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Geo-Strategic Trend

China’s Shifting Strategy: Overseas Investment in the Electric Vehicle Industry

A report from the American think tank Rhodium Group suggests that China likely set a new record in outward direct investment in the EV industry last year. This year, China’s overseas investment in EV will remain strong, but will shift from primarily investing in the battery sector to manufacturing electric cars in Europe, Latin America, and Asia. This shift will aim to appeal to host countries’ demand for high value-added investment and job creation in exchange for market access.

So far, Chinese EV manufacturers have focused mainly on auto exports rather than on overseas production. The volume of Chinese car exports surged in 2022-2023, triggering an EU anti-subsidy investigation into Chinese EV imports. As a result, BYD announced plans to build a car factory in Hungary. This move would bypass potential anti-subsidy tariffs that the EU might impose.

Chinese EV manufacturers realize that the EU welcomes direct investment even though it might block direct auto exports from China. Unlike the U.S., which would strictly scrutinize Chinese EV production on U.S. soil, EU member states compete with each other to provide incentives for Chinese companies. The Rhodium Group anticipates that the EU’s investigation into Chinese EVs will encourage direct investment by the Chinese electric car industry in the EU.

China is also attempting to circumvent U.S. restrictions by investing in US trade agreement partners such as Morocco and Mexico.

Source: Deutsche Well, March 14, 2024
https://p.dw.com/p/4dVjM

RFI: Chinese EVs Flooding Europe, Will Challenge Core German Industries

Radio France Internationale (RFI) reported that “Chinese goods are pouring into European markets, and the first wave of repercussions for German industry has begun to take shape.” Below are some key points from the report:

Within China, sales of electric vehicles (EVs), consumer goods, and industrial products have stalled. State-owned enterprises are facing overcapacity. China’s plan [to alleviate the overcapacity] is to flood the European market with these products.

Products from China no longer just involve steel batteries and solar panels, which dominated the market for years with unparalleled prices. The mechanical engineering industry is another area where China has over-invested, and Chinese goods are now putting greater pressure on European manufacturers. It is said that Chinese manufacturers can produce around 50 million cars annually, but domestic demand may only be as much as 23 million vehicles. China plans to export the surplus to the rest of the world.

In terms of technical specifications, Chinese cars are at least comparable to most German cars, but they are often much cheaper in terms of price. “In the near future, a wave of industrial products may spread from China to Germany.” This is a harbinger for serious issues potentially facing Germany’s core automotive industry. Businesses and policymakers must find new answers to address these challenges.

Source: Radio France Internationale, March 15, 2024
https://rfi.my/AQv7

Lianhe Zaobao: Netherlands Closes Consulate General in Chongqing

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that, as China faces difficulties in attracting foreign investment, the Netherlands announced the closure of its consulate in the city of Chongqing. According to the Dutch Embassy in China, the Consulate General of the Netherlands in Chongqing was officially closed on March 1. The Dutch Embassy in Beijing will now handle consular matters in Chongqing, Sichuan, Shaanxi, Yunnan and Guizhou.

An unnamed source quoted a Dutch representative at a gathering of foreign businessmen in Chengdu as saying that the consulate was closed due to the limited Dutch business activities in the region. Data released in mid-February by China’s State Administration of Foreign Exchange showed that China’s foreign direct investment (FDI) growth last year was at the lowest level since the early 1990s; China is facing challenges as it seeks more overseas funding to boost a sluggish economy.

Recent changes in trade relations between China and the Netherlands have been significant. The Dutch intelligence agency issued a report last year saying that China “posed the greatest threat” to the economic security of the Netherlands. The Netherlands recently decided to withdraw the license of Dutch photolithography giant ASML for export of certain products to China, citing concerns over Chinese use of advanced chip-making equipment for military purposes.

Source: Lianhe Zaobao, March 4, 2024
https://www.zaobao.com.sg/news/china/story20240304-1472075

2023 Saw Record High Purchases of South Korean Real Estate by Foreigners, 70% Were Chinese

According to a report by Yonhap News Agency on March 10th, data from the South Korean court’s property registration website showed that in 2023, over 15,000 foreign nationals applied for property ownership transfers in South Korea after purchasing real estate, accounting for 0.9% of all property registrations. The number of foreigners earning rental income is also increasing.

When the collection of such data began in 2010, only 4,307 foreigners purchased properties in South Korea, making up just 0.2% of total buyers. However, this number has been rising annually since 2014, reaching a new high last year. Among foreign buyers, mainland Chinese accounted for the largest group at 113,840 or 72.9%. They were followed by Americans (7,892), Canadians (1,627), Taiwanese (521), and Australians (510).

By property type, 12,027 foreigners purchased multi-family housing units, comprising 1.21% of all such buyers. The city of Incheon had the highest proportion of foreign-purchased multi-family housing units at 2.09%, followed by South Chungcheong (1.74%), Gyeonggi (1.68%), Jeju (1.53%), and North Chungcheong (1.21%).

As foreign ownership of Korean properties increases, more foreigners are earning rental income. In 2023, 17,786 rental contracts were signed by foreign landlords, the highest number since collection of such statistics began in 2010.

Source: Sputnik News, March 10, 2024
https://sputniknews.cn/20240310/1057570944.html

Net Ease: China’s Water Cannon Injures Filipino Admiral, Renders Filipino Ship Inoperable

Chinese Internet portal NetEase has published a commentary claiming victory following an incident on March 5 when China’s maritime police used high-pressure water cannons against a Filipino boat, causing injuries to several Filipino crew members and damaging the ship. The Filipino boat was on a resupply mission for Filipino troops stationed at the disputed Second Thomas Shoal, a submerged reef in the South China Sea that is claimed by several countries including China and the Philippines.

The Associated Press reported that the Chinese water cannons shattered the windshield glass of the Filipino boat’s cockpit, resulting in four injuries. The NetEase article bragged that Filipino Admiral Alberto Carlos, who was aboard the resupply boat, was among those injured in the incident, adding that Adm. Carlos is Commander of the Philippines’ West Theater and calling him a “big fish” (i.e. an important person in the Philippines’ military).

From the NetEase article: “The Chinese Coast Guard ship fired a high-pressure water cannon at the supply ship where Carlos was, instantly shattering the glass in the cockpit of the Philippine supply ship. The situation in the Philippine ship’s cabin was chaotic. Four Filipino personnel were bleeding and injured, including Adm. Carlos. Subsequently, Chinese water cannons swept across the superstructure of the Philippine ship, destroying external equipment including communication antennas, causing serious damage to the Philippine ship.”

According to the NetEase article, a U.S. Morpheus-class littoral combat ship was in nearby waters during the incident. “The U.S. ship tried to enter the Second Thomas Shoal to assist the Philippine ship. However, not far from the Littoral Combat Ship, a PLA Navy warship and a carrier-based helicopter were on patrol, and so the U.S. ship dared not to act rashly.” The article also commented that, although the U.S. has signed a Mutual Defense Treaty with the Philippines, the Biden administration dared not take real actions to help the Philippines; it only offered lip service.

There have been several previous incidents involving clashes between the Chinese Coast Guard and the Philippine military, including another incident with a water cannon in August 2023 and an incident in February 2023 when the Chinese maritime police used a laser against a Philippine boat, temporarily blinding one Philippine soldier.

It is not clear whether the NetEase article is just an individually-authored piece or if it was written at the behest of orders from the CCP. The article appears to be written by an individual journalist, but the Chinese Communist Party has a long-standing practice of writing articles and then letting its fans (members of the “fifty-cent” party) publish the articles in their name, packaging the articles as “public opinion.”

Sources:

NetEase, March 9, 2024
https://m.163.com/dy/article/ISQ2OUKI05561T48.html

Associated Press, March 6, 2024
https://apnews.com/article/south-china-sea-philippines-disputed-second-thomas-shoal-5fec2d298151891d79cc077ff02f3a74

China Among Largest Foreign Direct Investors in Indonesia’s New Capital City

In 2019 Indonesian President Joko Widodo ratified a motion to move Indonesia’s capital city from Jakarta to the new planned city of Nusantara, which is currently under construction and is to be inaugurated in 2024. China has become one of the biggest foreign investors in this new “smart city,” focusing mainly on infrastructure and industrial projects. The Nusantara Capital Administration has held investment forums and conferences in Beijing, Shanghai, and Shenzhen, to attract China’s money. Widodo said in October 2023 that in two years Beijing would bypass Singapore to become the country that contributes most to Indonesia in terms of foreign direct investment.

Research published by the University of Kentucky in 2021 showed that China had already invested in “smart cities” in Southeast Asia countries such as Malaysia, the Philippines, Thailand, and Myanmar.

Source: Voice of America, March 6, 2024
https://www.voachinese.com/a/china-to-invest-in-indonesia-new-capital-20240305/7514971.html

China’s Official Media Blasts European Parliament Statements on Taiwan

China Daily, the official English-language mouthpiece of Chinese government, recently published an editorial criticizing the European Parliament (EP) for making statements about Taiwan.

During a recent plenary session, the EP adopted the “Annual Report on the Implementation of the Common Foreign and Security Policy, 2023” in a vote of 338 in favor, 86 against and 122 abstentions. The report included language stating that “Neither Taiwan nor China is subordinate to the other” and “only Taiwan’s democratically elected government can represent the Taiwanese people on the international stage.” China Daily has argued that this wording is “problematic” and an “infringement on China’s sovereignty and territorial integrity.”

The annual report also calls for supporting Taiwan’s participation in international organizations. China Daily has responded by accusing the EP of “interfering in China’s internal affairs.” It argues that the report will negatively impact China-EU relations, accusing some European Parliament politicians of being influenced by a “Cold War mentality” or “instigated by Washington to challenge China over Taiwan.”

Source: China Daily, March 3, 2024
https://global.chinadaily.com.cn/a/202403/03/WS65e4799fa31082fc043ba45f.html

Sina: US-led “Shared Principles on 6G” Aims to Curb China’s 6G Development

Well-known Chinese news site Sina (NASDQ: SINA) recently published an article commenting on a “Joint Statement Endorsing Principles for 6G” that was jointly released by the United States as well as nine other countries. The article stated that “this US-led effort is obviously aimed at curbing China’s 6G development.”

The Sina article quoted sources saying “this move is intended to compete for dominance of the 6G standard.” The article also stated that “China has an extremely large user base, and Chinese technology companies such as Huawei have their own independent 6G strategies. … China has established a 6G promotion group in 2019 to systematically promote various tasks such as demand, technology, standards and international cooperation. The group also launched 6G technology trials.”

The ten countries party to the statement include the United States, the United Kingdom, Australia, Canada, the Czech Republic, Finland, France, Japan, South Korea and Sweden. A copy of the statement released by the White House on February 26 enumerated six “shared principles” to be fulfilled by 6G networks: “Trusted Technology that is Protective of National Security”, “Secure, Resilient, and Protective of Privacy”, “Global Industry-led and Inclusive Standard Setting & International Collaborations”, “Cooperation to Enable Open and Interoperable Innovation”, “Affordability, Sustainability, and Global Connectivity”, and “Spectrum and Manufacturing.”

Sources:
Sina, February 28, 2024
https://news.sina.com.cn/c/2024-02-28/doc-inakqwnf2276916.shtml

The White House, “Joint Statement Endorsing Principles for 6G: Secure, Open, and Resilient by Design.”
https://www.whitehouse.gov/briefing-room/statements-releases/2024/02/26/joint-statement-endorsing-principles-for-6g-secure-open-and-resilient-by-design/