Mike Dunn | Author | Thought Leader
China’s Electricity Shortages are chasing away Manufacturing
You have to have consistent electricity to run Apple iPhone manufacturing plants, and Tesla plants or companies will leave.
It was announced this week that both big tech icons Apple and Tesla are leaving China and relocating manufacturing to India. It looks like the last straw for big tech manufacturing was the lack of consistent electricity. The slang term for electricity is “Apple Juice,” which is used to recharge millions of Apple iPhones every day. Both scheduled and unscheduled blackouts are unacceptable to manufacturers.
What happened to the “Apple Juice?” (Electricity)
The reason for the rolling blackouts across the country is due to the lack of coal to make electricity in their 900 CCP coal plants.
- As a punitive retaliation measure, PRC banned all Australian imports, including coal.
- To a stated goal to have my posts stay non-political, the reason for the retaliation is omitted in this post.
- The blackouts will get worse this winter, and the need for heating a billion homes will increase demand. In addition to powering the factories and heating the homes, the PRC also needs Australian coal and iron to make one of their most important exports: steel.
The CCP plan backfires like a kick from a Kangaroo.
The PRC leaders banned the Australian coal but did not think the plan through. Not only did the PRC start an exodus of manufacturing companies leaving China with the lack of electricity to run the foreign and domestic factories, but the Aussies also replaced much of the Chinese business with other countries. Australia’s exports are still down, but their profits are up due to price increases.
Apple Juice is Not China’s Only Economic Problem
There are other reasons companies are either fleeing China or considering leaving China.
- The real estate collapse will greatly reduce the disposable income of a billion Chinese, thus making the Chinese domestic market less attractive to marketers.
- With China’s increased military spending and goal to take over Taiwan as the PRC did in Hong Kong, the chance of a shooting war in the South China Sea is significant. A shooting war will shut down almost all imports and exports to China.
- New PRC regulations and tariffs have created an environment of more risk than the benefits warrant. Companies doing business in China reevaluate the calculus of their profitability and risk each month. Some are pulling the plug, but some will stay.
- The Chinese “Mandate from Heaven” is a reason the Chinese people follow the PRC. Once the narrative that the PRC no longer has the Mandate from Heaven, the PRC leaders will need to flee the country to survive.
- Many world leaders and industry leaders feel the PRC have overplayed their hand, and things are spinning out of control in China. Nothing is scarier and riskier than doing business with desperate totalitarian leaders.
- If there is a shooting war and India shuts down the 1.7-mile-wide Straight of Malika, that will shut off much of the oil from the Persian Gulf. Moreover, since the Straight of Malaki is 2,100 miles from the Chinese mainland, it will be hard for the PLAN (China’s Navy and Air Force) to take and maintain the straight for India, the US, Japan, and NATO.
My Guess on the PRC Military Plan from Investors Point of View
Investors need to try to plan for future moves of powers you have no control over. Of course, this is just one view. I recommend you review other opinions.
- Continue to use the “Belt and Road” plan (also called Debt Trap Diplomacy) to take over ports in Africa and many other small countries around the world.
- Take over Taiwan and the South China Sea to control trade in the entire region to partially control the global trade.
- Take over the Straight of Malaka to help ensure their access to oil.
- Invade Australia to take the coal and iron natural for the Chinese supply chain.
How Can Investors Profit?
Change is opportunity. There will be massive macroeconomic and geopolitical opportunities and risks in the next five years. There will be fortunes made and fortunes lost. Place your bets wisely.