Hi folks, This week, at Peking University, I held a lecture on the US-China tech competition for a group of European students studying in the dual-degree program between LSE / Sciences Po and PKU. It was much more engaging and lasted much longer than I expected. Many students, many of whom would be future diplomats for their respective countries, stayed up after the lecture and bombarded me with many further questions. I even went to dinner with the last of them, where we even debated some of the ideas. Overall, I left with a strong feeling that there is so much more to be done for cross-cultural communication, especially at the human-to-human level.
As an American, I would kill for a cheap Chinese commuter EV. EVs are very impractical right now in America. Thanks for offering free paid tier for Baiguan subscribers. Its very nice!
I'm not sure what's best for the US economy or US car manufacturers, but speaking solely as a consumer, I would certainly like to have those cars available here as well.
Btw just to give you an “on the ground” American perspective, my main complaint about the “overcapacity” is that so much crapware got shoveled onto Amazon lately, it’s impossible to trust any of the options anymore.
It was different back when the crapware was just one option among many, and there were also plenty of decent-quality Chinese options that came at slight premiums over the crapware.
But the sheer flood of it all changed my calculus as a consumer where it’s now worth paying even more for domestic/friendshored alternatives just because I can be sure I won’t have to throw it away and buy another in a few months.
Seems to me this is an unintended consequence that’s been ignored in most of your pushback against the overcapacity narrative.
It used to be just a bunch of Chinese-sounding brands that were clearly made to be at the cheap end of the spectrum but still provide decent value. If you saw a word salad, it was mostly just a jumble of features for SEO optimization.
What’s different now is that the brands are all these nonsensical strings of letters. The product descriptions are all poor AI translations and word salads about how this cheap crappy thing will supposedly enhance your lifestyle forever. The products themselves are obviously much shoddier and seem to follow certain market-optimized feature sets rather than the old smattering of features and designs which might prove more or less useful.
And the big difference is that there are now DOZENS of them for every single product category, instead of the old 2-3/handful-at-most.
It’s just a big mess right now. Irrespective of geopolitical biases WRT each country’s supply-side policies, I think the PRC leadership is REALLY missing the demand-side impacts they’re having.
I'm not sure we can blame the PRC for suboptimal search results on Amazon. If less people are making purchases, Amazon itself will having to update its algorithms for surfacing relevant content to users, or hide low-quality sellers entirely. This is basic user experience... something very distant from macroeconomic policy.
The search results are a result of the decision to export massive amounts of stuff in order to make up for the real estate crisis. Whether they intended to or not, the PRC incentivized shitty bot-written product page copy and incentivized dozens of firms to compete where there had been only handfuls.
Fun read! The Yangwang U8 looks great! I see its designed by Wolfgang Josef Egger who, according to Wikipedia, "is a German car designer who formerly served as a head designer for the European luxury car brands Alfa Romeo, Audi and Lamborghini", he's a great poach! Maybe get some good skills transfer from him within BYD too
RE the Lingang part your mentioning of "China’s secret weapon to fight the inherent inclination toward loss of vitality in a centralized managed system", China , for the past few decades has in big ways been much more politically and economically decentralized than the USA with a much, much less centrally planned economy than ours; did you mention what you did because you think the central government is trying to centralize and will succeed and you think things like what you mentioned will alleviate the risk or that even though it is relative to us very decentralized these things will just make that work even better?
Robert, I read a lot of substacks and other sources about China. I get more out of your blog than I do out of about 7 others put together. Don't ever give up on your cross-cultural mission! I just fear that some government idiot might take a dislike to you.
Do you think that part of the reason for the “tepid” response on EV’s is that Chinese leadership is satisfied with eating Europe’s lunch and flooding Africa/ME instead? Seems to me like if the “dumping” of “overcapacity” (however one thinks about those two charged terms!) is *working* without America, there’s no point getting upset.
I just think those tariffs by the Biden admin do not hurt China that much to warrant a forceful response, and it's very likely intentional by mutual agreement, which may be the whole point of Yellen's visit. (The whole "over-capacity" debate was also started by the Yellen visit.)
Also, as I’m reading more, maybe you missed it, but Biden’s policy is actually more likely to incentivize a version of your Option 2 where China sets up EV factories in Mexico.
Since I can’t see Chinese leadership being all that eager to have their own “semi-forced technology transfer via domestic factories” playbook run against them, I kinda see this as a more-likely kludge scenario that it all degenerates to, given that neither side seems interested in pushing towards the other extreme of all-out conflict.
Regarding the auto tariff subject, your second option is preferable. However, the first option will be the one taken. I don’t see much hope irregardless of the election winner. Both are in love with tariffs. Trump may actually be worse but who knows.
As an American, I would kill for a cheap Chinese commuter EV. EVs are very impractical right now in America. Thanks for offering free paid tier for Baiguan subscribers. Its very nice!
I'm not sure what's best for the US economy or US car manufacturers, but speaking solely as a consumer, I would certainly like to have those cars available here as well.
Btw just to give you an “on the ground” American perspective, my main complaint about the “overcapacity” is that so much crapware got shoveled onto Amazon lately, it’s impossible to trust any of the options anymore.
It was different back when the crapware was just one option among many, and there were also plenty of decent-quality Chinese options that came at slight premiums over the crapware.
But the sheer flood of it all changed my calculus as a consumer where it’s now worth paying even more for domestic/friendshored alternatives just because I can be sure I won’t have to throw it away and buy another in a few months.
Seems to me this is an unintended consequence that’s been ignored in most of your pushback against the overcapacity narrative.
I have no idea... can you give some examples of the "crapware"? Very curious.
Hi Robert, thats about 20% of Wish and Temu is my experience - but the cars are a completely different story!
It used to be just a bunch of Chinese-sounding brands that were clearly made to be at the cheap end of the spectrum but still provide decent value. If you saw a word salad, it was mostly just a jumble of features for SEO optimization.
What’s different now is that the brands are all these nonsensical strings of letters. The product descriptions are all poor AI translations and word salads about how this cheap crappy thing will supposedly enhance your lifestyle forever. The products themselves are obviously much shoddier and seem to follow certain market-optimized feature sets rather than the old smattering of features and designs which might prove more or less useful.
And the big difference is that there are now DOZENS of them for every single product category, instead of the old 2-3/handful-at-most.
It’s just a big mess right now. Irrespective of geopolitical biases WRT each country’s supply-side policies, I think the PRC leadership is REALLY missing the demand-side impacts they’re having.
I'm not sure we can blame the PRC for suboptimal search results on Amazon. If less people are making purchases, Amazon itself will having to update its algorithms for surfacing relevant content to users, or hide low-quality sellers entirely. This is basic user experience... something very distant from macroeconomic policy.
The search results are a result of the decision to export massive amounts of stuff in order to make up for the real estate crisis. Whether they intended to or not, the PRC incentivized shitty bot-written product page copy and incentivized dozens of firms to compete where there had been only handfuls.
Fun read! The Yangwang U8 looks great! I see its designed by Wolfgang Josef Egger who, according to Wikipedia, "is a German car designer who formerly served as a head designer for the European luxury car brands Alfa Romeo, Audi and Lamborghini", he's a great poach! Maybe get some good skills transfer from him within BYD too
RE the Lingang part your mentioning of "China’s secret weapon to fight the inherent inclination toward loss of vitality in a centralized managed system", China , for the past few decades has in big ways been much more politically and economically decentralized than the USA with a much, much less centrally planned economy than ours; did you mention what you did because you think the central government is trying to centralize and will succeed and you think things like what you mentioned will alleviate the risk or that even though it is relative to us very decentralized these things will just make that work even better?
Robert, I read a lot of substacks and other sources about China. I get more out of your blog than I do out of about 7 others put together. Don't ever give up on your cross-cultural mission! I just fear that some government idiot might take a dislike to you.
Do you think that part of the reason for the “tepid” response on EV’s is that Chinese leadership is satisfied with eating Europe’s lunch and flooding Africa/ME instead? Seems to me like if the “dumping” of “overcapacity” (however one thinks about those two charged terms!) is *working* without America, there’s no point getting upset.
I just think those tariffs by the Biden admin do not hurt China that much to warrant a forceful response, and it's very likely intentional by mutual agreement, which may be the whole point of Yellen's visit. (The whole "over-capacity" debate was also started by the Yellen visit.)
Also, as I’m reading more, maybe you missed it, but Biden’s policy is actually more likely to incentivize a version of your Option 2 where China sets up EV factories in Mexico.
Since I can’t see Chinese leadership being all that eager to have their own “semi-forced technology transfer via domestic factories” playbook run against them, I kinda see this as a more-likely kludge scenario that it all degenerates to, given that neither side seems interested in pushing towards the other extreme of all-out conflict.
Regarding the auto tariff subject, your second option is preferable. However, the first option will be the one taken. I don’t see much hope irregardless of the election winner. Both are in love with tariffs. Trump may actually be worse but who knows.
The phrase “China hack” comes to mind. You are breaking the code and allowing us to peek inside China’s veil of inscrutability.