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    Trade Dispute With US Can Fuel China's Conversion From Workshop to Brain Trust

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    Taiwan Semiconductor Manufacturing's CEO Morris Chang says that the trade dispute between China and the US poses a threat to Apple's supply chain. Speaking to Sputnik, Chungyang Institute for Financial Studies researcher Bian Yongzu outlines the seismic changes that will hit the world economy if the squabble continues.

    Speaking to The Financial Times, the electronics giant's CEO said that China's role as the "workshop of the world" means that the trade dispute with the US poses losses for both countries, supply chain difficulties and ultimately price hikes for consumers on finished goods.

    Analysts say there are two broad scenarios for the future in the US-China trade dispute, one more likely than the other. The first is that China continues to produce finished goods out of more expensive foreign components and takes the loss. The second envisions Beijing committing itself to import substitution in the technology sector. The latter was hinted at by Chinese President Xi Jinping during a trip to a high-tech enterprise in Wuhan province last month. During the visit, the leader stressed that "core technologies" were the basis for the survival of China's high-tech industry and the future prosperity of its economy as a whole.

    Speaking to Sputnik, Chinese trade expert Bian Yongzu noted that both scenarios pose difficulties for both countries, with China heavily integrated in the global supply chain at the moment.

    "The global economy is a single organism. No country can create high technologies alone. Take microchips for example; they are used extensively in computers, smartphones, high-speed railways, and practically every other technologically advanced field. Neither China nor the US can produce the components for all the technologically advanced industries in the world," Bian said.

    China, according to the analyst, has taken steps to improve its position in the value chain and gradually transform the country from the workshop of the world into a global "designer and or integrator" as well.

    Chinese workers assemble electronic components at the Taiwanese technology giant Foxconn's factory in Shenzhen, in the southern Guangzhou province (File)
    © AFP 2018 /
    Chinese workers assemble electronic components at the Taiwanese technology giant Foxconn's factory in Shenzhen, in the southern Guangzhou province (File)

    Bian stressed that the country "has excellent informational resources, an understanding of the needs of customers, and knowledge of the latest global trends," which will allow it to create technologically advanced products from scratch. The question of economic expediency is another story, he said.

    "From a technical standpoint, China has the opportunity to engage in import substitution, both in terms of capital and technology. And while it's unlikely that the production of such products can be established simultaneously, China will eventually be able to solve this problem. But being able to do something and doing it are different questions. In conditions of globalization, it's not necessary to produce something oneself just because it's possible. It's better to cooperate, and for all countries to engage in activity which has a competitive advantage," Bian noted.

    On the other hand, the expert said that if trade contradictions with the US are not resolved, and on the contrary, are aggravated, China will be able to rid itself of its dependence on foreign suppliers.

    The latter sentiment was hinted at by President Xi during his Wuhan visit. "Under socialism, if one part faces a problem, eight other parts will support it. In the future, we will need to drop all illusions, and rely solely on our own strength when climbing to new technological heights," Xi said.

    Chinese President Xi Jinping and other officials sing the national anthem at an event commemorating the 200th birth anniversary of Karl Marx, in Beijing, China May 4, 2018
    © AP Photo / Jason Lee
    Chinese President Xi Jinping and other officials sing the national anthem at an event commemorating the 200th birth anniversary of Karl Marx, in Beijing, China May 4, 2018

    US Treasury secretary Steven Mnuchin's visit to China last week to try to iron out the two countries' widening trade dispute seems to have proven fruitless, with both parties talking about the need for further talks. Financial experts weren't surprised by the apparent stalemate, given Washington's steep demand that Beijing find ways to cut its trade surplus with the US by $200 billion, slash tariffs against US goods and cut back subsidies under the Made in China 2025 industrial program by 2020. Even before the start of the talks Beijing declared that while the surplus was on the table, the country's industrial policy was not.

    The views and opinions expressed by Bian Yongzu are those of the expert and do not necessarily reflect those of Sputnik.

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    trade restrictions, tariffs, Xi Jinping, Donald Trump, China, United States
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