Ukraine war sanctions, China winner, Germany biggest loser.

 CHINA TAKES ADVANTAGE OF ECONOMIC OPPORTUNITY

CONTINUED SANCTIONS WILL CAUSE EUROPEAN DECLINE

While of course, Ukraine is the ultimate loser from this conflict, its economy is now near non-existent and will be for the foreseeable future.  It appears Europe will be the next loser in this economic catastrophe, particularly Germany. While Germany and Europe are losing markets in Russia and elsewhere, China is expanding its reach everywhere.

One example is the Russian automobile business. Before sanctions, German cars were the vehicles of choice for many Russians. BMW, Mercedes and VW being the top selling cars in Russia. Now that these vehicles are no longer available, except for overpriced black market cars, the Chinese have gone full bore in capturing the Russian auto market. They are now offering cars with all the bells and whistles of high priced German cars and 7 year 100,000 mile warranties. The Russians, who prefered German cars are discovering that Chinese cars are actually performing pretty well and it is likely that much of the German brands will find it may never regain its former market share. The Chinese are actually able to sell their cars in Russia for double what they cost in China, so if it later should come to price competition, the Germans may have a hard time competing. 

While sanctions are directly removing markets to the Europeans it is also the cost of energy that has quadrupled with the sanctions now making many manufacturing plants no longer competitive in the world market. At the same time China, India and other manufacturers are reaping a competitive advantage by continuing access to cheap Russian energy and basic materials. 

While Europe is the big loser it is also effecting some Asian and other manufacturers. Recently France has agreed to purchase 21 billion euros of cargo ships form China. While China trails S. Korea and Japan, who are the biggest builders of ships, China is going after this market with its new competitive advantage in energy and material from Russia. S. Korea and Japan cried foul, but then it was revealed that China has agreed to purchase 292 planes from French based Air-bus for 37 billion Euros. A deal the French could not economically resist even with the political repercussions.

Australia whose economy has enjoyed Chinese thirst for raw materials and is dependent for over 50 % of its economy will likely soon feel the shift of trade to other Asian, Russian and African resource competitors.

Now, China has unveiled their entry into the commercial airline business, so we can expect they will be a competitor for Boeing and other western manufactures, particularly in the Asian and southern hemisphere market.

Some believed that the decline of manufacturing in Europe would be a boost for U.S. attracting European companies and U.S. products, but time will tell if the high manufacturing costs, regulations and a sketchy labor market can compete with China.

At present the Chinese economy is projected to grow 6% in the coming year, Russia + 2 % and Germany is now considered in a recession with a -2% growth. Most of the rest of Europe is either flat or down. It is unlikely to get better in the near future and the shifts in global trade may become permanent and difficult for European economies.

It seems that China, Russia and other asian and southern countries are accepting that they will need to do without access to American and some european markets. They believe they can thrive and prosper by focusing on trade with the other half of the world. The question will be can the west thrive and prosper without that other half.