My final thoughts
Misconception
Even today (almost 2020), I still
heard of many naïve arguments on China such as poor quality, stealing our IPs
and no innovation. It was true ten years ago in 2010 but not any more in 2020.
First, do you find poor quality
in Apple’s products and most of them are assembled in China? Quality control is
the responsibility of the companies who outsource their manufacturing to China.
China needs to establish brand names to boost consumers’ confidence.
Take 5G as an example. Huawei has
nothing to steal from us as they have more advanced products such as their new
phones and we do not sell even 4G networks.
If they can send a space ship to
moon, these projects have to be supported by industries with advanced
capability and decent quality control. They have many innovations in building
infrastructure. The new Beijing airport has been built in less than 5 years; we
would spend 5 years in arguing how to build such big projects. We cannot build
such huge projects as they may be credited by the next political party which may not be themselves.
Our government is trying to stop
China from passing us (will discuss each item). It will stop China in a few
years, but it will backfire and make China even more dominant in five or so
years. The trade war is not about trade any more.
·
5G.
Ericsson and Nokia are years behind Huawei. Some countries such as Germany and United Kingdom have to choose side. Verizon may have
to pay Huawei royalties in using their 5G patents.
Most countries cannot find any security backdoor as
claimed by our government.
The U.S. consequences- There is a good chance that
some African countries will use 5G network far earlier than us.
· Trade and
GDP
Both U.S. and China will suffer from the trade war. The
U.S.’s GDP will fall below 2% and China’s will fall below 6% for the first time
in the last 30 or so years. It would affect most economies.
·
Chips (or
core technology).
China has been investing heavily today in core technology
such as chips. It will take time to catch up. Huawei can produce a phone
without any software and hardware from the U.S.
It is harder to sell their phones outside China without Google’s apps, but
some can easily load these apps illegally to Huawei’s phones. China can have
the memory chips from other sources and/or using some outdated chips made in
China.
The U.S. consequences- Most chip companies will lose
financially. Recently I sold my MU and QCOM.
·
Decoupling.
It is in many fronts such as foreign students from China
and research cooperation. Chinese students will be diverted to many other
countries such as United Kingdom and there will be more universities in China,
some of which are formed by foreign institutions.
The U.S. Consequences- Our colleges will lose financially
as most Chinese students pay full tuitions while most foreign students from
Africa are not paying full tuitions. The research institutions will suffer due
to lack of qualified students / researchers. We also lose a lot of money from
tourism as Chinese spend most per tourist (due to high import taxes from China)
and the large size of tourists from China.
·
Space
station.
By 2025, China could be the only country that has a
space station after ours retires. China welcomes all countries to participate
in their space station program while the U.S. bans China from participating
in ours.
·
Delisting
Chinese companies.
In 2018, the top 4 IPOs out of the top 10 in the U.S.
were Chinese companies. It will hurt Chinese in funding new companies. London,
Hong Kong and eventually Shenzhen and Macau will benefit.
The U.S. Consequences- The investment bankers managing
IPOs will suffer. It will be a mess delisting so many Chinese companies. I do
not know what China will retaliate the U.S. companies doing business in China. Apple’s
sales has been suffering in China. U.S. is looking for a solution on the tariff
on Apple’s products imported from China to fend off Samsung’s advantage whose
majority of their products are assembled in South East Asia.
·
Chinese
fight back.
It may withdraw their debts; China is #1 or #2 foreign
country in buying our debts. With our high debts, the reserve status of USD
will be harmed. China has already used their currency in their oil exchange. I
predict in 2025, USD would be down to 50% from the current 65% of global
country reserves. EU’s Euro would gain from 20% to 25% and China’s Yuan would
gain from 1% to 5%.
China may ban export of rare earth elements to U.S. Since
many weapons depend on these elements, China has a real argument on national
security.
·
World
peace.
With China’s advances in military technology, the
world is more peaceful than today on the contrary. It is the balance of power
as evidenced by the cold war between U.S. and the Russia.
With the low oil prices, the disputed islands in South
China Sea will not be a concern now. The only concern is the invasion of
Taiwan. Taiwanese at one time wanted to invade China to recover the lost land, so it would be a civil
war then and now, and most likely China would win.
·
S.E. Asia,
Africa, S. America and Russia.
Most countries especially Russia win big by supplying
farm products and energy to China.
China helps S.E. Asia and Africa to build the
infrastructure as part of their “One Belt, One Road” Initiative. Many Chinese
factories have been moved to S.E. Asia due to the trade war between the two
largest economies.
China has built many infrastructure, hospitals and stadiums
in Africa. Hence, China is looking for long-term relationship.
·
Europe.
EU will spit in their decisions to support China or not. So
far, Germany, Spain, Italy and many smaller countries side with China. United Kingdom
most likely will implement 5G from China.
·
Mexico,
Canada, Australia, India and Japan.
They will side with U.S. due to the financial ties. Australia
is a surprise to me as they have been benefiting from the China trade. It is
more political and financial insecure by not siding with China.
With the prolonged conflict, most
global economies would be in a recession and so would be the stock markets.
Links
The following are more recent additions and most are on China.
Mega projects.
Manufacturing: Mega project
Energy: Mega project
One Belt One Road: 1
Technology: Mega project, Challenging, 5G
Education: Better than US?
# Filler 12 noon is not 12 pm
The next hour after 11 am is 12 am, NOT 12 pm. The one who set it up did it totally wrong and no one complains about it until now. If I were born earlier, I would have corrected it. If I were born here, I would be the president and every one would have a job by now.
-------------------------------------------------------------------------------------------------------------------------------------------------
Click here for my new book "Trade War with China".
No comments:
Post a Comment