The story not being told is that Chinese factories are absurdly automated compared to the rest of Asia - their competitors are South Korean and Japanese factories, but they're entering markets that are still heavily labour-centric. China is spearheading this new evolution of industrial manufacturing and everyone else is forced to either adapt or die.
this post was submitted on 15 Jul 2024
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How can the Chinese subsidiarize so many things but other countries won't?
Is China that rich or do those companies just lose money left and right but have more saved than others and thus they can break the market and take it over?
Economics says that Chinese companies are just more efficient as a whole - through sheer competitive advantage, China can produce more per work-hour than everyone else. In fact, this has been a huge problem for China's labour demographics as there's just simply no more manufacturing jobs - an auto factory that would've employed thousands just a decade ago might employ barely a few hundred today. Instead of outsourcing to other countries, most of those jobs have been literally outsourced to robots
Instead of outsourcing to other countries, most of those jobs have been literally outsourced to robots.
Good, those are exactly the types of jobs that should be automated by robots. Not AI generated art and creative.
Chinese companies have several advantages going for them:-
- Large domestic market
- Skilled and educated workforce
- Natural resources and good transport infrastructure
- Loans / subsidies for investment
All of these lead to:-
- Economies of scale - building your thousandth car is much cheaper than building your first; and
- Short supply chains - building a smartphone becomes a lot cheaper when chips, cameras, screens and cases are all manufactured in the same country, perhaps even the same city.
And yes, China is a lot richer than Thailand, so they can take over the local market if they want to.
I believe it comes down to a difference in philosophy, the Chinese government is comfortable choosing "winning" companies and funding them, scaling them immediately to compete on the global market. It's part of their "Industrial Policy" approach. Western countries (including countries under their influence) widely refuse to support individual companies (with some exceptions) and let the market decide as they say. Both approaches come with their own inefficiency and risk.
And yes the long term vision is to break the markets. Subsidize and come in cheap, get everyone used to the new floor prices, outlast the competition, and raise the floor once they control it.
Edit - when Romney called China the US #1 geopolitical trade adversary, this is the kind of behavior he was talking about.
Western countries support individual companies constantly.
Intel received $8.5 billion in funding under the CHIPS Act
The General Motors bailout forced the US government to write off a $11.2 billion loss
Shell, ExxonMobil, and others have received countless billions in O&G subsidies
Government sales make up $49.2 billion, or 74.6% of Lockheed Martin's total sales
The entire principle of US industrial policy is that the government does nothing and everything should be outsourced to a private contractor. Inherently that must mean supporting some private companies more than others.
Your argument makes literally no sense when considering that Chinese companies consistently and notoriously sell their products in China for a fraction of the cost of the export models. BYD's Atto 3 sells for $20k in China and more than $40k in the EU, for example. Those export prices aren't subsidized. In fact, their margins are absolutely absurd.
The fact is that China has figured out industrial manufacturing and can build the same class of product for half the price... Or less. Of course, there's no reason to pass those savings onto consumers without competition, and export markets are simply less competitive than China.
Much of the world has gone insane with capitalism. Why am I paying like $10-$20 for friggen USB cables when I can get it from China for a few dollars. Probably the actual cost. A few dollars for the product. And what like $15 to whatever millionaire/billionaire dudes who need keep padding their ridiculous game breaking stats.
People can't even tell anymore because the goal posts have shifted so far. The anchoring bias has normalized the price to $20. Much lower prices seems like it must be cheating or something right. Has to be the only explanation. Can't be anything else. Nope.
The Chinese subsidies are different than most other countries.
It is a collection of city and province leaders whose performance is reviewed on a variety of metrics, including economic growth. So, a lot of local governments invested in a ton of manufacturing capacity.
They are significantly overinvesting to the point it is a known bubble. However, it isn't exactly known what the national government is going to do to handle the aftermath of this, especially as most local government finances are a mess. At minimum, the national government has recognized that it should try to sell what it can.