Since the end of 2020, the Chinese economy is in “self-destruct mode” as many private, foreign and technology companies are fleeing the country due to the politicization of the business environment in China.
Adding insult to injury! The global chip shortage and price hike has already caused some Chinese companies to shut down and lay off workers, and now the U.S. Congress intends to further expand the ban on the sale of Chinese semiconductor equipment based on the Trump administration’s policies, with SMIC bearing the brunt.
This wave of chip shortage triggered Europe and the United States to smash heavy money to build the semiconductor manufacturing industry, TSMC Chairman Liu Deyin analyzed the three main reasons for the chip shortage.
Xi Jinping opens the mode of Beijing people ruling Hong Kong in Hong Kong, and the richest man Li Ka-shing loses his power. Romania 5G construction refuses to cooperate with CCP, excludes Huawei. Ant rectification more severe than expected, facing 100 billion capital shortage.
Xi Jinping rules Hong Kong, Hong Kong’s richest man Li Ka-shing is cancelled
The Hong Kong government has introduced a draft bill to revise Hong Kong’s electoral system, and the Election Committee, which is responsible for the selection of the Chief Executive, has been reshuffled, with Hong Kong’s traditional supporters of Beijing giving way to groups appointed by Beijing.
A pro-Beijing Hong Kong media reported that the pro-Beijing camp is also in conflict because the “Chiu Chow Association”, which has 42 associations and more than 100,000 members under the jurisdiction of the “Election Committee”, is not included in the new “hometown associations” in the third sector. “did not make the cut. In the past, the richest man in Hong Kong, Li Ka-shing, who is regarded as one of the “kingmakers” of Hong Kong, is the chief honorary president of the association.
Hong Kong’s Chief Executive Carrie Lam has said that one of the criteria for determining the electorate of the EAC groups this time is to have a history of three years in order to avoid vote planting. But in the shortlist of 24 associations, the Hong Kong Shandong Association will only be established on April 12, 2021, and the Hong Kong Gansu Association will only be established on June 10, 2019.
The politicization of the business environment, China’s economy is on “self-destruct mode”
The Chinese Communist Party’s crackdown on business has become increasingly harsh since Ant Group’s “largest IPO in history” was halted late last year, and China’s increasingly politicized business environment could pose a threat to the country’s economic future.
On Saturday (10), the Communist Party’s anti-monopoly agency fined Alibaba 18.2 billion yuan. Bloomberg reported that Ali made the unusual move of thanking the regulator for the CCP’s sky-high fine.
One aspect of China’s increasingly politicized business environment is that the Communist government is tightening its grip on private companies internally, according to a Voice of America report dated 15 May, under the headline “Politicized Business Environment: China May Be Smashing Its Own Pot.
Fraser Howie, co-author of “Red Capitalism,” points out that private companies face real political risks in doing business in China.
Howie argues that the Communist Party’s control over large technology companies will only get tighter in the future.
Worse, Howie says, the seemingly clear red lines of monopoly drawn by CCP regulators – for example, prohibiting “second-choice” or “killing the familiar” – are so arbitrary that there is no guarantee that the existing rules of the game will not be further tightened in the future. There is no guarantee that the existing rules of the game will not be further tightened in the future.
According to Hoy, the CCP’s arbitrariness in setting the rules of the game is the biggest problem in doing business in China, and its policies have been changing with the political climate.
Huang Qiyuan, a veteran venture capitalist and president of Landor Asia, also said that the CCP’s heavy hand on Jack Ma will also cast a shadow in the minds of other entrepreneurs, who will be like “birds of a feather”.
Huang Qiyuan believes that the main thing the Chinese Communist Party wants is for private enterprises to be obedient, not to put Alibaba to death.
Gary Hufbauer, a trade expert at the Peterson Institute for International Economics, said, “The message from Beijing is that no company can challenge the government’s rules, especially not a big company.”
The Voice of America reports that the investigation into Alibaba also appears to be just the beginning of a campaign. On Tuesday (April 13), the Communist Party’s top market regulator summoned 34 Internet companies to self-correct their anti-competitive behavior, with participation including industry giants such as Tencent, Baidu, Byte Jump and Racer.
Paul Triolo, a global technology policy expert at political risk consultancy Eurasia Group, said the Communist Party regulator used Alibaba as an example to sound the alarm, expecting the companies to “keep a low profile and bow down to Beijing on a regular basis. Leaders of other technology companies won’t make the same mistake.”
Facing increasing political pressure at home, China’s tech giants are moving the focus of their operations to Singapore.
Tencent is setting up its Asian headquarters in Singapore. Jitterbug parent company ByteDance is now recruiting quickly after setting up its regional headquarters in Singapore. Alibaba is also investing in real estate and recruiting talent in Singapore.
A growing number of companies are abandoning plans to list on the Shanghai Stock Exchange’s Science and Technology Board in light of a trend of further tightening of Communist Party regulations on technology companies.
According to an analysis by the Financial Times, as many as 76 companies withdrew their IPO plans in March, doubling the number in February and setting a new record for withdrawals, threatening to stifle the CCP’s original priority of developing China’s domestic capital markets.
Another aspect of China’s increasingly politicized business environment is the wave of nationalism that is being whipped up by the Chinese government abroad.
Less than three months after China and Europe reached an investment agreement in principle, the European Parliament announced the cancellation of the latest meeting to discuss the investment agreement. The wave of Chinese nationalism has also hit foreign companies doing business in China.
Multinational corporations and brands are and will continue to be under pressure to ensure that their supply chains meet the highest international standards in the areas of labor, environmental and other business best practices,” said Doug Barry, a spokesman for the U.S.-China Business Council. Host governments need to understand and support this requirement. Otherwise, companies will be forced by their stakeholders to locate some or all of their supply chains elsewhere.”
Gary Hufbauer, a trade expert at the Peterson Institute for International Economics, argues that “foreign companies based in the U.S., EU, UK, Canada and Australia are on edge. Many companies have postponed expansion plans in China. A few companies are moving some production to other countries.”
He also predicted that “the loss of foreign direct investment growth could reduce China’s GDP growth by 0.5 percentage points.”
U.S. to Expand Restrictions on Semiconductor Equipment Sales to Land, SMIC to Bear the Brunt
Korean media BusinessKorea reports that the National Security Council on Artificial Intelligence (NSCAI), appointed by the US Congress, has recommended that the US government ban the export of equipment for technologies such as deep ultraviolet (DUV) to the mainland. Previously, former U.S. President Donald Trump had banned the Dutch exposure machine maker ASML from exporting EUV exposure machines necessary for advanced processes to the mainland, hitting SMIC’s advanced process technology development layout hard.
Trump’s export restrictions at the time, did not include more than 7 nanometers, the deep ultraviolet light equipment necessary for the production of mature processes, with the U.S. Congress to support the request to expand the government’s export restrictions on mainland semiconductor equipment, and the ban extended to equipment.
The industry believes that, in the U.S. Congress to support, the Biden government to expand the opportunity to expand the current shrinkage of equipment exports to the mainland, the SMIC will be a major blow to the mature process-oriented UMC, the force of the Taiwan plant such as CMC more sought after.
SMIC for the mainland’s largest NOR chip factory Zhaoyi innovation foundry capacity will also be affected. It is reported that Zhaoyi innovation monthly commissioned by SMIC foundry 10,000 wafers, if SMIC can no longer obtain deep ultraviolet light machine, the future will inevitably focus on the limited capacity of non-NOR chip business, will lead to provide Zhaoyi innovation NOR chip greatly reduced, Huabang, Macronix, etc. will usher in more transfer orders.
Chip shortages spread, some companies in China shut down and lay off employees
Affected by the shortage of chips, many semiconductor electronics companies across China have recently been forced to shut down, some even closed down. Some workers fear that the impact will cause another wave of unemployment.
According to the 21st Century Business Herald, a small chip is stirring the nerves of the entire Chinese electronics industry. Since the beginning of this year, Liu Qingchun, general manager of Dongguan Zhonghe Vision Technology Co., Ltd. has been anxious about the price increase of the chip. What makes him more anxious is that “the chip not only repeatedly increased prices, and now even if you add money, you can not order the goods.”
According to the report, the chip price surge, downstream enterprises have to face the pressure of rising costs. Under the pressure of the lack of core, many companies fell into the embarrassing situation of single dare not accept; some companies had to suspend the order, and delayed the shipment cycle.
This week in the WeChat circle of friends circulated a video of enterprises forced to stop work because of less chips. A man filming the shutdown said: “(The factory) no chips, has been on vacation. Holiday, holiday, holiday, no chip holiday la.”
A number of industry analysts say that the chip shortage and price increases will continue throughout 2021, and downstream companies dependent on it will have to continue to carry the weight under pressure.
China’s cell phone manufacturing, tablet PCs, car manufacturing and other semiconductor industries all need chips, since the second half of last year, the demand for cell phones and semiconductor products has surged, but subject to limited wafer manufacturing capacity, chip supply exceeds demand.
April 12, the first Guangzhou International Electronics and Electrical Appliance Fair opened. A number of electronic enterprises exhibitors disclosed that the chip shortage and price increases have become the most headache for enterprises. For example, some companies have orders but dare not take, only to be forced to reduce production. Financial scholar commander said, “Many companies are subject to the current dilemma of short-term supply of chips and can not be delivered on schedule, resulting in a large number of products default, thus affecting many Chinese companies.”
Data show that communications equipment, PCs/tablets, consumer electronics and automobiles are China’s top four downstream industries with the strongest demand for chips, with each of these industries accounting for between nearly 10 percent and 30 percent of global downstream end demand for chips. Some netizens told Radio Free Asia that recently, computers, hard drives and graphics cards have all seen increases of 15% or more.
In addition, the shutdown of companies has led to a large number of workers losing their jobs. Mr. Sun, who works in Wuhan, told the station that since the beginning of this year, many companies have shut down and laid off workers due to the lack of chips: “The survival environment is so bad, the whole environment is also bad, the wages are not even high, and they are all laying off people. The country’s newspapers, television said how good, this good that good, Wuhan has recovered. Recover a ghost.”
Huawei Group, a major Chinese communications equipment maker, is close to running out of cell phone chips in its inventory due to U.S. sanctions. Huawei’s phone shipments plunged 40% in the fourth quarter of last year and are expected to fall another 60% this year, leaving it to enter the pig and coal mining industries to save itself.
Europe and the United States to smash heavy money to build semiconductor manufacturing, Liu Deyin analysis of the chip shortage of three major reasons
World Semiconductor Trade Statistics Organization (WST) statistics of the global semiconductor market, the overall output value in terms of the headquarters market, the United States semiconductor to 42.9% in the leading position, Taiwan ranked second with 19.7%, South Korea ranked third with 15.9%. The overall output value of Taiwan’s semiconductor industry exceeded NT$3.2 trillion (about US$114.2 billion).
After the global chip drought, countries have turned to Taiwan for assistance, countries around the world realize the importance of chip manufacturing, including the U.S. announced to invest $50 billion to support the U.S. chip manufacturing industry, the European Chip Alliance will raise 30 billion euros to build the semiconductor industry, China will also devote its efforts to the development of third-generation semiconductors.
Taiwan Executive Yuan spokesman Luo Bingcheng said: “Our semiconductor supply chain, whether it is IC design, wafer manufacturing, packaging and testing, etc., are among the best in the world, the world’s cutting-edge chip manufacturing, 92% of production capacity is concentrated in Taiwan. “
Tiburon Technology (TrendForce) estimates that Taiwan controls about 64% of the global foundry market, of which TSMC holds more than half of the market share.
Recently TSMC chairman Liu Deyin, in an interview at the Taiwan Semiconductor Industry Association members’ meeting, “semiconductor shortage, and fab location has nothing to do with the region. Mainly due to the epidemic prompted the supply chain inventory increase, trade tensions between the United States and China, and the epidemic to accelerate the digital transformation of three factors. Among them, the supply chain inventory increase and trade tensions two factors are temporary, digital transformation is the only change in the trend.”
Romania 5G construction rejects cooperation with CCP, excludes Huawei
On Thursday (April 15) the Romanian government approved draft 5G network legislation that officially bans Huawei and other Chinese companies from participating in the construction of its 5G network.
Pavel Popescu, the Romanian parliament’s lead on 5G legislation and a representative of the country’s parliamentary cyber committee, said, “In line with a 2019 memorandum signed with Washington, the Romanian government has just approved this bill, which is crucial for our country, meaning that China (the Chinese Communist Party) and Huawei are excluded from Romania’s 5G partnership.”
Romania’s mooting of the bill to exclude Huawei started under Trump (Trump). In addition to Romania, the Trump administration has signed 5G security agreements with Poland, Estonia and the Czech Republic, which means Huawei has lost the Eastern and Central European markets.
Ant rectification tougher than expected, faces $100 billion capital shortfall
This week, the Communist Party’s central bank introduced a plan to overhaul Ant Group, which will be regulated similarly to banks and become a financial holding company.
On Monday (April 12), the central bank required Ant Group as a whole to become a financial holding company, with all institutions engaged in financial activities regulated as such, and asked Ant Group to shrink the size of its funds, disconnect “improper connections” between its microfinance and payment services, and curb monopolistic practices in the collection, control and use of consumer data. The Wall Street Journal in April asked Ant Group to shrink the size of its funds, disconnect “inappropriate connections” between its microfinance and payment services, and curb monopolistic practices in the collection, control and use of consumer data.
The Wall Street Journal reported on April 14 that Ant Group would be subject to regulation similar to that of banks, which would weaken some of the company’s growth prospects and force it to scale back and eliminate some of its business arrangements. Those businesses are precisely where Ant has gained a huge advantage over competitors, China’s banks and traditional financial institutions in the past.
Dong Ximiao, chief researcher at the Zhongguancun Institute of Internet Finance, told Reuters that the rectification plan was stricter than expected, meaning Ant Group would need at least 200 billion yuan in registered capital to meet the capital adequacy requirements for financial holding companies.
According to Sun Haibo, director of the Institute of Financial Regulation, a think tank for private financial policy research in China, the core regulatory issue facing the financial holding group is the enhanced capital requirements, which are expected to require a minimum capital injection of 150-300 billion yuan.
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