Thread by @johnarnold

Just returned from my first trip to China, mostly looking at the energy and robotics industries. Fascinating. Random observations, both business and general, below...
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The speed to add manufacturing capacity is stunning. Permitting takes weeks. A factory making sophisticated equipment is built in 12 months. An auto plant took 16 months from groundbreaking to first production. Slack in labor market makes it easy to staff and flex employment.
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The US and China have significantly decoupled since early 2020. The # of flights between the two countries is down roughly 70%. Two long-term residents I spoke with said the # of American expats is down 50-75% from the peak. The # of Americans studying in China is down ≈90%.
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Universities and government research labs are at least as tightly woven into the startup ecosystem as in the US, and in many cases more so. Their mission and incentive structures explicitly include commercialization, not just research.
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China awards 1.3 million engineering undergraduate degrees each year vs 130,000 in the US.
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Intense competition leads to widespread overcapacity and low profitability across many industries. Once an industry is deemed strategic, provincial governments deploy subsidies and other supports as they compete to turn local firms into hubs and capture the associated jobs.
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I don't know if Chinese manufacturers will ever make money but I came away not wanting to invest in any manufacturing business in the rest of the world.
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Here's (one reason) why high-speed rail works in China and not the US. These population density maps are roughly the same scale. 1.3 billion people live east of the line in China. 220 million live east of the line in the US.
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You see American fast food everywhere. There are 12k KFCs (vs 4k in the US), 6k McDonalds, 7k Starbucks, 4k Pizza Huts.
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Tier 2-4 cities are very quiet. Few cars on the road. Don't see many people. Factory workers live in dorms on campus. Other workers are in gated compounds that are self-contained neighborhoods. Food delivery and e-commerce have replaced dining out and shopping.
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China is one of only handful of countries with highly educated workforce, robust access to capital, and strong entrepreneurial culture. Only the US and China meet those conditions and have scale.
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As industries become more complex, scale matters more than ever. Large countries can fund frontier R&D, support dense talent markets, amortize infrastructure, and create robust supply chains. Few countries can be cost competitive in high value-add manufacturing.
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While the supply chain on transmission and grid infrastructure is backed up in the US, there is spare capacity in China. Anecdotally, data center developers are increasingly buying Chinese equipment. Half of the electrical transformers at one factory were heading to the US. There does seem to be confusion and contradictory messages from the US government and local regulators about what Chinese equipment is allowed on our grid. Best I can tell, it's ok if at the edge of the grid but not part of the main transmission and generation backbone.
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A security check including bag x-ray is required to enter subway stations, at least in major cities. It's interesting that most Western countries that are more dangerous do not do this, presumably for speed and cost.
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After all these years, Tiananmen Square is still a police state. ID checks are required to exit nearby subway stations. A reservation is needed just to walk the square. Bag X-rays & metal detectors are mandatory even hundreds of yards away. Police everywhere on a random day.
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There were fewer cranes than I expected, presumably reflecting the collapse of China's real estate market.
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Lower density cities still had most housing in high-rise residential buildings, usually built in complexes of 10-50 identical buildings. I guess it's the most practical way to house people in a city growing quickly but the aesthetic damage is real.
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Can we please bring platform screen doors to subways in the US?
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Interesting that robotic coffee shops are taking off in China first even though wages are much higher in the US.
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I learned a ton about how China works, which coincidentally is the name of the book I'm reading now that details the history and significant role the government has played in promoting growth. It feels the US is moving more towards that model than vice versa these days.
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