Colour me skeptical. The Chinese are trying to boost exports as much as possible both for economic reasons, and for political reasons, to prove that tough talk from the US, EU, Australia, Canada etc. is just talk (being blockheaded mercantilists, they’re not so keen on imports).
Yes, and they have. In 2019 China was facing heavy losses from the Trade War, reported their first drop in GDP, and were able to flip it in 2020 into huge gains using Covid.
Trade War Effects - Jan 2020 - Heavy losses, drop in investment, and drop in demand from China; China hits 30-year low growth rate
https://www.reuters.com/article/us-china-economy-gdp-instantview-idUSKBN1ZG092
China exports to US fall sharply in 2019, even after China depreciated the yuan:
Virus Effects - July 2020 - China is first economy to grow in 2020
The business that fled from 2010-2019 (especially 2018-2019) came rushing back after March 2020. You can see even Apple has come rushing back to China with big investments this year after they moved things to India, Vietnam, and even the US. How did that happen? Well, the virus made it difficult to maintain peak operational efficiency that could meet the price and schedule targets in countries outside of China, meanwhile inside China there was a recovery as early as March 2020. Thus it’s simple math for a business to decide that China is the better option again.
China’s strategy is:
- Stop bleeding business, bleed others instead
- Make it hard for businesses to continue efficient operations outside of China, encourage them to come back into China where supply chains are well linked by exploiting known bottlenecks and covid containment protocol, etc. For example, a factory in Manila,PH needs parts from Suzhou,CN, China can play it slow and manifest delays in Manila factories. Businesses would then be enticed to move things back to China where they don’t have to worry about shipping disruptions to certain components. In some cases like Vietnam, the virus has forced complete shut down of factories — that’s more business for China in the end.
- Once businesses shift back to China, use this leverage to pressure US to drop tariffs
- If the US doesn’t comply quickly, and if US continues to probe Virus Origins, then China will embargo products sporadically at major ports which ship to North America and EU countries. These interruptions create shockwaves in the supply chain.
- China can repeat sporadic embargoes disguised as covid containment protocol as needed until China gets what it wants.
The only way to get out of that cycle is for the world to decouple from China, and in the long term make significant and rapid progress in diversifying raw materials, supply chain, and manufacturing.
Case in point. Covid is China’s retaliation for the trade war:
This’ll put a damper on tough talk as well.
That’s an interesting assessment coming from the newly appointed Chief Global Investment Strategist, Wei Li. Note that she replaced Mike Pyle in March 2021 since he was tapped to join the Biden Administration as advisor to VP Kamala Harris.
China should no longer be considered an emerging market and recommended investors boost their exposure to the country by as much as three times.
Correct not to consider China as emerging market so China doesn’t keep exploiting loopholes, but wrong to triple investments, this is insanity.
Wei Li’s approach to triple investment in China is highly suspicious – my goodness, have we learned nothing on this planet?
“It’s not about eliminating the risks, it’s about are you being rewarded for the risks? We believe we are being compensated.” - Wei Li
No no no, not falling for that again.
Its recommendations come as BlackRock and other big asset managers are seeking to build businesses in the sprawling country. BlackRock earlier this year received the first approval for a foreign asset manager to launch a wholly owned mutual fund business in China.
Oh great…
It’ll look good on paper…
Um, other than your idea being insane…
Tangential but important to note - China is halting rail freight to Lithuania over Taiwan dispute.
I think there is a connection between China using embargoes/blockades, like halting trains and shutting down ports, as a type of negotiation tactic. China is holding products hostage anytime they don’t get their way…will the world stand for it?
Senior government sources in Vilnius see the rail suspension as another escalation in geopolitical tensions with China and expect further retribution.
“It’s going to be more than this, unfortunately. It will be more like total blockade of exports to Lithuania,” they said.
The Meishan terminal at Ningbo port was shut last week after a dock worker became infected with the delta variant of Covid-19. The terminal accounts for about a quarter of the port’s capacity, and it was still closed Tuesday, according to a worker in the press office, who declined to give their name or any other information.
There were no updates on the wechat accounts of the port and the provincial government’s Wednesday morning, and the city propaganda office didn’t answer the phone.
China using Covid to quarantine crew members 21 days, sometimes up to 28 days. Obviously massive impacts coming…
“At other ports, we are hearing reports of mandatory quarantine periods, cargo operations not being allowed to proceed until negative PCR test results are obtained, and other protocols,” added Ristic.
According to Argus Media, "Many Chinese coastal ports require a 14-day quarantine for imported cargoes after they depart from ports in other countries — including Indonesia, India, and Laos — before they can berth. Some other Chinese ports, including Nanjing and Changshu along the Yangtze River, require a 21-day quarantine. The Liuheng terminal at east China’s Zhoushan port requires a quarantine as long as 28 days. All crew members must take COVID-19 test before vessels are allowed to discharge their cargoes."
Bulker congestion has now risen to historic highs as China enforces stricter COVID rules for arriving vessels. And what happens in China will be felt in America. Every bulker stuck at anchor in China is one less ship that’s available to load U.S. soybeans, corn, wheat, and coal — pushing spot freight rates for U.S. bulk exports higher.
“It is staggering how much congestion there is [in China],” said Martyn Wade, CEO of Grindrod Shipping), on a conference call with analysts on Thursday.
Highest Congestion On Record
Asked whether China’s attempt to contain the delta variant could extend the dry bulk rate rally, Ristic told American Shipper, "We were expecting [congestion] to clear up a bit quicker but with what’s happening in China now, I think the COVID factor will remain significant for the remainder of the year.
“Ultimately though, if there is a significant slowdown in import growth or disruptions to cargo supply, congestion alone won’t be able to save the market,” he warned.
Motive goes beyond containment - it has to do with the US’s slowness of getting back to actionable Trade Talks, that tariffs have remained in place, and the ongoing Virus Origin Investigation. China is getting creative in its ways to pressure the US.
Ultimately it’s unlikely the US returns to older tariffs that allowed China to exploit America…
“Foreign Trade may face more complicated situation next year” - China
This is likely a threat directed at the US for the trade tariffs and the covid origins investigation. Are blockades on the horizon? Is War on the horizon?
The cnn analysis is barely scraping the surface of the real issue at hand – blockades disguised as covid containment.
https://us.cnn.com/2021/08/23/business/global-supply-chains-christmas-shipping/index.html
Look to China’s literal blockade on Lithuania over Taiwan… situation is worse than mainstream news reports:
Thirty years ago this month, Lithuania triumphed against overwhelming odds. Its resistance to a Soviet economic blockade, backed by lethal violence, hastened the evil empire’s collapse.
Now Lithuania’s courage is being tested again, by the Chinese Communist Party. It has already withdrawn its ambassador in protest at Lithuania’s invitation to Taiwan to open an office in Vilnius and cut direct rail cargo links. The communist regime in Beijing insists that the offshore democracy is merely a rebel province awaiting imminent reunification with the mainland.
New Sanctions on Lithuania – keep in mind these have global impacts.
" China-U.S. container shipping rates sail past $20,000 to record"
“Container shipping rates from China to the United States have scaled fresh highs above $20,000 per 40-foot box as rising retailer orders ahead of the peak U.S. shopping season add strain to global supply chains.”
Cause and Effect…
Allied Powers protest Beijing’s coercion in South China Sea… (related to Tariffs, Trade War with regards to shipping lanes and global economic dependency on the region)
Axis Powers using microwave weapons in Hanoi against VP visit …we are witnessing a war unfold
Same day the US Covid Origins Investigative Report arrives with “inconclusive results”, China reopens the worlds third busiest port…
Messaging is loud and clear — Any efforts to tie Covid to the Wuhan Lab will equal port shut downs & targeted blockades.
Now let’s see if the US can push through a new 9-11 style commission on Covid Origins…
Suggest you look up the meaning of the word “blockade”.
Blockade , an act of war whereby one party blocks entry to or departure from a defined part of an enemy’s territory,most often its coasts.
AFAIK the PLAN isn’t sitting in the Baltic closing Lithuania’s ports.
The China-EU Wuhan Railway.
From the article you’ll see Lithuania actually has prior experience from the Soviet Era Blockade. I guess they are used to it.
Yes, it is an Act of War. There’s been many Acts of War by China, probably because we actually are in a War with China at this very moment. Take for instance yet another microwave attack yesterday on VP Harris staff visit to Hanoi.
Wuhan Freight Trains which Link China and the European Union is the major hub which connects all of China’s Rail, Air, and Yangtze River/ maritime shipments. It’s the reason China picked the city of Wuhan to release the virus during the height of the trade war (to shut down the supply chain at its core and send shockwaves around the world as retaliation, an Embargo disguised as covid containment).
Like I said, look up the meaning of the word “blockade”.
The word you are looking for is “embargo”:
Embargoes are generally considered legal barriers to trade, not to be confused with blockades, which are often considered to be acts of war.[8] Embargoes can mean limiting or banning export or import, creating quotas for quantity, imposing special tolls, taxes, banning freight or transport vehicles, freezing or seizing freights, assets, bank accounts, limiting the transport of particular technologies or products (high-tech) for example CoCom during the cold-war.
China has so little trade with Lithuania that it is not even among their top 15 trading partners.
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The trade tactic mirrors those used against in previous disputes with countries [such as Australia ] and its exports of coal, wine, and beef. But while Australia’s economy is largely dependent on China, Lithuania’s trade was “negligible”, said Noah Barkin, a Europe-China expert at US research group Rhodium. Any economic leverage China had was limited “but by taking retaliatory steps, [Beijing] is sending a message to other countries that there will be consequences if they cross its red lines on Taiwan.”
What Lithuanian food and drinks are available here ?
Volfas Engelman Beer and Rutas Chocolate are available in Taiwan fyi. Rutas Chocolatiers is in Taipei.
Separately, other info on Trade:
- China to EU freight costs are up 10x
- China to LA freight costs are up 6x
- Component costs are unstable
- Semiconductor costs are sky high and limited supplies
- Toyota slashing production by 40% due to semiconductor shortage
- Companies who source critical components are increasing their onsite storage to last One Year, putting even more strain on supply chains
The global supply chain has become so fragile that a single, small accident “could easily have its effects compounded,” HSBC Holdings Plc. said in a note.
Some 60% to 70% of shipping deals on the Asia-America route are done through spot or short-term deals, according to Michael Wang, an analyst at President Capital Management Corp. He said auction-style pricing may continue until Chinese New Year in February 2022.
“We are talking about a lot of money just to move things around,” said Sunny Tan, executive vice president of Luen Thai International Group Ltd., which makes clothing and leather handbags for global brands.
As factories succumb to lock-downs, manufacturers are forced into a game of whack-a-mole, switching raw materials from one country to another. Some have resorted to air-freighting materials such as leather to factories to keep production lines rolling.
Meanwhile, Luen Thai’s Tan, who is also Deputy Chairman of the Federation of Hong Kong Industries, is trying to figure out how he’ll fill festive display windows in time for Christmas. “I wish when shoppers see our product they give it a kiss when they realize how difficult it was just to get it to the shelf.”
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