The next global economy led by you know who!

“When the power of love overcomes the love of power, the world will know peace.”―?Jimi Hendrix

The Next Global Economy - The West is losing

Having lived in China I studied the country's consumers, culture and political views. I was also interested in their global aspirations politically and economically. China is a communist run country with the fastest growing military in the world. Read More And who do they have to thank for that? The west looking for ways to drive out costs and increase their profits, we turned to China. It started in the 1970's. However, the last 25 years have been especially fruitful for China as they evolved into a major manufacturing hub for the world. Private businesses and state owned enterprises made a lot of money, as did the Chinese government. Millions of Chinese have come out of rural poverty joining the workforce even today. They now have a consumer economy that contributes to about 40% to their GDP.

Ironically more and more people in the West live pay-check to pay-check, ranging from 50-60% of families in the UK, EU, Canada and the US. Jobs in the west may be abundant but they are not raising everyone's economic wellbeing. The question now is have we given up too much and are we now faced with the superpower we helped create? Can we continue with a peaceful coexistence where there really is fair Guangxi (Win-Win) relations and equal for all. We may have some serious challenges ahead because the student has outgrown the master. And they don't agree with us anymore.

The auto sector is easy pickings for Chinese car manufacturers

As of late I have been spending time reviewing the auto industry and came across an article that says 福特 is considering selling a German plant to 比亚迪 the Chinese auto manufacturer read more . When I read this three thoughts came to mind. Why would Ford allow another competitor to enter Europe? Is it for the promise of greater trade in China? Second, it doesn't make sense because ultimately we are adding another competitor into the Euro market, and eventually in North America. It will cost jobs because of automation, and weaken existing players. Is that really smart? You're not about to sell more cars to Europeans or North Americans. That's not how it works. There will be losers, some car manufacturers may fail. Third, China is emerging not only above its days of being a manufacturing hub for the world and the largest consumer market.

Large western investors are betting on China

Large western investors are betting on China. Does that mean they no longer see growth in the West? A few days ago Charlie Munger a principle of Berkshire Hathaway said that BYD is way ahead of Tesla in China. Read more That's possible. But trashing an American business actually in the name of profits surprised me. It is very evident that 通用汽车 , 福特 and others have been too busy chasing Tesla and are not paying enough attention to the real threat to their industry. There may be a day of reckoning for western car manufacturers in China and now it may spread to their home countries and threaten their own growth.

Jobs:

Between the EU, Canada and the US over 7.0 Million manufacturing jobs have been lost because of trade with China. The US alone lost about 3.7 Million jobs between 2001 to 2018 Read More About one third went to China and the rest to automation and redundancy. While Governments did a lot to help businesses they didn't do enough to help workers. No wonder the crash of the housing market in 2007 was so hard, many were already out of work or losing jobs. We need a stop and think button for a number of reasons and we need it now! Because it is unexpected consequences that turn up later that we can't rollback. Of course, the argument will be made that we have new jobs being created everyday. That is true, but not everyone qualifies or they just don't pay well. As mentioned above China's Consumer contribution to GDP continues to grow, Canada's and the US has remained flat. It really is time to start asking the hard questions. The problem in today's tight job market may be that the workers who were in the service industry still are. It's just that the people who lost jobs from other sectors can't bring themselves to accept a lowering pay job or role. I suspect that governments wouldn't want to broadcast that too much either. China is also leading in Ai I am sure that will play a big role in modernizing their workforce and competitive capabilities. The west will have to do the same.

Retailing: From China with love

If China were to enter the Western markets with some of its retail brands it could end up with cost advantages that most retailers will never have. And it may even elevate service which will impact most existing western retailers who have been cutting back labor costs, especially at the front lines, over the last couple of decades. Do they have the kind of retail savvy that will give them an edge? Take a look at this group of retailers. They may not all be attractive but some will be able to compete. List of top clothing brands in China The downside for Chinese brands will be western sentiment over China's activities, it may be too soon for them to expand. However, if this were to happen you are also exporting values and culture. Are we ready for that? In many ways that is what trade is about because it allows for prosperity to spread, in theory equally and lessen the risks of conflicts. Of course, there is some truth to it. However, as Jimi Hendrix said, “When the power of love overcomes the love of power, the world will know peace.”

You be the political judge.

When it comes to the Chinese spy or weather balloon that the US shot down a couple of weeks ago, China issued a warning to the US that there will be consequences. Read More

In Canada, friends of China have been trying to influence elections according to our secret service. Read More And if that isn't enough we've already had illegal Chinese police stations in Canada Read More Actually they have been operating 100 police stations globally. Read More

US warns China not to provide lethal weapons to Russia Read More They most likely will.

Personal Log: What have we done?

In June of 2006 I was sitting in the back of a van with my wife and a real estate agent, driving around Shanghai looking for an apartment. I was overwhelmed by the sheer development of high rises and malls that were going on. Hundreds of luxury cars, modern subways, commuter buses, high end department stores and everyone with a mobile device. That was 17 years ago, my first impression of China if you can imagine was that of a 1950-60s booming economy in a modern world. It was amazing to watch. However after a busy day of hunting for a place to live I looked at my wife and said, what have we done? I was not referring to our move to China. I was referring to the disparity in growth that we were not seeing in Canada, US or Europe versus China. I knew this was real economic growth and opportunities. We did not have that. In fact, when I returned for Christmas in 2007 the market had already crashed and many people I spoke to were looking for a financial safety. Back in China entrepreneurs were still building businesses. We in the west do not have the same appetite for entrepreneurship that we think we do. Our tolerance for risk, for many of us, is limited to jumping to new jobs. I believe that this is the key to reviving the West. If we don't embrace innovation and the spirit of builders versus caretakers of companies we will limp into the 22nd century which is really a short 77 years away. It may not matter to you today however if we don't embrace economic growth that abandons the past and builds on the future that technology poses on us, we will begin to fall further behind and it will begin in the next decade as China rises. By then it will be too late to respond to the question of what have we done? Because it will be upon us. I am all for fair trade. I am not for trade that doesn't reciprocate in kind and instead sends balloons.

I know #LinkedIn doesn't make it easy to say you like this newsletter from your email. But it would be appreciated. Thank you for reading this week's edition. I have an essay I am doing for a magazine to be published in a couple of weeks on how retail will be impacted by Ai.

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