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Trueanalog workers sit at long, green tables under fluorescent lights assembling audio speakers.Credit...Andrea Verdelli for The New York Times
China’s currency, the renminbi, has strengthened only slightly against the dollar in recent months. It has also weakened 6 percent against the euro since the start of May, even though Europe faces a severe recession.
Foreign economists suspect the Chinese government has used its tight control of the country’s financial system to keep the renminbi weak. Brad Setser, an economist at the Council on Foreign Relations in New York, said the most likely explanation for the currency’s performance this summer was that state-owned or state-controlled Chinese banks and other financial institutions were shifting some of their immense assets, selling vast sums of renminbi and buying dollars or euros to prop up those currencies.
The People’s Bank of China has said, including , that it is not manipulating the renminbi, but has also said it is committed to maintaining a mostly stable value for the currency.
A factory in southern China that makes steel parts for use by other manufacturers. China has retained production of fairly low-tech industries even as wages have surged. Credit...Andrea Verdelli for The New York Times
The production of steel parts in factories like this one has mostly stayed in China instead of moving to lower-wage countries like Vietnam or Bangladesh. Credit...Andrea Verdelli for The New York Times
Exporters in China are often able to find all the parts they need for their products within a couple of hours’ drive. Credit...Andrea Verdelli for The New York Times
China’s advantages go beyond a weak currency, however. China has built a 700-city bullet train network in a decade. It also has an abundance of labor, a culture of long working hours and tightly restricted unions. Manufacturers are not as encumbered by environmental laws against pollution as in many other countries.
Robert Gwynne, a shoe manufacturing and exports specialist in Guangdong, said reviving competitiveness in the United States and elsewhere to compete with China would not be quick or easy.
“To get it back,” he said, “you’re looking at 20 to 30 years, depending on what business you’re in.”
To be sure, China’s dominance of global manufacturing could be hurt by geopolitical shifts, such as if other countries demand that companies move part of their supply chains elsewhere. The United States and Japan have begun to do so. European governments like France’s have started to move in the same direction, particularly for medical supplies. Large companies with the capacity to set up entirely new supply chains elsewhere, like Foxconn of Taiwan and Apple, are exploring alternatives.
But the pandemic, which has grounded many flights and slowed logistics, has shielded China at least temporarily from attempts to move factories to other countries. Many multinationals have cut back on investment as global demand has slowed, and so have little money to set up new operations elsewhere.
“In the middle of a global recession, companies are not going to divest unless trade barriers force them,” said Joerg Wuttke, the president of the European Chamber of Commerce in China. “Companies would rather close facilities than open up new ones.”
Trueanalog workers sit at long, green tables under fluorescent lights assembling audio speakers.Credit...Andrea Verdelli for The New York Times
China’s currency, the renminbi, has strengthened only slightly against the dollar in recent months. It has also weakened 6 percent against the euro since the start of May, even though Europe faces a severe recession.
Foreign economists suspect the Chinese government has used its tight control of the country’s financial system to keep the renminbi weak. Brad Setser, an economist at the Council on Foreign Relations in New York, said the most likely explanation for the currency’s performance this summer was that state-owned or state-controlled Chinese banks and other financial institutions were shifting some of their immense assets, selling vast sums of renminbi and buying dollars or euros to prop up those currencies.
The People’s Bank of China has said, including , that it is not manipulating the renminbi, but has also said it is committed to maintaining a mostly stable value for the currency.
A factory in southern China that makes steel parts for use by other manufacturers. China has retained production of fairly low-tech industries even as wages have surged. Credit...Andrea Verdelli for The New York Times
The production of steel parts in factories like this one has mostly stayed in China instead of moving to lower-wage countries like Vietnam or Bangladesh. Credit...Andrea Verdelli for The New York Times
Exporters in China are often able to find all the parts they need for their products within a couple of hours’ drive. Credit...Andrea Verdelli for The New York Times
China’s advantages go beyond a weak currency, however. China has built a 700-city bullet train network in a decade. It also has an abundance of labor, a culture of long working hours and tightly restricted unions. Manufacturers are not as encumbered by environmental laws against pollution as in many other countries.
Robert Gwynne, a shoe manufacturing and exports specialist in Guangdong, said reviving competitiveness in the United States and elsewhere to compete with China would not be quick or easy.
“To get it back,” he said, “you’re looking at 20 to 30 years, depending on what business you’re in.”
To be sure, China’s dominance of global manufacturing could be hurt by geopolitical shifts, such as if other countries demand that companies move part of their supply chains elsewhere. The United States and Japan have begun to do so. European governments like France’s have started to move in the same direction, particularly for medical supplies. Large companies with the capacity to set up entirely new supply chains elsewhere, like Foxconn of Taiwan and Apple, are exploring alternatives.
But the pandemic, which has grounded many flights and slowed logistics, has shielded China at least temporarily from attempts to move factories to other countries. Many multinationals have cut back on investment as global demand has slowed, and so have little money to set up new operations elsewhere.
“In the middle of a global recession, companies are not going to divest unless trade barriers force them,” said Joerg Wuttke, the president of the European Chamber of Commerce in China. “Companies would rather close facilities than open up new ones.”
