From the world of arms and war to France and much more
This week we explore the world of arms & war, while moving to France. We also try to analyse whether global manufacturing is moving away from China or not.
Analysing the arms market
The global arms market is dominated by five countries: America, Russia, France, China and Germany. Together, they account for more than three-quarters of weapons exports. However, they are facing increasing competition from emerging arms producers, who are taking advantage of changing geopolitical dynamics and the fallout of the Russian invasion of Ukraine.
South Korea has emerged as the leader among the rising arms exporters, ranking ninth in the world in 2022. It sold weapons worth $17bn in 2022, more than double the amount in 2021. Most of its sales came from a $14.5 billion sale with Poland.
Turkey is another country that has invested heavily in its defense industry, especially since the ruling AK party came to power in 2002. Turkey’s weapons exports increased by 69% between 2018 and 2022 compared with the previous five-year period, and its share of the global arms market doubled.
Another potential supplier can North Korea, which has a diverse arsenal of weapons that could appeal to some buyers like Russia. Besides drones and missiles, North Korea could also offer self-propelled howitzers and multi-launch rocket systems, which are useful for artillery fire support.
Iran has sold some 2,400 of its Shahed “kamikaze” drones to Russia.
Russia has lost some of its key customers, such as India, which reduced its purchases of Russian arms by 37% in the 2018-22 period.
China’s half of arms exports in the 2018-22 period went to Pakistan, which is a strategic ally and a rival of India.
Which all countries are aiding Ukraine?
In case you are wondering, which all countries are helping Ukraine in the Russia-Ukraine conflict currently going on, this post would help you understand that.
The United States have been aiding Ukraine with now more than $60 billion, since the start of the war. Out of that $60 billion, around 65% is for direct military aid, while the rest are for economic and humanitarian activities.
Just to give a perspective, after the World War 2, US came up with a plan to aid Europe of around $150 billion (adjusted for inflation) over three years, which was commonly referred to as the Marshall Plan. However, this $60 billion aid will be just 3.4% of the US defense budget of $1.77 trillion.
The rest of the world is also helping Ukraine with contributions that are having more percentage value with respect the individual countries GDP numbers.
Is China losing its status of the global manufacturing leader?
Since the Covid pandemic and the US - China trade war, there has been reports of reshuffling of global supply chains and that manufacturing will be slowly pulled out of China. Is this something that’s coming up in the near future?
China’s low-cost manufacturing is moving inland from the coast, where land and labor are cheaper. This is helping China to maintain its global manufacturing dominance.
China exported ($630 billion) more than India ($425 billion), Mexico ($590 billion), and Vietnam ($346 billion) for last 12 months till Aug 2023.
China’s factories enjoy cheap loans, abundant suppliers, and low logistics costs compared with other countries.
However, India, Mexico, and Vietnam have grown their exports by over 40% since 2018, benefiting from the U.S.-China trade war and the pandemic.
Even if there are certain percentage point moves away from China to India, Mexico, Vietnam and other countries, it is likely that China will continue to be dubbed as the world manufacturing hub for some time to come.
Western countries are trying to attract more manufacturing back home with subsidies and technology restrictions for China.
China still has a 14% share of global goods exports, the highest in the world, followed by the U.S. and Germany.
Growth of France
Due to the impact of a slow growth / recession in Germany, worker shortages, high interest rates amidst a persistent high inflation, France is expected to grow slower than previously anticipated.
France is the second biggest economy within the Euro zone
It is now expected to expand by 1.4% in 2024, lower than the previously estimation of 1.6%.
While its fiscal deficit in 2022/2023 is around 4.9%, it plans to reduce to 2.7% by 2027.
Due to higher interest rates, the debt costs are likely to rise from 38 billion euros to 74 billion euros in 2027.