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The author is a senior colleague at Harvard Kennedy School
After the Covid-19 epidemic struck, when China closed down and countries around the world were struggling to find defensive weapons, many wrote a report on China’s interdependence. It seemed logical, thanks to Donald Trump’s economic situation with Brexit and the US-China trade war. But there is little evidence that the plague has caused companies to either abandon China or to spread the word.
A rough metric of globalization is the ratio of world trade to globalization. After a sharp rise from the 1970s until the economic crisis, this has moved away from there. All commercial banks may not provide us with information on trading companies or international interdependencies. But if companies leave the country and return home, we can expect trade deficits to decrease. The US trade deficit reached a record high when imports reached more than $ 288.5bn in September. Most of China’s trade deficits, meanwhile, have survived the plague.
If the companies are near- or inland, we should expect the long-distance shipping methods to be complete. The busiest trade route in the world is still east of Asia and North America. The port of Los Angeles saw write books in September.
Foreign exchange flows into China should be reduced if companies leave. But China annexed the US as a country the top spot for the new FDI last year. According to a report released by China’s Ministry of Commerce, China’s FDI spending skyrocketed in 2020 and, based on figures for the first nine months of 2021. on the way forward to history this year.
The division of states should also be reflected in the payment system. According to the Institute of International Finance, non-performing funds emerged from Chinese markets in March 2020 as part of the economic downturn in the coming markets. But from then on, Chinese loans and stock markets faced an economic meltdown almost every month.
Most do not agree with the issue of deglobalization. What about research? According to HSBC, as of September six of the 10 companies are currently expanding their operations in China or planning to do so next year. The respondents were from 10 countries (with the exception of Japan, South Korea and Taiwan) and all are doing or doing business in China. Ninety-seven percent (97%) of companies say they want to continue to invest in China, with about one-fifth wanting to invest at least 25 percent of their profits.
Every year China Business Report from the American Chamber of Commerce in Shanghai found similar results. Of the US manufacturers in China, 72 percent have no plans to export for the next three years. Of the remaining 28 percent, zero was exporting products from China to the US. About 60 percent of those surveyed have increased their spending in China this year.
Why did globalization not happen? Companies make production-based decisions based on rigorous calculations that range from middle to long term. Creating new tools takes time and resources. Taiwan Semiconductor Manufacturing Co is building a semiconductor factory in Arizona will not work until 2024, For example. Usually the supply chains do not change when you press a button.
It is possible that the election is already in the pipeline, but it has not been announced. However, foreign companies are able to connect high-end networks, deep vendors, major ports and operators as well as operators in China. And while many began to use Chinese goods for export, they now want to acquire larger and faster growing economies. Automotive manufacturers first came to China to build their domestic markets, but the growth of the Chinese market means they now have reason to grow, not to leave.
Prices are rising in China and trade disputes with the US continue. And we do not know how China’s geopolitics will work. What is more possible than international distribution is the growing “China Plus One” approach: save the industry in China but save your money with retailers elsewhere. FDI is growing rapidly in Thailand, Vietnam and Malaysia.
There is no doubt that retail chains will change after the epidemic. The system of things is about to change, and China could lose another business. But globalization of manufacturing is more stable and makes the business more resilient to change.
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