Is China Becoming "America Free"?
The geopolitical tables are turning
During the pandemic, the pressure rose to move supply chains out of China. A shift was occurring where integration with China was suddenly more risk than opportunity.
As this occurred, I coined the expression “China free” to describe how a growing number of stakeholders (economies and businesses) were seeking to limit China in their critical areas - and eventually decouple from China completely over a certain timeline.
America Free
But fast forward a couple of years, and the geopolitical tables appear to be turning.
Instead of “China free,” a different expression I coined is beginning to ring louder: “America Free.”
And, ironically, the driver of America Free appears to be no less than China. The Chinese are rapidly taking steps to eject and decouple from the world’s largest economy.
The latest push by US President Donald Trump to warm up ties with Beijing by restarting the export of advanced Nvidia chips has run into a strange situation. The Chinese government is reportedly preparing to limit access to the chips within the local market. This means, Beijing may control or throttle how Nvidia chips circulate within China. Even as America hands China its chips on a silver platter, China has lost its old interest.
America Free?
Or, the latest data that China’s trade surplus with the world has reached over $1 trillion has a hidden story. China’s trade with Europe, Southeast Asia, and Australia is surging. However, exports to the US are down by a third. Think about that for a moment. Even with goods shipped to America down 29%, the demand for Chinese goods elsewhere is skyrocketing. Put differently, China is the global trade captain, with or without access to America.
America Free?
Local & Global
China is moving on two fronts at the same time.
Within the local market, the government is restricting America. At one moment, it is controlling the circulation of Nvidia chips. At another moment, it is removing foreign chips from state-backed data centers. And, at yet another moment, it is gaining control of strategic US enterprises, like the latest tie-up between Starbucks and Boyu Capital, co-founded by Alvin Jiang, the grandson of Jiang Zemin, the former president of China.
Outside of China, investments that China has made, from fast fashion to EVs, are bringing in windfall, building China’s footprint in ways that keep America out. The largest market for BYD outside of China is the UK, with sales up more than 880%. Meanwhile, Shein has around 145 million active users in the EU. This means 30% of the EU is accessing the Chinese platform. Adding to this, of the 12 million “low-value” packages that are delivered throughout Europe every day, 91% are from China, from brands like Shein and Temu. This is a mountain American (and Western) brands cannot rival. Not only have US tariffs failed to make China less competitive, but they have resulted in China redirecting goods to markets that America is trying to dominate (i.e., Europe, Southeast Asia).
New Course
All of this means that China is on a new course. Even with soybean purchases, a potential sale of TikTok, and a future state visit by Trump to Beijing next year, the picture forming is not one of romance. It is one of divorce.
China is taking steps, in clear view of the US and the world, that were unthinkable a short time ago.
The prevailing wisdom has been that China is hooked on America. But the prevailing reality is that China is fed up with America. And even as Washington reopens the door, China is eager to keep it closed and cut the US out of the picture completely.
-ABISHUR PRAKASH AKA. MR. GEOPOLITICS
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