Shenzhen put under glass: our economy is suffocating

Published March 17, 2022


In China, as soon as a case of infection appears, entire cities, ports or manufacturing centers are destroyed or even paralyzed. Once again, this scenario has just been repeated on a grand scale. As of March 14, 5280 cases have been recorded, which may seem ridiculous for a country of this size. On the same day, France lifted most of the restrictions when there were 4 times as many new cases. Under the draconian zero covid strategy ordered by Xi Jinping, the Chinese authorities have decided to restrict the 17 million people in the Shenzhen region, China’s Silicon Valley.

From an economic standpoint, this means the paralysis of China’s leading export port, the closure of its largest technology center, the closure of Taiwan’s Foxconn, which assembles Apple’s iPhone and Samsung’s Galaxy, and the freezing of SMIC (the international semiconductor manufacturing corporation). ), the main Chinese semiconductor manufacturer, while the market for these products is already very seriously disrupted.

Other regions were affected by similar measures, in particular Changchun, a city of 9 million people located in northeast China. The three factories of the Volkswagen concern, located there, were forced to hastily close their doors.

A total of 40 million people have again been imprisoned in highly coercive measures: only one person per household is allowed to go outside for supplies once every two days.

The first lesson to be drawn from these facts is the dead end that the authorities’ persistence in driving their country into an illusory medical bubble leads to. Most of the population is not immune to the virus, while the country has banned any use of foreign vaccines and there are still no effective vaccines.

The second is the inability of dictatorial regimes to challenge the decision of the center. The few voices that are raised to say that it is possible to live with the coronavirus are silenced. As the Eurasia Group think tank noted last January: “ The initial success of zero coronavirus and Xi’s personal attachment to it makes any change of course impossible.”

This state of affairs is a great risk for the global economy in general and ours in particular.

Chinese style by all means

Due to the implementation of a strategy that is now inadequate but dictated solely by political imperatives, the Chinese economy should have a very bad year in 2022, with growth half that of 2021.

But we must also suffer directly and indirectly.

Indirectly, because China is the largest contributor to global GDP, which the IMF predicts will account for a fifth of global growth over the next five years. When the Chinese locomotive slows down, the entire economy of the planet suffers.

Directly, because the decisions made in Beijing will be provocative, according to Thierry Breton.” stop in value chains The European Commissioner for the Internal Market adds: and automatically if it lasts it will have consequences “.

These consequences, which are likely to be severe, further underscore our blindness.

Blindness of Europeans.

The third lesson to be learned from China’s repeated restrictions is the extent to which we rely on the assembly and production of electronic components that have become essential in information technology, telephony, automotive, aeronautics and electronics, and defense. In this case, the decisions made in China could at any moment weaken all of our value chains, whether in the assembly of consumer electronics, the supply of components or the production of automobiles.

Here we have a small idea of ​​what might happen if China decides to gobble up Taiwan, just like Ukraine is being taken over by Russia. A stone’s throw from the Chinese coast, in Taiwan, there is TSMC, which has a virtual monopoly in the production of these latest generation chips, which are absolutely necessary for Europe, but cannot produce them themselves.

This total dependence is not the result of chance, but of illusion, illusion fairy, a factoryless company, is a fantasy born in the minds of our elite, convinced that they can solve a social problem while avoiding pollution problems. The events of the last two years clearly confirm the fallacy of this approach. They show that the globalization of technology has reached its limit and now it is necessary to adapt to a geopolitical environment that has become very unstable.

We are taking big steps towards a more closed world. The challenge is to draw conclusions without dismissing liberalism, which raises the question of what role the state can legitimately play in promoting the necessary changes.

become sustainable

The role of companies is to reduce our dependence through large investments, especially in the field of semiconductor design and manufacturing. The task of public authorities is to support them by enabling them to find the best solutions without forcing them to choose one or another technology.

Decreasing our dependency also means a return to the fleet electrification march imposed by the big blows of European decrees. Once again, market mechanisms were not trusted to find the optimal solution. However, simply observing the signals that prices are would put consumers on the path to viable sobriety. They clearly indicate that the cost of producing heavy and powerful vehicles using complex technologies that consume large amounts of rare metals and electronic components will become prohibitive.

By massively subsidizing these vehicles, which are far from economical, the state is temporarily hindering this inevitable development, when its role should be to support the search for more economical mobility solutions by private players. This is an option that was seriously considered ten years ago, when the then government took up the topic of the car of the future. Launched in 2012 and included a year later among New Industrial France’s 34 plans, the V2L plan aimed to develop an affordable car that consumes less than 2 liters of petrol per 100 kilometers by 2020. Several hundred million euros of public money were allocated for the project.

The result was a hybrid air technology developed in connection with a future investment program created by the government and in partnership with equipment manufacturers Bosch and Faurecia. This device, which did without a battery, combined gasoline and compressed air. This allowed the energy recovered during deceleration and braking to be stored in the batteries, with very promising results.

But what happened to the V2L plan? What happened to hybrid technology?

This once again raises the question of the correct use of state support measures, which can be fruitful when they are limited to supporting private initiatives as stimulating and targeted ones. It is still necessary that public authorities have a minimum continuity of ideas.

One might also wonder why not everything is being done to effectively manage the market for refurbished electronics (computers and mobile phones), where the law of the jungle still reigns. Just as what are they waiting for to bring order to the processing sectors, the functioning of which leaves much to be desired?

It would be so many simple ways to reduce the fragility of the value chains we have become dependent on, and so many questions that the Shenzhen closure raises again.

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