mr Friedman's first of two recent opens re China
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How Elon Musk and Taylor Swift Can Resolve U.S.-China Relations
Dec. 17, 2024
Photo illustration by The New York Times; source photographs by Mark Peterson for The New York Times and Robyn Beck/Agence France-Presse — Getty Images
I just spent a week in Beijing and Shanghai, meeting with Chinese officials, economists and entrepreneurs, and let me get right to the point: While we were sleeping China took a great leap forward in high-tech manufacturing of everything.
If no one has told Donald Trump, then I will: His nickname on Chinese social media today is “ Chuan Jianguo” — meaning “Trump the (Chinese) Nation Builder” — because of how his relentless China bashing and tariffs during his first term as president lit a fire under Beijing to double down on its efforts to gain global supremacy in electric cars, robots and rare materials, and to become as independent of America’s markets and tools as possible.
“China had its Sputnik moment — his name was Donald Trump,” Jim McGregor, a business consultant who lived in China for 30 years, told me. “He woke them up to the fact that they needed an all-hands-on-deck effort to take their indigenous scientific, innovative and advanced manufacturing skills to a new level.”
The China that Trump will encounter is a much more formidable export engine. Its advanced manufacturing muscles have exploded in size, sophistication and quantity in the last eight years, even while consumption by its people remains puny.
If I were drawing a picture of China’s economy today as a person, it would have an awesome manufacturing upper body — like Popeye, still eating spinach — with consuming legs resembling thin little sticks.
China’s export machine is so strong now that only very high tariffs might really slow it down, and China’s response to very high tariffs could be to start cutting off American industries from crucial supplies that are now available almost nowhere else. That kind of supply-chain warfare is not what anyone, anywhere needs.
The Chinese experts I spoke with during my trip two weeks ago would like to avoid that battle. The Chinese still need the U.S. market for their exports. But they will not be pushovers. Both Beijing and Washington will be much better off with a bargain — one that imposes a gradual increase in U.S. tariffs, while both of us do what we needed to do long ago.
What is that? I call it the “Elon Musk-Taylor Swift paradigm.” America would use higher tariffs on China to buy time to lift up more Elon Musks — more homegrown manufacturers who can make big stuff so we can export more to the world and import less. And China would use the time to let in more Taylor Swifts — more opportunities for its youth to spend money on entertainment and consumer goods made abroad, but also to make more goods and offer more services — particularly in health care — that its own people want to buy.
But if we don’t use this time to respond to China the way we did to the Soviet Union’s 1957 launch of Sputnik, the world’s first artificial satellite, with our own comprehensive scientific, innovative and industrial push, we will be toast.
You have to go to China to see it, but because a U.S. congressional delegation, led by Senator Chuck Schumer in October 2023, was the first official visit by U.S. lawmakers since 2019 — and because many U.S. companies that moved their American staffs out of China for Covid never returned them — a lot of people in Washington have missed the country’s staggering manufacturing growth.
Here’s what Noah Smith, who writes about manufacturing, posted the other day, using data from the United Nations Industrial Development Organization:
In 2000, “the United States and its allies in Asia, Europe and Latin America accounted for the overwhelming majority of global industrial production, with China at just 6 percent even after two decades of rapid growth.” By 2030, Smith wrote, the U.N. agency predicts “China will account for 45 percent of all global manufacturing, single-handedly matching or outmatching the U.S. and all of its allies.
“This is a level of manufacturing dominance by a single country seen only twice before in world history — by the U.K. at the start of the Industrial Revolution, and by the U.S. just after World War II.” Smith wrote, “It means that in an extended war of production, there is no guarantee that the entire world united could defeat China alone.”
Let me offer a few examples of the scale of what we’re talking about: In 2019, as Trump was finishing his last term, net lending by Chinese banks to domestic industries was $83 billion. Last year it swelled to $670 billion, according to the People’s Bank of China. That is not a typo.
When I visited China in 2019, before Covid, Xiaomi and Huawei were only Chinese smartphone companies. When I returned a few weeks ago, both were now also electric car companies — each leveraging its battery technologies to make really cool electric cars.
Xiaomi’s SU7, which is manufactured in a formerly abandoned plant that used to make gasoline-fueled cars, was the talk of the Beijing car show last April. Meanwhile, BYD, the famed Chinese battery company, which already had a car-making subsidiary, doubled down on automobiles. I rode all over Shanghai in super-comfortable BYD electric cars operated by Didi, China’s Uber. BYD now offers a subcompact E.V., the Seagull, that starts at less than $10,000.
In an effort to export its large inventory of cars, China has begun construction of a fleet of 170 ships capable of carrying several thousand automobiles at a time across the ocean. Before the Covid-19 pandemic, the world’s shipyards were delivering only four such vessels a year. That is also not a typo.
Because China has essentially a national electric grid, it has installed charging stations all over the country, which is why more than half of new car sales in China are of E.V.s. Apple talked for 15 years about making an electric car. Has anyone driven an Apple car?
I took the bullet train from Beijing to Shanghai. The trip is roughly the distance between New York City and Chicago. Only it takes just 4.5 hours because the train goes over 200 miles per hour and there’s almost 100 of them going back and forth each day. The ride is so smooth, if you put a dime on the ledge next to your window — half on the ledge and half off — it will be there exactly as you left it from the beginning of the trip to the end. Try that on the Acela between New York City and Washington and the dime will be on the floor in two seconds after the train starts wobbling out of the station.
In case you missed the story, while I was in Beijing, General Motors took a write-down of more than $5 billion on the value of its once cutting-edge factory that at one time was a major player in the Chinese car market. Sales at G.M.’s China joint venture, SAIC-GM, “slumped 59 percent in the first 11 months of this year, to 370,989 units, while local new-energy vehicle champion BYD sold more than 10 times that number in the same period,” Reuters reported.
But don’t worry, folks, help is on the way. Trump has vowed to make America great again by doubling down on drill-baby-drill gas guzzlers and ending U.S. government subsidies for Americans who purchase electric cars.
So, what do you think is going to happen? The rest of the world will gradually transition to Chinese-made self-driving E.V.s, “and America will become the new Cuba — the place where you visit to see old gas-guzzling cars that you drive yourself,” as Keith Bradsher, the Times Beijing bureau chief and an auto industry specialist, mused to me.
If that happens, one day we’ll wake up and China will own the global electric vehicle market. And since fully autonomous driving technology only really works with E.V.s, that means China will own the future — the self-driving-cars market as well.
Here’s another way the China that Trump will face in 2025 looks a lot different from his last go-round. If Trump were even to tell China, “Hey, I’ll let you off the hook on tariffs, if you build more factories in America,” that would definitely help reduce our trade deficit with Beijing, but it might not be such a vote-getter for Republicans. Because here is what China would say: “Sure, how many factories would you like? Forty? Fifty? But there’s one thing. The assembly lines will all be staffed by robots, and we can even operate them remotely.”
I learned a new term on this visit: “dark factory.” A retired Chinese official mentioned to me in passing over dinner that she wanted to buy a new high-tech bed and decided to go see the offerings at the factory. When she arrived, though, she found it was a “dark factory” — so the lights were turned on just for her. It wasn’t dark because it was out of business, she told me. It was dark because it was so fully roboticized that the company doesn’t waste electricity keeping the lights on for any humans — except for the engineers who come to clean or adjust the machines once a day.
As an article in the state-run China Daily explained: “From steel plates and mobile phones to household motors and rocket ignition device parts, more business lines in China are using artificial intelligence to power their production and have introduced ‘dark factories’ with their 24-hour uninterrupted and unattended production capabilities. Dark factories, also called smart factories, are entirely run by programmed robots with no need for lighting.”
You remember the old joke? “The modern factory will be just a man and a dog. The dog will be there to keep the man from touching the machines and the man will be there to feed the dog.” That is not a joke in China.
More Americans might get a better feel for what is going on there if they simply went and ordered room service at their hotel. I love this account from a German travel vlogger from his Shanghai hotel experience, recounted recently by Global Times: “‘OK, so the phone is ringing. That means the robot is here,’ he said at the beginning of the video. When he opened the door, he saw a robot standing there waiting for him. When he pressed the ‘open’ button on the machine, the lid on the top opened to reveal the food he had ordered inside. He took out the package and hit ‘finished’ to close the compartment and watched the robot return to the elevator.”
No tip required.
But there is another reason for China’s headlong rush to robotization: demographic necessity. In America, strong trade unions and a growing population make robots the natural enemy of working people, because of how they supplant blue-collar labor. China’s population collapse and its heavy restrictions on trade unions make introducing more and more robots to factory floors both economically essential and politically easier (but China, too, will most likely face a backlash from its blue-collar workers).
In the last seven years alone, the number of babies born in China fell from 18 million to nine million. The latest projection is that China’s current population of 1.4 billion will decline by 100 million by 2050 and possibly by 700 million by the end of the century. To preserve its own standard of living and be able to take care of all its old people, with a steadily shrinking working population, China will drive the robotization of everything for itself — and the rest of the world.
In his first term, Trump — and Biden, too — was right to impose tariffs on China as long as it didn’t give us reciprocal access. China has consistently violated World Trade Organization trade rules to avoid giving reciprocal access to its major trading partners, and it has greatly subsidized its companies. I have complained about this for years. China has historically bought $1 from America for every $4 America bought from China; much of that is soybeans and other agricultural products.
But here’s what’s scary: We no longer make that many things China wants to buy. It can do almost everything at least cheaper and often better.
Eric Chen is the founder of Kingwills, a Chinese materials science company that competes with, among others, DuPont. He explained to me that what young Chinese entrepreneurs like himself learned from the Chinese internet giants like Tencent, ByteDance and Alibaba was “rapid innovation and improvement.” His foreign competitors, said Chen, upgrade their products much more slowly and, when they do, can take five or six years to build a new factory.
“We upgrade some products every 30 days. We can produce a new production line in six months. We learned from Elon Musk and Steve Jobs. You are really good” at taking products “from zero to 1. We are good at going from 2 to 100.”
This is possible because the steady buildup of manufacturing capacity in China means that virtually anything you need today — from a tiny part to a rare earth chemical — can be sourced domestically. No other country in the world has such a complete homegrown ecosystem, Chen explained, so any idea you come up with, “you can do all the sourcing from here. We have a three-year target to have zero labor for production and storage using a combination of robots and A.I.” Then “we can sit in China and control production outside of China. Then we can put factories closer to the customer.”
He added one warning, though: “Probably in the future the competition for the U.S. is not China, but A.I. It is coming for both of us.”
Foreign business executives operating in China will tell you that you used to have to be there to have access to its giant market of consumers. You still have to be there, they say, but today it’s also in order to have access to China’s expanding market of innovators. Get ready for more “designed in China,” not just “made in China.”
We fool ourselves if we believe that China’s growing strength in advanced manufacturing is only from unfair trade practices. It is also because it has lots and lots of people still burning to work, as they say, “9-9-6” — that is 9 a.m. to 9 p.m. 6 days a week to make a better life, and because Beijing has invested in world-class infrastructure, and because it deliberately suppresses consumer spending and because it has a seemingly endless supply of students majoring in engineering — and not so many in sports management, sociology and gender studies.
“The Chinese treat education like we treat sports,” said Han Shen Lin, who teaches at N.Y.U. Shanghai.
*So, China’s going to bury us? That is not at all inevitable.
I left as impressed with China’s weaknesses as much as with its strengths. I don’t want to see instability in China. It’s important to the world that China continues to be able to give its 1.4 billion people a better life — but it cannot be at the expense of everyone else.
And it is clear to me from being there that, in the relative absence of foreign visitors, a lot of Chinese have grown out of touch with how China is perceived in the world. As a senior White House official said to me, China “freaked out” the rest of the world when it began its “ Made in China 2025” agenda — a state-led and -funded industrial policy that aimed to make China the dominant producer in every aspect of advanced manufacturing, from aerospace to material science to machine tools. And it’s not only freaking out more developed manufacturers, like the United States and Germany, but also developing countries like Brazil, the Philippines and Indonesia, as they see China dominating overseas and yet still constricting its domestic consumption.
China has billions and billions of dollars in domestic savings that could stimulate its economy, but people will spend those savings only if they have confidence in their government and faith in the future. But the government’s bad performance at the end of Covid shook that confidence, and the lack of transparency about China’s future direction has kept savers cautious.
Their reluctance to spend is compounded by youth unemployment stuck over 17 percent, as well as by seeing some cities so starved for cash that raiding parties of tax collectors are sent to track down tax evaders in other provinces. In addition, the persistent housing crisis, born of immense overbuilding, has left many Chinese feeling house-poor. It also doesn’t help confidence to read that China’s third consecutive serving or former defense minister is being investigated for alleged corruption in the People’s Liberation Army.
Most important, the government’s prioritizing of Communist Party ideology and state-owned industries is driving some of China’s most talented private-sector innovators to quietly move their money, families or themselves to Japan, Dubai and Singapore. That is not a good trend for China.
My free advice to my friends in China is that an economy this unbalanced is not sustainable. It will eventually generate a global trade alliance against them. The world will not let China make everything and only import soybeans and potatoes. China needs more nurses to provide good health care at home — and fewer engineers to design more cars for abroad. Its youth need more outlets for creative expression — without having to worry that a song lyric they write could land them in prison. I talked to too many people who feel choked or don’t dare speak their minds. They see the crackdown in Hong Kong. It was not like this 15 years ago. There is a reason so many educated young Chinese now yearn to go abroad.
As for my neighbors in America, I have a confession. I caught a virus in China that I never imagined I’d get: “Elon Musk appreciation.”
I’d become so disgusted with the way Musk had been using his X megaphone to bully defenseless people and fawn over Donald Trump that I just wanted that Elon Musk to shut up and go away. But there is another Elon Musk. The genius engineer-entrepreneur who can make stuff, big stuff — electric cars, reusable rockets and satellite internet systems — as well as anyone in China can, and often better.
Elon Musk at his best, though, is the one American manufacturer the Chinese fear and respect. It is crazy to me that Trump is wasting Musk on the project of shrinking the U.S. bureaucracy — under the acronym DOGE, for the informal “Department of Government Efficiency” — when he should be leading another DOGE, a government office for enabling more Americans to “Do Good Engineering.”
In sum, America needs to tighten up, but China needs to loosen up. Which is why my hat is off to Secretary of State Antony Blinken for showing China the way forward. On April 26, as Blinken was en route to the airport after a visit that included a meeting with China’s president, Xi Jinping, Reuters reported, he popped into the LiPi record store in the Chinese capital’s arts district.
Blinken bought two records — one was an album by the classic Chinese rocker Dou Wei. The other was Taylor Swift’s 2022 record “Midnights.” Swift’s “Lover” album in 2019 had more than one million combined streams, downloads and sales in China within a week of its release — a record for an international artist, the Reuters story noted.
The demand from Chinese consumers is there. I’d say it’s time for China’s leaders to let their people have more of the supply. It would be good for both our countries.
Thomas L. Friedman is the foreign affairs Opinion columnist. He joined the paper in 1981 and has won three Pulitzer Prizes. He is the author of seven books, including “From Beirut to Jerusalem,” which won the National Book Award. @tomfriedman • Facebook |
