On Friday, June 30, 2023 at 12:00:52 AM UTC-7, David P. wrote:
> It’s Getting Riskier to Do Business in China
> By Simone Gao, June 21, 2023, WSJ
> Foreign executives who visit China lately are getting the royal treatment.. A photo of Tim Cook shaking hands with customers at a Beijing Apple store went viral on Weibo in March. Chinese social-media users showered Tesla CEO Elon Musk with compliments during his trip to the country last month. In his first post-pandemic visit to China, JPMorgan CEO Jamie Dimon took center stage at the bank’s Global China summit in Shanghai. And last week Bill Gates met Xi Jinping in person.
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> Mr. Musk reportedly described the U.S. and Chinese economies as “conjoined twins” that can’t be separated. Mr. Dimon proclaimed the enduring connection between the West and China. The Chinese government seeks to use such visits to entice skeptical foreign investors back into the country after Covid. And it’s fair to say that people such as Messrs. Musk and Dimon, having tasted success in China, genuinely believe what they say. It is crucial to understand, however, that their triumphs in China are the product of unique circumstances.
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> Tesla’s influence on China can’t be overstated. The company’s open-source technology has become the backbone of the country’s electric-vehicle industrial chain. Tesla’s Shanghai Gigafactory manufactures 95% of its parts locally. But other foreign manufacturers, most of which are reluctant to give away their secrets, can’t replicate Mr. Musk’s success. By sharing its technology with China, Tesla jump-started an entire domestic industry. Now, as that industry is beginning to show signs of maturity, Tesla faces increasingly tough domestic competition from Chinese companies. Soon Beijing won’t need Tesla, and Mr. Musk will face regulatory hurdles and other difficulties.
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> Tesla and JPMorgan have succeeded in China, but that doesn’t mean others can too. China faces serious demographic challenges that make it hard to sustain an expanding economy, which most companies need to thrive. China’s population is shrinking and getting older. The official count is in dispute, but demographer Yi Fuxian predicts China’s population will decline to one billion by 2050. The latest edition of the U.N. World Population Prospects report estimates it could fall to 767 million by 2100.
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> A shrinking population means the ailing Chinese property market won’t recover no matter what the government does. That will restrict growth and hurt global investors’ confidence in the Chinese economy. China will lack the labor force to maintain its status as the world’s factory. Consumption will also decline as the population shrinks, while local-government debt piles up to the point of default. As China’s economy contracts, the Communist Party will protect the profits of state-owned enterprises, further limiting opportunities for foreign companies.
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> Despite these obstacles, foreign companies remain hesitant to scale back their operations in China, where there’s plenty of money still to be made. Mr. Xi is well aware of this reality and making the most of it. In recent months, Chinese authorities have raided at least three foreign consulting and research firms as part of a national-security-related investigation. In March, investor Mark Mobius told Fox Business that he couldn’t withdraw money from his HSBC account in Shanghai because of the country’s capital controls, and he warned investors to be “very, very careful” about investing in China.
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> China doesn’t allow yuan to be exchanged freely for U.S. dollars. As Mr. Mobius has learned, it’s also difficult for depositors to transfer money from dollar-denominated accounts out of the country. If Mr. Xi decides one day to take Taiwan by force or cut ties entirely with the West, foreign capital could be trapped inside China. Corporate assets—and people—could be held hostage by the Chinese Communist Party. Western shareholders should waste no time asking their CEOs to prepare contingency plans.
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> Ms. Gao is a journalist and advisory council member of the Krach Institute for Tech Diplomacy at Purdue.
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> https://www.wsj.com/articles/its-getting-riskier-to-do-business-in-china-taiwan-capital-control-yuan-tesla-d3dc88f6

Do you think Apple's planned exit from the PRC will increase the danger to Taiwan?