Geo-Strategic Trend - 34. page

German state-run media Deutsche Welle reported that the U.S. government has passed an executive order to restrict US corporate investment in China in key areas such as semiconductors and AI. This has implications for European businesses — the order reportedly applies not only to U.S.-based firms but also to European firms managed by US citizens.

Berlin regarded the new U.S. order with caution, noting that the E.U. is examining security risks associated with investment in third-party countries.  A spokesman for the German Ministry of Economic Affairs stated that, while Germany has mechanisms to screen Chinese investments, controlling outbound investments in China is a complex task.

Meanwhile, the E.U. announced that it will use a new tool to prevent circumvention of export bans related to sensitive technology, working with E.U. member states to identify affected tech areas like quantum computing and AI.

Some have criticized the U.S. order as lacking economic justification, saying that the US is using national security arguments to justify protectionism against China.

Source: Deutsche Welle, August 15, 2023
https://p.dw.com/p/4VCfM

German newspaper Handelsblatt reports growing concern among German companies over rising competition from Chinese exports, not just in low-tech goods but increasingly in complex, high-tech products. A recent study by the German Institute for Economic Research found China’s share of EU imports in industrial goods such as machinery and autos is rapidly increasing, while Germany’s is declining. In 2000, China accounted for just 2.5% of EU industrial imports versus 17.7% for Germany; by 2022, China’s share grew to 13% while Germany’s declined to 15.5%.

Experts attribute China’s gains to generous government subsidies throughout entire supply chains as well as the country’s recent efforts to catch up on technology and innovation. In machinery, China’s EU import share grew from 6.8% in 2010 to 11.4% last year, while Germany’s share fell from 22.6% to 20.5%. The auto market could be China’s next target, with capacity to produce 40 million EVs annually, greatly exceeding China’s domestic demand of 20-25 million units annually.

Source: Deutsche Welle, August 15, 2023
https://p.dw.com/p/4VCfM

Central News Agency (Taiwan) reported that Chinese automakers’ market share in Russia has surged to 52%, making Russia the largest overseas market for Chinese cars. This growth in market share follows the suspension of exports to Russia by automakers from many other regions, a reaction to Russia’s invasion of Ukraine. Chinese brands have taken advantage of this situation, filling the void left by foreign auto firms.

In July, China’s Chery sold 17,735 cars in Russia, up 4.2 times from the same period last year. Geely sold 8,800 new cars in Russia, and several other Chinese brands also made the top 10 in terms of sales volume in Russia.

The report noted that, due to import tariffs and other factors, Chinese cars retail in Russia at much higher prices than they sell for in China. Chinese cars are still competitive in the Russian market, however, as the Chinese brands have been able to deliver value by focusing on a small number of models with high product strength.

The Russian market is only one facet of the recent, dramatic increase in Chinese automobile exports. In the first half of this year, China’s automobile exports to all regions increased by 76.9% annually, surpassing Japan as the world’s top auto exporter.

Source: Central News Agency (Taiwan), August 15, 2023
https://www.cna.com.tw/news/acn/202308150387.aspx

Primary Taiwanese news agency Central News Agency (CNA) recently reported that Jens Eskelund, chairman of the European Union Chamber of Commerce in China (EUCCC), said that China’s efforts to revitalize the private economy are insufficient and that Chinese officials have been unwilling to seriously discuss how to solve the country’s core economic problems. He also said that EU companies in China are experiencing “commitment fatigue” and are are beginning to doubt whether the Chinese government will enact meaningful economic support policies.

Eskelund said that the EUCCC has yet to see signs that the Chinese government is willing to implement structural reforms to address the fundamental challenges facing the Chinese economy, thus preventing foreign private companies from realizing their potential to support the Chinese economy. He mentioned that the Chamber of Commerce has met with Chinese government officials many times since the Chinese government relaxed its strict Zero-Covid measures, but these officials have not been willing to seriously discuss how to solve the country’s core problems.

China’s overall economy is weak, and the manufacturing and service industries are shrinking. The Chinese government has issued multiple documents in the past month promising to revitalize the country’s private sector. Chinese officials have thus far refrained from enacting large-scale monetary and fiscal stimulus measures, however, instead using relatively modest measures to boost consumption.

Source: CNA, August 5, 2023
https://www.cna.com.tw/news/acn/202308053001.aspx

Major Australian Chinese language newspaper Australian Chinese Daily recently reported that the agreement just reached at the Annual Meeting of the Australian and US Defense Ministers (AUSMIN) has further deepened the Australia-US military alliance. In response to China’s growing threat to regional stability, U.S. intelligence analysts will be placed in the defense intelligence agency in Canberra, and Australia’s northern air base will be expanded to accommodate more U.S. military aircraft. The talks also reached an agreement to re-expand the deployment of the U.S. military in Australia, including amphibious combat forces and maritime reconnaissance aircraft. As expected, the U.S. will provide advanced technology to aid in Australia’s domestic production of missiles and will ensure that Australia is a secondary supplier of U.S. missiles.

According to the Daily report, the AUSMIN communiqué contains multiple criticisms of China. It accuses China of exacerbating regional tensions with its “excessive maritime claims,” urges China to end its threat of force against Taiwan, and asks Beijing to cooperate with the United States constructively.

The new Australia-U.S. joint intelligence center is likely to track China’s security agreements with countries in the South Pacific and Southeast Asia, as well as to monitor China’s further militarization efforts in the South China Sea.

Source: Australian Chinese Daily, July 31, 2023
https: //www.acd.com.au/australian-news/aomeifangzhangwaizhanghuitangongbaozezhongguo-qianghuajunshilianmengshelianheqingbaozhongxin/