Explosive
China EV lead unassailable, Ukraine situation explosive, China-US marathon, US banks drop again, ASEAN connectivity and integration, China's global initiatives
UPDATE: China has the EV supply chains, better tech and cheaper costs that keep on falling. Many of the global carmakers that dominated its market chose not to fully commit to EVs – and are thus being left behind.
Russian Aerospace Forces destroyed the ammunition for the Leopard and Marder tanks and €200-220 million cargo from Denmark, Germany, Italy and Japan in addition to ammunition and €83 million worth of satellite communication systems, military tablets and data encryption systems.
The Chinese side noted that the correct way for China and the US to get along is mutual respect, peaceful coexistence, and win-win cooperation. The overall China-US relationship cannot be simply defined by "competition" and the US cannot ask for communication and dialogue while harming China's interests, according to the senior official.
Deposits at commercial U.S. banks dropped again and lending activity declined further, stoking concerns about a pick-up in the pace of tightening credit conditions that threaten economic growth.
The 42nd ASEAN Summit stressed stronger economic and digital connectivity, an ecosystem for electric vehicles, a key part of the global supply chain and the use of local currencies and better connectivity of digital payments between member countries.
The Global Development Initiative, Global Security Initiative and Global Civilization Initiative unveiled by China, are Chinese public goods that respond to the common challenges confronting humanity under the prevailing global order. Like the Belt and Road Initiative, they uphold inclusivity and the sharing of the fruits of development.
China’s EV Lead unassailable
China has the supply chains, better tech and cheaper costs that keep on falling and Trade barriers would only force the world into two prices for one product – where the cheaper one is also likely to be better. The EV industry’s coming of age is China’s Walkman moment. It is a reflection of the efforts to develop indigenous capability throughout China’s supply chain and by Chinese private companies. As a largely electronic product, EVs fit well with China’s manufacturing strengths. But it was also a lucky break for China that many of the global carmakers that dominated its market chose not to fully commit to EVs – and are thus being left behind.
Countries in the Global North will find it very hard to compete against the rise in Chinese EVs. Their policy is still mainly to subsidise the buying of uneconomic EVs against the ICE alternatives. Their EV supply chains are incomplete and costly.
Given how the carmaking sector is critical to so many of their economies, they are likely to erect trade barriers against Chinese EVs. Some Western companies may continue to sell EVs made with Chinese components, as some already do. But it is likely that politics will catch up sooner or later with this loophole.
Even if the Global North decides to strongly invest in EVs now, the development of an indigenous supply chain will be very slow. China can complete a mega factory in a year. It would take three to five years in most developed countries and cost many times more. Meanwhile, Chinese companies continue to innovate at the frontier of EV technology.
This is one industry in which China simply won’t lose its lead. Even if the Global North manages to set up an EV supply chain, costs could be twice as high as China’s. The world is moving towards two prices for one product – except in this case, the cheaper one is also likely to be better.
Legacy carmakers have argued that EV adoption in the Global South would be slow because of the poor charging infrastructure. But low EV prices are likely to stimulate solutions, especially as the mass adoption of EVs can insulate the Global South from the volatility in oil prices.
For many places in the Global South, transport is a relatively clean slate – and cheaper and more secure options are always attractive. Mass adoption of cheap and affordable EVs could greatly boost mobility, enhancing workforce productivity.
The relative simplicity of making EVs, compared to ICE cars, also opens up opportunities for emerging economies to join the game. The spread of the EV-making industry in the Global South would be a direct economic boost. China will also benefit as emerging EV makers in the region import batteries and other key components from China.
But the most immediate impact of the rise of EVs is the transformation of China’s car market. China, the world’s largest car market, is on track to become the largest car exporter. EV sales in China are rising rapidly – at the expense of ICE cars – nearly doubling last year to make up 25.6 per cent of the market. In the first three months of this year, EV sales rose by 25 per cent year on year.
Within five years, China’s car market is likely to mostly comprise sales of EVs. The impact of this on global carmakers that have long relied on Chinese customers will be severe. Some may go bust.
Three decades ago, the Chinese government embraced the strategy of partnering global companies with Chinese state-owned enterprises to develop its carmaking industry. That strategy didn’t do so well. Instead, some private companies that rose in the electronics industry pivoted successfully to the EV market.
This should be a lesson about the effectiveness of industrial policy or political preference for state ownership. Private companies work best in a highly competitive and fast-evolving market.
Two decades ago, I wrote that 50 million cars would soon be on China’s newly built highways, seen as hyperbole at the time. There are now more than 250 million cars on China’s roads. And China is ready to supply the world with its EVs, sporting the latest technology and, soon, maybe even price tags from the 1980s.
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Ukraine Ammo Storage Site Obliterated
New satellite imagery of an ammunition and explosives storage site just to the west of the Ukrainian city of Khmelnitsky show that most of the installation has been wiped off the map. Yesterday, videos emerged showing an absolutely gigantic fireball rising over the outskirts of Khmelnitsky. The destruction was clearly caused by a series of huge secondary explosions. Now we know for certain that it was indeed this site.
Reports state that the facility was attacked by drones and multiple injuries and damage to buildings in the region occurred due to the resulting shockwaves from the secondary explosions. Beyond the reports of a drone strike, exactly what weapon set off the explosion is unknown. Russia had targeted a similar storage site in eastern Ukraine just less than two weeks earlier. That attack caused similar devastation, including gigantic crater left in the ground where the main secondary explosion originated.
Eduard Basurin has reported that the Khmelnitsky strike, from the Russian Aerospace Forces, destroyed the ammunition for the Leopard and Marder tanks. There was also a €200-220 million cargo from Denmark, Germany, Italy and Japan in addition to ammunition and €83 million worth of satellite communication systems, military tablets and data encryption systems. Other reports say the site had old ammo and explosive material. Regardless, Russia looks to be targeting these facilities to destroy any relevant materiel stored in them or at least to cause a massively destructive secondary blasts.
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10 hours with Wang Yi and Jake Sullivan
The meeting between China's top diplomat Wang Yi and US National Security Advisor Jake Sullivan in Vienna lasted for more than 10 hours with the two sides having "candid, in-depth, substantive and constructive" exchanges on major topics, including on bilateral relations, the Taiwan question, Asia-Pacific situation, and the Ukraine crisis, the Global Times has learned exclusively from a senior official familiar with the meeting.
Wang Yi, director of the Office of the Foreign Affairs Commission of the Communist Party of China (CPC) Central Committee and also a member of the Political Bureau of the CPC Central Committee, met with Sullivan in Vienna on Wednesday and Thursday.
The Chinese side emphasized that the Bali meeting between the Chinese and US top leaders was successful and constructive, and pointed out the direction for the development of China-US relations. However, the US side overreacted and abused force in the unmanned civilian airship incident and lessons must be learned from the incident, a senior Chinese official who is familiar with the meeting but asked for anonymity, told the Global Times on Friday.
During the meeting, the Chinese side also noted that the correct way for China and the US to get along is mutual respect, peaceful coexistence, and win-win cooperation. The overall China-US relationship cannot be simply defined by "competition" and the US cannot ask for communication and dialogue while harming China's interests, according to the senior official.
The Chinese side noted that what the US should do is to establish a correct understanding of China, prevent strategic misjudgments, abandon the Cold War mentality, stop containment and suppression, stop engaging in zero-sum games, return to rationality and pragmatism, and meet China halfway to promote the stabilization of China-US relations, the source said.
Wang Yi comprehensively expounded China's solemn position on the Taiwan question, emphasizing that the Taiwan question is the core of China's core interests, the bedrock of the political foundation of China-US relations, and the first redline that cannot be crossed, according to the source.
Wang also noted that the top priority at the moment is that the US should earnestly abide by the one-China principle and the provisions of the three China-US joint communiqués, and stop interfering in China's internal affairs.
The US side stated that the US' one-China policy has not changed and does not support "Taiwan independence," "two Chinas" or "one China, one Taiwan," according to the source.
The anonymous senior official also unveiled that China also requires the US to remove unreasonable restrictions and obstruction on China-US people-to-people and cultural exchanges, and to work with China to carry out more exchanges between various sectors of the two countries and enhance mutual understanding between the peoples.
The two sides also exchanged views on the Ukraine issue. The Chinese side emphasized that China is not a party to the Ukraine crisis, and has always maintained an objective, fair and calm stance, actively promoting peace talks, and has been urging all parties not to add fuel to the fire. Complying with the purposes and principles of the UN Charter and safeguarding the sovereignty and territorial integrity of all countries should be universally applicable without imposing double standards.
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U.S. banks drop again
Deposits at commercial U.S. banks dropped again in the week ended May. 5, and lending activity resumed its decline, stoking concerns about a pick-up in the pace of tightening credit conditions that threaten economic growth. Deposits at large U.S. banks fell to $17.150 trillion from $17.167T a week earlier, on a seasonally adjusted basis, data released on Friday by the Federal Reserve showed.
Commercial bank lending decreased to a seasonally adjusted $15.70 billion during the week. On an unadjusted basis, loans and leases increased nearly $4.00B.
Residential lending decreased $2.6B, commercial real estate loans rose $2.9B, and consumer loans fell nearly $2.5B from the prior week. Commercial and industrial loans were down about $6T.
The report comes just days after the Fed’s April Senior Loan Officer Opinion Survey showed that major banks continued to tighten corporate lending standards and loan demand declined in the first quarter of the year.
A faster pace of tightening in credit conditions, particularly at regional banks, will likely rein in lending and economic growth that many believe will help the Fed bring down inflation.
“Corporate America goes to small and mid-term banks for loans, those loans are going to get harder to get. If companies can't get loans, or have a harder time getting loans, there’ll be less spending and the ripple effect goes on," Robert Conzo, CEO of The Wealth Alliance told Investing.com's Yasin Ebrahim in an interview on Friday.
“I think this banking turmoil absolutely will do some of the Fed's work,” Conzo added. “This story is very much unfolding because there's a lot of banks out there."
Regional banks (NYSE:KRE) ended the week down 5%, led by 21% slump in PacWest Bancorp (NASDAQ:PACW) as bearish bets on the bank continued after it announced a drop in deposits, and pledged more collateral to borrow more from the Fed’s discount window.
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ASEAN digital connectivity & economic integration
The 42nd ASEAN Summit closed on Thursday with leaders of the regional bloc stressing their commitment to the interests of the common people, and stronger economic and digital connectivity. Attention to the important issues includes the protection of migrant workers and victims of human trafficking, Indonesian President Joko Widodo told the media at the end of the two-day conference in Labuan Bajo, a popular tourist site on Flores Island, East Nusa Tenggara Province.
Indonesia chairs the Association of Southeast Asian Nations this year. The leaders at the summit also made a declaration on advancing regional payment connectivity and promoting local currency transactions. Seamless and secure cross-border payments, taking country circumstances into consideration, are to be facilitated. They also agreed to encourage the use of local currencies for cross-border transactions in the region and support the establishment of a task force to explore the development of an ASEAN Local Currency Transaction Framework.
Mochamad Ridwan Kamil, governor of West Java, Indonesia's biggest province, noted how regional blocs like ASEAN are part of "globalization 2.0". Kamil said globalization 2.0 is also about more local small and medium-sized enterprises expanding their businesses by going overseas. He said this is why he has established a training center in West Java to encourage more SMEs to use e-commerce so that they can export their products.
Arsjad Rasjid, chairperson of the Association of Southeast Asian Nations-Business Advisory Council, said the ASEAN economy has a growing impact on global trade. ASEAN countries are "broadly regarded as the future base of global production and consumption", or as the Indonesian government has defined it, "as a new epicenter of growth".
Widodo said at the summit that ASEAN has agreed to become an ecosystem for electric vehicles and wants the region to become a key part of the global supply chain. The use of local currencies and better connectivity of digital payments between member countries are in line with the concept of ASEAN centrality, which will make the region stronger and more independent.
Kirida Bhaopichitr, director of economic intelligence service at the Thailand Development Research Institute, said ASEAN needs to focus on building a resilient supply chain in the region that will make it a "very attractive" investment destination.
Lee Sheung Yuen, director-general of the Hong Kong Economic and Trade Office in Jakarta, talked about the close relationship between the special administrative region and ASEAN. Lee said Hong Kong hopes to contribute more in the partnership with ASEAN through its financial, professional services, logistics and transportation sectors.
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Cultural connotations
Understanding Chinese initiatives through its civilisational prism. The Global Development Initiative, Global Security Initiative and Global Civilization Initiative unveiled by China, are by nature the Chinese public goods in response to the waning global governance. All three initiatives are a response to the common challenges confronting humanity under the prevailing global order. Like the Belt and Road Initiative, they uphold inclusivity and the sharing of the fruits of development.
This is clearly demonstrated in the sharing of the development dividends among the partnering countries of the Belt and Road Initiative and the GDI. The GSI, meanwhile, envisions a new indivisible security architecture that calls for common, comprehensive, cooperative and sustainable security characterized by a model of mutual respect, openness and integration. And the GCI is an inclusive model of civilizational co-existence and mutual interaction that is in stark contrast with the theory of a clash of civilizations. All these initiatives have elevated China's active participation in the world affairs to a new height in its pursuit of good global governance.
In the face of China's rising influence, the United States' juxtaposition appears somewhat contradictory and perplexing. On the one hand, the reigning superpower feels its primacy threatened day by day, with its "anguish of displacement" apparent to the world. Its hegemony leaves no room for any potential challenge, much less from a country with a different culture and polity. On the other hand, China is expected to play a bigger international role in "bailing out" the world, in many instances in the wake of the catastrophic effects caused by others. A case in point, the climate change is an exigency on which the US anticipates a bigger contribution, if not sacrifice, to be made by China.
All in all, the prevailing spectrum of global woes and challenges has pointedly revealed the governance deficit under the waning of the Pax-Americana. Under such dire circumstances, any new initiatives intended to enhance the global governance in the interest of humanity should not be viewed negatively as a challenge to the existing order, but should instead be embraced with confidence. The reigning superpower must learn to live with the new reality of a multipolar world and new paradigm of international relations.
In the face of the emergence of new centers of power, any brutal bid to stifle fair competition vis-a-vis these emerging powers only reveals the lack of self-confidence and the lack of fair play spirit on the part of the superpower. This is not commensurate with the status of global leader that the superpower proclaims to be.
Under the geopolitical prism of the US, China's offer of public goods in the various initiatives is seen as a "charm offensive "intended to draw more countries, notably the developing Global South, into the orbit of its partnership diplomacy.
From the US' perspective rooted in its belief in its Manifest Destiny, the unipolar superpower is destined to expand its sphere of influence and spread its model of democracy and capitalism across the entire world, albeit brutally and at the expense of others' sovereignty and territorial rights in many instances. The so-called "ideological divide" between Western democracy and non-democracy is merely a convenient tool Washington resurrected from the old toolbox of the Cold War. It is a tool for stoking clashes in its pursuit of hegemonic dominance.
In reality, having been cognizant of the multipolarity of global dynamics and cultural diversity, China's ideal of shared growth and co-existence underpinning the GDI, GSI and GCI is a more realistic and prudent approach to addressing the current deficit in global governance. This wisdom has its origin in the various Chinese philosophical thoughts which constitute the rich heritage of the Chinese civilization.
From the Chinese perspective, in its pursuit of a shared future for humanity, economic collaboration and infrastructural connectivity embodied in the Belt and Road Initiative are merely the key means to address the economic disparity among nations, in addition to enhancing understanding through human connectivity; while both the GDI and GSI constitute the two pillars for nurturing peace and harmony.
In pursuit of development, the Chinese wisdom imbued in the GDI portrays a much bigger picture than the notion of "prosper-thy-neighbors" which many might be familiar with. The wisdom of "collaboration and harmony for all nations" is not just an endeavor embracing near neighbors in the name of good neighborliness, but rather it is a global endeavor embracing humanity.
In the same context, perhaps the myth that the Belt and Road Initiative brings about so-called debt traps, can be demystified by the understanding of the Chinese philosophical wisdom which may remain incomprehensible to those who are prepared to weaponize anything and everything for geopolitical gain.
The element of inclusiveness has an entrenched spot in the Chinese civilizational philosophy which encapsulates "harmony in diversity". This has shaped the Chinese global view for ages. It could only be appreciated in the right perspective if we really stay true to our commitment to striving for a better world.
Ong Tee Keat is chairman of the Centre for New Inclusive Asia in Kuala Lumpur.
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