12/20/2024
Yesterday, I discussed China's rise alongside the growing tide of globalization. Today, I will continue with my narrative on when relations between the U.S. and China began to sour.
The turning point that I remember can be traced back to the "Pivot to Asia" policy, a hallmark of Barack Obama’s foreign policy. This strategic shift redirected the U.S.’s diplomatic, economic, and military focus from the Middle East to the Asia-Pacific region. As part of this pivot, Obama committed to stationing 60% of the U.S. naval force right at China’s doorstep in the South China Sea.
Amid rising geopolitical tensions, supply chains—a once purely economic matter—emerged as a critical national security concern. The U.S. began prioritizing securing its supply chains over cost-efficiency, marking a significant shift in policy.
By 2018, under the Trump administration, trade wars erupted. The U.S. imposed tariffs on Chinese goods five times in succession, escalating tensions between the two nations.
In 2019, following the detention of Meng Wanzhou in December 2018, the Trump administration targeted Huawei, banning its 5G technologies and cellphones from the U.S. market, accusing Huawei of carrying out espionage and surveillance, though without any evidence.
Concurrently, export controls on high-tech products to China tightened, and these measures evolved into a systematic effort to dismantle China’s supply chain system. If anything, the Huawei event and Trump might be the pivot moment, a wake-up call for China to build independence in every aspect imaginable.
Fast forward to today, U.S. policies revolve around “decoupling,” “de-risking,” and “choking” China’s high-tech development, pushing out these major strategies:
1. Onshoring Manufacturing Opposite to offshoring, this strategy aims to relocate manufacturing operations back to the U.S. However, its impact has been limited due to high wages, insufficient supporting industries, and incomplete supply chains. As a result, much of the manufacturing that was offshored decades ago remains unviable to bring back.
2. Nearshoring Manufacturing This approach relocates manufacturing operations to nearby countries, such as Mexico and Canada. In 2020, the U.S. signed the USMCA (United States-Mexico-Canada Agreement) to stimulate regional manufacturing. Yet, progress has been slow, hindered by limited industrial capacity, skilled labor shortages, and production constraints in North America.
3. Friendshoring Manufacturing This strategy focuses on moving manufacturing to allied nations, ensuring political alignment and economic stability. For instance, the U.S. has partnered with Japan and South Korea to establish semiconductor factories and increased investments in countries like Vietnam and India. Intel invested $1.5 billion in Vietnam to build Asia’s largest chip testing and assembly plant. Similarly, Apple has set up 14 production bases in India, aiming to produce over a quarter of its global iPhone output there. These efforts are designed to reduce reliance on China’s supply chain. But friend countries have not reduced their reliance on China.
There's a Chinese saying, “置之死地而后生” (Zhì zhī sǐ dì ér hòu shēng), means: "Driven to a dead end, one is forced to find a way to survive and ultimately thrives," similar to the English saying, "What doesn't kill you makes you stronger." This saying captures the spirit that external pressures or crises can drive innovation and resilience, as shown how U.S. sanctions on Huawei have spurred China to redouble their efforts to be independent.
Ultimately, China moves head regardless. And the U.S. government's strategies have thus far failed to achieve their intended goals. China continues to advance in technology and maintain its formidable, seemingly unbreakable supply chain.
Continue tomorrow...