ARTICLE
22 October 2024

China And Walmart, Please, For The Love Of ____, Let's Observe A Silver Lining Partnership In An Otherwise Dismal Global Landscape

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At a glance, gauging where we stand in our relationship with China overall, one would assume the key operative word in most descriptions would be "dismal" at best.
Worldwide International Law

At a glance, gauging where we stand in our relationship with China overall, one would assume the key operative word in most descriptions would be “dismal” at best. This is of course accurate to a certain extent but looking at trade and commerce between the two countries, let's take a look at the largest retailer in the U.S. as Walmart gives us a prime example of where we stand regarding unity as nations. Unity, you say between the two countries, hmmm. Yes, the absolute opposite of what we see and hear on a daily basis in the news regarding the highly contentious activity in the S. China sea. It's good to keep in mind as we hear about the impending gloom and doom, highlighting the outbreak of the third world war, invasion of Taiwan, and ever escalating trade war, that Walmart's supply chain includes some 30,000 Chinese factories, which produce an estimated 70 percent of all of the goods it sells. In fact, Walmart's global sourcing headquarters, the heart of its international operations, is also located in Shenzhen, a booming city on the southeastern coast of China. (99.9% of the Walmart employees in China are locals).

Those of you who have read a decent amount of my articles over the last few years would, and justifiably so, put me in the category of a pessimist regarding China and the U.S. relationship. Although this is true, I have kept in mind that regardless of where the militaries of the two countries continue to be mired in controversy, and are a gnat's eyelash from a major clash, I have to assume that Xi and his top advisors recognize the importance of the economic bond between the two largest economies on the planet. I actually see this the major deterrent to a potential war.

Do we share that sentiment? One may question that given the fact that regardless of who wins the upcoming election in the U.S., the trade war will continue, with the Section 301 and 232 tariffs, sanctions on the microchips, high tariffs on EV's, never ending cases of anti-dumping and countervailing duty, the new mandate on stamping out de minimis abuse via Section 321, intellectual property theft, illegal transfer of technology, and of course Forced Labor issues. (A recent major point of contention between China and Sams Club).

So, looking at the bright side of continued support for each other's economies, and Walmart as our example as some of the “glue” that keeps us from tearing each other apart, here is the current trade landscape between, China, and Walmart. Honestly, it's not the best, but it's still solid in revenue. Walmart generated $11.43 billion in annual revenue in China in 2023.

Walmart doesn't really like to make their import numbers well known, so let's just do some “approximate” mathematics. The estimated value of imports into the U.S. from China in 2024 is $448 billion (2023 total was $423 billion) representing approximately 18% of overall imports. Walmart accounts for approximately 11.2% of total U.S. imports from China. So, 11% of $448 billion is $49 billion. (I suck at math, so I asked Alexa-blame her if this is inaccurate) Let's keep this 11% and Walmart in mind given the following breakdown of some of the major categories and their approximate values regarding imports by category to the U.S. from China in a full year such as 2023:

Electrical and electronic equipment: $126.68 billion

Machinery, nuclear reactors, boilers: $85.89 billion

Toys, games, and sports requisites: $33.39 billion

Furniture, lighting, signs, prefabricated buildings: $20.29 billion

Plastics: $20.16 billion

Vehicles other than railway or tramway: $16.41 billion

Optical, photo, technical, medical apparatus: $11.79 billion

Articles of iron or steel: $11.71 billion

Footwear, gaiters, and the like: $10.04 billion

Articles of apparel, knit or crocheted: $10.00 billion

Other made textile articles, sets, worn clothing: $8.59 billion

Organic chemicals: $8.39 billion

Articles of apparel, not knit or crocheted: $7.81 billion

Pharmaceutical products: $6.00 billion.

Who is doing the majority of the above manufacturing in China? Well, much like the U.S., the Chinese economy is approximately 75% comprised of SME's, small to medium size enterprises. Considering that 99% of them sell online and recognize the U.S. market as key to their success, 63% of Amazon's 3rd party sellers are based in China. Also worth a mention, about 11% of AliExpress shoppers come from the U.S. I have shopped on AliExpress (China's Amazon) for the last decade and use Amazon at least twice daily. My commitment to the China-U.S. economic partnership is absolutely solid just based on the number of packages delivered to my address any given day. (Bezos owes me big time for my annual investment). Granted, I may not be the “average” online shopper tapping into this union, so let's defer to the average Walmart shopper (many of whom show up on social media), who represent that slice of the American buying population which is substantial. Walmart revenue for 2023 was $611 billion. Worth noting, of Walmart's 10,619 worldwide stores, 365 are located in China. (4,615 are in the U.S.) 

One might ask, with all of this economic camaraderie, how can the trade war be eased? Would President Xi perhaps be interested in a trip to Walmart's home office in Arkansas, and maybe even take in a Razorback football game with board members? I don't see that in his future but hey, consider this, the Walmart family members are billionaires having built their empire on the backs of the Chinese manufacturers for the most part. Stay with me here. I am making a point. Based on the aforementioned camaraderie, how can a conflict between the militaries even be considered much less avoided? I do trust that more rational minds from the economic scholars are prevailing at the negotiating table with the Generals who are more than willing to put their expensive toys to use in a display of strength and dominance. As close as we are to a major conflict, will cooler heads prevail? I would hope so, but Xi once again recently mentioned the reunification of Taiwan and how nothing can stop him. Well, we just sold Taiwan $567 million in military hardware which looms large as an “in your face” injection into the discussion of why we shouldn't just start shelling each other's military installations. Xi just wants the microchips, we get it.

So, let us relax for a moment and ponder. With all of the escalation, pending violence and projected outcomes being floated between the U.S. and China on the global landscape regarding a display of military dominance, should that totally discount the strong economic relationship? It begs the question, why the hell would you want to jeopardize 75% of your country's businesses, by escalating confrontation with one of your main trading partners? Hey, what about Walmart?

Those who have been paying attention to the Chinese economic landscape may say that Xi has simply had other priorities over the last few years, and it's brought some very dark clouds to the horizon. Basically, the Chinese economy is currently in bad shape, and the unemployment rate is almost 20%. Young grads can't get a job, and all that money that 70% of the population dumped into real estate has all but vanished. (There are roughly 80 million abandoned apartment units in China) Also notable here was the mandate of reunification of Hong Kong with the mainland which ran off a slew of Foreign Direct Investment. Hong Kong used to be the gateway of FDI into mainland China. It is obvious that authoritarian rule is driving away private business. Sorry, I am digressing somewhat here, it's what I do. There is a totally separate article here just based on the “bad” going on between the two nations, but the jest of this article is to bring back to light just how much the economies depend on each other, using Walmart as a prime example of the dependence. It's the best example I can think of as its where America in general shops. (Walmart's U.S. based revenue in 2023 was $421 billion) Most Americans have no idea that the large percentage of products they are purchasing at Walmart is from China, and most probably don't care, because it's cheaper when it's made in China, and the quality in this day and age is highly competitive.

Within this country-of-origin China to N. America discussion, the U.S. is determined to bring manufacturing back to the U.S., but it's going to be a very long journey out of China (especially with pharmaceuticals). In the meantime, I must mention Walmart's ongoing commitment to its U.S. manufacturing which it made in 2021 across six priority categories including plastics; textiles; small electrical appliances; food processing; pharmaceutical and medical supplies; and Goods Not for Resale (GNFR).

In closing if you believe as I do, that there are some well-respected, powerful, and relatively sane individuals running the country on both sides of the two largest economies, the conclusion at the end of each heated meeting of the administration's top minds, is that keeping the economies thriving in partnership is far more important than who could blow the other out of the South China Sea faster. As a reminder of our partnership, is anyone making sure that at least on occasion President Xi is presented with the most up-to-date Walmart-China trade stats? I think not but he should be. I asked him to call me in one of my recent podcasts, but I haven't heard from him yet. In the meantime, let those cooler, more economically motivated minds in the administrations prevail. When it comes to face-to-face discussions, I have great faith in Katherine Tai, and so does China, as they think of her not just as a Chinese-American, but an intelligent and skilled negotiator.

On the other hand, I must observe the recent mud thrown on my rose-colored glasses and mention in closing a recent headline: “China denounces Walmart for ‘stupidity' after Sam's Club was accused of pulling Xinjiang products.” Yes, there is controversy in the ranks regarding Forced Labor issues. Here is a link to a recent article from CNN. China denounces Walmart for ‘stupidity' after Sam's Club was accused of pulling Xinjiang products | CNN Business

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