For more than a quarter of a century, the United States and China were fused in an exceptionally monumental joint venture.
Americans bought impressive quantities of low-priced manufacturing products exported from China. Big brands exploited China as the ultimate means to cut costs, manufacturing products there, where wages were low and unions were banned.
Meanwhile, factory jobs lifted hundreds of millions of Chinese out of poverty. China’s leaders used the proceeds from the export boom to buy billions of dollars in U.S. government bonds, keeping America’s borrowing costs low and allowing its spending bonanza to continue.
The two countries were linked in such an important way that economic historian Niall Ferguson coined a term, Chimerica, to reflect their “symbiotic economic relationship.”
Today no one uses words like symbiotic. In Washington, two political parties that agree on almost nothing are united in their portraits of China as a geopolitical rival and a threat to the security of the middle class. In Beijing, leaders accuse the United States of conspiring to deny China its rightful place as a superpower. As each country seeks to reduce its dependence on the other, companies around the world are adapting.
Chimerica has fallen into a trade war, in which both sides have extended high tariffs and restrictions on critical exports — from advanced technology to minerals used to make electric vehicles.
American companies are moving factory production to less politically risky locations. Chinese companies focus on trade with allies and neighborswhile looking for domestic suppliers for technology that are prohibited from buying from American companies.
“Essentially, these two countries got married without knowing each other’s religion,” said Yasheng Huang, an economist at the Massachusetts Institute of Technology (MIT).
But divorce is not practical for the world’s two largest economies. Chinese manufacturing has evolved into advanced industries, including those critical to fighting climate change. The United States continues to be the consumer market par excellence. Even as geopolitical tensions corrode their ties, these two countries still depend on each other.
Apple makes most of its iPhones in China, even though it has been moving some production to India. A Chinese brand, CATL, is the world’s largest maker of electric car batteries, and Chinese companies dominate the refining of critical minerals such as the nickel used in those products. Chinese companies account for more than three-quarters of the global solar panel supply chain.
China is also a leading source of sales for major global brands in many industries. Chipmakers such as Intel, Micron and Qualcomm earn about two-thirds of their revenue from sales and licensing deals in China.
Instead of depending on China, companies that sell to North America are setting up factories in Mexico and Central America.
China’s share of U.S. imports has fallen 5 percent since 2017. But goods imported from other countries are more expensive — 10 percent more from Vietnam and 3 percent more from Mexico, finds research by Laura Alfaro of Harvard University, and Davin Chor, from Dartmouth College in New Hampshire.
Additionally, many industrial products manufactured in countries such as Vietnam contain parts and materials produced in China.
“You’re still dependent on China, it just takes more steps,” said Brad Setser, an economist at the Council on Foreign Relations. “There are more places where things could go wrong.”
By: PETER S. GOODMAN
BBC-NEWS-SRC: http://www.nytsyn.com/subscribed/stories/6995015, IMPORTING DATE: 2023-11-21 19:50:07
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