The Twilight of the West and China's global expansion
We are at the beginning of the end of the West. highly developed countries' societies are not yet aware that this process has already begun. In the United States, most public opinion is unaware of what is happening, and many elites are reluctant to accept this reality. Only a narrow ellipse of professionals and insightful observers admit the ominous signs. In Europe, due to the US safety umbrella, the atmosphere of self-adoration and self-sufficiency are even more palpable. The vast majority of public opinion, represented by mainstream media, would be amazed at the thought of Europe falling on the outskirts of the world. At best, they would admit that a fall may happen someday, but they would surely consider it an exaggeration to propose that this is already happening.
The reality invalidates the narratives presented by Western media. There is no uncertainty that China has become an economical superpower. According to the German paper ‘Handelsblatt’, the Central State is the only planet production superpower liable for 1 3rd of the global production of goods. In addition, energy and labour are much cheaper and more efficient than in Europe, making competition more difficult. China has surpassed Europe in many advanced technologies, any have overtaken the United States and others are rapidly reducing distance.
According to any calculations, China produces more than 9 major economies combined. They dominate photovoltaics (they satisfy 2.5 times the current global demand) or the production of electrical vehicles (they produce 50 million cars per year, which is twice the request on their own market). China is simply a monopolist in fierce competition for uncommon earth elements. The transition to green energy (which is so crucial to EU countries) can only be achieved through affordable and advanced quality production of Chinese solar modules, wind turbines and electrical vehicles. Looking at supply chains reveals China's dominance in these key areas (a percent share in the global market):
- solar modules: 85%;
- solar panels: 90%;
- Polysilicon for solar panels: 85% ;
- battery cells: 90%;
- battery cathodes: 90%;
- Battery anodes: 95%;
- wind turbines: 63%;
- hydrogen electrolysers: 70%.
This list shows the crushing dominance of your centre. It is estimated that without China's involvement, green transformation in the EU would cost at least an additional six trillion dollars. This difference in costs would be borne primarily by taxpayers in associate States, including Poland. China's energy advantage is further reinforced by the usage of inexpensive energy supplies from Russia, which the EU has mostly abandoned.
The mediate State is developing rapidly in East Asia, Latin America and Africa. He is Mexico's largest trading partner, ahead of a powerful neighbour – the USA. The Chinese build industrial centers there for solar panels, lighting, electronics, automotive parts and mechanical equipment. abroad direct investment from China increased from 0.2 billion dollars in 2012 to 2.5 billion dollars in 2022. In 2023 20% of all car sales in Mexico will go to China.
According to any calculations, China produces more than 9 major economies combined. Moreover, the mediate State is simply a monopolist in fierce competition for uncommon earths. The transition to green energy (which is so crucial to EU countries) can only be achieved through affordable and advanced quality production of Chinese solar modules, wind turbines and electrical vehicles.
A comparison between the BRICS block and the G7 countries is besides instructive. In 2012, the economical production of the BRICS and G7 countries remained at $30 trillion. By 2023 production of G7 dropped to US$29 trillion, while BRICS (excluding fresh members) increased to $34 trillion. In addition, the BRICS Group increased importantly in 2024, including Turkey, which, after bitter EU experience, applied for accession in June 2024. Although the October summit in Kazan did not bring any key settlements, a clear signal was sent from the states that they wanted to break the dominance of the US dollar in global economical accounts and even replace it with their own currency.
Industrial policy: protectionism, tariffs and subsidies
In the world, peculiarly in the United States and Europe, there has been a immense shift towards an industrial policy characterised by protectionism, tariffs and subsidies. any examples of a departure from the free marketplace rules and the non-interference of the state in economical matters are worth mentioning.
In the United States – under the law CHIPS and discipline Act – Intel received $8.5 billion to build fresh factories in 4 states (Arizona, fresh Mexico, Ohio, Oregon), while Global Foundries gained $1.5 billion from state funds. The aim of these activities is to increase American production of advanced chips from 12% to 20% of global production by 2035. Micron Technology and Samsung are expected to receive a full of over $11 billion in subsidies in the US. Intel's CEO, Pat Gelsinger, predicts that even over $100 billion will flow from American taxpayers to Intel and Micron over the next 5 years, with Intel himself expecting at least $50 billion of state subsidies.
Inflation simplification Act (Inflation simplification Act), with a budget of $430 billion, is the largest climate investment in history. It benefits companies specified as BMW, Mercedes, Volkswagen, Linde, Holcim, Northvolt, Tesla, DRAX and Audi, thereby causing the relocation of production to the US. Furthermore, the United States increased its duties on Chinese electrical vehicles to 100% of their value, despite imports of only 3,000 Chinese electrical cars per year. Even America's submissive Europe has protested against these unfair practices of subsidisation.
In the world, peculiarly in the United States and Europe, there has been a immense shift towards an industrial policy characterised by protectionism, tariffs and subsidies. In the EU, Germany is an appalling example of breaking all the "free Marktwirtschaft" principles and promoting the trend towards the rebirth of protectionist industrial policy.
However, has Europe inactive been faithful to the principles of free marketplace and fair competition? Take Germany, the largest dominant economy in the EU. Germany is simply a striking example of breaking all the “free Marktwirtschaft” principles and promoting the trend towards industrial policy rebirth, or protectionism. Here are any examples of the German state's crucial investments in the German industry: Wolfspeed in Ensdorf (EUR 0.8 billion), Infineon in Dresden (EUR billion), Intel in Magdeburg (EUR 10 billion), TSMC in Dresden (EUR 7 billion) and Northvolt in Schleswig-Holstein (EUR 0.9 billion). Thyssen Krupp received more than 2 billion euros from the German state for the production of "green steel".
Saarstahl and Dillinger Hütte received 2.6 billion euros, Salzgitter – billion euros, and ArcelorMittal – 1.3 billion euros from the national budget. In addition, Germany has already spent EUR 100 billion from the Zeitenwende Fund (although its best feature seems to be its name, indicating indeed a ‘return point’ within the meaning of economical mechanisms).
Germany is keen to criticise China for over-production (overcapacity), even though in the past they have sold 2 thirds of their production of cars outside the country. This bright hypocrisy underlines the current change in industrial dynamics. The slogans of the free marketplace and free trade and the harmfulness of state interference have been mostly abandoned and forgotten. full generations of economists were taught to believe in free marketplace mechanisms and the benefits of specialisation and exchange, but these principles were dropped unceremoniously erstwhile they ceased to service the interests of major economies. Pragmatic Americans were the first to abandon this narrative, noticing its harmful effects.
Consequences of Protectionism
Ultimately, all players want the same thing: that the factories of the future be located in their own countries. This effort revolves around taxes, jobs, economical growth and safety interests. any defend their old industries while others effort to build fresh ones. However, this race threatens to exceed the mark – global request is yet limited. What happens if everyone has their own factory, but no of them will be full exploited? Politically motivated investments that bypass real request can lead to a sharp fall in prices and in the underprofitability of producers and thus possibly harm the economy. This can be seen from both the United States and Germany.
In the United States, chip shortages caused by a sharp increase in request during the pandemic turned into a surplus in 2022, overburdening company revenue. Intel delayed the construction agenda of the mill in Ohio, where production was initially due to marketplace challenges (due to "business conditions" and "market dynamics"). The American chip maker now claims that he will request even bigger subsidies due to the fact that he is wasting money on his foundry business. Intel Corp.'s stock fell after the company reported expanding losses in this segment. Intel revealed in a message on securities that he lost 7 billion dollars last year on his foundry unit, with $18.9 billion in sales, after about 5 billion in losses in each of the erstwhile 2 years.
It's disappointing that this legendary American company is so dependent on government support. Although politicians of both parties advertise chip producers as a national champion, it is increasingly seen as a symbol of the dubious quality of government industrial policy. Intel can receive up to $50 billion in national grants, but his CEO, Pat Gelsinger, wants more. He stated that the American production of integrated circuits "will not be repaired under 1 three- or five-year programme" and suggested the request for the CHIPS 2 programme. In addition, Intel revealed that it does not anticipate its foundry business to scope a profitability threshold by the mediate of the period from now until the end of 2030. Industrial policy, although frequently "sold" as patriotic nationalism, usually ends with a plea for peculiar interests. On the another hand, capital is directed for political reasons alternatively than for the most productive usage of it. late Intel announced that it would release 15000 employees and quit plans to build a modern chip mill in Magdeburg (notabene also the assembly line for integrated circuits close Wrocław), despite the German government's grant of EUR 10 billion. This decision is another nail in the coffin for Germany's ineffective technological and economical improvement policy. Infineon, the largest German semiconductor company, received in 2023 a billion euros to build a chip mill for the automobile manufacture in Dresden. However, in August of that year, she announced that she would be forced to fire 1,400 employees.
It is disappointing that Intel – a legendary American company – is so dependent on government support. Although politicians of both parties advertise the chip maker as a national champion, it is increasingly seen as a symbol of the dubious quality of government's industrial policy, which, although frequently "sold" as patriotic nationalism, usually ends with a plea for peculiar interests. On the another hand, capital is directed for political reasons alternatively than for the most productive usage of it.
W On the another hand, Germany's Volkswagen electrical car mill in Zwickau, erstwhile praised by Angela Merkel as "a cornerstone of the future of the German automotive industry", reduced production due to low demand. The plant operates at only two-thirds of its production capacity and temporary contract workers are released. erstwhile the deal was announced with Intel, any questioned whether car manufacturers would actually buy more costly “Made in Germany” chips or would inactive choose cheaper counterparts from Asia.
Mercedes faces akin problems with its electrical cars. In order to accelerate slow sales so far, specified as the EQS electrical sedan, the company implements measures specified as fresh radiator designs, larger ranges and more comfortable seating. However, it is improbable that these efforts will have a crucial effect. Mercedes sold at least 170 000 fresh electrical cars little than planned last year, and in the first 4th of 2024 the supply of these vehicles decreased by 9%. Volkswagen announced a fewer weeks ago that he would gotta close 3 factories in Germany, lay off 15,000 workers and cut off Christmas bonuses and another social benefits for the remainder of the workforce. The head of Volkswagen stressed that in the current structures the company is incapable to compete with Chinese car manufacturers. specified a situation in the key economical section of the German manufacture is unprecedented in the post-war past of our western neighbour.
Forced decoubling
No 1 in the West talks about globalisation, free marketplace or free trade anymore. If anyone advocates these ideas, they are Chinese. At 1 time, the West utilized globalisation, but now its usefulness has passed. The economy is not governed by universal laws, specified as the law of gravity in physics. In economics, circumstances dictate action, and national economies and companies adapt accordingly. There are presently 2 emerging trends: voluntary separation and forced separation. Decoupling, i.e. the separation of the American economy, and preferably – wider – western, from China, is the key word in the current deglobalization processes.
The United States is exerting large force on its allies to limit trade with China. Under US influence, the German chemical giant BASF closed the mill and refinery in Xinxiang Province. The alleged reason was Chinese persecution of the Uighurs. The tradesblatt paper suggested that Volkswagen could besides be forced to close the mill in Xinxiang. If that happens, it will affect, among another things, well-paid Uighur workers.
In addition, Australia, at the request of the Americans, ordered Chinese conglomerate Yuxieo to divest ownership of Northern Minerals – an Australian company dealing with the extraction of uncommon earth elements essential for modern electronics. Furthermore, the Dutch company ASML, which produces critical equipment for printing the smallest nanometer structures on silicon substrates, was forced to halt sending equipment to China. As a result, ASML, after the failure of a lucrative Chinese market, is now undergoing a major crisis. There are many more examples of this. These are not isolated cases, but a broad-scale policy.
The West utilized globalisation as a tool for development, but now its usefulness has passed. Economics are not governed by universal laws, specified as the law of gravity in physics. In economics, circumstances dictate actions, and companies adapt to them. There are 2 emerging trends: voluntary separation and forced separation.
Geopolitical implications for Europe
Germany is struggling with its dependence on China. Although Ursula von der Leyen told Chinese president Xi Jinping at a gathering in Paris that Europe had to engage in “reducing risks” (derisking), Germany remains mostly related to Chinese trade and investment. This dependency creates a dilemma, leading to indecision and delays in strategical planning. Production to the US and China carries large corporations, including BASF and Volkswagen. Only these 2 companies invested $12 billion in the Central State. For example, the Volkswagen ID.3 costs EUR 15,200 in China and EUR 39,900 in Germany, although both are mainly assembled from parts manufactured in China. This price discrepancy is due to lower labour costs, cheaper energy, lower social benefits and closer supply chains. Production strategy just-in-time, inactive effective in the Central State, in the West was replaced by systems just-in-case, thus reflecting the change in industrial dynamics. In addition, Germany faces a serious shortage of specialists, which forces companies specified as Herrenknecht to decision production to Spain. The bureaucratic process and the advanced social costs, which represent 50% of the budget, make the situation even more difficult.
Our western neighbour is facing an impending budget disaster, exacerbated by increased force on military spending from the US. At the same time, the United States is pushing Germany to limit trade with China, which further complicates the situation. In 2023 German exports to the US amounted to €158 billion and to China – €100 billion. President-elect, Donald Trump, announced the imposition of 10 or 20 percent import duties on EU goods before the U.S. elections. Given the negative trends described above in the German economy, this interplay of factors seems to carry out the darkest script for Germany. This could lead to the collapse of the full German task for Europe and the underforeseeable changes on the Old Continent.
Our western neighbour is facing an impending budget disaster, exacerbated by increased force on military spending from the US. At the same time, the United States is pushing Germany to limit trade with China, which further complicates the situation. Moreover, the EU risks imposing 10% of import duties on goods. This could lead to the collapse of the full German task for Europe.
The industrial upheaval in China causes the supply chains to be revalued. This change leads to discussions on a fresh branch of economics – meso-economics – which focuses on indirect economical factors specified as supply chain efficiency. A fewer decades ago, economists did not pay much attention to the economics of supply. Their discipline was dominated by macroeconomics (top-down strategy research) and microeconomics (bottom-up individual stimulus research), and industrial supply chains were somewhat in the middle. At present, however, geopolitical, environmental, social and political shocks are putting supply chains at the centre of attention. Prof. Bill Janeway of Cambridge University mesoeconomics calls the central space between micro- and macro-economics. Artificial intelligence and digital innovation (big date) let economists to track business networks with an unimaginable level of detail, almost in real time. Analysis of interconnection networks is crucial in many areas of political economics. Firstly, meso-economics will aid decision-makers to better realize how the economy actually works, and secondly, it can broaden the scope of influence of economists who will be able to track and optimize value creation ecosystems. Mesoeconomics becomes peculiarly crucial erstwhile the supply management structure undergoes extremist changes in a very short period of time.
Consequences for Poland
Poland, akin to a tiny boat drifting behind a German industrial giant, is mostly dependent on its western neighbour. Unlike the US or Western Europe, it cannot afford billions of subsidies from its industrial base, which limits its ability to compete at the same level in terms of industrial and technological investment.
Poland's best chance for economical growth is to invest in fresh technologies, including artificial intelligence. Advanced technological innovations from the Polish state can be a possibly crucial economical engine. Our companies are already embedded in a dense global network of cooperation, creating long value chains. Take the example of a smartphone. The processor was created in Taiwan, utilizing the photolithography device of the Dutch company ASML, which has a monopoly on specified advanced devices. In this machine, infrared detectors produced in VIGO Photonics from Ożarow Mazowiecki are mounted. For them, too, it is vain to search competition in the world. Next to them we will besides find lenses with coatings that withstand utmost levels of UV radiation, which provides Dutch Solaris Optics from Józefów.
It is besides worth mentioning Smarttech from Lomianek. It produces 3D scanners, including for industrial purposes. These devices make any of the best three-dimensional models in the world, distinguishing themselves, for example, with the highest resolution and faithful colour reproduction. It is worth noting that Smarttech offers the final product, not just components. Another example is the Poznań company Airoptic, producing any of the best gas analysers for emanation control in the energy and chemical industries. Inframet from fresh Koczarzgi provides top calibration systems for thermal cameras. Its customers are practically all manufacturers of this advanced equipment. Eagle in Walcz produces the fastest laser metallic cutters on the market. However, in Zablack FIBRAIN started the fibre optic mill on its own. These household businesses are effectively utilizing national technologies to grow to global markets. So if we're going to invest in something, it's just infrastructure and state-of-the-art technologies.
Advanced technological innovation from Poland can be a possibly crucial economical engine. Our companies are already embedded in a dense global network of cooperation, creating long value chains. If we are to invest in something, it is infrastructure and state-of-the-art technologies.
There are inactive not adequate "integrators" in Poland, which makes it hard to make the most modern technologies. In the example of IBnGR's ideas from Gdańsk, we should prioritise the creation of a cluster of partners of technological companies and make networks of interconnected entities. Most companies that succeeded in the abroad marketplace did so by their own forces. possibly this fact reflects our proverbial individualism. However, it is crucial to realise that the Polish state apparatus has the means to identify successful industries and to make technological and investigation infrastructures and ecosystems of common support within the sectors concerned.
Despite many successes, Poland lags behind another countries that more effectively implement specified strategies. Investment in infrastructure and modern technologies will velocity up importantly if we take good care of Polish economical relations with China. In this respect, we can learn a lot from Hungary and their multi-vector policy model. Hungary attracts crucial Chinese investments, specified as a $12 billion battery mill in Debrecen and a BYD mill in Szeged. large Wall Motors besides builds the second electrical car mill in Pecs. These investments position Hungary as the future leader in the production of advanced technologies. In turn Poland has tried to carry out projects specified as Izera with its own forces so far, alternatively of looking for cooperation with Chinese companies. Of course, there is small chance that specified partnerships will be acceptable to Germany or the US – there would inevitably be a threat over Poland of the imposition of geopolitical "security caftane" by Western partners.
Meanwhile, China invests heavy not only in Hungary but besides in Italy and Serbia. Serbia, without being a associate of the EU or NATO, is more free to invest. She even created a Belt and way investigation Institute at her Academy of Sciences. Hungary, on the another hand, is trying to redirect the Belt and way Initiative, which presently runs through Polish cities specified as Łódź, Kutno and Małaszewicze, into its territory, which can importantly strengthen their strategical and economical position. Unless global conflict disturbs these trends, Hungary and Serbia are likely to appear as winners in the fresh geopolitical landscape. Poland should consider following in their footsteps and become more independent, diversifying its economical and diplomatic links. Our country needs “Zeitenwende”. In pursuit of Western modernity, however, we do not announcement that the West has already changed or changed direction, or is going the other way. The more we effort to catch them, the more we become backward and late.
In relations with China, we are presently experiencing serious trade imbalances thanks to the proberlinian and prowassynton politics of Polish governments. Poland exports mainly agricultural products and natural materials specified as apples, chickens, powdered milk and copper to you. In return, China exports advanced technologies specified as 5G and 6G telecommunications, modern electronics and electrical cars. Poland is far behind Hungary, Serbia and even France erstwhile it comes to utilizing the Chinese partnership for technological and economical improvement of the country. The Chinese automotive company Geely formed an alliance with the French company Renault based in the UK. Even if we do not want to put ourselves at hazard in the EU by becoming the second Orban - l’enfant terrible The EU – I think we can follow in the footsteps of France and Spain.
In relations with China, we are presently experiencing serious trade imbalances thanks to the proberlinian and prowassynton politics of Polish governments. Poland is far behind Hungary, Serbia and even France erstwhile it comes to utilizing the Chinese partnership for technological and economical improvement of the country.
In conclusion, in order to become independent of Germany and the US, Poland must adopt a more diversified and independent economical strategy. Following Hungary, Spain and France's approach to Chinese investments and focusing on technological innovation, our country has a chance to take a better position in an evolving global economy.
