You have it backwards. The US and Europe can source their cheap products from many locations in Asia, while China is very reliant on the EU and US economies to keep buying their stuff.
China is not 1,1 billion new consumers. It's a 200 million people extension of the western economy with 900 million people in Africa level poverty.
And despite this massive human surplus wages keep rising because even assembling an iPhone is relatively hard.
And soon other Asian countries will start doing it cheaper. If that happens, China has a huge industrial plant with no internal market to afford it.
Also, the average profit of Chinese exports is just 1.7%. So basically the Chinese made massive investments based on a projection of export demand that lasts long enough for sustainable internal demand to catch up. When the discount rate turns out to be a bit higher than expected, the house of cards falls.
Think of China as the Groupon of nations.
The smart Chinese elite is also buying foreign assets as fast as they can. Like insider stock trades, when a management of a country starts divesting, that's a sign of troubles, not of wealth.
This is not to say the Chinese elite was wrong to grow via market liberation and exports. What I do say is that the bulls on China conflate revenues with profits, and activity with lasting competitive advantages.
It also means the Chinese are buying US debt not to enslave the US (hard to do that with zero procent interest rates!), but as a favor to their largest client base.
Automation is a big unknown facing Chinese manufacturing. Eventually the West will have robotic lines that can manufacture iPhones cheaper than Chinese laborers. When, and what happens next, is anyone's guess.
China is unlikely to be left too far behind in any robotic revolution. Foxconn's been building a "million-robot army", likely to build the aforementioned iPhones.
>"Also, the average profit of Chinese exports is just 1.7%"
What is the average net profit margin on American exports? Due to the nature of much of what the Chinese export, we can assume low profit margins, but we need some context for this.
>when a management of a country starts divesting, that's a sign of troubles, not of wealth.
Wealthy countries own vast amounts of foreign assets.
>but as a favor to their largest client base
It isn't a "favor"; Americans purchase Chinese exports with dollars. What else are the Chinese to do with all those dollars? They purchase "risk-free" government bonds. There's no magical arrangement. It's mutually beneficial.
China is not 1,1 billion new consumers. It's a 200 million people extension of the western economy with 900 million people in Africa level poverty.
And despite this massive human surplus wages keep rising because even assembling an iPhone is relatively hard.
And soon other Asian countries will start doing it cheaper. If that happens, China has a huge industrial plant with no internal market to afford it.
Also, the average profit of Chinese exports is just 1.7%. So basically the Chinese made massive investments based on a projection of export demand that lasts long enough for sustainable internal demand to catch up. When the discount rate turns out to be a bit higher than expected, the house of cards falls.
Think of China as the Groupon of nations.
The smart Chinese elite is also buying foreign assets as fast as they can. Like insider stock trades, when a management of a country starts divesting, that's a sign of troubles, not of wealth.
This is not to say the Chinese elite was wrong to grow via market liberation and exports. What I do say is that the bulls on China conflate revenues with profits, and activity with lasting competitive advantages.
It also means the Chinese are buying US debt not to enslave the US (hard to do that with zero procent interest rates!), but as a favor to their largest client base.