Companies of the USA and its allies can move out of
their main market in China, but the market will not collapse, and who
can they sell to in the end, conducting their businesses outside of the
main market. This is like a fishmonger moving his stall out of a fish
market to set up shop far away from the fish market, and hoping that
customers will continue to patronise it. No such thing. Customers will
still patronise the main fishmarket, where variety and choice is all
theirs to choose.
Chinese companies are having a busy time
filling the void left by those USA and Western companies moving out of
China. Even in Russia, Chinese carmakers are now making headway by
taking over the void left by Western car companies. And will those
companies that left China or Russia be able to return later to retake
their share of the market? Even if they do, the market is already
engulfed by Chinese or other friendly foreign companies. This is the
same scenario in any open market competition, where if you move out, you
cannot regain the edge again, once customers found a better choice.
But
as de-coupling or de-listing are so grand an idea that the USA and EU
are so deeply embroiled with, let it be. Who gets punished is still left
to be seen. Chinese domestic companies never had so much impetus to
expand or rise from the ground. This is their opportunity to make hay
while the sun shines. Even just producing for the 1.4 billion population
is good enough. I used to say that a shoe factory in China producing
shoes for the domestic market is enough to survive already, selling a
pair to each family in a normal family of three.
Even as I am
saying this, Apple is facing serious problems in France and Canada,
among other countries over the older iphone 12 model that was reported
to emit unacceptable electromagnetic waves aka radiation levels.
Released in October 2020, what consequence will result after three years
of use is only talked about today. Think about it!
Meanwhile in
China, the ban on iphones in Government circles and expanding to
employees of Government linked entities, of which there are more than
150,000, employing tens of millions, the damage to iphone sales in China
is going to be instrumental. Added to that, Huawei's Mate 60 is
reported to be selling like hot cakes, with Huawei said to be unable to
cope with demand over the short term.
China, even well before
the IMF recent advice, had already been promoting domestic consumption,
knowing that moving forward, more sanctions and heavy handed actions are
on the line to hype up the demonisation of Chinese companies, operating
and competing too well, with Western competitors.
The
investigation of subsidies being raised against Chinese EVs is one good
example, to put down the Chinese competition, knowing Chinese EVs are
competing too well against USA and European car makers. These non
Chinese carmakers are doing catch up in EV sales, having taken their
eyes off while concentrating on internal combustion engine vehicles,
with Japan hedging its bet on hydrogen fuel cell vehicles that is
obviously not taking off. China has already been phasing out ICEV, which
will add another nail in the coffin of USA, Japanese, South Korean and
European carmakers.
Suffice to ask, what about the USA's US$52
billion subsidies thrown at the Chips Alliance congregating in Arizona?
Isn't that also a subsidy and needs to be investigated as well? Even the
EU is against that move, knowing it is nothing more than unfair trade
practices to subsidise USA chip manufacturers to provide an unfair
advantage when competing overseas. But the USA clearly plugged their
ears, refusing to acknowledge what the EU is complaining against.
Going
forward, not only is the USA surrendering areas of influence and
markets in China, but is moving into an era of competing with China in
markets outside of China itself. Can they compete in markets in Africa,
Latin America, Central Asia or even ASEAN that still sees China as their
main market for trade.
Anonymous
2 comments:
The USA is now in the process of finalising rules to prevent China benefiting from the US$52 billion chip subsidies given to chip manufacturers building facilities in Arizona. USA companies and other foreign manufacturers benefiting from the subsidies are not to be allowed to expand their foothold in China or export products to China. Note that the narrative now is just to 'slow down' China's advance in technology sector, realising that the prevention of China's rise is now an exercise in futility. Good for China's domestic chip industry, good for SMIC and perhaps TSMC and Samsung as well.
TSMC already discarded acceptance of those subsidies because of unreasonable terms designed to hijack their high end chip expertise, on top of having to give the USA Government client's information and having to share profits with the USA Government as well, for a miserable US$15 billion subsidy. The accusation that China is stealing Western technology under the terms of its agreements with foreign entities is never more high handed than what the USA tried to steal from TSMC. TSMC already invested US$40 billion in Arizona, with benefits still uncertain, and is between a rock and a hard place.
Looking at it, TSMC is now in no way being tied down by the USA's new rules, due to non acceptance of the subsidies, and needed to expand its operations in mainland China to restore its bottom line. Unless the USA makes use of further high handed measures to stifle TSMC and Samsung, which might even collapse these two chip giants, the failure of the new rules is apparent. Perhaps the intention was to engineer a collapse of TSMC and Samsung, in order for USA chip makers to corner the market.
The indication is that this new ruling will also meet with failure, because Chinese chipmakers are now on the verge of taking a more substantial slice of the market, both in chips production and share of the domestic market demand, decreasing its dependence on foreign chip makers. China will emerge stronger by its determination to overcome the odds. What China is capable of is clear for all to see, in space technology, AI, EVs, infrastructures, Jet propulsion, and catching up on chip expertise which it had a belated start.
The new rules are centred on the chips business right, and the subsidies were given on the condition that chip manufacturers do not expand chip production in China or sell to China. Where can Chinese domestic chip producers have such opportunities to make hay while the sun shines in the absence of foreign firms competing in the Chinese market. It will be a blessing in disguise. The USA can continue to find more ropes to hang itself, not to mention hanging to dry its own chip manufacturers.
Just like the war in Ukraine, the USA is still advocating for more ropes to hang itself and Nato. Now about to send longer range ATACMS to Ukraine, touted as another game changer. Developed in the 1980's, these are probably obsolete missile system destined for the scrapyard. Dumping these to Ukraine is logical and good business for the Military Industrial Complex.
USA's rope is also hanging around the necks of its European Allies. Germany is now in recession, de-industrialisation crippling its manufacturing in the face of expensive energy cost. When Germany suffers, countries like the PIGS are not going to find others to continue to bail them out in case of difficulty. As the war is now expected to be a long haul, these tottering economies in the EU are not going to enjoy good days ahead.
Japan's Hokkaido seafood piles up following China's ban. Now it is starting to have a meaning why China's ban on seafood from Japan is important, following the release of the contaminated wastewater from the cripple Fukushima Power Plant into the ocean. Not giving China a voice of opinion over the issue and just taking China as a non important player, when it is the biggest market for Japan's seafood, is a bad mistake.
Japan is sending its radioactive wastewater around the world and there is no way of putting the Genie back into the bottle. While the global community is talking about saving Mother Earth, the Japs are sabotaging all the effort. Soon, the world would be talking about saving humankind, lives in the ocean and extinction issues.
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