China’s increasing strengths and weaknesses should sound alarms for companies producing and sourcing there. Military strength is up; economic growth is near zero and uncertain; and foreign companies are less welcome. The possibility of voluntary decoupling by China or a military incident over Taiwan are increasing. Additional considerations include the ongoing labor shortage; rising wages; and the recent announcement that China’s zero-Covid policy will continue through at least 2027.

We focus on China because it represents 33% of the U.S. goods trade deficit and has been the source of 44% of reshoring. As U.S. companies recognize that China will not be as good a market as in the past and an unreliable source of goods, they will increasingly choose to reshore.

China Is Giving Off Strong Lehman Brothers Vibes  Xi keeps going missing, the economy is on the brink and people are getting restless.

Beijing Doubles Down on Zero COVID China announced that the Zero Covid policy will continue until at least 2027. Watch the video or see LinkedIn discussion here.

Jeep’s China Failure Sends Foreboding Signal to Global Carmakers  China is not as hospitable as in the past. “The golden era of brisk growth and abundant profits for international companies and their local joint venture partners is over.”

China more aggressive, dangerous to US, allies “U.S. military officials have said Beijing wants to be ready to make a move on the island (Taiwan) by 2027.” “The message is the Chinese military, in the air and at sea, have become significantly more and noticeably more aggressive in this particular region,”

U.S. Officials Grow More Concerned About Potential Action by China on Taiwan Learning lessons from the Ukraine, China could make a move soon, before Taiwan can build up its military arsenal.

Moving Production from China and Taiwan Matters More Than Ever “World events far more powerful than any industry trends can render all supply-chain microplanning moot.”


What should the US be doing?

Companies need to prepare for deteriorating U.S.-China relations. In June, Harry Moser arrived at the senate to present a testimony to the U.S.-China Economic and Security Review Commission outlining the needed actions by companies and government. While there are many pieces to the puzzle, the number one objective toward reducing our dependency on China is to improve our cost competitiveness. The first policy is to massively improve the quantity and quality of our skilled workforce, to be more like Germany. The testimony below details this and other needed policy changes.  View Harry Moser’s oral Hearing, written testimony and supporting appendices. In the video Harry presents at 7:45.