Decoupling: will they do it?

This one is, in my opinion, one of the most important I’ve done. It appears that the US would really like to decouple from China in many respect and, while creating an environment to improve their own manufacturing is great, creating one to destroy others is not, it’s evil and discriminatory and is only carried out for one purpose: to maintain primacy.

Despite all the rhetoric, if anyone cares to look, they will see that, year on year and month on month, trade between China and USA continually increases. Don’t believe me? Check the US trade department’s own figures: So, decoupling is not an eventuality on anyone’s mind right now but…

The recent CHIPS Bill, that’s: Creating Helpful Incentives to Produce Semiconductors coupled with another bill, the Innovation and Competition Act, just a year ago, make it patently clear that the USA is leaning towards a world order in which it remains, or becomes the dominant producer of any technology while it stymies, hinders, threatens, bullies, blocks, bans and sanctions China back to the 20th Century

Economists may say decoupling can’t happen and psychologists would say it could, but will end badly. China has given no hint that it will go this direction, it would be a disaster.

Economically, it would be disastrous for the world, it would wipe billions off the value of everything we’ve ever invested in, it would make money worthless and there’d be trillions in lost income for China. China would need to completely rethink its debt and its infrastructure investments. Poverty Alleviation and Rural Revitalisation plans would be set back decades and the 5-year plans would be useless, they’d need to be rewritten for the next 30–50 years. Globally the Belt and Road Initiative could be in danger of collapse.

From a psychology standpoint, it’s quite apparent that no one in the US state department or administration really understands the psyche of China. China is long-term focused and so are its people. They don’t think much about what’s the benefit right now, they think very much about what’s the benefit in 25 or even 50 years-time. Psychologists know this dimension of culture as Long-Term Orientation.

Academic observers such as Harvard Ashe and the University of California unerringly find one thing that surprises the average “China watcher or China expert” which is that Chinese people are generally very satisfied with their lives and optimistic of the future. Less recent surveys in China by such as an older 2013 survey by Pew expressed widespread optimism coupled with some concerns, which appear, judging by more recent surveys to have been overcome

This would come as something of a shock to most US citizens as they view their news reports which keep telling them the same story, Chinese people are wonderful, but their government is terrible. Compare this with the US surveys of government satisfaction and you’ll immediately see a different story. There are so many to choose from, but a good satisfaction rate in US government usually hovers around the mid 50’s and has recently dipped to as low as 16%.

These factors, long term orientation and government satisfaction are important because if the Chinese government tells the people they need to do go through a very difficult time, as long as the reason is good, it will get widespread support. The complete opposite is true for the US who will not support a political motivated austerity campaign.

The situation is quite frightening. According to the Washington times: if no trade were to happen between China and the USA, 95% of all ibuprofen, 91% of all hydrocortisone, 80% of all antibiotics used in the US, is made in China would stop arriving. Within a few days of decoupling, hospitals would be hoarding drugs for “special cases”: read, rich people!

Sportwear is a little more complicated. A vast amount of sportswear is labelled Made in America, when the components are made overseas and assembled in America, probably more than 40% of all sports apparel is made in China, or is made using products sourced in China, but this could amount to 80% or higher when all the sports products are taken into account — a pair of Nike shoes, for example may have laces from China, soles from Vietnam, uppers from Bangladesh and assembled in the USA.

Exactly the same thing applies to cars in the USA, they may very well proudly call themselves US products, but up to 70% of the components in them are sourced from China. Read any car or mechanical component website and look carefully at the wording: designed and engineered in USA. What it means is, made somewhere else and, we all know where that is most likely to be.

At least 70% of all the mobile phones in the US are made in China. None are made in the USA, not the Apple, nor Motorola, which moved out of Texas to sites in Brazil and China and has now been sold to Asian interests. Even when they were made in the USA, they were assembled from components made mostly in China.

So, within a month of decoupling, average Americans will go shopping and find no clothes, no shoes, no medicine, no mobile phones, no new cars, or parts to repair the old car. Think of images of Cuba, with many cars over 70 years old; this is the reality for the US automotive a few years after decoupling.

It’s ok, many people will say, we can get products elsewhere but remember decoupling means exactly that. No-one knows how many shipping containers exist but it’s probably about 35 million, and China owns approximately 35% of them. If US and China decouple, sourcing products from other places will be manageable, but shipping them back to the USA may become highly problematic without access to China’s approximately 12 million containers or placing them onto container ships, of which almost one in five belong to China.

There are some things that the US doesn’t rely upon China for. Food is one of them, with neighbours such as Canada and Mexico, the US can be sure they will have enough to eat but distribution might be difficult. Oil is plentiful in the USA too although not the reserves are not being exploited well because it’s cheaper and less locally polluting to import it. Guns are another, the US currently holds an estimated 400 million privately owned guns with 38% of its citizens armed. There’s little doubt, if they need more guns, they’ll get more guns.

Imagine if you can, a country where citizens can’t get their cars repaired, nor upgrade to the latest iPhone, which probably wouldn’t work anyway because the infrastructure can’t be maintained. nor can they get the latest Nike or Converse shoes or any new clothes for that matter and, if that picture isn’t dystopian enough, try to picture the world’s largest percentage of both legal and illegal drug dependent citizens who will be off their medication and carrying 400 million private guns.

In other words: USA; be careful of what you wish for because what doesn’t come from China, quite often comes in on Chinese ships in Chinese containers with components made in China for assembly, almost certainly by immigrant labour who may very well realise that conditions are better in their own country and think about leaving.

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Jerry Grey

I’m British born Australian living in Guangdong and have an MA in Cross Cultural Change Management. I write mostly positively about my China experiences