Chapter 1: What has been China's evolution in the global economy?
Pushkin.
When you think of China's role in the global economy, you might think of it as the place that makes low value stuff for the world. It makes widgets, it makes the basics and it does that quickly, cheaply and on a huge scale. And that makes it hard for other countries to make widgets and basics because we just can't beat China on price or speed.
But it's also made life much cheaper for all of us over the years as we load up on bargain goods that are made in China. People who are very upset about this include a Mr. Donald J. Trump. But actually, that image of China is really out of date. In fact, China is absolutely crushing it as a superpower in super high-tech industries, including electric vehicles and solar.
Today in the show, what does that mean for the rest of the world? And also, how might China emerge as the big winner from the war in Iran?
Chapter 2: How is China impacting high-tech industries globally?
This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. It's Martin, a markets columnist at the FT in sunny but chilly London. With me, down the line from New York City, back from his jolly in Switzerland, we have a somewhat jet-lagged Robert Armstrong. Rob, say hi.
Hi. What time is it right now?
I don't know. Maybe you can check your cuckoo clock. Did you purchase a cuckoo clock while you were there? I'll take that as a no.
Chapter 3: What are the implications of China's high-tech advancements for Europe?
But excitingly, with me in the studio here in London, I also have our man in Beijing, Joe Leahy. Joe, thanks for coming in.
Thanks, Katie.
I spotted you in the newsroom in London and I thought, aha, I'm going to kidnap Joe Leahy and make him talk about China.
Joe, I read the excellent China Shock 2 series that you and several colleagues put together yesterday. It is a tapestry of many threads. Can you kind of give us the summary? Yeah, thanks very much, Rob. So the series really describes how China's moving up into very high-tech industries and really hitting the economies of other producers such as Europe and Southeast Asia.
And the reason we thought of doing this series was that we thought that the world really needs to wake up and take notice if this is one of the trends, perhaps one of the most important trends of the decade.
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Chapter 4: How has COVID-19 influenced China's industrial landscape?
It's not about the widgets anymore. It's about the solar panels and all of that good stuff. What's the deal here?
Yeah, I mean, this is something that's been coming slowly. And I think during COVID, people sort of lost touch with China for a while.
Right.
And during that period, I mean, even before that, China had set its sights on these high-tech items. And it's not just solar panels and green stuff. It's machine tools as well. So very high-quality machine tools.
Chapter 5: What challenges does Southeast Asia face due to China's growth?
You name it, China's actually producing it these days and it's creating a shock for Europe and also for Southeast Asia and all countries that have an industrial base are being challenged.
How long have you been out there? How much has it changed since COVID?
I've been there since the end of COVID. I got there in 22 and was locked down for a while and even almost put in one of those COVID camps at one point, which, thank God, it didn't happen to me. But it's just going very fast, this process.
I think when I arrived there, I was surprised, like most people, at the number of electric vehicles, beautiful, very high-quality electric vehicles on the streets of Beijing.
Yeah, I hear Beijing and Shanghai are like quiet.
Yeah, exactly. That was one of the first things I noticed.
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Chapter 6: How is China positioning itself in the green energy market?
I used to go to China in the 90s and then the 2000s. And it was always very noisy with trucks and motorbikes like any city. And now it's just strangely quiet. It's kind of almost surreal.
It's just humming along on all those EVs. And so, as you say, it's getting good at the high-end stuff. Part of this series that you've just been involved in, this China Shock 2.0 series, is like the rest of the world is waking up to this. What does it mean? How much should this bother Rob Armstrong and his ilk out in the States?
Well, I think the states don't need to be bothered because they already got de-industrialized by China shock 1.0.
Chapter 7: What geopolitical advantages does China gain from the current energy crisis?
But I think the interesting thing is, you know, China, since they came out with this plan made in China 2025 in 2015, and they targeted all of these sectors from shipbuilding, trains, supercomputers, everything. And they're sort of gradually meeting those targets. And now, square in their sights, all of the industries that Europe traditionally has been very good at.
Germany, for example, its economy, its manufacturing base has been based around a couple of things. One of them is its car industry, which is sold cars all around like Europe and the UK and all over the place. But also German industry is very much about selling high end stuff to China, like manufacturing equipment to China, heavy industrial stuff to China.
That whole equation seems to be getting a little bit out of joint now. And it's kind of the same picture in Southeast Asia, if I'm not mistaken, right?
Yeah, the Southeast Asia case is particularly interesting because these are developing economies that had hoped to continue down the path of industrial progress, but China's essentially doing everything. It's doing everything from textiles and shoes all the way to EV exports, power machinery, everything.
Chapter 8: How does China's industrial policy affect global relations?
So there's really nothing left for these countries to do, and they're losing jobs. If it is the case, Joe, that China... is focusing on high value, but subsidized and state mandated production. And along with those EVs and machine tools, it is exporting to the rest of the world. It's essentially exporting unemployment to the rest of the world.
Why doesn't this end in a terrible political conflict? In other words, can China expect the rest of the world to stand for this industrial policy? I mean, that's a great point, Robert. I think if you talk to European business leaders in China, this is something that they're constantly warning the Chinese about. They're like, this is unsustainable.
Our politicians are not going to accept this on a long-term basis. Maybe European companies will transfer more jobs to China, but at some point... politicians will react against it. I mean, we already have Trump in the US. I mean, what are we going to get in other countries? And same thing in Southeast Asia.
They've been very good in the past at blocking imports that they don't want, but this is very pervasive and very hard to resist.
Rob, is this cutting through in the States or is there still a perception that China's just there for the widgets and putting the little screws in the iPhones?
Oh, I think it's absolutely coming through. though, of course, it has a powerful political overlay in the United States where people talk about how every bit of Chinese technology is also a piece of surveillance technology that has a role to play in the great power battle between the United States and and China.
And I actually have a question for Joe on this topic, which is, there is a characterization of China's economy that says it's extremely different from other industrialized high-tech economies in the world, in that it's not competitive in the same sense. In other words, the targets set by and for the companies are not profit-
so much as market dominance, employment, creating security for China itself. Is that an accurate characterization or are there kind of subtleties that broad brush miss? I think it's both. I mean, it is absolutely a different kind of economy from other market economies, if you like.
You know, we know that at the local government level, there's huge subsidies, and we go through that in our China 2.0 series. I think it's between three and nine times more subsidized than OECD, normal OECD economies. So the subsidies are huge, and also they set these targets, these growth targets, so the local officials need to meet those targets. So they're investing in production.
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