China had been one of the richest nations and greatest civilisations from at least 200 BC to 1800, the dawn of the Industrial Revolution. It was only a matter of time for China to reclaim its historical glory and dominate the world once again. Napoleon Bonaparte said more than two centuries ago: "China is a sleeping lion. Let her sleep, for when she wakes she will shake the world."
China had a larger population than Europe and was politically united for long periods thus had large percentage of global GDP for many centuries:
In 2019 China's population stands at 1.418 billion, the US has much smaller population of 328 million. China has over four times the population of the US and US's GDP of 20.4 trillion is larger than China's GDP at 13.4 trillion, yet this is changing fast:
The world is rapidly changing and based on current momentum sometime over the next decade China will overtake the US in GDP.
China still needs significant growth to overtake the US as the largest economy, yet in many areas China is already more advanced the the US. Anyone who has recently been to to major cities is US and in China notices that China is already more advanced. The most advanced cities in US look old compared to major cities in China. Chinese cities look like they’re a century in the future and dwarf those in the US. The quality of infrastructure in top Chinese cities is significantly better: airports, public transportation, high speed rail, super modern buildings are on a completely different level. They also have innovation with extensive use of technology and mobile payments, delivery of goods and wide use of AI.
China still needs significant growth to overtake the US as the largest economy, yet in many areas China is already more advanced the the US. Anyone who has recently been to to major cities is US and in China notices that China is already more advanced. The most advanced cities in US look old compared to major cities in China. Chinese cities look like they’re a century in the future and dwarf those in the US. The quality of infrastructure in top Chinese cities is significantly better: airports, public transportation, high speed rail, super modern buildings are on a completely different level. They also have innovation with extensive use of technology and mobile payments, delivery of goods and wide use of AI.
China has ambitious plans with the “Belt and Road” initiative, which seeks to expand China’s overland and maritime trade links. This massive infrastructure project is estimated to cost an estimated US$4–8 trillion.
The Belt and Road Initiative is a global development strategy adopted by the Chinese government involving infrastructure development and investments in 152 countries and international organisations in Asia, Europe, Africa, the Middle East, and the Americas. "Belt" refers to the overland routes for road and rail transportation, called "the Silk Road Economic Belt"; whereas "road" refers to the sea routes, or the 21st Century Maritime Silk Road.
China has bold plan with the Made in China 2025 initiative:
The goals of Made in China 2025 include increasing the Chinese-domestic content of core materials to 40 percent by 2020 and 70 percent by 2025. The plan focuses on high-tech fields including the pharmaceutical industry, automotive industry, aerospace industry, semiconductors, IT and robotics etc, which are presently the purview of foreign companies. This is an initiative to comprehensively upgrade Chinese industry. It is an attempt to move the country's manufacturing up the value chain and become a major manufacturing power in direct competition with the United States. Chinese government is committed to roughly investing $300 billion US dollars to achieve this plan.
| Industry sector | Description |
|---|---|
| Information Technology | AI, IoT, smart appliances |
| Robotics | AI, machine learning |
| Green energy and green vehicles | energy efficiency, electric vehicles |
| Aerospace equipment | |
| Ocean engineering and high tech ships | |
| Railway equipment | |
| Power equipment | |
| New materials | |
| Medicine and medical devices | |
| Agriculture machinery |
The current trade war is not about trade war, it is about the future of trade, a tech-economic war as the largest areas of trade are now technology products:
China is determined as 19th-century US were to achieve economic parity with Britain and like early US, will steal all the technology they can. The US had a long history of stealing intellectual property as it rose to power.
Back in 1812, finished cotton textiles dominated British exports, accounting for about half of all trade revenues, the fruit of a half century of progress in mechanised mass production. Proportionate to GDP, the industry was about three times the size of the entire US automobile sector today. High-speed textile manufacture was a highly advanced technology for its era, and Great Britain was as sensitive about sharing it as the United States is with advanced software and microprocessor breakthroughs. The British parliament legislated severe sanctions for transferring trade secrets, even prohibiting the emigration of skilled textile workers or machinists.
Back in 1812, finished cotton textiles dominated British exports, accounting for about half of all trade revenues, the fruit of a half century of progress in mechanised mass production. Proportionate to GDP, the industry was about three times the size of the entire US automobile sector today. High-speed textile manufacture was a highly advanced technology for its era, and Great Britain was as sensitive about sharing it as the United States is with advanced software and microprocessor breakthroughs. The British parliament legislated severe sanctions for transferring trade secrets, even prohibiting the emigration of skilled textile workers or machinists.
But the US had no respect for British intellectual property protections. They had fought for independence to escape the mother country’s suffocating economic restrictions. In their eyes, British technology barriers were a pseudo-colonial ploy to force the United States to serve as a ready source of raw materials and as a captive market for low-end manufactures. While the first US patent act, in 1790, specified that "any person or persons" could file a patent, it was changed in 1793 to make clear that only U.S. citizens could claim US patent protection.
The US has clearly violated Intellectual property rights as it rose to power and is now accusing China of the same as they about to overtake the US. The idea of stealing a country's trade secrets is nothing new, furthermore this is just a normal part of international relations — practiced by China, but also by the United States. In addition to IP theft another challenge for the US is forced technology transfer.
Forced technology transfer has to do with Chinese requirements for foreign direct investors in certain industries to become equal joint-venture partners with Chinese enterprises. Under WTO rules, countries are free to seek technology transfer from their foreign partners on a commercial and voluntary basis.US companies do not have to agree to the commercial terms and partner with China.
The US has clearly violated Intellectual property rights as it rose to power and is now accusing China of the same as they about to overtake the US. The idea of stealing a country's trade secrets is nothing new, furthermore this is just a normal part of international relations — practiced by China, but also by the United States. In addition to IP theft another challenge for the US is forced technology transfer.
Forced technology transfer has to do with Chinese requirements for foreign direct investors in certain industries to become equal joint-venture partners with Chinese enterprises. Under WTO rules, countries are free to seek technology transfer from their foreign partners on a commercial and voluntary basis.US companies do not have to agree to the commercial terms and partner with China.
China is investing heavily in semiconductors which are vital to all the next great tech advances, including 5G, AI, and quantum computing. Silicon Valley’s supremacy is “under threat from China's 'Made in China 2025' policy that seek to localise supply chains and build state-backed national champions to compete abroad.”. China hopes to become more self-sufficient in semiconductors. It wants to increase its domestic semiconductor production from less than 20% in 2015 to 70% by 2025.
Xi Jinping called for Chinese tech companies to double down on developing “core technologies”—newspeak for semiconductors, or integrated circuits (ICs). These core technologies are vital for any advanced tech product and are also pivotal to Beijing’s Made in China 2025 plan, a national push to achieve global superiority in advanced manufacturing.
Most technology manufacturing has long ago moved to Asia predominately to China and China is now challenging the US in semiconductors, software, AI and robotics. Top Chinese tech companies such as Huawei, Baidu, Alibaba, and Tencent are challenging US companies equivalent to Apple, Google, Amazon, and Facebook. Their deep pockets have also funded a broad range of tech devices, software, AI companies, focused on everything from smart cities to finance to education.
The US know it will be challenging to stop the progress of China tech hence they cite national security concerns to impose controls on import of Chinese tech products. This seems like hypocrisy as the US has been exposed spying by Edward Snowden. Snowden revealed the NSA’s PRISM program in June of 2013 as one of the American intelligence community’s tools for spying on the entire world. The US does not want to surrender the largest global GDP to China as such there is a global campaign against Huawei which has little to do with security, and more to do with the US desire to suppress a rising competitor.
As US businesses moved manufacturing from the US to China they lowered the cost of production and increased company profits. These corporation sold out the American workers and many companies used legal tax avoidance schemes to pay minimal corporate tax by sending profits to tax havens offshore to avoid tax thereby eroding US tax revenue. The corporate shareholders that moved production to China were rolling in money and this encouraged more and more US companies to move to China.
Over the last 20 years, the US has been consumed by costly wars in the Middle East and South Asia. The country has allowed its infrastructure to decay, stood by while its education system deteriorated, allowed corporations to move operations to Asia destroying American jobs and tax revenue, and its political discourse to descend into a dysfunctional abyss. China, on the other hand, has made massive long term investments in education, research and development, military modernisation, and artificial intelligence. It is now poised to overtake the United States as the world’s largest economy and is steadily closing the military gap.
With the rise of China many people in the US lost jobs. Trump campaigned on "Make America Great Again", he promised Rust Belt voters their manufacturing jobs back. Unfortunately the jobs have moved and it won't be easy for these jobs to come back to the US, furthermore corporations want to retain high profits from China products and as such will lobby government to ensure their high profit margins can be maintained. If they are somehow forced back to the US their profit margins will decrease and share price will fall. If share prices fall on large scale then the US markets could decline significantly and the whole economy could go into recession.
Tariffs on China imports can lead to unintended consequences could harm US economy:
- Many US companies import intermediate goods from China as inputs for their own manufacturing processes. Cost of these product will rise
- Electronic products that the US imports from China contain components designed and manufactured in the US. By levying tariffs on imports from China, in lots of cases the US will effectively be imposing export tariffs on its own exporting industries.
- US products no longer being competitive in the largest market in the world. As US would be locked out of sales to 1.4 billion Chinese US companies can suffer. Beijing could target the Chinese operations of US companies – Apple sells more iPhones in China than the US, GM more cars.
- US companies can not easily and quickly move manufacturing to other countries thereby lobbying US government to stop tariffs.
- US Brick & mortar retail is already struggling against online retailers and new 25% tariffs could force widespread store closures
- Trade war could see significant decrease in US companies by Chinese investors
- Shares price of Chinese companies that are listed on US exchanges could decline which would impact US investors and 401k retirement savings contributions
- Slowdown of US economy leading to recession
China is ambitious, organised and they have a long term centralised 50 year plan rather than companies having to answer to shareholders focused on short term quarterly results.
China have 1.4 billion people which is almost five times larger than the US population, China also have much stronger STEM education than the US which is required for tech supremacy. How long can the US delay the inevitable rise of China tech?
One country’s decline, and the subsequent rise of another, marks a radical transformation for the world, especially as market demand shifts. The country that dominates global trade during any given period is usually marked with the status of having the reserve currency. Spain and Portugal dominated the 15th and 16th centuries, the Netherlands the 17th century, France and Britain the 18th and 19th centuries, and the US dominated the 20th century. Now we are moving to a new empire, China the sleeping giant that has woken up.
US import tariffs goods:
China import tariff goods:
https://markets.businessinsider.com/news/stocks/china-tariffs-american-goods-thatll-get-hit-hardest-by-latest-round-2019-5-1028196268
More trade is done with China than any other country (click play in top right corner):
More trade is done with China than any other country (click play in top right corner):
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