Recently, the sanction of America on China’s technology brand Huawei has been officially applied. And following that is the restrict of this brand from using software and outsourcing service from American’s companies.
Following this event is a mass withdraw of American and it’s alliance countries’ companies out from China. Leaving behind a critical wound for the production economy of this country.
President Trump’s snap
Alphabet, the mother company of Google is the pioneer of the battle. On the early morning of 20 May 2019, the official announcement released by Reuter mentions that Google has cut off the contract with Huawei.
This will prevent the company’s products from access to Android update and support, Google Play and other apps provided by Google.
Continuously, many companies provide hardware and software of America and alliances also announce to cut the contract with Huawei. Which included: Samsung (Korean), ARM (England), Synopsis (America),
Mitsumi (Japan), Wetzlar (German), and a lot more. Without those companies, Huawei cannot make a smartphone and provide their telecom products which are two main business of this technology company.
The reason stems from allegations of spying activities for China government of Huawei through their products. And a series of other accusations of violating sanctions against Iran, steal US intellectual property, tax evasion and money laundering.
Not stop there, to answer China’s threat to retaliate over US sanctions. A mass amount of foreign’s companies (most are the US and its alliances) are withdrawing from China.
There are over 400 US-funded companies claiming to withdraw from China.
Apple announced to transfer iPhone production line to India. Foxcom, one of the most important partners of Apple has also fired all of its Chinese employees. Foxcom also moved its factory to India, which created more than 1 million jobs for this country.
Following US move, its alliances with over 20,000 companies are claiming to have the plan to move out from China too.
Some notable big companies are:
- Japan: Olympus, Sumitomo, Kobe Steelt, Mitsubishi Electric, Ricoh, Omron, Epson, Kyodo News. 60% of Japan’s companies have withdrawn from China, 40% remaining are decreasing their capital.
- Korea: Samsung, OEM.
- Taiwan: Yue Yuen
- Europe: Adidas, Puma
Just like a Thanos’s snap in the famous series of Marvel. With only one move, president Trump’s just nearly wipe out the economy of China and push this country faster to depression.
The “paper tiger” economic of China.
More than 728 million Chinese people live with an income of US $ 2-5 per day according to PEW research centre.
The Chinese government’s public debt has reached more than 255.7% of its GDP (according to BIS International Bank). However, the 2018 GDP report of $13,285 billion USD was simply inflated while the actual total debt was about $34,000 billion USD.
The megacity in Fushun, Liaoning – where the famous masterpiece The Ring of Life with 22 km2 wide has been abandoned without a shadow! Across the territory of China are hundreds of such metropolitan areas. Asked a Chinese citizen, he replied, “They” simply could not stop building! “They” here are the interest groups. The real estate bubble is very huge!
Freezing real estate led to a huge bad debt bubble in the nation’s financial system as organizations and individuals were engulfed in debt, overlapping debts were difficult to resolve.
Less than 24 hours after Washington officially raised $200 billion USD taxes with Chinese goods, US President Donald Trump ordered a further tax increase for all remaining goods worth more than $300 billion USD.
According to Bloomberg, China will default on this debt in 2019
Result
All of these moves of president Trump is a slap on China face, sending his message that “do not kidding with me in a commercial war”.
Although there will be a huge damage with US’s companies and its alliances when left an enormous market like China. But everyone seem like has smelled of the depression of China’s economic, it is better to stay away before it’s really come.
Soon or late, president Xi Jinping will have to concessions with the US to save his country’s economy.
But in my opinion, it’s too late for China to prevent the corruption of its economy. The sanctions of US only a drop of water overflow to activate the blow of China’s bubble.
Best thing China can do now is to minimize the damage as much as possible.
What do you think?