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Kyodo Chinese: Japan Approved TSMC Plant Construction Plan

Major Japanese news agency Kyodo News recently reported in its Chinese edition that the Japanese government announced, based on the relevant laws,  to support the construction of semiconductor factories in Japan. The global semiconductor giant Taiwan Semiconductor Manufacturing Company (TSMC) and others have been approved to build factories in Kumamoto Prefecture. The Japanese government will give a subsidy of up to 476 billion yen (about US$3.5 billion). TSMC will join hands with the Sony Group and Denso to manufacture mainly in order to supply Japanese customers. The factory is expected to make its first shipments in December 2024. The monthly production capacity of semiconductors in the 10 to 20 nanometer scale will reach about 55,000 pieces. According to the plan, the factory covers an area of about 213,000 square meters and employs about 1,700 people. The government believes that TSMC has met the conditions of continuous production for at least 10 years and supplies more than half of the materials purchased in Japan. The Minister of Economy and Industry said at a press conference that the government looks forward to enhancing the resilience of the semiconductor supply chain.

Source: Kyodo Chinese, June 17, 2022
https://china.kyodonews.net/news/2022/06/4abfb33025f7–4760.html

Briefings | | |   Geo-Strategic Trend Information/Technology

DW Chinese: Russia Became China’s largest Crude Oil Supplier

Deutsche Welle Chinese Edition recently reported that, in May of this year, China’s crude oil imports from Russia hit a new high, an increase of 55 percent over the same period last year. So far, Russia has replaced Saudi Arabia as China’s largest crude oil supplier. Chinese customs data showed that, despite sanctions from the West, Russia has been able to find Chinese buyers for its crude, but has had to cut prices. Though China’s demand for crude oil has fallen due to Covid, yet companies such as PetroChina and Zhenhua Oil have increased imports of cheap Russian crude. Saudi Arabia is China’s second-largest oil supplier. Its daily supply to China fell to 1.84 million barrels in May from 2.17 million barrels in April. Chinese customs data also showed that China imported 260,000 tons of crude oil from Iran in May of this year, which is the third batch of Iranian crude oil China has imported since December of last year. Despite U.S. sanctions on Iran, China typically imports Iranian oil through third countries, with Iranian crude accounting for 7 percent of China’s total imports. Chinese customs data also showed that China imported 400,000 tons of Russian LNG (Liquid Natural Gas) in May of this year, a 56 percent increase from May of last year. In the first five months of this year, China’s LNG imports from Russia increased by 22 percent year-over-year to 1.84 million tons.

Source: DW Chinese, June 20, 2022
https://bit.ly/3QPPtpJ

Briefings | | |   Economy/Resources Geo-Strategic Trend

China Russia Interactions

While the Western world has imposed tough sanctions against Russia for its invasion of Ukraine, China and Russia held a series of activities recently.

  1. On June 10, the Heilhe-Bragoveshchensk road bridge officially opened. Hu Chunhua, China’s Vice Premier, attended and addressed the online opening ceremony.
  2. On June 15, Putin called Xi Jinping on Xi’s birthday.
  3. On June 17, Xi Jinping attended, online, and addressed the plenary session of the 25th St. Petersburg International Economic Forum in Russia.
  4. Russia and China sent naval ships which separately sailed around the Japanese archipelago.
  5. On June 17, China’s Ambassador to Russia Zhang Hanhui said that China is ready to provide airplane parts to Russian Airlines. The Western sanctions ban exporting airline parts and leasing or supplying airplanes to Russia.
  6. On June 20, Russia’s St. Petersburg Stock Exchange started trading 12 stocks listed on the Hong Kong Stock Exchange, including Tencent, Alibaba, Meituan, Xiaomi, and Jingdong.

Sources:
1. China’s Government Website, June 10, 2022
http://www.gov.cn/guowuyuan/2022-06/10/content_5695126.htm
2. China’s Foreign Ministry Website, June 17, 2022
https://www.fmprc.gov.cn/eng/zxxx_662805/202206/t20220617_10705728.html
3. Net Ease, June 23, 2022
https://www.163.com/dy/article/HAGVK42D0542ONXL.html
4. Epoch Times, June 21, 2022
https://www.epochtimes.com/gb/22/6/21/n13764456.htm
5. Net Ease, June 17, 2022
https://www.163.com/dy/article/HA3938FF05198CJN.html

Briefings | | |   Geo-Strategic Trend

Multinational Corporations Have a Crisis of Confidence in China

The French newspaper Les Échos published an analysis on Multinational companies’ crisis of confidence in China, focusing on the business community’s shock at  the brutal closure of Shanghai. They have been forced to re-evaluate the “China risk” including factors such as the zero-Covid policy, the war in Ukraine and tensions between the US and China.

The analysis says that the closure, as well as the broader disruptions caused by China’s zero-Covid policy, translate into huge economic costs. Foreign companies have massively reduced their forecasts. According to data from the European Union Chamber of Commerce, as of April, 60 percent of European subsidiaries had lowered their business targets for 2022. Production could be suspended at any time, with the epidemic and China’s draconian Covid prevention policies becoming a sword of Damocles hanging over these companies. According to a survey by the French Chamber of Commerce and Industry in China, 80 percent of French subsidiaries said that China’s zero-Covid policy is affecting their investment strategy, with 76 percent believing China’s image has deteriorated.

Geopolitics and the growing competition between the U.S. and China are other major long-term factors. Trade wars have complicated the business of multinational companies in China. The war between Russia and Ukraine has abruptly posed new risks. The potential consequences of Beijing’s possible attack on Taiwan could be even greater than that of Western companies’ retreat from Russia. In addition, companies are weighing the effect of the rise of local competitors, increased regulatory restrictions and the reputational risk of doing business in China due to Western condemnation of issues such as Xinjiang and Hong Kong. Many factors are prompting these companies to reassess their long term “China risk.”

Source: Radio France International, June 21, 2022
https://rfi.my/8WHA

Briefings | | |   Geo-Strategic Trend

Japan Plans to Establish a New “Integrated Commander” Position

Well-known Chinese news site Sohu (NASDAQ: SOHU) recently reported that relevant sources in the Japanese government revealed that the Ministry of Defense of Japan has generally decided to establish an “integrated commander” to unify the land, sea and Air Self-Defense Forces, as well as an “integrated command” to support the new position. Regarding the motives for the Japanese Ministry of Defense to make this move, Kyodo News said that the Ministry was mainly considering China’s increased maritime activities and new security areas like space, computer networks, and electromagnetic waves, and other areas. Therefore, Japan believed that there is a necessity to have a new dedicated position to improve mobility. Before the end of the year, the Japanese government will revise defense documents such as the National Security Strategy,” the Defense Plan Outline, and the Mid-term Defense Capacity Improvement Plan.  Various branches of the government are coordinating the updates to include the creation of the “integrated commander” in these official documents.

Source: Sohu, June 8, 2022
https://www.sohu.com/a/555167675_114911

Briefings | | |   Geo-Strategic Trend

Global Times: India and EU to Resume Free Trade Agreement Talks This Month

Global Times recently reported that India’s Ministry of Commerce and Industry said India and the European Union will resume free trade agreement negotiations, which have been stalled for nine years. The first round of negotiations between the two sides is scheduled to start in New Delhi on June 27. For India, this will be one of its most important free trade agreements as the EU is its second largest trading partner after the United States. Between 2021 and 2022, India’s merchandise trade with the EU reached a record high of US$116.36 billion, up 43.5 percent year-over-year. India’s exports to the EU are expected to grow 57 percent to US$65 billion in Fiscal Year 2021-2022. India is currently the EU’s tenth largest trading partner. Before Brexit, an EU study showed that a free trade deal with India would bring benefits worth US$10 billion. Negotiations on a free trade agreement between India and the EU began in 2007, but they were shelved in 2013 due to differences over issues like tariffs on cars and wine. In April this year, the European Commission President Von der Leyen Von der Leyen visited India, and Indian President Narendra Modi also visited Europe in May. The two leaders settled on the roadmap for the negotiation.

Source: Global Times, June 18, 2022
https://world.huanqiu.com/article/48TbaJjAZtw

Briefings | | |   Geo-Strategic Trend

First Russia-China Transnational Highway Bridge Opens to Traffic

On June 10, Russia and China announced the official opening of the Heilongjiang River Bridge, the first transnational highway bridge between the two countries. While confronting the West over the invasion of Ukraine, Russia is turning to Asia for support.

The bridge, more than one kilometer long, connects Blagoveshchensk, the capital of Russia’s far eastern Amur region, with the city of Heihe in northern China’s Heilongjiang province. Although it was started in 2016 and completed in 2019, the opening ceremony was delayed due to the COVID-19 outbreak.

According to official figures, the bridge, which cost 19 billion rubles (about US$328 million), is a two-lane road. According to Chinese media, the bridge is currently limited to cargo traffic only.

Source: Central News Agency, June 10, 2022
https://www.cna.com.tw/news/acn/202206100334.aspx

Briefings | | |   Geo-Strategic Trend