Several important trends are continuing, from businesses ditching China to record gun sales and rising gas prices.
Manufacturers Continue to Leave China
The rush of U. S. companies leaving China is accelerating. Meanwhile, businesses in other democracies are joining the exodus.
The Chinese government denies this mounting trend. The best they can do to support this claim is to cite a 2020 survey by the American Chamber of Commerce in Shanghai (AmCham). That report said 71 percent of 200 member businesses polled did not plan to leave China. Which means 29 percent do.
A more independent survey by Gartner, a global research firm, showed a slightly higher movement out of China. It reported 33 percent of 260 “global supply chain leaders” have left or plan to leave China by 2023.
Can You Trust the Surveys?
The actual number of companies leaving China may be higher than the surveys show.
That is because survey respondents might not want to tip their hands on plans to leave China.
Beijing can take harsh actions against companies planning to move out of the country. The government can take proprietary data, charge exit fees, and seize assets.
Covid and related supply chain issues are also factors for the exit of manufacturing from China. However, there is more to it.
China and the United States Trade War
China and the United States have been in a protracted trade war for a couple of years now. Tariffs make Chinese-produced products more expensive.
As a result, Chinese companies are not catering to American companies, according to Doug Donahue, founder of Strategic Footprint, a firm that helps businesses end offshore subcontracting.
“Chinese companies appear increasingly willing to prioritize customers from countries Beijing sees as stable, predictable business partners, moving American companies to the back of the queue.” writes Donahue in Forbes. “The trading relationship with the U.S. has moved from cooperative to combative, as many Chinese companies have declined or delayed orders from American customers.”
Other factors are contributing to manufacturing moving out of China.
China’s Intellectual Property Theft
One of the long-standing frustrations of companies and countries is China’s approach to intellectual property theft. The IP Commission Report, update in 2017, estimates “that the annual cost to the U.S. economy continues to exceed $225 billion in counterfeit goods, pirated software, and theft of trade secrets and could be as high as $600 billion.”
Human Rights
The Chinese government has viciously trampled on the rights of its people for decades.
Last year was particularly harsh. Beijing threatened Wuhan health officials who tried to alert the world about COVID. Wuhan is where to COVID outbreak originated.
Authorities in the Xinjiang region are holding Turkic Muslims in “political education camps,” according to a Human Rights Watch report. Many of those released from these camps are pressed into slave labor in factories and fields
Hong Kong Attack
Attacks on Hong Kong’s autonomy have also caused international companies to head for the border. Beijing has replaced pro-democracy officials with Communist Party functionaries who have dramatically attacked free speech.
Gas Prices Riding Higher
A Trump supporter recently told my wife that President Biden was responsible for high gas prices. However, rarely, if ever, are presidents responsible for gas prices.
Factors That Boost Gas Prices
Some things are out of a president’s control, such as weather, supply and demand, and OPEC Plus. The latter is a confederation of oil-producing countries. All three factors combined to boost gasoline prices as the nation emerged from the first round of COVID setbacks earlier this year.
Low Demand Triggers Gas Price Drop
Drillers and refineries slowed production during 2020 because demand plummeted as the pandemic took hold. Lower demand resulted in lower prices at the pump.
Then, as the economy began to recover earlier this year, an epic winter storm hit Texas freezing wells and further cutting production. OPEC Plus voted to cut oil production at about the same time.
Higher Demand = Higher Prices
On top of it all, demand for gasoline increased dramatically as Americans hit the road this summer.
Various costs determine the price of gasoline at the pump. The greatest cost is the price of crude oil. It accounts for 56 percent of the cost of gas, according to Statista, a consumer data tracking company. Other factors include marketing costs and state and local taxes. Less than 20 cents of every gallon of gas are federal taxes.
What’s Ahead For Gas Prices
Gas prices are still headed up. However, the rate of increase is slowing.
After a stalemate earlier this summer, OPEC Plus has reached an agreement to increase crude production through December 2022. That will probably slow, but not stop, the rise in gas prices.
U.S. Gun Sales Hit New Highs As Supply Dwindles
A new trend is slowing the purchase of weapons. Customers are clean-out gun store inventories.
Sales of guns rose to a record high over the last two years. The first six months of 2021 resulted in over 22 million gun sales. That is a 15 percent increase over the same time last year. It is also a record for first-half sales of any year in history.
The Federal Bureau of Investigation has tracked gun purchase background checks since 1998. Only two million rejections have occurred on over 340 million checks.
Pandemic, Unrest, and Fear of Gun Bans Push Sales
Fear has accelerated gun sales, according to store owners and industry leaders.
“Gun sellers across the country said the pandemic and civil unrest over the past year have pushed customers to feel they must take control of their families’ protection,” reported NPR. “Fears of Congress passing new gun control legislation in the wake of a rash of mass shootings since March are also adding fuel to the buying craze, industry insiders said.”
First Time Gun Customers
Many sales over the last two years have been to first-time buyers, according to the National Shooting Sports Foundation (NSSF). The NSSF is a gun industry trade organization.
Over forty percent of those new buyers were women. And they were not messing around. The most purchased weapon, according to the survey were semi-automatic handguns.
Reduced Gun Store Inventory
The record-high demand and supply chain interruptions have ravaged gun store supplies and hiked prices.
“You can’t sell what you don’t have, so sales haven’t been as brisk in the last few months as it was last year, simply because of inventory levels,” Dunnellon, FL gun salesman Mark Peltier, told Forbes. “A lot of guns are unavailable and unobtainable.”
“My gun store has had a run like I’ve never seen before,” Todd Cotta, the owner of Kings Gun Center in Hanford, Calif., told NPR. “It was just an avalanche of new gun buyers for the first time.”
Other store owners report a corresponding increase in gun safety classes.
What Would You Do?
A recent Reshoring Institute survey found that 70 percent of respondents said they prefer American-made products. About 83 percent said they would pay an extra 20 percent for products made in the United States.
How about you? Would you pay more for products made domestically or do you believe outsourcing some production is needed to help other nations grow?
Let us know your thoughts in the comments section.
Max K. Erkiletian began writing for newspapers while still in high school. He went on to become an award-winning journalist and co-founder of the print magazine Free Bird. He has written for a wide range of regional and national publications as well as many on-line publications. That has afforded him the opportunity to interview a variety of prominent figures from former Chairman of the Federal Reserve Bank Paul Volker to Blues musicians Muddy Waters and B. B. King. Max lives in Springfield, MO with his wife Karen and their cat – Pudge. He spends as much time as possible with his kids, grandchildren, and great-grandchildren.
Comments