Economist Paul Krugman was on Amanpor & Co on PBS last night. He said China mostly buys raw materials but few finished products from the West.
Commodities like oil, coal, iron ore, aluminum, copper, etc might be impacted but not manufactured products.
You wonder about agriculture. They still have to eat but fertilizer, grain, pork, etc might see a slow down.
He said the China economy tends to be isolated from the global economy. They have their own problems but they have little impact on the rest of the world.
I saw that interview too. What he missed was that, to keep their economy chugging, the Chinese could be expected to be more aggressive about exporting stuff. The west handed one market to China: Russia. I have posted before about the vacuum created in Russia by the withdrawal of western automakers, and how the Chinese are filling that vacuum, as one example.
Another example is how the Chinese have taken over the low end TV market. Hisense has bought the TV operations of both Sharp and Toshiba, and builds a lot of the Best Buy house brand “Insignia” TVs. The amusing thing I noticed, while shopping for a new set last month: the “list price” for a 4K Toshiba TV at Best Buy is $330, but the Toshibas are perpetually on sale for $220. The comperable Hisense “list price” is $270, on sale for $240. The Toshiba looks like a much better deal, a whole third off, vs the Hisense set being only $30 off. But the Toshiba and the Hisense are essentially the same ChiCom set. because Hisense bought a license to paste a Toshiba label on their TVs.
Remember the late 90s, when some Pac rim companies were offering microwave ovens in the US for $40? Expect to see western markets be upended by ChiCom products at astoundingly low prices.
Remember when #44 slapped a protectionist tariff on ChiCom car tires, to give the US manufacturers a bit of relief? It didn’t last. The place where I buy tires still offers a couple Michelin and Goodyear products, at the top of their price list. Everything else in ChiCom.
And there’s a recent story of Chinese companies flooding the market in Europe with cheap Electric Vehicles.
Already in the 1980s Japanese companies were having electronics made in other countries including China. Their labor costs were rising.
Some companies are going to Viet Nam or India as an alternative to China. But China has vertical integration and excellent infrastructure. Alternatives may have low labor costs but may take a while to become competitive on other aspects.
I am skeptical and distrustful about most of what Krugman writes because he has a history of left-leaning (Democratic-supporting) “analyses” - going back many years.
That said, what would be his motivation for declaring such a thing, that a top 3 world economy slowing has no negative impact on “the free developed world”? Because they don’t buy many finished products? Strange.
The Chinese have major capital problems. It is forcing them eventually into supply-side economics. The country needs to recapitalize.
Andy Groves wrote about Intel competing with the Japanese for Dram production. Engineers in Japan kept improving the RAM. Intel was losing money. Finally trying to figure out what Intel should do it was noticed that in one corner of one plant in Arizona Intel was actually making money off CPUs. Intel pivoted but Japanese manufactures did not.
The Chinese probably are not making any money off of HDTV sets. It is a commodity item. The chipmakers supplying TV makers are making money in most cases.
Doing something and making money are two different things even for the JCs.
Really interesting comments. Supply-side economics for 40 years in the US offered no industrial policy. No roads up to factory doors along with utilities and or rails. No support towards new foundries etc…Our companies outsourced to China primarily much of our factory production.
Demand side or Democratic-leaning policies, as laws passed in 2022, do support the onshoring happening right now. The monies mostly are for retooling our factory build-out.
It is possible we cut the money needed to onshore more industry. That purposeful decision happened from 1981 to 2020. The idea is cut spending and then cut taxes.
Do you want a tax cut? Or do you want to see the USA take back the industrial base?
China can not retain its industrial base because the country does not have enough water to meet demand. The Chinese economies of scale had been a global deflationary force. That force gone is why there is global inflation.
The US and Mexico are now gearing up production to create a global deflationary force in finished goods.
Do you want us to fail for a political label to succeed?
The truth is you really never got those promised tax cuts. Not much of them anyway.
On the simplest level, people see the taxes they pay and hate it. That sets up constant lying by people who won’t cut your taxes but will lie to your face.
The constant reduction in real output after 1981 has in larger part led to benefit cuts and in real terms pay reductions. The lie to cut your taxes is still in your face.
Westinghouse (owned by ChiCom Tsinghua Tongfang, but, apparently, builds it’s sets in the US) $200. (Westinghouse TVs have a dreadful reputation, often failing in a few months. When I bought a new mattress some years ago, I was supposed to get a free Westinhouse set. I refused the set in favor of a couple Samsung Blu-Ray players)
TCL (ChiCom) $210
Toshiba (built by Hisense, ChiCom) $220
Hisense (ChiCom) $240
Insignia (may be built by Hisense, ChiCom) $270
Samsung (Korean company, may be built in Mexico, my Samsung was) $280
LG (Korean company, may be built in Mexico, my LG was) $280
Sony (Japanese company. could be built in Mexico or Japan) $400
So the questions could be is Sony gouging the daylights out of it’s customers? Are the ChiCom factories using forced labor, that is a lot cheaper than even Mexicans? The US built Westinghouses aren’t worth the gas to drive to the store to buy them, then drive them to be recucled.
The Chinese factories have an advantage. Situated in larger cities the factory is paid for much quicker.
Factories in Mexico City will have that advantage as well.
Factories in such cities then export a lower-priced product. That does not mean there is a profit. There is flooding the market. The idea later is to profit. That usually won’t happen because the models get updated. This means factory changeovers do not stay put long enough to make a profit.
The Japanese and Korean brands make very little money. It is not labor. Mexico is less expensive than China for labor. The issue is the assembly line costs money.
Found something here that is interesting.
This is how the TV makers make some money. It is not from the TV sets. It is from placements. When NetFlix wants placement they do a kickback.
Thanks. I had not thought of that. It is routine for TV remotes, now, to have buttons for one touch access to certain streaming services. The remote on my new Samsung has buttons for Netflix and Amazon, along with Samsung’s own streaming service. This remote for the cheaper, ChiCom, Hisense has more service direct access buttons.
On top of that, after a week of use, I noticed, when I turned on the Samsung, it would come on showing a streaming channel, not the over-the-air broadcast channel I had previously been watching. Since new, every time I turned the TV on, the bottom half of the screen would be filled with a menu of available streaming services, obscuring half of the picture of what I wanted to see. Every time I switch the set between inputs (antenna, HDMI, analog video) it also shows the menu of streaming services. Being naturally ornery, I went into the tuner setup menu and found “off” switches for the “turn on to streaming service”, and “turn on with streaming service menu” “features”, so used them.
Of course, in a few years, we may not have a choice, but pay for streaming services. For 20 years, the cell phone industry has been trying to get the government to shut down over-the-air TV broadcast, so the cell operators can have the spectrum. They apparently got a partial win: now, under certain circumstances, a broadcast station can sell it’s spectrum. A station in metro Detroit tried to sell it’s license, but the “JC” could not get as much money as he wanted.
Listening to NPR last night. Hollywood getting into China has been a huge change in cultural inputs. Product placements like a Chinese ATM in the middle of an Arizona desert because Chinese audiences would appreciate it. Movie topics that do not offend the Chinese government such as things on Tibet are taboo. Action films suddenly showing up in Shanghai.
On the surface not harmful. But the first two movies banned in China were on Tibet. It went deeper. One was from Martin Scorsese for Disney. Michael Eisen had to go hat in hand to the Chinese government and promise not to offend them again. The Chinese government relented and Disney built Disney Shanghai. Disney had banned Disney for one year at that point.
The product placements are paid for by Chinese brands. The placements amp the box office sales in China.
China was allowing 37 films per year from the US. Now the Chinese industry is more mature. The US quota may be silently dropping without no word from the Chinese government.
Years ago, I read about how US TV programs in the 50s became less and less about anything, for a while. People were afraid of attracting the attention of the McCarthyites, in a bad way, especially after seeing many of their coworkers and friends unable to obtain work because they had been blacklisted.
Today, I look at the growing flood of singing and dancing shows. Mindless fluff, viewed and instantly forgotten. No allegories, no point of view, no message, like we saw in many shows of the 60s, when the fear of McCarthyism faded. Seems US TV producers now, are afraid of being branded “woke”.
I have learned that when self-described experts tell me not to worry about something (China, oil, inflation, economy, debt), I probably should look into things and make some defensive preparations. When they tell me to really worry about something, the risk is probably less than whatever they are saying (Covid)
In the past 36 months, 1/3 of the country has contracted Covid, and1,127,000 people have died of it, roughly equivalent to having three fully loaded 747’s plow into the ground every single day, including weekends and holidays.
Which of those has turn out to be an insurmountable, or even particularly heinous problem?
I’m sorry, there is no world where the politicians are the experts. They are politicians, the art of negotiation, trade-offs and compromise. One side has run out of these guys and the placeholders are defective.
and the actual risk, bad as it was, is not as bad as they told us it was going to be. Remember the 3% case fatality rate? I do. then they said 1%. and what did it really turn out to be. Key word - I said the risk was probably less than they were saying - and it was
At the beginning the death rate was 3.4% of people infected. The CDC predicted there would be 1.5M deaths if no mitigation strategies were implemented . Of course there were strategies used: vaccinations, social distancing, masks, closing of schools & churches, and the death toll still ended at 1.1M.
There was one study done by a University in England (IIRC) that predicted 2.5M deaths in the US, but that was the highest that I remember. Perhaps there were others. For the record 2.5M is a huge number, but then so is 1.1M which is what it turned out to be.
At the beginning, I recall, NYC had refrigerated trucks lined up in a row to serve as temporary morgues, the death rate was so high until we heard the scary stuff, people began to understand, and the mitigation measures were put in place and - not unimportantly - the most vulnerable succumbed. That, more than any “prediction”, was the scariest thing I remember.
Astonishing to me that the Florida Governor is telling people now NOT to get vaccinated for the latest variant, as though it is any of his business. It’s so weird because although there were costs to closing (business, school scores, etc.) there were also significant costs to reopening too soon (indeed, school scores in Florida fell even further than California, which reopened later.)
Anyway, it is the continuing narrative of the right that somehow if we do nothing we will be better off, and dadgum those meddling gubmint bureaucrats for trying to save lives anyway! I am sorry that some businesses got hurt, but then they were going to get hurt anyway, and I am not sorry that million fewer people died because … people in government tried to do the right thing.
