Shein and Faster Fashion's Emergence

♠ Posted by Emmanuel in ,, at 12/21/2021 01:19:00 PM

Much has already been written about the emergence of "fast fashion": clothing retailers that are able to translate trends seen on the world's fashion runways... to a store near you in a matter of weeks. The success stories of Sweden's H&M and Spain's Mango have become the stuff of business legend in upending the fashion industry in recent decades. It was probably only a matter of time that onetime suppliers in China would become the firms at the cutting edge of evolving to customer's whims and desires that move so quickly. 

Younger women should be familiar with China-based online retailer Shein. Reflecting the democratization of fashion brought by the online world, it's not the big fashion houses that set today's trends but rather posts on the likes of Instagram and Pinterest. In keeping with the times, Shein is almost entirely an Internet selling pure play instead of having bricks-and-mortar stores still like H&M or Zara. Rest of the World writes more about this emerging business success story:

Shein eventually expanded to offer apparel for women, men, and children, as well as everything from home goods to pet supplies, but its core business remains selling clothes targeted at women in their teens and 20s — a generation who grew up exploring their personal style on platforms like Instagram and Pinterest. 

Its clothes aren’t intended for Chinese customers, but are destined for export. In May, the company became the most popular shopping app in the U.S. on both Android and iOS, and, the same month, topped the iOS rankings in over 50 other countries. It’s the second most popular fashion website worldwide.

By 2020, Shein’s sales had risen to $10 billion, a 250% jump from the year before, according to Bloomberg. In June, the company accounted for 28% of all fast fashion sales in the U.S. — almost as much as both H&M and Zara combined. The same month, a report circulated that Shein was worth over $47 billion, making it one of the tech industry’s most valuable private startups.

Think of Shein more as an Amazon-a-like instead of comparing it to the established fast fashion names in terms of its business model:

At the heart of these issues is Shein’s aggressive business model. Comparisons to fast-fashion giants like H&M miss the point: it’s more like Amazon, operating a sprawling online marketplace that brings together around 6,000 Chinese clothing factories. It unites them with proprietary internal management software that collects near-instant feedback about which items are hits or misses, allowing Shein to order new inventory virtually on demand. Designs are commissioned through the software; some original, others picked from the factories’ existing products. A polished advertising operation is layered over the top, run from Shein’s head offices in Guangzhou.

Ethical concerns with work conditions in Chinese garment factories aside, Shein's advantage is being able to call on PRC suppliers to shift even more quickly than European fast fashion firms:

For years, European brands like Zara and H&M have embodied fast fashion, shortening the route from runway to storefront from months to weeks. But Shein isn’t chasing runway trends — rather, it often knocks off items seen on TikTok and Instagram, where hype cycles move significantly faster. Whereas Zara typically asks manufacturers to turn around minimum orders of 2,000 items in 30 days, Shein asks for as few as 100 products in as little as 10 days. “They want factories to be much more nimble,” said Lu.

If speed is Shein's competitive advantage, it must adapt to even quicker cycles going forward. Or, will someone even speedier supplant Shein just as it has H&M and Zara (which outran department stores before them)? Something else I thought the article could have shed more light on is how Shein is working around supply chain snags like the US-China trade war, intermittent COVID-19 lockdowns in the PRC, and rising shipping costs.

2021's Miseries: The Great Creatine Shortage

♠ Posted by Emmanuel in , at 11/20/2021 08:56:00 AM

By now, it should be obvious to just about everyone that goods whose availability we once took for granted are in short supply. Blame COVID-19 lockdowns affecting countries where these goods are being produced, a breakdown in air/sea/land transport logistics, and so on. The pre-COVID-19 world was built on distributing manufacturing facilities where things could be made most efficiently, assuming fairly inexpensive shipping even across vast distances. Is that world now gone? We'll have to wait and see if and when the pandemic subsides.

In the meantime, here's another not-quite-amusing example for those encountering these shortages: A few days ago, I noticed that my supplies for the exercise supplement creatine monohydrate were running low. I experienced sticker shock while scanning current selling prices. Briefly, what creatine does is replenish the body's supply of adenosine triphosphate (ATP), which fuels muscle contractions such as while performing resistance training. It turns out that most of creatine's precursors come from (surprise!) China. As many of you are probably aware, China has taken a zero tolerance approach to confronting COVID-19 outbreaks. With production centers and major port cities not immune to these recurrent lockdowns, creatine supplies have taken a hit. Here is a detailed and enlightening discussion of the ongoing creatine shortage from the Natural Products Insider:

Strict export regulations and regional COVID-related limitations are slowing China-originating supply chains for two top sports nutrition energy ingredients, caffeine and creatine. Outside of China, suppliers and manufacturers are clamoring to beef up inventories of these increasingly hard-to-find materials but face steeply rising prices for whatever supply they can secure [...] Similarly, the price of creatine has risen from its consistent $4 per kilo to between $10 and $14/kg.

There is more good detail:

More unique to the sports nutrition industry is creatine, which factors into energy production in the body and is popular with core market users, namely bodybuilders and athletes looking to boost muscle, performance and recovery. “There is a worldwide creatine shortage,” confirmed Jeff Golini, Ph.D., executive scientist for All American Pharmaceutical, who confirmed all the raw material to manufacture creatine comes out of China, meaning this shortage impacts all forms of creatine, from monohydrate to hydrochloride (HCl).

Thus, while suppliers such as AlzChem Trostberg GmBh (Creapure) and All American Pharmaceutical (Kre-Alkalyn) make their ingredients in Germany and Montana, respectively, their starter materials come out of China, placing even these suppliers in the impact zone. What’s behind the shortage is not quite clear and asking different “insiders” results in varying answers, including lots of guesswork and perspectives.

Vitajoy sells both caffeine and creatine, and Crane said as far as he can tell the shortage is related to the pandemic. His sources suggested COVID-related issues in the northern area of China, where most creatine factories reside, caused production facility closures. “I believe that is what might have started the ball rolling,” he reasoned. “From there it was reported that there were some starting material issues and, before you knew it, any availability in creatine was gone.”

Worse yet, the US-China trade conflict seems to be worsening availability: 

Golini attributed the shortage to changing world politics, including the recent U.S. presidential administration transition, and the ongoing global power struggle involving trade. “China now is saying we have a shortage of everything in order to re-control the world market, create demand and raise pricing,” he said. “From creatine to resins to make plastics to pipe to erythritol to you name it.”

“Creatine is $14/kg if you can find it,” Kneller lamented. Crane noted pricing went from around $4 to more than $8/kg in a matter of months. “We feel like we might be seeing some daylight regarding supply in the coming months, but it’s hard to pinpoint exactly when,” he reasoned. Golini sees a longer struggle. “This shortage for creatine—as a matter of fact, there is none [available]—will continue this entire year, and you will see pricing go through the roof,” he warned.

Then there are the aforementioned regional shutdowns for COVID-19 containment--including areas crucial for creatine supply chains. These include Wuhan itself:

Creatine producers appear concentrated in the northeastern province of Hebei, near the Yellow Sea separating China from both Koreas and Japan [...] In January 2021, Chinese officials locked down the city of Shijiazhuang, the capital Hebei, and other areas of the province due to a COVID outbreak. Hebei Hangwang Import and Export Trading Co. Ltd., Sure Chemical Co. Ltd. Shijiazhuang and other creatine producers are located in this city. However, this restriction was lifted March 25, leaving only the city of Wuhan, Hebei, still under a lockdown that was lifted April 7. According to Made in China, several creatine suppliers are located in Wuhan, where COVID was first detected in China.

The bottom line is supply chain disruptions have become more common and rolling over the past several years due, among several reasons, to trade wars and the pandemic. Many supplement companies have grown to accept this fact, take steps to be better prepared and hope situations improve. “We expect global supply chain disruptions to follow COVID,” Titlow summarized. “The better COVID is managed (e.g. vaccines), the better the supply chain.”

There's even an amusing video online about bodybuilders regarding the creatine shortage as a harrowing event of enormous proportions. These are not quite the best of times for global supply chains; that much is clear.

Oil Crisis? Bah. UK’s Fake Tan Shortage

♠ Posted by Emmanuel in at 11/09/2021 03:11:00 AM

There are all sorts of unexpected but fairly amusing shortages occurring worldwide given supply chain snarls that are happening as the world deals with the ongoing pandemic. It seems that spreading out manufacturing and sourcing locations to far-flung areas of the globe makes less sense when logistical hurdles arise due to lockdowns as COVID-19 surges pop up again and again in various key countries.

Take, for instance, ethoxydiglycol. This chemical sourced from places like (surprise!) China are in short supply in Europe. Without it, a lot of formulations for cosmetics cannot function properly. Ever wonder how UK celebrities maintain that year-round glow despite the onset of winter? Well, their beauty secrets may be unraveling real soon unless these supply chain issues are worked out:

The UK could be on the cusp of a cosmetics shortage as prices balloon for a vital chemical used in many eczema creams, fake tans and shampoos. A chemical called ethoxydiglycol has been described as the "unsung hero" of cosmetics. It is part of the formula that improves the way cosmetics are applied to the skin. Without it, many cosmetic products as we know them would be unusable.

Ethoxydiglycol is widely used in cosmetic products because it is soluble in both oil and water-based products, such as propylene glycol, water, vegetable oil and ethanol. The shortage, which is expected to hit UK and European cosmetics manufacturing in the next few weeks, has already seen a near ten-fold price hike. 

While price hikes have become necessary in light of what's happening, they may rise yet further:

Ethoxydiglycol prices have increased from £12.10 ($16.50) to £103 per kg in recent weeks. Many suppliers are now completely out of stock. Minimum order quantities set by many suppliers have also increased from 24kg to 1,000kg. This means that the minimum order to purchase Ethoxydigylcol is £103,000, which will halt production for many smaller businesses who cannot afford to purchase in those quantities.

In keeping with the concept of economies of scale, it's often the little guys who get hurt the most.

Bitcoin's Astounding Environmental Cost

♠ Posted by Emmanuel in at 11/01/2021 03:58:00 PM

 

There's an interesting article in Fortune on the true environmental costs of using Bitcoin as a medium of exchange to replace cash, debit cards, credit cards, and other commonly-used payment methods. Given the enormous amounts of electricity needed for bitcoin mining, it is perhaps no surprise that estimates on the high end find it to be an unsustainable proposition. So much for using Bitcoin for everyday transactions?

The [MoneySuperMarket] report states that each Bitcoin transaction consumes 1,173 kilowatt hours of electricity. That's the volume of energy that could "power the typical American home for six weeks," the authors add. The Bitcoin mining that enables a purchase, sale or transfer, it posits, uses a slug of electricity that costs $176. That number is based on an average worldwide cost per kWh of 9.0 cents over the past 12 months.

What it we lower the estimated price per kilowatt hour to 5.0 cents? Some argue that figure is more in line with global energy costs. I am afraid that does little to make Bitcoin any more sensible as a means to transact given the costs of generating these coins still:

So let's reduce the MoneySuperMarket number from 9 cents per kWh to the 5 cents favored by de Vries. That would put the average cost of producing a coin at around $19,000, which looks reasonable (and underscores the industry's gigantic profitability as price hovers at over three times that level). At 5 cents, the electricity cost per transaction would fall from $176 to roughly $100.

For every transaction you make with Bitcoin, that's what you would be paying in electricity costs. When the likes of Visa and Mastercard can process these sorts of transactions for cents, it puts Bitcoin's true costs into sharp relief. The argument that ever-lower cost locations for mining these coins is a solution has its limits too, with these destinations now discouraging Bitcoin mining as power outages arise as a result.  The global movement of Bitcoin miners eventually becoming persona non grata is a very interesting story in itself, but I digress...

Bitcoin's drawback is that electricity is finite, and what Bitcoin uses, a family or a business can't use. In several nations, Bitcoin mining is imposing severe stress on the grid. Kazakhstan, one of world's leading crypto mining hubs and a top destination for producers displaced by the Chinese lockdown, is suffering blackouts caused by the industry's sudden explosion within its borders. Its government is limiting producers to a fraction of the electricity they're now deploying. Iran has also suffered severe shortages that's led to ejecting producers, and tiny Abkhazia is raiding mines––many of them illegal––to forestall an energy crisis.

The bottom line is that Bitcoin mining in its current form is unsustainable, and so is its use as a medium of exchange. 

Next in the PRC Firing Line: Hermes, Gucci?

♠ Posted by Emmanuel in , at 8/30/2021 04:36:00 PM

Unless you've been hiding under a rock these past few months, headlines about how the PRC is cracking down on its most lucrative companies--Internet-based services, video games, online education, and the rest--have dominated business news. This crackdown is ostensibly in the name of maintaining social order--not letting inequality get out of hand, not getting young people hooked on mindless games, and so forth. This social engineering is most evident in new rules aiming to restrict hours spent by those under 18 on video games to no more than three.

So far, the largest victims of this erstwhile Xi Jinping-organized socialist putsch have been local firms. However, those feared to be next in the firing line are foreign purveyors of luxury goods. Are they next in line in being styled as "enemies of the people"?

Chinese President Xi Jinping has stepped up his call for "common prosperity," sending shudders through luxury goods vendors, which worry that China's rich will not be able to splurge on $3,000 bags.  

The fear was palpable on the stock market last week. Shares of Paris-listed Kering, owner of the Gucci brand, slumped 17%. Switzerland's Richemont, the company behind such names as Cartier and Piaget, sank 14%. LVMH Moet Hennessy Louis Vuitton and Hermes slid 13% and 8%. Makers of high-end cars were hit as well, with Porsche down 10% and Ferrari 6%.

The catalyst was Xi's call for "common prosperity" as part of "high-quality economic development" last week at a meeting of the Chinese Communist Party's Central Committee for Financial and Economic Affairs. The committee called for adjusting "excessive incomes" and redistributing wealth that has become overly concentrated in the hands of a small number of people.

Veteran China commentator George Magnus (ex-UBS) I believe has it right when he says the current crackdown has more to do with the Communist Party maintaining control than any sort of re-commitment to socialist principles. Insofar as the likes of Alibaba and Tencent were gaining more and more of the "mindshare" of the Chinese people, they posed a threat to Communist Party fealty. Hence, they had to be knocked down to size to ensure that no other gods would be placed before the Party.

My belief is that Western luxury brands are not as vulnerable for this reason: while they may symbolize the wrong things like conspicuous consumption, they do not really pose a threat to the control that the Party has on various aspects of Chinese life--political, economic, social or technological. Ironically, it's the domestic tech giants who pose more of those kinds of threats, hence the recent actions.

Is Childbearing Immoral Amid Climate Change?

♠ Posted by Emmanuel in , at 8/12/2021 06:11:00 PM

Be fruitful and multiply during the age of climate change? Think again. 

One of the most fascinating existential questions has been posed on the business news channel CNBC, of all places, as would-be parents consider the wisdom of having children. While there are climate deniers like most of the US Republican Party and other reality-challenged individuals, most reasonable people accept the premise that global temperatures are rising due to human activity. The recent IPCC report leaves us in no doubt that things are getting worse in this regard. Already, we are witnessing severe climate change negatively affecting human life. So, the question is: Does it make sense to have children who will grow up on a degraded planet?

The article is interesting in probing a number of angles on this question, the answer to which will ultimately have significant implications on the future of humanity:

1. What is the carbon footprint of raising a child?

2. How does a warming planet impact fertility rates?

3. Is it ethical to bear children knowing their quality of life will be negatively impacted by worsening climate change?   

As a Catholic educator, the third question is the most interesting one to me. The obvious "Christian" answer would be that we should not presume things will get worse: It is still within the current generation's abilities to limit the future negative effects of climate change on future generations, although that window of opportunity is rapidly closing (see Pope Francis' 2015 encyclical Laudato Si). Given the massive collective action problems we have, though--including a main political party in the world's second-largest carbon emitter the United States denying the very existence of climate change--what are the chances of global citizens clamoring and working towards improvement? As the article suggests, more thoughtful would-be parents are giving these considerations a lot of though provided the almost non-existent progress on arresting warming trends observed around the world. 

There are no easy answers going forward.

Falling Births? US Needs to Actually be Livable

♠ Posted by Emmanuel in , at 6/27/2021 05:07:00 PM

Ever consider that the US birthrate is dropping precipitously since it's a rather s--tty place to live?
 

Like most developed countries, the United States is experiencing cratering birth rates. If the replacement rate is 2.1 birth per woman, its current reported rate of 1.6 is well below that. In other words, depopulation will set in for America just as it has for the likes of Japan and others if births continue to crater and anti-immigrant sentiment scares off would-be migrants. Fewer birth and nobody being welcomed inevitably spells depopulation.

Although the United States likes to portray itself in all sorts of self-aggrandizing ways--the promised land, shining city upon a hill, and all that jazz--the truth is that its livability is rather worse than any number of other places.A Bloomberg interview with demographer Lyman Stone has some interesting things to say on the matter. First, flexible work may not be the solution:

I think policymakers still have this delusion that the path to high fertility is everybody having an awesome job with great benefits allowing them to be “flexible” for their family, but this just isn't reality. As jobs, even “family-friendly” jobs, turn into careers, and careers turn into essentially religious or spiritual vocations, family is deprioritized and birth rates decline. In empirical studies of surveys across nearly 100 countries, a co-author and I found that this effect was actually as strong for men as for women, so this isn't just about breadwinners. The boss in the movie “Elf” is the bad guy because as far as a child is concerned, a parent's work is always the biggest competition for that parent's mental and emotional energy.

Another observation is that Trumpian racists tend to gain favor as birth rates fall, which obviously has ominous portents:

But as birthrates fall, far-right anti-immigration parties tend to do better, not worse. So if a traditional value of being welcoming to immigrants is something important to Americans, again, low fertility is a problem, because it threatens the viability of political coalitions that support an attitude of welcome and hospitality. And of course, in a more literal sense, the absorptive capacity of a society with regard to immigrants is related to population size: 1 million immigrants has a very different social significance to a society with 100,000 births than a society with 1 million or 10 million. 

Completing this downward spiral of falling birth rates mobilizing far-right ultra-racist groups is that low birth rates tends to quash innovation, too: 

Another thing we appear to value is something like, “Having a dynamic economy with lots of innovation and entrepreneurship, without inherited wealth that dominates the economic landscape.” But I've shown in extensive work that low birth rates directly predict less innovation, lower entrepreneurship and a higher salience for inherited wealth.

America with all its problems has too far to go in fixing its broken society. It won't become much more livable anytime soon, so expect its birth rates to continue stagnating. 

Happiest Country, Finland, Has Few Migrants

♠ Posted by Emmanuel in , at 6/22/2021 01:27:00 PM

The Finnish far-right scares away many migrants... but how welcoming are ordinary Finns?
 

There's this interesting conundrum in international migration of countries that, on paper at least, should be among the world's most attractive destinations having problems finding migrant workers. The rationale for this migration are well-known: Developed (and mostly Western) nations with high standards of living are aging, and generous state-provided benefits cannot continue when those being supported (retirees) are promised far greater resources than those being put into the system by current employees. The logical solution in theory is to attract migrant workers to fill this gap, but reality intrudes. 

Take the case of Finland. While it is near the top or tops global league tables for standards of living, paths for migrant workers remain treacherous. Let's begin with its dire population projections that necessitate more migrant workers coming in:

While many Western countries are battling weak population growth, few are feeling the effects as sharply as Finland. With 39.2 over-65s per 100 working-age people, it is second only to Japan in the extent of its ageing population, according to the United Nations, which forecasts that by 2030 the "old-age dependency ratio" will rise to 47.5.

The government has warned that the nation of 5.5 million needs to practically double immigration levels to 20,000 to 30,000 a year to maintain public services and plug a looming pensions deficit.

Despite its dire demographic situation, however, the country has done little to make itself more attractive and hospitable to migrant workers. While there is outright xenophobia in the form of far-right politics, what may be more concerning is that regular Finns do not really make much in the way of concessions to newcomers. As a result, those with high levels of "human capital" are no more likely to stay given the less-than-welcome reception they have received in Finland:

But anti-immigrant sentiment and a reluctance to employ outsiders are also widespread in Western Europe's most homogenous society, and the opposition far-right Finns Party regularly draws substantial support during elections...

But previous such efforts have petered out. In 2013, five of the eight Spanish nurses recruited to the western town of Vaasa left after a few months, citing Finland's exorbitant prices, cold weather and notoriously complex language. Finland has nonetheless seen net immigration for much of the last decade, with around 15,000 more people arriving than leaving in 2019. But many of those quitting the country are higher-educated people, official statistics show.

Horror stories are rife of even talented folks experiencing outright hostility:

Start-ups "have told me that they can get anyone in the world to come and work for them in Helsinki, as long as he or she is single", the capital's mayor, Mr Jan Vapaavuori, said to AFP. But "their spouses still have huge problems getting a decent job". 

Many foreigners complain of a widespread reluctance to recognise overseas experience or qualifications, as well as prejudice against non-Finnish applicants. Mr Ahmed (who requested his name be changed for professional reasons) is a 42-year-old Brit with many years' experience in building digital products for multinational, household-name companies. Yet, six months of networking and applying for jobs in Helsinki, where he was trying to move for family reasons, proved fruitless. "One recruiter even refused to shake my hand. That was a standout moment," he told AFP.

As with Japan, the same question holds: For how long can they hold on to such parochial attitudes in the face of such unfavorable demographic headwinds?

Highly Subsidized US Industries: Horse Racing

♠ Posted by Emmanuel in , at 5/23/2021 07:44:00 PM
Addled horses may be the least of horse racing's worries if the sport's subsidies take a hit.

As a casual follower of horse racing, I was intrigued by the legendary horse trainer Bob Baffert being barred from participating in the third leg of the Triple Crown, the Belmont Stakes, due to doping. Baffert has already been cited for doping a number of times, but this time is the most noteworthy, just coming off a Kentucky Derby victory in the sport's most prestigious event. As it turns out, horse racing--in the United States at least--is a dying sport. if the pot of money being contested over keeps shrinking, well, that would help explain why even the most prominent trainers are tempted to turn the odds in their favor through underhanded means. 

Unbeknownst to me, and I suspect most everybody else outside the industry, American horse racing circa 2021 cannot stand on its own... four legs. Probably by invoking nostalgia and tradition, the industry has managed to wangle massive state government subsidies:

It’s a story rarely told outside the racing industry, and understandably so: Horse racing is propped up by tax dollars from casinos that have nothing to do with what happens on the track or at the betting windows. Although the sport loses public interest with each passing year, at least 24 states, almost three-quarters of those with racing, directly subsidize it with public funds. Based on publicly available information and statistical analysis, the total is likely close to $1 billion annually.

New York and Pennsylvania alone account for half of that amount; over the last 15 years, they’ve distributed around $6 billion. Both states also forgo countless millions each year in sales taxes they don’t charge on racehorse purchases, an exemption that doesn’t apply to other kinds of horses.

Throughout the country, horse racing has become so heavily subsidized that it resembles a public enterprise. In Pennsylvania, for instance, the Race Horse Development Fund is the state’s single largest economic development program, and it funds nearly every aspect of horse racing, from purses to support for breeders, health and pension benefits for horsemen, drug testing of the horses, and even racetracks’ advertising costs.

Is horse racing too big to fail, in financial parlance? The emerging backlash is that these taxpayer dollars are going to an increasingly marginal pastime whose patrons are mostly the rich who can spare cash to gamble with when there are so many urgent social concerns:

But the issue isn’t going away, especially not as the pandemic has dynamited state finances, leaving lawmakers with tough decisions. This February, [Pennsylvania governor] Wolf again included a cut to racing’s subsidy in his proposed 2021 budget. And last week, the editorial board of The Philadelphia Inquirer called for the industry to be “put out of its misery.”

“It’s like a giant party on the Titanic,” Ward said, “except the guests know what is coming.” For racing’s dependence on public money, Pennsylvania might be just the tip of the iceberg.

The doping scandal will probably only raise more questions the industry would rather the general public be unaware of. Make no mistake: American horse racing, a pastime for the wealthy, is on the dole in a big way. 

China-Oz Trade War: Higher Ed Next?

♠ Posted by Emmanuel in , at 5/12/2021 06:00:00 PM

Will PRC students soon be an increasingly rare sight on Aussie campuses?

Just when you thought China-Australia relations could get no worse, it seems they find something new to quarrel about. Perhaps the last golden goose Australia has left is its higher education sector, which still (rather amazingly) attracts scores of PRC students. That said, there appears movement afoot in China for recruiters to not promote Australia as a higher education. Anticipating matters may get worse (which is likely given how things are going between these two), Aussie universities are setting their sights on diversifying their international student base. 

Researchers from the Australia National University in Canberra are urging the government to get moving in making their country's universities less reliant on Chinese students:

Dr Dirk van der Kley and Dr Benjamin Herscovitch argue education is Australia’s only remaining export valued over $10 billion annually which is “both reliant on China and which Beijing can target without significant self-harm”. The industry employs thousands of Australians, and is closely linked to the country’s technological competitiveness, the pair say.

Coercion against the sector would significantly impact Australia’s prosperity. “If there was a significant drop in students from China, the revenue and research loss would be impossible to fully replace through other international markets because China is the largest source of globally mobile students,” the authors write. The government would not be able to step in and fill that gap, they say.

Speaking of which, the Chinese government holds more cards in being able to harm Australia's economy given the economic importance of higher education service exports to the PRC and other nations:

The pair point out that media reports already indicate education agents in some Chinese cities were discouraged from promoting Australia as an education destination. Beijing could go further, by fostering negative views of Australia and its universities via the state-controlled media or even ceasing to recognise some or all Australian qualifications.

By recruiting more students from other locations, Australia could safeguard itself from Chinese coercion to a degree.

With both countries apparently not keen on talking with each other to resolve economic and other differences, it will probably happen all of a sudden and without much warning if the PRC starts discouraging its students from going to Australia.