Last week was dominated by the Chinese balloon that waltzed across North America before being shot down, and most of THIS week has been taken up with ponderings about whether or not three other balloons shot down subsequently were also from China, or from another galaxy. Answer: no to both. But both houses of Congress underlined the moment by passing a unanimous resolution against Chinese balloons.
Of great interest this week was an announcement from Foxconn, the main producer of Apple products, that it is setting up another large manufacturing facility in Vietnam. Following the messiness of the end of COVID and the impact it had particularly on iPhone production in Zhengzhou, this was inevitable. It’s tough for companies to ween themselves off the China manufacturing system, but for many there is now simply no choice but to diversify to some extent. The first steps are the hardest, and it gets easier from there on. We’re now on that track for sure.
Another decoupling sign, perhaps, was the announcement from Warren Buffett’s Berkshire Hathaway that it had sold another slab of BYD shares. Given the rosy outlook for the EV auto manufacturer, this is puzzling unless it is viewed as a way of reducing China exposure. Which would turn out to be either wise in the event of unforeseen developments, or unnecessarily hasty. Time will tell.
The NYT published a new estimate on the number of deceased from the great COVID wave that passed through China at the end of 2022 and early 2023, of between one and 1.5 million. That would still be a massive victory for the China system in that the US recorded over one million deaths, and China’s population is four times that of the US. Meaning, very roughly speaking, that the way China’s population was protected through 2020 and 2021 by closing off the country when the most virulent variants were rampaging around the world, left China with only a quarter as many fatalities.
And finally, there is the state of the overall system from a financial perspective. There have been demonstrations in a number of cities about reductions in medical payments to older people, just one of a number of factors which suggest local governments are running out of money, and the Center does not want to bail them out. What is needed to boost the economy, as Mr Xi said in a speech released this week, is for consumers to spend more. But for that to happen, people need to feel comfortable about, amongst other things, the healthcare safety net. Making the middle class and private entrepreneurs feel comfortable is also an important part of this process of keeping the system stable and the economy buoyant, but the disappearance of high-flying financier Bao Fan, presumably into detention, doesn’t do too much to support the comforting perception of a rules-based and transparent system.
Busy times all round. Have a great weekend.
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