Concise and well-argued. Thank you for the shout-out and the citation. I sheepishly admit that I had not thought to check whether the authors' own prior published works provided ammunition for a counterpoint while preparing my piece. Perhaps simply a consequence of being spoiled for choice in terms of potential lines for rebuttal.
I also note with appreciation that you chose to get straight to the implication of the original piece: that this strand of China Shock 2.0 anxiety is mostly accurately a China-and-India story, not a China-and-Global-South story. It struck me as somewhat disingenuous to frame an argument for one country's industrialization with the language of Global South development solidarity, while simultaneously arguing for remedies that would raise costs for developing countries importing Chinese capital goods, industrial inputs, or infrastructure (and glossing over the already observable outcomes in countries that are coordinating with Chinese actors, rather than waiting for a spot in the queue).
The China squeeze is indeed true. However, it’s largely due to automation.
Just five years ago, automation in China was only available to larger manufacturers, but today is not the case, even small companies, tiny even have access to automated systems.
And given that China has a large population, with uneven development, arguably there is ample room for the nation to maintain its low level manufacturing.
Modi saw this, hence when he came to power, his flagship policy was, “Make in India,” which has failed miserably.
The problem isn’t just China maintaining its low level manufacturing, it’s India failing to absorb it and its poor relations with China.
The manufacturers in China would rather invest in Belt and Road nations which are friendly to China, rather than in India which has always been at America’s beck and call.
And it’s worth noting that manufacturing in India is horrendously difficult, its infrastructure is poor, its energy supply is unstable, and the quality of labour not always up to standard.
Apple which has moved some production to India knows this only too well with low efficiency rates and substandard quality that leads to higher costs.
The fact that India has failed to capture manufacturing is largely a fault of its own.
“India which has always been at America’s beck and call”
I had to laugh here. India has always played both sides and has rarely been reliably in America’s camp.
Nevertheless, I appreciate your insight on the trickledown of automation. But I think China has been masterful at climbing the value chain: starting with inexpensive goods and subsequently developing better and better versions till they reach a halo / luxury level.
Isn’t the legacy of colonialism the elephant in the room? The neglect of universal education, while having an hyper-educated local elite, an extractive economy that benefits not only the colonial power but also the local comprador elites (often religious minorities like the the great Parsi dynasties: the Tatas, the Mistries or the Mehtas) are handicaps that must have weighted, but curiously many Indian academics are unwilling to pursue the subject, perhaps because they are part of the social stratum that actually benefitted from the colonial regime.
It is telling that the success stories of East Asia, namely Japan, S Korea and China were never colonized by European powers. OTOH one can look to the basket case left behind by the British: India, Pakistan, Bangladesh in S Asia and Nigeria in Africa
on the subject of colonialism IMO novels beat essays, at least regarding the psychological consequences on the colonised. Some suggestions:
1 Amitav Ghosh The Ibis Trilogy (Sea of Poppies, River of Smoke and Flood of Fire)
2 Salman Rushdie Midnight's Children
3 Mohsin Hamid The Reluctant Fundamentalist and Moth Smoke (all of his books are excellent)
4 Abdulrazak Gurnah Desertion
And William Dalrymple who writes essays that blur the distinction between fiction and non-fiction: The Anarchy, The Last Mughal and White Mughals are excellent, instructive and deeply entertaining.
This article by Amartya Sen sums up his views on the consequences of British colonialism:
Sen has long maintained that the British Raj is responsible for famines and many excess deaths, some historians put the toll at 165 millions excess deaths, in theis page you can find calims and counter-claims, again the most outspoken defender of the British rule is of Indian origin
This is a fine piece indeed and I appreciate your refusal to pathologise China. But I think some more "immaterial" factors need to be considered, beside the low technology and advanced to high technology, etc. We are anchored too much in the last 200-300 years of development and what the driving force was: primarily military advancement in applying concentrated and overwhelming force, which led to ability to extract unimpeded, from others. Now, the field has been leveled, the technical genie is out of the bottle, and the West for instance (as well as the rest) have to compete on their structural strengths. Let's compare India and China for instance: which one has a multi-millenia long tradition of examination and meritocracy? S&C would like us to forget certain civilizational aspects...
Thank you, Professor, for the generous citation and, more importantly, for placing the argument in the broader context of development history.
The idea that low-skilled manufacturing should eventually be distributed according to population quietly turns export markets into national entitlements. But manufacturing capacity is accumulated through education, infrastructure, industrial organization, supply-chain depth, and decades of institutional learning. China did not inherit its export share from its population; it built the productive system that made that share possible.
If China Shock 2.0 allows Europe to use narratives of Chinese overcapacity and subsidies to deflect attention from its own high energy costs, regulatory excess, declining capacity to commercialize innovation, and weak federal authority, the China squeeze narrative risks serving a similar function for India and a few other Global South economies: diverting attention from their own excessive protectionism, weak state capacity, and dense layers of democratic veto points.
This is a brilliant piece, and both the essay and the comments are radiating real insight!
Fairly speaking, the "China Squeeze" is simultaneously a fact (a nation dominating labor-intensive exports inevitably shrinks space for others with similar skills) and a narrative (a country unable to capture industrial relocation due to internal constraints blames China instead). This narrative isn't new; it has existed since China first started exporting cheap goods. But the reason it has become so universally accepted—to the point where Professor Tooze has to write a detailed piece like this to deconstruct it—might largely be credited to Donald Trump. Since his initial presidential campaign around 2016, his relentless framing of "China, China, China" solidified this worldview across the global mainstream, like it or not.
So, for what it's worth, my humble observation is this: regardless of the academic debate, the structural "Great Industrial Relocation" out of China has already begun. Friends of mine in Shenzhen noticed a clear turning point as early as 2017—a trend that started even before the trade war fully erupted. Of course, China’s industrial story is far from over; its momentum in EVs, solar, and renewables feels like it’s just getting started (and who knows, maybe massive scale in advanced chips is next?). But the outward shift of low-skill manufacturing is a real, observable trend now, much like how China’s integration into global supply chains actually began in the 1980s–90s, long before its formal WTO accession in 2001.
In a way, we are looking in the rearview mirror—debating and justifying a chapter that is already transitioning. Countries like India, Indonesia, or Mexico & whoever would be far better off taking a page from Vietnam’s playbook: actively welcoming and positioning themselves to receive these migrating supply chains rather than resisting or complaining. If they focus on reforming internal bottlenecks to match what made China competitive in the past, it could truly be a win-win for global development.
Geographically, China is rather continent than a country, if by that term we have in mind anythng except -and arguably not even- the US. Politically, it is in some respects closer to an empire, i.e, a collection of countries.
Proof of the last is the hukou system, which prevents the spatial arbitrage through which regional income differences would balance. Indeed, through it China retains a large reservoir of low-income labour, where by "large", I insist, we mean country-size.
Hukou allows people to work in the developed regions, but without settling. It is similar to the "Gastarbeiter" Europe summoned to reconstruct after the war, but with lower benefits and no bargaining power. This political institution gives China the ability to stay competitive at the lower level of industrial development.
Notice that this competitiveness applies both internally and externally. Indeed, within its borders China functions like a scaled-down version of the World itself, sourcing from regions or, as in the cases above, from the same region that is paying salaries that actually apply to less developed ones, the osmotic pressure kept in check by the hukou.
In the broader global economic & political ecosystem, what is the purpose of BRICS? On whose side are the Saudis, Emiratis & Egyptians? What, if anything, does India get out of this? Should Brazil & South Africa be challenged on play agnosticism? Here's military historian Phillips O'Brien, an Ukraine partisan (which China, India & Brazil, are not. South Africa, certainly is not): https://phillipspobrien.substack.com/p/is-china-going-in-for-the-kill. Is Trump & Trumpism, which are deliberately undermining the US economy, in the very least, a patsy for Putin & Xi, or something far worse? Notice, per this essay, how infrequently he invokes his personal relationship with Modi. I would add that China has been the most brilliant student of the US. The latter, without acknowledging it, has widely succeeded as mentor. This goes back to the late 19th century when the Chinese Exclusion Act made an exception for Chinese students coming to study at US colleges & universities. Are Kapur & Subramanian ironically revealing the substance of the world's largest democracy to be an own Achilles heal? Are there Gandhian reasons for women & Dalit continuing to be socially crippled, hence dragging down the whole post-colonial endeavor?
...yeah, Tooze is right again, and the counterfactual is doing work the evidence won't.
Blaming China for India's missing factories is a grievance dressed as economics. It only holds if you think manufacturing jobs sit in a global pool, waiting to be handed out by fairness.
Here's what the tariff faithful still haven't priced. Last year China's exports to America fell twenty percent, and its total trade surplus still hit a record near 1.2 trillion dollars, up another fifth. It just sold everything somewhere else.
One can also eliminate some of the xenophobia about what is going in the car industry by pointing out that German car makers assume that they are operating in a mature market, milking their cash cows. Chinese car makers, well, they don't assume that. ChatGPT provides these figures (usual chatGPT caveats): in 2020-2025 German big 3 (BMW, Mercedes, VW) invested €375 billion in capex+R&D and generated €202 billion in net profits. BYD, the leading Chinese car maker, invested around €115-130 billion in capex+R&D and generated 24-26 € billion in net profits. The interesting aspect is the investment intensity, BYD invests 4.5-5 times the spending in Capex-R&D as part of net profits while German big three spends around 2 times Capex-R&D/net profits.
As for German car manufacturers, I'd say that shareholders are the ones that are doing the squeezing.
China used state direction and funding to pick future priorities and make them happen.
India did not.
Examples include basic manufacturing, agriculture, IT and EVs.
China seems a well-planned economy.
India seems a chaotic mess.
As an Australian, it is interesting that so many well-educated Indians have fled India to Australia that Indians have overtaken English and Chinese to become the largest immigrant group in Australia. About half of them have university degrees.
Does this indicate that Indian society has failed to create domestic opportunities for its well-educated citizens?
In contrast, China values education and rewards its graduates with good opportunities.
So is the real problem India's failure to plan for advanced industrial opportunities for its educated citizens?
Please clarify the meaning intended in the sentence from the text below:
"Likewise, is the main problem of the American working-class the threat of Chinese competition or the manifest crisis of social reproduction in the United States itself?"
One cannot follow current events without tripping over yet another opinion of what ails the American working class. But your phrase here is new to me; I'm clueless what you mean by "the manifest crisis of social reproduction". Care to send a pointer -- perhaps a previous post of your own -- explaining what this means, to humble folks like myself?
I saw that too, and after googling and browsing, I'm led to believe that the term 'social reproduction' is a term for the parts of society that take care of daily living- cooking, cleaning, taking care of children and elders, teaching social values, etc, that is usually unpaid and provided by family members. I think the crisis he refers to in America is the lack of affordable childcare and eldercare for families that have to spend many hours working to ensure they have the basic necessities. If someone else has a better explanation, please do chime in!
I could be wrong, and either way I would be delighted to hear Professor Tooze further illuminate his thoughts about “the crisis of social reproduction” in the United States, but he might be referring to this: https://shoplocal.bookmanager.com/isbn/9781771136655
This essay is really interesting, but there is a key point missing: The CCP cannot tolerate opposition or resistance. A working, occupied population is a source of stability, and the workplace is a place where control, subtle indoctrination and observation can occur. Therefore, China is not going to give up jobs to developing countries, so long as there are workers available to do those jobs.
Export share and production share aren't the same thing, and the paper flags the reason itself: the benchmark only holds if export propensity is equal across countries. A country making a lot of apparel for its own domestic market looks squeezed out of a space it never actually left.
The FA article points to a couple of China anomalies. I suspect most readers would find it strange that China’s per capita income is under $14,000, much closer to India than Korea. There’s also the sheer size of the manufacturing sector, not only the world’s largest supplier of electric vehicles, but shoes. And textiles and garments. Too big and too poor are what you would expect in a country pursuing self-sufficiency in manufacturing. An undervalued currency is integral to both anomalies. Beijing believes it’s found the winning formula. Protectionism is the biggest threat to business as usual.
Concise and well-argued. Thank you for the shout-out and the citation. I sheepishly admit that I had not thought to check whether the authors' own prior published works provided ammunition for a counterpoint while preparing my piece. Perhaps simply a consequence of being spoiled for choice in terms of potential lines for rebuttal.
I also note with appreciation that you chose to get straight to the implication of the original piece: that this strand of China Shock 2.0 anxiety is mostly accurately a China-and-India story, not a China-and-Global-South story. It struck me as somewhat disingenuous to frame an argument for one country's industrialization with the language of Global South development solidarity, while simultaneously arguing for remedies that would raise costs for developing countries importing Chinese capital goods, industrial inputs, or infrastructure (and glossing over the already observable outcomes in countries that are coordinating with Chinese actors, rather than waiting for a spot in the queue).
The China squeeze is indeed true. However, it’s largely due to automation.
Just five years ago, automation in China was only available to larger manufacturers, but today is not the case, even small companies, tiny even have access to automated systems.
And given that China has a large population, with uneven development, arguably there is ample room for the nation to maintain its low level manufacturing.
Modi saw this, hence when he came to power, his flagship policy was, “Make in India,” which has failed miserably.
The problem isn’t just China maintaining its low level manufacturing, it’s India failing to absorb it and its poor relations with China.
The manufacturers in China would rather invest in Belt and Road nations which are friendly to China, rather than in India which has always been at America’s beck and call.
And it’s worth noting that manufacturing in India is horrendously difficult, its infrastructure is poor, its energy supply is unstable, and the quality of labour not always up to standard.
Apple which has moved some production to India knows this only too well with low efficiency rates and substandard quality that leads to higher costs.
The fact that India has failed to capture manufacturing is largely a fault of its own.
“India which has always been at America’s beck and call”
I had to laugh here. India has always played both sides and has rarely been reliably in America’s camp.
Nevertheless, I appreciate your insight on the trickledown of automation. But I think China has been masterful at climbing the value chain: starting with inexpensive goods and subsequently developing better and better versions till they reach a halo / luxury level.
“India played both sides?”
Really? That is funny!
Isn’t the legacy of colonialism the elephant in the room? The neglect of universal education, while having an hyper-educated local elite, an extractive economy that benefits not only the colonial power but also the local comprador elites (often religious minorities like the the great Parsi dynasties: the Tatas, the Mistries or the Mehtas) are handicaps that must have weighted, but curiously many Indian academics are unwilling to pursue the subject, perhaps because they are part of the social stratum that actually benefitted from the colonial regime.
It is telling that the success stories of East Asia, namely Japan, S Korea and China were never colonized by European powers. OTOH one can look to the basket case left behind by the British: India, Pakistan, Bangladesh in S Asia and Nigeria in Africa
Would you happen to have any sources on this subject? I'd love to read something about this
Hi Sam
on the subject of colonialism IMO novels beat essays, at least regarding the psychological consequences on the colonised. Some suggestions:
1 Amitav Ghosh The Ibis Trilogy (Sea of Poppies, River of Smoke and Flood of Fire)
2 Salman Rushdie Midnight's Children
3 Mohsin Hamid The Reluctant Fundamentalist and Moth Smoke (all of his books are excellent)
4 Abdulrazak Gurnah Desertion
And William Dalrymple who writes essays that blur the distinction between fiction and non-fiction: The Anarchy, The Last Mughal and White Mughals are excellent, instructive and deeply entertaining.
This article by Amartya Sen sums up his views on the consequences of British colonialism:
https://newrepublic.com/article/61784/imperial-illusions
Sen has long maintained that the British Raj is responsible for famines and many excess deaths, some historians put the toll at 165 millions excess deaths, in theis page you can find calims and counter-claims, again the most outspoken defender of the British rule is of Indian origin
https://www.reddit.com/r/AskHistorians/comments/1f8ivd3/british_empire_killed_165_million_indians_in_40/?logging_in=true
This is a fine piece indeed and I appreciate your refusal to pathologise China. But I think some more "immaterial" factors need to be considered, beside the low technology and advanced to high technology, etc. We are anchored too much in the last 200-300 years of development and what the driving force was: primarily military advancement in applying concentrated and overwhelming force, which led to ability to extract unimpeded, from others. Now, the field has been leveled, the technical genie is out of the bottle, and the West for instance (as well as the rest) have to compete on their structural strengths. Let's compare India and China for instance: which one has a multi-millenia long tradition of examination and meritocracy? S&C would like us to forget certain civilizational aspects...
Thank you, Professor, for the generous citation and, more importantly, for placing the argument in the broader context of development history.
The idea that low-skilled manufacturing should eventually be distributed according to population quietly turns export markets into national entitlements. But manufacturing capacity is accumulated through education, infrastructure, industrial organization, supply-chain depth, and decades of institutional learning. China did not inherit its export share from its population; it built the productive system that made that share possible.
If China Shock 2.0 allows Europe to use narratives of Chinese overcapacity and subsidies to deflect attention from its own high energy costs, regulatory excess, declining capacity to commercialize innovation, and weak federal authority, the China squeeze narrative risks serving a similar function for India and a few other Global South economies: diverting attention from their own excessive protectionism, weak state capacity, and dense layers of democratic veto points.
This is a brilliant piece, and both the essay and the comments are radiating real insight!
Fairly speaking, the "China Squeeze" is simultaneously a fact (a nation dominating labor-intensive exports inevitably shrinks space for others with similar skills) and a narrative (a country unable to capture industrial relocation due to internal constraints blames China instead). This narrative isn't new; it has existed since China first started exporting cheap goods. But the reason it has become so universally accepted—to the point where Professor Tooze has to write a detailed piece like this to deconstruct it—might largely be credited to Donald Trump. Since his initial presidential campaign around 2016, his relentless framing of "China, China, China" solidified this worldview across the global mainstream, like it or not.
So, for what it's worth, my humble observation is this: regardless of the academic debate, the structural "Great Industrial Relocation" out of China has already begun. Friends of mine in Shenzhen noticed a clear turning point as early as 2017—a trend that started even before the trade war fully erupted. Of course, China’s industrial story is far from over; its momentum in EVs, solar, and renewables feels like it’s just getting started (and who knows, maybe massive scale in advanced chips is next?). But the outward shift of low-skill manufacturing is a real, observable trend now, much like how China’s integration into global supply chains actually began in the 1980s–90s, long before its formal WTO accession in 2001.
In a way, we are looking in the rearview mirror—debating and justifying a chapter that is already transitioning. Countries like India, Indonesia, or Mexico & whoever would be far better off taking a page from Vietnam’s playbook: actively welcoming and positioning themselves to receive these migrating supply chains rather than resisting or complaining. If they focus on reforming internal bottlenecks to match what made China competitive in the past, it could truly be a win-win for global development.
Geographically, China is rather continent than a country, if by that term we have in mind anythng except -and arguably not even- the US. Politically, it is in some respects closer to an empire, i.e, a collection of countries.
Proof of the last is the hukou system, which prevents the spatial arbitrage through which regional income differences would balance. Indeed, through it China retains a large reservoir of low-income labour, where by "large", I insist, we mean country-size.
Hukou allows people to work in the developed regions, but without settling. It is similar to the "Gastarbeiter" Europe summoned to reconstruct after the war, but with lower benefits and no bargaining power. This political institution gives China the ability to stay competitive at the lower level of industrial development.
Notice that this competitiveness applies both internally and externally. Indeed, within its borders China functions like a scaled-down version of the World itself, sourcing from regions or, as in the cases above, from the same region that is paying salaries that actually apply to less developed ones, the osmotic pressure kept in check by the hukou.
In the broader global economic & political ecosystem, what is the purpose of BRICS? On whose side are the Saudis, Emiratis & Egyptians? What, if anything, does India get out of this? Should Brazil & South Africa be challenged on play agnosticism? Here's military historian Phillips O'Brien, an Ukraine partisan (which China, India & Brazil, are not. South Africa, certainly is not): https://phillipspobrien.substack.com/p/is-china-going-in-for-the-kill. Is Trump & Trumpism, which are deliberately undermining the US economy, in the very least, a patsy for Putin & Xi, or something far worse? Notice, per this essay, how infrequently he invokes his personal relationship with Modi. I would add that China has been the most brilliant student of the US. The latter, without acknowledging it, has widely succeeded as mentor. This goes back to the late 19th century when the Chinese Exclusion Act made an exception for Chinese students coming to study at US colleges & universities. Are Kapur & Subramanian ironically revealing the substance of the world's largest democracy to be an own Achilles heal? Are there Gandhian reasons for women & Dalit continuing to be socially crippled, hence dragging down the whole post-colonial endeavor?
...yeah, Tooze is right again, and the counterfactual is doing work the evidence won't.
Blaming China for India's missing factories is a grievance dressed as economics. It only holds if you think manufacturing jobs sit in a global pool, waiting to be handed out by fairness.
Here's what the tariff faithful still haven't priced. Last year China's exports to America fell twenty percent, and its total trade surplus still hit a record near 1.2 trillion dollars, up another fifth. It just sold everything somewhere else.
You don't squeeze that. You out-build it.
One can also eliminate some of the xenophobia about what is going in the car industry by pointing out that German car makers assume that they are operating in a mature market, milking their cash cows. Chinese car makers, well, they don't assume that. ChatGPT provides these figures (usual chatGPT caveats): in 2020-2025 German big 3 (BMW, Mercedes, VW) invested €375 billion in capex+R&D and generated €202 billion in net profits. BYD, the leading Chinese car maker, invested around €115-130 billion in capex+R&D and generated 24-26 € billion in net profits. The interesting aspect is the investment intensity, BYD invests 4.5-5 times the spending in Capex-R&D as part of net profits while German big three spends around 2 times Capex-R&D/net profits.
As for German car manufacturers, I'd say that shareholders are the ones that are doing the squeezing.
Could the answer be much simpler?
China used state direction and funding to pick future priorities and make them happen.
India did not.
Examples include basic manufacturing, agriculture, IT and EVs.
China seems a well-planned economy.
India seems a chaotic mess.
As an Australian, it is interesting that so many well-educated Indians have fled India to Australia that Indians have overtaken English and Chinese to become the largest immigrant group in Australia. About half of them have university degrees.
Does this indicate that Indian society has failed to create domestic opportunities for its well-educated citizens?
In contrast, China values education and rewards its graduates with good opportunities.
So is the real problem India's failure to plan for advanced industrial opportunities for its educated citizens?
thank you for much-needed clarity
Please clarify the meaning intended in the sentence from the text below:
"Likewise, is the main problem of the American working-class the threat of Chinese competition or the manifest crisis of social reproduction in the United States itself?"
One cannot follow current events without tripping over yet another opinion of what ails the American working class. But your phrase here is new to me; I'm clueless what you mean by "the manifest crisis of social reproduction". Care to send a pointer -- perhaps a previous post of your own -- explaining what this means, to humble folks like myself?
I saw that too, and after googling and browsing, I'm led to believe that the term 'social reproduction' is a term for the parts of society that take care of daily living- cooking, cleaning, taking care of children and elders, teaching social values, etc, that is usually unpaid and provided by family members. I think the crisis he refers to in America is the lack of affordable childcare and eldercare for families that have to spend many hours working to ensure they have the basic necessities. If someone else has a better explanation, please do chime in!
I could be wrong, and either way I would be delighted to hear Professor Tooze further illuminate his thoughts about “the crisis of social reproduction” in the United States, but he might be referring to this: https://shoplocal.bookmanager.com/isbn/9781771136655
This essay is really interesting, but there is a key point missing: The CCP cannot tolerate opposition or resistance. A working, occupied population is a source of stability, and the workplace is a place where control, subtle indoctrination and observation can occur. Therefore, China is not going to give up jobs to developing countries, so long as there are workers available to do those jobs.
The US should have been so sensible 50 odd years ago …
Export share and production share aren't the same thing, and the paper flags the reason itself: the benchmark only holds if export propensity is equal across countries. A country making a lot of apparel for its own domestic market looks squeezed out of a space it never actually left.
The FA article points to a couple of China anomalies. I suspect most readers would find it strange that China’s per capita income is under $14,000, much closer to India than Korea. There’s also the sheer size of the manufacturing sector, not only the world’s largest supplier of electric vehicles, but shoes. And textiles and garments. Too big and too poor are what you would expect in a country pursuing self-sufficiency in manufacturing. An undervalued currency is integral to both anomalies. Beijing believes it’s found the winning formula. Protectionism is the biggest threat to business as usual.