By Thomas Friedman ; New York Times; December 17, 2024

I just spent a week in Beijing and Shanghai, meeting with Chinese officials, economists, and entrepreneurs, so let me get straight to the point: while we sleep, China has made tremendous leaps in high-tech manufacturing. 

If no one has told Donald Trump, then I will: his nickname on Chinese social media today is “Chuan Jianguo”—meaning “Trump (China) Nation Builder”—because his relentless attacks on China and tariffs during his first presidential term ignited a fire in Beijing, prompting it to double down on its efforts to achieve global dominance in electric vehicles, robotics, and rare materials, while striving for as much independence from the US market and tools as possible.

“China has entered its Sputnik moment—his name is Donald Trump,” Jim McGregor, a business consultant who has lived in China for 30 years, told me. “He made them realize that they need to all work together to elevate their domestic science, innovation, and advanced manufacturing skills to a new level.”

The China that Trump will face is a much stronger export engine. Over the past eight years, the scale, complexity, and quantity of China’s advanced manufacturing have exploded, even though its people’s consumption remains negligible. If I were to portray today’s Chinese economy as a person, it would have an imposing manufacturing upper body—like Popeye, still eating spinach—yet its legs would be as thin as sticks.

Now, China’s export machine is so powerful that only extremely high tariffs could truly slow it down, and China’s response to high tariffs might be to start cutting off key supplies to American industries, which are now nearly impossible to source anywhere else. This supply chain war is not something anyone needs. Two weeks ago, during my visit, I spoke with Chinese experts who hope to avoid this war. The Chinese still need the American market to export products. But they will not easily yield. Both Beijing and Washington would prefer to reach an agreement—gradually increasing American tariffs while both sides do what we have long needed to do.

What is that? I call it the “Elon Musk-Taylor Swift Paradigm.” The US will use higher tariffs on China to buy time to cultivate more Elon Musks—more domestic manufacturers capable of producing big products—so we can export more to the world and reduce imports. Meanwhile, China will use this time to bring in more Taylor Swifts—offering more opportunities for its youth to spend money on foreign-produced entertainment and consumer goods while also producing more goods and providing more services—especially in healthcare—that the Chinese people want to buy. However, if we do not use this time to respond to China with our own comprehensive scientific, innovative, and industrial drive, like we did when the Soviet Union launched the world’s first artificial satellite, Sputnik, in 1957, we will be doomed.

You have to see China to understand, but many in Washington have missed the remarkable growth of this country’s manufacturing sector, as the US Congressional delegation led by Senator Chuck Schumer was the first official visit by American lawmakers to China since 2019—and many American companies that relocated employees out of China due to the pandemic have never brought them back.

Here are some insights shared by manufacturing columnist Noah Smith using data from the United Nations Industrial Development Organization:

In 2000, “the US and its allies in Asia, Europe, and Latin America accounted for the vast majority of global industrial production, while China, even after twenty years of rapid growth, only accounted for 6%.” Smith wrote that the UN agency predicts that by 2030, “China will account for 45% of global manufacturing, rivaling or surpassing the US and all its allies.”

“There have only been two instances in world history where a country dominated manufacturing to such an extent—Britain at the start of the Industrial Revolution and the US shortly after World War II,” Smith wrote. “This means that in a long-term production war, global unity does not guarantee defeating China alone.” Let me provide a few examples of the scale we are discussing: In 2019, as Trump was nearing the end of his term, net loans from China’s banks to domestic industries amounted to $83 billion. According to the People’s Bank of China, that number skyrocketed to $670 billion last year. This is not a typo.

In 2019, before the COVID-19 outbreak, when I visited China, Xiaomi and Huawei were just Chinese smartphone companies. When I returned home a few weeks ago, both companies had also become electric vehicle manufacturers—utilizing their battery technology to produce very cool electric cars.

Xiaomi’s SU7 was the highlight at the Beijing Auto Show last April, produced in a former factory that used to make gasoline cars. Meanwhile, the well-known Chinese battery company BYD has established an automotive manufacturing subsidiary and is now doubling down on its automotive business. I traveled around Shanghai in a super-comfortable BYD electric vehicle operated by Didi (China’s Uber). BYD has now launched a super compact electric car, the Seagull, priced at under $10,000.

To export its large inventory of cars, China has begun constructing a fleet of 170 ships capable of transporting thousands of vehicles across the ocean at once. Before the pandemic, global shipyards delivered only four such vessels per year. This is also not a typo. Because China essentially has a national power grid, charging stations have been installed nationwide, which is why more than half of new car sales in China are electric vehicles. Apple has been talking about manufacturing electric cars for 15 years. Has anyone ever driven an Apple car?

I took the high-speed train from Beijing to Shanghai. The distance is roughly equivalent to that between New York City and Chicago. It takes only 4.5 hours because the train travels at over 200 miles per hour, with nearly 100 trains running back and forth every day. The ride is so smooth that if you place a dime on the windowsill—half on the sill and half off—it will remain exactly as it was from the start to the end of the journey. Try doing that on the Acela train between New York City and Washington; two seconds after the train leaves the station, the dime will fall to the floor.

If you missed this report, when I was in Beijing, General Motors wrote down more than $5 billion in value in its cutting-edge factory that was once a major player in China’s auto market. According to Reuters, GM’s joint venture in China, SAIC-GM, saw its sales “plummet 59% in the first eleven months of this year to 370,989 units, while local New Energy Vehicle champion BYD’s sales were more than ten times that of SAIC-GM.”

But don’t worry, friends, help is on the way. Trump has vowed to make America great again by doubling down on gas-guzzling vehicles and ending the US government’s subsidies for Americans purchasing electric vehicles. So, what do you think will happen? Other countries will gradually turn to self-driving electric vehicles made in China, and “America will become the new Cuba—a place where you can personally drive old, gas-guzzling cars,” as Keith Bradsher, the New York Times bureau chief in Beijing and an auto industry expert, mused to me.

If that happens, one day we will wake up to find that China will dominate the global electric vehicle market. And since fully autonomous driving technology is practically applicable only to electric vehicles, this means that China will own the future—the autonomous vehicle market as well.

The China that Trump will face in 2025 will be very different from the one he encountered during his last campaign. If Trump were to tell China, “Hey, if you build more factories in the US, I’ll exempt you from tariffs,” it would certainly help reduce our trade deficit with Beijing, but it might not earn too many votes for Republicans. That’s because China would say, “Sure, how many factories do you want? Forty? Fifty? But one thing: the assembly lines will all be operated by robots, and we could even control them remotely.” During this visit, I learned a new term: “dark factory.” A retired Chinese official mentioned at dinner that she wanted to buy a new high-tech bed, so she decided to check out the products in a factory. But when she arrived, she found it was a “dark factory”—the lights were turned on specifically for her. She told me that the factory was dark not because it was closed, but because it was fully automated; the company wouldn’t waste electricity lighting up the place for anyone—except for engineers who come in daily to clean or adjust the machines.

As a state-run *China Daily* article explains: “From steel plates and mobile phones to household engines and rocket ignition components, more and more business lines in China are using artificial intelligence to drive production and introducing ‘dark factories,’ which have 24-hour uninterrupted and unattended production capabilities. Dark factories, also known as smart factories, are entirely operated by programmed robots and do not require lighting.”

Do you remember that old joke? “Modern factories will have only one person and a dog.” The dog is there to prevent the man from touching the machines, while the man feeds the dog. This is not a joke in China. If Americans went directly to a hotel to order room service, they might better understand the situation there. I really enjoyed the story shared by a German travel vlogger about his experience at a hotel in Shanghai, which he recounted recently in the *Global Times*: “‘Okay, the phone rang. That means the robot is coming,’ he said at the beginning of the video. When he opened the door, he saw a robot standing there waiting for him. When he pressed the ‘open’ button on the machine, the top lid opened to reveal the food he had ordered inside. He took out the package, pressed ‘complete’ to close the compartment, and watched the robot return to the elevator.”

No tips required.

But there’s another reason why China is eager to push for automation: the necessity of its population. In the US, strong unions and a growing population make robots the enemy of labor because they replace blue-collar workers. The sharp decline in China’s population and strict limitations on unions make it not only economically essential to introduce more robots in factory workshops but also politically easier (though China is likely to face strong opposition from blue-collar workers). In just the past seven years, the number of babies born in China has dropped from 18 million to 9 million. The latest projections suggest that by 2050, China’s current population of 1.4 billion will decrease by 100 million, and by the end of the century, it could drop by 700 million. To maintain living standards and care for an aging population amid a declining labor force, China will drive automation both within itself and across the rest of the world.

During his first term, Trump—and Biden as well—was right to impose tariffs on China, as long as it did not grant us reciprocal access. China has long violated World Trade Organization rules to avoid granting its major trading partners reciprocal access and has provided massive subsidies to its enterprises. I have been complaining about this for years. Historically, for every $4 that the US buys from China, China buys $1 from the US; most of that is soybeans and other agricultural products.

But the scary thing is: we no longer produce as much of what China wants to buy. China can essentially do everything, and at least cheaper, and often better.

Eric Chen is the founder of Kingwills, a Chinese materials science company that competes with companies like DuPont. He explained to me that young Chinese entrepreneurs like him have learned from Chinese internet giants like Tencent, ByteDance, and Alibaba about “rapid innovation and improvement.” Chen said that the product upgrade speed of his foreign competitors is much slower; even when they upgrade, it takes five or six years to build a new factory. “We upgrade some products every 30 days. We can produce a new production line within six months. We learned from Elon Musk and Steve Jobs. You are very good at taking products from zero to one. We are good at taking them from two to one hundred.”

This is possible because the steady enhancement of China’s manufacturing capabilities means that almost anything you need today—from tiny parts to rare earth chemicals—can be sourced domestically. Chen explained that no other country in the world has such a complete domestic ecosystem, so any idea you come up with, “you can source everything here. We have a three-year goal to achieve production and storage with zero labor using a combination of robots and AI.” Then “we can sit in China and control production outside of China. Then we can build factories closer to customers.”

However, he added a warning: “In the future, America’s competitors may not be China, but artificial intelligence. This is a war for both of us.”

Executives from foreign companies operating in China will tell you that in the past, you had to be in China to access its massive consumer market. They say that you still have to be in China, but today doing so is also about accessing China’s expanding market of innovators. Get ready for more “China-designed” products, not just “made in China.” If we think the growth of China’s advanced manufacturing capabilities is solely due to unfair trade practices, we are deluding ourselves. It’s also because there are still many people in China eager to work, as they say “9-9-6″—working six days a week from 9 AM to 9 PM—to improve their lives because Beijing has invested in world-class infrastructure, because it deliberately suppresses consumer spending, and because it has what seems to be an endless supply of engineering majors—while there aren’t many students studying sports management, sociology, or gender studies.

“The Chinese treat education like we treat sports,” said Lin Han-sheng, who teaches at NYU Shanghai.

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So, will China bury us? That is by no means inevitable. I am impressed by both China’s weaknesses and strengths. I do not want to see instability in China. It is important for the world that China continues to provide a better life for its 1.4 billion people—but not at the expense of everyone else.

I see clearly that many Chinese have become estranged from the world’s perceptions of China due to the relative scarcity of foreign visitors. As a senior White House official told me, the world was “frightened” by China when it began implementing the “Made in China 2025” initiative—an industry policy led and funded by the state aimed at making China the dominant producer in advanced manufacturing across various sectors, from aerospace to materials science to machine tools. This not only shocked the world further but also alarmed developed manufacturers like the US and Germany, as well as developing countries like Brazil, the Philippines, and Indonesia, because they felt China was dominating overseas while still restricting domestic consumption.

China has billions of dollars in domestic savings that can stimulate its economy, but people will only spend those savings if they have confidence in the government and in the future. However, the government’s poor handling of the pandemic has undermined that confidence, and the lack of transparency about China’s future direction has kept savers cautious.

With a youth unemployment rate exceeding 17% and some cities so cash-strapped that tax collectors are sent to other provinces to hunt down tax evaders, it exacerbates their reluctance to spend. Additionally, the ongoing housing crisis triggered by overbuilding has left many Chinese feeling a “housing shortage.” Reading about the investigation of China’s third consecutive or former defense minister for alleged corruption in the People’s Liberation Army does not help to bolster confidence either.

Most importantly, the government prioritizes Communist Party ideology and state-owned industries, which has prompted some of China’s most talented private sector innovators to quietly relocate their funds, families, and even themselves to Japan, Dubai, and Singapore. This is not a good trend for China. I offer my friends in China unsolicited advice: this unbalanced economy is unsustainable. It will eventually generate a global trade alliance against them. The world will not allow China to manufacture everything while only importing soybeans and potatoes. China needs more nurses to provide good healthcare domestically—fewer engineers to design more cars for abroad. Its youth need more avenues to express their creativity—without fearing that the lyrics they write will land them in prison. I have spoken with too many people who feel stifled or afraid to express their thoughts. They have seen the crackdown in Hong Kong. It wasn’t like this 15 years ago. There’s a reason so many educated young Chinese are eager to go abroad.

As for my neighbors in America, I have a confession. I contracted a virus in China that I never thought I would get: “Elon Musk admiration.”

I am repulsed by Musk bullying defenseless people with his X megaphone and flattering Donald Trump; I just want that Elon Musk to shut up and go away. But there’s another Elon Musk. This genius engineer and entrepreneur can create things—big things—electric vehicles, reusable rockets, and satellite internet systems—just as well as anyone in China, and often better. However, Elon Musk at his peak is the American manufacturer that China both fears and respects. It’s insane that Trump wastes Musk’s time on projects to shrink the American bureaucracy—an initiative abbreviated as DOGE, or unofficially the “Department of Government Efficiency,” when he should be leading another DOGE, one that gets more Americans “to do engineering.”

In summary, America needs to tighten up, but China needs to loosen up. That is why I want to salute Secretary of State Antony Blinken for pointing China in the right direction. According to Reuters, on April 26, after visiting China and meeting with Chinese President Xi Jinping, Blinken took a detour to LiPi Record Store in the capital’s art district.

Blinken bought two records—one was an album by Chinese rock singer Dou Wei, and the other was Taylor Swift’s 2022 album, *Midnights*. According to Reuters, Swift’s 2019 album, *Lover*, achieved over a million in streams, downloads, and sales within a week of release in China, setting a record for international artists. The demand from Chinese consumers is evident. I believe it’s time for Chinese leaders to allow their people access to more supplies. This would benefit both our countries.

https://www.nytimes.com/2024/12/17/opinion/us-china-musk-swift-tariffs-manufacturing.html

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