Beijing rolls out the red carpet for global CEOs…
China pulled out all the stops for Elon Musk’s visit to the country this week. The Tesla CEO met with the Chinese foreign, commerce, and industry and technology ministers, and was treated to an elaborate dinner with the CEO of battery giant CATL.
The rock star welcome stands in stark contrast to Beijing’s rebuff of Washington’s request for a meeting between their defense chiefs. Plus, Beijing got to claim that Musk said he opposes decoupling, and sees the US and China as two “conjoined twins.” (No one mentioned, though, that it’s typically regarded as a safer bet to separate conjoined twins earlier rather than later.)
Musk’s visit—along with recent trips by other big CEOs like JP Morgan Chase’s Jamie Dimon, Starbucks’ Laxman Narasimhan, and GM’s Mary Barra, plus Apple’s Tim Cook and Pfizer’s Albert Bourla in March—are burnishing Beijing’s narrative that the country is open for business and not in the least hostile to foreign firms.
But it’s certainly not China’s priority to help foreign companies thrive in its home market. Just look at the dwindling Chinese market shares of foreign automakers. To wit: Mitsubishi is extending a production suspension in China as it struggles from local competition—and has to pay a hefty penalty to its local joint venture partner. Meanwhile, the Chinese ministry of commerce is rolling out new measures to help further cement China’s EV export dominance.
…but global capital is leaving China
While foreign CEOs flock to China, global capital is leaving China in droves. The Hang Seng China Enterprises Index is down some 20% from its recent January peak, while key stock indices in Taiwan, Japan, South Korea, and India have climbed to record highs. According to HSBC data, global fund allocations for China have retreated to October levels, and local fund sales last month fell to their lowest since 2015.
Even as global capital seeks out alternatives to China, Chinese capital is chasing global targets. The Financial Times this week documents how Chinese state-backed funds are pouring hundreds of billions of dollars into western economies through investments in western private equity funds—and in turn gaining indirect stakes in companies in strategic sectors while flying under the radar of regulatory scrutiny.
Year-to-date percent change of major Asian stock indices
Competition heats up in the cathode and anode space
General Motors and South Korea’s Posco Chemical are teaming up to build an EV battery materials plant in Quebec, with the Canadian and provincial government putting up 300 million Canadian dollars (223 million US dollars) to fund about half of the project’s costs. The plant will produce cathode active materials like processed nickel and lithium, which make up about 40% of the cost of a battery.
It’s all part of an effort to kick start a North American EV battery supply chain. But that task faces formidable challengers like Chinese giant Ronbay Technology, which dominates the global cathode market. Ronbay is currently looking at potential factory sites in North America and Europe, and is also ramping up capacity in South Korea—shipments from which the company believes won’t get slapped with US Inflation Reduction Act tariffs.
Meanwhile, Chinese anode maker Putailai New Energy Technology last month announced a 1.3 billion USD investment to build Europe’s largest anode factory in Sweden. The westward factory expansion of Chinese battery suppliers will help lower costs for EV producers. But it also makes it harder for battery makers in the west to compete against Chinese counterparts.