Thitima C.’s Post

Japan's close alignment with US further widens destination gaps to US & China (9Apr24) Closer alignment between US - JP on subsidies for vital goods like semiconductors and batteries — a topic to be discussed by Biden and Kishida at their summit. Japan's FDI to US increased steadily, 5 times the level to China in 2023, compared to 3 times a decade earlier. The Biden administration’s top-down efforts to bring more manufacturing to the U.S. have also encouraged Japanese investment. Companies in fields like electric vehicles and renewable energy need to set up local supply chains to qualify for U.S. incentives. For Japanese companies, the difficulty of investing in US is high costs in a fiercely competitive market and high political risks. Returns from investment in US is lower — 8% in 2023, compared with 18% in China and 10% in Europe and Southeast Asia. Cr. Article from Nikkei https://lnkd.in/geQVygAn

German investment is here to stay in China (14.8.24) Amid a de-risk call across the EU businesses and pullout of outward investment trend from China, German direct investment into China rose sharply. The flows rose from €2.48bn in Q1 to €4.8bn in Q2 (€7.3bn in H1 compared to €6.5bn in 2023). Most of them came from big German automakers. Much of profit made in China were reinvested there under "In China, for China strategy". This causes a growing fear in Europe. Germany businesses have not learnt from over-reliant issue on Russia gas since the Russia-Ukrain war sparked. In case geopolitical tensions in the Taiwan Strait escalate, it could harm those German companies with deepening reliance on China such as critical inputs, raw materials, and rare earth metals for production, as well as export market. The Olaf Scholz's goverment called on German companies "not to put all their eggs in one basket” by diversifying their supply chains and export markets away from China. It could help reduce vulnerability to external shocks. Cr FT "German investment in China soars despite Berlin's diversification drive"

I think the revenge spending came and went. And it came at a time when the manufacturing was weak. But China does not want to change its growth model. To be fair, neither does Germany. They want to be export driven, not consumption driven. Because they see themselves having surpluses as a good thing and trade deficits as bad. They want the world to act like SEA - but SEA is an export-focused economy with few global champions; many of the national champions are local - so we do not really compete with China, and welcome FDI. And China does run a deficit with SEA - so of course we love China trade. But when the China trade reverses into surpluses for China, SEA won't like China so much any more. This distinction seems to elude Chinese agencies touting SEA trade co-operation as the model. (Also why ASEAN countries not starting with C, are always hedging between China and the West [which includes Japan and Korea]).

German firms keen to invest more in China German companies are determined to ramp up investment in China, motivated by the country's heightened focus on expanding market openness and fast-growing industries. German direct investment in China reached 7.3 billion euros ($8.04 billion) in the first half of the year, compared with 6.5 billion euros for the whole of 2023, according to data from the Bundesbank, Germany's central bank, shared with the Financial Times newspaper early this week. In the context of a rapidly changing global economy, China's ongoing opening-up measures, flourishing high-end manufacturing and green industries are set to accelerate the emergence of new economic growth drivers and foster innovation. These advancements will present decent opportunities for German businesses. https://lnkd.in/gjMBm6cn

My article is on the CGTN opinion page, which shows that despite the slowdown in global #trade, the trade relationship between #China and #Mexico continues to proliferate and may be the fastest-growing in the world. In January the demand for containers was up almost 60 percent as compared to the same period last year. China's investments have proven beneficial to Mexico's exporters, with Mexico surpassing China as the top exporter of goods to the #USA in September of last year, a position it had not held in about two decades. Many believe that Chinese companies are interested in Mexico to bypass economic #sanctions. However, as we show in this piece, this is unlikely to be the case. Chinese automakers have seen significant growth here, with their sales now accounting for almost 20 percent of the total sales in Mexico. This is a significant increase compared to virtually zero sales six years ago. It becomes clear why #EV car manufacturers such as MG, BYD, and Chery discussing how to determine suitable locations for their production facilities with Mexican officials. Simultaneously, another Chinese company announced plans to construct a $12 billion battery plant in Mexico. Mexico is part of the US-Mexico-Canada Agreement, which allows for free trade of products between the three countries. However, the US has restricted specific electrical components produced by Chinese companies under the Inflation Reduction Act. These restrictions include EVs, #batteries, and other high-tech electrical components. The winner of this year's election in the US may take additional measures to restrict imports from Mexico. However, any investments in the Mexican economy have significant potential for further exports to the Latin American market. Chinese companies are gaining experience and creating jobs in those markets. For instance, trade with China generated 6.8 million jobs in Latin America between 1995 and 2021, which is even more than the 6.7 million jobs created by interactions with the US. The pressure from the American government will not be a disaster for Chinese manufacturers in #LatinAmerica.

🌏 China's Strategic Economic Shifts: August 2024 Update As we dive deeper into August 2024, China continues to make significant strides in shaping its economic future. Amidst global economic uncertainties, the Chinese government is doubling down on its commitment to high-tech industries and strategic supply chain dominance. Recent policies highlight a roadmap to advance cutting-edge sectors like quantum technologies, new energy sources, and smart manufacturing. This push is set against a backdrop of challenges, including external pressures from international tariffs and internal industrial competition. Despite these hurdles, China remains resolute in its vision, prioritizing innovation while navigating the complexities of a rapidly evolving global landscape. The success of these initiatives will be crucial in determining China's role in the global economy in the coming decades. #China #Economy #Innovation #GlobalEconomy #EconomicPolicy

New FDI into China from Germany has fallen while reinvested profits from their operations in China increased. "In a separate report published this week, the US-based Rhodium Group said Bundesbank data suggested German companies are increasingly reinvesting their made-in-China profits inside the country, to lower their costs." "As part of that trend, companies like automaker Volkswagen and BASF are reducing their footprint in the German market while increasing China-based jobs, research and development and, — in some cases — the production of goods destined for export, the report said." So what is going to happen? MAGA Germany style is coming up next. "“The surge in investment in China, and recent wave of downsizing in Germany, suggests that a gap is emerging between the financial interests of some German corporations, on the one hand, and the interests of their Germany-based staff and the broader German economy, on the other,” the Rhodium report added." It also shows that Germany is a less attractive place for investment relative to China, even for German firms.

At a news conference earlier in March, Jens Eskelund, president of the EU Chamber of Commerce in China, called for immediate talks between Beijing and Brussels to avert trade tensions as European producers struggled to compete with dumped products. “What we see right now is the unfolding of a slow-motion train accident. Over-capacity in Chinese industry is across the board. There is still a possibility of finding off-ramps and that’s what we hope,” he said. China has 60 per cent of global manufacturing capacity, 31 per cent of global production and 14 per cent of global consumption. In cars, it sells 23 million per year and in 2023 exported three million. Its annual capacity is 41-50 million -- the 27 million is equal to the entire production of US and Europe. In photovoltaic cells, China accounts for 80 per cent of global production and its capacity is 2.5 times global demand. In 2023, the EU installed 4,000 gigawatts of photovoltaic cells. The vast majority were made in China. Europe still has stocks of 80 gigawatts of the cells, meaning that it needs no imports for one or two years. With demand weak at home, Chinese manufacturers have no alternative but to export their excess production if they want to stay in business.

Industrial Policy is proving to be as important as ever around the world. In an increasingly complex and fast-changing world, countries are using industrial policies to boost their economies and stay competitive. These policies help support specific industries like clean energy, advanced technology, and manufacturing. For example: - The European Union launched the European Chips Act to strengthen its semiconductor industry. In the Czech Republic, Onsemi made the country's most significant foreign inward investment in modern history. - Japan is improving its supply chains to avoid disruptions like those seen during the COVID-19 pandemic. Japan's Ministry of Trade and Industry aims to enhance supply chain stability by assisting businesses in establishing new manufacturing plants and facilities for essential products and materials within Japan. - The U.S. passed the Inflation Reduction Act to invest in clean energy and lower energy costs. It is described by the US Treasury as one of the most significant investments in America's economy, energy security, and climate initiatives in the nation's history. - China has the "Made in China 2025" plan to become a leader in manufacturing and technology. This can be seen clearly in how competitive China's EVs have become. -South Korea's New Deal focuses on digital and green initiatives. The Digital New Deal aims to develop AI and 5G infrastructure, while the Green New Deal promotes eco-friendly industries and renewable energy. This policy is designed to create jobs, modernize infrastructure, and reduce carbon emissions. - Japan is improving its supply chains to avoid disruptions like those seen during the COVID-19 pandemic. Japan's Ministry of Trade and Industry aims to “strengthen supply chain resilience by supporting businesses in building new plants and introducing new facilities for these important products and materials in Japan”. - India's Production-Linked Incentive (PLI) Scheme Aims to boost domestic manufacturing in sectors like electronics, pharmaceuticals, and textiles by offering financial incentives based on production output. This policy has attracted major investments from global tech companies like Apple and Samsung. These actions show how important it is for governments to play a role in shaping the economy and how important industry and supply chains remain today. By focusing on key industries, governments continue to drive innovation, create jobs, and ensure that their countries and economic zones are ready for future challenges. Understanding and supporting policies in industry, along with the infrastructure/ real estate that supports it, can help us build a stronger, more resilient global economy. #EconomicGrowth #Innovation #GlobalEconomy #IndustrialPolicy #Sustainability

"Despite a shared interest in reorienting the US economy away from China, the two administrations have employed different rhetoric to describe their deeds. While Lighthizer refers to a process of “strategic decoupling” in his book, Biden and his officials have said the US is “de-risking”. Regardless, the results have been similar: stricter controls on China accessing hi-tech components and know-how." Huh? What are you on about? The main purpose of de-risking is moving supply chains away from China, and creating jobs in America. Limiting China access to US hi-tech is only one of the goals (and is not used in the same breath as de-risking. Or sentence.) "“Reindustrialization, once it starts, is hard to reverse because it is cost effective. [It] involves a lot of investment which has been sunk.” US manufacturing investment in 2022 rose 10.5 per cent from the year before, reaching US$670.5 billion according to Chinese data provider Wind – up 54 per cent compared to a decade earlier." In other words, reshoring is working. "China, meanwhile, reported a 10.3 per cent fall of direct investment from the US the same year. " Now China is not Burundi. It has its own industries, some of them advanced, some of them world leaders and some of them near world leading. Chips is one example. And it is no surprise that Huawei can jury rig a homegrown chip to power its smartphone. But it cannot also disguise that the chip is 2 years more backward vs what it got from Samsung 2 years earlier. But they will survive, and they can mass kludge solutions, that can mimic or surpass the best that the world can offer. But ... "“This may provide opportunities for China to become less reliant on other countries by developing its domestic market and making more investments in innovation,” he added." Because China has not developed its domestic market - it has kept consumption low (relative to the US) because it aims to keep wages low to be the factory of the world. By keeping wages low, innovation is invariably more limited as the kind of financial incentives are not available to drive innovation as in SV, but would rely on brute force and passion only.