World Reset: Four Reasons China Faces Challenges in Altering Global Structure
In a continuation of our China series, we delve into the evolving dynamics of China as an investment destination and its impact on the global economy.
Once a powerhouse in the global supply chain, China's attractiveness as an investment destination in 2015 was closely tied to its strategic position. Fast forward to the present, China is no longer just a cog in the supply chain, but a direct competitor. The country, once dubbed the "make-everything country," where factory location decisions were simple due to its uniquely enormous scale, has moved up the value chain, making many more high-value components for the products it exports.
The auto industry serves as a prime example of this transformation. China has risen from a bit player to a world-beating export powerhouse, challenging the dominance of traditional players in the industry.
The meeting between U.S. Secretary of State Antony Blinken and Chinese President Xi Jinping in Beijing was seen as an attempt to strike a tone of detente. The economic pressure to play nice with China has fallen considerably in the past decade, with the Biden administration working hard to tamp down talk of "decoupling" from China. However, the administration has also been walking back some of its tougher economic policies towards China, delaying punitive measures and softening its stance.
This shift in China's role in the global economy may make it easier to address China's issues in the future. The author suggests that in the past, the rich people in rich countries benefitting from the China gold rush made it difficult to assemble a coalition to address China's espionage, mercantilist policy, and growing military might. With China no longer the sole economic power it once was, the economic pressure to maintain the status quo with China is no longer as strong as it once was.
However, the recent Spy Balloon incident in February 2023, and the subsequent declaration by President Biden that the incident was not the Chinese leadership's fault, has raised questions about the true state of U.S.-China relations. China's leaders aired their grievances with seemingly little overt pushback during the meeting between Blinken and Xi Jinping, indicating that tensions remain.
In other news, the weekly link roundup has been delayed this week. Stay tuned for more updates on the evolving relationship between the U.S. and China, and the impact on the global economy.
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