{"id":50961,"date":"2020-02-05T16:55:40","date_gmt":"2020-02-05T21:55:40","guid":{"rendered":"https:\/\/olduvai.ca\/?p=50961"},"modified":"2020-02-05T16:55:46","modified_gmt":"2020-02-05T21:55:46","slug":"when-chinas-supply-chains-break-so-will-the-delusion-the-u-s-economy-is-invulnerable","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=50961","title":{"rendered":"When China’s Supply Chains Break, so Will the Delusion the U.S. Economy Is Invulnerable"},"content":{"rendered":"\n

When China’s Supply Chains Break, so Will the Delusion the U.S. Economy Is Invulnerable<\/a><\/h3>\n\n\n\n

Was it ever plausible that China’s economy could grind to a halt and there wouldn’t be any consequences for the U.S. economy? No.<\/em><\/p>\n\n\n\n

Many commentators talk about supply chains in China, but how many have actually visited factories in China, other than carefully choreographed PR visits<\/strong>\u00a0to suitably high-tech facilities? I’ve visited many factories in China, and not with a staff of minders who swiftly guide the visitors through the\u00a0happy story<\/em>\u00a0of high-tech wonderland.<\/p>\n\n\n\n

I’ve visited some high-tech facilities but also many low-tech factories, where most of the supply chain originates, usually with one or two bored local government functionaries. You get a much less distorted view of the supply chain on the ground, away from the carefully guided tours.Since we weren’t important visitors, nothing was staged. Workers glanced at us, as in\u00a0what are they doing here?<\/em>, but otherwise we simply observed everyday operations.<\/p>\n\n\n\n

As I’ve reported here for a decade, profit margins in the vast majority of these supply chain companies are wafer-thin<\/strong>, with 1% being bandied about as a typical profit margin. Due to the extremely distorting way imports and exports are recorded, as little as $10 of every $400 iPhone “imported” from China actually stays in China as wages, overhead and profit.\u00a0We estimate China only makes $8.46 from an iPhone<\/a>.<\/p>\n\n\n\n

Most of the high-value components are manufactured elsewhere in the world, and all the profit and overhead flows to Apple HQ in Cupertino, California.<\/p>\n\n\n\n

The reality is that much of the supply chain is at risk of financial collapse.<\/strong>\u00a0Many if not most of the thousands of spontaneous protests in recent years in China are not political; they’re workers demanding back pay or promised bonuses from shuttered supply-chain companies.Here’s how bankrupt supply-chain factory owners deal with bankruptcy: they leave in the middle of the night and vanish.<\/p>\n\n\n\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

When China’s Supply Chains Break, so Will the Delusion the U.S. Economy Is Invulnerable Was it ever plausible that China’s economy could grind to a halt and there wouldn’t be any consequences for the U.S. economy? No. Many commentators talk about supply chains in China, but how many have actually visited factories in China, other […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[130,587,827],"class_list":["post-50961","post","type-post","status-publish","format-standard","hentry","category-economics","tag-china","tag-of-two-minds","tag-united-states"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/50961","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=50961"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/50961\/revisions"}],"predecessor-version":[{"id":50962,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/50961\/revisions\/50962"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=50961"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=50961"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=50961"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}