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The title picture is from Visual China. On June 14, 2019, Vietnam ’s first auto production line of Vinfast was unveiled. This article is from WeChat public account: Medium European Business Review (ID: ceibs- cbr) , the original title “The rise of Southeast Asia, China’s” world factory “status is not guaranteed? “, Dictation: Shi Zhan (a scholar of political science and a professor of the Department of Diplomacy of the School of Foreign Affairs), interview, editor: Zhou Qi

Since the middle of 2018, large-scale trade friction has occurred between China and the United States. For a time, the Internet was full of news that China’s manufacturing industry was facing serious trade frictions. A large number of manufacturing factories were shifting overseas, especially Vietnam, and the Chinese economy seemed to be facing a major crisis.

Politics scholar Shi Zhan conducted an in-depth investigation of Vietnam from north to south last year, and his results confirmed his rational analysis. Large-scale manufacturing industry migration is unlikely. The so-called “transfer” is actually from the Chinese supply chain. “overflow”. But he also admits that at a time when the new crown epidemic is raging globally, the world order is undergoing some profound changes. These changes may determine China’s development in the next 50 years.

Strategic focus

• The main change brought about by the epidemic is not that the manufacturing industry is going away, but China and the world. The mutual trust between people was severely damaged

  • If the West rebuilds safety-related industries, it may lead to the formation of two parallel production systems between China and the West

    • People who are angry about “supply chain deweaponization” lack the ability to think empathically p>

      • “Do n’t let XX run away” is pseudo-anxiety, if you call “Do n’t let every day” “Some ran away”, people really have to run

        • Future globalization will have a “schizophrenic” —economic globalization will continue, But political globalization may be reversed
          

          
          

          Next stop, Vietnam?

          Last year, the team and I went to Vietnam twice, and the two times together for more than half a month. The density of our research in Vietnam is extremely high. We go out at 9 in the morning until we return to the hotel at 10 in the evening. This density is the same every day. The sociology teacher of the same industry said that we have completed the research of others for 2 to 3 months in most of the month.

          Why is Vietnam? Speaking of the next world factory, we will naturally think of two countries, India and Vietnam, India, I ruled out from the beginning. Indeed, with the advantage of a large population and a young age structure, India may be among the candidates for the next world factory, but most people do not know that India ’s billions of people are actually divided into thousands of labor markets. The reason lies in its thousands of castes.

          There are a large number of sub-castes under the four major castes in India. Each (Asia) when the castes differentiated, All correspond to a profession. For different (Asia) caste, religionThe promises given in the afterlife will have different expectations in this life. Therefore, companies with different (Asia) castes have no way to provide effective incentives in the same way, which is very detrimental to the development of manufacturing.

          There is a ready-made case. After a domestic heavy machinery manufacturer set up a factory in India, he found that a young man among the local workers was particularly capable, and decided to promote him as the team leader. However, this young man is the lowest caste of Sudra, and the workers of the Veisha caste (status higher than the Sudra) refused to let him be a group Long, strikes. Coupled with other problems, the manufacturer eventually gave up building a plant in India.

          However, some Chinese companies have set up factories in India in recent years, such as some domestic mobile phone manufacturers. But the result of my investigation is that they do this, the larger purpose is to deal with India’s tariffs. These manufacturers mainly complete the simplest assembly process locally, and the upstream components still need to be shipped from China.

          The Modi government has launched a national-level policy to promote “Made in India”. The central idea of ​​this policy is to protect its weak manufacturing industry with high tariffs. High tariffs mean that things produced in India are produced in India The market has lost its competitiveness, so the companies that we just set up in the past basically serve the Indian domestic market and are difficult to export. In addition, India ’s poor infrastructure and low government efficiency are all very difficult for India to become a world factory.

          Another popular candidate is Vietnam. Through field investigation, we want to answer the following questions:

          It is said that China is migrating to Vietnam. What exactly is migrating? There are two sub-questions here, specifically what industry is migrating, and whether it is the entire process of the manufacturing industry, or part of it?

          Is migration related to the technological content of the industry?

          Is migration related to the size of the enterprise? Because when enterprises of different sizes migrate abroad, the capital path they rely on may be different.

          I intuitively speculate that a large number of Chinese have gone out to invest in this round of migration, so is there anyway? What percentage does it have?
          

          In my last book “Hub”, based on research on China’s manufacturing industry, I made some assumptions. These assumptions include: the specific links in the manufacturing industry are migrated, not the manufacturing industry as a whole; Chinese people all over the world play a considerable role in it.

          These two hypotheses were confirmed in my research, and the confirmed results strengthened the previous hypothesis-the participation of the Chinese people is deeper than I thought. Less. After my trip to Vietnam, I am still very confident about China’s current status as a world factory.

          Trust is broken, then?

          The series of economic logics I found in the survey will not change substantially because of the epidemic. The main change brought about by the epidemic is not that the manufacturing industry is going away, but the mutual trust between China and the world. Was severely damaged.

          The destruction of trust may cause the West to rebuild certain “security-related” industries at any cost and at any cost.

          What are safety-related industries? It depends on how much mutual trust between China and the world is hurt. The definition boundary of the safety-related industry changes dynamically. The deeper the distrust, the more industries are classified within the boundary of the safety-related industry.

          For example, public health and information-related industries, which hit Huawei in the past, are already a kind of distrust of China. After the epidemic, the possibility of expanding the borders of safety-related industries exists. This is not to say that we are going to “fight” ZTE outside of Huawei, but that we are “piping” Huawei while piggybacking on some of our core products and no longer export to China.

          The Western world has the “Wassenaar Agreement”, which stipulates that some of the most advanced safety-related products are not allowed to be exported to China. When mutual distrust reaches a certain depth, a new “Wassenaar Agreement” may appear.

          Safety PhaseRelated industries account for a small proportion of the entire manufacturing industry. It is because of the small proportion that it can be rebuilt at any cost. However, it is worth noting that, generally speaking, safety-related industries are closely related to the technological frontier route.

          If the West rebuilds safety-related industries, it may cause many industries to form two parallel production systems with China.

          There is a gap in technology application between China and the West, but it is not big. There is still a generation gap in the most cutting-edge technology. Ultra-precision manufacturing, China and the West also have a generation gap. There are some people on the Internet who are excited, “Who says that China is not good, China is very powerful.” Bragging is meaningless. China may still have certain advantages at the application level, but not at the basic level. As far as the basic layer is concerned, China and the world are still far away, and if the application layer is not supported by the basic layer, the stamina will be insufficient.

          Once two parallel production systems are formed, two parallel technical routes will be formed. The speed of technological route iteration in China will definitely be slower than that in the West. Maybe 50 years later, China and the West can keep pace, but within these 50 years, China has almost no chance.

          Some people may say that it is no big deal to distrust each other. For a few years, China has developed itself. This idea is very stupid. China ’s supply chain and market are global. Once the outside world feels that you cannot be trusted, it will not buy from you again. Even if you have to buy from you in the short term, you will definitely make other reserves. It’s our own harm.

          I proposed “supply chain deweaponization”. Some people are very angry. These people are very short-sighted and they have no ability to think empathically. Imagine putting yourself in the position of other countries, a person who threatens you every day, do you dare to put life-related matters in his place?

          What does “supply chain deweaponization” mean? It is you who “give up the ability to use it to threaten others.”

          To give an inappropriate example, during the crisis in Ukraine, Russia used its oil and gas to threaten Germany. For Germany, it is indeed cheaper to buy from Russia, but if you threaten me with this, ask me to I have to cooperate with you internationally. I cannot accept it. I chose to lay out other oil and gas pipelines at any cost. After a few years, I no longer need you. What will Russia do then?

          Others do n’t need you anymore, which means that there is a huge market shortage. Only on the premise of promising not to weaponize oil and gas can we continue to sell oil and gas. Similarly, only by committing to “de-weaponization of the supply chain” can China’s supply chain be truly preserved. Of course, there are some institutional arrangements that cannot be trusted alone.

          The epidemic tests human nature, but human nature has never stood the test

          I think that the epidemic will not have a particularly big impact on China’s manufacturing unless it is closed for two or three years.

          In a sense, the epidemic may be a “bubble squeeze” process. A factory that was struggling before the epidemic collapsed if it could not support the cash flow for a few months. But the collapse of the factory does not mean that the demand is gone. The demand is still there, but it is temporarily suppressed.

          After the epidemic has passed, the demand will come back. At this time, the factories that can survive will meet the demand again, and the equipment, personnel, etc. of those peer factories that died can be integrated at a low cost. So this will be a “shuffle” process.

          For small countries around China, they may face bigger problems. Small countries lack capital and have little room for manoeuvre. If something goes wrong, it may lead to a systematic collapse. When demand recovers, compared with China, it is more difficult for them to “return blood”, and the speed is slower than China.

          And, as long as the epidemic is transnational, companies may find that China is more capable of responding to the epidemic than small countries. Therefore, after the epidemic, it is not excluded that some manufacturing industries will return to China. In fact, relevant reports have recently appeared.

          There is a view that we want to divide the world into a “pre-epidemic world” and a “post-epidemic world”. This division makes sense, but I do n’t think it ’s at the manufacturing or economic level There will be such a big difference, I think it is more in the level of mutual trust between countries, there will be great changes.

          On the one hand, the relationship of mutual trust between China and Western countries has been greatly damaged. On the other hand, the relationship of mutual trust between other countries will also be eroded. For example, the masks of Germany “cutting the tiger” and Switzerland, Italian “cut Hu” Swiss ventilator and so on. The epidemic tests human nature, but human nature never withstands the test.

          
          

          “Do n’t let XX run away” is pseudo-anxiety

          The strength of China’s manufacturing industry lies not in the low price of production factors, but in the super strong supply chain network.

          Dao Cao ’s American factory has particularity. Glass has no demand for the supply chain, so he can transfer to the United States, but many other companiesThere is a demand for YingChain. They cannot go to the United States, and the operating costs will greatly increase after they go.

          As we all know, China ’s Foxconn is Apple ’s foundry and has been producing iPhones and other products for Apple. When Obama was still serving as the US president, there was a meeting with Jobs. At that time, Obama asked Steve Jobs: Why almost all of the 70 million iPhones and 30 million iPads sold by Apple in the previous year were produced overseas. Can’t these jobs be returned to the United States?

          Jobs said: The iPhone 4 is about to go online, and a major revision is needed. At that time, China was already 12 o’clock in the middle of the night, but the director of the Foxconn plant ordered 12,000 people to get up at the same time, and the capacity had been scaled up after 8 hours. If you are in the United States, let alone 8 hours, you can’t do it in 8 weeks.

          It sounds sad, but this is the power of the supply chain network.

          You can draw a quadrant for what kind of enterprises are suitable for relocating from China, and what kind of enterprises are not suitable. The abscissa represents the complexity of the supply chain, and the ordinate represents the proportion of labor costs in the production process.

          Why emphasize the “production link”? Because every factory today no longer divides labor by product, but by link. Like building blocks, each factory only produces blocks of a specific shape. As for the specific use of the blocks produced, it depends on how the various links in the entire supply chain are dynamically combined.

          In this quadrant, those with low labor cost and high supply chain complexity can hardly leave China; those with low supply chain complexity and high labor cost can move away, and in a sense they should move away . For companies with a high proportion of labor costs and high supply chain complexity, whether to switch away depends on the market, but if it is transferred, it should be close to China, because the main chain of the supply chain is still in China; The complexity is also low, and whether or not to turn away depends on the market, and there is no need to be close to China.

          So, I do not recommend to say in a general way, if a certain industry or a certain enterprise is to be transferred, it must depend on the specific industry and the specific quadrant where the transferred company is located.

          Recently the media said “Don’t let Japanese companies run”It’s actually a kind of” pseudo-anxiety. “For example, if Sony runs away, Sony’s Chinese factory still exists, and this factory has actually been embedded in the entire Chinese supply chain. If this factory runs away, It’s not easy to live. If you call “Don’t let X and X run” every day, people really have to run, because he thinks you have to “close the door and hit the dog.”

          China must have identity anxiety. As I mentioned in the book “Hub”, when a rising power comes to a crossroads, the past order, frame, meaning, and frame of reference are all invalid. After the failure, you don’t know who you are, and there must be anxiety at this time. At the same time, there will be anxiety in the world, because China’s rise is too fast and the scale is huge, which will inevitably lead to structural changes in the world order.

          Globalization is “schizophrenic”

          When accepting the “Beijing News”, Cao Dewang said that perhaps the trend against globalization is inevitable and will eventually become a foregone conclusion. In terms of manufacturing, I don’t think there will be a process of counter-globalization.

          Future globalization will have a “schizophrenic”-economic globalization will continue, but political globalization may reverse. How to define political globalization? After World War II, with the WTO and IMF institutions, compared with before World War II, the globalization of politics has moved forward. When Keynes designed these systems, they all had far-reaching political considerations, but he believed that these political considerations needed to be implemented through economic means. Only through economic programmes can political trust among countries be ensured. What I mean by economic globalization is by no means an organization similar to the WTO, but a specific process of economic activity.

          My feeling in this interview in Vietnam is that the impact of the epidemic on economic globalization is still limited. You can raise tariffs, but I have some ways to circumvent it, and it is all legal. As I mentioned in “Overflow”, more than 90% of Apple’s money is stored in Ireland. Based on the local special tax policy, one year its tax is only 0.0%. In a sense, it is precisely because of the existence of national borders that it is provided with greater room for evasion.

          As for the WTO, I regard it as a kind of political globalization, because it is led by the state as a unit, and behind it is the national will, not the specific activities of businessmen. This epidemic has caused great harm to trust between countries. Such damage may cause a regression in political globalization. It is manifested in the West ’s attempt to establish another set of trade orders, and China and some others are not willing to comply with Western rules Countries are blocked.

          Cao Dewang believes that the trend against globalizationThe situation is inevitable. I guess he may have received a political inverse globalization but an economic inverse globalization, but there may not be a linear transmission relationship between the two. In the book “Overflow”, I call this kind of thinking “encapsulated thinking”-instinctively encapsulate all kinds of problems together, and the political space is the shell used to encapsulate these problems.

          Encapsulated thinking simplifies the complex world in order to shape consensus and transform the effects of political mobilization. Nationalism is a typical manifestation of this way of thinking. But it will obscure the true order. Under this mode of thinking, our understanding and attitude to the world may be distorted.

          Since the late 19th century, after the popularization of national education in the world, the underlying thinking of people in all countries in education has been encapsulated thinking. Trump ’s shouting “Let American companies come back” is also driven by encapsulated thinking, thinking of economic issues in terms of political units. Today, under the highly inconsistent economic and political space, encapsulated thinking has finally come to an end, and it needs to be broken through urgently.

          There is a “schizophrenic” phenomenon in today’s world order. Since the great geographical discovery of mankind, the process of globalization has continued to advance, and economic globalization has continued to deepen, so that the depth of political globalization cannot keep up.

          From the perspective of global governance, when the speed of political globalization cannot keep up with the speed of economic globalization, friction will occur, and there will be a low tide in globalization, but the low tide will not really solve the problem, and after the low tide there will be new In a round of rising tide, I judge the trend of this round of rising tide to be merchant order.

          Today’s global governance order and economic governance order take the state as a unit, but the real economic process is no longer running on the state as a unit, and there is a mismatch between the governance subject and the governance object. In the future, multinational organizations similar to enterprise alliances will certainly evolve. This process will not happen overnight. It may take decades, but sooner or later it will evolve in this direction.

          This article is from WeChat public account: China Europe Business Review (ID: ceibs-cbr) , Oral: Shi Zhan (Politics scholar, Diplomatic AcademyProfessor, Department of Foreign Affairs), interview, editor: Zhou Qi. More of Vietnam manufacturing closer look, see “Overflow: Made in China in the future history”, author: display, Press: CITIC Publishing Group, published on 24 January 2020.