Written by 1:44 pm EU Investment

Why “decoupling from China” is doomed to fail-Xinhua

*In its latest attempt to decouple from China, the U.S. has signed into law a new chips act, forcing companies to move back their production lines.

*Some analysts say that decoupling from China is not the right way to address challenges the U.S. faces, while others say that decoupling from China isn’t just perilous, but impossible.

*Despite the U.S. rhetoric of decoupling from China, more business insiders have realized the importance of the Chinese economy in the global industrial and supply chains.

BEIJING, Aug. 27 (Xinhua) — In reply to a question from U.S. media about decoupling from China, Doug Barry, a spokesperson for the U.S.-China Business Council, replied, “Why would we want to decouple from this gravy train?”

Given China’s market scale, economic resilience and pivotal position in the global economy and supply chains, it’s no surprise multinationals and industry veterans share Barry’s view.

Consider Tesla’s success in China. The U.S. automaker’s Shanghai Gigafactory hit a new milestone with its 1 millionth vehicle produced in mid-August, after it delivered a record high of 77,938 vehicles in China in June, up 177 percent year-on-year.

There is no reason for the world’s leading EV company to abandon the booming market that accounted for more than half of the global EV sales last year.

Tesla is one of the more than 1 million international companies operating in China, most of which are tightening the knot with their Chinese partners rather than closing shop.

DECOUPLING ISN’T HAPPENING

The Western media continue to push the lies that multinationals are leaving China in droves amid geopolitical tensions and other uncertainties.

 A customer shops at a supermarket in Millbrae, California, the United States, Aug. 10, 2022. (Photo by Li Jianguo/Xinhua)

Reality tells us otherwise.

“If your definition of decoupling is foreign companies either leaving China outright, or at least significantly decreasing their footprints and diversifying investments out of China, then that certainly is not happening,” Jacob Gunter, a senior analyst at the Mercator Institute for China Studies in Berlin, was quoted by Bloomberg as saying.

“What we generally see across most industries is kind of the opposite,” Gunter said.

For instance, in early July, Audi started building its first EV plant in China, and Airbus SE won one of its biggest-ever orders worth more than 37 billion U.S. dollars from four Chinese airlines.

Meanwhile, in Guangzhou, the host city of the China Import and Export Fair, multinationals including LG, ZEISS, AstraZeneca, Panasonic and Mars Wrigley have launched new projects or added production lines.

A report released by the American Chamber of Commerce in South China in March indicated that more than 70 percent of the assessed U.S. companies have reinvestment plans in China for 2022.

Not coincidentally, in the first half of 2022 compared to last year, investment from the European Union into China was also up 15 percent, data from Rhodium Group showed.

Apart from investment, experts say that China, as one of the top three trading partners of over 120 countries and regions worldwide, including the United States, the EU and Japan, occupies an irreplaceable position in global trade and supply chains.

“China has developed a complete and efficient manufacturing ecosystem over the years, which is non-duplicable by any other country,” Koh King Kee, president of the Center for New Inclusive Asia, a non-governmental Malaysian think tank, told Xinhua recently.

“There is no country in the world that can completely replace China,” and that means decoupling from China is “completely empty talk,” said Yuki Izumikawa, an official at the Japanese Association for the Promotion of International Trade.

People visit the 130th session of the China Import and Export Fair, or the Canton Fair, in Guangzhou, south China’s Guangdong Province, Oct. 15, 2021. (Xinhua/Liu Dawei)

A POLITICAL AGENDA DOOMED TO FAIL

After former U.S. President Donald Trump’s administration dragged the world’s two largest economies into trade clashes and threatened economic decoupling from China, his successor Joe Biden has, to some extent, continued the hardline trade policies.

However, decoupling from China is a political slogan not based on reality, wrote Kent Lassman, president of the Washington-based Competitive Enterprise Institute, and Iain Murray, a senior fellow with the organization, in an article published in the Hill.

As part of Washington’s pursuit of geo-economic and geopolitical dominance, decoupling will backfire, with rippling effects worldwide.

In 2018-2019, the significant increases in tariffs imposed by Washington led consumers and businesses to pay 114.2 billion dollars more for imported products. If the Trump-era policies continue, U.S. GDP will be almost 60 billion dollars lower, and employment will decline by 176,800, said the Washington International Trade Association in a blog post.

In the wake of Biden’s signing of the CHIPS and Science Act a few days ago, Stephen Ndegwa, a lecturer at the Nairobi-based United States International University-Africa, warned the move is “like shooting yourself in the foot.” In a hyperconnected globe, “what happens in one part will reverberate across the world,” he said.

A recent study by the Munich-based economic research institute Ifo found that for Germany, a locomotive of the EU economy, decoupling from China will cost the country six times as much as Brexit.

Decoupling would amount to “economic suicide” for Germany, said Helga Zepp-LaRouche, founder and chairman of the German think tank Schiller Institute, noting it is clear that “the majority of the world population does not want to go with such a decoupling.”

CHINA INDISPENSABLE IN GLOBALIZATION

As a staunch champion of globalization and multilateralism, China continues to open its doors to the world and share development opportunities with global partners. Its ever-deepening integration with the world economy renders “decoupling from China” impractical.

Aerial photo taken on Aug. 20, 2022 shows the Tesla Gigafactory in Lingang new area of the China (Shanghai) Pilot Free Trade Zone in east China’s Shanghai. (Xinhua/Jin Liwang)

In late July, the Political Bureau of the Communist Party of China Central Committee convened a meeting that analyzed the current economic situation and arranged economic work for the second half of the year, which highlighted the importance to boost economic development through reform and opening up, urging efforts to boost export, expand import, promote the introduction of technology and foreign investment, and push forward high-quality Belt and Road cooperation.

LaRouche credits China’s steady economic growth and success in eliminating absolute poverty partly to its open economic policies and the China-proposed Belt and Road Initiative, adding that issues like Africa’s development and the Middle East’s reconstruction are out of the question without China’s cooperation.

Noting China’s contribution to global economic growth was steady at about 30 percent in the last decade, Koh said China has long promoted open, inclusive and win-win cooperation through regional cooperation platforms such as the ASEAN-China Free Trade Area and the Regional Comprehensive Economic Partnership.

Koh said globalization, which fosters economic growth worldwide, is irreversible.

(Video reporters: Li Cheng, Zhao Xiaona, Guo Shuang, Guo Jun; Video editors:Zhu Cong, Wang Houyuan)

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