More monograph than research the highlighted piece today from Alicia García-Herrero, the Asia Pacific Chief Economist for Natixis with affiliations to Bruegel (a Brussels based think-tank) and the Hong Kong University of Science & Technology, is a chilling piece if your business is selling mid/high-tech products to China.
It’s only 12-pages so I’d urge a full read as she pulls together the best join-the-dots argument I’ve to date seen about what ‘Dual Circulation’ and ‘Belt and Road’ mean in practical terms when the two are combined.
In crude summary China’s push into mid and higher tier manufacturing capability will displace today’s suppliers. Think Swiss microwave fabric drying machines, German biscuit packaging equipment or Japanese surgical mask fabrication systems for example.
The first step is to substitute domestic demand but the next obvious one must be to then send out surplus capacity to new friends along the belt and road (among others).
A good example of this process already at work can be seen with solar panels.
Whether this development would have occurred without the West’s efforts to economically encircle China is a moot point but that behavior, as it proceeds, will only only accelerate the trend.
Ms. García-Herrero is merely predicting at this stage but her conclusions that this economic restructuring, if it comes to pass, will be to China’s long-term dis-benefit and encourage an ever more Balkanized world are too important to be dismissed lightly.
You’ll find the argument in full via this link What’s Behind Dual Circulation?
Happy Sunday.