Today: Why are millions of factory jobs leaving China? Victor Shih on the country’s extraordinary self-inflicted loss.

+ Is Donald Trump making the People’s Republic more popular? What we’re tracking for this week’s member’s despatch. & New music from Max Richter …

Whisked away

Thanks to enormous government subsidies, Chinese firms now dominate the global markets for many high-tech products, such as solar panels and EV batteries—though it’s come at the cost of anger with Beijing in these countries for crowding out their domestic producers.

It’s the latest variation on a theme that’s become common since China joined the World Trade Organization in 2001: Cheap Chinese products flood global markets, a major consequence of which has been the loss of manufacturing jobs throughout the developed world—often called the “China Shock.”

But over the past couple decades, there’s been a dramatic change within China: Labor-intensive factory jobs are disappearing. From 2011 to 2019, average employment in 12 labor-intensive manufacturing industries—like textiles, shoes, and toys—fell by about 14 percent. The number of jobs in the textile industry shrank by 40 percent. From 2011 to 2023, those 12 industries lost almost 7.5 million jobs.

Why?

Victor Shih is the Ho Miu Lam Chair in China and Pacific Relations at the University of California, San Diego, and the author of Factions and Finance in China: Elite Conflict and Inflation. Shih says mostly, the Chinese government chose to let these jobs go.

It’s true that as any country gets richer, labor-intensive jobs in the manufacturing of lower-value goods tend to move to poorer countries. But Beijing has engineered this one: In 2015, the country launched Made in China 2025, a plan to direct the country’s manufacturing capacity—and lavish state subsidies—toward high-tech industries and away from low-end ones. Then, during its first trade war with Washington in 2018, Beijing nudged companies to shift some factories overseas to evade American tariffs.

These massive shifts in industrial policy are having a correspondingly massive impact on people across China. With their former manufacturing employment disappearing, Shih says, millions of Chinese now find themselves dependent on either modest public welfare or the precarious gig economy—which might now be even more labor-intensive than the factory line …

China first

China’s Foreign Minister Wang Yi has meanwhile met with more than 20 foreign leaders, including of Nigeria, Uzbekistan, and Switzerland. And last week, Beijing dropped sanctions against several members of the European Parliament that had been in place for four years.

What’s going on here?

• Trump defended the plan on Monday, saying the plane would be transferred to the Defense Department, not directly to him personally—and that only a “stupid person” would say no to such a gift.
• Authoritarian regimes in the Middle East regularly spend millions each year on influence operations in Washington, in both direct lobbying and gifts to think tanks or universities—and in fact, Qatar lags behind the annual spending by the United Arab Emirates and Saudi Arabia. … For context, see Ben Freeman, “Broad daylight”—from The Signal’s recent print extra Altered States.
• A UAE investment firm recently put $2 billion into a cryptocurrency venture owned by the Trump family.

The Gulf autocracies are typically low-key with their U.S. influence strategies: They might sponsor sports teams or events—but in politics, they typically funnel money through legal donations to institutions and registered lobbying efforts in Washington. These latest, massive—and obvious—moves to win favor with the Trump administration raise a question about why these dictators are suddenly operating so conspicuously.

They clearly expect the White House to be receptive—and part of the reason for that may be that they now see in it a similar governing style to their own, in which power is concentrated in the person of the ruler, who runs the state like a family business. … For context: Stephen Hanson, “The custom of dons.”

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