China Direct

Date for Diaries: A discussion with U.S. Ambassador to China Nicholas Burns - 16 June 2023

A Fireside Discussion with U.S. Ambassador to China Nicholas Burns

Date: Friday, June 16, 2023

Time: 2300-2400 (BJ)

On June 16^th from 11-12pm, please join CSIS Freeman Chair Jude Blanchette for a public fireside discussion with Ambassador Nicholas Burns on U.S.-China relations and his on-the-ground impressions as U.S. Ambassador to China. After welcome remarks by CSIS Senior Vice President for Asia Victor Cha, the conversation will explore recent developments in this critical bilateral relationship and the outlook for the years ahead.

To register please click on this link.

Our thanks to the CSIS for sharing this information.

 

China is upping its bets on Southeast Asia's EV market as South Korea drives to narrow the gap

With strong government support and increasing purchasing power, Southeast Asia has emerged as a hotly contested arena for Chinese and South Korean automakers.

With strong government support and increasing purchasing power, Southeast Asia has emerged as a hotly contested arena for Chinese and South Korean automakers, vying to dominate the electric vehicle (EV) industry.

Since the beginning of this year, Chinese companies, which include not only automakers but also battery suppliers, have intensified their efforts in Southeast Asia, particularly in Thailand and Indonesia. These two major regional auto manufacturing hubs have become focal points of interest for Chinese companies seeking to expand their presence in the area.

Timeline of recent investments:

• In March, BYD reportedly set its sights on building an electric bus assembly plant and, eventually, a battery manufacturing factory in Indonesia. In the meantime, the company has commenced construction of a new factory in Thailand, projected to be finalized in 2024, with an impressive annual capacity of 150,000 electric cars.

• In April, a Thai official revealed that Changan Auto has committed to investing $285 million in a facility in Thailand.

• On May 6, Hozon Auto, the parent company of the EV brand Neta, disclosed plans to initiate the construction of a manufacturing facility in Thailand. This upcoming facility is anticipated to possess an annual production capacity of 20,000 vehicles.

• On May 11, GEM Co. Ltd., a Guangzhou-based battery and material recycler, announced a $500 million joint investment to build a nickel project in Indonesia, with the target of producing 20,000 tons of nickel intermediate products for the new energy sector annually.

• On May 13, SAIC Motor started building a factory in Thailand for its sub-brand MG. The planned manufacturing facility, set to sprawl over an area exceeding 437.5 rai (equivalent to around 173 acres), will accommodate battery production, parts fabrication, and MG's EV assembly line.

The accelerated deployment of Chinese firms in Southeast Asia is not only driven by the growing demand in the EV market but also by the determined efforts of their South Korean counterparts to catch-up.

Hyundai has surpassed Chinese automaker Wuling to become the top player in Indonesia's electric car market, capturing a 55% market share in February, according to the Korea Economic Daily. By comparison, the South Korean automaker delivered 1,829 units of its electric SUV IONIQ 5 last year, well behind Wuling Air EV's 8,053 units.

The IONIQ 5 was launched in Indonesia last April with a starting price of 748 million rupiahs ($50,186), three times that of runner-up Wuling and twice the average selling price in Indonesia.

Back in 2017, Wuling opened its first overseas production site in Indonesia with an investment of $700 million. This was well before Hyundai, which only started full production at its new plant in Indonesia in March 2022.

It's evident that Hyundai is playing catch-up aggressively. From January to April this year, Hyundai and Wuling sold about 1,700 and 1,000 EVs in Indonesia, respectively, according to Nikkei. Driven by the surge in demand, the company recently decided to increase production of its IONIQ 5 at the local plant to 1,000 units per month.

Hyundai has announced its plans to intensify marketing efforts in Thailand this year to drive sales of its EVs in the country. While the South Korean automaker currently lacks an EV assembly plant in Thailand, it strategically relies on its Indonesian factory to cater to the burgeoning demand and service the wider region.

The battle between EV battery suppliers heats up as well.

As aforementioned, GEM, China's largest battery recycler, has unveiled its intentions to build nickel intermediate products in Indonesia for the new energy sector, while SAIC has started to build a factory in Thailand, including battery production for the MG brand.

Indonesia stands as one of the foremost global producers of nickel, a key raw material for EV batteries. Thailand also boasts significant lithium reserves, another crucial raw material in the realm of EV batteries.

South Korean battery suppliers have also recognized the value of these resources. In June 2022, LG Energy Solutions (LGES) broke ground on a nickel processing plant in Indonesia. This venture is part of the LGES’s substantial $9.8 billion investment in the country aimed at manufacturing EV batteries. Prior to this, in September 2021, LGES and Hyundai began construction of a $1.1 billion factory in Bekasi, West Java, which will also produce EV batteries.

There are multiple reasons why South Korea and China are eyeing establishing battery-related supply chains in the emerging market: As global demand for EVs continues to rise, it is increasingly vital to have more raw materials under control; a more comprehensive local supply chain will help automakers gain more strength in the face of increasing competition; local governments offer incentives including tax breaks, land concessions, and financial assistance to attract battery manufacturers to the region, as well as cheaper labor costs.

Over the years, South Korean companies have established a strong presence in the field of nickel, manganese, and cobalt (NCM) batteries. However, as the market landscape evolves and priorities shift, there is a notable transition towards lithium iron phosphate (LFP) batteries. These LFP batteries offer several advantages, including lower cost, a longer lifespan, improved safety, enhanced ecological sustainability, and reduced risks of fire or explosion compared to NCM batteries. Consequently, Chinese battery manufacturers are beginning to dominate EV battery production globally.

LG Energy Solution, Samsung SDI, and SK On's combined share in the global EV battery market declined from 30.2% in 2021 to 23.7% in 2022, according to a February report by market research firm SNE Research, while at the same time, the market share of EV batteries supplied by Chinese manufacturers rose robustly.

But the ground is likely to keep shifting. South Korea's trade ministry last year identified batteries as one of the country's three strategic industries, along with semiconductors and artificial intelligence. LGES, Samsung SDI, and SK On are ramping up the development and production of LFP batteries.

The South Korean automotive sector shares certain parallels with its Chinese counterpart, particularly in aspects like supply chain and manufacturing capabilities. For instance, China is renowned for its world-class battery providers like CATL and Gotion High-Tech, as well as well-established automakers such as BYD, Wuling, and GMW, alongside emerging startups like Hozon. On the other hand, South Korea, while trailing China in EV battery market share, boasts a strong presence in automobile manufacturing, anchored by its two flagship brands, Hyundai and Kia.

Even though Chinese brands may not have achieved the same level of recognition as their counterparts in the traditional vehicle market, they possess significant potential for growth. "In the EV segment, consumers can easily jump over old brand walls and are willing to try new options," said Pitaya Tanadamrongsak, managing director of EV Primus, the Thai distributor of China's second-largest automaker, DFSK (Dongfeng).

Writer: Rebbeca Ren

For more information please click here. Our sincere thanks to Ms. Ren and the PingWest team for sharing this article.

 

British Business in China Position Paper 2023 - Conditional Optimism in reopening

 

China’s ability to restore its position as a leading global investment destination depends largely on the ability to regain a reputation for certainty, stability, and trust, finds the results of the British Business in China: Position Paper 2023.

While businesses are much more optimistic about their prospects in the market than they were a year ago, they say more needs to be done to improve consultation between businesses and the Chinese government, and level the unequal playing field between SOEs, domestic businesses, and international companies.

Still, British businesses highlight many reasons to be optimistic about the Chinese market; 86% of businesses are optimistic about China’s market potential in the long-term, and almost three-fifths of businesses are more optimistic now travel has resumed.

To make sure China is able to reach its full market potential, the British Chamber of Commerce is calling for concrete action, to improve transparency, restore competition, and reduce uncertainty.

We call for: 

1. Actions to support proposals and statements related to further opening up;
2. Measures to improve transparency and competition between SOEs, domestic companies, and international businesses;
3. Clarity to reduce compliance uncertainty for businesses navigating the regulatory environment;
4. An open and inclusive consultation process when designing and implementing policies;
5. Clear and increased lines of communication at all levels.

To access the Report please click here.

Our sincere thanks to the British Chamber of Commerce in China for kindly sharing the Position Paper.

 

 

China Dialogue - Environmental News Digest 19 May 2023

Dear CBI Members and Partners,

For reports, interviews and insights into a country shaping the world please review China Dialogue directly here.

Download News digest China Dialogue 19 May 2023

With grateful thanks to the team at China Dialogue for so very kindly sharing this content.

China’s emerging decarbonization toolkit - MERICS

 

 

Triggered by the EU's defensive green trade tools, China is exploring a strategic long-term approach in its policy planning as it slowly moves toward a decarbonized economy. By discussing a full life-cycle carbon footprint tracking system, Beijing is thinking even further than the EU’s Carbon Border Adjustment Mechanism (CBAM). If implemented, this could make CBAM look rudimentary in comparison.

While the international trading system is slowly moving towards a green future, Beijing is exploring and developing its own policies (foreign trade, green tech trade, foreign climate policy, etc). This domestic and global decarbonization toolkit, tailored to China’s own circumstances, comes as the European Union (and the United States) develop their defensive green trade instruments, often aimed at China.

The European Parliament and the Council of the EU reached a provisional agreement on a Carbon Border Adjustment Mechanism (CBAM) framework in December 2022. Since then, debate in China on carbon mitigation measures and on how to comply with CBAM has intensified. Although the official line on CBAM has labeled it an "unnecessary" and "unilateral trade barrier," some comments, including a recent one by a Ministry of Commerce staffer, have downplayed its negative impact on Chinese exports to the EU in the initial stage, implying its positive impact on decarbonization.

One policy instrument China can use to face CBAM obligations is its national emissions trading system (ETS). It can accelerate the expansion of ETS sectors, which would subject more industries to a carbon price, and make them more CBAM-compliant. However, China's still-nascent ETS is currently the only instrument it has to respond to CBAM, and so far, its expansion has been repeatedly delayed with no specific timeline. This situation does not give China much leverage or options to provide reliable data on carbon emissions once CBAM comes into effect.

Triggered by CBAM, Chinese government and expert circles are also discussing the introduction of a full life-cycle carbon footprint tracking system, or life-cycle assessment (LCA). The LCA would radically change that situation and give back China some of the initiative to respond to CBAM.

The LCA is a similar but also quite different policy instrument compared to CBAM. While CBAM in its early stages will urge importers to measure (and later pay for) carbon emitted by companies only during the production process, the LCA focuses on measuring products’ carbon footprint during their whole life cycle. It follows a (still emerging) approach to measure all CO2 emitted during production (direct and indirect), consumption and after-life. While the difference between the two instruments was rather confused in earlier stages of the debate in China, where the LCA was referred to as a “response” to comply with measures such as CBAM, Chinese stakeholders have begun to recognize the difference and have pointed it out more explicitly in recent comments.

To read the full commentary please click here.

Our thanks to MERICS for kindly sharing this information.

Sue-Lin Wong and David Rennie of The Economist Win Osborn Elliott Journalism Prize

NEW YORK, May 12, 2023 — Asia Society is pleased to announce that the 2023 Osborn Elliott Prize for Excellence in Journalism on Asia is being awarded to Sue-Lin Wong and David Rennie of The Economist for their China coverage. The $10,000 cash award is presented annually by an independent jury to the best example of journalism about Asia during the previous calendar year. 

In announcing the award, the Osborn Elliott Prize Jury issued the following statement: 

“We are pleased to award the 2023 Osborn Elliott Prize to The Economist’s Sue-Lin Wong and David Rennie for their deeply reported, engagingly accessible coverage of China. In an eight-part podcast, ‘The Prince,’ Wong explained how Xi Jinping skillfully navigated his way to power, drawing on the personal history and circumstances that shaped his world. Rennie’s definitive primer on what Xi’s rising, sometimes righteous, often resentful Communist Party-led China wants offers insight into looming geopolitical and economic challenges.” 

“Rennie and Wong recognize China’s many recent historical achievements, but also have experienced the limits of life under Xi. Wong, who also poignantly reports on how Beijing has shorn once-freewheeling Hong Kong of its autonomy, has had to leave the city. Rennie, who writes about Xi’s drive for absolute command of society, spent nearly two years separated from his wife and child by China’s draconian COVID lockdowns.” 

The two will be honored at an awards ceremony and discussion at Asia Society in New York, on Tuesday, June 6. 

Sue-Lin Wong is The Economist’s South-East Asia correspondent. She was previously China correspondent and host of “The Prince”, a podcast about Xi Jinping. Prior to joining The Economist, she was South China correspondent at the Financial Times covering politics, business and technology in Hong Kong and mainland southern China. Before that, she was a correspondent at Reuters with beats including the Chinese economy and North Korea. She opened the Shenzhen bureaus of the Financial Times and Reuters. She is a graduate of the Australian National University.  

David Rennie is Beijing bureau chief of The Economist. He is the author of its weekly “Chaguan” column on China and co-host of the “Drum Tower” podcast. He joined The Economist in 2007. From 2007-10 he was the EU correspondent and “Charlemagne” columnist, based in Brussels. From 2010-12 he was British political editor and “Bagehot” columnist, in London. In the summer of 2012 he moved to Washington DC. He was “Lexington” columnist 2012-17, and Washington bureau chief 2013-18. In May 2018 he moved to China as Beijing bureau chief, launching “Chaguan” that year. He has written special reports for The Economist on China and the world order, on the China-U.S. relationship, on Hispanics in America, and on the enlargement of the EU to take in formerly communist countries.  

Previously, he was on the foreign staff of the Daily Telegraph, with postings in Sydney, Beijing, Washington DC and Brussels. From 2006 until he joined The Economist he was also a contributing editor to the Spectator. He is a contributing panelist on the “1A” program on NPR/WAMU. He is a graduate of Cambridge University. 

The Jury praised a number of other entries this year. Their citations follow: 

“Uditha Jayasinghe and Devjyot Ghoshal of Reuters, reporting from Sri Lanka, dispassionately captured the country’s tragic descent into economic crisis, as a nepotistic government made a series of bad decisions that left farmers without fertilizer, hospitals without life-saving drugs, and petrol stations without fuel. They then covered the massive protests that eventually overturned the government, leading to a China vs. India rivalry for influence that emerged in the revolution’s wake.” 

“Nikkei Asia’s Cheng Ting-Fang and Lauly Li, two of the world’s most knowledgeable tech reporters, delivered an extraordinarily detailed package of coverage that demonstrated the futility of efforts to shorten and nationalize semiconductor supply chains, a critical national-security and economic question for many countries.” 

“The People’s Archive, from India, published a detailed, important look at the difficulties many of the 200 million Indians living in Uttar Pradesh have accessing healthcare, often because of reasons of caste or socioeconomic status.” 

The jury for the Osborn Elliott Prize is chaired by Marcus Brauchli, managing partner of North Base Media and the former top editor of both The Washington Post and The Wall Street Journal. Jurors for the 2023 prize are: Barbara Demick, journalist, author, and 2006 Osborn Elliott Prize winner; Dorinda Elliott, Executive Director of the Fairbank Center for Chinese Studies at Harvard University and formerly with Newsweek; Nisid Hajari, author, member of the Bloomberg editorial board and a former top editor at Newsweek; and Norman Pearlstine, media executive and advisor and former top editor at the Los Angeles Times, Time Inc., and The Wall Street Journal. 

The Osborn Elliott Prize for Excellence in Journalism on Asia, affectionately referred to as the “Oz Prize,” honors the late Osborn Elliott, legendary journalist, author and former editor-in-chief of Newsweek. Elliott was a leading figure in the field of journalism who became one of the earliest practitioners of “civic journalism”—the deliberate focusing of the journalistic enterprise on urgent issues of public policy.  

Find out more about the Oz Prize at AsiaSociety.org/OzPrize. 

Date for Diaries: Webinar - Thailand Investment Opportunities in the Electric Mobility Sector: 24 May 1600 (BJ)

Thailand Board of Investment (BOI), Paris Office cordially invites companies to join its webinar on the Electric Vehicle and Mobility Sector. Learn about the Incentive Packages for EV and mobility companies, current opportunities in this sector and experiences from companies like Robert BOSCH Automotive Technologies that are already in Thailand.

Agenda:

• 9 am BST / 1600 (BJ) Introductory remarks. Speaker: Thailand Board of Investment BOI

• BOI incentives packages for electric mobility and update on investment trends. Speaker: Thailand Board of Investment BOI

• Overview of opportunities for electric mobility in Thailand. Speaker: Electric Vehicle Association of Thailand (EVAT)

• Automotive and electric mobility sourcing from Thailand. Speaker: SNECI (an independent company providing services and operational consulting in the automotive and other industrial sectors)

• Success story in doing business in Thailand. Speaker: Mr. Martin Knoss, Regional President ASEAN - Robert BOSCH Automotive Technologies (Thailand).

To register for this free webinar please click here.

Our thanks to the Thailand Board of Investment and UKABC for kindly sharing this information

 

China Dialogue - Environmental News Digest 12 May 2023

Dear CBI Members and Partners,

For reports, interviews and insights into a country shaping the world please review China Dialogue directly here.

Download News digest China Dialogue 12 May 2023

With grateful thanks to the team at China Dialogue for so very kindly sharing this content.

US vs China Economic Policy - Analysis

As the U.S. develops a more robust and muscular set of international economic policies related to China, a key challenge for the U.S. government will be to convincingly distinguish greater U.S. government involvement in the economy and its new approach to international economic policy from that of China.

Joshua P. Meltzer

Senior Fellow - Global Economy and Development

@JoshuaPMeltzer

Call it winning hearts and minds, but creating a real and understandable difference is important if the U.S. is going to convince other governments that the U.S. approach is not just self-interest wrapped up in national security garb. The U.S. needs to reassure allies that there are principled limits to the role of the U.S. government in the economy that are consistent with democratic values, leave a key role for markets, and deliver outcomes that benefit both the U.S. and its allies.

To read the full article please click here.

Our thanks to The Brookings Institute for sharing these invaluable insights.

MERICS - Chinese Inward Investment Trends into Europe - A Report

Berlin, May 9, 2023. Battery investments are now the mainstay of Chinese investment in Europe, showing that the region has become a key part of China’s global electric vehicle (EV) expansion. 

This is one of the key findings from a report published today by the Mercator Institute for China Studies (MERICS) and Rhodium Group on the latest trends in China's foreign direct investment (FDI) footprint on the EU-27 and UK.
According to the authors, there has been a substantial shift in the nature of Chinese investment in Europe: driven by EV battery factories, greenfield investment now dominates Chinese investment activities in the region, reaching EUR 4.5 billion and 57 percent of China’s total FDI in Europe in 2022. 

Chinese greenfield projects, in which parent companies create subsidiaries in foreign countries and build operations from scratch, overtook mergers & acquisitions (M&A) in Europe for the first time since 2008. The latter fell to EUR 3.4 billion in 2022, the lowest level since 2011.

The increase in greenfield investment was driven mainly by a few large-scale projects, almost exclusively concentrated in the automotive sector as Chinese battery giants – including CATL, Envision AESC and SVOLT – invested in building plants in Germany, Hungary, the UK and France.

These four countries were also the main recipients of Chinese investment in Europe in the past year, accounting for 88 percent of China’s total FDI. All four not only received major greenfield investments, but also most of the year’s M&A activity. 

Overall, Chinese investment in the EU and the United Kingdom continues to decline, dropping to a decade low of just EUR 7.9 billion in 2022, down 22 percent compared to the year before. This takes Chinese investment back to its 2013 level. As in 2021, consumer products and automotive remained the two top sectors, accounting for three quarters of total Chinese investment in Europe.  

Ongoing and new greenfield investments will put a floor under aggregate investment amounts, and Chinese firms are considering further expansion in Europe in segments of EV value chains, including vehicle production. Yet these will not be enough to create a long-lasting rebound in overall Chinese FDI in Europe, as the experts from MERICS and the Rhodium Group write. 

You can read the report “EV battery investments cushion drop to decade low: Chinese FDI in Europe – 2022 update” by Agatha Kratz, Max J. Zenglein, Mark Witzke and Gregor Sebastian online here.

Best regards,
Claudia Wessling, Director Communications and Publications MERICS 

Our sincere thanks to Claudia Wessling and the team at MERICS for providing this report.