On a recent trip to mainland China, I found myself posing the same question, again and again, to the economists, technologists and business leaders who I met with. “Trade is an exchange. You provide something of value to me, and in return, I must offer something of value to you. So what is the product, in the future, that China would like to buy from the rest of the world?”
The answers were revealing. A few said “soyabeans and iron ore” before realising this was not much help to a European. Some observed that Louis Vuitton handbags are popular and then went on to talk about the export prospects for fast-rising Chinese luxury brands. “Higher education” was another common answer, qualified sometimes with the observation that Peking University and Tsinghua are harder to get into, and more academically rigorous, than anything on offer in the west.
Several of the economists, who had perhaps pondered the issue already, jumped ahead to a different point altogether: “This,” they said, “is why you should let Chinese companies set up factories in Europe.”
It is a train of thought that gives away the real answer to the question. Which is: nothing.
There is nothing that China wants to import, nothing it does not believe it can make better and cheaper, nothing for which it wants to rely on foreigners a single day longer than it has to. For now, to be sure, China is still a customer for semiconductors, software, commercial aircraft and the most sophisticated kinds of production machinery. But it is a customer like a resident doctor is a student. China is developing all of these goods. Soon it will make them, and export them, itself.
“Well, how can you blame us,” the conversation usually continued, after agreeing on China’s desire for self-sufficiency, “when you see how the US uses export controls as a weapon to contain us and keep us down? You need to understand the deep sense of insecurity that China feels.”
That is reasonable enough and blame does not come into it. But it leads to the following point, which I put to my interlocutors and put to you now: if China does not want to buy anything from us in trade, then how can we trade with China?
This is not a threat but a simple statement of fact. Workers in Europe, Japan, South Korea and the US need jobs. We do not want our economic development to go into reverse. And even if we did not care, without exports, we will eventually run out of ways to pay China for our imports. In a different context, Beijing policymakers do recognise this: they worry about a devaluation or default on the mountain of dollar assets China has already accepted.
The drag on the rest of the world was well illustrated when Goldman Sachs recently upgraded its forecast for the size of China’s economy in 2035. Normally, a growth upgrade in any country benefits all others: there is more demand, more consumption and more opportunity. Yet in this case, the extra Chinese growth comes from exports, taking markets from other countries. Germany will suffer the most, according to Goldman, with a drag of around 0.3 percentage points on its growth over the next few years.
Worth-Jicama3936 on
Ya…it’s chinas fault
Maximilianne on
I mean there is nothing preventing the west from making games like genshin or arknights to hawk to the Chinese gacha player,western companies just don’t choose to
tnalt1111111 on
>There is nothing that China wants to import, nothing it does not believe it can make better and cheaper, nothing for which it wants to rely on foreigners a single day longer than it has to
Isn’t this the exact prelude to the opium war
sleepyrivertroll on
If only there was something we could offer that was a substitute for goods and/or services so that nations didn’t have to resort to bartering.
Truly international trade is impossible without it 😞
But yeah, this is a dumb take that is reminiscent of British complaints about the trade balance leading to the conditions that resulted in the opium wars. It just assumes that the world has no comparative advantage over China and that they will be the best at producing everything.
23USD on
how dare china give me goods and services in exchange for printed pieces of paper they must be stopped
Otherwise_Young52201 on
I mean, this is true but at the same time it’s hard to imagine Chinese policymakers changing their course especially with regards to the last few years of Europe and the US imposing technology controls on AI chips and EUV machines. We can go back and forth on who is more responsible for China going down the path of industrial policy but this is useless given that there are severe grievances on both sides. If we’re going to be fair then a deal should be made where the West agrees to loosen technology controls and China stops subsidizing their industries (it should be noted this is not the only reason for why Chinese industry is successful, there are genuine advantages that lie in vertical integration, human capital, etc.)
For what it’s worth, the Chinese government is projected to at least alleviate some of the stress going forward. For example, the RMB will likely appreciate towards 6.7-6.8 on the USD by the end of 2026, and Chinese policymakers are letting this happen as opposed to pegging it lower compared to before. And China is getting rid of subsidies in matured sectors, such as the EV sales tax exemption being cut in half by the start of 2026, and being removed entirely in 2027.
7 Comments
On a recent trip to mainland China, I found myself posing the same question, again and again, to the economists, technologists and business leaders who I met with. “Trade is an exchange. You provide something of value to me, and in return, I must offer something of value to you. So what is the product, in the future, that China would like to buy from the rest of the world?”
The answers were revealing. A few said “soyabeans and iron ore” before realising this was not much help to a European. Some observed that Louis Vuitton handbags are popular and then went on to talk about the export prospects for fast-rising Chinese luxury brands. “Higher education” was another common answer, qualified sometimes with the observation that Peking University and Tsinghua are harder to get into, and more academically rigorous, than anything on offer in the west.
Several of the economists, who had perhaps pondered the issue already, jumped ahead to a different point altogether: “This,” they said, “is why you should let Chinese companies set up factories in Europe.”
It is a train of thought that gives away the real answer to the question. Which is: nothing.
There is nothing that China wants to import, nothing it does not believe it can make better and cheaper, nothing for which it wants to rely on foreigners a single day longer than it has to. For now, to be sure, China is still a customer for semiconductors, software, commercial aircraft and the most sophisticated kinds of production machinery. But it is a customer like a resident doctor is a student. China is developing all of these goods. Soon it will make them, and export them, itself.
“Well, how can you blame us,” the conversation usually continued, after agreeing on China’s desire for self-sufficiency, “when you see how the US uses export controls as a weapon to contain us and keep us down? You need to understand the deep sense of insecurity that China feels.”
That is reasonable enough and blame does not come into it. But it leads to the following point, which I put to my interlocutors and put to you now: if China does not want to buy anything from us in trade, then how can we trade with China?
This is not a threat but a simple statement of fact. Workers in Europe, Japan, South Korea and the US need jobs. We do not want our economic development to go into reverse. And even if we did not care, without exports, we will eventually run out of ways to pay China for our imports. In a different context, Beijing policymakers do recognise this: they worry about a devaluation or default on the mountain of dollar assets China has already accepted.
The drag on the rest of the world was well illustrated when Goldman Sachs recently upgraded its forecast for the size of China’s economy in 2035. Normally, a growth upgrade in any country benefits all others: there is more demand, more consumption and more opportunity. Yet in this case, the extra Chinese growth comes from exports, taking markets from other countries. Germany will suffer the most, according to Goldman, with a drag of around 0.3 percentage points on its growth over the next few years.
Ya…it’s chinas fault
I mean there is nothing preventing the west from making games like genshin or arknights to hawk to the Chinese gacha player,western companies just don’t choose to
>There is nothing that China wants to import, nothing it does not believe it can make better and cheaper, nothing for which it wants to rely on foreigners a single day longer than it has to
Isn’t this the exact prelude to the opium war
If only there was something we could offer that was a substitute for goods and/or services so that nations didn’t have to resort to bartering.
Truly international trade is impossible without it 😞
But yeah, this is a dumb take that is reminiscent of British complaints about the trade balance leading to the conditions that resulted in the opium wars. It just assumes that the world has no comparative advantage over China and that they will be the best at producing everything.
how dare china give me goods and services in exchange for printed pieces of paper they must be stopped
I mean, this is true but at the same time it’s hard to imagine Chinese policymakers changing their course especially with regards to the last few years of Europe and the US imposing technology controls on AI chips and EUV machines. We can go back and forth on who is more responsible for China going down the path of industrial policy but this is useless given that there are severe grievances on both sides. If we’re going to be fair then a deal should be made where the West agrees to loosen technology controls and China stops subsidizing their industries (it should be noted this is not the only reason for why Chinese industry is successful, there are genuine advantages that lie in vertical integration, human capital, etc.)
For what it’s worth, the Chinese government is projected to at least alleviate some of the stress going forward. For example, the RMB will likely appreciate towards 6.7-6.8 on the USD by the end of 2026, and Chinese policymakers are letting this happen as opposed to pegging it lower compared to before. And China is getting rid of subsidies in matured sectors, such as the EV sales tax exemption being cut in half by the start of 2026, and being removed entirely in 2027.