article丨Wang Mingyuan
China's external economic environment has undergone great changes in the past two years. In addition to the increasingly tense economic relations between China and the United States, the biggest challenge is the increasing rise of emerging markets such as Vietnam and India. How big is these emerging markets have on China? Optimists believe that it does not damage China's economic status; pessimists believe that they may replace China as a new manufacturing center. So, what extent of challenges China faces and what the economic environment it faces in the next twenty years, this article will conduct a detailed analysis.
The fourth wave of industrialization after World War II is unstoppable
After the end of World War II, industrialization began to spill over to regions outside the West, and East Asia is increasingly becoming the focus of the world's industrial. As for why it is East Asia, rather than Latin America and South Asia with better economic foundation and closer relations with the West, this is a topic worth discussing. Simply put, from an internal perspective, although East Asia lags behind, its labor quality is high, its willingness to save, and its national capacity is strong. They have two very critical elements of industrialization: labor and capital. Although labor in other places is rich, it cannot be converted into labor capital. The national capacity and people's willingness to save are low, which also makes it difficult to gather capital accumulation that continues to promote industrialization.
From the international environment, East Asia except mainland China is basically included in the Asia-Pacific order dominated by the United States, and they form a large market with good interaction with the United States. Later, China also actively joined this economic system in reform and opening up . Therefore, East Asia was lucky to have become the transmitter of global industrialization for more than 70 years after the war.
From a geographical and temporal perspective, there were three waves of industrialization in East Asia after World War II. The first wave of was the industrialization of Japan in the 1950s and 1960s; the second wave was the industrialization of Asian Four Dragons that began in the mid-1960s. The climax was around 1980. During the same period, Philippines , Thailand and Malaysia also experienced industrialization. However, due to cultural and political reasons, these effects were far less than Four Dragons , and they stayed in the semi-industrial stage for a long time; the third wave of was the industrialization of mainland China, this was the largest manufacturing transfer in human history. China took more than 30 years to become a world industrial center from a weak agricultural country, and then an important scientific and technological research and development center. This is a miracle in the history of global economic development.
Under modern production conditions, the industrial geographical center will be transferred every 20-30 years, which is a common law. From a cost perspective, when a country completes industrialization in about 20 years, there will inevitably be structural changes in urbanization and neutralization. Therefore, wage levels will also increase significantly, which will become increasingly unattractive to capital. From the perspective of international competition, especially big countries like China and Japan, once industrialized, it will have a huge impact on the power of the traditional Western economic power. Western countries that are still at the top of the industrial chain will also actively arrange transfer production chains and cultivate new economic partners to offset the influence of these emerging countries.
Therefore, it is not unexpected that the recent relocation of manufacturing industry and the increasing exposure of emerging markets are becoming higher and higher. This is a general law of global industrial development. In the near future, it is also a high probability that economies that compete with China will have a highly competitive economy. Even if there is no accidental occurrence such as the Sino-US trade war, it will happen at this point in time. This is an inevitable historical law.
Therefore, we cannot be careless or pessimistic about the changes that are taking place. China's rise benefits from this economic law, and after its rise, it will inevitably face the test of this law. This is a compulsory course in the continuous growth of any industrialized country.
Who is the competitor in China?
So where will the fourth wave of industrialization focus occur? There are many places that are popular now, such as Latin America's Mexico , Brazil , Africa's Ethiopia , Uganda . These places have a rich labor force and their economic performance has been quite good recently.However, the laws of global industrial drift often follow the principle of proximity. Although Latin America and Africa also have labor and cost advantages, they are difficult to be favored by capital because the supply chain and market are isolated from the Eurasian continent. Therefore, emerging industrialized countries in the future are destined to still appear in Asia, which is the outer region of China, Japan and South Korea, a contemporary global industrial center.
Vietnam is undoubtedly the next industrialized "son of choice" and has many obvious advantages: the population is nearly 100 million, the average age is 33 years old, and more than half of the country's population is labor force; it is a member of the cultural circle of Confucianism , with high labor quality and strong government capabilities. Now the only country in the Confucian culture circle without industrialization is Vietnam; it has a long and narrow geography, many excellent ports, and convenient processing trade; it has recently pursued a pro-Western policy in politics, and at the same time maintaining traditional friendly relations with China, which is good for everyone.
But now has many deified statements about Vietnam, believing that it is the next world factory and replaces China's status, which is impossible. In terms of labor supply, as a medium-sized country, Vietnam can use about 15 million people in manufacturing, while China's manufacturing labor force reaches 200 million; in terms of output value scale, the most optimistic estimate of Vietnam's manufacturing scale in 20 years is about US$1.5 trillion (China will be US$4.86 trillion in 2021), accounting for at most about 4% of the world. Therefore, the upper limit of Vietnam is to become a large South Korea, or the Pearl River Delta in China. is at best a large workshop for global industrial products production, and cannot become a world factory.
India is also the undisputed "Son of God". Many people say that the Indian government has weak capabilities, infrastructure and demolition cannot be handled, and the population quality is not as good as China. But we need to look at it from a dialectical historical perspective. When China's export industrial park just started thirty or forty years ago, its infrastructure was also very bad, not as good as that of the industrial park in Mumbai, India or Bangalore, . Although India's overall labor quality is not as good as China, the education in some Indian states is very good, and it is still more than enough to select 100 million or 200 million to support industrialized labor.
Furthermore, India has its own advantages. For example, they have many scientific and technological talents, and the number of Indian doctoral students in prestigious European and American universities is no less than that in China. Indian elites have close ties with the West. They have great influence in the United States and the United Kingdom. Many people have become CEOs of technology giants, and even Indian vice presidents have appeared in the United States.
Therefore, India now forms a close interest alliance with the Western capital circle and political circles. On the one hand, this makes multinational companies increasingly favor India and lay out a new supply chain system here; on the other hand, it also allows India to quickly form a full-level industrial chain in its development, rather than being limited to relatively low-level OEM manufacturing.
The Modi government began to implement the "China Industrial Substitution Policy" in March 2020. This policy is divided into three levels: the first level is to replace "Made in India" with "Made in China", the second level is to replace "Chinese capital" with "Indian capital", and the third level is to replace "America + India" industrial cooperation model with "America + China". India's ambitions and conditions are evident.
Even if it is difficult to repeat China's development speed, India is still the best choice for the next wave of industrialization; even if its economic scale can only reach half of China's or less, given that India is also a global power, the impact of its economic take-off on China will still be comprehensive.
Indonesia's recent development achievements show that it is also a country that cannot be underestimated in the future. Indonesian has a population of 262 million, making it the largest country in Southeast Asia and the fourth largest population in the world. Although Indonesia has many ethnic groups, unlike India, its main ethnic groups are the Malay language ethnic groups that believe in Islam . Therefore, the internal ethnic conflicts are not very serious. Since the resignation of Suharto in 1998, the country has achieved relatively stable political transformation. The current domestic situation is stable and it is actively opening up to the outside world, becoming a favored place for foreign capital.
As for some other important countries in Southeast Asia, such as Thailand, Malaysia and Myanmar , it will not have much impact on China. Thailand and Malaysia, although these two countries have good economic and infrastructure foundations and are almost close to the level of developed countries, they each have their own shortcomings. Malaysia has a small population and is scattered, and Thailand has a very low population growth rate and has entered the aging stage. Therefore, the industrialization of these two countries will no longer improve greatly, and at best it will continue to play an important supporting role in the Southeast Asian economic circle. Although Myanmar's population is growing rapidly and its labor force is rich, its politics has been very turbulent and will not improve much in the short term.
From economic data, the impact of emerging markets on China,
How to measure the impact of these emerging market countries on China? The author believes that we must adhere to two perspectives: , one is to compare the perspectives of the entire industry field, cannot only choose data in certain industries to compare. This comparison can easily make people feel that these countries are very good or not. , two is to compare with the perspective of development. cannot only look at the current data gap, but also fully consider the characteristics of these countries in a period of rapid industrial growth, and scientifically evaluate the changes in strength between the two sides in the next 10 or 20 years.
first, Since the export processing industry plays a key role in Asian industrialization, the export volume of goods in the industrialization process is an important indicator for judging changes in the global industrial status. In 2012, India was US$291.1 billion, Vietnam was US$114.6 billion, while China was US$2048.9 billion, and the export volume of the two countries was approximately equal to 19.8% of China. By 2021, India's exports increased to US$669.6 billion, while Vietnam's exports reached US$336.3 billion, respectively. The two countries increased by 1.3 times and 1.9 times respectively. During the same period, China only increased by 0.6 times, and the ratio of the total export volume of the two countries to China also rose to 30%.
Second, Since the initial stage of industrialization in Asia is mainly foreign-driven, the total FDI (foreign direct investment) is also a key indicator for judging the future prospects of industrialization. In 2005, the total FDI of India, Vietnam and Indonesia was US$17.6 billion (Vietnam 1.9 billion, India 7.2 billion, and Indonesia 8.5 billion), which is insignificant compared to China's US$104.1 billion, but by 2021, the total foreign investment attracted by the three countries has reached US$153.1 billion (Vietnam 38.5 billion, India 83.5 billion, and Indonesia 31.1 billion), which is equivalent to 85.5% of China (China 179 billion), and it is about to tie China.
Third, from the perspective of industrial structure, in the process of industrialization in China and East Asia, the industries with the largest GDP growth and export pull rate are: textiles and footwear, steel, chemicals, machinery, electronic communications and automobiles. Judging from the development of emerging countries in the past decade, these industries are rising rapidly, eroding China's market advantages.
For example, in terms of textiles and clothing, China's exports have been declining since reaching its peak in 2014. Currently, China's exports in this field are around US$290 billion, and the global proportion has dropped from nearly 40% to about 30%. The exports of India, Vietnam, Indonesia and Bangladesh have exceeded US$100 billion, becoming a strong competitor in "Made in China" in this field. In terms of
electronics, China's mobile phone production peaked in 2016 and accounted for about 75% of the world, and has now dropped to about 65%. China's mobile phone exports in 2021 were US$310.8 billion, while Vietnam also reached US$57.3 billion. In recent years, several major mobile phone brands or their main OEMs have invested in setting up factories in India and Vietnam, and are planning to relocate the world's largest manufacturing plant in the future. India's PC shipments also increased by 45% last year to 18.6 million units (57 million units in China).In the field of home appliances, Vietnam and India have also become the fastest growing production areas and markets in the world. Now, Samsung , Sony , Panasonic , Haier , TCL, etc. have established production bases in India. Last year, India's smart TV production exceeded 21 million units, with a growth rate of 55%, and its share has reached about 10% of the world. In terms of
cars, Indonesia and India are also striving to catch up with China. In the last wave of dividends of global fuel vehicles, China has borne a group of powerful car companies by exchanging market for technology. However, India and Indonesia have directly caught up in the field of new energy vehicles with their latecomer advantages. India is ambitious in this regard. Because of India's talent and market advantages, now Toyota , Suzuki , BYD and BMW are all establishing new energy vehicle parts or vehicle manufacturing factories in India. India hopes to become one of the global new energy vehicle production centers in the future. With the production advantages of non-ferrous metals such as nickel, Indonesia is attracting Tesla to open factories, and has also attracted important supply chain companies such as CATL .
According to the above analysis, in terms of total, the peak of the gap between emerging countries such as India, Vietnam and Indonesia and China was around 2012. Although there is still a big gap in recent years, the gap is constantly narrowing. As for the industry, processing industries with relatively low technical content are currently accelerating their transfer to these countries. Some industries may be able to complete within the next 5-10 years, but the migration range of industries with relatively high technical content is relatively small. However, these emerging market countries are also actively planning to PK with China. Therefore, in the competition of emerging industries, China's opponents not only include traditional opponents such as the United States, Japan, and EU , but may also have India in the future.
Furthermore, many people are concerned about what changes will happen to the economic landscape in Asia in the future? We can do some simple analysis. With the early industrialization, the industrial policies and supporting facilities of India and other three countries are becoming more and more perfect, and with the further increase in foreign investment, the economic growth rates of these three countries are expected to further increase in the near future and enter the golden cycle of industrialization, which generally lasts for about 20 years.
According to the forecasts of World Bank and other institutions, as well as the experience of Asian first-mover countries, Vietnam's average growth rate is expected to reach 10%, India will be around 8%, Indonesia will also reach around 6%, and China's economic growth rate will be around 4.5%-5% in the next 20 years. This means that in 20 years, Vietnam's total economic output will reach about 10 times, India will be about 5 times, Indonesia will be about 4 times, and China will be about 2.5 times.
Last year, the total GDP of China, India, Vietnam and Indonesia was US$17.73 trillion, US$2.94 trillion, US$0.36 trillion and US$1.18 trillion, respectively. The total of the three countries is equivalent to 16.8% of China. is expected to be around US$40 trillion by 2042, China's GDP will be around US$15 trillion, Vietnam's GDP will be around US$4 trillion, Indonesia's GDP will be around US$5 trillion, and the GDP of the three countries is expected to reach about 60% of China.
Therefore, since China has accumulated an absolute leading advantage over the past four decades, in the future, as long as China does not make fundamental strategic mistakes, or the international situation does not experience severe turmoil, China will remain the economic leader in Asia, and India cannot replace China's position. However, Asia will change from the current one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one, one
Supply chain transfer is the biggest challenge to China
Supply chain transfer has gradually become an increasingly popular topic in recent years. The supply chain has played a very critical role in China's rise. If the take-off stage of China's economy relies on labor-intensive foundry industry, then after about 2010, the birth of supply chain companies with a certain technical content will play a key role in continuing the high growth of China's manufacturing industry.
Trump In order to weaken China's manufacturing industry and to reduce the trade deficit with China, he proposed a policy of returning to manufacturing, but it was ineffective in implementation. The reason is that American companies cannot do without China's supply chain. Biden's Democratic Party team realized this. They saw that the key to solving China's trade deficit and weakening China's manufacturing industry is not to fight a trade war, but to take a slash-based shift - to transfer the supply chains of US companies. Shortly after Biden took office, he signed the "Administrative Order on Supply Chain". Recently, when Biden visited Japan and South Korea, he proposed the Indo-Pacific Economic Framework , one of the important contents is to reshape the supply chain.
The Ruyi plan for the US to reorganize its supply chain is to form a US-Japan-Korea (and perhaps Taiwan)-India + Southeast Asia supply chain system to replace the previous US-Japan-Korea China-Taiwan-China Mainland supply chain system. Since the United States has the right to speak economically in the Western world, once American companies make a supply chain transfer, European companies will follow suit, just like when American companies laid out their supply chains in mainland China, German and French companies will also be synchronized.
Many economists believe that mainland China has formed the world's largest and most complete supply chain system, so it is difficult for the United States to reconstruct the supply chain. The author believes that this is just a static advantage, and does not mean that this is China's eternal advantage.
First, we should see that although the supply chain in mainland China is strong, these large and small supply chain companies are all operating around Western multinational companies. The highest predator and dominant of each supply chain ecosystem are Western multinational companies. Ultimately, Western companies such as have the initiative in supply chain layout, and is that they have more power to choose downstream supply chain companies rather than downstream supply chain companies, and more power to dominate these Western multinational companies. Therefore, when these Western multinational companies begin to deploy new processing bases and supply chain systems, the original supply chain companies may be gradually removed.
Second, We look at supply chain issues from the perspective of value chain. my country's supply chain system is still at the middle and low end of the value chain, and is highly replicable and substitutable. takes Apple as an example. Among its 200 most important supply chain companies, although mainland Chinese companies have the largest number, accounting for almost half of them, they are all concentrated in consumables and packaging with relatively low value content, accounting for about 4% of their value chain. In contrast, the United States, Japan and South Korea still occupy the majority.
Therefore, although the supply chain in mainland China is strong, most of the technical thresholds are not very high. In emerging market countries, especially India with a lot of talents, it is easy to replicate and establish a supply chain system that competes with China. This will greatly promote their industrialization level and help them establish an industrial system that competes with China. Therefore, the impact of supply chain transfers is more far-reaching and more fatal challenge compared to manufacturing plant transfers.
How does China view and respond to new challenges?
Although China is an ancient civilization, we are a newbie in international economic competition . The external changes in the past two years have caught China, which has just completed the modernization adult gift , a little off guard. So how should China pass through the first major test after the coming-of-age ceremony safer? How to avoid stagnation and marginalization in the midst of drastic changes in the economic environment? The author believes that we should base ourselves on the following points.
First, recognize your own advantages and stress resistance. China has the largest market and the most complete industrial system in the world, and scientific and technological innovation has also formed a certain scale. China is not as vulnerable as the challengers of the past Japan or Germany. Therefore, what is more decisive about for China's future development is not the external environment, but whether it can continue the past development mechanism, continue to release market vitality, and maintain economic growth.
Now some right-wing anti-China forces in the international community are trying to deliberately worsen China's external economic environment and actively decouple China from the outside world, and thus make China closed and conservative. We should keep our minds clear about these conspiracies. The more international situation changes, the more we should be confident that we should continue to maintain openness and cooperation, and continue to improve the market economy system. This is China's powerful stabilization needle and the anti-China forces are most afraid of.
Second, for the Indo-Pacific Economic Framework initiated by the United States to encircle and isolate China, China should continue to hold high the banner of globalization and unite all the forces of progress in the world; on the other hand, it should also build its own dominant regional economic framework to offset the impact of the US dominant framework. As for the selection of regional framework partners, we should still focus on "allies" that the United States relies on, such as Japan, South Korea, India, and Vietnam. Industrially, these countries have higher compatibility with China and have a larger trade volume. China is almost the largest trading partner of almost all Indo-Pacific framework countries; they are not one-sided economic competition between China and the United States. Therefore, they should still strive for these countries in order to differentiate their opponents and even cover or replace the regional frameworks built by the other party.
Third, treat the rise of emerging countries with a positive attitude. We should see that the rise of countries such as India and Vietnam is not entirely a bad thing for China. Economically speaking, it also means opportunities for China. Their rise is inseparable from China's investment, technology, and products. Chinese companies can do a lot in emerging markets. Xiaomi , Huawei , etc. are all successful cases. From the perspective of the international situation, with the rise of Asian countries, the proportion of Western countries in the global economy will further decline. It is expected that by around 2050, the global share of the economic output value of the United States and the EU will drop to about 35%, while Asian countries will rise to about 50%. From a civilizational perspective, although Asian countries currently have frictions with China, there is no fundamental confrontation. Therefore, the rise of Asia will ultimately help improve China's international environment. Given that China is the unique leader in Asia, the rising Asia will also help China find strong like-minded people and reshape the world order.
Fourth, regarding supply chain issues, China must continue to work hard to create a social environment conducive to scientific and technological innovation, cultivate core competitiveness, and shape first-class Chinese brands. If China, like Japan and South Korea, has a group of companies with high brand awareness internationally and core technologies in the high-end links of the value chain, then we don’t need to worry about the processing industry and supply chain transfer.
Because, for global leading companies, they are in a winner-takes-all position, and no matter where the supply chain is transferred, the most important profiter is still them. However, if a country does not do a good job in scientific and technological innovation and the core competitiveness of enterprises is not very strong, processing industry and supply chain transfer will occur, and economic hollowing out will occur, which means that high-end ones are not done, while mid- and low-end ones are hollowed out.
Therefore, we must take advantage of the window period of processing industry and supply chain transfer to make China's technology companies bigger and stronger, and China's overall industrial competitiveness reaches the level of Japan and South Korea. In this way, emerging markets are more of creating value for Chinese companies, rather than competitors of the same level of Chinese companies.
However, the number of
in China's unicorn companies has decreased recently, and the investment in technological innovation ventures has also decreased sharply. Many new economy industry companies are calming down, which is a serious signal. Creating an innovative loose environment and continuing the rapid development of China's science and technology is the best way to avoid risks.(The article only represents the author's views. This article was first published on Phoenix.com . The original title is " Biden's supply chain plan to build China, Vietnam becomes the world's factory? Who is China's biggest challenge?" interface news is authorized to publish.)
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