Huawei arrest, US-China relations and effect on electronics industry

[Wan Huang Luo]

Make no illusion. In China, everyone has to work for Chinese government, even seemingly anti-China propaganda spreaders, such as the Youtuber laowhy86 and his South African friend.

I was wondering why China tolerated that guy.

[bd139]

Everyone needs a bogeyman to point at and say "look at the irrational fool".

Back in the 1980s my father worked for a company who started another company on the side. The second company placed an advert in one of the local computer magazines advertising their services as fixed rate but really expensive. First company pointed at this in their adverts and said they were insane and got all the business. Same thing.

[Bud]

@edy: Sarbanes-Oxley Act establishes top executives' Individual responsibility for certain violations of financial regulations. They become individually accountable. This is in a different area maybe, but illustrates that individual managers may be held accountable.

[jmelson]

Just to focus back to the main topic... Apparently it is highly unusual to arrest an individual person that is part of a company when the said company is violating some kind of law.

There definitely have been arrests when export restrictions were violated.  I remember back in 2001, McDonnell-Douglas sold an old CNC machine tool to a permitted aviation shop in China.  That shop then transferred the machine to a military plant.  The company eventually paid a fine.  I'm not sure if jail time was sentenced, but I think some people were at least held in jail and then sentenced to time served.

Jon

[Rick Law]

Just to focus back to the main topic... Apparently it is highly unusual to arrest an individual person that is part of a company when the said company is violating some kind of law.

There definitely have been arrests when export restrictions were violated.  I remember back in 2001, McDonnell-Douglas sold an old CNC machine tool to a permitted aviation shop in China.  That shop then transferred the machine to a military plant.  The company eventually paid a fine.  I'm not sure if jail time was sentenced, but I think some people were at least held in jail and then sentenced to time served.

Jon

At times, arresting the individual is the only thing that make sense.  Take Costa Concordia sinking for example, 32 people drown because the Captain was reckless.  He took the ship off route and too close to shore.

To quote Daily Mail headline^[1], "[the captain] admits he WAS showing off to ship's waiter, a friend on shore and passengers when he attempted fatal 'salute' to island".  You can sue the cruse ship company, penalize the company for X million dollars and jail the conference room for 16 years - what justice would that serve?  It was the Captain, the most senior officer of the ship, he was reckless.   He was found guilty of manslaughter.  He was sentenced to 16 years in prison.  That was justice.

When the illegal/irresponsible act can be traced to particular individual(s), charging them make sense.  It follows that arresting them make sense also.

Applying that to the Huawei case, they will have to trace the act directly to the CFO for the arrest to be "proper".  It is possible that the hardball played by the USA may be just theater.  It would be better had Canada not been involved.  We kind of ask a friend to throw the rock instead of throwing it ourselves.

[Pure speculation here:]  That Canada became involve brings other thoughts into mind - could it be the case that she knew to avoid being on US soil?  If so, it may be indicative of her being aware of what she has done might not have been cool...

[1]
https://www.dailymail.co.uk/news/article-2857448/I-wanted-kill-three-birds-one-stone-Costa-Concordia-s-Captain-Calamity-admits-showing-attempted-dangerous-salute-island.html
 

[raptor1956]

Japan was different game back when,,,

Korean war needed a supply base and Japan took off.

Japan did not become a world industrial power post WWII because they housed some portion of the US military during the Korean war, they did so because US and western companies outsourced manufacturing to them as they were a place with low wages and smart people.  Before long the US and western companies that went to Japan to have products made more cheaply were put out of business by indigenous Japanese companies.  This same game is being played again.  It should also be mentioned that Korea itself benefited and rose to international significance thanks to some portion of world production moving there and the subsequent rise of indigenous Korean companies like Samsung. 

And that's really the point, the world is filled with people that production can be moved to when the current location gets too pricey.


Brian

[raptor1956]

You are delusional if you think the US would be harder hit than China.  The value of goods and services each country has with the other results in a balance of trade that hugely favors China so it, for example, the trade was to zero out then China would be impacted about 2X as much in dollar value as the USA and given the relative monetary systems the effect would in fact be more like 4X as much or even greater.  Mind you I'm not suggesting we engage in a trade war but having a balance of trade in the ballpark of -$500B every year is not sustainable.


Brian

The EU and Asia are not a country but a continent or group of nations and the USA is most definitely the country with the largest market on the planet and with that market has clout.

I know Americans don't like to hear it, but the US economy would fall flat on its arse if China decided to call it quits. Look at what gets sold in US shops and stores. It's mostly Chinese made. There's no other country or combination of countries which can fill the gap quickly enough to prevent disaster. It's not just that though. The Chinese own a lot in the US. That's a lot of leverage. Again, the Chinese aren't stupid enough to do that exactly because they own a lot of US assets and about 5% of US debt. You don't choke the life out of your own investments, even if the other threatens to put his own head into the noose.

I'm not getting into a discussion over the balance of trade that gets touted so often, but so few people actually seem to understand. Much more than "big number bad" it generally doesn't appear to be, despite actual economists being very clear about that not being a bad thing.

Yes, given the fact that a substantial percentage of goods sold in the USA is made in China there would indeed be trouble if a full on trade war broke out.  The Chinese would see enormous numbers of people thrown out of work while the US would have to employ millions to rebuild our manufacturing base.  There would be problems for sure but the rebuilding would begin the turnaround.


Brian

[coppice]

Yes, given the fact that a substantial percentage of goods sold in the USA is made in China there would indeed be trouble if a full on trade war broke out.  The Chinese would see enormous numbers of people thrown out of work while the US would have to employ millions to rebuild our manufacturing base.  There would be problems for sure but the rebuilding would begin the turnaround.

A huge number of jobs can be automated which are not automated while labour costs are low. China has lost an enormous number of jobs to low cost labour countries over the last decade. Most of its clothes manufacturing went to Indonesia and Bangladesh, because that was cheaper than automating the work. It has automated other work, and kept it on shore, but with much lower employment. If it becomes uneconomic to manufacture in China the assembly jobs which are hard to automate will move to countries with better tariff conditions. The jobs which can be automated may move to the US, creating new factories but little employment. The limited number of jobs those factories do create will require highly skilled people. Do enough suitable skills exist in the US?

[cdev]

Classical economics would tell us that as the number of jobs shrinks globally wages would fall, not rise. At least thats what economists say about it.

This is why they want to liberalize services, so companies located in high wage countries can take advantage of the cheap labor in various ways. As the tale goes, the Global South nations "demanded it".

The problem with that plan is that things are changing so quickly, even with access to cheap labor its quite likely there will be a large net loss in jobs and sales nomatter what they do if they do that as planned.

Plus that will be throwing away the developed world's trust in the system and the social contract that was hard won after the Depression and WWII.

So many people might stop buying that the global economy might collapse.

[beanflying]

Yes, given the fact that a substantial percentage of goods sold in the USA is made in China there would indeed be trouble if a full on trade war broke out.  The Chinese would see enormous numbers of people thrown out of work while the US would have to employ millions to rebuild our manufacturing base.  There would be problems for sure but the rebuilding would begin the turnaround.


Brian

You seriously you think a complete breakdown of trade with China would hurt them but the USA would magically employ millions to rebuild its manufacturing base and turnaround using pixie dust and miracles? 

Perhaps the more likely outcome would be you rely more heavily on the other low cost countries for your imports and your manufacturing base remains in its current state or worse due to the damage this decision would to to your already perilous economic state.

[bd139]

What manufacturing base. All the tools and equipment and materials are made in China 

You sold out. Can't go crawling back now. It'll be like the Russians eviscerating the heavy machinery and production capacity from the Eastern Bloc. A 30-40 year mission to build everything from scratch again.

[IconicPCB]

And now for a sobering thought....

Imagine China with a middle class consumer base of 300 million consumers.

Wait... that's a reality.. Chinese middle class is approximately the size of American population.

[BrianHG]

The low-down so far:

[beanflying]

Makes more sense than the 'Truth' you might get on FOX or similar. Not one of subscribers but from time to time his videos run across my recommended ones on youtube and I do like his tongue in cheek style if not always his take on something.

[cdev]

Its impossible for any of us outsiders to even remotely grok the huge problems of mega-countries like India and China, which both have over 1.5 BILLION people.

Thats almost half the world's entire population in those two mega-countries alone.

[Mr. Scram]

What manufacturing base. All the tools and equipment and materials are made in China 

You sold out. Can't go crawling back now. It'll be like the Russians eviscerating the heavy machinery and production capacity from the Eastern Bloc. A 30-40 year mission to build everything from scratch again.

Meanwhile, China has plenty of other markets to sell to. Asia is a massively larger market and the EU is larger too. Cutting trade relations with the US may dampen growth somewhat, but it won't be the total reset scenario that the US has to face while they essentially build their manufacturing from scratch. The US needs China more than China needs the US.

But once more, China won't do that. They own a fair part of US assets and debt. Why would they burn down the house of which they own the kitchen? They want control, not complete destruction.

[cdev]

China is in a better economic situation than many other developing countries. But look at all that pollution. Thats a ticking time bomb as far as their health is concerned.

[raptor1956]

Yes, given the fact that a substantial percentage of goods sold in the USA is made in China there would indeed be trouble if a full on trade war broke out.  The Chinese would see enormous numbers of people thrown out of work while the US would have to employ millions to rebuild our manufacturing base.  There would be problems for sure but the rebuilding would begin the turnaround.


Brian

You seriously you think a complete breakdown of trade with China would hurt them but the USA would magically employ millions to rebuild its manufacturing base and turnaround using pixie dust and miracles? 

Perhaps the more likely outcome would be you rely more heavily on the other low cost countries for your imports and your manufacturing base remains in its current state or worse due to the damage this decision would to to your already perilous economic state.

Didn't say that, yes a full scale trade war will be devastating to both sides and that certainly includes the USA.  However, if the USA then focuses on rebuilding its manufacturing that WILL employ millions and that will offset and ultimately reverse the damage.


Brian

[raptor1956]

What manufacturing base. All the tools and equipment and materials are made in China 

You sold out. Can't go crawling back now. It'll be like the Russians eviscerating the heavy machinery and production capacity from the Eastern Bloc. A 30-40 year mission to build everything from scratch again.

Not quite, the USA has lost about half of its manufacturing base and if current trends continue it will all be gone in about 40-50 years.  But, that still mean we have a fairly substantial manufacturing base even now. 


Brian

[cdev]

The last few factories Ive been in have been big spaces where a lot was going on but not very many almost no people. The era of large scale manufacturing employment - at least of human workers, is quite likely almost over.

"E-commerce" is being looked to as some kind of savior in many countries and thats an even bigger mistake.

Obviously those folk have no idea what e-commerce actually involves. Its not a job creator either, compared to what it replaces.

[coppice]

What manufacturing base. All the tools and equipment and materials are made in China 

You sold out. Can't go crawling back now. It'll be like the Russians eviscerating the heavy machinery and production capacity from the Eastern Bloc. A 30-40 year mission to build everything from scratch again.

Not quite, the USA has lost about half of its manufacturing base and if current trends continue it will all be gone in about 40-50 years.  But, that still mean we have a fairly substantial manufacturing base even now. 

Brian

The 50% the US lost is not evenly distributed. The US lost most of some types of manufacturing, and very little of others. The areas where there are few skilled people left in the US may be very hard to restart.

[beanflying]

Didn't say that, yes a full scale trade war will be devastating to both sides and that certainly includes the USA.  However, if the USA then focuses on rebuilding its manufacturing that WILL employ millions and that will offset and ultimately reverse the damage.


Brian

  If it were viable in anyway why isn't it already being done? It would remain nonviable even in the case of China being excluded. Walmart and Costco would just switch to another Asian Country for it's stock.

Simple economics tells us it isn't viable and practical to make $20 toasters and kettles in a Western wage earning economy even with the most automated factories. Interested to know how you think the USA can make low end products to compete on price without using pixie dust?

One of your large remaining industries vehicles even with handouts and tariffs for protection is shrinking with continuing job losses. Not terminal yet but they had better sort it out before it gets added to the pile of industries in an unrecoverable spiral. Protection doesn't work!

[cdev]

Thats just acting, beanflying. Posturing, Acting, look up "overcompensating".

The people who run this country are greedy. They don't want to invest money in educating people because under their ideology it makes no sense to employ them. So they have to pretend they are trying to preserve low paying jobs. This is happening all around the world in every country. The leaders actually couldn't care less.

They don't want the responsibility at this point in history of the expectations put on them that they will act in our best interests because they want to act in their best interests which are very different than ours.

They are pretending in a really evil and cynical way that anybody who can read and write and show up to work can get a good job but they know its bullshit, or course. That hasn't been true since the 70s. The same thing with health insurance.

In many cases they are doing this because they simply don't care about most people. Its not personal, they just don't care. They would like the growing numbers of poor people to just go away, and 'become somebody else's problem'. as they put it.

They are profoundly clueless people who sometimes almost always literally had everything handed to them on a silver platter. They don't know why voters expect so much since we're not the ones paying their campaign expenses. Most are just indifferent, however the worst of them are really evil, mean spirited people. Who would prefer to give the good jobs to others, elsewhere.

They resent the middle class perhaps because narcissists generally dislike "needing" people for any reason, so they tend to try to devalue the worth of people with practical skills. They are fighting an old war between management and labor.

Which is really short sighted.

I wouldn't be surprised if many other countries leadership right now were similar. It seems the world is going through hard times as far as leadership goes.

[beanflying]

Leadership by popularity and because of connections made or inherited then driven by polls. Yep that works for the good of no one  Australia is not much better and you need to go back a good number of years to find good leadership and government 'for the people' rather than 'for our sides particular ideology'.

When I made my first trip to the US for work a bit over 25 years ago the thing that struck me even then was the disparity the top and bottom of society. The idea of helping yourself rise up and the American Dream were in places no where to be seen at that time. Dropping South of the Loop in Chicago for the first time was interesting to say the least. The factories I went to at the time looked like they were stuck in a time warp and in need of capital spend even then.

At least here we have a reasonable chance no matter how poor your family may be of going on to University (albeit you leave with a debt) and thanks to Universal Free Public Health even the less well off don't suffer poor health outcomes.

Viva La Revolution

[VK3DRB]

If Wun Hung Lo has not done anything wrong, why are the comrades in the People's Hypocrisy of China so upset? This issue has exposed the hypocrisy and elitism of the Central Committee of the so-called Communist Party. Any wonder why reporting the elite's personal wealth will make you disappear in China.