For decades, Wall Street and US corporations ran after the promise of the rising Chinese client. As Chinese families enriched themselves, money could be earned by promoting everything, fried bird in Fendi. American corporations such as Starbucks, Apple and Nike intervened to absorb market share. Of course, there were some boycott and recessions, but the trend of returns was ascending and correct. And while the excellent promotion of the Chinese client was as inevitable as the Chinese Communist Party stated, the profits would multiply. It was the story. It was the Gospel. But now collapse.

The Chinese customer, once prosperous, is languishing. U. S. corporations are squandering market share for their China-based rivals. Plagued through political and economic forces, American brands can no longer rely on China for their growth. This adjusts the calculation of risk. Why invest heavily in a market plate market that excludes you?Without the promise of profits, U. S. corporations are also unwilling to fight for China, reinforcing the concept that the Chinese Placeplaceplace marketplace is for their long-term success. Beijing is finding itself increasingly hostile to Washington, and the weight of U. S. -China appointments is shifting from building mutually favorable economic ties to balancing competing national security interests. Instead of seeking to resurrect the Chinese client and, through extension, re-establish the essential economic ties with the United States, its leader, Xi Jinping, does not seem to care.

“Xi doesn’t wake up every day, look at the economy, and panic,” Lee Miller, the founder of the survey firm China Beige Book told me. “He thinks they’re doing what they need to do, and it’s painful medicine.”

What China will have to do, in XI’s mind, is to become indestructible and indispensable. This means supporting state companies and other national companies, giving them an advantage in the market while competing with foreign corporations for a portion of China’s reduction. Economic foot. That means obtaining the rest of world addicts to Chinese products, not only reasonable manufactured products, but also avant -garde technologies such as semiconductors, batteries and AI, as well as the products that make up the posterior current of its source. Chain, such as Gallium and Germanium. Supply to me, but not for you. This is such an unbalanced strategy that demands situations that the rest of the global act. And that does not come with other Chinese people who become addicted to frappucinos made through an American company.

Part of the peace between China and the US has been the notion that we can do business with one another even though we don’t share the same values. The US strives to be an open society; China is increasingly closed. We may butt heads in the South China Sea, over Taiwan, over resources across the globe, but it was money that kept us together. Without access to the Chinese consumer, US stakeholders have less reason to see China as a market and more reason to see it as a menace.

After the end of the blockages related to the pandemic in 2023, the Chinese economy experienced what Wall Street calls the “rebound of the dead cat. ” Imagine that a dead cat is dropped: it can bounce on the ground for a while, but then it does not happen anywhere. Similarly, China’s decimated economy experienced some recovery after Covid restrictions ended in 2023, but a year later the stage seems gloomy. The 5% Beijing GDP expansion objective – sometimes considered a safe opportunity – is now blatant. The debt in the asset market continues to weigh on the economy and government bets to an export boom do not seem to be paying off. Prolonged deflation erodes the price of Chinese currency and finally forces the country to sell more exports to earn the same amount of money. Unemployment among Chinese young people between 16 and 24 years old reached 17. 1% in July, which forced a new class of graduates (often) over would compete for low -wage jobs. They are called “the young people of the rotten tail. ” Brutal.

During past slowdowns, the Chinese Communist Party reacted by pulling the financial gun: spending on infrastructure, housing and maintaining employment. He turned the wheels, but each circular left the country with an even bigger pile of debt. There is only one way out of a turn like this: a painful era of debt repayment that can erase demand from an economy. XI to suppress the silver gun while doing nothing to help medium-sized Chinese families as the economy shrinks. XI told party members in July to show “unwavering faith” in his wonderful economic strategy, but he paid them in dust. Earlier this month, in a rare divergence from XI policy, former People’s Bank of China chief Yi Gang said the government deserves to interact on some kind of stimulus to achieve its already deep growth goals. The inflation that exists in the economy, as noted by Carnegie Foundation founder Michael Pettis, is due to an increase in food costs due to shortages, a slight sign that things may become circular.

American corporations have felt this burn. Earlier this year, Apple’s Chinese iPhone sales fell 24% and have continued to decline since. Starbucks, which has more than 7,300 outlets in China, has seen a 14% drop in comparable point-of-sale sales (the source of revenue generated through a retail position compared to its results in the past) in the second trimester. The misfortunes of Nike porcelain have contributed to its collapse of almost 30% of the percentages. Foreign car brands are also crushed. Tesla (yes, even Tesla) saw its Chinese market share in the electric vehicle market go from 9% to 6. 5% in the first seven months of the year. Reacting to the reports, CEO Elon Musk said: “Believe the news is nonsense. Our Shanghai factory is running at full capacity. ” In other words: no. In a recent survey of members of the Chinese American Business Council, China’s economic expansion was American corporations’ moment of fear about the country, a “real constraint that was unthinkable just a few years ago. ” The Council said a quarter of its members had cited “inadequate requisition or excess capacity as the number one constraint on profitability this year”.

What Chinese consumers can still spend is increasingly for corporations that have grown up in their country of origin. Chinese telephony brands eat Apple’s lunch, with Huawei smartphone sales that expand 70% in the first 3 months of the year. Starbucks opened his first store in China in 1999 and was considered a status symbol, but now he has a more inflexible festival of Chinese brands such as Luckin and Cotti Coffee. It is not an accident; This is a component of XI plan to free China from foreign dependence and influence. In the United States Affairs Council survey, 80% of respondents declared that “the industrial policies of China’s corporations that were in the non -competitive past” and that the Chinese competition festival was the third highest with respect to business there. . Yes, US corporations are still earning effective in China. But it is increasingly uncomfortable, and the Magic 8 ball says that the attitude is not good.

The United States elite monetary companies will continue to tell you publicly that they plan to continue investing in China, even if the investment banking activities in the country are, as JPMorgan’s executive director, Jamie Dimon, “fallen from the cliff. ” However, behind closed doors, the influential actors of Wall Street are doing another thing. It is not only about economic certainty, but also about political climate. It is difficult to do business in a country where knowledge and other people continue to disappear. The converting attitude of Wall Street is reflected in cash flows to China: direct foreign investment is at its lowest point in 30 years, and from June to (to where we know) early August, investors withdrew 12,000 million dollars of the Chinese stock market. This could make 2024 the first year of capital exits in China. But we may not know for certainty because, given the inventory dumping, China made the decision last month to publish information on net investment flows of the foreign budget to the inventories of the continent.

The decline in ties between China and Wall Street is noteworthy, not because I think other people in Shanghai and Beijing will miss drinking Moutai with Goldman Sachs Bankers, but because Wall Street is a tough best friend in Washington. They organize meetings between interested parties and communicate about the benefits of the inter-Pacific relationship. Once upon a time, Ray Dalio, the founder of Bridgewater Associates, the world’s largest hedge fund, would tell you (global politicians, investors, who read one of his many books or blog posts) about China’s bright future. Now he tells everyone that he is minimizing his exposure to the country and that there will not be “much deterioration” for China. This is the last thing Beijing wants to infiltrate the minds of American policymakers. A former East Asian State Department official told me that China is sending CCP delegations to DC as MAD, but no one will meet them. Without allies, Washington is a lonely (or hostile) position for foreign governments, especially when those foreign governments have developed an economic strategy that can potentially harm our economy.

“We’re headed for some other industry war no matter who’s president,” Miller told me. “The economic style Xi needs is not compatible with the rest of the world. The mentality is to look at it from an attitude of national security rather than an economic attitude. “

However, there are distinctions between what President Kamala Harris and President Donald Trump would mean for this industrial war. The Harris camp would continue with a more progressive strategy, focused on covering generation-like industries and national security, and more concerted with our allies, an organization that the CCP began to abrogate “to the western United States. “Providing the United States, as the cause of our industrial policies, with kicks and screams, Trump would create more chaos and disunity between the United States and its allies, which would serve Beijing in publicity wars. However, you’ll probably surround yourself with a lot. More competitive Chinese advisors. and to have a wider diversity of opinions on how to attack the Chinese economy – a bullish strategy in a china store, if you prefer. For Beijing, the challenge is that this rebel organization will be more likely to cross its red line: Taiwan. and Trump has no attention and the temperament to prevent them. The CCP has a plan on how to manage an industrial war, a kinetic war against Taiwan is far more unsettling for it and for the planet as a whole.

In addition to the White House, Beijing has a blind spot here. The House Financial Services Committee, once willing to let Wall Street invest freely in China’s economy, cannot agree on the strict standard of making an IT investment. Some need to go through hard times; Others need to go harder. China’s elected bipartisan committee has no challenge in drawing cautionary shots to some of China’s last allies, the semiconductor corporations. Broadcom and Nvidia. These corporations, in turn, love the billions they make in China. But in a series of tweets, the Election Committee suggested that the Biden management forget about the semiconductor lobbyists running in Washington.

“We urge the Biden Administration to maintain the strong export controls put in place in October 2022,” it said. “Weakening these measures would raise serious concerns about safeguarding U.S. technological leadership and our national security.”

“If those [Semiconductor CEOs] believe that the current US export control policy is bad for the US economy and our national security,” the text continues, “then they want to make this point publicly, perhaps before a congressional committee “.

Miller told me that a technological decoupling between the United States and China is no longer a challenge for Congress: it is a goal. “Much of this is to speak with US corporations that have a significant participation in China and say: ‘They can’t do this,” he said. “Well, guess what? There are compensation. At this time, we are not paying a sufficiently high value for intelligent policy. “

The price of this shift cannot be quantified in corporate profits. It cannot be quantified in dollars at all. Cordell Hull, the US Secretary of State from 1933 to 1944 and recipient of the Nobel Peace Prize, once said, “Unhampered trade dovetailed with peace; high tariffs, trade barriers, and unfair competition with war.” Putting national security, rather than economic cooperation, at the center of the US-China relationship centers it in a space where the two great economic powers are antagonistic. It gives corporations, already under financial pressure as China’s economy declines, even less reason to act as interlocutors encouraging stability between Washington and Beijing. It leaves us living in a more precarious world.

López Linette is a correspondent for Business Insider.

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