The Road to War: The War For Manufacturing and Cold War 2.0

With TPP in the process of being ratified and the American presidential race well under way, focus has again returned to the war for manufacturing (and manufacturing jobs) and its future in America.  Boston Consulting Group released a remarkable survey a few weeks ago, which can be viewed here (pdf), here (slideshare) or here (scribd).  It's worth posting the executive summary here to see its significance:

Executive Summary

Key takeaways from BCG's fourth annual survey of U.S.-based manufacturing executives

1)  Interest in reshoring production to the U.S. remains strong, and the percentage of companies actively moving operations back to the U.S. continues to increase

Turning Point for China’s Economy?

Uh oh.  Have we finally reached the turning point for China's economy?  Per Caixin:

 

(Beijing) – China's services sector continued to expand in December, albeit with less strength than in previous months, according to the latest Caixin China Services Purchasing Manager's Index.

December's index of 50.2 pointed to nationwide expansion for service business in general, even though the figure was down from 51.2 in November. It was also the second-lowest figure for the sector since record-keeping began in November 2005. The weakest services PMI ever recorded was 50 in July 2014.

Exposure to China’s Slowdown

Here's a short video from FT exploring the effect of China's economic slowdown on its major trading partners.  Outside of the commodity exporters, the takeaway seems to be that the slowdown won't affect the developed world to a significant degree, at least not directly.  Here's the key screenshot:

 

China Trade Links

 

And the video:

 

One Belt, One Road: Not So Easy

While many in the West wring their hands and Chinese analysts exult over China's "One Belt, One Road" (OBOR) initiative to invest in large-scale infrastructure construction and expand China's trade dominance overseas, this story from Caixin illustrates several reasons why OBOR may be harder to implement than is commonly assumed.

The story revolves around the construction of a gigantic luxury resort in the Bahamas, and the players include: China State Construction Engineering Corp. (CSCEC), a Chinese state-owned enterprise and one of the largest contractors in the world; the China Import-Export Bank, which financed the project to the tune of USD $2.34bn; thousands of Chinese workers, who were shipped overseas to work on the project; the government of the Bahamas; and Baha Mar Ltd., the project owner. 

Schadenfreude: Does the US Benefit From China’s Troubles?

The WSJ presents a provocative suggestion: the economic slowdown in China could end up benefiting the United States.

http://www.wsj.com/articles/china-slowdown-could-end-up-being-good-news-for-u-s-1441734057

China’s economic slowdown and Beijing’s fumbling policy response have battered U.S. markets recently. But a slower-growing China, over the long haul, could be a plus for the U.S. in several ways.

On the economic side, a China slowdown would keep a lid on consumer prices as weak demand in China would depress the price of commodities such as copper, oil and steel used in cars, electronics and other consumer favorites, economists say.