ROBIN YOU: Tech cold war will hit global suppliers, but some locals could benefit
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These days it is hard to have a conversation about China without considering geopolitical risks. We are seeing a decoupling between China and the US on all fronts — Covid-19, geopolitics, trade and technology.
Hong Kong has historically been the financial hub connecting mainland China with global financial markets. China uses Hong Kong’s currency, equity and debt markets to attract foreign capital, while many international companies use it as a base to expand into mainland China.
Pro-democracy protests and a national security law have brought uncertainty to Hong Kong and increased tensions between the US and China. But Hong Kong’s economy as a proportion of China’s total GDP has fallen from 18% in 1997 to less than 3% today (reflecting astonishing growth on the mainland rather than the contraction of Hong Kong).
A recent survey suggested two thirds of Americans disapprove of China, making China an ideal target for both the Trump and Biden election playbooks. The rhetoric will likely intensify as the US election nears. A “technology cold war” is a major future risk for global investors. It might have far-reaching implications for industrial supply chains, technology companies and consumers everywhere.
Global supply chains have never been more integrated. For example, Tesla procures electric vehicle batteries from Korean and Japanese suppliers who import cobalt and graphite from China. Tesla then sells its final products globally. Can these supply chains be easily restructured? Given concerns over national security and supply chain reliability after Covid-19, some adjustments will take place, but we do not expect China to lose out in the process, as long as it continues to embrace globalisation and innovation.
The evolution of a supply chain is a natural process driven by various factors, such as cost efficiency, labour supply, supporting facilities or logistics to end-markets. Technological breakthroughs often require co-operation from everyone in the ecosystem. For instance, ASML, a Dutch semiconductor supplier, could not have made advances in manufacturing smaller components for smart devices without support from TSMC, a Taiwanese company. It can be difficult to quickly replace part of a supply chain without severe disruptions to all in the chain.
The US government recently announced that it will further tighten restrictions on Huawei, China’s leading telecoms equipment producer. No doubt this will pressure the company and its supply chain, but not to a full stop. Huawei has been adapting since tensions started two years ago. In addition ...
Hong Kong has historically been the financial hub connecting mainland China with global financial markets. China uses Hong Kong’s currency, equity and debt markets to attract foreign capital, while many international companies use it as a base to expand into mainland China.
Pro-democracy protests and a national security law have brought uncertainty to Hong Kong and increased tensions between the US and China. But Hong Kong’s economy as a proportion of China’s total GDP has fallen from 18% in 1997 to less than 3% today (reflecting astonishing growth on the mainland rather than the contraction of Hong Kong).
A recent survey suggested two thirds of Americans disapprove of China, making China an ideal target for both the Trump and Biden election playbooks. The rhetoric will likely intensify as the US election nears. A “technology cold war” is a major future risk for global investors. It might have far-reaching implications for industrial supply chains, technology companies and consumers everywhere.
Global supply chains have never been more integrated. For example, Tesla procures electric vehicle batteries from Korean and Japanese suppliers who import cobalt and graphite from China. Tesla then sells its final products globally. Can these supply chains be easily restructured? Given concerns over national security and supply chain reliability after Covid-19, some adjustments will take place, but we do not expect China to lose out in the process, as long as it continues to embrace globalisation and innovation.
The evolution of a supply chain is a natural process driven by various factors, such as cost efficiency, labour supply, supporting facilities or logistics to end-markets. Technological breakthroughs often require co-operation from everyone in the ecosystem. For instance, ASML, a Dutch semiconductor supplier, could not have made advances in manufacturing smaller components for smart devices without support from TSMC, a Taiwanese company. It can be difficult to quickly replace part of a supply chain without severe disruptions to all in the chain.
The US government recently announced that it will further tighten restrictions on Huawei, China’s leading telecoms equipment producer. No doubt this will pressure the company and its supply chain, but not to a full stop. Huawei has been adapting since tensions started two years ago. In addition ...
