The U.S. and European response to changes in the industry’s global location is not exaggerated. China concentrates 35% of global manufacturing output after just over four decades of launching its new economy, and forecasts suggest that share will rise to 45% in the next five years. This affects more than the USA, Germany, Japan, India and Korea combined.
Exports and construction were initially China’s most important growth drivers. The government established special economic zones (SEZs) to attract investments from multinational companies by providing extensive tax exemptions, infrastructure, and cheap and disciplined labor for assembling imported parts and pieces to export the final products to the markets of developed countries. The special economic zones were located in coastal areas to facilitate transportation and became real export platforms for training and foreign exchange procurement.
Vice President James D. Vance pointed out that globalization failed because Western leaders failed to anticipate the speed of adaptation and learning of countries receiving foreign investment, particularly pointing to changes in China’s foreign trade. This relationship can be illustrated by the development of investments by multinational companies. The leading German automobile company began its operations in China in 1984 with a modest CKD assembly plant imported from its parent company. The company currently has 39 plants, a technology center (VCTC) in Heifen with more than 100 laboratories, an extensive network of domestic suppliers and produces 3 million automobile units for both the domestic and export markets.
Foreign trade between China and Germany changed with changes in the activities of multinational corporations and the emergence of local companies. In 2010, trade between these two countries was 181,074, with a favorable balance for the first of 22,920 million. In 2024, bilateral trade increased by 46% to 266,693, but the surplus in favor of China increased by 208% to 71,726 million. During these 40 years, China not only reduced the import of parts from Germany, but also became an important component supplier for the European automobile industry and the main competitor of the German industry in both quality and price. Due to restrictions in the USA, Chinese companies are redirecting this surplus to the European market and third countries. The de-industrialization process in Germany is a reality today.
The expansion of multinational companies partly explains industrialization. Although these companies found a favorable market for growth and increased profitability, the Chinese government used planning, subsidies, state-owned enterprises, and loans to solidify their position as the center of global industry. A current work by the Hinrich Foundation states: “The old growth model collapsed in 2021 with the real estate crisis.
Most economists assumed that China would adopt the higher consumption model to absorb excess production.” However, the country launched a program that President Xi called “New Quality Productive Forces” (NQPF) to boost productivity, innovation and industrial upgrading. China appears determined to continue the policy of consolidating its superiority in order not only to grow but also to challenge the leadership of the United States.
The deindustrialization process is not limited to Europe and the United States. The countries of the “Global South,” ostensibly China’s allies in this competition with the West, face the same pressure, receiving Chinese investments that only collect what they import from the continent. The US restrictions are accelerating this process, as Chinese exports increase initially to ASEAN countries, but also to peripheral countries. It won’t be long before Xi Jinping sees his ambition to make Chinese civilization centralized realized, while the rest of the world patiently strives to become a universal Tierra del Fuego.
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