![]()
© AP That’s
a football (aka soccer) metaphor for those who don’t know (and every
good Swamp Notes reader should). “Own goals” occur when a team
unintentionally scores for its opponents. Both America and China have
been recording lots of them recently in the battle to beat each other
economically. First, consider the US moves, or lack thereof. As Greg Ip laid out
nicely in The Wall Street Journal last week, American political
polarisation is making it impossible for us to pass an infrastructure
bill to boost domestic demand for semiconductors. Republicans are, for
example, trying to hold its passage hostage to demands that the
administration stop addressing climate change and that Democrats roll
back tax increases. Meanwhile, recent Supreme Court decisions have made
it difficult for any White House to guarantee rule of law will be
applied consistently across the country. That has investors wondering if
the US is beginning to resemble an emerging market, more than a rich
country, in terms of political risk — a topic I look at more closely in
my own column today. Meanwhile,
China’s handling of the pandemic, with its zero-Covid policies and
multiple lockdowns, have finally done what no amount of public shaming
or political risk had accomplished — it has made American CEOs begin
seriously reshoring production to avoid further supply chain problems,
amplifying a nascent trend towards regionalism and localisation. As this
very smart Bloomberg analysis
laid out, the construction of new manufacturing facilities in the US
has gone up 116 per cent in the last year, as compared to a mere 10 per
cent gain on overall building projects. A
January UBS survey noted that 90 per cent of CEOs were in the process
of moving production out of China or had plans to do so. Not all those
jobs will end up back in the US (nor should they). Some will go to lower
labour cost countries in Asia or countries that have opted for less
disruptive pandemic strategies. But taken all together, the moves make
it clear that the “cheap capital for cheap labour” bargain between China
and the west is over. We’ve entered a new, post-neoliberal era that
will be characterised by more local-for-local production, nearshoring
and onshoring by countries that have the capacity to do this. That will
force China to address the challenges of moving up the economic food
chain faster than it had wanted to. Finally, there was an interesting and unprecedented joint FBI and MI5 announcement last week about the dangers of Chinese espionage.
The American and British agencies held a press conference to warn
multinational executives that “the Chinese government is set on stealing
your technology — whatever it is that makes your industry tick — and
using it to undercut your business and dominate your market,” as FBI director Christopher Wray put it.
On the one hand, this is very much a “dog bites man” story — China has
been stealing technology for decades. But Anglo-American security
officials say the Chinese are trying to gather as much proprietary
technology as they can, more quickly than ever, as they expect western
sanctions at some point in the future. Well, yes. But attacks on big
companies in the US and Europe certainly may well speed up the risk of
those. |