Chinese pundits are divided over Washington’s proposed plan to restructure America’s industrial supply chain by decoupling with China.
Chen Feng, a writer for Guancha.cn, or The Observer, writes that US companies will not be able to relocate their high-value production lines from China to nearby countries such as India and Vietnam, which he says lack a full supply chain of automated machinery and equipment.
According to Chen, even if US factories are relocated, India and Vietnam will need to buy more machinery parts from China – resulting in a rising reliance on China.
Li Wei, a professor in the School of International Studies at Renmin University of China, writes on the contrary that the impact of the United States’ decision after four decades to reform its supply chain should not be underestimated. The move, he warns, may shake China’s status as the world’s manufacturing center.
Other commentators, meanwhile, argue that China can sustain its position at the center of the global supply chain by continuing to open up its economy.
A quick summary of the background to the issue might start with the G20 Rome Summit held on October 31 last year. There, US President Joe Biden held a meeting with leaders of the European Union (EU) and 14 other countries including Australia, India and South Korea to discuss the global supply chain.
Biden said the world’s retail business and manufacturers were severely affected by the pandemic and that the assembled country leaders should take action to ensure that their people could get the products they need, from consumer goods to automobiles.
In April this year, US Treasury Secretary Janet Yellen said the US should implement a “friend-shoring” strategy in which America and its allies relocate their production lines to countries where they feel comfortable geopolitically.
Yellen said the US, Europe and some other countries had expressed national security and human rights concerns regarding some of China’s practices.
She said: “Friend-shoring means that we have a group of countries that have strong adherence to a set of norms and values about how to operate in and run the global economy.
“We need to deepen our ties with those partners and work together to make sure that we can supply our needs of critical materials.”
The Biden administration has since made moves in that direction, including the approval of a US$1.2 trillion package last November to upgrade US infrastructure. On August 11, Biden also signed to approve the CHIPS and Science Act, which involves a $280 billion plan to boost the local chip-making sector.
Guancha’s Chen wrote in an article on October 7 that the so-called restructuring of the US supply chain was all about “de-sinicization,” namely the elimination or reduction of Chinese participation in global industries.
Chen said the US was trying to shift away from China by rebuilding its raw-material bases to obtain rare earths and other key metals such as tungsten and magnesium; reconstructing its chemical, pharmaceutical and biomedical production lines; building new energy industries; and encouraging mid-and-low-end consumer goods makers to move to “friendly countries.”
Chen said China has a very strong advantage in the rare earth and steel sectors over all other countries so it will continue to enjoy pricing power for these products.
He argued that it will be difficult for the US to use subsidies to make private companies avoid using China’s chemical and medical products or attract chip manufacturers to base in America.
On that line, Chen noted that TSMC’s 5-nm chip fab had commenced operations in Arizona but failed to use the same staff-management procedures as in Taiwan due to the difference in America’s working culture.
Moreover, Chen said the US would not be able to use political issues to suppress China.
He wrote: “The US and Europe cannot intervene in China by using the QUAD [Quadrilateral Security Dialogue], AUKUS [a trilateral security pact between Australia, the United Kingdom and the US], or Taiwan, Xinjiang and Hong Kong matters.
“Climate and supply chain issues are more effective ways to pressurize China.” Chen argued, “but the US and Europe still cannot achieve anything over these topics. Their moves will only hurt the credibility of the global order of ‘Pax Americana,’ which will be replaced by a dual leadership in the world or even a ‘Pax Sinica’ era.”
However, Renmin University’s Li expressed a contrary view in a September 30 article in which he wrote that US-China competition was intensifying while the Biden government’s moves would have a great impact on China and the wider world.
Li said the US would push forward with its two main strategies – on-shoring and friend-shoring – to strengthen domestic manufacturing and relocate overseas production lines.
“The US wants to undermine China’s status in the global supply chain by rebuilding a new network with America as a center,” he said. “The United States’s plan to shorten or relocate its supply chain can threaten China’s industrial security. It is a slight change but will affect everything else. The strategic competition between China and the US is actually a fierce game over the status of the world’s factory.”
Li said Washington started to restructure the global supply chain, suppress China’s industrial development and strengthen local US industries during the Trump era. However, he said the US had failed to reduce its trade deficit with China by raising tariffs as its imports from China grew last year.
Citing a supply chain report published by the Biden administration in June 2021, Li said the US faced risks in securing steady supplies of semiconductors, medicines, rare earths and large batteries.
Li pointed out that the US had already set up different groups, including the Chip 4 Alliance (which comprises the US, Taiwan, South Korea and Japan), the Indo-Pacific Economic Framework, the US-EU Trade & Technology Council and the Americas Partnership for Economic Prosperity, to secure those supplies.
In an article published on September 30 – an example of what we might call the “Keep on keeping on” school of Chinese thought – commentator Wu Chuping criticized the US for its protectionist and anti-globalist moves.
Wu said China will be able to contribute to the global supply chain by further opening up its economy, particularly to Belt and Road countries, and by digitalizing its supply chain.
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