tag:theconversation.com,2011:/fr/topics/made-in-china-52253/articlesMade in China – The Conversation2023-06-14T19:45:05Ztag:theconversation.com,2011:article/2071782023-06-14T19:45:05Z2023-06-14T19:45:05ZWhy does so much of the world’s manufacturing still take place in China?<figure><img src="https://images.theconversation.com/files/531184/original/file-20230609-19-aos7wu.jpg?ixlib=rb-1.1.0&rect=22%2C22%2C4970%2C3278&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Workers assemble ice-skating shoes at a manufacturing factory in Zhangjiakou in northwestern China's Hebei province.</span> <span class="attribution"><span class="source">(AP Photo/Andy Wong)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/why-does-so-much-of-the-world-s-manufacturing-still-take-place-in-china" width="100%" height="400"></iframe>
<p>With the current geopolitical challenges between China and the United States, as well as the ongoing supply chain issues affecting manufacturers and consumers, there’s been much talk about <a href="https://qz.com/1874825/supply-chain-leaders-want-to-get-out-of-china-by-2023">moving global manufacturing out of China</a>.</p>
<p>But despite the talk, U.S.-China trade <a href="https://www.bbc.com/news/business-64563855">reached a record level in 2022</a>, with no signs of any slowing in the near future. </p>
<p>While former U.S. secretary of state Henry Kissinger is <a href="https://thehill.com/opinion/international/595241-fifty-years-after-nixons-historic-opening-china-is-still-hostile-and">credited with opening China to the West</a> under then-President Richard Nixon, it wasn’t until 2000 that the U.S. <a href="https://www.govinfo.gov/content/pkg/PLAW-106publ286/html/PLAW-106publ286.htm">granted China permanent normal trade relations</a> — a legal designation that allows foreign nations be granted most favoured nation status, and hence be treated similarly to other members of the World Trade Organization.</p>
<p>This move reinforced China’s growing role in global trade. Since then, <a href="https://sgp.fas.org/crs/row/RL33534.pdf">much of the world’s manufacturing base has migrated to China</a>, attracted by low-cost labour and favourable policies from the Chinese government. These policies include massive investments in infrastructure and trade capacity.</p>
<h2>Tariffs and trade wars</h2>
<p>The spectacular economic rise of China has created many geo-political challenges, from <a href="https://www.nbcnews.com/politics/national-security/china-spy-balloon-collected-intelligence-us-military-bases-rcna77155">spy balloons</a> to <a href="https://www.bbc.com/news/business-58991339">unfair trade practices</a> and <a href="https://www.cbsnews.com/news/chinese-hackers-took-trillions-in-intellectual-property-from-about-30-multinational-companies/">accusations of intellectual property theft</a>. This has <a href="https://www.cfr.org/blog/cost-trumps-trade-war-china-still-adding">resulted in an active trade war between the U.S. and China</a>. </p>
<p>In 2018, Donald Trump invoked Section 301 of the Trade Act of 1974 <a href="https://www.cnn.com/2018/03/22/politics/donald-trump-china-tariffs-trade-war/index.html">to apply tariffs on billions of dollars on Chinese goods</a> when he was president. As a result, pressure intensified on global companies to relocate their manufacturing to lower-cost destinations across Asia, such as Vietnam, Bangladesh and India. </p>
<p>After the COVID-19 pandemic <a href="https://theconversation.com/the-covid-19-pandemic-has-revealed-that-global-supply-chains-are-a-huge-house-of-cards-164821">caused chaos in global supply chains</a>, there were <a href="https://www.nytimes.com/2023/01/01/business/mexico-china-us-trade.html">calls to bring manufacturing back closer to home</a> either by <a href="https://doi.org/10.1016%2Fj.retrec.2021.101089">“nearshoring”</a> — building factories in Mexico for the U.S. market, for example — or <a href="https://www.investopedia.com/terms/r/reshoring.asp">reshoring</a> back to home countries.</p>
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<img alt="China Shipping Company and other shipping containers stacked at a terminal." src="https://images.theconversation.com/files/531176/original/file-20230609-26434-aos7wu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/531176/original/file-20230609-26434-aos7wu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=368&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531176/original/file-20230609-26434-aos7wu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=368&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531176/original/file-20230609-26434-aos7wu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=368&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531176/original/file-20230609-26434-aos7wu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=463&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531176/original/file-20230609-26434-aos7wu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=463&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531176/original/file-20230609-26434-aos7wu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=463&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Donald Trump intensified the country’s trade war with China in 2018 by increasing tariffs on US$200 billion in Chinese imports.</span>
<span class="attribution"><span class="source">(AP Photo/Steve Helber)</span></span>
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<p>Despite these significant financial and political pressures, many companies are still not moving more of their production out of China. Why not? As it turns out, China has mastered the craft of manufacturing. </p>
<p>As part of our ongoing research into global competitiveness, we had the opportunity to review confidential data from some manufacturing firms. This data indicated that even though labour costs associated with production are significantly lower in other markets, such as Bangladesh, so is productivity.</p>
<p>Chinese labourers are both more expensive and more productive than labour in other emerging economies in Asia. Both of these factors must be taken into account when making the decision to relocate production out of China. But this is only part of the story.</p>
<h2>The reality of manufacturing</h2>
<p>We interviewed Joseph Eiger, our former student and an executive in a global sourcing company that manufactures consumer products, about how the world of manufacturing operates.</p>
<p>Consider the case of making a baseball cap, for example. Some baseball caps are very basic, while others are more complicated and involve embroidery and more expensive fabrics. As Eiger put it: “While producing baseball caps is not the same as producing a cell phone, it’s still pretty complex.” </p>
<p>China’s manufacturing industry has access to a high level of agglomeration economies — or ecosystem. Take the example of producing a hoodie. It’s not just about the textiles needed to cut and sew into a hoodie. It is also about the trims, dyes, zippers, cords and other necessary pieces that are required for assembling the product, Eiger explained. </p>
<p>China has deployed a strategy that ensures the entire manufacturing supply chain is located there, and has mastered each step of the process. China even <a href="https://www.ers.usda.gov/topics/crops/cotton-and-wool/cotton-sector-at-a-glance/">imports and processes much of the world’s wool and cotton</a>, including a significant amount of U.S.-grown cotton that comprises approximately 35 per cent of the world total.</p>
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<img alt="A person, seen from the shoulders down, opens a plastic bag over a massive spool of yarn sitting on a table. Yarn stacked in pyramids is seen in the background." src="https://images.theconversation.com/files/531175/original/file-20230609-22-m87frt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/531175/original/file-20230609-22-m87frt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531175/original/file-20230609-22-m87frt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531175/original/file-20230609-22-m87frt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531175/original/file-20230609-22-m87frt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531175/original/file-20230609-22-m87frt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531175/original/file-20230609-22-m87frt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A worker packages spools of cotton yarn at a textile manufacturing plant in Aksu in western China’s Xinjiang Uyghur Autonomous Region in April 2021.</span>
<span class="attribution"><span class="source">(AP Photo/Mark Schiefelbein)</span></span>
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<p>This cotton is then processed, made into fabric, dyed and sewn into clothing and other products. They are then exported globally, including back to the U.S. as finished goods. The entire <a href="https://fashionunited.com/statistics/china">textile ecosystem for production is located in China</a>. And this is not just the case for fabric, it’s also the case for all of the components. </p>
<p>If a retailer in the U.S. or Canada wants to move the production of the textiles it sells out of China, it would have to move the entire ecosystem with it. Either that, or they would need to source the inputs needed from China into other countries like Bangladesh, where final production would take place. </p>
<h2>Costs are too high</h2>
<p>It turns out that the costs associated with leaving China are simply too high. As long as the ecosystem for manufactured goods remains in China, then so will its significant share of the world’s manufacturing. </p>
<p>Will there be a tipping point when companies will relocate production out of China? It is unlikely that conditions will suddenly switch one day in favour of other countries. </p>
<p>In the coming years, as manufacturing sectors in other Asian countries emerge and develop their own ecosystems, the economic case to move production out of China will as well. But this is some years away.</p><img src="https://counter.theconversation.com/content/207178/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Despite significant financial and political pressures, many companies are still not moving their production and manufacturing out of China. Why not?Walid Hejazi, Professor of International Business, Rotman School of Management, University of TorontoBernardo Blum, Associate Professor, Rotman School of Management, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1093022019-01-07T13:43:25Z2019-01-07T13:43:25ZTikTok: the world’s most valuable startup that you’ve never heard of<figure><img src="https://images.theconversation.com/files/254102/original/file-20190116-163280-kx79oi.png?ixlib=rb-1.1.0&rect=0%2C1%2C1200%2C790&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Ricky Kresslein / Shutterstock.com</span></span></figcaption></figure><p>Anticipation has long been building about the impending <a href="https://www.ft.com/content/3530f178-6e50-11e8-8863-a9bb262c5f53">takeover of the tech world</a> by Chinese digital giants like Alibaba, Tencent, Baidu, and JD. Efforts so far, however, have been largely disappointing. The most popular messaging app in the West is WhatsApp, not WeChat; people use PayPal, not Alipay, for digital payments; Google dominates the search market, not Baidu. </p>
<p>Indeed, Google, Facebook, Instagram, Snap, Spotify, and Amazon, have barely noticed the competitive impact of their Chinese equivalents. While China has found great success in global hardware markets, they have had much less success with software. That is, until now. </p>
<p>You may not have heard of it, but TikTok became one of 2018’s most downloaded mobile apps for Apple and Android devices <a href="https://www.digitalmusicnews.com/2018/11/02/tiktok-app-downloads/">in the US and Europe</a>, unseating the likes of YouTube, Instagram, and Snapchat. TikTok has already been downloaded more than 80m times in the US, logging 4m downloads from the App Store in October alone. It is also one of the most popular apps on Google Play. </p>
<h2>What is TikTok?</h2>
<p>TikTok is a video sharing platform with a twist. Videos can be no longer than 15 seconds and they are based on various themes: music, cooking, travel, dance, fashion, and so on. Users create these short videos, use simple tools to add music and special effects, and share them on the site. The most popular clips are high on entertainment value, with a premium on instant gratification. Similar to Vine, <a href="https://medium.com/@vine/important-news-about-vine-909c5f4ae7a7">which shut down in 2016</a>, TikTok can be thought of as a video version of Instagram or Snapchat. </p>
<p>TikTok comes from China, but, interestingly, it is not owned by one of the Chinese tech giants. Despite massive investments in video platforms by the likes of Alibaba, Tencent, and Baidu, none of them dominates this area. TikTok – known locally as Douyin – was launched in 2016 by ByteDance, a Beijing-based tech company traditionally focused on news. Its news app, called Toutiao, uses advanced AI algorithms that learn user preferences, then provides customised news feeds. Bytedance uses the same algorithms to provide relevant video feeds to TikTok users. </p>
<p>By the start of 2017, Douyin had become China’s most popular mobile video app. In November of the same year, ByteDance spent US$1 billion to acquire a competing video sharing <a href="https://www.reuters.com/article/us-bytedance-musically/chinas-bytedance-scrubs-musically-brand-in-favor-of-tiktok-idUSKBN1KN0BW">site called Musical.ly</a>. While Musical.ly was also founded in China, most of its users were based in the US. The combined global reach of TikTok and Musical.ly made for a powerful combination.</p>
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<img alt="" src="https://images.theconversation.com/files/252504/original/file-20190104-32148-knhmv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/252504/original/file-20190104-32148-knhmv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/252504/original/file-20190104-32148-knhmv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/252504/original/file-20190104-32148-knhmv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/252504/original/file-20190104-32148-knhmv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/252504/original/file-20190104-32148-knhmv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/252504/original/file-20190104-32148-knhmv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">TikTok came for Music.ly. Now it’s coming for Facebook.</span>
<span class="attribution"><span class="source">MichaelJayBerlin / Shutterstock.com</span></span>
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<p>While many social media applications focus on global consistency and reach, TikTok focused on targeting specific local audiences. For example, in Japan, TikTok collaborated with a large artist management company to drive traffic from YouTube and Instagram using watermarked TikTok videos created by local celebrities. It also ran a series of dancing and music campaigns focused on overcoming shyness, an issue for many young people in Japan. </p>
<p>Challenges are one of the key elements of TikTok. These are video skits that get acted out on masse, with people creating various responses to a popular meme. A recent one involved gummy bears singing an Adele song, which got <a href="https://m.tiktok.com/v/6640342878226763014.html">1.7m likes on TikTok</a>, went <a href="https://twitter.com/Vknbberiv/status/1079418894538940418">viral on Twitter</a> and <a href="https://mashable.com/article/tik-tok-gummy-bear-haribo-someone-like-you-challenge/?europe=true#fCon9XFs15qn">spawned numerous spinoffs</a>. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1079418894538940418"}"></div></p>
<h2>Competition looms</h2>
<p>By the end of 2018, TikTok had more than half a billion active users (<a href="https://venturebeat.com/2018/10/25/twitter-loses-9-million-monthly-active-users-in-q3-2018-its-steepest-decline-ever/">more than Twitter</a>) – around 40% of them outside China. It is no surprise that the Chinese giants are closely studying TikTok’s successful approach of simple design, active promotion, attention to different locales, and focused acquisition, with an eye to understanding and emulating the magic formula for succeeding in global markets. </p>
<p>Tencent is already making a bet on the short-video streaming industry by <a href="https://uk.reuters.com/article/us-kuaishou-fundraising/chinas-kuaishou-in-1-billion-tencent-led-funding-round-eyes-ipo-sources-idUKKBN1FE11D">investing in Kuaishou</a>, TikTok’s main local competitor, and reportedly giving out subsidies <a href="https://kr-asia.com/tencent-bets-on-its-revived-weishi-app-to-take-on-toutiaos-tik-tok-in-short-video-streaming">worth nearly US$500m</a> to promote its own platform Weishi. The giants of the West are also taking note, with Facebook quietly launching a TikTok competitor app <a href="https://techcrunch.com/2018/11/09/lasso-facebook-app-store/">called Lasso</a> in November 2018. </p>
<p>Meanwhile, Bytedance recently <a href="https://www.bloomberg.com/news/articles/2018-10-26/bytedance-is-said-to-secure-funding-at-record-75-billion-value">completed</a> a new round of funding led by major tech investor SoftBank. This valued the company behind TikTok at US$75 billion, making it the world’s most valuable startup, higher even than Uber. </p>
<p>Bytedance cannot rest on its laurels, however, if it wants TikTok to build on its position as the first globally successful “made in China” app. TikTok will need to massively expand from its base, while staving off attacks from well funded and ambitious Chinese and global competitors. Building a successful app is one thing. But, <a href="https://www.recode.net/2018/9/16/17861692/snap-stock-decline-explained-user-growth-evan-spiegel">as Snapchat’s fall from grace shows</a>, sustaining that success is an entirely more challenging endeavour.</p><img src="https://counter.theconversation.com/content/109302/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>TikTok was one of 2018’s most downloaded mobile apps for Apple and Android devices in the US and Europe.Michael Wade, Professor of Innovation and Strategy, Cisco Chair in Digital Business Transformation, International Institute for Management Development (IMD)Jialu Shan, Research Associate at Global Center for Digital Business Transformation, International Institute for Management Development (IMD)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/992582018-07-06T16:42:47Z2018-07-06T16:42:47ZWe estimate China only makes $8.46 from an iPhone – and that’s why Trump’s trade war is futile<p>The Trump administration’s tariffs on China have so far targeted mostly <a href="http://www.businessinsider.com/trump-china-tariff-full-list-of-goods-products-2018-6">industrial goods</a> like aircraft engines and gas compressors. But the administration has also threatened to slap tariffs on <a href="https://www.vox.com/world/2018/6/19/17478526/trump-china-trade-war-tariff-taxes-xi-jinping">US$200 billion in other goods</a> if the dispute continues.</p>
<p>No list of all the goods that might be subject to tariffs has been released, but it would have to include consumer electronics, such as smartphones, which is the <a href="https://www.census.gov/foreign-trade/statistics/product/enduse/imports/c5700.html">largest single product category</a> in China’s exports to the U.S.</p>
<p>One well-known product that might be affected is Apple’s iPhone, which is assembled in China. When an iPhone arrives in the U.S., it is recorded as an import at its <a href="http://www.wipo.int/edocs/pubdocs/en/wipo_pub_econstat_wp_41.pdf">factory cost of about $240</a>, which is added to the massive U.S.-China bilateral trade deficit. </p>
<p>IPhone imports look like a big loss to the U.S., at least to the president, who <a href="https://www.nytimes.com/2018/06/19/business/china-trade-war-peter-navarro.html">argues</a> that “China has been taking out $500 billion a year out of our country and rebuilding China.” One estimate suggests that imports of the iPhone 7 and 7 Plus <a href="https://qz.com/1234437/the-iphone-alone-accounts-for-16-billion-of-the-us-trade-deficit-with-china/">contributed $15.7 billion</a> to last year’s trade deficit with China.</p>
<p>But, as our <a href="https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=Dedrick+Kraemer+Linden&btnG=">research</a> on the breakdown of an iPhone’s costs show, this number does not reflect the reality of how much value China actually gets from its iPhone exports – or from many of the brand-name electronics goods it ships to the U.S. and elsewhere. Thanks to the globe-spanning supply chains that run through China, trade deficits in the modern economy are not always what they seem. </p>
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<h2>Who really makes the iPhone?</h2>
<p>Let’s examine an iPhone 7 a little more closely to see how much value China is actually getting. </p>
<p>Start with the most valuable components that make up an iPhone: the touch screen display, memory chips, microprocessors and so on. They come from a mix of U.S., Japanese, Korean and Taiwanese companies, such as Intel, Sony, Samsung and Foxconn. Almost none of them are manufactured in China. Apple buys the components and has them shipped to China; then they leave China inside an iPhone.</p>
<p>So what about all of those famous factories in China with millions of workers making iPhones? The companies that own those factories, including Foxconn, are all based in Taiwan. Of the factory-cost estimate of $237.45 from IHS Markit at the time the iPhone 7 was released in late 2016, we calculate that all that’s earned in China is about $8.46, or 3.6 percent of the total. That includes a battery supplied by a Chinese company and the labor used for assembly. </p>
<p>The other $228.99 goes elsewhere. The U.S. and Japan each take a roughly $68 cut, Taiwan gets about $48, and a little under $17 goes to South Korea. And we estimate that about $283 of gross profit from the retail price – about $649 for a 32GB model when the phone debuted – goes straight to Apple’s coffers.</p>
<p>In short, China gets a lot of (low-paid) jobs, while the profits flow to other countries.</p>
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<h2>The trade balance in perspective</h2>
<p>A better way of thinking about the U.S.-China trade deficit associated with one iPhone would be to only count the value added in China, $8.50, rather than the $240 that shows up as a Chinese import to the U.S. </p>
<p>Scholars have found <a href="https://econpapers.repec.org/article/eeeinecon/v_3a86_3ay_3a2012_3ai_3a2_3ap_3a224-236.htm">similar results for the broader U.S.-China trade balance</a>, although the disparity is less extreme than in the iPhone example. Of the 2017 trade deficit of $375 billion, probably one-third actually involves inputs that came from elsewhere – including the U.S.</p>
<p>The use of China as a giant assembly floor has been good for the U.S. economy, <a href="https://www.nytimes.com/2007/04/17/business/worldbusiness/17iht-glob18.1.5316471.html">if not for U.S. factory workers</a>. By taking advantage of a vast, highly efficient global supply chain, Apple can bring new products to market at prices comparable to its competitors, most notably the Korean giant Samsung. </p>
<p>Consumers benefit from innovative products, and thousands of companies and individuals have built businesses around creating apps to sell in the App Store. Apple uses its profits to pay its armies of hardware and software engineers, marketers, executives, lawyers and Apple Store employees. And most of these jobs are in the U.S.</p>
<p>If the next round of tariffs makes the iPhone more expensive, demand will fall. Meanwhile Samsung, <a href="http://www.businesskorea.co.kr/news/articleView.html?idxno=8785">which makes over half its phones in Korea and Vietnam</a>, with a lower share of U.S. parts, will not be affected as much by a tariff on goods from China and will be able to gain market share from Apple, shifting profits and high wage jobs from the U.S. to South Korea.</p>
<p>Put another way, research has shown globalization hurt some Americans while it <a href="https://piie.com/publications/chapters_preview/3802/2iie3802.pdf">made life better for many others</a>. Putting globalization in reverse with tariffs will also create winners and losers – and there could be far more of the latter. </p>
<h2>Why not make the iPhone in America?</h2>
<p>When we discuss these topics with policymakers and the media, we’re often asked, “Why can’t Apple just make iPhones in the U.S.?” </p>
<p>The main problem is that the manufacturing side of the global electronics industry was <a href="http://pcic.merage.uci.edu/papers/2007/GlobalizationOfInnovation.pdf">moved to Asia in the 1980s and 1990s</a>. Companies like Apple have to deal with this reality. </p>
<p>As the numbers we’ve cited make clear, there’s not much value to be gained for the U.S. economy or its workers from simply assembling iPhones here from parts made in Asia. </p>
<p>While it’s possible to do so, it would take at least a few years to set it up, cost more per unit than production in Asia, and require a lot of carrots and sticks from policymakers to get the many companies involved to do so – for example, like the <a href="https://www.washingtonpost.com/news/wonk/wp/2017/09/18/scott-walker-signs-3-billion-foxconn-deal-in-wisconsin/?noredirect=on&utm_term=.d1c92b8b14d0">potential $3 billion in subsidies</a> Wisconsin gave to Foxconn to build an LCD factory there.</p>
<h2>A flawed response to the challenge from China</h2>
<p>There is, of course, plenty for the U.S. to complain about when it comes to China’s high-tech industry and policies, whether it’s the lack of intellectual property protection or <a href="http://www.scmp.com/comment/insight-opinion/article/2123957/china-vs-google-facebook-and-other-us-internet-giants-lesson">non-tariff barriers</a> that keep major tech companies such as Google and Facebook out of the huge Chinese market. There is room for much tougher and more sophisticated bargaining to address these issues.</p>
<p>But where trade is concerned, policies should reflect that manufacturing is now a global network. The World Trade Organization has already developed <a href="https://www.wto.org/english/res_e/statis_e/miwi_e/countryprofiles_e.htm">an alternate set of trade numbers</a> that shows each country’s trade in value added terms, but the administration seems to have missed the memo.</p>
<p>Trump’s trade war is based on a simplistic understanding of the trade balance. Expanding tariffs to more and more goods will weigh on U.S. consumers, workers and businesses. And there’s no guarantee that the final outcome will be good when the dispute ends.</p>
<p>This is a war that should never have been started.</p><img src="https://counter.theconversation.com/content/99258/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jason Dedrick has received funding from the Alfred P. Sloan for research that is relevant to this article. </span></em></p><p class="fine-print"><em><span>Greg Linden received funding from the Alfred P. Sloan Foundation for research related to this article. </span></em></p><p class="fine-print"><em><span>Kenneth L. Kraemer received funding from the Alfred P. Sloan Foundation for research related to this article. </span></em></p>The president launched a trade war largely on the premise of a massive trade deficit with China. A closer look at the iPhone shows why he’s wrong.Jason Dedrick, Professor of Information Studies, Syracuse UniversityGreg Linden, Research Associate, University of California, BerkeleyKenneth L. Kraemer, Research Professor of Business, University of California, IrvineLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/976012018-06-04T10:45:31Z2018-06-04T10:45:31ZLimits on Chinese graduate student visas may protect US intellectual property but drive away talent<figure><img src="https://images.theconversation.com/files/221283/original/file-20180531-69514-idd291.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Trump administration may limit visas for Chinese students in hopes to curtail intellectual property theft. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/waving-usa-china-flag-together-dried-640597375?src=TTzkuMDffH2outQWQBi6ZA-1-11">Onur Buyuktezgel/www.shutterstock.com</a></span></figcaption></figure><p>Some Chinese students studying STEM-related fields may not be staying in the U.S. as long as they’d planned. The Trump administration announced on May 29 that it may limit some graduate students’ visas to one year. </p>
<p>Many U.S. universities have <a href="https://www.insidehighered.com/news/2013/07/12/new-report-shows-dependence-us-graduate-programs-foreign-students">looked to Chinese students</a> to fill out their programs and revenues, so this has caused <a href="https://www.insidehighered.com/news/2018/03/16/reports-trump-administration-considering-limits-visas-chinese-citizens-cause-concern">widespread concern</a> in higher education. </p>
<p>This debate rests on concerns dating back to at least 2004, when China was first elevated to the Office of the United States Trade Representative’s <a href="https://ustr.gov/archive/Document_Library/Press_Releases/2005/April/Special_301_Report_Finds_Progress_Need_for_Significant_Improvements.html">Priority Watch List</a> due to abuses of intellectual property. Since 2004, the USTR has issued reports documenting allegations of specific <a href="https://www.nytimes.com/2017/08/15/opinion/china-us-intellectual-property-trump.html">theft and costs to the U.S. up to US$600 billion per year</a>. </p>
<p>The Chinese government under Xi Jinping has a clear and top-down <a href="https://www.realclearworld.com/articles/2017/05/03/the_pitfalls_of_being_an_american_businessperson_in_china.html">“Made in China 2025” policy</a> that calls for accelerating the percentage of Chinese-made and designed products in advanced IT, robotics, aerospace, power, biotech and other fields. This pressures Chinese firms, researchers and individuals to get up to speed fast and – in my view – gives them an incentive to copy. </p>
<p>International students as a percentage of university populations have been <a href="http://graphics.wsj.com/international-students/">steadily rising</a> since 2005. Chinese students make up more than 30 percent of the total. Foreign STEM graduate students <a href="https://www.insidehighered.com/quicktakes/2017/10/11/foreign-students-and-graduate-stem-enrollment">make up between 50 and 80 percent</a>. Limiting the numbers Chinese and other foreign students in itself, however, will not make up for a shortage of homegrown American STEM talent at the graduate level. </p>
<p>The Great Wall of China was notoriously ineffective in keeping out foreign invaders. Each outpost could be gotten around. A policy that seems targeted only toward Chinese citizens could deter many talented Chinese students from coming. Moreover, there is the risk of deterring students from other countries as well, leading to an overall drop in student enrollment. The Chinese media is already fighting back with <a href="http://www.globaltimes.cn/content/1104880.shtml">cries of U.S. insecurity and intimidation</a>.</p>
<p>Blanket policies, such as one-year visas, only serve to create a perception of xenophobia. I’m not clear on how limiting a visa to one year would affect those students who might be tempted to steal secrets, which can be done instantly via a flash drive. </p>
<p>The threat of intellectual property theft is real. An effective policy must focus first on clearly identifying sensitive areas of research, deciding what is private and public, and requiring clearances on a project-by-project basis. If certain technologies are funded by government agencies such as the National Science Foundation or the Department of Defense, it makes more sense for them to set the guidelines on security clearances. On the other hand, private companies funding university research, say in the “internet of things” for example, already have high incentives to protect their secrets. This would limit the number of individuals that need to be looked at and focus resources on quality rather than quantity of checks. Finally, as a more precise tool, it will leave less room for the kinds of backlash that will hurt broader U.S. interests among the nation’s universities and beyond.</p><img src="https://counter.theconversation.com/content/97601/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jack Marr does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Trump administration’s plans to restrict visas for Chinese students to curtail intellectual property theft may be necessary, but could also scare away talent, a U.S-China relations expert warns.Jack Marr, Clinical Associate Professor of International Business, Boise State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/944612018-04-10T11:31:50Z2018-04-10T11:31:50ZHow Chinese products went from cheap and cheerful to weapons in US trade war<figure><img src="https://images.theconversation.com/files/214069/original/file-20180410-566-1ebet3c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">At loggerheads.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/china-united-states-trade-american-tariffs-1052256230?src=al0mvOgdlH0cfy7M6sKcxA-1-0">shutterstock.com</a></span></figcaption></figure><p>Tensions are escalating between China and the US over trade. The Chinese government has announced retaliatory measures on a range of American products including <a href="https://theconversation.com/why-chinas-soybean-tariffs-matter-94476">cars and some American agriculture products</a> after the US listed 1,333 Chinese products <a href="https://www.theguardian.com/world/2018/apr/05/china-us-win-concessions-tariff-war-trade-donald-trump-xi-jinping">to be hit by punitive tariffs of 25%</a>.</p>
<p>Yet a trade war does not make economic sense for either side. Bilateral trade between the US and China was worth about <a href="http://nationalinterest.org/blog/the-buzz/fact-2017-the-us-china-traded-711-billion-worth-goods-24893">US$711 billion in 2017</a> and Boeing’s single deal with China signed during Donald Trump’s visit to Beijing in 2016 was worth about <a href="https://www.reuters.com/article/us-trump-asia-china-deals-boeing/boeing-signs-deal-to-sell-300-planes-worth-37-billion-to-china-idUSKBN1D91BZ">US$37 billion</a> alone. </p>
<p>The jobs and livelihoods at risk are huge. So why is there no particular desire, especially from Trump, to ease the tension and find a new solution?</p>
<p>There has been much talk about the US trade deficit with China and allegations that China steals US intellectual property. But the answer could lie in US fears of the Chinese government’s <a href="http://english.gov.cn/2016special/madeinchina2025/">“Made in China 2025”</a> initiative and how it signals the growing threat of China as an economic rival. That the official US Trade Representative’s recent investigation into Chinese trade practices mentioned the Made in China 2025 initiative <a href="https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF">more than 100 times</a>, suggests this is the case.</p>
<h2>Image problems</h2>
<p>Made in China 2025 was launched by the Chinese government in 2015 to upgrade the country’s manufacturing capabilities. It is a plan to transform what China produces from a low-cost, labour-intensive model to advanced and smart manufacturing. Certain <a href="https://www.mta.org.uk/system/files/resource/downloads/Made%20in%20China%202025%20Booklet%20One.pdf">key industries</a> such as aerospace, robotics and high-tech medical equipment have been prioritised. The hope is that China will gradually match developed countries’ manufacturing capabilities and become industry leaders. </p>
<p>A lot of the products from these key industries, such as industrial robots, aviation and aerospace equipment, new energy and power supplies and advanced rail machinery were all included in the tariff target list <a href="https://ustr.gov/sites/default/files/files/Press/Releases/301FRN.pdf">published by the US Trade Representative</a>. So it would seem that the current situation is not simply a trade issue aimed to reduce America’s trade deficit with China. Instead, it is likely targeted at the future competition China will pose.</p>
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<img alt="" src="https://images.theconversation.com/files/214065/original/file-20180410-540-1ay52jz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/214065/original/file-20180410-540-1ay52jz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/214065/original/file-20180410-540-1ay52jz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/214065/original/file-20180410-540-1ay52jz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/214065/original/file-20180410-540-1ay52jz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/214065/original/file-20180410-540-1ay52jz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/214065/original/file-20180410-540-1ay52jz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Made in China 2.0.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/macro-image-motherboard-inscription-made-china-724767955?src=TFUSckkvS_BXLWja23cT6Q-1-6">shutterstock.com</a></span>
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<p>China’s Made in China 2025 strategy makes perfect sense in my field of research, which concerns where products are manufactured and how this effects their popularity in the global market place. A strong and positive image of a country can generate what economists call <a href="https://www.economist.com/node/14299211">“halo effects”</a> on its products. So, Germans have built good reputations for their cars and engineering, France and Italy for their wine and fashion, and the US for their innovative products.</p>
<p>This worldwide reputation brings with it prestige and higher price premiums. Although there is still debate around whether brand origin could be more important than where the product is produced (Apple, for example designs its products in the US but manufactures them in China), there is no doubt that “Made in China” suffers from an <a href="https://www.futurity.org/made-in-china-1116202-2/">image problem</a>.</p>
<p>Chinese products have long been associated with a cheap and cheerful perception that they are not good in terms of quality or ingenuity. The Chinese government has long been aware of this view and keen to change it. </p>
<p>At the turn of the 21st century, it set up a <a href="https://www.cigionline.org/publications/deeper-look-chinas-going-out-policy">policy called “Going Out”</a> to encourage leading Chinese firms to expand internationally, acquire new technology and the tools to innovate. The two big examples were IT firm Lenovo’s <a href="http://time.com/3845674/lenovo-ibm/">takeover of IBM’s personal computer division</a> in 2005 and Geely automotive’s <a href="https://www.reuters.com/article/us-geely/chinas-geely-completes-volvo-buy-idUSTRE66S1TC20100802">purchase of Volvo</a> in 2010. Made in China 2025 serves the same purpose – to boost China’s technology and innovation capabilities and to improve the image of Chinese products.</p>
<h2>Impressive growth</h2>
<p>There is no doubt that China has come a long way since the 1990s. It has built 22,000km of <a href="https://www.economist.com/blogs/graphicdetail/2017/09/daily-chart">advanced high speed rail network</a> within the last decade, which is more than the rest of the world combined. It is also considered as the global leader in <a href="https://www.theguardian.com/environment/2017/jan/06/china-cementing-global-dominance-of-renewable-energy-and-technology">renewable energy and technology</a>, <a href="http://www.ipwatchdog.com/2017/12/12/wipo-stats-patent-application-filings-china-lead/id=90855/">patent filings</a>, <a href="https://www.cnbc.com/2017/09/01/in-race-to-dominate-drone-space-west-is-no-match-for-chinas-dji.html">commercial drones</a>, <a href="https://www.therobotreport.com/industrial-robots-china-away/">industrial robotics</a> and <a href="https://www.forbes.com/sites/rebeccafannin/2017/06/06/china-leads-the-world-in-livestreaming-mobile-payments-bike-sharing-what-next/#1ff94fb715d6">e-commerce and mobile payments</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/214067/original/file-20180410-536-nq3mkv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/214067/original/file-20180410-536-nq3mkv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=396&fit=crop&dpr=1 600w, https://images.theconversation.com/files/214067/original/file-20180410-536-nq3mkv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=396&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/214067/original/file-20180410-536-nq3mkv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=396&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/214067/original/file-20180410-536-nq3mkv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=497&fit=crop&dpr=1 754w, https://images.theconversation.com/files/214067/original/file-20180410-536-nq3mkv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=497&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/214067/original/file-20180410-536-nq3mkv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=497&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">China is already a leader in some tech.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/two-engineers-conducting-outdoor-inspection-solar-737424406?src=Mq_RlgQiBB1s_xGjOnZz_A-1-1">shutterstock.com</a></span>
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<p>Chinese telecommunications company Huawei typifies the transformation of Chinese products in recent years. Within the last decade, Huawei <a href="https://www.caixinglobal.com/2018-03-19/huawei-now-worlds-largest-telecom-equipment-maker-101223256.html">has surpassed Ericsson and Nokia</a> to become the world’s biggest telecom equipment supplier and has just overtaken Apple as the world’s <a href="http://uk.businessinsider.com/huawei-second-biggest-smartphone-apple-counterpoint-research-2017-9">second largest smartphone maker</a>, behind Samsung. </p>
<p>What’s more remarkable about these statistics is that Huawei has transformed itself from a cheap phone maker to an accepted premium brand that can compete with <a href="https://www.nytimes.com/2017/11/19/technology/huawei-mate-10-smartphone.html">Apple and Samsung</a>. Its latest releases the top of the range Huawei P20 Pro will retail for US$1,100 and its top end model Huawei Porsche Design Mate RS will sell <a href="https://www.theverge.com/circuitbreaker/2018/3/27/17168032/huawei-porsche-design-mate-rs-512gb-storage-in-screen-fingerprint-reader">for US$2,109</a> – even more than the iPhone X.</p>
<p>There is no doubt that some in the US <a href="https://www.ft.com/content/08c9e370-a33e-11e7-9e4f-7f5e6a7c98a2">are uncomfortable</a> with China’s impressive growth and feel threatened by it. It suggests the current trade dispute is not just about imports and exports, but also an incumbent superpower feeling the threat of a growing challenger.</p><img src="https://counter.theconversation.com/content/94461/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Qing Shan Ding served as Deputy Secretary General, Head of Academic Division, Member of National Executive Committee of Chinese Students and Scholars Association UK.</span></em></p>The brewing US-China trade war is probably linked to the Chinese government’s attempts to revamp its industry.Qing Shan Ding, Senior Lecturer in Marketing, University of HuddersfieldLicensed as Creative Commons – attribution, no derivatives.