China Likely Will Agree to Trade Deal to Minimize Decoupling

The US administration has stopped talking about soybean-purchase agreements and begun talk of decoupling.

Is it geopolitically prudent for a large part of the US industrial supply chain to be inside of China? Why are American companies allowed to transfer critical technologies to China in exchange for short-term market access?

A study titled ‘2015 Global Innovation 1000’ by Strategy& and PwC, looks at key trends of the 1000 global organizations that spend the most on R&D.

American firms are moving their R&D operations to China not just to take advantage of lower costs, but to be in close proximity to their supply chains. About 50 percent of foreign R&D centers in China are now run by American companies, helping China achieve first place in market share for manufacturing R&D.

American policy toward China is seeking to prevent American businesses from speeding the rise of an adversary. Tariffs are one piece of an emerging anti-China strategy. The Trump administration is rolling out new export controls to limit the transfer of sensitive technologies such as AI and quantum computing. They have blacklisted high-tech Chinese firms such as the telecom giant Huawei from doing business in the U.S.

China is working to reduce its dependence on foreign wide-body airplanes, semiconductors and oil and gas.

There will be decoupling on both sides. If the Trade War is resolved then it will be partial decoupling and diversification of supply chains rather than complete separation.

SOURCES- National Review, 2015 Global Innovation 1000’ by Strategy& and PwC
Written By Brian Wang, Nextbigfuture.com

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