[HN Gopher] China's manufacturers are going broke
___________________________________________________________________
China's manufacturers are going broke
Author : campuscodi
Score : 81 points
Date : 2024-08-17 14:18 UTC (8 hours ago)
(HTM) web link (www.economist.com)
(TXT) w3m dump (www.economist.com)
| skullone wrote:
| Paywall
| wslh wrote:
| Fix: https://archive.is/mwnRq
| klyrs wrote:
| https://archive.is/d56oU
| andrewl wrote:
| Their audio version of the article is free at:
|
| https://www.economist.com/media-assets/audio/062%20Business%...
| lenerdenator wrote:
| Well, if they want to learn from the US, they should ship their
| manufacturing capacity and intellectual property off to their
| geopolitical rival for short-term monetary gain.
| derefr wrote:
| China was actually trying to heavily establish offshoring in
| the Philippines--but that has seemingly dried up with the
| increasing South China Sea tensions.
| alephnerd wrote:
| Same with India before 2020 - China used to be India's
| largest FDI partner before the Galwan crisis.
|
| After that, the Indian government "persuaded" Chinese players
| to sell off their Indian assets to Indian, Taiwanese, Korean,
| Japanese, and American players instead.
|
| 4 years later, the GlobalTimes - which was extremely
| provocative against India - has started pushing out content
| arguing that India should begin reopening it's economy to
| Chinese players.
| Gibbon1 wrote:
| I swear a lot of wars get started by guys like Xi who after
| seizing power internally try to seize power externally and
| it often ends really really badly for the host country.
|
| Seriously, the leader of Germany in the 1930's, Stalin,
| Putin, Saddam Hussein, now Xi. All seized power
| domestically and then couldn't help themselves when it came
| to neighboring countries.
| para_parolu wrote:
| Obviously this is heated topic, but did it ends really
| bad for USSR under Stalin rule (until his death)? I mean
| it was bad for many citizens but other areas were
| actually ok-ish considering war destructions.
|
| I'm not trying to make point about Stalin. Just trying to
| find if this is really a rule, but my historical
| knowledge is pretty limited. Intuitively I feel any
| overpowered political entity end up like shit. But
| interesting to see real data.
| hkpack wrote:
| Of course it was bad. But the point was about starting
| wars.
|
| Stalin did start many wars, disastrous invasion of
| Finland, invasion of Poland, Molotov-Ribentrop pact with
| Germany and so on.
| Gibbon1 wrote:
| You could imagine an alternate universe where Stalin gets
| dysentery and dies. The USSR tells Ribentrop to f'off.
| And then joins the allies declaring war on Germany when
| Hitler invades Poland.
|
| Also I forgot to add Mussolini and his designs on Greece,
| Balkans, North and the Horn of Africa.
| petre wrote:
| If you ask the Russians the Brezhnyev rule was the best
| (stability, stagnation), with Stalin trailing him (won
| WW2, rapid industrialization). If you ask westeners,
| Khrushchev (space race, reforms) and Gorbachev
| (glasnost).
|
| https://en.m.wikipedia.org/wiki/Legacy_of_Leonid_Brezhnev
| marcosdumay wrote:
| Looks like militarism and imperialism are not compatible at
| that crazy new 21th century world.
|
| IMO, that's a good development. I hope it lasts.
| ein0p wrote:
| Uh, and what would that mean for the United States? China
| hasn't been at war with anyone for decades.
| daliusd wrote:
| Militarism and imperialism is not about wars only
| ein0p wrote:
| Ah I see. "It's OK when we do it?"
| BobbyJo wrote:
| Confused about what point you're attempting to make here?
|
| Political conflict with a trade partner obviously leads
| to reduced trade, no matter the parties involved. What
| part of that statement are you taking issue with?
| ein0p wrote:
| > Looks like militarism and imperialism are not
| compatible at that crazy new 21th century world
|
| Your faux confusion isn't really impressing anyone. Is
| the US, the most militarist and imperialist nation in the
| world by far at the moment, "compatible" with the "crazy
| new 21st century world"?
|
| I've also yet to see any practical examples of Chinese
| militarism or imperialism. I keep hearing that it's going
| to start happening any day now, but then it never does.
| What I do see is the hegemon (the US) trying to take down
| a rising superpower via economic warfare, and by creating
| instability in the region - a typical behavior of a
| militarist and imperialist nation.
| salawat wrote:
| Hong Kong. Or the many "shadow CCP police" instances in
| other sovereign nations.
|
| Or did you just conveniently ignore those? Just because
| they don't wear uniforms and march in lines doesn't mean
| there isn't power projection going on.
| luuurker wrote:
| You've pointed out what the US is doing. That's good, but
| you're clearly biased, so let me tell you two things that
| China is doing that is contributing for that instability
| you've mentioned: claims in the south china sea that no
| country would accept if it was done to them and a major
| naval build up.
|
| You need two to tango and both the US and China are
| dancing right now. Anyone only blaming one side need to
| stop for a second, take their US or China tinted glasses,
| and look again at the problem.
| Nevermark wrote:
| > You need two to tango [...]
|
| > Anyone only blaming one side need to stop for a second
| [...]
|
| When it comes to military coercion (wars, threats), and
| imperialism, it only takes one bad actor to cause
| problems.
|
| When there are two sides, or three, it just means more
| actors willing to push around everyone else.
|
| Albeit, they amplify each other. Their respective needs
| to dominate encourage each others' aggressive tendencies.
| And it is much easier to justify/ignore/repeat
| misbehaviors when there are other aggressors to point at.
| ein0p wrote:
| Take a look at a map of US bases around China and then
| try to find any Chinese bases near the US, and you'll
| understand who's "militarist" and who isn't.
| Terr_ wrote:
| That's evidence of having more allies than China, not
| evidence of being more militaristic than China.
| illiac786 wrote:
| Who is saying the US is the most imperialist and the most
| militarist country? They do have the highest military
| budget, I'll give you that. What else?
| ein0p wrote:
| Approximately 1 million victims (mostly civilian) just in
| this century, with trillions spent on wars. Multiple
| continuous wars since WW2. Iraq (2x), Afghanistan, Libya,
| Syria, Yugoslavia, Korea, Cuba, Vietnam, Grenada, Panama,
| Somalia, Haiti. Multiple proxy wars on top of that. Need
| I continue?
| illiac786 wrote:
| oh, I don't debate the US have done quite a bite of
| imperialism and horrible things.
|
| I'm talking about today though.
| BobbyJo wrote:
| Its not faux. I'm genuinely asking what about the
| original comment you disagreed with. It didn't really
| have anything to do with what you're talking about, so,
| Im wondering what connection you're trying to make.
|
| Do you think political conflict makes trade better, and
| are using the US as an example? It doesn't seem like
| you're disagreeing with the original premise, but rather
| just aggressively responding with a tangent.
| marcosdumay wrote:
| The countries you keep invading are not your key
| economical partners.
| uoaei wrote:
| The US government has put a lot of effort into isolating
| China from the Phillippines. It's just statecraft and
| covert influence campaigns, nothing to do with the moral
| supremacy of anti-imperialism.
|
| Moralizing arguments such as this one are FUD.
| dareal wrote:
| totally agree, you have to so naive to believe it's not
| US gov's influence that's maneuvering this behind the
| scene, just like in Japan, South Korea and other China's
| neighboring countries.
| BobbyJo wrote:
| So tensions between China and the Philippines have
| nothing to do with China's actions and are just the U.S.
| performing a psyop?
| greyw wrote:
| Or maybe its just that china demands all of south china
| sea for itself up to the phillipine coast. Ah no that
| must be the fault of the USA too! /s
|
| https://en.wikipedia.org/wiki/Timeline_of_the_South_China
| _Se...
| fdschoeneman wrote:
| It's almost as if they're making their comments from a
| place where they are unable to read about these Chinese
| Navy military activities.
| fdschoeneman wrote:
| This comment ignores the facts of Chinese naval
| activities that many of their neighbors, including the
| Philippines, are wary of. You can say that US diplomacy
| is taking advantage of these facts in a way you don't
| like, but pretending the facts do not exist makes it
| necessary for people who do know them to ignore you.
| quohort wrote:
| > It's just statecraft and covert influence campaigns
|
| I'm sure that has something to do with it, but such
| campaigns are catalyzed by china's military aggression in
| the south pacific. Morality is an afterthought.
| aragonite wrote:
| This is just one example that's come to light, as
| reported by Reuters:
|
| https://archive.is/ZlCmK
|
| Note:
|
| > Unlike earlier psyop missions, which sought specific
| tactical advantage on the battlefield, the post-9/11
| operations hoped to create broader change in public
| opinion across entire regions.
|
| > ...
|
| > Nevertheless, the Pentagon's clandestine propaganda
| efforts are set to continue. In an unclassified strategy
| document last year, top Pentagon generals wrote that the
| U.S. military could undermine adversaries such as China
| and Russia using "disinformation spread across social
| media, false narratives disguised as news, and similar
| subversive activities [to] weaken societal trust by
| undermining the foundations of government."
| petre wrote:
| Good luck with that. The Philippines has aligned with the US
| for some time and water gunning their fishermen doesn't help
| either.
|
| They should try to outsource to their colonies in Central
| Asia instead.
| fspeech wrote:
| I've never sensed any real desire for China to offshore to
| the Philippines, given its military alliance with the US.
| Maybe they dangle the prospect from time to time to try to
| pry the Philippines away. They have much friendlier targets
| in Southeast Asia, with Thailand and Malaysia at the top of
| the list.
| philipov wrote:
| Those places are Vietnam and Africa, and it's already
| happening.
| rmbyrro wrote:
| Vietnam and Africa are not their geopolitical rivals.
| almost_usual wrote:
| Nor was China when the US began offshoring.
| lenerdenator wrote:
| Vietnam and China have never been any more than allies of
| absolute convenience.
|
| In fact, in one of the weirder turns of recent geopolitical
| history, the Vietnamese would prefer to be American allies
| over Chinese if forced to choose, and it's not even close.
|
| [1]https://www.reddit.com/r/VietNam/comments/1c22j7l/vietna
| m_st...
| alephnerd wrote:
| In VN, Chinese manufacturers tend to compete directly with SK
| and JP FDI, so the RoI isn't too hot, and Chinese
| manufacturers face the same hurdles American manufacturers
| faced when entering China (eg. Forced JVs, ToTs, etc)
| pogue wrote:
| Too many acronyms!
| quohort wrote:
| IA into BS, BSDF LJL your AJS IoK. From NJBW Chinese UAU
| in BA PFF!?
| dsnr wrote:
| VN - Vietnam
|
| SK - South Korea
|
| JP - Japan
|
| FDI - Foreign Direct Investment
|
| RoI - Return on Investment
|
| JV - Joint Venture
|
| ToT - Transfer of Technology ?
| _nalply wrote:
| You two are funny. Looks a bit like good cop, bad cop.
|
| Informative, though!
| ForOldHack wrote:
| TMTLA - Too many three letter acronyms.
| tchalla wrote:
| WAUTA?
| limit499karma wrote:
| It wasn't just US. The hidden politburo of capitalists decided
| and the nations followed orders.
| kibwen wrote:
| The CCP's current manufacturing policy is analogous to the modern
| venture capitalist approach of "subsidize the product until your
| competitors go broke, then reap the fruits of having a captive
| market by the balls", except the fruits have gone from "the power
| to set prices as a monopoly and extract a massive amount of
| profit" to "massive geopolitical leverage against countries that
| are dependent on your exports". It's a risky strategy because
| it's trivially countered by protectionist policies, but that
| depends on countries voluntarily refusing the free money that
| China is doing its best to shovel into your pockets. In other
| words, it's a bet that China's rivals cannot successfully resist
| short-term greed despite the huge and transparent long-term
| risks.
| Johanx64 wrote:
| > it's trivially countered by protectionist policies
|
| This assumes your local manufacturing and supply chains aren't
| completely demolished, expertise hasn't died out and been
| replaced and you can just restart it "trivially" overnight by
| slapping an import tariff
| cjbgkagh wrote:
| I worry that since protectionism is discretionary it's highly
| prone to corruption which would prevent any real
| manufacturing revival.
| User23 wrote:
| Outsourcing is also discretionary and highly prone to
| corruption.
| cjbgkagh wrote:
| Major difference on who has the discretion
| stratom wrote:
| Yeah, that policy wasn't enacted yesterday. It's already much
| futher along.
| klyrs wrote:
| I would not say that this is trivially corrected. The latest
| news from Boeing is that American manufacturing has been
| obliterated. Rebuilding the skill and _culture_ that has been
| lost is neither easy nor guaranteed.
| kortilla wrote:
| Not a good example because Boeing didn't outsource. China
| flies Boeing airframes made in the US and has for the last 50
| years.
|
| Boeing is an example of financiers running the company from
| an ivory tower on the other side of the country.
| klyrs wrote:
| > Not a good example because Boeing didn't outsource.
|
| No, that's precisely my point actually. Boeing is one of
| the very few companies that maintained its local
| manufacturing capacity. (to say that they "didn't
| outsource" is not remotely accurate)
|
| Despite _everything_ that was pointing in Boeing 's favor
| -- culture, financials, market, reputation; it was taken
| over by the MBAs that put McDonnell-Douglas into a nosedive
| and now all of that is gone.
|
| So now, let's assume that Boeing sees the light and wants
| to rebuild their manufacturing chops. Who do they hire? Who
| can they hire, who has the manufacturing expertise? When I
| worked at Boeing 25 years ago, the old-timers were
| invaluable. Most of those folks are dead and gone; my
| generation _should_ be graduating into old-timer-hood in
| the next couple of decades but Boeing hasn 't invested in
| us. Wages have been stagnant, software is easier, tiktok is
| more exciting, and the young generation is used to being
| bossed around by MBAs who don't understand the work.
|
| If not Boeing, the once-shining-example of American
| manufacturing what _didn 't_ outsource, _who_ can bootstrap
| our manufacturing renaissance?
| grogenaut wrote:
| Aah the McDonald excuse again. The favorite pivot of
| every boing apologist and conspiracy theorist. If only
| Mac, a completely successful defense contractor, hadn't
| somehow engineered a completely galaxy brained backdoor
| purchase of their largest competitor Boeing like a
| tapewirm because they needed cash after the f112
| cancellation they never would have lost that engineering
| led spirit.
|
| Get over it. Boeing wasn't doing great and has always had
| struggles. They wanted to get further into defense and
| kill off a competitor.
|
| Also Wharton came for everyone in the 90s and 00s. If
| Boeing stayed seperate from the evil Mac they still would
| have been inmundated by best practice short term bean
| counters from every MBA school in the country.
|
| Also if you ask a machinist in Seattle or STL if Boeing
| outsources, they sure do, to those non-union untrained
| unqualified folks in the south. Nevermind all the
| moisture that gets into the plane when you wheel a 747
| from an air-conditioned warehouse to the southeast sauna.
| Boeing has always fought with it's union so that wasn't
| the fault of the Boogeyman either.
| klyrs wrote:
| I was there at the time, so was my mom; quite a few of my
| friends. The McDonnell merger was the death knell. I'm
| not saying that everything was rosy and without
| challenge, but moving corporate to Chicago triggered
| _massive_ changes throughout the hierarchy. And those
| changes are now visible as rot and corruption.
| aeonik wrote:
| Cold air holds less water than dry, AC is great for
| drying, also saunas are super dry. Heating up ACed air
| would be ultra dry.
|
| You mean that the wet rainy Seattle weather combined with
| _jungle_ like south east make a bad moisture combo,
| right?
| gopher_space wrote:
| Boeing's entire problem was not realizing they were
| offshoring by moving to a location with no engineering
| culture.
|
| Getting quality out of a right-to-work state is difficult.
| vinceguidry wrote:
| Tell that to the French
| stefan_ wrote:
| Because they weren't allowed to, what with their military
| single-source business and all that gov money keeping them
| alive. You betcha these MBA graduates would have shipped
| the entire farm to China if it promised a quarterly profit.
| mensetmanusman wrote:
| They did outsource to various states.
| beambot wrote:
| Pointing at Boeing for any broad business thesis is difficult
| given recent developments (i.e. failures) -- maybe excepting
| a shift to finance-driven culture away from engineering-
| driven culture.
| klyrs wrote:
| Sorry, what? I think that examining Boeing, the way that it
| has adopted modern business practices, and the way that led
| to their catastrophic failure as an organization, is
| necessary for us to grow beyond this as a society. Even if
| it's difficult, it must be done.
| jncfhnb wrote:
| It's even more than that. Chinese manufacturing is sort of a
| growth vehicle like real estate. They've pumped up
| manufacturing capacity far more than is necessary to undercut
| international competitors. These firms are dying in large part
| because there's too many of them.
| namaria wrote:
| Trade policymaking is anything but trivial.
| manuel_w wrote:
| > It's a bet that China's rivals cannot successfully resist
| short-term greed despite the huge and transparent long-term
| risks.
|
| Seems they have correctly identified the western worlds
| weakness.
|
| Isn't it the same with climate warming? In the long run it
| would have been cheaper to prevent climate warning in it's
| early stages. Yet, we delayed (and are delaying) necessary
| actions as long as possible. In the end, the loss caused by
| climate change will by far outweigh the cost if we'd have taken
| measures early.
| kiba wrote:
| If your strategy is dependent on the enemy continuing to make
| the same mistake year after year, then it's a bad strategy.
| The enemy always get a vote after all.
|
| Now that said, assuming your enemy is competent can also lead
| to strategic miscalculation, such as Russia invading Ukraine
| when everybody but the US thought they would never be insane
| enough to do so. There's a difference between "what I would
| do if I were X" as opposed to "what would X really do?"
|
| That said, it's safer to assume that the adversary is
| intelligent but that isn't a substitute for actually
| understanding your enemy. Or perhaps, they don't have to be
| your enemy.
| kwhitefoot wrote:
| > China's solar industry is also grappling with oversupply. This
| year the prices of most components of solar modules have fallen
| below their average production cost.
|
| This should surely be regarded as an opportunity to install solar
| panels at low cost while stocks and production capacity still
| exist.
| pstrateman wrote:
| The panels themselves have been an insignificant parr of the
| total cost for a while.
|
| Mounts, connectors, wires, and inverters end up costing much
| more than the panels.
| kwhitefoot wrote:
| If the profit margin is 10% then a 10% reduction in total
| material and labour cost more than doubles your profit margin
| if you keep your prices the same.
|
| So how small a part of the total is the module cost? Even if
| you can only save 5% you still make more than 50% extra
| profit.
| djfobbz wrote:
| I live in China, and what I see is quite the opposite.
| LoFiSamurai wrote:
| Go on
| gopher_space wrote:
| I live in a coastal blue state in the US and would think the
| entire country ran this well if I didn't have the internet.
| saddat wrote:
| In machinery industry it's absolutely the same situation as in
| article
| jncfhnb wrote:
| > Hengchi, an electric-vehicle (ev) maker owned by Evergrande, a
| failed property developer, told investors that two of its
| subsidiaries had been forced into bankruptcy. The group
| originally aimed to sell 1m evs a year by 2025; amid feverish
| competition it sold just 1,389 last year.
|
| When you miss sales targets by 99.9% it's got to be more than a
| competition problem
| alephnerd wrote:
| > When you miss sales targets by 99.9% it's got to be more than
| a competition problem
|
| It's fairly common across the EV industry in China.
|
| BYD is an amazing product and makes good cars. The other
| manufacturers not so much, as is reflected in Chinese EV car
| sales [0].
|
| That's why manufacturers like SAIC (MG Motors), GAG (Wuling
| Motors), etc have resorted to trying to export abroad because
| they cannot beat BYD domestically, but this faces hurdles as
| most other major markets abroad (VN, JP, SK, ID, IN, Brazil,
| EU, MX, etc) place tariffs on autumotiive exports, forcing
| Chinese manufacturers to either open entire factories abroad
| with JVs or quit those markets
|
| Every factory SAIC, GAG, GAC, etc opens with a foreign JV is an
| equivalent set of jobs and IP lost in China.
|
| [0] - https://autovista24.autovistagroup.com/news/big-boost-
| chines...
| mayama wrote:
| It has to do with govt subsidy policy on making EVs that ended
| couple of years ago. Before that, every company with cash and
| even local govts entered EV manufacturing to avail the
| subsidies. Even when their core competency has nothing to do
| with EV manufacturing and even manufacturing anything. Same
| reason, some companies filled dumping yards with bogus "sold
| EVs", since repairing and keeping quality when being used will
| cost them more instead of making some substandard EV and
| generating fake sales cert.
|
| Similar policy PRC used when building up solar and battery
| industries. Subsidise a hundred companies, and few will come
| out as winners. Reportedly with real estate issues and semi
| trade war economy is facing headwinds and PRC is scaling down
| subsidies.
| okasaki wrote:
| It feels like The Economist and other Western oligarch media have
| been saying that China is going to collapse "next week" for
| decades. Almost like they have some sort of anti-reality agenda.
| jncfhnb wrote:
| I can't find that claim in the article.
| pphysch wrote:
| If you look at the aggregate of The Economist's "reporting"
| on China, the GPs comment is correct.
|
| One could even argue they are a Chinese asset because they
| mislead Western investors so fantastically and consistently
| on basic economic topics, a sort of Great Filter.
| gruez wrote:
| >they mislead Western investors so fantastically and
| consistently on basic economic topics
|
| ???
| jncfhnb wrote:
| How many stacks of tinfoil hats are you rocking, exactly?
|
| I'm counting at least 3
| 1mcag wrote:
| Any newspaper contains significantly more conjecture and
| guessing that the comment you reply to. It is ironic that
| the Economist was the magazine from which I learned
| speculating about behind the scenes actions and personal
| power politics.
|
| Yet you do not call the Economist reporters conspiracy
| theorists.
|
| The Economist is consistently wrong about ... economic
| predictions, which is what GP was making fun of.
| mrmetanoia wrote:
| I regularly read The Economist and it is not a flawless outlet
| but it does not and has not attempted to perpetuate any sort of
| collapse narrative about China. Individual opinion pieces with
| negative outlooks based on current global market context?
| Perhaps, but an overarching narrative of collapse just doesn't
| exist.
| Qwertious wrote:
| The reality of China is that their GDP stats are so
| systematically faked and so clearly don't add up that nobody
| actually knows whether China is economically healthy, not even
| Xi Jinping.
|
| In such a scenario, China _could_ collapse at any time, and
| _past performance is not a predictor of future results_.
| scrollop wrote:
| It's collapsing, just not "nest week"
| User23 wrote:
| Excess slack in productive capacity can be taken up not only with
| exports, but also with domestic demand side stimulus. The Chinese
| market is huge and can almost certainly generate demand for this
| productive capacity with proper fiscal policy.
| maxglute wrote:
| China's manufactures finding the winners. This is the system
| working as intended - create many producers in xyz sector via
| subsidies, hardcore (involution) competition from 1000s in
| different provinces innovate manufacturing to bare margins,
| losers go out of business/ get bought up by better competitors
| and consolidate like _intended_ outcome of other PRC industrial
| policy. TLDR Set up competitive environment to force producers
| speed run to a $250 model-T while everyone else could only make
| cars for $1000. Have so much competition to force manufactures to
| improve processes/drive down prices/affordability in short time
| and then settle with a few large but sustainable survivors that
| are globally competitive / can (out)compete with western
| incumbents.
| alephnerd wrote:
| > China's manufactures finding the winners
|
| But what happens to the failures, especially since they are
| overwhelmingly subsidized by local governments?
|
| Shanghai (SAIC), Jiangxi (BAIC), Guangxi (GAG), Guangdong
| (GAC), Hebei (Dongfeng), Beijing (BAIC), and other prefectures
| are putting tens of millions of dollars in SoEs that cannot
| compete with BYD domestically, and face preemptive hurdles
| entering foreign markets.
|
| If these were private players, it wouldn't matter as much
| because they could be safely shut down, but these are mixed
| public-private, and this means a lot of misallocated capital
| due to political considerations.
|
| Ideally, all these prefectures could better utilize that
| equivalent amount of money building domestic consumption
| instead - like I pointed to you before, the median household
| income in China is still around $350-400/mo in 2024, so even
| with a loan, a cheap class-A vehicle like a Wuling Hongguang
| Mini is still pricy.
|
| Instead, these players are forced to export abroad leading to
| unnecessary trade wars and causing other countries to either
| limit ToTs with Chinese companies, or force Chinese companies
| to ToT to domestic players abroad.
|
| This is the same story in PV Cells, Analog Chips, Mobile
| Phones, etc.
| maxglute wrote:
| Some local jurisdictions, especially wealthier ones will
| continue to misallocate because they can. For sectors like
| ev/pv/chips, they pay back in reducing imports/dependencies,
| some level of even stupid pork barrel waste should be
| expected/endured, i.e. US fine with 700B fossil subsidies
| because strategic. 700-800/m couple income fine for 4000-5000
| budget EV (new). Realistically in a few years when EV enter
| secondary market, they'll be 2-3k used. E: (apology for
| edits, out and about) 6m / 50% of annual household 8500-9500.
| Vs US median household income of 75k (round up to 80k to be
| generous) and average new vehical price of 50k. Of course
| they're not equivalent quality goods, but the point of
| driving costs down is to make 4k-5k tier cars possible.
|
| >Instead, these players are forced to export abroad leading
| to unnecessary trade wars
|
| This is very necessary, no reason not to take share from
| incumbent car makers, especially in RoW markets. ToT domestic
| players fine (E: as in fine to jurisdictions that, especially
| ASEAN / more integration), especially with current
| sanctions/potential, PRC FDI via recirculating USDs, better
| use now than risk lose later. E2: Let's not pretend PRC trade
| wars are any less strategic than US trade wars (like semi).
| PRC EVs sells -> EV piles -> energy infra -> sensors/fusion
| -> telco.
| alephnerd wrote:
| > apology for edits, out and about
|
| No worries. We all have lives.
|
| > Some local jurisdictions
|
| It's not some - it's a lot. And a number of these are not
| wealthy prefectures - Guangxi, Jiangxi, Jillin, Anhui, and
| Hebei underperform compared to the Chinese average on
| social indicators and economic health.
|
| The amount of money spent to subsidize EV cars made by GAG,
| FAW, Dongfeng, Changan, Chery, JAC, etc that most Chinese
| buyers just don't think about for EVs when they can buy a
| BYD is staggering, and could be better used by the
| prefectures I listed to better living standards or further
| increase consumer spending via DBTs or a better welfare
| system (which itself has been devolved to prefectures since
| the 90s).
|
| > This [export] is very necessary
|
| Absolutely, and this is why every major automotive market
| (US, EU, TR, MX, BR, SK, JP, VN, ID, IN, ZA) has already or
| is in the process of closing their markets to direct "Made
| in China" automotive exports (as well as other sectors like
| renewables, consumer electronics, pharmaceuticals, etc).
| Why should these countries lose their domestic champions at
| the expense of Chinese players?
|
| What large greenfield market can Chinese manufacturers
| directly sell to? And you can't say "Africa" - it's not a
| uniform market, and Chinese companies face competition from
| (depending on the region) Turkish, Japanese, Korean,
| Brazilian, Vietnamese, Indian, Emirati, European, South
| African, and American competitors.
|
| This is the crux of the problem - the very low median
| household income forcing players to export.
|
| Either the collective billions in subsidizes are deployed
| to push Chinese median household incomes to at least
| Malaysian or Mexican levels (~$10,000/yr) or even Thai
| levels (~$6,500/yr) in order to consume this excess
| capacity, or keep burning money subsidizing laggards while
| alienating foreign markets and partners.
|
| > Let's not pretend PRC trade wars are any less strategic
| than US trade wars
|
| At a high level it is, but the governance is atrocious.
| Just look at the First and Second Big Fund for example.
|
| And anyhow, Chinese manufacturers in these sectors then
| face similar tariffs like EVs in the markets I listed above
| under NatSec or Dumping grounds, which in turn drives
| neighbors further into the US camp (eg. VN after the 2011
| standoff and the Techo Canal, JP after Senkaku Diaoyu, TW
| after the 2014 trade war, SK after the 2017 trade war,
| India after the 2019-20 Galwan crisis, PH after the PoGo
| scandal, ID and the US CSP, etc).
|
| This in turn means you guys will escalate under the fear of
| being encircled, which pushes those countries to further up
| the ante. The same fear Chinese nationalists have about the
| US is the fear those countries have about China.
|
| Either way, this means China both loses potential economic
| partners/markets AND exacerbates an arms race.
|
| It didn't have to be this way, but the MFA's and CMC's tone
| change since 2014 has drastically deteriorated China's
| relations with it's neighbors.
| maxglute wrote:
| Excuse typos and lack of structure. Just long mobile
| typing.
|
| >It's not some - it's a lot.
|
| It's a lot now, because the race just winding down. It
| will be some later, if local gov can dig hard enough to
| eat shit on land finance, they can learn to eat shit on
| losing out on race for XYZ strategic sectors. Are we
| going to pretend this initial overcapacity -> cull ->
| consolidation cycle hasn't happened before? It's
| textbook. Like bro, it's only been ~5 since capacity
| explosion ramp, last few years was shaking out winner, it
| will take a few more years before losers accept they've
| lost. You're portraying as some long term sunk cost that
| will never end, when cycle is barely even short term, and
| local govs are historically pretty good at ditching dead
| ideas. A few years to adjust course is about as
| responsive as governance can be. Everyone knows model of
| "quality growth" = lots of regional hubs up for grabs in
| many industries PRC wants to compete with western
| incumbents on, local gov going to ditch dead weight and
| try to grab the next big thing. And you know what, some
| are just geographically rat fucked and won't make it.
|
| > staggering
|
| Naw, it's good deal. I surmise you're thinking about CSIS
| report that overestimates subsidies per vehicle (nvm
| subsidies are drawing down), a few $1000 per vehicle last
| few years now made 20k-30k quality vehicle accessible to
| 10k buyers. Fuel savings on 11k avg annual kms -> EV is
| ~$400. Proliferating new energy vehicles to 50% market
| share in short term is going to pay for itself in terms
| of fossil imports and energy secuirty.
|
| > Why should
|
| They wouldn't, they'll do what they do, and PRC glad to
| FDI their way, and entrench PRC components into global
| supply chains. Are you going to pretend all those
| competitors are on the same cost:value level as PRC? Just
| randomly making lists doesn't make a compelling argument.
|
| > forcing players to export
|
| Except what are most of the auto export? ICE vehicles,
| mostly from western manufactures with idle PRC capacity
| because PRC market not buying their ICE after shifting to
| EVs. Meanwhile PRC EVs selling abroad at reasonable
| markup, we're already seeing shifts in ASEAN against
| SKR/JP leaders. Where's the NEV excess capacity, oh
| right, it doesn't exist. Most % of NEV prorduced still
| absorbed by domestic market, less % export vs other
| automakers.
|
| > consumption
|
| Meanwhile I'm sure know the argument that PRC consumption
| about OECD average with proper accounting, that western
| wonks like to ignore to push the lack of consumption
| narrative. All the while disposable income according to
| states.gov.cn that you link frequently is growing at
| health clip YoY. And for whatever reason, you seem to
| enjoy obfuscating per capita to USD instead of PPP or
| local currency and use local prices for comparisons. Like
| it matters BYD dophin sells for 20k USD in malaysia but
| 10k USD in PRC. Lot's of shit just much cheaper in PRC
| since PRC producer. Like PRC doesnt magically overtake US
| on protein consumption because they spend all their money
| on protein (yes they love pork), but also because they
| consume a lot of stuff, most stuff just happens to be
| cheap.
|
| Was First and Second Big Fund attrocious? It seemed so
| until export controls forced PRC semi to coordinate, and
| then they realize big funds built a shit load of pieces,
| but just never connected them. Dumping 500b into semi
| over ~10 years to setup conditions to move away from
| 300-400B PER year semi impmorts is fair deal, especially
| considering how PRC indigenous semi doing last post
| sanction compared to how CHIPs doing.
|
| > or keep burning money subsidizing laggards while
| alienating foreign markets and partners.
|
| Again is it burning? Again subsidies phasing out, and
| actually effective in driving down durable unit cost. Is
| it alientating foreign markets or partners? Seems like
| tike most are fine with following PRC JV path, taking PRC
| FDI, and so far seems like PRC is fine with that
| arrangment too. Except you know, US whose allergic to
| anything PRC. Are we also ignoring PRC exports still
| hitting/maintaining near record levels, including with
| India. Is it any worse than US spending 5%+ GDP than
| average healthcare spending for less life span, i.e.
| ~1.4T annually. Or the aforementioned 700b on fossil
| subsidies. Is PRC spending a 200B on NEV subsidies that
| will save trillions in keeping money into PRC compnaies
| and energy import costs in perpituity... burning money?
|
| In similar lens, was First and Second Big Fund
| attrocious? It seemed so until export controls forced PRC
| semi to coordinate, and then they realize big funds built
| a shit load of pieces, but just never connected them.
| Dumping 500b into semi over ~10 years to setup conditions
| to move away from 300-400B PER year semi impmorts is fair
| deal, especially considering how PRC indigenous semi
| doing last post sanction compared to how CHIPs doing.
|
| > neighbours
|
| And does it matter if SKR/JP/TW/PH goes into US camp? The
| point is to bleed the first 3 that are high end export
| competitors. US security partner gotta US security hedge
| regardless. That's less an economic battle more a
| military force balance, one which PRC is increasing gap
| in theatre. Whose To Lam's first visitor? To PRC. I think
| blob wank thinks PRC is really interested in playing nice
| with US partners in region, when PRC see knos no amount
| of playing nice is going to get US security architecture
| out of east Asia short of force. In the meantime
| (peacetime) focus on eroding them as economic
| competitors. And we can all pretend PRC is making a
| folley not using carrots when the only real solution, is
| a much bigger stick.
|
| It was always going to be this way, PRC was always going
| to move up value chain to compete with tier1
| economies/exporters. PRC was always going to move up
| value chain, it was always going to take a swipe at
| leading incumbants, and at PRC scale, it's was always
| going to aim for her disproportionate share of pie. In a
| world where PRC is adding more skilled workforce than
| rest of the world combined + going for 11 on involution
| driven industrial output is also world where PRC is
| poised to win the arms race. She simply has too much
| people not to do all these things and still have 100ms
| farmers/informal economy. There was never going to be
| anything but (arguably zero sum) fight for many pies.
|
| TLDR We've interrogated this before, I don't find you
| rehashing latest blob narratives on PRC behaviour
| compelling. I don't find their conclusions/analysis
| particularly sincere/unmotivated. Trade numbers seems to
| show PRC is building lots of economic partners AND
| winning the arms race. Meanwhile US security architecture
| straying further and further from what was deemed
| neccessary (AGILE, NGAD, lol missiles in vietname) while
| acquisitions/prepositions in theatre by US+co is being
| out paced by magnitudes by PRC. I sit any wonder defense
| blob last couple month started referencing PRC as no
| longer "pacing power" but "past pacing". That's what
| happens one PRC shipyard builds more than entire US
| shipbuilding combined.
|
| > You guys
|
| Again, I'm Canadian, like you. I'm just not (a presumably
| American related/adjacent) recovering policy wonk. Anyway
| feel free to have last word. You're still a very
| intelligent posters with IMO very obvious biases, as am
| I.
| aquamar2 wrote:
| Still doesn't work.
|
| 1.) Internal consumer demand for China has collapsed, due to
| real estate debt overhang, local government debt overhang,
| increasing job loss, and incoming and increasing college
| graduates. It's estimated that 80% of this year's current
| graduates are jobless.
|
| 2.) External demand for China has been decreasing, 3.5T total
| export in 2022, only 3.3T in 2023. probably below 3T this year.
| Due to geopolitical factors such as China allying with Russia,
| and increasing tariffs from every other country due to
| overproduction/overexport from China.
|
| 3.) EV (at 36B in 2023) is only 1% of value of all Chinese
| export (3.7T). Not going to rescue the Chinese economy at all.
| On top of that, only BYD is capable/making some profit, while
| every other Chinese EV is going to shut down in the next 5
| years.
| maxglute wrote:
| Work what? I think Ctrl+F China + collapse arguments still
| doesn't work.
|
| 1) Consumption is "sluggish", i.e. it's small positive growth
| instead of large precovid positive growth. It's not negative
| decline let alone collapse. Get off the FLG. Employment rate
| steady, including new grads at 20% accounting for those in
| school and not looking for work (i.e. the Chinese tertiary
| way), 40%-50% for graduate cohorts who takes time job hunting
| / not ready to settle. Which they will, given broad
| unemployments is steady, i.e. new grads get job after 1+ year
| and roll into genpop employment stats. There's 1% drop in new
| salaries in some industries, people are staying in jobs
| longer. "New productive" industry jobs, i.e. the high value
| ones set to drive PRC economy including energy, semi etc
| experience continuous growth. In aggregate positive, not
| fantastic, but also opposite of collapse.
|
| 2) Exports stabilizing after record covid highs, still only
| ~20% of gdp, i.e. PRC hasn't been (barely) export dependant
| for 10+ years at high of ~35%. If you follow brad setser,
| he'll note PRC exports probably being massively/deliberately
| hidden/under reported because two way data suggest much
| higher. BTW export dependant countries regularly over 50-100%
| export to gdp. Entire overproduction/overexport narrative is
| retarded considering how little PRC exports as share of GDP.
|
| 3) Who said EV was suppose to rescue PRC economy? PRC too big
| for 1 sector/industry to make difference. Collection of New
| productive industry jobs doing their part, sure. But
| generally when you remove RE drama, which they deliberately
| crippled, you get current modest 5% growth instead of
| previous 7-8%. Settling to modest growth is expected sooner
| or later. Modest growth (~5%) is enough to increase GDP PPP
| gap vs US. Most of projections on PRC passing US GDP assumes
| eventual modest growth + FX movements i.e strength RMB. Which
| they strategically don't want to because right now it's all
| about pricing out incumbant competitors in new export
| categories. Like CCP can get easy propaganda win by moving
| RMB band 5-10% to entier per capita $14000 USD high income
| range, but they don't because modest growth works fine.
| aquamar2 wrote:
| It's a bit funny that you think I'm copy pasting, when all
| your China (sorry, PRC, I guess you don't want dang to come
| find you) posts reads like llm rambling garbage with no
| references to back it up.
| olalonde wrote:
| The title of the article is a bit misleading. Manufacturers are
| going broke because there's too many of them, which is arguably a
| nice problem to have.
| from-nibly wrote:
| Not when your money is funding them even if you don't want it
| to.
| rkwz wrote:
| Genuine question, if they have so much excess capacity and low
| domestic demand, wouldn't it be easier to just export to other
| countries? Or are there barriers put in place in the world stage
| that limits this?
| marcosdumay wrote:
| You are suggesting that China "just" exports an order of
| magnitude more.
|
| That's not a simple "just" you have there. Who is buying all
| those goods?
| Axsuul wrote:
| Tariffs[0]
|
| 0. https://www.bbc.com/news/articles/cy99z53qypko#
| chiph wrote:
| A common bit of advice is to build one less of your widgets
| than what your customers will buy. You then meet demand
| (nearly!) and your price gets supported.
|
| Chinese manufacturers on the other hand, seem to be following
| the "build it and they will buy" philosophy. When you do this,
| prices (and profits) head towards zero.
|
| This is the exact opposite of the Toyota Way, where customer
| demand serves as a signal (Kanban) to produce a widget and
| deliver it when needed.
| almatabata wrote:
| Let us assume they start dumping all their excess
| internationally. Do you think other countries will just allow
| china to flood the international market and drive other
| countries respective auto makers out of business? Other
| countries will raise tariffs accordingly until they reach an
| equilibrium that they feel comfortable with.
| fspeech wrote:
| Not everyone makes cars. Shrinking the global market shares
| of the ones that do will make the competitors' economy of
| scale worse as they withdraw from the ROW to hide behind the
| trade barriers.
| highfrequency wrote:
| These are some staggering numbers: 52 _thousand_ Chinese EV
| companies shut down last year.
|
| Xi Jinping (successfully) stimulated EV and semiconductor
| manufacturing through massive government investment and loans.
| The problem is that so many companies were funded that they are
| now viciously driving each other out of business through
| oversupply.
|
| Because the supply chain networks are so dense, each bankruptcy
| easily cascades because the company then defaults on contracts
| with vendors and customers.
|
| None of this, of course, is good news for US competitors like
| Tesla. With such a large field of vicious competition, it's
| almost assured that the small set of businesses that succeed will
| be able to outcompete globally with extremely low cost structure.
| We see this happening with BYD.
| alephnerd wrote:
| > With such a large field of vicious competition
|
| Other than BYD (which has a strong product market fit and a
| very strong technical foundation in both battery tech and
| automotive development), where can the competition export?
|
| Every major automotive market has preemptively or actively
| placed tariffs on Chinese automotive exports straight from
| China.
|
| SAIC, GAG, GAC, BAIC, BYD, etc will all have to either ToT IP,
| open domestic factories, or create JVs in order to enter most
| markets.
|
| BYD completely owns the Chinese EV market in absolute numbers -
| and the competitors had to preemptively begin exporting abroad,
| which sparked trade wars and worries of dumping, which made it
| harder for BYD and other players to export "Made in China" cars
| reisse wrote:
| > where can the competition export?
|
| You see, there is a 1.5m-2m new car market right next to
| China, completely abandoned by western players. And another
| 500k-1m market in Central Asia, where General Motors
| neocolonialist monopoly is waiting for disruption.
|
| Of course it's not US or EU-sized market, but realistically,
| in the best case scenario I'd expect China to have at most
| 20% of US or EU. Here, they can take it all.
| alephnerd wrote:
| > You see, there is a 1.5m-2m new car market right next to
| China, completely abandoned by western players
|
| Which one? If you mean Russia (which by the way is only
| 600-700k), then those Chinese players face secondary
| sanctions in most markets which settle trade in USD, along
| with a lot of politically connected domestic players.
|
| If you mean India, most Chinese players have been chased
| out or forced to transfer technology and majority ownership
| to Indian companies (eg. SAIC MG Motors India now being
| majority owned by JSW Group). Also, the dominant foreign
| players are Japanese and Korean with massive Indian
| government backing.
|
| If you mean VN, ID, MY, or PH, then it's South Korean and
| Japanese JVs that have a dominant position along with
| govenenent backing.
|
| > another 500k-1m market in Central Asia
|
| Which is dominated by a mix of American (GM) and South
| Korean (Hyundai) JVs with UzAutos, Russian automotive
| players, and Japanese JVs with Pakistani+Indian players
| (eg. Toyota x Pakistani Army)
| reisse wrote:
| > If you mean Russia
|
| Yes.
|
| > (which by the way is only 600-700k)
|
| 700k was the official figure for 2022, which, besides the
| obvious reasons to be an outlier, is also skewed by the
| fact 300k more cars were imported as "used" to workaround
| stopping of the official deliveries. It was more than 1m
| new cars sold in 2023, now it's 700k just for the Jan-Jun
| 2024.
|
| > then those Chinese players face secondary sanctions in
| most markets which settle trade in USD
|
| Yet the reality shows they don't really care much. Why
| should they, though? The big ones have the leverage of
| controlling the access to the Chinese domestic market,
| which is too important for the Western manufacturers. And
| the small ones are already effectively excluded (by the
| tariffs and such) from the markets that can implement
| secondary sanctions.
|
| > Which is dominated by a mix of American (GM) and South
| Korean (Hyundai) JVs with UzAutos
|
| There is no economic reason why GM dominates that market.
| GM produces too little cars, of a questionable design age
| and quality. The day someone is able to talk local
| government into a deal with favorable tariff conditions
| (not circa 100% import tax that exists now), GM business
| in Central Asia is dead.
| yorwba wrote:
| Their graph off loss-making industrial enterprises looks slightly
| more dramatic than the underlying monthly data.
|
| If you check the National Bureau of Statistics' data on Yu Sun Qi
| Ye (Yue Du Shu Ju > Zhi Biao > Gong Ye > Gong Ye Qi Ye Zhu
| Yao Jing Ji Zhi Biao ), https://data.stats.gov.cn you see that
| there is a yearly cycle where the number jumps in February: from
| 67,570 in 2021-12 to 132,371 in 2022-02 (January is skipped),
| from 91,222 in 2022-12 to 161,892 in 2023-2, and from 103,994 in
| 2023-12 to 167,895 in 2025-02. By plotting the last available
| month for every year, 2024 ends up sticking out a bit more than
| it will once the end-of-year data is out.
|
| Nonetheless, the overall trend is undeniable.
| kkfx wrote:
| I fail to see a specific news, the article cite a single example
| of a failed BEV OEM, there are many, it's perfectly normal that
| some are not good enough to survive. In our golden age of
| automotive we have had countless automakers, most have failed
| some have skyrocketed...
|
| Aside overcapacity should be synonymous of low prices, I still
| wait to see here in EU prices like in the BRICS area for products
| imported from China. An example a BYD Atto 3 here cost a bit less
| than 40kEUR while in Thailand cost a bit less than 10kEUR
| https://asia.nikkei.com/content/1f9ed40b4b44745e1a39fafaf94b...
| such price delta have no justification in mere free market
| economical terms, have only political justifications NONE OF THEM
| acceptable by the civil society. I still wait to see LFP
| batteries prices drops like in China to have a well-sized home
| battery at a price cheap enough to make buying it convenient,
| let's say 50kWh for 5kEUR. Let's say 15kW p.v. inverter for
| 1.5kEUR etc.
|
| If China manufacturers goes broke we customers do the same in EU,
| and I suspect in USA to, simply to enrich some local cleptocrats.
| 486sx33 wrote:
| It's pretty simple, Chinese companies need to lower Chinese
| wages, reduce costs, reduce profit expectations, provide lower
| cost shipping to ports, guarantee the quality of their product
| once it arrives in North America not pay when it leaves the
| factory.
|
| We want $1 products again at dollar tree (not $1.25 tree), and
| better quality for less money.
|
| Otherwise we will just make the stuff in the USA ourselves. One
| day we will get smart and export more TO China because no one in
| China trusts the quality of anything made in China
| missedthecue wrote:
| Personally, I have been coming more around to Chinese
| manufactured goods. It used to be low-end crap 30 years ago,
| but they are market leaders in many sectors today and probably
| even more tomorrow. I recently drove a Chinese (ICE) SUV for
| the first time and was blown away by the fit, finish, and
| price.
| mensetmanusman wrote:
| I think they are referencing various food scandals that
| rocked trust of Chinese food production in china (esp. for
| babies).
| aquamar2 wrote:
| lots of other scandals, not just food
|
| 1.) recent 2024 huge scandal regarding oil container trucks
| swapping out cooking oil with cancerous industry oil
| without cleaning the tank. the trucks ended up covering up
| their tank with tarp so people can't see what kind of oil
| these trucks are carrying.
|
| 2.) videos of Chinese EVs just simultaneously combusting in
| the streets while driven or parked
|
| 3.) toxic chemicals found on Temu/Shien clothes, found by
| South Korea and US
| sandspar wrote:
| Great, now do scandals in the US. The Chinese internet
| was very interested in the Ohio train derailment, for
| example.
| leoh wrote:
| Links! Sounds interesting
| AtlasBarfed wrote:
| The inherent assumption here is "China is a functioning
| country".
|
| Chairman Xi is a dear leader now. Autocratic controls are
| coming down with force, and the free market reforms are being
| rescinded. This is not a competent autocracy, Xi has purged any
| competence from the central government.
|
| China is also facing a massive financial house of cards and a
| real estate disaster.
|
| China long term is facing an unprecedented demographic collapse
| in terms of raw numbers of people. Both Russia, who also face a
| massive demographic collapse, and China are masking their
| population losses and the sharp declines in population
| replacement.
|
| The UN projects 100 million people less by 2050, but I
| personally think that demographic attrition will actually be in
| the 200 million range. I also think that China will suffer a
| massive country-wide food supply disruption either due to
| Taiwan aggression, economic depression, collective
| international isolation, or political collapse that will lead
| to a huge famine in that time span. Finally, the population
| will age considerably, so even if the "loss" in absolute terms
| is only 100-150 million people, the collective productivity
| loss will be shockingly high.
| sandspar wrote:
| Judging from your post alone, you seem to have started with a
| conclusion ("China will collapse") and sought out evidence
| that will support your prejudgment. Also, the statistics you
| cite are less sophisticated than the statistics you'd find on
| a rag like CNN, so it's not even apparent whether you've done
| any serious research.
| naveen99 wrote:
| If the capacity was for exports of ev's, solar panels, batteries
| to U.S. and Europe, the 100% tariffs are going to bring some
| pain. somehow iPhones, leather bags are not getting tariffs.
| mensetmanusman wrote:
| iPhone tariffs would hurt the us and china both too much.
|
| Ev tariffs are meh for china because they don't sell here much
| anyway.
| naveen99 wrote:
| Not with 100% tariffs they won't
| jeffbee wrote:
| China: tons of stuff, no profits.
|
| America: lots of profit, no product.
|
| Maybe we can borrow from each other? I can think of a bunch of
| sclerotic industries in America that need to have their margins
| driven to zero.
| xrd wrote:
| Does anyone know if this means hot deals on extra EV inventory?
|
| I tried to buy an electric golf cart which looked like a Hummer
| on Alibaba, but importing it (getting it past customs) was
| challenging. They had me at MP3 player!
|
| If I could buy an EV for $3k, it would be worth the hassle with
| charging infrastructure and hiding an illegal vehicle from the
| coppers. </joke>
| seatac76 wrote:
| A lot of these were unsustainable to begin with, the number
| inflates the viability. The key players are expanding, and
| increasingly building out manufacturing in cheaper countries like
| Mexico, Vietnam, Thailand so they will become much more dominant.
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