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Showing posts with label Trade and investments. Show all posts
Showing posts with label Trade and investments. Show all posts

Friday, November 29, 2024

The Second China International Supply Chain Expo Opens in Beijing, Those who claim China is waging ‘supply chain warfare’ have got wrong playbook

The second China International Supply Chain Expo (CISCE) opened in Beijing on Tuesday, bringing together 620 companies and institutions from around the world to showcase their products, technologies and solutions.


Reporters talk to the camera at the 2nd China International Supply Chain Expo, which kicked off on November 26 in Beijing. Photo: Chen Tao/GT

A recent article in The New York Times accused China of waging so-called supply chain warfare by sanctioning the American drone company Skydio. The article also mentioned a Global Times editorial titled "US company sanctioned by China 'cries out in pain,' tearing off American façade," but it failed to acknowledge that Skydio was sanctioned by China due to its involvement in US arms sales to Taiwan island. Inventing new terms to exert the discourse hegemony and label other countries, including China, is a typical tactic employed by some US media and think tanks. 

Currently, the second China International Supply Chain Expo (CISCE) is being held in Beijing, attracting over 620 companies, institutions, and international organizations, a 20 percent increase from the inaugural expo. One notable feature of this year's expo is the joint exhibition booths set up by Chinese and foreign companies. 

For example, Apple and its Chinese suppliers are exhibiting together; German company Bosch, Chinese electric vehicle maker Xpeng, global mining and materials company Rio Tinto, and China Baowu Steel Group are showcasing their collaboration in an industrial chain partnership; and New Zealand dairy giant Fonterra is displaying its green agriculture supply chain alongside Chinese partners. Clearly, these companies want cooperation. None of them would agree with The New York Times' claim that China is waging "supply chain warfare."

The supply chain emerged alongside global industrial division and cooperation, serving as a "win-win chain" that benefits all countries. The successful hosting of the CISCE is a strong testament to this. Tim Cook, the CEO of Apple, who appeared at this year's CISCE, praised the event, saying "I think it's a very great expo, a tour de force of innovation." 

In fact, since the 1990s, economic globalization has developed rapidly, significantly reducing the costs of multinational collaboration. Many companies have enhanced the quantity and quality of supply chains through the global division of labor, outsourcing, and cooperation, maximizing the comparative advantages of various countries while also increasing employment and enhancing people's well-being.

However, a few countries, such as the US, have initiated "supply chain warfare," transforming the "win-win chain" into a "blockade chain" and a "confrontation chain." This has caused disruptions and damage to the originally smooth-running global supply chain. These countries narrowly view trade deficits as "losses," forcibly swaying public opinion, and attempting to reverse so-called "unfair trade" through imposing additional tariffs. The ultimate result is that domestic consumers pay higher price. 

A few countries feel uneasy and anxious about China's rising status in the global supply chain, which has led them to strengthen control over key technologies, critical resources, and essential links. They artificially politicize and weaponize the supply chain, promoting "decoupling," building "small yard, high fences," and abandoning international cooperation based on the resource endowments and comparative advantages of various countries. They enforce the "de-sinicization" of multinational companies' supply chains and reduce their own dependence on Chinese products. As a result, the institutional costs of supply chain cooperation are continuously increasing, undermining the original advantages of high efficiency and low costs, while adding more and more uncertainty and instability.

The reason the supply chain is referred to as a "win-win chain" lies in the fact that it is not merely a simple accumulation of independent links, but rather a complex system that is tightly interconnected and interdependent, formed over a long period of time through the collaboration of various countries, enterprises, talents, technologies, and regulations. Just as the skeletal and nervous systems of the human body are the cornerstones of sustaining life, every link and component of the supply chain is an organic part of the normal functioning of the global economy. Once this organic structure is damaged, it is akin to a broken bone or dislocated joint in the human body, and the difficulty of repair far exceeds the superficial loss. When the global supply chain experiences "dislocation" due to political interference, many long-accumulated structural advantages cease to exist. Although the supply of certain products or resources can be restructured, the deep cooperative relationships formed historically are difficult to repair. Furthermore, the rupture of a single link can trigger a chain reaction, leading to the accumulation of systemic risks in the global economy.

The supply chain belongs to the world, not to any single company or country, and it should not be used as a weapon. In the era of economic globalization, only by adhering to open cooperation in global industrial and supply chains can we achieve win-win development. China is committed to promoting the establishment of an open world economic system and maintaining the stability and smooth operation of global industrial and supply chains. It is not only a participant and beneficiary of the global industrial and supply chain cooperation but also a steadfast defender and builder of economic globalization. Those who claim that China is waging "supply chain warfare" have got the wrong playbook.


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Poised for correction: A file picture showing a woman walking by an electronic stock board of a securities firm in Tokyo. After 10 years of continued rise in asset prices, markets are poised for correction. — AP

Tariffs are here to stay and likely to disrupt the 10-year economic cycle

IF investors ever needed a reminder that not all is right with the equities market, the shock waves the world capital markets, including Bursa Malaysia, had to endure earlier this week are proof enough.

Most stock markets are at the tailend of a 10-year bull run, although the same cannot be said for Bursa Malaysia which has generally has been more bearish than others in the last five years. Going by the current trends, Bursa Malaysia is likely to finish the year lower, which if it happens will be the fourth time in the last five years.

But the leading platform in the world which sets the pace for global flow of capital – the Wall Street – has been hitting new highs although it corrects from time to time largely due to the tweets from President Donald Trump.

Wall Street’s run started in May 2009 and seems to have the strength to carry on for a few more legs, defying conventional logic that economic boom-bust cycles corrects after 10 years. Other stock markets have had good and bad times since 2009 but the US has been consistently on the rise.

The benchmark Dow Jones Industrial Average, the Nasdaq and S&P 500, which charts the broader market, have all hit news highs. Bursa Malaysia on the other hand has languished between the 1, 600 and 1, 700 levels, with only one year of positive returns since 2014.

There are several reasons for Bursa Malaysia’s poor performance compared with other markets. For instance, the United States slashed tax rates, which spurred earnings of companies and has the best technology companies listed there. It’s not the same elsewhere in the world.

Nevertheless, after 10 years of continued rise in asset prices due to the combination of a low interest rate environment and advancement in technology, the markets are poised for correction. Until earlier this week, nobody had an inkling of an idea where and how the correction will take place.

However, after President’s Trump latest statement that the US would impose 10% tariff on an additional US$300bil worth of exports from China, it clearly underlines that the trade war is here to stay.

If anybody had a view that the trade war would end if President Trump does not retain his position in the US elections next year, they are wrong. Even some Democrats are leaning towards imposing tariff as measure to help the US keep its competitive edge in the world economy.

Reverse globalisation is no longer a bad word in world trade.

A 25% tariff has already been imposed on US$250bil worth of China’s exports to the United States since March this year.

It is bringing in billions to the US coffers with some going towards helping the farmers overcome the woes of the trade war. The person who takes over from Trump is not likely to dismantle the structure.

Any other president will want to get more from China, which is led by the influential President Xi Jinping, who is seen as the most powerful man that rules the second biggest economy in the world after the late chairman Mao Zedong.

China has retaliated by imposing tariffs on US$110bil worth of imports from the US so far including the produce from farms. It has also allowed the yuan to weaken, sparking concerns that the trade war is evolving into a currency war.Latest data from China shows that the exports are still growing and imports dropping in July even though there is a trade war, suggesting that President Xi will not yield to pressure from the US easily.

A new cold war in the form of the trade war has emerged. As a result, it has caused upheavals in the capital markets that should worry investors.

There have been significant shifts in asset prices from bonds to equities and commodities such as oil. Among all asset classes, dramatic movement in bond prices of government debt papers is the first to feel the impact from the trade war.

This is on the back of increasing certainty that the Federal Reserve and other major central banks will reduce interest rates more aggressively to stimulate the sagging economy. It has caused for money to seek safe haven such as US government debt papers.

For instance the yields on the 10-year US debt paper is 1.69% now. It was 1.9% a week ago and 2.06% a month ago. The yields moves inversely with the price of the bonds.

The yields on the five- and two-year government debt papers have also moved by up 18 points in the last one week. Such movements on billions of dollars will have an impact in the months to come.

The trade war has caused a major disruption in the global supply chain, evidence of the economy slowing globally.

If anybody wants any evidence of the disruption in global supply chain, they only need to go to the KLIA cargo complex and see for themselves the number of idle lorries that do not have enough cargo to move about.

In Malaysia’s case, apart from a slowdown in movement of goods around the world, the uncertainties in Hong Kong have exacerbated the situation.

The combined effects of the trade war, China’s economic uncertainties and Hong Kong’s future as Asia’s financial hub will only be felt in the fourth quarter of this year.

Until then, asset prices will continue to adjust to the new norm.

The views expressed here are solely that of the writer. Source link 

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Monday, July 15, 2019

Trump is the biggest threat

Not much help: Despite his use of tariffs to help skew the playing field in favour of US firms, the very industries Trump has tried to help have become the weakest links in the otherwise solid economy.

WASHINGTON: At rallies and whistle-stop campaign tours, President Donald Trump proclaims a renaissance in US factories rebuilding the nation with “American steel”, “American heart” and “American hands”.

But in reality, despite his relentless use of punitive tariffs to help skew the playing field in favour of US companies, the very industries he has tried to help have become the weakest links in the otherwise solid economy.

With just over a year to go before he faces re-election, Trump takes credit for the most vigorous economy in the industrialised world, with the expansion entering its 11th year and historically low unemployment.

But while services and office jobs dominate the US economy, Trump continues to promote the factory and mining jobs that were the lifeblood of the economy in the last century.

“American steel mills are roaring back to life,” he declared last month in Florida – the same day US Steel announced it would idle plants in Michigan and Indiana until “market conditions improve”.

And to West Virginians he said, “The coal industry is back.”

But in fact each of the sectors Trump has championed – coal mining, steel, aluminium and auto manufacturing – have been buffeted by a combination of market forces and changing technologies – factors beyond his control – or damaged by the very things he did to protect them, economists and analysts say.

Last month, a national survey of manufacturing activity hit its lowest level in nearly three years – narrowly avoiding slipping into contraction – while regional surveys have also seen record declines.

In March, the number of workers in US manufacturing shrank for the first time in nearly two years and it is now growing more slowly than the rest of the American workforce.

Trump has imposed tariffs on hundreds of billions in imports, renegotiated trade agreements and dangled the threat of worse over China and Europe and Mexico – all while publicly browbeating companies that close US factories or move production offshore.

But weak foreign demand, a strong US dollar and a decades-long evolution away from domestic manufacturing have progressively shrunk America’s industrial sector, said Gregory Daco, chief US economist at Oxford Economics.

Trump’s world trade war has not helped either.

“The policies that have been implemented in terms of protectionism have hurt the very sectors they were meant to protect. There’s no escaping that,” Daco said. - AFP/The Star

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