China must start to Phase out Export or Processing Trade


Banned Idiot

The challenges brough by China's military modernization is increasing daily. This has urged America to re-evaluate its current military strategy and find new concepts of military strategy. But among the various military strategies, maritime blockade should receive more attention. Once Sino-American war broke out, America can focus on China's biggest advantage -- its exports dependent mode of economic development -- and turn it into China's biggest military weakness. Therefore, America can cut off most of China's miritime trade by blockading China. Maybe America can seriously damage China's economy and force it to come back to the negotiating table and thereby win the victory.


But in recent years, blockade strategy has been basically overlooked. Maybe it is because Sino-American trade has been very tight. Economic warfare itself seems to be inappropriate. But if these two countries has explosive conflict then the security interests will quickly override economic mutual dependence.


Due to the heavy potential cost of blockade, America will not lightly use this strategy. More importantly, blockade strategy will hinge on the cooperation of third parties in the region. Many of China's neighbors are too weak and cannot make any difference. But India, Japan and Russia have the weight. India and Japan can help America to cut off China's trade routes to the south and east. China's other neighbor, Russia, is the key to the success of the blockade.

First, I have always said that it is long overdue for China to shift away from exports dependent mode of economic development. China's growth rate has declined precipitously from more than 12% to less than 8%. China's growth now comes almost entirely from its domestic development. China's exports are almost exclusively low tech labor intensive products that do not benefit China very much. Most of China's exports are products of the so-called "processing trade" where imported parts and components are assembled into finished products and exported as "made IN China" products. China derives little more than the cheapest wages in the world paid to its hard-working people. Therefore, if Xi expects to double the incomes of the Chinese people over the next 10 years then he must phase out exports and concentrate on developing China's internal economy through the advancement of indigenous technologies, the urbanization of the rural residents and the energy self-sufficiency. Once China has become independent in terms of technologies and energy and its people can produce 300 trillion yuan of goods and services that are bought and consumed by the Chinese people themselves, there is very little need for China to trade with foreign countries. If China ceased to rely on foreign trade for its economic development, then the strategy of blockading China simply falls apart by itself.

Secondly, it is nonsense to say that America can blockade China. If America can blockade China, then China can also blockade America. Or at least keep America out of West Pacific. If Japan can block Chinese trade in the Pacific, then it is essentially blocking Chinese ships going to America and Canada. Do you think China is the only one that will be hurt if Japan stopped Chinese ships going to America? If America did not want Chinese ships going to America, it is not necessary for it to blockade Chinese ships. It can simply pass a law prohibiting the import of Chinese products into America. Therefore, those who think it is necessary to blockade Chinese ships going to the East Pacific did not think things through carefully.

To say Japan can block Chinese ships going to the S. China Sea and through the Malacca St. and into the Indian Ocean, it is just nonsense. Japan simply does not have that capability. It is much more likely that China will block Japnese shipping through S. China Sea. In the end, American ships have to do the blockading. But if American ships blockaded Chinese ships in the S. China Sea, so can Chinese naval ships deny access to the American shipping in the S. China Sea. In other words, American cargo ships will not be able to pass through S. China Sea and American trade with S. E. Asia will stop. The fact that Chinese naval ships can sink American cargo ships will immediately stop all the America cargo ships passing through the S. China Sea. The cost of shipping insurance will increase many times and become prohibitively expensive. American businesses will stop doing business in S. E. Asia due to the uncertainty and the increased cost of doing business there. So not only will American shipping stop totally but American businesses will cease totally in S. E. Asia. And do you know what that will do to the American stock market? It will plunge and crash more than 50% in a week wiping out trillions of dollars of value and pauperize most Americans and bankrupt most American corporations and wiping out most pensions funds and such.

And India stopping China? The very idea is ludicrous to anybody with any knowledge of the relative strength of the two countries' naval power. It is not even worth commenting. Suffice it to say without America doing most of the heavy lifting, India by itself cannot run fast enough away from Chinese naval ships. And if India actually blockaded Chinese shippings, then there will be a land war the result of which is the immediate re-occupation of Zhangnan which is very good for China.

And Russia participating in an American orchestrated blockade of China is simply idiotic. At this point in time, it is simply impossible for Russia to blockade China without some earth shattering conflict between China and Russia first. And I just don't see that happening.

In the end, it is time for China to shift its economic mode of development from exports dependent to domestic dependent. And Japan and India are simply too weak to blockade China. And the result of blockading China will harm Japan, India and the US much more than China. China will be even more effective in blocking Japnese, Indians and Americans out of West Pacific and S. E. Asia. In fact, it will be good for China because if nothing else it will force China to become domestically self-sufficient which in the long term is the only way it can become fully developed. So the effect of blockading China is that China will grow even faster while the economies of Japan, India and the US collapse totally. Blockading China is BRILLIANT!!!!!


Junior Member
How much petrol does China import from which sources?
Many of them are at the other side of the Strait of Hormuz. Now you know one chokepoint, where a blockade can operate.

Your argument is that Chinese export is mainly cheap assembly of goods. That's no irreplaceable qualification. So other countries can easily replace this Chinese economic niche in case of a blockade. How quickly could this happen? Latin America, South East Asia and South Asia are suitable economies for this demand.

If Chinese exports are just assemblies done by cheap labour, America and other countries would NOT suffer under a blockade, because they can replace the Chinese contribution. A blockade on the other hand hits China in its dependance on essential imports such as oil and food. This would make China worse off in such an engagement.

No sane person would suggest that China currently could operate beyond the First Island Chain with anything but submarines in case of a military US blockade. China can deny shipping within the zone of the First Island Chain and her shores. That does affect the South China Sea to a great extent. The small islands in this sea are key to naval dominance in this theatre and make it an amphibious warfare contest. I'm astonished that anyone believes to outclass the US in that field. Beyond the First Island Chain, it would be a rerun of the old submarine warfare to starve an enemy into submission. Pray tell me, how to block the Atlantic harbours with Chinese submarines.

Overall, without a blue water navy that can cover the Indian Ocean routes, China is in no position to win against a US blockade, but the US would also have loses by such an event. There seems no current dispute worth that much trouble.

To reevaluate the situation, you need to make a difference between Chinese exports to developed and developing countries. To developed countries, China can currently send only products with limited labour input, to developing countries, they can send the same array of goods as to their domestic market. Wages speaking for themselves, China will someday develop into a country that outsources cheap labour elsewhere and exports home developed products, not just assembled in China, to developed countries. Until that day comes, there will hopefully be no more talk of naval blockades because a better political understanding has been established.


Banned Idiot
  • Thread Starter Thread Starter
  • #3
How much petrol does China import from which sources?
Many of them are at the other side of the Strait of Hormuz. Now you know one chokepoint, where a blockade can operate..
I guess you haven't heard the new pipeline in Myanmar and the new railroad being built in Pakistan linking to Xinjiang.


China does not simply export to America, and so the US is not the only country that benefits from Chinese economy/export. Which means that other countries, many of them US allies, have interests staked in an open trade/energy line to and from China.


Even though a disruption in trade is not good, I think the effects as noted of its importance to China are exaggerated. As Japan experienced recently when trade was affected over political disputes, Japan was the one hurt while China felt very little. Why? Because most of the exports from China to Japan are in fact Japanese companies outsourcing to China. The Japanese companies that profit from cheap labor outsourcing to China were the ones that got hurt. Foreign corporations outsource to China because the operative word is "cheap." The US is a bigger example of Japan. I think European trade with China would actually have more of an effect than the US and Japan since actual Chinese products, and not outsourced, are sold in Europe. Given that can the US really carry out such an action when their corporations are dependent on high profits from exploiting the cheapest labor? What would be the reason for a blockade? It would have to be war. War tends to do that but then a blockade is really secondary. If not for reasons of war, are the US and allies going to sink every ship importing and exporting to and from China? No one sees that as an crime in itself. Do you think China wouldn't break the blockade?

Some figures say 40% of China's exports are foreign corporations outsourcing. Cut that off and the less China has to scour the world for resources to make crap for foreign corporations. That also means less pollution China produces in making their crap for them. Of course there are cheaper outsourcing countries than China but do they have the infrastructure? Are those countries going to scour the world for the resources to make their crap? Many of the cheaper labor countries are expecting these rich foreign corporation to pay for building the factories and infrastructure for them. In China that's all already there. The costs for outsourcing no matter what with cutting themselves out of China will definitely go up.

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Even the nationalistic protectionists Japanese would rather buy the less expensive Chinese alternative. Have Americans been buying Made in America like they've been preaching for decades? Apparently not enough since they're still calling for Americans to buy Made in America. The costs is still all most important from the consumer to the manufacturer. Unless there's a war, what's to stop China from flooding the world with cheap alternatives?