Asked on 06 Jun 2019
Given the current trade wars and everything going on, how strong is China's economy and what are the chances that they will emerge with benefits out of all that is going on? Also, where is USA when it comes to this?
This trade war is bad for China in the short term but is going to make China stronger in the long term if it realises it's weaknesses and adopts a more responsible role in engaging other countries. The lessons include...
Global financial system -
China will realise its weaknesses as the global financial system is still pretty reliant on a financial system dominated by the USA.
Responsible Global Power -
This will forced them to double up on their working relationship with the world by showing their willingness to be a responsible global power.
It will realised that USA is holding many rights to a lot of Patents used in current technologies and can bar anyone from using them. They will double up their efforts to fill these gaps to be an alternative system for the rest of the world.
How powerful is China? We are basically using everything made in China - from agriculture products to daily goods such as cups and plates, porcelain wares to high tech stuff like handphones.
And where is USA products? Aside from software - eg Microsoft office, Salesforce and platforms - eg linkedin, Facebook. Hardly anything else comes to mind. And even if a certain product is designed in USA, it's probably made elsewhere because of economical reasons.
With the recent trend of China catching up and even exceeding USA in its technological brilliance, I'd expect more and more influence on our life due to changes (how minor it may be) in China as compared to USA. That's how powerful China has become.
With the current trade war, China 's economy is really in a bad shape, as reflected in its recent PMI. Business's sentiments and consumer's confidence are falling. With its currency at risk of breaching 7 and more susceptible to international capital flights, China' companies also face mounting debt pressure, especially those with lots of US debts. It would not be surprising that a lot of companies were to close down if the trade war drags on. Perhaps, that is the demonstration of the survival of the fittest. However, China is prepared to fight US for the long term. According to the Chinese press，“对于美方发起的贸易战，中国早就表明态度：不愿打，但也不怕打，必要时不得不打。面对美国的软硬两手，中国也早已给出答案：谈，大门敞开；打，奉陪到底。 The slogan “Want to talk? Let’s talk. Want to fight? Let’s do it. Want to bully us? Dream on!” has also been going viral on Chinese social media.
Personally, I am not optimistic that both countries could resolve their differences in the near term. This trade war, is going to escalate into technology war and finally currency war. The country that controls technology is going to reign supremacy. With so many things at stake, it is going to be another cold war. With China and Russia now collaborating to fight against US economically, it is even obvious that it is a long term fight. Benefits or losses, I am not sure yet. What I am sure is that Singapore cannot afford to take sides. Singapore should stay nimble and make the best out of the situation. This is just my humble opinion.
China is hungry for success, US is resting on its Laurels.
If US wins the trade war, China will get hungrier.
If China wins the trade war, they'll double down.
Bet on China.
Given that most of our daily used items are made in China, in 10 years time , China will overtake USA to be the world leading economic power .
Peter Frankopan published a book titled "The New Silk Roads", in which he analyzed how the Belt and Road Initiative catalyses greater cooperation from countries of the Silk Roads and enhances China's economic and political might. He even had an interesting section in which he detailed how pervasive China's influence - China's wealthy businessmen have their hands on many pies, it seems. Not only are they actively involved in the development of many African countries, but they are also owners of many English football clubs! Hence, I feel that China will emerge unscathed from the current trade wars since it seems that its meteoric development is already happening, with or without the rest of the world.
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China has tremendous assets on their hands.. from natural resources to number of people in their workforce. What we need in quality to make up for numbers; they have it. In the past, many used to make fun of China for bad quality products, bad education blah blah but now that China has the financial means (they have tons of cash at their disposal that they are loaning to countries who needs them; and when they cannot repay, China negotiate other form of repayments with them e.g. letting Chinese companies takes on the infrastructure construction in said countries). What this do is that they get major contracts for their own businesses; interfere in countries development (or at least have info of what's leading) and it all pays favorably to China's internal development and strategy planning.
While it is a temporary setback with the U.S sanction in place now; China has more than enough international businesses and influences to survive; especially with the fact that they have been using the extra cash to increase the education level in China.
U.S on the other hand is facing huge debts and will be facing higher overhead costs for businesses who might have to move out if there are no other solutions (subsidy is unlikely; since they don't have the money). Also, in the short term even if some businesses do gain from the U.S sanction; one wouldn't expect that these businesses would be able to ramp up their productions to meet the demands. This means some of the business needs cannot be met and therefore loss in business opportunities.. and $$.
While U.S businesses do holds many patents etc; note that inventions are being made everyday and new patents are issued everyday. It would not be an understatement to say that for every patent issued today; there is one for the Chinese to replace of the Americans old version. Also let's not forget that most if not all countries are aware of the Chinese purchasing power + influential that they would be unwilling to go head on with the giant; especially if many are reliant on them (e.g. imports from China to build infrastructure etc.in home country).
I can only say that at this moment it looks like China still has a lot going for them while U.S seems to have a very short term win unless they could come up with something more sustainable and promising.. with more credibility than their president.
Theoretically speaking, if all Chinese nationals decides to slap everyone that’s not from China, almost everyone in the world will get slapped in less than 5 slaps slapped
That said, China can be self contained and shut itself out from the world and it will affect the rest of the world more than China itself. But this should affect the rest of the world temporarily as many developing nations will seize this opportunity to prove themselves as a manufacturing powerhouse.
US on the other hand functions differently. plus right now, it has a businessman at it’s highest office compared to a career politician everywhere else. this can be a double edge sword.