"Macroeconomic policy drawbacks make it difficult for U.S. manufacturing to advance"
2024-08-15
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This article is reproduced from [Global Information Broadcast of China Central Radio and Television];
The Financial Times recently published the results of its survey on the US manufacturing industry. The results showed that the two signature manufacturing bills launched by US President Biden did not go smoothly in the first year of implementation. Among the major projects with a cost of over US$100 million that have been announced, nearly 40% have lagged behind or stopped.
△ Screenshot of report from the Financial Times website
In August 2022, the Biden administration enacted the Inflation Reduction Act and the Chips and Science Act, which aim to provide more than $400 billion in tax credits, loans or grants to promote the development of clean technology and semiconductor supply chains in the United States. This move has attracted many clean technology and semiconductor companies to reschedule their planned projects and move their factories from other countries to the United States.
However, an investigation by the Financial Times found that there were 114 large projects worth over 100 million US dollars related to the above-mentioned bill, with a total investment of 227.9 billion US dollars. However, among them, the progress of projects with a total investment of about 84 billion US dollars was delayed by two months to several years, or even suspended indefinitely.
The Financial Times based its conclusions on interviews with companies, local and state governments in the United States, and analysis of corporate announcements and financial reports.
Among the blocked projects, larger ones include Italy's Enel's $1 billion solar panel factory in Oklahoma, South Korea's LG Energy Solution's $2.3 billion battery storage plant in Arizona, and U.S. lithium giant Albemarle's $1.3 billion lithium refinery in South Carolina.
In addition, the Palidus project of US semiconductor manufacturer has a total investment of US$443 million and is expected to create more than 400 jobs. It was originally scheduled to be put into operation in the third quarter of last year, but the factory has been vacant so far.
△Rendering of the battery storage plant of South Korea's LG Energy Solution in Arizona (Photo from LG Energy Solution's official website)
Relevant companies told the Financial Times that factors such as deteriorating market conditions and slowing demand have led them to change their project plans. Other companies pointed out that they usually have to meet certain production capacity standards to be eligible for funding from the two bills. Some companies are hesitant due to uncertainty in government policies.
According to the Financial Times, the project delay has caused public opinion to question the Biden administration's belief that industrial transformation will bring jobs and economic returns to the United States.
△ Screenshot of report from the Financial Times website
Liu Ying, researcher at Chongyang Institute for Financial Studies, Renmin University of ChinaIn an interview with China Media Group's Global Information Radio, an analysis pointed out that the Biden administration has beautiful ideas about "reviving manufacturing" but has done very little, and the results are predictable.
First of all, the U.S. federal government and local governments are not synchronized. There are policies at the top and countermeasures at the bottom. The top goes to the left and the bottom goes to the right. This is a common occurrence.
Secondly, the United States does not have an advantage in either new energy batteries or other related major manufacturing fields. Not only is it not technologically advanced, it also lacks the supporting capabilities in the industrial chain and supply chain. More importantly, its business environment is also limited.
Although the US government politically hopes that manufacturing will return, the economic and market conditions are not available or sufficient, and tax incentives or loan incentives are not sufficient conditions for the return of manufacturing. Only when policy conditions, business environment, market conditions, technical conditions, industrial supporting capabilities and other aspects are in place can major manufacturing projects be carried out. These are advantages that the United States no longer has.
Liu Ying further pointed out that the shortcomings of the United States in its macroeconomic policies will inevitably lead to difficulties in advancing the U.S. manufacturing industry.
First of all, the so-called "near-shoring" and "off-shore friendliness" of manufacturing that the United States is trying to achieve violates market laws and is a political act.
Secondly, the United States' strength in manufacturing has long been declining, and the United States must recognize this. The United States should do more in areas where it is good at and cooperate more in areas where it is not good at, rather than trying to do everything, which results in doing nothing well.
In addition, although the macroeconomic and fiscal policies of the United States seem to support the development of the manufacturing industry and have provided some preferential tax reduction measures, the tight monetary policy has maintained a high interest rate level of 5.25% to 5.5% for quite a long time. This has suppressed corporate investment and market consumption. If the economy is suppressed, it will be difficult for the manufacturing industry to advance.
Source: Global Information Radio "Live World"
Reporter: Yang Zhuoying
Editor: Yin Meimei, Wang Hongling, Yang Nan
Signature Review丨Hou Chenjiang Aimin
