China’s Dominance and the U.S. Economy: A Comprehensive Analysis

China’s Dominance Over Taiwan

China’s dominance over Taiwan is rooted in historical, political, and economic factors. Historically, Taiwan was under Chinese control in the 17th Century, and then again in 1945 after Japan lost World War Two. Politically, China sees Taiwan as a breakaway province that will eventually be under Beijing’s control. Economically, China has more troops, missiles, and ships than Taiwan or its possible supporters, like the US or Japan.

China’s Defense Budget

China’s defense budget has been increasing over the years. As of 2023, the official military budget was announced to be 1.55 trillion yuan (US$224 billion), which is an increase of 7.2% over the last year. This makes it the second largest in the world behind the US. However, some estimates place the total amount of military spending for China higher than the Chinese government figures. This budget finances employee salaries and training costs, the maintenance of equipment and facilities, support of new or ongoing operations, and development and procurement of new weapons, equipment, and vehicles.

The Chip Industry and Intel’s Role

The chip industry is a significant factor in the China-Taiwan dynamics. Taiwan holds a dominant position in the global chip industry, with companies like Taiwan Semiconductor Manufacturing Company (TSMC) leading the way. However, Intel, a US-based company, is making efforts to reclaim its technological lead. If successful, this could potentially shift some of the global chip production away from Taiwan, altering the geopolitical dynamics.

China’s Rare Earth Dominance

China’s dominance in the rare earth industry is significant. China controls 85% of rare earth processing and 92% of rare earth magnet production. This dominance has been achieved through state investment, export controls, cheap labor, and low environmental standards. Rare earth elements are crucial for various industries, including the production of high-tech products such as electric car motors and advanced batteries.

Nickel in Batteries

Nickel plays a critical role in battery technology. It helps deliver higher energy density and greater storage capacity at a lower cost. Nickel is used as a cathode in multiple rechargeable batteries, including lithium-ion batteries. As the demand for electric vehicles and renewable energy storage increases, the importance of nickel in batteries is set to grow.

China’s Role in Solar Power Production

China has made enormous efforts to expand its solar capacity, which increased from only 4.2 gigawatts in 2012 to over 390 gigawatts in 2022. China controls over 80% of the world’s production of polysilicon, wafers, cells, and modules – the critical components of solar panels. This dominance is based on its advanced technology, low costs, and complete supply chain. China’s solar supremacy has implications for the global energy market, particularly as the world shifts towards renewable energy sources.

Electric Vehicles (EVs)

China has become a world leader in the production and purchase of EVs. The number of EVs sold annually in the country grew from 1.3 million to a staggering 6.8 million in just two years, making 2022 the eighth consecutive year in which China was the world’s largest market for EVs. This dominance in the EV sector has not only given China’s auto industry sustained growth during the pandemic but also boosted China in its quest to become one of the world’s leaders in climate policy. China’s rise as an automotive exporter is fueled by the growing importance of the country’s globally leading electric vehicle (EV) industry.

Cellphones

China has more mobile phone users than any country in the world. In 2021, smartphone shipments in China reached over 285 million units. The mobile phone service in China is provided by three domestic telecommunication network operators, namely China Mobile, China Unicom, and China Telecom. About 70% of smartphones shipped to the US in Q2 2020 were made in China.

Grains Export

China plays an enormous role in the world grains market, with a large population that is increasing in affluence. The International Grains Council (IGC) forecasts China’s total grains imports (not including rice) at 49.8 million tons in 2021-22. Wheat imports in 2021-22 are put at 10.5 million tons, down from 10.8 million in 2020-21. Corn imports are now predicted at 16.5 million tons. China exported more grain in April on a monthly basis. Grain exports totaled 312,000 tons, an increase of 97% from March.

Meat Export

China’s meat exports quantity was 1.67 million tons as of 2018, which accounts for 65.14% of total meat exports quantity. The U.S. Meat Export Federation reports that China’s General Administration of Customs has recently granted approval for 18 U.S. beef establishments and 12 U.S. pork establishments to export to China. This marks the first approval of new U.S. plants for export to China in nearly 10 months.

Apple’s Shift to India

Apple has been gradually shifting its production from China to India. This move is influenced by several factors:

1. Geopolitics: The U.S.-China trade war has led Apple to push its suppliers to shift its supply chain outside of China.
2. Labor Disputes and COVID-19: Last year, COVID-19 lockdowns and protests of harsh working conditions caused major disruptions at Foxconn’s factory in China, costing Apple an estimated $1 billion per week.
3. Diversification of Supply Chain: Apple wants to reduce its dependence on a single country for its production needs.

As a result, Apple’s main supplier, the Taiwan-based Foxconn, has been moving more of its production out of China into India. The Indian government has offered subsidies to Foxconn to ramp up production.

Is China Still Producing Apple Phones?

Yes, despite the shift to India, China still plays a significant role in the production of Apple phones. As of 2022, 95% of the total iPhone supply still comes from China, and around 80% of all iPhones are made in a single plant in Zhengzhou, also known as the iPhone City. However, Apple is reportedly aiming to produce a quarter of all iPhones in India by 2025.

The U.S. Economy: Areas of Lag

The U.S. economy is one of the largest and most influential in the world. However, like any economy, it has areas where it lags behind. Here are some aspects for comparison:

1. Manufacturing: The U.S. has seen a decline in its manufacturing sector over the past few decades. This is due in part to the offshoring of manufacturing jobs to countries with lower labor costs, such as China.
2. Trade Deficit: The U.S. has a significant trade deficit, particularly with China. This means that the U.S. imports more goods and services than it exports. In the second quarter of 2023, the U.S. current-account deficit was $212.1 billion.
3. Public Debt: The U.S. has a high level of public debt, which has been a concern for many economists. The U.S. net international investment position, the difference between U.S. residents’ foreign financial assets and liabilities, was -$18.00 trillion at the end of the second quarter of 2023.
4. Income Inequality: While the U.S. has a high level of overall wealth, it also has significant income inequality. The gap between the rich and the poor in the U.S. is wider than in many other developed countries.
5. Healthcare: The U.S. spends more on healthcare per capita than any other country, yet it lags behind other developed countries in several key health indicators, including life expectancy and infant mortality.
6. Education: While the U.S. has some of the world’s top universities, it lags behind in primary and secondary education. In international assessments, U.S. students often score below average in math and science compared to students in other developed countries.

Conclusion

China’s dominance in various sectors has significant implications for global geopolitics and economics. Its control over Taiwan, the chip industry, the rare earth industry, the solar power industry, the electric vehicle industry, the mobile phone industry, the grain export industry, and the meat export industry shapes the dynamics of these sectors. As other countries and companies strive to catch up, the landscape of these industries may change. However, China’s current dominance presents both challenges and opportunities for the global community. It is crucial for policymakers worldwide to understand these dynamics and make informed decisions to ensure a sustainable and equitable global economy. The shift of Apple’s production from China to India is a notable example of how global companies are responding to these dynamics. Despite this shift, China continues to play a significant role in Apple’s supply chain, demonstrating the complexity and interconnectedness of global production networks. On the other hand, the U.S. economy, while being one of the largest and most influential in the world, has areas where it lags behind. These include manufacturing, trade deficit, public debt, income inequality, healthcare, and education. These areas present challenges that need to be addressed to ensure the continued growth and prosperity of the U.S. economy. The comparison of the economic health of the U.S. and China reveals the strengths and weaknesses of each, providing valuable insights for future economic strategies and policies.