A reappraisal of China's semiconductor strategy

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Hey that's what the results indicate. I don't judge victory or success by aggression of actions; I just look at the results.
well I've been looking at Xinhua in English for four (?) years now, seeing positive-only stuff (as I expected: I lived in a country which had been Communistic until I was 18)

and you
manqiangrexue
are similar to Xinhua I mean for people in the West it's pretty normal to assume Government would screw up (one example: Brexit, LOL!), apparently not for you

but as I said, I sorta like that, it's probably what they say at Party meetings LOL
 

Brumby

Major
now

Opinion
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US-China trade war: here are Beijing’s options – and not one looks any good

  • Hit by a hike in US tariffs China could: respond with equal tariffs (impossible); dump US Treasury bonds (ineffective and impractical); let the yuan weaken (expensive)

China can effectively dump US Treasuries and weaken the yuan at the same time. It is a "Cutting off the nose to spite the face" strategy.

Correlation of the yuan to US Treasuries holdings.
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Brumby

Major
These Are the Worst-Case Scenarios for China in the Trade War

Bloomberg News May 16, 2019

China’s economic growth could tumble, debt surge and foreign companies flee in a deepening trade war, economists warn as a week of escalating tensions forces them to ponder worst-case scenarios.

Bank of America Corp., Morgan Stanley and UBS Group AG say China’s expansion may slow below 6 percent under such a scenario for the first time in almost three decades. The 5.8% pace seen by chief Greater China economist Helen Qiao at Bank of America would create “a more dire growth environment than the number suggests.”

Analysts are assessing the damage to China’s role as the world’s supply hub as tariffs drive manufacturers overseas. They’re also warning of a spiraling of debt that’s already closing on 300 percent of output as the government cushions the blow with additional spending. Fresh curbs on
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’s access to the U.S. market and American suppliers underscore the threat of economic containment China that is having to contend with.

“The potential long-term cost is huge,” said Larry Hu, chief China economist at Macquarie Securities Ltd. in Hong Kong. "They must know that Japan fell into the lost decade partly because the Bank of Japan overstimulated the Japanese economy after the Plaza Accord.”

The escalating clash with the U.S. is exacerbating existing economic judders, with
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released Wednesday showing the expansion lost momentum in April even before President Donald Trump raised additional tariffs on $200 billion of Chinese imports to 25% from 10%. The weakness raises the stakes for President Xi Jinping to avert a prolonged economic confrontation at a possible meeting with Trump at the Group of 20 summit in Japan next month.

To Be Tariffed...Maybe

Top 10 U.S. imports from China which haven't been tariffed in current dispute
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The economy is set for a bumpy ride in the short term, with additional tariffs on $200 billion of Chinese products shaving 0.3 percentage points this year, according to economists
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by Bloomberg News. An additional 0.6 percentage points will be sliced off expansion in the year after all goods are hit by U.S. tariffs -- as Trump threatens from June, according to the survey’s median estimate.
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A full-blown escalation with blanket 25% tariffs imposed by both sides would push China’s growth below the lower bound of the 6% to 6.5% growth target set for this year by the second half of 2019, and to 5.5% next year, according to Morgan Stanley.

Citigroup sees the cumulative impact of U.S. tariffs eliminating as many as 4.4 million jobs even before Trump slaps tariffs on those remaining Chinese exports of about $300 billion.

“The outlook is bleak,” said Chen Long, an economist at research firm Gavekal Dragonomics in Beijing in a May 14 note. “Equities are likely to correct further, potentially wiping out most of the market’s year-to-date gains. Bond yields will fall again, after the recent pick-up. And the renminbi is likely to soften,” he said, referring to the yuan by its other name.

Xi is poised to deliver the stimulus needed to prevent a steeper growth plunge, likely causing debt to rise more sharply after a two-year campaign to rein it in. Blanket tariffs on Chinese products render the balance between short-term growth and debt sustainability "unattainable," according to Societe Generale SA. As debt climbs, that may reignite concerns over systemic financial risks.
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It’s the potential for longer-term damage to China’s economic model though that most concerns economists should Xi become embroiled in a protracted economic war.

U.S. tariffs on Chinese products have already set in motion a profound shift in global supply chains that won’t be easily reversed. That threatens to accelerate the departure of manufacturers that already are reeling from rising labor and other costs.

Production Leaving China

Japanese office equipment maker
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Thursday it is moving some production from China to Thailand to avoid trade war risks and Taiwan’s Kenda Rubber Industrial is
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in Vietnam for the same reason. Big consumer brands Samsonite International SA, Macy’s Inc. and Fossil Group Inc. have all said on recent calls with analysts that they are continuing to move production and sourcing out of China.

“Both foreign multi-national companies and Chinese private enterprises are more actively seeking alternative manufacturing bases,” said Klaus Baader, global chief economist at Societe Generale. “A lower trend growth in investment, coupled with more restricted access to foreign know-how, would mean permanent damage to long-term productivity growth.”

Restrictions on Chinese investment in the U.S., especially in technology-related areas, risk stalling the transfer of technologies and foreign know-how, slowing China’s move up the value chain, said Zhuang Bo, chief China economist in Beijing at research firm TS Lombard.

Even worse may await should Trump add export tariffs or ban shipments of key technology components to China, especially semi-conductors, said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA in Hong Kong. That would strangle the Chinese economy, she says.

Altogether, an economic war with the U.S. “blows China up,” said Michael Every, head of Asia financial markets research at Rabobank in Hong Kong. “China would be cut off from Western markets, ideas, technology, and U.S. dollar-flow long, long before it’s ready to replace the U.S. for real.”

— With assistance by Kevin Hamlin, and Xiaoqing Pi
 

Weaasel

Senior Member
Registered Member
Building a world class semiconductors industry has always been one of China's major goals. However, breaking into that industry is quite difficult. It requires a significant amount of $$$, thousands of skilled engineers, IP, and decades of hard work. China has been trying since the 1990s. Back then the country was mainly focused on getting people out of poverty and didn't allocate enough funds towards the semiconductors sector. Also, I do agreed that the CPC was a bit naive and got caught off guard by the USA's self destructive trade war. They didn't really anticipate that the USA would literally hurt their own business just to get at China.

Now the lesson has been learned. Time to invest in our own industries instead of relying on others..


BIG, BIG MISTAKE, but yeah...
 

Brumby

Major
Taiwanese Tech Companies Homeward Bound from China

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A boatload of
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tech companies who moved their production operations to China decades ago are now sailing home. But the reason for this return voyage isn't what you might think.

In the past four months alone, 40 Taiwanese companies with significant operations in China have decided to leave the mainland. The movement, sometimes described in Taiwan as “the salmon run,” hardly amounts to an exodus. Yet, it is a milestone for Taiwan after more than fifteen years of its government trying to lure these firms back from China.

Those who announced their departure from China have pledged to invest more than NT$200 billion (US$6.47 billion) in Taiwan,
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in Taipei. More firms are expected to follow, the Ministry said. Meanwhile, more companies are suspected to have already returned – without fanfare.

The most common narrative is that the U.S.-China trade war has trigged this phenomenon. Punitive tariffs imposed on Chinese manufactured goods by the U.S. government are forcing companies with factories in China to face revenue losses.

Tariffs, however, are more likely just a handy cover story for firms who were already planning to leave China, revealed several high-level industry executives and government officials in Taipei recently interviewed by EE Times.

Instead of seeking a quick fix for what might be short-term political tension between China and the United States, Taiwan companies in China have long seen the handwriting on the wall.

They explain that the real forces behind their return are the worsening business environment in China. The issues include rising labor costs, the burden of paying for rapidly increasing social welfare outlays and environmental taxes.

“Unless you are as big as Foxconn, most small and medium-sized Taiwanese companies in China can’t possibly meet China’s ever-growing demands,” Paul Chou, secretary general of Taiwan Telematics Industry Association, told EE Times.

Finally, not the least among Taiwan’s concerns is a growing political and social fear about the mainland. For example, many Taiwanese find China’s social credit system – under which China rates its own citizens, including their online behavior – particularly jarring.

Fueling Taiwan’s angst further is China’s approval last year to remove its two-term limit on the presidency. The new political system allowing Xi Jinping to remain in power for life is another sign – in the eyes of Taiwanese companies – that China is developing an unfriendly business environment, EE Times’ Taipei sources noted.

In other words, this is not so much about Donald Trump, but it's about Xi Jinping.

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manqiangrexue

Brigadier
well I've been looking at Xinhua in English for four (?) years now, seeing positive-only stuff (as I expected: I lived in a country which had been Communistic until I was 18)

and you
manqiangrexue
are similar to Xinhua I mean for people in the West it's pretty normal to assume Government would screw up (one example: Brexit, LOL!), apparently not for you

but as I said, I sorta like that, it's probably what they say at Party meetings LOL
I recognize mistakes as they become apparent but I certainly do not presume that I know better before the results are out. For example, I said that it was a mistake to announce MIC2025, because the results are the red scare that it caused in the West. But I would certainly never say that it is a mistake for China to refuse the current trade deal because I don't know what it was and there are no results from it. I would not give this benefit of the doubt to just anybody; the CCP has moved China forward further and faster than any other government on the planet in such a short time so I assume that unless proven wrong, these are competent people who know what they are doing.
 
I recognize mistakes as they become apparent but I certainly do not presume that I know better before the results are out. For example, I said that it was a mistake to announce MIC2025, because the results are the red scare that it caused in the West. But I would certainly never say that it is a mistake for China to refuse the current trade deal because I don't know what it was and there are no results from it. I would not give this benefit of the doubt to just anybody; the CCP has moved China forward further and faster than any other government on the planet in such a short time so I assume that unless proven wrong, these are competent people who know what they are doing.
to me, you
manqiangrexue
and
tidalwave
it's like yin and yang if you know what I mean LOL it's hilarious when you two exchange posts

now need to get my bike ready though (no hidden message here)
 

manqiangrexue

Brigadier
to me, you
manqiangrexue
and
tidalwave
it's like yin and yang if you know what I mean LOL it's hilarious when you two exchange posts

now need to get my bike ready though (no hidden message here)
That is VERY insulting. You compared me to a dude whose logic reasoning is limited to: "There were only 3 J-20 produced this year! You want a source? I saw it on TV! If you think I'm wrong, you need to prove it's not 3!"
 

Xizor

Captain
Registered Member
@Jura
Oh.So the constant stream of doom and gloom reports regarding china that you enthusiastically post then would be the result of your hatred towards an ideology.
Good to Know. Not particularly hilarious. Warrants pity.
China wouldn't have Huawei if it was "communist" btw. Equating it to the Soviet satellite motherland of yours might not be the first or last of your mistakes. Objectivity helps.
 

phynex92

New Member
Registered Member
well I've been looking at Xinhua in English for four (?) years now, seeing positive-only stuff (as I expected: I lived in a country which had been Communistic until I was 18)

and you
manqiangrexue
are similar to Xinhua I mean for people in the West it's pretty normal to assume Government would screw up (one example: Brexit, LOL!), apparently not for you

but as I said, I sorta like that, it's probably what they say at Party meetings LOL

Obvio
I recognize mistakes as they become apparent but I certainly do not presume that I know better before the results are out. For example, I said that it was a mistake to announce MIC2025, because the results are the red scare that it caused in the West. But I would certainly never say that it is a mistake for China to refuse the current trade deal because I don't know what it was and there are no results from it. I would not give this benefit of the doubt to just anybody; the CCP has moved China forward further and faster than any other government on the planet in such a short time so I assume that unless proven wrong, these are competent people who know what they are doing.

It was pretty apparent that the US was not going to hand over its dominance to China without any hindrance. China's mistake was underestimating the extent that Trump is willing to go through to achieve their goal. Many American presidents before Trump had threatened to be tough on China but none followed through their words after they got elected. The fact that Trump followed through definitely caught China off-guard. This was probably the reason China appeared eager to negotiate with the US for the past year and buy precious time for the domestic industries to get ready. The US demands from the beginning was extremely derogatory and condescending, and had China agreed on the terms it'd be a Plaza Accord 2.0. I think the CPC has been doing internal evaluations ever since the trade war was declared by Trump and after the 10th round of negotiations, they concluded that China was ready for a full-blown trade war. That's probably the reason why the Chinese team decided to end the negotiations.
 
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