Excellent essay. It strongly echoes the argument I made in Globalization Is Moral When the West Wins: globalization was celebrated as efficient, peaceful and morally progressive when Western capital controlled technology, finance and brands while China supplied cheap labour and low-margin manufacturing.
The moral language changed only when China began moving into electric vehicles, batteries, solar equipment, machinery and advanced manufacturing. What is now called the “China shock” is partly a real industrial challenge, but it is also a crisis of hierarchy. Globalization remains acceptable to the West only when the distribution of power within it remains unchanged.
Great article. But I would like to add that the largest misconception regarding China’s ability to produce things at such affordable price isn’t lower labour costs nor tariffs, its economies of scale, vertical integration, efficient localised supply chains and state owned corporations.
Practically all the heavy industries, plastics, metals, synthetics materials, glass are all made by SOCs in China. There are over 360,000 SOCs in China and they do not maximise profits, they maximise affordability and act as a cushion against international price volatility.
They produce the inputs and energy and sell it to the private sector and households to below profit maximisation levels, this allows the private sector to thrive. As the private sector profits, it pays taxes for the state which operates the SOCs.
This is a system built to ensure stability and growth, the Chinese call it “Socialism with Chinese characteristics,” and it’s a good description.
So when the west realises it’s not subsidies or wages it’s about economic and political systems, the competition is ideological. It’s Capitalism vs Socialism with Chinese characteristics.
Thanks. I think I agree with everything you say including the West needing their own industrial policy. Except that (I think you would agree too) the focus should be on up-skilling European workers, making Western economies more efficient, not just protecting existing Western jobs and incumbents.
The other thing that I object is the US and EU (championed by many economists) denied this kind of industrial policy to developing countries. For example, when Indonesia wanted to ban nickel exports so it can do more downstream processing, the EU complained and (I think) took the matter to the WTO. Please stop being so hypocritical (saying this to these Western economists) and admit to mea culpa. China has done nothing wrong, using subsidies to encourage learning and skill development among Chinese workers.
The other issue is Chinese labour is not so cheap anymore and their efficiency is due to lower energy costs and automation (among others). All this should be celebrated by Western economists like Paul Krugman if they were not so prejudiced towards China.
One thing I kept thinking while reading this: the “China shock” was never evenly distributed.
Consumers across an entire country benefited from cheaper goods, while a relatively small number of towns absorbed the factory closures, lost apprenticeships, shrinking tax revenues, and population decline. Economists could describe the overall effect as positive while those places were still falling apart.
That’s also why I’m not convinced tariffs alone are an answer to China Shock 2.0. They may slow imports, but they don’t rebuild supplier networks, technical skills, industrial land, or local confidence.
The harder question is whether cities and regions can turn trade and foreign investment—including Chinese investment where it makes sense—into capabilities they actually own.
As an urban planner, I increasingly see this less as a simple China-versus-the-West story, and more as a question of which places can still build and retain productive capacity.
I very much agree with everything here, particularly the assessment that "The West did not stumble into economic entanglement with China. It sought it out because it clearly benefited Western-based corporations and consumers ... To now treat the results of that arrangement as a hostile act is to rewrite the story of who asked for what."
I would only add that entanglement was sold in the 1990s as mechanism not just for opening markets but also for creating more liberal societies in China and the Soviet bloc. It's possible that the salespeople for that vision were cynical, and it's possible that the voters who bought the story were naive. But might a lot of the resentment come from the perception that economic development was achieved without liberalizing society? At least not in accordance with how we in the West conceptualize liberalization.
When it comes to biased narratives about China, the central argument is that China is not a democratic society, and that no matter how much progress it makes or how many positive contributions it brings, it will eventually become a harmful force because of its authoritarian, non-democratic political system.
I personally find it difficult to argue against this line of reasoning. Would be interested to hear Jostein Hauge's view point on this.
The central argument is hollow. The term "democratic society" is casually stated with the presumption that homelessness, drug addiction, poverty, race riots do not exist in democratic societies. It also presumes that democratic societies would never impose crippling sanctions on societies that don't toe the western line, that democratic societies would welcome less fortunate immigrants, that democratic societies would never condone genocide. It also presumes that China "no matter how much progress it makes or how many positive contributions it brings, it will eventually become a harmful force ..." - This of course is irrefutable, in the same way as the statement "no matter how good the US (or Germany or UK ...) is today, it can't be trusted to be good in the future."
OK, I'll be snarky here - US Germany UK can be trusted to be good because they have gotten genocide, world wars, and colonial oppression out of their system already.
Agree on all counts, though this account is missing another element of Western, especially American, disingenuousness where assignment of “blame” for China’s rise is concerned: China didn’t “steal” American industrial production — America’s c-suite voluntarily moved it there at the expense of their fellow citizens in the working class!
This is a great essay, thank you. Will save it and share with others. I recommend you publish an updated version of this in an academic political economy journal.
Excellent essay. It strongly echoes the argument I made in Globalization Is Moral When the West Wins: globalization was celebrated as efficient, peaceful and morally progressive when Western capital controlled technology, finance and brands while China supplied cheap labour and low-margin manufacturing.
The moral language changed only when China began moving into electric vehicles, batteries, solar equipment, machinery and advanced manufacturing. What is now called the “China shock” is partly a real industrial challenge, but it is also a crisis of hierarchy. Globalization remains acceptable to the West only when the distribution of power within it remains unchanged.
Great article. But I would like to add that the largest misconception regarding China’s ability to produce things at such affordable price isn’t lower labour costs nor tariffs, its economies of scale, vertical integration, efficient localised supply chains and state owned corporations.
Practically all the heavy industries, plastics, metals, synthetics materials, glass are all made by SOCs in China. There are over 360,000 SOCs in China and they do not maximise profits, they maximise affordability and act as a cushion against international price volatility.
They produce the inputs and energy and sell it to the private sector and households to below profit maximisation levels, this allows the private sector to thrive. As the private sector profits, it pays taxes for the state which operates the SOCs.
This is a system built to ensure stability and growth, the Chinese call it “Socialism with Chinese characteristics,” and it’s a good description.
So when the west realises it’s not subsidies or wages it’s about economic and political systems, the competition is ideological. It’s Capitalism vs Socialism with Chinese characteristics.
Thanks. I think I agree with everything you say including the West needing their own industrial policy. Except that (I think you would agree too) the focus should be on up-skilling European workers, making Western economies more efficient, not just protecting existing Western jobs and incumbents.
The other thing that I object is the US and EU (championed by many economists) denied this kind of industrial policy to developing countries. For example, when Indonesia wanted to ban nickel exports so it can do more downstream processing, the EU complained and (I think) took the matter to the WTO. Please stop being so hypocritical (saying this to these Western economists) and admit to mea culpa. China has done nothing wrong, using subsidies to encourage learning and skill development among Chinese workers.
The other issue is Chinese labour is not so cheap anymore and their efficiency is due to lower energy costs and automation (among others). All this should be celebrated by Western economists like Paul Krugman if they were not so prejudiced towards China.
One thing I kept thinking while reading this: the “China shock” was never evenly distributed.
Consumers across an entire country benefited from cheaper goods, while a relatively small number of towns absorbed the factory closures, lost apprenticeships, shrinking tax revenues, and population decline. Economists could describe the overall effect as positive while those places were still falling apart.
That’s also why I’m not convinced tariffs alone are an answer to China Shock 2.0. They may slow imports, but they don’t rebuild supplier networks, technical skills, industrial land, or local confidence.
The harder question is whether cities and regions can turn trade and foreign investment—including Chinese investment where it makes sense—into capabilities they actually own.
As an urban planner, I increasingly see this less as a simple China-versus-the-West story, and more as a question of which places can still build and retain productive capacity.
I very much agree with everything here, particularly the assessment that "The West did not stumble into economic entanglement with China. It sought it out because it clearly benefited Western-based corporations and consumers ... To now treat the results of that arrangement as a hostile act is to rewrite the story of who asked for what."
I would only add that entanglement was sold in the 1990s as mechanism not just for opening markets but also for creating more liberal societies in China and the Soviet bloc. It's possible that the salespeople for that vision were cynical, and it's possible that the voters who bought the story were naive. But might a lot of the resentment come from the perception that economic development was achieved without liberalizing society? At least not in accordance with how we in the West conceptualize liberalization.
When it comes to biased narratives about China, the central argument is that China is not a democratic society, and that no matter how much progress it makes or how many positive contributions it brings, it will eventually become a harmful force because of its authoritarian, non-democratic political system.
I personally find it difficult to argue against this line of reasoning. Would be interested to hear Jostein Hauge's view point on this.
The central argument is hollow. The term "democratic society" is casually stated with the presumption that homelessness, drug addiction, poverty, race riots do not exist in democratic societies. It also presumes that democratic societies would never impose crippling sanctions on societies that don't toe the western line, that democratic societies would welcome less fortunate immigrants, that democratic societies would never condone genocide. It also presumes that China "no matter how much progress it makes or how many positive contributions it brings, it will eventually become a harmful force ..." - This of course is irrefutable, in the same way as the statement "no matter how good the US (or Germany or UK ...) is today, it can't be trusted to be good in the future."
OK, I'll be snarky here - US Germany UK can be trusted to be good because they have gotten genocide, world wars, and colonial oppression out of their system already.
Agree on all counts, though this account is missing another element of Western, especially American, disingenuousness where assignment of “blame” for China’s rise is concerned: China didn’t “steal” American industrial production — America’s c-suite voluntarily moved it there at the expense of their fellow citizens in the working class!
This is a great essay, thank you. Will save it and share with others. I recommend you publish an updated version of this in an academic political economy journal.