Eyewitness account of Huawei factory

Investment Analysis Clubs Macro Economic Trends and Risks
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Thomas L. Friedman is one of my favorite observers of the world economy. He sees clearly and shoots straight.

https://www.nytimes.com/2025/04/02/opinion/trump-tariffs-china.html

I Just Saw the Future. It Was Not in America.

Thomas L. Friedman, The New York Times, April 2, 2025

…
I’d never seen anything like this Huawei campus [in Shanghai]. Built in just over three years, it consists of 104 individually designed buildings, with manicured lawns, connected by a Disney-like monorail, housing labs for up to 35,000 scientists, engineers and other workers, offering 100 cafes, plus fitness centers and other perks designed to attract the best Chinese and foreign technologists…

Huawei officials said in 2024 alone it installed 100,000 fast chargers across China for its electric vehicles; by contrast, in 2021 the U.S. Congress allocated $7.5 billion toward a network of charging stations, but as of November this network had only 214 operational chargers across 12 states.

It’s downright scary to watch this close up. President Trump is focused on what teams American transgender athletes can race on, and China is focused on transforming its factories with A.I. so it can outrace all our factories. Trump’s “Liberation Day” strategy is to double down on tariffs while gutting our national scientific institutions and work force that spur U.S. innovation. China’s liberation strategy is to open more research campuses and double down on A.I.-driven innovation to be permanently liberated from Trump’s tariffs…

What makes China’s manufacturing juggernaut so powerful today is not that it just makes things cheaper; it makes them cheaper, faster, better, smarter and increasingly infused with A.I… [end quote]

This is a long article describing many advances in China that leave the U.S. far behind. A key observation is that China doesn’t want a trade war with the U.S. because they need the export market to absorb their products. Blocking those products won’t instantly create similar products in the U.S. and those will be more expensive.

Every empire in history rose, maintained its power and then fell to be displaced by a stronger empire. This has always been a combination of bad choices by the old empire and better choices by the new empire.

Wendy

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That is a problem

I remember before the LLM Shanghai spent $16 B per year on AI. They employed 230k programmers. Googling at the time there were 1000 top flight AI programmers in China.

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I got called away but am reading this now.

It is a propaganda piece.

China’s economy is so bad that…

AI Overview

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Yes, China is experiencing a period of deflation, with prices falling for several consecutive quarters, posing challenges to the world’s second-largest economy.

Here’s a more detailed explanation:

  • Deflationary Trends:

China’s economy has entered a deflationary cycle, with prices declining for several consecutive quarters.

  • Factors Contributing to Deflation:

    • Weak Domestic Demand: Consumer spending and investment have been sluggish, contributing to deflationary pressures.

    • Housing Slump: The real estate market slump has depressed prices for household items and residences, further contributing to deflation.

    • Overcapacity and Debt: Industrial overcapacity and a high debt-to-GDP ratio are also factors exacerbating deflationary pressures.

    • Policy Push: A policy push to develop manufacturing and high-tech goods led to increased production, but demand for the goods has been weak, forcing businesses to mark down prices.

  • Impact of Deflation:

    • Economic Slowdown: Deflation can lead to a slowdown in economic activity as consumers and businesses hold off on spending and investment.

    • Debt Overhang: Falling asset prices and a negative wealth effect can exacerbate the debt overhang.

    • Global Spillover: China’s deflationary pressures can also have a negative impact on the global economy, as declining export prices translate into lower import prices for other countries.

  • Government Response:

    • Stimulus Measures: The Chinese government has implemented stimulus measures, such as cutting interest rates and reducing mortgage down-payments, to boost demand.

    • Policy Changes: The government is also exploring other policy changes to address the deflationary pressures.

  • Long-Term Outlook:

While some analysts predict that inflation may rise in the next few years, the risk of sustained price falls remains.

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The simple complicated truth is that China is extraordinary, collapsing and growing at the same time. Almost as if (like the USA has only recently become) China is being run by a ambitious lunatic…..

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Be nice if your lunatic was somewhat competent. A boy can hope. But alas no.

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Why compare Huawei to a dysfunctional government instead of to a leading private enterprise?

Tom , visit Tesla [in Shanghai].
[in Berlin].
[in Austin].
[in Sparks].

The Captain

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Two things can be true at the same time. During the worst period of deflation in US history: the car radio was invented (Motorola), Xerography was developed, Scotch tape became popular, Edwin Land invented the Polaroid camera, and my favorite: Ruth Wakefield developed and sold the rights to her chocolate chip cookie to Nestles for $1, with the proviso that it would be called the Toll House (cookie), the name of her restaurant in Massachusetts.

China may have deflation to deal with, but they also have some astonishing scientific things going on that we ought to be worried about.

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