Southeast Asia'S Rise, China'S "World Factory" Status Is Not Guaranteed?

Since the mid 2018, China's manufacturing industry is facing a serious impact of trade friction, and a large number of manufacturing factories are moving abroad, especially Vietnam. China's economy seems to be facing major crises.

The research conducted by political scientists last year made a deep investigation from Vietnam to Vietnam. The result confirmed his rational analysis. The large-scale migration of manufacturing industry is unlikely. The so-called "transfer" is actually a "spillover" of China's supply chain. But he also acknowledges that the world order is undergoing some profound changes at the moment when the new crown epidemic is raging around the world. These changes will determine the future development of China in the next 50 years.

Key points

The major change brought by the epidemic is not the manufacturing industry has to go, but the mutual trust between China and the world has been seriously damaged.

If the West rebuilds safety related industries, it may lead to the formation of two parallel production systems between China and the West.

People who are angry with the "supply chain to weaponry" lack the ability to empathy.

"Don't let a certain person run away" is a pseudo anxiety. If you shout every day, "don't let such a person run away", people must really run away.

The globalization of the future will have a "split up" - economic globalization will continue, but political globalization may backslide.

01 next stop, Vietnam?

Last year, I went to Vietnam with my team for two times, and the two plus had more than half a month. The density of our research in Vietnam is very high. We go out at 9 in the morning and return to the hotel at 10 o'clock in the evening. Every day is such a density. The peer's sociology teacher said that we completed the 2~3 months' research in most of the month.

Why Vietnam? Speaking of the next world factory, we will naturally associate with two countries, India and Vietnam, India. Indeed, with the advantages of large population and age structure, India is likely to become a candidate for the next world factory. But most people do not know that hundreds of millions of people in India are actually divided into thousands of labor markets, because of its thousands of castes.

Under the four castes of India, there are a large number of subfamily names. Each (sub) caste corresponds to one occupation when it is differentiated. For different castes, the expectations of religions for the afterlife are different from those of this world. Therefore, enterprises can not effectively motivate employees of different (caste) castes in the same way, which is very unfavorable to the development of manufacturing industry.

There is a case in hand. After a domestic heavy machinery manufacturer went to India to set up a factory, he found that one of the local workers was very capable and decided to promote him as a group leader. However, this young man is the lowest caste, and the workers of the barrow caste (position above the supreme rule) are determined not to let him be the leader of the group. Coupled with other problems, the manufacturer finally gave up building a factory in India.

But it can still be seen that some Chinese companies have set up factories in India in recent years, such as some domestic mobile phone manufacturers. But the result of my research is that they are doing more to deal with India's tariffs. These manufacturers mainly finish the simplest assembly part in the area, and the upstream parts still need to be shipped from China.

The Modi administration has launched a national level policy to promote "made in India". The central idea of the policy is to protect the fragile manufacturing industry with high tariffs. High tariffs mean that the products produced in India have lost competitiveness in the world market. So the factories that had just been built were basically serving the domestic market of India, and it was difficult to export them. Coupled with the poor infrastructure in India and inefficient government, all of which make India very difficult to become a world factory.

Another popular candidate is Vietnam. Through field surveys, we would like to answer the following questions:

What is the migration of China to Vietnam? There are two sub problems. What is the specific industry migration, and whether the migration is the whole process or part of the manufacturing industry?

Is migration related to the technological content of the industry?

Is migration related to the size of an enterprise? Because different scale enterprises move outward, the capital paths they may rely on may differ.

I intuitively assume that in this round of migration, a large number of Chinese people have gone out to invest. How much proportion do you have?

In my last book "hub", I put forward some hypothetical ideas based on the study of Chinese manufacturing industry. These assumptions include: migration is the specific link of manufacturing, not the whole manufacturing industry; Chinese people in the world play a significant role.

These two hypotheses have all been corroborated in my research, and the results confirm the previous assumption that Chinese participation is deeper than I thought, and the migration is less than I thought. After my trip to Vietnam, I still have confidence in China's status as the world's factory.

02 trust collapsed, then?

A series of economic logic that I discovered in my research will not be changed substantially because of the epidemic. The major change brought by the epidemic is not that the manufacturing industry has to go, but the mutual trust between China and the world has been seriously damaged.

The destruction of trust may make the West rebuild some "safety related" industries at any cost and at any cost.

What is safety related industry? It depends on the degree of mutual trust between China and the world. The definition boundary of safety related industries is dynamic, and the more distrust it is, the more industries will be assigned to the border of safety related industries.

For example, public health and information related industries, in the past, HUAWEI has been a certain distrust of China. After the outbreak, the possibility of expanding the borders of safety related industries exists. It is not to say that HUAWEI is going to "fight" ZTE instead of HUAWEI. Instead, it is said that "HUAWEI" is being handed over at the same time, and some core products are no longer exported to China.

The western world has the "Watson agreement", which stipulates that some of the most sophisticated products related to safety are not allowed to be exported to China. When mutual distrust reaches a certain depth, a new "Watson agreement" is likely to emerge.

Safety related industries account for a small proportion of the entire manufacturing industry. It is because of a small proportion that we can rebuild at any cost. But the concern is that, generally speaking, the safety related industries are closely related to the frontier of technology.

If the West rebuilds safety related industries, it may lead to many industries forming two parallel production systems with China.

There is a gap between China and the West in terms of technology application, but not very much. In the forefront of technology, there are still generation differences, ultra precision manufacturing, and there is a generation gap between China and the West. Some people on the Internet are excited. "Who says China can't do that?" Bragging is meaningless. China may have some advantages in the application layer, but it will not work on the basic level. As far as the basic level is concerned, China and the world are still far away from each other, and if the application level is not supported by the basic level, the stamina will be insufficient.

Once the two parallel production systems are formed, two parallel technical routes will be formed. The speed of technological routes in China will be slower than that in the West. Maybe 50 years later, China will be able to keep pace with the west, but within 50 years, China has little chance.

Some people may say that mutual distrust is not a big deal. We should simply block it for a few years, and China will develop itself. Such an idea is very foolish. China's supply chain and market are global. Once the outside world feels you can't trust, it will never buy from you. Even if you have to buy from here in the short term, you will make other reserves. In the long run, we will ultimately hurt ourselves.

I put forward "supply chain to weaponry", some people are very angry, these people are very short-sighted, they have no ability to empathy. Put yourself in other countries' position. Imagine a person who threatens you everyday. Do you dare to put your life in danger?

What does "supply chain go weaponry" mean? It's your ability to give up threatening others. For an inappropriate example, Russia used its oil and gas to threaten Germany when Ukraine was in crisis. It is cheaper for Germany to buy it from Russia. But if you threaten me and demand that I have to cooperate with you in the world, I will not accept it. I will choose to lay another oil and gas pipeline at any cost, and I will not need you in a few years. What will Russia do then? People do not need you, which means a large market is missing. Oil and gas can be sold continuously only if they promise not to weaponry oil and gas. Similarly, only by undertaking the "weaponry of the supply chain" can we really keep China's supply chain. Of course, there are still some institutional arrangements for making promises.

03 epidemic tests test human nature, but human nature has never stood the test.

I do not think the epidemic will have a particularly big impact on China's manufacturing industry unless it is suspended for two or three years. In a sense, the epidemic may be a "crowded bubble" process. The factory that struggled before the epidemic collapsed after several months of cash flow. But the collapse of the factory does not mean that demand is no longer there. Demand is still there, but it has been temporarily suppressed. When the epidemic is over, the demand will come back, and the factories that will survive will meet the demand again, and can integrate the equipment, personnel and so on. So this will be a "shuffle" process.

For small countries around China, they may face bigger problems. Small countries lack capital and have little room for maneuver. Once problems arise, they may lead to systemic collapse. When demand recovers, compared with China, they are more difficult to return to blood and slower than China.

Moreover, as long as the epidemic is transnational, enterprises may find that China is more capable of coping with the epidemic than small countries. Therefore, after the outbreak, some manufacturers will not return to China. In fact, relevant reports have been reported recently.

There is a view that we should divide the world into "pre epidemic world" and "post epidemic world". This division has some truth, but I do not think there will be such a big difference in manufacturing or economic level. I think there will be great changes in the level of mutual trust between countries.

On the one hand, the mutual trust relationship between China and Western countries has been greatly undermined. On the other hand, mutual trust relations between other countries will also be eroded, such as Germany's "cut Hu" Swiss masks, Italy's "cut Hu" Swiss ventilator and so on. The epidemic tests human nature, but human nature has never stood the test.

04 "don't let anything run away" is fake anxiety.

The strong part of China's manufacturing industry is not the low price of production factors, but the super strong supply chain network.

Cao Dewang's American factory has particularity, glass has little demand for supply chain, so he can turn to the United States, but many other enterprises have demand for supply chain, they can not go to the United States, and after that, the cost of operation will be greatly increased.

As we all know, China's Foxconn is Apple's foundry, has been producing products such as iPhone for Apple Corp. When Obama was president of the United States, he had a meeting with Jobs. At that time, Obama Wen Jobs: Why did Apple Corp sell 70 million iPhone and 30 million iPad in the previous year, almost all of them are produced overseas? Can't these jobs return to the US?

Jobs said: iPhone4 is about to go online. It needs to make a major change. At that time, China was already at 12 in the middle of the night, but the factory director of Foxconn factory ordered 12000 people to get up at the same time, and after 8 hours, the capacity had already been large-scale. If you don't speak for 8 hours in the United States, you won't be able to do it in 8 weeks.

Sounds sad, but this is the power of the supply chain network.

What kind of enterprise is suitable for moving away from China, what kind of enterprise is not suitable, can draw a quadrant, abscissa coordinates the complexity of supply chain, and ordinate represents the proportion of labor cost in production.

Why is emphasis on production? Because today, factories are no longer divided by products, but by division of labor. Like building blocks, each factory only produces bricks of specific shape. The specific use of building blocks depends on the dynamic combination of all links in the entire supply chain.

In this quadrant, the labor cost ratio is low and the supply chain complexity is high. It is difficult to leave China. The complexity of the supply chain and the high proportion of labor costs can move away, and in a sense, it should be removed. It is up to the market to decide whether or not an enterprise with high labor cost and high supply chain complexity depends on the market, but if it turns around, it should be close to China, because the main chain of the supply chain is still in China. The low labor cost ratio and the low complexity of the supply chain depend on the market, and there is no need to get close to China.

Therefore, I do not recommend that in general terms, a certain industry and a certain enterprise must be transferred to a certain industry.

Recently, the media said, "do not let Japanese companies run away" is actually a kind of "pseudo anxiety". For example, if SONY runs away, SONY's Chinese factory is still there, and the factory has actually chimed in the entire supply chain of China. If the factory runs away, it will not be easy to survive. If you shout every day, "don't let XXX run away", people must really run away, because he thinks you need to "shut the door and beat dogs".

China must have identity anxiety. As I mentioned in the book "hub", when a rising power comes to the crossroads, the past order, frame, meaning and reference system are invalid. After failure, you don't know who you are, and there will be anxiety at this time. At the same time, the world will be anxious because China's rise is too fast and its scale is large, which will inevitably lead to structural changes in the world order.

05 globalization is "schizophrenic".

In the Beijing News, Cao Dewang said that perhaps the trend of anti globalization is inevitable and will eventually become a foregone conclusion. From the manufacturing sector, I do not think there will be a reverse globalization process.

The globalization of the future will have a "schizophrenia" - economic globalization will continue, but political globalization may retrogress. How to define political globalization? After World War II, there were WTO and IMF institutions, advancing with politics before globalization. When Keynes designed these systems, he had profound political considerations, but he thought that these political considerations need to be implemented in an economic way. Only through economic programmes can political trust be ensured among countries. What I mean by economic globalization does not mean anything like WTO, but a specific process of economic activities.

My impression of this interview in Vietnam is that the impact of the epidemic on economic globalization is still limited. You can raise tariffs, but I have some ways to avoid it, and all of them are legal. As I mentioned in the overflow, more than ninety percent of Apple's money is in Ireland. Based on the local special tax policy, it has only zero percent tax a year. In a sense, it is precisely because of the existence of national boundaries that it provides greater space for evasion.

As for WTO, I regard it as a kind of political globalization, because it is led by the state as a unit, behind it is the will of the state, not the specific activities of businessmen. This epidemic has led to great damage to trust between countries, which may lead to a retrogression in political globalization. It shows that the West has begun to try to establish another trade order, shielding China and other countries that are not willing to abide by Western rules.

Cao Dewang thinks that the trend of reverse globalization is inevitable. I guess he may have received economic reverse globalization from the political reverse globalization, but there may not be a linear relationship between them. In the book "overflow", I call this kind of thinking "encapsulated thinking" - instinctively encapsulating all kinds of problems together and thinking, and political space is used to encapsulate the shell of these problems.

Packaged thinking simplifies the complex world in order to shape consensus and transform the effect of political mobilization. Nationalism is a typical manifestation of this way of thinking. But it will obscure the real order. In this way of thinking, our understanding and attitude towards the world may be distorted.

Since the late nineteenth Century, after the popularization of national education in the world, the underlying thinking of people in all countries receiving education is encapsulated thinking. Trump's call to "let us enterprises return" is also driven by encapsulation thinking, which is based on political units as a unit to think about economic issues. Today, when the economic and political space is highly inconsistent, the encapsulation thinking has finally come to an end, and it needs to be overcome.

There is a phenomenon of "schizophrenia" in today's world order. Since the great discovery of geography, the process of globalization has been advancing, and the economic globalization has deepened, so that the depth of political globalization can not keep up.

From the point of view of global governance, when the speed of political globalization can not keep pace with the speed of economic globalization, there will be friction. Globalization will have a low tide, but the ebb tide can not really solve the problem. After the ebb tide, there will be a new round of high tide.

Today's global governance order and economic governance order take the state as the unit, but the real economic process is not running by the state as a unit. In the future, there will be a transnational organization similar to an enterprise alliance. This process will not take place overnight. It may take decades, but sooner or later it will evolve in this direction.