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Why the World Can’t Quit Its Addiction to Chinese Goods · Trumponomics

0:00
Speaker 1: And the key plank of ensuring the future will be
0:03
Speaker 1: made in America.
0:04
Speaker 2: Megan India, for India, n for the world.
0:15
Speaker 3: Hello' Stephonomics here the podcast that brings you the global economy.
0:18
Speaker 3: Joe Biden has put made in America and the revival
0:21
Speaker 3: of American industry right at the center of his economic policies.
0:26
Speaker 3: He wants to bring more jobs home as a good
0:28
Speaker 3: in itself foreign policy for the middle class, they call it,
0:32
Speaker 3: but also to reduce what he sees as a dangerous
0:35
Speaker 3: reliance on China. But it is hard to do, especially
0:40
Speaker 3: when it comes to core consumer goods like clothes and toys,
0:44
Speaker 3: where China has built itself a completely dominant position. Have
0:48
Speaker 3: I mentioned recently that China makes nearly all of the
0:50
Speaker 3: world's socks, while India's Prime Minister Narindra Modi thinks India
0:55
Speaker 3: can give the world a Plan B, probably more easily
0:58
Speaker 3: than the US. Well, hear how that's going in a minute.
1:02
Speaker 3: We'll also hear an economists perspective on all this from
1:05
Speaker 3: the Milk Institute's William Lee. But first, our luxury retail
1:09
Speaker 3: reporter Jeannette Newman went to la in search of a shirt.
1:23
Speaker 4: I'm walking through the Fashion district in downtown LA It's
1:26
Speaker 4: one hundred block area that's at the heart of apparel
1:28
Speaker 4: production in the US, but I can't really tell that
1:31
Speaker 4: from walking around.
1:33
Speaker 2: Right now.
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Speaker 4: I'm on Santi Alle, an outdoor shopping market that's packed
1:36
Speaker 4: with stalls and people seeking bargains. To my right, I
1:39
Speaker 4: see some knockoff Adidas sweatshirts and joggers, And to my left,
1:42
Speaker 4: I see some T shirts that are selling for three
1:44
Speaker 4: ninety nine. I've been looking at the tags, and most
1:47
Speaker 4: of the clothes are made in China or elsewhere in Asia.
1:51
Speaker 4: But down at the end of this alleyway, I see
1:53
Speaker 4: one sign, one single sign that says made in the USA.
1:56
Speaker 4: I'm going to go talk to the owner to find
1:58
Speaker 4: out a little bit more. Hello, Hi, can I speak
2:04
Speaker 4: with you, ah claro in Espanol. No, But effect Maria
2:11
Speaker 4: tells me. The leather belt she's selling our USA made.
2:15
Speaker 5: La Maria Pa Saina.
2:17
Speaker 4: But most stuff at the market is from China. She
2:22
Speaker 4: says that's because labor costs are lower there. I'm not
2:26
Speaker 4: surprised that a lot of these cheaper goods are made
2:28
Speaker 4: in China and Asia, as Maria told us, But I
2:30
Speaker 4: would have expected to see just a few more products
2:33
Speaker 4: around here that are made in LA. After all, we're
2:36
Speaker 4: just a few blocks from ten story brick buildings that
2:38
Speaker 4: are full of floor after floor of people cutting and
2:40
Speaker 4: sewing apparel. And right around the corner from where I
2:43
Speaker 4: am is a street where you can find roll after
2:46
Speaker 4: roll of fabrics and also buttons and zippers, anything you
2:49
Speaker 4: could possibly need to make clothing. And the county where
2:54
Speaker 4: I am, LA County, is home to more than a
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Speaker 4: quarter of all apparel manufacturing.
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Speaker 3: In the US.
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Speaker 4: That's the largest ship in the country. To learn more
3:02
Speaker 4: about why it's so hard to find made in America
3:04
Speaker 4: products at the epicenter of American apparel production, I set
3:08
Speaker 4: off to talk to some designers and factory owners in
3:10
Speaker 4: the area.
3:13
Speaker 6: LA is all about image and being able to create,
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Speaker 6: you know, the style and the looks that influenced the world.
3:19
Speaker 6: That all happens right here in downtown.
3:22
Speaker 4: That's Courtney Campbell. He's thirty six years old and runs
3:25
Speaker 4: a small clothing brand called Almighty Los Angeles. It's one
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Speaker 4: of the few boutiques I've come across in the fashion district,
3:31
Speaker 4: which surprised me. Feels like going to Little Italy in
3:34
Speaker 4: New York and struggling to find a slice of pizza.
3:38
Speaker 4: A lot of retail stores in LA closed during the pandemic.
3:41
Speaker 4: The bounce back has been slow, like in other city center's,
3:45
Speaker 4: but the decline in LA was underway before COVID nineteen.
3:48
Speaker 4: The number of apparel factories and shops in the city
3:51
Speaker 4: has been falling for years, succumbing to rising labor costs
3:54
Speaker 4: at home and increase competition abroad. When Courtney started designing
3:58
Speaker 4: clothes in twenty seventeen, he was able to source most
4:01
Speaker 4: of what he needed in downtown LA.
4:03
Speaker 6: When I started, I would just walk blocks and go
4:05
Speaker 6: into a building and hit each floor and just knock
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Speaker 6: on doors and say, you know, what do you guys
4:09
Speaker 6: do here? Or can you do this for me?
4:12
Speaker 4: But it's become harder for Courtney to find everything he
4:14
Speaker 4: needs here. He recently bought some checkered fabric from a
4:17
Speaker 4: nearby store and then hired a small factory to cut
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Speaker 4: and sew some shirts, but he couldn't find anyone to
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Speaker 4: make matching baseball caps.
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Speaker 6: It's very hard to find manufacturing in America for your hats,
4:28
Speaker 6: and if you do find it here, most of the
4:30
Speaker 6: times they're going to send it over to China, get
4:32
Speaker 6: it made, and then and then just sell you the product.
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Speaker 4: So he cut out the middleman and source the hats
4:38
Speaker 4: directly from China.
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Speaker 6: China gives you that opportunity to still be able to
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Speaker 6: maintain what your consumers are used to at the cost
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Speaker 6: that they can afford.
4:48
Speaker 4: As Courtney expands his business, he keeps encountering hurdles to
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Speaker 4: manufacture apparel in la.
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Speaker 6: If you're going to do one hundred pieces and America,
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Speaker 6: it's fine. If you're gonna do a thousand, then it
4:58
Speaker 6: doesn't make any sense.
5:03
Speaker 4: I've spoken to a lot of apparel executives and entrepreneurs
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Speaker 4: who would like to rely less on Chinese suppliers. In
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Speaker 4: the past several years, the list of reasons to exit
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Speaker 4: China has only gotten longer. First there were the tariffs.
5:16
Speaker 4: Then COVID nineteen snarled supply chains and shut down factories.
5:20
Speaker 4: More recently, pandemic restrictions were abruptly lifted, and US authorities
5:25
Speaker 4: have restricted the use of cotton from a Chinese region
5:27
Speaker 4: because of human rights abuse is there. Meanwhile, geopolitical tensions
5:32
Speaker 4: have forced many to contemplate what would happen if China
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Speaker 4: were to invade Taiwan. Despite the laundry list of hurdles,
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Speaker 4: many clothing companies say they're sticking with China. It's unrealistic,
5:43
Speaker 4: they say, to think they can quickly extricate China from
5:46
Speaker 4: their supply chains. Why. For one, Chinese companies dominate the
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Speaker 4: global production of yarn, cotton, polyester fabrics, and the cotton
5:56
Speaker 4: spandex used to make your work from Home loungewaar. Some
6:00
Speaker 4: executives told me that even if they've managed to stop
6:02
Speaker 4: producing in China, they remain reliant on the country for
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Speaker 4: raw materials. Also, Chinese factories have machinery that's top notch
6:11
Speaker 4: and a workforce that's highly skilled. That means they're unbeatable
6:14
Speaker 4: at making hats, for example, or sowing a certain type
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Speaker 4: of stitch that doesn't chafe. And even if factories elsewhere
6:21
Speaker 4: can do those things, they often can't produce them at
6:24
Speaker 4: the same volume, price, or quality. Some firms have been
6:27
Speaker 4: moving out of China, of course, to countries such as
6:30
Speaker 4: Vietnam or Cambodia, but sometimes those factories are owned by
6:34
Speaker 4: Chinese companies that are also trying to diversify outside the country.
6:39
Speaker 4: All of this is possible because China has been investing
6:41
Speaker 4: billions of dollars for decades to become the world's manufacturing powerhouse.
6:47
Speaker 4: That's turned cities like Guangzhou into supply chain marbles. Here's Linfeng,
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Speaker 4: who owns clothing factories in and around guangzhout.
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Speaker 5: Great reach.
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Speaker 1: If we need materials for production, will immediately contact our suppliers,
7:01
Speaker 1: send photos to them, and they'll deliver to us within
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Speaker 1: just a few hours. Or sometimes we'll go to the
7:06
Speaker 1: wholesale markets to purchase. That's also less than a forty
7:08
Speaker 1: minute drive away, so it'll just take up to half
7:11
Speaker 1: a day to finish the purchase. I don't think anywhere
7:13
Speaker 1: else can be that efficient in sourcing.
7:17
Speaker 4: Lynn says. Many employees live nearby in areas populated mainly
7:20
Speaker 4: by migrant workers. Their salaries are low, which keeps the
7:24
Speaker 4: lid on costs. In this dense network of workers, suppliers,
7:28
Speaker 4: and infrastructure, orders are turned around quickly and at a
7:31
Speaker 4: competitive price. It's taken decades to build this ecosystem. US
7:36
Speaker 4: apparel executives say it will be hard for any country
7:39
Speaker 4: to compete effectively at scale against China and its factories
7:42
Speaker 4: anytime soon, but that doesn't mean US factories have given up.
7:46
Speaker 4: They're pulling out all the stops to convince American brands
7:49
Speaker 4: to produce here. That's the sound of what it takes
8:01
Speaker 4: to compete against China. It's an automated knitting machine that
8:04
Speaker 4: looks like it's printing out a sweater. I met on
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Speaker 4: Dari Fashion, a knitwar factory about twenty minutes from downtown la.
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Speaker 7: It's being tough the past five years.
8:14
Speaker 4: That's way Wang, the CEO.
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Speaker 7: We have to find efficiency winning the factory to continue.
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Speaker 7: I mean to basically to be profitable.
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Speaker 4: His parents moved here from Taiwan in nineteen ninety one
8:27
Speaker 4: to start the factory. After the two thousand and eight crisis,
8:31
Speaker 4: Wade left his tech job to help his parents run
8:33
Speaker 4: on Darry. He started producing for Ralph Lauren and other
8:36
Speaker 4: high end clients that can afford a manufacture in the US,
8:40
Speaker 4: and he put his tech background to work by automating
8:42
Speaker 4: the factory as much as possible. Oh, it's right, it's
8:47
Speaker 4: writing the RL right, Ralph Lauren.
8:49
Speaker 3: Yeah, Okay.
8:49
Speaker 4: We watch one machine embroider Ralph Lauren's initials on a polo.
8:53
Speaker 4: In another room, the automatic knitting machine spits out three
8:56
Speaker 4: separate pieces of a sweater that an employee will then
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Speaker 4: sew together. The machines cost between eighty to one hundred
9:02
Speaker 4: and fifty thousand dollars each, so.
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Speaker 7: Each machine is like a Mercedes. That's why we detail
9:07
Speaker 7: people like there's like ninety Mercedes in a park here
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Speaker 7: in the in this factory.
9:14
Speaker 4: But not every brand can afford to produce nitwear on
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Speaker 4: these machines, so even Wi has to outsource the production
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Speaker 4: of some apparel to China. Listening to the sounds of
9:24
Speaker 4: his factory, Way says he can tell the apparel industry
9:27
Speaker 4: has a tough year ahead.
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Speaker 7: So usually we should be picking up for the fall
9:31
Speaker 7: and holiday a sweater season production, but this year has
9:35
Speaker 7: been slow, so we're not. I mean it's not as
9:39
Speaker 7: loud here in the in the lining.
9:41
Speaker 4: Room, production is down by about one third at Andari
9:45
Speaker 4: and Way here's the same thing from factories in China
9:47
Speaker 4: and Sri Lanka. Despite all the hurdles, Way thinks he's
9:51
Speaker 4: discovered away to keep more brands producing at home.
9:54
Speaker 7: This is what waff Lauren calls a cree your own
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Speaker 7: poil shirt. Basically, consumer can't go to the website and
10:02
Speaker 7: pick a base style and customize it who they like
10:05
Speaker 7: you way things.
10:06
Speaker 4: Clothing made on demand for a single shopper is the
10:09
Speaker 4: future of US apparel production. This version of that future, though,
10:13
Speaker 4: does look a little hodgepodge.
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Speaker 7: The sleeves are different color, the rice lead or left
10:18
Speaker 7: sleeve is different.
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Speaker 4: Right has the left sleeve is black and the right
10:21
Speaker 4: sleeve is white. And then the cuff is green and
10:25
Speaker 4: the body of the polo is blue with a red
10:28
Speaker 4: a red collar. So this person had very particular taste
10:31
Speaker 4: right about what they about what they wanted.
10:33
Speaker 7: And then you can also put the leather on the sleeve.
10:36
Speaker 4: I can't imagine anyone I know wearing the shirt, but
10:40
Speaker 4: that's kind of the point. It's one of a kind,
10:42
Speaker 4: and that allows way to charge clients more for brands.
10:46
Speaker 4: It reduces the amount of extra merchandise they have on hand. Also,
10:50
Speaker 4: the likelihood of returns is lower. Los Angeles factories haven't
10:54
Speaker 4: been able to go head to head against China on
10:57
Speaker 4: price or volume, but perhaps if they go customized cuff
11:01
Speaker 4: by customized collar, they'll have a shot at survival. That
11:05
Speaker 4: future looks a lot more colorful. From Bloomberg News, I'm
11:08
Speaker 4: Jeanette Newman.
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Speaker 3: Well, we're going to hear the Indian side of that
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Speaker 3: story in just a minute. But first you might remember
11:26
Speaker 3: my conversation on the sidelines of that big Milken investment
11:30
Speaker 3: conference in la with their chief economist William Lee. Well,
11:34
Speaker 3: as it happens, we also spoke about whether not making
11:38
Speaker 3: in China was a viable strategy for global business or
11:42
Speaker 3: a wise investment decision for all those big money investors
11:46
Speaker 3: gathered there in La. Okay, I want to talk to
11:51
Speaker 3: you about decoupling US China because it's an an endless
11:55
Speaker 3: source of conversation on this podcast, but it's also you know,
11:58
Speaker 3: it comes up again and again, and we have had
12:02
Speaker 3: you know, reporters coming at this story in different ways.
12:05
Speaker 3: And one thing they've noticed in the US is really
12:11
Speaker 3: hard for people to source outside China. That China plus
12:14
Speaker 3: strategy is proving much easier said than done. Yes, and
12:21
Speaker 3: yet it does seem like the US is wanting us
12:24
Speaker 3: to reduce our vulnerability or a dependence on China. So
12:28
Speaker 3: what are you seeing? I mean, how realistic is it
12:32
Speaker 3: to think that one can have this diversification of supply chain.
12:36
Speaker 8: I think that every investor in the West looked at
12:39
Speaker 8: China at least at some point they say my god,
12:41
Speaker 8: look at that population, Look at that size of the market.
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Speaker 8: If I just sell one of my stuff right, one
12:46
Speaker 8: bottle of coke, right, just one to everyone there, I'll
12:49
Speaker 8: make a fortune. And so that huge size of the
12:53
Speaker 8: market was what attracted a lot of investors there. And
12:55
Speaker 8: then they discovered, my god, if I produce stuff in China,
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Speaker 8: it's going to be really low cost. Can export it
13:00
Speaker 8: to the rest of the world.
13:01
Speaker 3: Vultus just like that. They worked out much better than
13:03
Speaker 3: the first. The first one is hard to sell to
13:05
Speaker 3: Chinese consumers.
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Speaker 8: Because there's a high savings rate because when people earn
13:09
Speaker 8: money in China to save it rather than spending it.
13:11
Speaker 8: But also official policy is one where they really want
13:14
Speaker 8: domestic consumers to buy from domestic companies. Now, as an
13:19
Speaker 8: export engine, China has been very successful, but with COVID
13:23
Speaker 8: and the shutdowns, people recognize that it's very dangerous to
13:26
Speaker 8: have your supply chain concentrated in China. So the China
13:29
Speaker 8: plus model, let's see, the companies are moving out of
13:33
Speaker 8: China to Vietnam and other areas where they could take
13:36
Speaker 8: advantage of a lot of cheap labor, but also you know,
13:39
Speaker 8: avoid a lot of the political flag of having imported
13:42
Speaker 8: from China, so that model is there. But as you said,
13:46
Speaker 8: it's very hard for semiconductor company to or Apple to say, Gee,
13:52
Speaker 8: I want to take some of my stuff and make
13:53
Speaker 8: it over in India, because China really has a huge
13:56
Speaker 8: ecosystem set up to service all the facet of manufacturing,
14:01
Speaker 8: and when you try to take one or two elements out,
14:03
Speaker 8: you really can't succeed by just manufacturing someplace else. You
14:07
Speaker 8: really need the entire to replicate the entire ecosystem. So
14:10
Speaker 8: for China, a lot of the industries have proven to
14:13
Speaker 8: be a lot stickier. The question I think most of
14:16
Speaker 8: my colleagues here at Milkin are asking, which is should
14:20
Speaker 8: I allocate an extra dollar to China now or should
14:23
Speaker 8: I be going to Vietnam and other places. Well, China's
14:26
Speaker 8: gone on a charm offensive to say to everyone we're
14:29
Speaker 8: open for business, be welcomed foreign capital. But if you
14:33
Speaker 8: look back at the speeches of Hijin Pin, his warning
14:37
Speaker 8: was we want to have domestic champions. You're welcome to
14:40
Speaker 8: come here and produce, but you have to help us
14:43
Speaker 8: build up our national champions. And unless you do that,
14:46
Speaker 8: you're really not welcome. And I think that's the message
14:49
Speaker 8: that most investors are starting to get now, and that's
14:51
Speaker 8: the hesitancy even without the US China conflicts, the fact
14:55
Speaker 8: that China's owned domestic policies are ones where you come
14:58
Speaker 8: to China to help us become better manufacturers, period.
15:02
Speaker 3: But that's what I was amazed. So that one of
15:04
Speaker 3: the one of the panels I did, as you know,
15:06
Speaker 3: at the at the Milk And conference, was with Asset Allocate.
15:10
Speaker 3: You know, these big investors, people from big asset management companies,
15:14
Speaker 3: and of course we had James Fraser, the head of
15:16
Speaker 3: City Bank, and it didn't really sense any lack of
15:20
Speaker 3: enthusiasm for China. It was extraordinary. I mean, people under
15:24
Speaker 3: people recognized the geopolitical headwinds quote unquote and everything that's
15:30
Speaker 3: happened in the last few years, but they were still
15:33
Speaker 3: I would say, pretty gung ho for China.
15:36
Speaker 8: Stephanie and Stephanie stuff. If you were in doing business
15:39
Speaker 8: in China to the extent that our audio are the
15:42
Speaker 8: people on stage were doing, and you actually said, gee,
15:46
Speaker 8: you know that domestic policies are getting less friendly toward me,
15:49
Speaker 8: you really think, and you're.
15:50
Speaker 3: Going to be welcome. That's interesting. So you think they
15:52
Speaker 3: weren't being because they also were talking about it. I
15:55
Speaker 3: was struck by one of the claims was from one
15:59
Speaker 3: of the big hedge fund managers was, you know, the
16:02
Speaker 3: more China gets separated from the rest of the world,
16:04
Speaker 3: but more it did couples, the more attractive it is
16:07
Speaker 3: to me because it's going to move in different directions
16:09
Speaker 3: from the rest of the world. And when the world's
16:11
Speaker 3: going down, maybe China's going up. It's that diversification benefit.
16:15
Speaker 3: You know. Again, that struck me as quite a little
16:17
Speaker 3: bit complacent. I mean, you know what happens if the
16:19
Speaker 3: US government just says no, sorry, you can't have any
16:21
Speaker 3: of those assets.
16:22
Speaker 8: And then they'll use their subsidiar of Luxemburg to do
16:25
Speaker 8: the investment. Right, so I think that they can avoid
16:29
Speaker 8: the US sanctions. And I think that that answer is
16:32
Speaker 8: actually very practical because they're thinking, if China really indeed
16:36
Speaker 8: the couples, that huge China market is still there and
16:39
Speaker 8: they want to chuck of it. So it means that
16:41
Speaker 8: I have to invest in the Chinese domestic champion to
16:44
Speaker 8: service that market. I'll at least get a share of
16:46
Speaker 8: that huge domestic market, and the Chinese domestic champion might
16:50
Speaker 8: start exporting to the rest of Asia other emergent markets
16:53
Speaker 8: Africa and Middle East. China is making inroads into places
16:57
Speaker 8: where a lot of these investors want to be. So
17:00
Speaker 8: just as investing in US multinationals used to be one
17:03
Speaker 8: way to get international exposure, if the world becomes a
17:08
Speaker 8: bifurcated bipolar world where China dominates and the US dominates
17:13
Speaker 8: other parts, it's pretty smart to invest in Chinese multinationals.
17:18
Speaker 3: It's fascinating though, because previously we would have had this
17:21
Speaker 3: model of globalization, a global capital market, and then the
17:24
Speaker 3: money is flowing to the most efficient place or the
17:26
Speaker 3: highest return place. You know, we have a segmented world
17:29
Speaker 3: that regionalized. There's more tensions, but somehow that makes us
17:34
Speaker 3: we're still making the argument that that means you should
17:36
Speaker 3: be investing in India or in China around than in
17:38
Speaker 3: the US.
17:39
Speaker 8: When I use to teach trade at Columbia and we
17:42
Speaker 8: talk about comparative vantage, we say, oh, gee, you know,
17:45
Speaker 8: this country should make wine, if this country should make machines,
17:48
Speaker 8: and they should trade with one another and just gains
17:51
Speaker 8: from trade. Comparative advantage is not static. It changes over time.
17:55
Speaker 8: And so one of the things that I think we
17:58
Speaker 8: have to recognize is that globalization, where China produces all
18:02
Speaker 8: manufacturing goods and it's the huge supply source to the
18:05
Speaker 8: rest of the world, may not be the most efficient model.
18:08
Speaker 8: You invested in China because there's low cost of labor input.
18:12
Speaker 8: But technology makes expensive labor actually more productive. So if
18:17
Speaker 8: you have the right technology in other places where labor
18:21
Speaker 8: is more expensive, call it the United States, the more
18:25
Speaker 8: productive worker could actually be more worthwhile to invest in.
18:29
Speaker 3: We have tended to say, and actually Bloomberg economics, we've
18:33
Speaker 3: made lots of you know, we make some assumptions in
18:35
Speaker 3: order to have estimates of what the cost of decoupling
18:38
Speaker 3: might be, and we have tended to think it will
18:41
Speaker 3: mean higher prices at the margin and lower productivity at
18:44
Speaker 3: the margin, even if you're using more productive workers. But
18:47
Speaker 3: you think that's going to potentially be turned on its head.
18:50
Speaker 8: The gap may not be as big as you think.
18:53
Speaker 8: When you have ESG you're missing a couple of essays
18:55
Speaker 8: there safety, souldness, security, and so when you tag take
19:00
Speaker 8: the aweing costs of manufacturing in certain parts of the
19:03
Speaker 8: world and concentrate a certain part of the world, those
19:06
Speaker 8: costs don't the economic costs don't incorporate all of the
19:10
Speaker 8: costs that you really have to worry about.
19:12
Speaker 3: Fascinating, Well, William Lee, thank you very much.
19:14
Speaker 8: Well, it's been a pleasure to talk to you, and
19:16
Speaker 8: I really feel privileged to be in your presence.
19:32
Speaker 3: Now, If made in America isn't practical for everything or everybody,
19:36
Speaker 3: could making in India be an alternative? A Prime minister there,
19:40
Speaker 3: Narindra Modi, certainly hope. So he's been pushing He's made
19:43
Speaker 3: in India strategy for nearly a decade. It's fair to
19:46
Speaker 3: say the world's now paying a lot more attention. Even
19:50
Speaker 3: the multinationals that Bill Lee was mentioning there who are
19:53
Speaker 3: sticking it out in China now do feel the need
19:56
Speaker 3: for a Plan B supplier. They call it China plus one.
20:00
Speaker 3: And with China's population now poised to shrink, India also
20:04
Speaker 3: stands out as the only country around with a population
20:08
Speaker 3: big enough and young enough to make up for all
20:11
Speaker 3: those workers about to retire in China and around the world.
20:15
Speaker 3: So it all looks very promising on paper, but in practice,
20:19
Speaker 3: Indian producers are struggling to supplant Chinese imports. Even in
20:24
Speaker 3: the domestic Indian market let alone to compete internationally. Bloomberg's
20:29
Speaker 3: Rushi Battia and Rishti Beneval in New Delhi have been
20:32
Speaker 3: digging deeper. Here's their report and it's Rushi's voice you'll
20:37
Speaker 3: hear doing the narration.
20:42
Speaker 5: We're in a Hamley store on the outskirts of New Delhi.
20:48
Speaker 5: It's a multinational toy retailer and this is one of
20:51
Speaker 5: the biggest toy stores in the country. And yet Olo
20:58
Speaker 5: Swen is finally given difficult to pick up something for
21:02
Speaker 5: his children. What's the five year old's name?
21:05
Speaker 6: Amen?
21:06
Speaker 5: And the one year old adi Adi. Swain used to
21:09
Speaker 5: come here a lot to shop for Hot Wheels, a
21:12
Speaker 5: brand of toy cars that's loved by his boys. It's
21:16
Speaker 5: a bit expensive, but of good quality. Most importantly, it
21:20
Speaker 5: can survive the endless energy of his kits. Now he says,
21:25
Speaker 5: the store doesn't offer many choices anymore. The lack of
21:31
Speaker 5: choice in toy cars might have revealed a bigger problem
21:35
Speaker 5: that Prime ministerndery in Remove faces.
21:37
Speaker 2: Making India, for Inja and for the world.
21:44
Speaker 5: He has been pushing to reduce India's reliance on Chinese
21:47
Speaker 5: imports for years. With the world's biggest youth population. India
21:52
Speaker 5: is naturally a key market for Chinese toy makers, so
21:56
Speaker 5: when Mody decided to crack a whip on trade with China,
22:00
Speaker 5: toys came on top of the list. Every metaboli cities
22:04
Speaker 5: there are shortage of toys. What I feel like, Swain.
22:09
Speaker 5: Many other customers are leaving the toy stores a bit disappointed.
22:13
Speaker 5: After Hamley's we went to a more than a century
22:16
Speaker 5: old toy shop in Delhi called Rum Tunder and Sons.
22:20
Speaker 5: There were just a couple of customers in the store
22:23
Speaker 5: when we visited. While it had a few toys imported
22:26
Speaker 5: from China, Vietnam and other Asian countries, most of the
22:30
Speaker 5: products had it made in India. Attack and World Gathering
22:34
Speaker 5: dust Sunjay came here looking for fine quality metallic helicopters.
22:39
Speaker 5: Any particular reason why you want to buy the toys
22:43
Speaker 5: which were manufactured in China.
22:46
Speaker 1: It's a good quality, good cost, good quality.
22:50
Speaker 5: Do you think the Indian manufacturers are not able to
22:52
Speaker 5: provide that or a scalability and the shoe licensing.
22:56
Speaker 2: No, India.
22:58
Speaker 1: Cannot make that quality. If India goes for the manufixing,
23:04
Speaker 1: it will be costly for them.
23:07
Speaker 5: The quality of the China product is far better than
23:10
Speaker 5: Indian products. It's the same tale from the US and
23:14
Speaker 5: Mexico to India and Vietnam. Most local producers will tell
23:18
Speaker 5: us no, we really can't do what China is doing,
23:21
Speaker 5: and even if we can, it won't be at the
23:24
Speaker 5: same scale or price. But the government tried to push
23:27
Speaker 5: the envelope to curb imports from China. Prime Minister Moi
23:32
Speaker 5: first tried to use the nationalist rhetoric calling for boycott's.
23:36
Speaker 3: Meridie call to localize industries.
23:39
Speaker 5: India's Apex Traders Association has also announced to launch our
23:42
Speaker 5: massive campaign to boycott Chinese products China. Next came the
23:47
Speaker 5: trade barriers. Duties on Chinese toys have been raised from
23:52
Speaker 5: twenty percent to a whopping seventy percent in the last
23:55
Speaker 5: three years, and India even offered fiscal incentives on local
24:00
Speaker 5: production in certain sectors, But all that effort didn't move
24:04
Speaker 5: the needle much further. China's imports to India stood at
24:09
Speaker 5: over one hundred billion dollars in twenty twenty two, nearly
24:14
Speaker 5: double of what it gets from UAE and the US combined.
24:18
Speaker 5: China was the biggest exporter for India in twenty fourteen
24:22
Speaker 5: when Mody came to power and it remains its biggest
24:25
Speaker 5: suppliers nine years later. That said, for some local producers,
24:32
Speaker 5: it certainly feels like a beginning of a boon after
24:35
Speaker 5: Corona Prime. Mister mister Modi has a great focus on toys.
24:42
Speaker 5: That's N. K. Gupta, the founder and owner of a
24:45
Speaker 5: local soft toy factory called Funzu. Since the policy change,
24:49
Speaker 5: sales at Funzu have more than doubled. But the rapid
24:53
Speaker 5: growth wouldn't have been possible with other raw materials like
24:56
Speaker 5: metallic pins, integrated circuits and LEDs, which Gupta gets from China.
25:02
Speaker 5: We have just introduced electronic choice. What I said now, Challenger, Look,
25:07
Speaker 5: that tells me that he needs to import more components
25:10
Speaker 5: from China now than before as he rams up assembly
25:14
Speaker 5: in the country. The conund room seems to be unsolvable,
25:18
Speaker 5: at least for the moment. What choice we have?
25:21
Speaker 9: We have the choice either to cut down my finished
25:23
Speaker 9: goods imports are cut down by ramty or immediate imports.
25:27
Speaker 5: Ajasa Hai is a director general of the Exporters Lobby
25:30
Speaker 5: Group in India. He believes India needs to pickets battles.
25:35
Speaker 9: We have taken a choice that initially we will focus
25:37
Speaker 9: in more on the finished goods. So as of now
25:40
Speaker 9: we are providing PLI support to those segments where finished
25:44
Speaker 9: goods are being imported, but over a period of time,
25:48
Speaker 9: once we are able to achieve that with the condition
25:52
Speaker 9: of the local content and with more competitiveness happening, I'm
25:56
Speaker 9: pretty sure the large companies will look into producing the part.
26:02
Speaker 5: India's plans to focus on some sectors has read benefits
26:05
Speaker 5: with companies like Apple moving to the country, but the
26:08
Speaker 5: jury is still out if India can break China's dominance
26:12
Speaker 5: and become the factory to the world, which means for
26:15
Speaker 5: Swain the search for his kid's favorite toy car could
26:19
Speaker 5: be a tad bit longer. From New Delhi, Ruchi Patia
26:24
Speaker 5: and Rishti Beniwal for Bloomberg News.
26:32
Speaker 3: That's it from this not Made in China episode of Stephanomics.
26:36
Speaker 3: Next week we'll be hearing from Morocco. We'll also be
26:38
Speaker 3: hearing what the man who led President Obama's trade policies
26:43
Speaker 3: thinks about the very different approach that President Biden is taking,
26:46
Speaker 3: So don't miss any of that. In the meantime, you
26:49
Speaker 3: can get a lot more economic insight news from the
26:51
Speaker 3: Bloomberg Terminal website or app. This episode was produced by
26:55
Speaker 3: mangnus Henrickson, Yangyang and Sammasadi, with special thanks to Aette Newman,
27:01
Speaker 3: Danielle Way, Bill Lee, Rishti Beneval and Rushi Batya. The
27:06
Speaker 3: executive producer of Stephanomics is Molly Smith and the head
27:09
Speaker 3: of Bloomberg Podcast is Sage Bowman.