“Deglobalization” has entered the narrative zeitgeist. But what’s happening on the ground? This weekly series seeks to answer that question with a round-up of deglobalization developments from the week that’s done.
1. No bearish views, please. Chinese state-media rebuked Goldman Sachs for its analysts’ recommendation to sell shares of local banks, saying such bearish sentiment are based on “pessimistic assumptions” and “misinterpretation.” Major lenders that Goldman downgraded to “sell” include the Agricultural Bank of China, Industrial and Commercial Bank of China (ICBC), and Industrial Bank; their Hong Kong-listed shares sank on the news. As Bloomberg notes, the reaction reflects Beijing’s anxiety over eroding investor confidence, especially as the Chinese economy weakens.
2. Elsewhere, the Wall Street-China relationship is showing still other signs of continuing tension: Reuters reports that US inspectors at the Public Company Accounting Oversight Board (PCAOB) have started a new round of routine checks of Wall Street-listed Chinese firms’ Hong Kong audits. The inspections are part of a deal reached between Beijing and Washington last year that prevented the mass de-listing of Chinese companies, resolving—for now—a longstanding dispute over access to audits of US-listed Chinese firms.
3. China is flexing its upstream muscles, as we detail in our weekly factor and markets briefing: from August, Beijing will restrict exports of the critical metals gallium and germanium, critical for manufacturing a wide range of semiconductors and defense technologies. While not an export ban, China’s move highlights its “dominant hold over the world’s mineral resources…[and] its willingness to use them” against the West, the Wall Street Journal notes.
4. Japan’s Nidec Corp. is planning a new factory in India that will more than double its production capacity of of cutting tools in the country—part of a move by companies to shift more of their manufacturing footprint to the South Asian nation. “That a maker of such tools, used on assembly lines, is setting up shop on the subcontinent suggests a broader dynamic at work—the development of a manufacturing ecosystem,” Bloomberg writes in a recent newsletter.
5. China’s highest-ranking diplomat, Wang Yi, urged South Korea and Japan to align with Beijing to “prosper together…[and] revitalise Asia”—rather than cooperating with the US and other Western allies. “No matter how blonde you dye your hair, how sharp you shape your nose, you can never become a European or American, you can never become a Westerner,” Wang said during a trilateral forum in Qingdao. “We must know where our roots lie.”
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