The new changes in the energy tug-of-war between Russia and Europe, what are the warnings for China's manufacturing industry?
Recently, in the face of the downturn and competition in the European gas market, the Russian side suddenly changed its strategy and expressed its willingness to resume natural gas to Europe, as long as the EU agrees, it can immediately open the Yamal-Europe pipeline. This move has aroused the attention and speculation of the international community, and has also sounded the alarm for China's manufacturing industry. As the world's largest manufacturing country, how should China respond to external challenges and pressures to maintain its competitiveness and influence?
1. Russia's helplessness and the EU's response.
Russia's "overture" to Europe this time is actually out of helplessness. According to data from the Intercontinental Exchange in London, European natural gas** has fallen below the $750 per thousand cubic meter level, returning to the level of February last year. This shows that the tension between natural gas supply and demand in Europe has been eased, and Russia's best strategy has not worked.
The EU has effectively reduced its dependence on Russian natural gas by increasing the import of LNG (liquefied natural gas). In the first half of 2022, the EU imported 65 billion cubic meters of LNG with a total value of more than 60 billion euros, of which the United States accounted for half, doubling year-on-year. In November and December 2022, the EU's LNG imports hit new highs, reaching 16.1 billion cubic meters and 19 billion cubic meters, respectively.
The EU's approach suggests that it is trying to break free from the shackles of Russia's 167 billion cubic meters of annual gas imports and seek more energy** and channels. This winter, Europe already has enough confidence and ability to no longer be subject to threats and blackmail from the Russian side. The Russian side realized its strategic mistake and had to take the initiative to make overtures to Europe, hoping to regain some market share and influence.
What are the lessons of this incident for China?As the world's largest manufacturing country, China is facing similar problems and challenges. The world's dependence on Made in China, like Europe's dependence on Russian energy, is a double-edged sword. On the one hand, it provides China with a huge market and income, and also enhances China's voice and status in the world. On the other hand, it has also exposed China to external interference and constraints, and may also be excluded and suppressed by other countries. How should China be vigilant and prevent itself from falling into Russia's predicament?
Second, the crisis faced by China's manufacturing industry and its response.
The strength of China's manufacturing industry is an important pillar of China's economy and China's trump card to deal with external challenges. As early as 2020, research data showed that for every $10 billion reduction in China's manufacturing industry, overseas production and sales would be pulled down by $6.7 billion. This shows that the world's huge dependence on Made in China also reflects the high efficiency and high quality of Made in China.
However, China's manufacturing industry cannot be taken lightly, as it is facing more and more headwinds and bad signals. These signals include:
Western countries have boycotted and blocked Chinese high-tech companies, especially in the field of 5G, and Chinese companies such as Huawei and ZTE have lost important markets such as the United States and the United Kingdom, and have also been restricted and questioned by other countries.
The U.S. "manufacturing reshoring" plan aims to attract global semiconductor manufacturing companies to invest and build factories in the United States through huge subsidies and preferential treatments, and weaken China's advantage and position in the chip field.
In November 2022, China's total exports to the United States fell by more than 25% year-on-year, and manufacturing orders from the United States fell by 40%. The United States is shifting more orders to Southeast Asian countries in an attempt to hit the competitiveness of China's manufacturing industry.
These signals show that China's manufacturing industry is suffering from unprecedented pressure and challenges, and if effective measures are not taken in time, it may lead to the recession and contraction of China's manufacturing industry, affecting the development and stability of China's economy, and also affecting China's status and reputation in the world. So, how should China respond?
If China's manufacturing industry wants to maintain its own strength and development, it must do a good job in the following aspects:
Strengthen independent innovation, improve the quality and technical level of products, constantly open up new fields and markets, and do not let yourself lag behind the international trend and standards.
We will open wider to the outside world, actively participate in international cooperation and competition, attract more international capital and enterprises to invest and cooperate in China, and enhance the internationalization level and influence of China's manufacturing industry.
We should flexibly use diplomatic strategies to establish and maintain a stable network of international relations, strive for more friendship and support, and resolve and avoid unnecessary conflicts and frictions.
The new changes in the energy tug-of-war between Russia and Europe have important warning significance for China's manufacturing industry. China's manufacturing industry cannot be taken lightly.