Jobs at Risk: The Human Cost of the U.S.-China Economic Clash

Hi, I'm Dong Seong. Welcome to Digging into China, where we explore China in depth to reveal unique perspectives. Recently, as the US China trade war has begun, there has been a surge of online analysis. However, most of these discussions adopted a broad macroeconomic perspective, debating which nation might emerge victorious. Few explore this issue from the viewpoint of ordinary individuals. In this episode, we will shift our focus to the ground level, examining how the US China trade war could impact everyday Chinese citizens and identifying the concerns we should have as this conflict unfolds. The primary concern for many regarding the trade war is likely the potential for job losses resulting from economic decoupling between the US and China. A CNBC report indicates that from April 1st to April 8th, the first week the trade war took effect, China's exports to the US plummeted by 64% compared to the prior week, rapidly approaching zero. If China's exports to the US were to seize entirely, would this trigger a wave of unemployment in China? and how many jobs are actually tied to these exports in mainland China. A common belief is that even if exports to the US dropped to zero, the impact would be minimal. The reasoning hinges on the fact that China's exports to the US constitute a small portion of its GDP, just 2.78% or approximately $524.6 billion. Compared to other nations, this figure is modest. For instance, Vietnam's exports to the US account for 30% of its GDP, making China's share seem negligible by comparison. Man does conclude that a complete halt in US China trade would result in a loss of just over 2% of GDP, a manageable setback. However, this perspective significantly underestimates the trade war's potential impact on China. First, it fails to account for the true scale of China's exports to the US. In 2024, China reported 524.6 billion in exports to the US. But this figure does not tell the whole story. It is widely understood that following the previous USChina trade war and the imposition of US tariffs, China expanded its use of trans shshipment trade. This involves routing goods through third countries to evade the tariffs. For example, since the 2018 trade war, Vietnam's export to the US have surged and China's exports to Vietnam have followed a similar trajectory. The parallel growth in these trade flows strongly suggests trans shshipment. A similar pattern has emerged with Mexico orbit starting later around 2020. China's trans shipment activities are primarily concentrated in Southeast Asia including countries like Thailand and Malaysia. While the exact volume of trans shship shipped to goods is unclear, 2024 trade data suggests Vietnam alone facilitated approximately $100 billion in trans shipments for China, equivalent to 20% of China's direct exports to the US. Precise data on trans shshipment is scarce as it operates in the legal gray area that contravenes US regulations. Nevertheless, estimates from major investment banks indicated that including trans shipments, China's actual exports to the US likely range between 700 billion and $1 trillion, far exceeding the official $524.6 billion. Beyond underestimating trade volumes, another overlooked factor is the multiplier effect of exports on employment. Even if exports to the US account for just 2% of GDP, this does not mean they support only 2% of jobs. To illustrate, consider Foxcon. A worker in a Foxcon factory producing iPhones for the US market is one export related employee only one. However, Foxcon requires truck drivers to transport its products and those workers need services like internet cafe which employ staff. Constructing Foxcon's factories demands construction workers and the nearby restaurants serving factory workers need a cooks and a servers. These roles, truck drivers, cafe staff, construction workers and the restaurant employees are all created indirectly by that single export job. This is the multiplier effect. Foss claims that a factory employing 300,000 workers can generate over 1 million local jobs, implying a multiplier effect exceeding three. While Foxcon's claim may be overstated, academic research typically estimates the multiplier effect for China's export sector at half to 0.7, meaning one export worker supports one and a half to 1.7 jobs. This is high globally reflecting China's economy being heavily oriented towards trade. Its high-speed rail and the railway system exist to transport the lowcost labor from rural areas to cities. Its extensive highway facilitate the rapid goods transport and its robust power infrastructure supports factory operations. Given this multiplier effect, how many jobs in China are tied to exports and their related industries? According to China's Ministry of Commerce, in 2022, exports supported 180 million jobs. Using this figure and the proportion of exports to the US, approximately 30 million jobs are linked to US exports, even without accounting for trans shipments. Including trans shipments, the number rises to between 40 and SE uh 40 and 60 million. Some may argue that losing a few tens of millions of jobs is manageable given China's large population. However, this overlooks another critical issue, China's actual employment landscape. By actual employment, I mean not just whether official data is accurate. Though some inaccuracies likely exist, but the distinction between urban and the rural jobs. For those working in export oriented manufacturing, what is their socioeconomic status in China? Many may many may view factory jobs as a low-end and undesirable due to long hours and grueling conditions. Yet nearly half of China's population earns less than 3,000 per month or roughly $411. Former Premier Lee Ka Chong noted that 600 million Chinese fall below this threshold, a figure that s surprises many, but is largely due to the oversight of rural workers. Rural residents in China have low incomes with an average annual disposable income of 23,119 Y, less than 2,000 Y monthly. Rural workers are numerous. of China's 730 million total workforce, 260 million are rural and 470 million are urban. Most rural workers are farmers, a role not traditionally counted as a job. Thus, when assessing employment, we should focus on 470 million urban workers as a trade war related job losses primarily affect this group. Using 470 million as the baseline, losing 30 million jobs equates to a 6.3% reduction in urban employment. Losing 60 million jobs would meant would mean a 12.6% reduction. Thus, if exports to the US ceases, the employment impact is far greater than commonly assumed, particularly in today's economic context. Even before the trade war intensified, China faced employment challenges. This year's job market appears even more daunting. Bloomberg reports that starting in January 2025, job numbers have noticeably declined. Additionally, this year's 12.22 million college graduates represents a record high. Combined, these factors make youth unemployment particularly dire with the graduating students facing unprecedented challenges. The fallout extends beyond the job losses and unemployment. It also pressures existing job. With more job seekers than available position, workers bargaining power diminishes. Employers can say, "Hey, if you don't want the job, others will. This harsh reality not only increases unemployment and depresses wages but also contributes to broader issues like reverse urbanization and related social challenges affecting society at large. China's export industry is concentrated in the prosperous southeast coastal regions where reliance on US exports far exceeds the national average of 2.78% of GDP. In Guangjo, US exports account for 6.7% of GDP. In Jang, over 7%. Shanghai, Fujian, and Jangu exceed 4% or significantly above the national figure. These regions will bear a disproportionate brunt of the trade wars impact. A wave of unemployment is likely to emerge in these coastal areas, potentially triggering reverse urbanization as migrant workers return to their hometowns. Coastal regions have high living costs and without sufficient jobs, many will return to their places of origin. Such mass returns are rare in China's history. They occurred in 2008 during the global financial crisis when a trade collapse left 15 million migrant workers jobless and in the 1970s postcultural revolution when urban youths were sent back from rural areas back to the cities. Both instances led to sharp increases in crime. In 2009, criminal cases rose 20% compared to 2007, and the postcultural revolution, public safety deteriorated significantly, prompting a nationwide crackdown. Unemployed individuals returning to hometowns with few job prospects often contributed to rising crime rates. While the negative impacts of US China trade decoupling are significant, the consequences of zero US exports will not manifest immediately. The trade wars onset does not mean exports and related jobs vanish overnight. The impact unfolds gradually. A key distinction is that the US feels the trade wars effect primarily on the consumer side while China feels them on the business side. In the US, higher prices particularly for consumer goods affect ordinary people immediately. In China, businesses bear initial brunt and China imports little from the US delaying the impact on individuals. Facing high US tariffs, Chinese businesses may not halt production immediately, but instead seek alternatives such as trans shipping through Vietnam, especially as US tariffs on Vietnam are currently paused. If trans shipment routes close, factories will seek other buyers, both domestic and international, only seizing production when all options are exhausted. Only then will the full unemployment impact emerge. Factories represent a significant investments incentivizing owners to maintain production which delays unemployment. Thus, in this trade war, the US may feel immediately consumer pain but could adapt through alternative supply chains while China may experience a delayed but intensifying impact akin to a slow boil. These projections assume the trade war's current trajectory and the partial decoupling. They do not account for scenarios where China faces global isolation with the countries like Vietnam and the EU also refusing imports. In such a case, job losses could reach 180 million, not just 30 or 60 million. Even non-manufacturing sectors like technology may not be safe. Recent US proposals to delist Chinese internet companies from US stock exchanges could devastate China's tech industry. For example, DOU, a live streaming platform, reported the net profits of negative 580 million yen, negative 70 million yen, positive 35 million yen, and a negative 300 million yen over four years. Its survival relies on US stock market access for fundraising, not profits. Dellisting could jeopardize such companies, eliminating tech jobs rapidly. Companies listed on both US and Hong Kong exchanges like JD.com may fare better, but would still face reduced liquidity and a failing stock prices impacting job creation. Additional risks such as foreign capital withdrawal and financial sector impacts are uncertain and depend on the trade wars progression. If it continues, effects will extend beyond the manufacturing. While these challenges could lower living standards, they are unlikely to destroy China. Whether 30 or 70 or 60 million jobs are lost. China can endure and 180 million job losses are likely beyond the current US capabilities. However, a more profound risk looms, one not tied to external actor like the US, but to the action of the Chinese Communist Party. This is the true concern. Some may fear CCP could escalate tensions perhaps over Taiwan if it feels globally cornered. Yet, my concern lies elsewhere. Historically, the CCP's greatest harm has often been inflicted on its own citizens, not external adversaries. We must be vigilant about the CCP resorting to campaign style policies. A review of its history reviews a regime ill equipped to address complex challenges rationally. Its solutions frequently devolve into campaigns that exacerbated the original problem. The cultural revolution exemplifies this. But the recent zero COVID policy is a closer example. Once the central government prioritized zero cases, all other activities were stylized, health codes were mandatory, and a single case could lock down families, neighborhoods, or cities. Ultimately, the virus harm was overshadowed by the policy's broader damage. The CCP's mantra of concentrating resources for great achievements often results in significant missteps. As history repeatedly demonstrates, the tendency stems from the CCP's topdown centralized structure, which issues rigid directives with little flexibility. The zerocoid mandate demanded the relentless enforcement leading to severe consequences. The greatest concern now is how the CCP will respond as the trade war causes GDP growth to falter, exports to decline, and unemployment to rise. a few a new campaign style initiative could emerge which is what we should fear most to address issues like weak consumption deflation or falling exports the CCP might launch a campaign reminiscent of zero co to stimulate spending could we see a consumption code requiring monthly purchases to leave a home to boost employment a mandatory employment code restricting access to services without a job. Businesses might face pressure to maintain production through excessive loans, potentially at zero interest or even mandatory borrowing. These are merely surface level possibilities. The CCP's ingenuity in such campaigns often surpasses imagination as seen with health codes and spatial temporal c companions during the pandemic. concepts that seemed almost fantastical. In campaign mode, the CCP's methods of imposing hardship will likely exceed our expectations, posing a risk greater than the trade war itself. The CCP has yet to outline its trade war strategy clearly, necessitating caution. Many may hope for policies like tax cuts or stimulus to navigate the trade wars challenges, viewing the CCP as a potential savior. However, the CCP has rarely been a savior for the Chinese people. It's restrained from adding to citizens burdens would already be cause for gratitude. We must remain highly alert to its next moves as they could deepen the trade war's pain, potentially becoming the primary source of suffering, surpassing the trade war's direct impacts. The CCP often remains dormant until it acts, at which point the challenges for the Chinese people frequently arise. China's recent progress stemmed not from CCP's action but from its relative inaction allowing organic growth. We must now guard against the CCP becoming proactive in response to the trade war as such actions could precipitate China's greatest challenges. Thank you so much for watching. If you find this video helpful, please like it, drop a comment below, and hit the subscribe button right here. It really helps YouTube suggest my video to others. I'll be back with more content soon. Until then, be