One of the most noteworthy geopolitical and economic developments in modern history has been the emergence of China as a superpower. The miraculous rise of the once-ascendent communist nation, however, could lose tremendous momentum as the strength of its manufacturing sector rapidly dissipates.
China’s gross domestic product has expanded at an average of 9% since the country opened and reformed its economy more than four decades ago, according to data from the World Bank, enabling more than 800 million residents to escape poverty. Over the past two years, however, the Chinese government has been among the most zealous enforcers of COVID lockdown policies on the planet.
Quarantines mandated under the nation’s zero-COVID policy have fostered unpredictable supply chain shocks for foreign companies in recent months, causing a push to build manufacturing and logistics capabilities elsewhere. American manufacturing orders from China have plummeted as much as 40%, according to data from the CNBC Supply Chain Heat Map.
“The fall in demand is a combination of persistent COVID-19 related shutdowns in China leading to bottlenecks in the export of products out of China, lower American consumer spending on merchandise goods, and supply chains gradually moving out of or diversifying away from China,” Hudson Institute senior fellow John Lee told The Daily Wire. “The latter reason will be a major cause of lower American demand for Chinese goods in structural terms as more goods into America will come from other markets.”
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In one high-profile example, an iPhone manufacturing facility in Zhengzhou was rocked by protests over zero-COVID restrictions, severely disrupting operations and leading Apple to accelerate production shifts to economies such as India and Vietnam, according to a report from The Wall Street Journal. The world’s most valuable technology company had already moved some iPad production earlier this year to Vietnam, where the AirPod earbud series is manufactured, in reaction to lockdowns in Shanghai.
Lee, who formerly worked as senior national security adviser to Australian Foreign Minister Julie Bishop, remarked that “permanent geopolitical tensions” are another factor behind the “deliberate decoupling” of manufacturing deals between the United States and China. The trend is especially apparent in the technology sector, which has been the subject of increased scrutiny over American regulators’ unease regarding Chinese espionage and intellectual property theft.
“In most merchandise goods which are not high-tech products, the supply chains moving out of China due to firms hedging against geopolitical tensions will continue to be a cause for lower American demand of Chinese goods into the future,” Lee commented. “Hence, it is geopolitical tensions leading to lower American demand for Chinese goods rather than lower American demand being the cause of geopolitical tensions.”
Staunch geopolitical aggression will likely be a central tenet of the nation’s foreign policy in the foreseeable future. Chinese President Xi Jinping, who recently began an unprecedented third term, lauded the defeat of democratic aspirations in Hong Kong and forecasted the imminent conquest of Taiwan in a speech at the Chinese Communist Party’s twice-per-decade meeting of senior legislators. The executive has largely staked his reputation as a leader on the zero-COVID policy over the past two years.