“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. Jay Newman writes in the Financial Times that “Apple is a Chinese company:” “It may turn out that the biggest driver of [Apple’s] share price has been the close relationship CEO Tim Cook has cultivated with China” – one that has including censoring content at Beijing’s behest and moving production to China. The question: “Is the SEC paying attention? What about auditors? Why are investors sanguine?”
2. At the same time, Taiwanese suppliers for American companies like Apple are building production facilities in Vietnam and India as part of their shift away from China. In part, they’re responding to geopolitical factors. Also at play: Rising wages in China.
3. South Korea’s chip-maker SK Hynix has halted plans to upgrade tech at one of its China facilities due to pressure from US sanctions. According to a report published on the subject, SK Hynix’s long-term strategy “involves shifting its capacity expansion back to South Korea, while the Wuxi fab caters to domestic demand in China and the legacy-process consumer DRAM market.”
4. Amid US-China tension and trade slowdown, FedEx plans to move its Asia headquarters and executives to Singapore from Hong Kong. The company may also move some non-essential roles to Malaysia or India. FedEx’s fortunes are often seen as a bellwether for those of the global economy: Are its geographical decisions, as well?
5. More broadly, China’s moves to put pressure on foreign companies (see: the counter-espionage law, raids on businesses) seem to be dampening flows of overseas capital to the country: By one measure, foreign direct investment into China dropped by almost half last year from a year earlier, hitting the lowest level in five years.
6. And restrictions are growing: China’s new restrictions on the export of data outside of China come into force on June 1. Because employment data is considered personal data, this will almost by definition affect multinationals in China.
7. The Senate voted to block a Biden administration move to remove tariffs on solar materials imported by Southeast Asia. This vote, 56-41, sends the measure to Biden’s desk for potential veto. Lawmakers argue that the tariff exemption hurts US solar manufacturers while benefiting their Chinese competitors, many of which send their products through Southeast Asia to circumvent US tariffs.
8. Canada passed a new law requiring companies to report on their efforts to stop goods made with forced labor from entering their supply chains. With the law, Canada joins a growing number of countries cracking down on Chinese forced labor in supply chains.
9. The EU is considering a new sanctions mechanism to target third countries through which Russia evades sanctions – with an eye to China, Turkey, the UAE, and Kazakhstan.
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