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Two tech investments counter decoupling story


Expanding in Wuhan

At the beginning of the 1980s, a group of British teenagers was asked whether they expected a third world war. Half said they were anticipating nuclear armageddon. A few years later American nuclear missiles were shipped to an airforce base in Berkshire. It was a contentious move but at one of the early meetings to discuss the move, residents appeared more concerned about the potential for disruption to the nearby racecourse than the prospect of being targeted by a Soviet atomic bomb.

Often more prosaic and immediate concerns trump less tangible dangers, especially those shrouded in unpredictable futures. And until Covid-19, similar thinking appeared to be at play when it came to the risks of trading with China. Of course, there was newspaper commentary about the wisdom of outsourcing so much production to the Chinese, but it was mainly concerned with job losses in developed nations. For most consumers there was still a net positive: doing business with China meant cheaper goods.

The virus turned that upside down, hammering home the message that what happens in China can affect the lives of ordinary people across the globe in profound ways.

In more academic terms, this is really a debate about globalisation and its potential limits. Increasingly, the argument is that the trend has gone too far, something that the historian Francis Fukuyama argued in a widely-read article last week that called for “gradual disengagement” from China. Fukuyama said that multinationals should focus less on squeezing every drop of efficiency out of their supply chains and more on “resilience, diversity of inputs and regard for capabilities that are better kept under control of countries that share democratic values”.

Will multinationals take heed? They’re often accused of putting profits above all else. But the pandemic has disrupted their operations in an unprecedented way, perhaps forcing a rethink.

Mindful of this the Chinese press has been on something of a charm offensive that’s targeted multinational firms and a paraded the attractions of globalisation rather than its drawbacks.

For instance, highlights research suggesting that multinationals earn $2 trillion from China each year. It remarks that companies which operate there typically enjoy gross profit margins five to eight percentage points higher than if they focused solely on their home markets. It also lists three US titans that are doing well in China: Tesla, Qualcomm and Apple. The example is offered of how it’s now cheaper to build a Model 3 at Tesla’s Chinese plant than at its US one. Qualcomm CEO Steve Mollenkopf is also quoted as saying that China’s recovery from the virus gives hope to the rest of the world economy.

The Global Times picked up on a similar theme in an article about Honeywell’s new investment in Wuhan. The US industrial giant opened an R&D centre in the city this month, the first investment by a Fortune 500 firm there since the coronavirus crisis began. Honeywell’s decision to persist with the investment, despite the privations of the pandemic, is further evidence of Chinese efforts to “expand market access for foreign companies” , the newspaper says. It also deals “a major embarrassment to some US officials,” the Global Times adds.

Also flagged for attention: Nasdaq-listed ASML has signed a similar deal with Wuxi’s government in Jiangsu to grow its technical servicing operations in the city’s high-tech zone. According to, the city’s integrated circuit industry generated goods and services worth Rmb117.8 billion ($16.5 billion) last year, ranking it second nationally. ASML’s business needs to be close to nearby semiconductor fabs in the Yangtze River Delta (most aren’t mainland Chinese; see WiC480 for more background). The Dutch-headquarterered firm’s decision to do more in Wuxi has “extraordinary significance”, reckons.

It certainly runs counter to all the headlines about decoupling and a Sino-US ‘Cold War’. To be fair, Honeywell and ASML made their investment decisions pre-pandemic but in April, AmCham president Alan Beebe confirmed that US company sentiment on China wasn’t cataclysmic. A survey of members showed they weren’t planning to “pack up and leave China anytime soon,” he added.

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