The China-Vietnam-U.S. "triangle": a model for globalization's future?
Following the escalation of the Chinese-U.S. trade war in 2018, the "Made in China" label is not as ubiquitous as it once was. Southeast Asian economies are on the rise — but their growth doesn't necessarily threaten Chinese dominance, Lu Yang writes in Hong Kong-based, Chinese-language online media The Initium.
There have been a flurry of reports recently in the Chinese media about the rise of Southeast Asian economies, particularly Vietnam's.
The question of whether Southeast Asia is about to replace China as the leading source of low-cost production is not new, and the "special trade corridor" between China, Southeast Asia and the U.S. became a popular subject again after the escalation of the China–U.S.trade war in 2018.
The many discussions of "supply chain relocation" for European and American companies often point to Southeast Asia as the first choice, while after the pandemic in 2020, some 60–70% of manufacturing companies in Zhejiang province in the east of China (the hub of the country's private economy) had said they would consider building factories in the neighboring Asian countries due to the rapid rise in domestic labor costs.
And now, there are more and more signs that Southeast Asia could be a good bet for companies as China faces issues both at home and abroad. But the larger picture reminds us that China and the West will very much need a middle ground in the future.
Unlike the Cold War scenario, even if China and the West are in fierce political opposition, their economic connection is unlikely to be completely broken in the short term as long as they do not enter a state of war.
Despite the inertia after the last 40 years of globalization, we will not revert back to square one in the foreseeable future.
The entangled economic links between the world's top two economies are bound to be transferred in various forms to third countries, third parties or third regions. The flip side of the decoupling of China with the West will therefore be the rise of a large number of "middle ground" regions. The emergence of the China-Vietnam-U.S. trade triangle over the past few years shows that Southeast Asia is one such middle ground.
As an example, electro-mechanical products are an important export item for China, accounting for a large share of exports and perennially accounting for about a quarter of China's merchandise exports to the U.S. The outbreak of the trade war in 2018 and the imposition of heavy taxes on Chinese electro-mechanical products by the U.S. led to a continued decline in China's direct exports, which are still below 2018 levels.
Almost simultaneously, such exports from Vietnam to the U.S., and Chinese exports to Vietnam, have risen rapidly in parallel. Chinese exports last year to Vietnam in electro-mechanical products increased by $23.2 billion compared to 2018, while Vietnamese exports to the U.S. increased by $24.4 billion over the same period. At the same time, Chinese exports to the U.S. decreased by $21.5 billion.
What is happening here is likely that some of the Chinese products have been simply processed and repackaged in Vietnam for export to the U.S., but Vietnam still needs a lot of Chinese spare parts and semi-finished products in order to meet the sudden increase in U.S. orders.
The decline in Chinese exports to the U.S. is often accompanied by an increase in both Chinese exports to Southeast Asia and Southeast Asian exports to the U.S. This occurs in many sectors, particularly in those where the U.S. has imposed tariffs on China. The "Made in China" label has become "Made in Vietnam", but for many Chinese exporters, as long as there is a middle ground in Southeast Asia, the U.S tariffs are not fatal.
Of course, simple repackaging and labeling is difficult to sustain and is a gray area legally. The U.S. has invested a lot of resources in "anti-circumvention" investigations and enforcement, which is not a long-term solution for Chinese exporters. To truly tap into the potential of the Southeast Asian middle ground, Chinese companies must have a physical presence in Southeast Asia.
Earlier this year, widespread economic stagnation could be seen in China. With multinational companies shutting down factories in China and relocating production lines to Southeast Asia, there were anxious rumblings in China about whether its status as the world's factory would be replaced by Southeast Asia. But are the export industries of China and Southeast Asia in competition or complementary? It could easily be argued that they are more complementary at present and will become even more so in future.
Depending on the stage of production, all goods could be classified into four categories: raw materials, intermediate goods (semi-finished products), capital goods (tools and equipment for production, such as lathes and cranes), and consumer goods. Using this classification, the composition of China-U.S. and Vietnam-U.S. trade is similar: the largest U.S. exports to both China and Vietnam are capital goods, accounting for around 40%.
Both China's and Vietnam's largest exports to the U.S. are consumer goods, accounting for around 50%. Therefore, from the perspective of the European and American markets, the trade roles of China and Vietnam mostly overlap, especially in some labor-intensive sectors such as clothing, footwear and hats. So, if we look at the question of "where do European and American imports come from?", the competitive relationship between China and Vietnam is clear.
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Puerto Rico faces its own gun culture problem
Gun sales have soared since a 2020 law made the process faster, easier and cheaper, reports Coraly Cruz Mejías in Global Press Journal.
🇵🇷⚖️ In 2020, the Puerto Rico Weapons Act made legally obtaining and carrying a firearm much easier. While this law may have brought Puerto Rico’s gun regulations in line with the Constitution of the United States, other factors underscored the push: a perception that crime is on the rise, that the police are helpless in tackling it — and that carrying a gun is an effective self-defense measure. Crime and police data from the past 50 years, however, show that these perceptions don’t match reality: Violent crime has been in decline for two decades in Puerto Rico, and the number of police officers per capita is well above the U.S. national average.
🇺🇸 It is true that previous gun regulations never stopped illegal guns from flowing into Puerto Rico. The region’s gun-related crime levels are higher than in most states in the United States. While Puerto Rico rarely has mass shootings in public places, some fear that the updated weapons law will only fan the flames in a region long troubled by gun violence.
🆕 Among the changes enshrined by the Puerto Rico Weapons Act of 2020 are the scrapping of a requirement for gun owners to be registered with a shooting range; eliminating a requirement to submit a declaration by three people attesting to the license applicant’s character; and limiting the deadline for the police to grant a gun license from 120 to 30 days.“I was motivated [to buy a firearm] for my own security, of my business and of my family,” says Raonel Marrero Lebrón, a 36-year-old restaurant owner in Mayagüez, a coastal town in western Puerto Rico, who obtained his license last year. ➡️ Read more on Worldcrunch.com