to stimulate China’s economy. Less attention has been paid, however, to China’s long-term strategy and the likely impact of that strategy on Western businesses. China’s entry into globalization – starting with reforms instituted by Deng Xiaoping in 1978 –challenged prices and manufacturing in the world’s developed countries. Now that a new globalization has taken form, new kinds of Chinese exports represent a similar challenge to the developed world’s high-tech industries. The first round of challenges hollowed out manufacturing in basic items from running shoes to furniture and from hospital gowns to consumer electronics. The latest round of exports is challenging more cutting-edge products, including new-energy vehicles (hybrids and electric vehicles, or EVs), solar panels, wind turbines, robotics, flat-panel displays, artificial intelligence, microchips and other cutting-edge technologies, threatening to hollow out Western manufacturing in those areas as well.

This long-term China strategy complements Beijing’s ongoing advances in global geo-economics and geopolitics through the Belt & Road Initiative (BRI), the Shanghai Cooperation Organization (SCO) and the BRICS alignment (Brazil, Russia, India, China, South Africa and several new members). Most of the actions are focused on building an alternative trade and geopolitical bloc to that of the U.S. and Europe. Sanctions and tariffs will likely be ineffective in halting the effects of this juggernaut of trade and geopolitics.