My Take | China containment becomes a lose-lose strategy for everyone

As Nobel economics laureate Paul Krugman recently observed in Foreign Affairs, “China’s role as the workshop of the world … might be as hard to replace as the global role of the US dollar.”

And yet, that hasn’t stopped Uncle Sam from trying to wreck the China workshop, which has the unintended consequence of pushing more countries to try to “de-dollarise”.

The United States has been strong-arming countries and companies to divert their supply chains away from China, and these involve not only advanced tech products such as superfast computer chips but also mundane items such as rare commodities. Meanwhile, it has weaponised the global economy and financial systems to pursue its own foreign and trade policy goals.

They are the two economic aspects of its full-spectrum containment against China, which of course, also includes a predominantly military component. Countries such as India, Vietnam, Indonesia and even the US were supposed to benefit from the supply-chain redirection. But they now find it hard to take up the slack. Much of the re-routing with new chains turns out to be just longer, more opaque and expensive, without severing ties to Chinese suppliers. Costs are adding up.

Last year, Taiwan’s Pou Chen Corp, a leading shoe manufacturer for the likes of Nike and Adidas, had to cut more than 6,000 jobs at its Ho Chi Minh City plant. The Vietnamese government once heavily advertised the investment of Japanese electronics giant Kyocera Corp, but it ended up producing low-tech ceramic packages for electronic insulation and resistance, rather than the more advanced packages for crystal devices.

Labour unrest, official corruption and red tape are cutting short the allure of Vietnam for foreign manufacturers. Comparatively, getting permits, licences and subsidies for foreign businesses in Vietnam for many has made China almost a bureaucratic paradise. Volatile internal party politics in Vietnam may be as tricky and scary as in China.