Do not believe the gloomy forecasts. China is just good

It’s already moving up the value ladder. Electric vehicle battery technology and the entire supply chain around it, including metal processing, have found a home in China. Companies in priority sectors continue to increase capital spending.

Longi Green Energy Technology, a solar module materials maker with a market capitalization of nearly US$70 billion ($101 billion), announced last week that it will invest an additional 6.95 billion yuan in addition to the 19.5 billion yuan already announced ($1.5 billion) spends increasing capacity for solar cell and module manufacturing project in Ordos, Inner Mongolia.


Warren Buffett’s Berkshire Hathaway-backed BYD signed an agreement to invest 28.5 billion yuan in a battery production plan. Chipmaker Semiconductor Manufacturing International said it does not plan to cut its $5 billion spending plans, the highest compared to annual spending over the past five years. Renewable energy spending — which accounted for just over 80 percent of new capacity in the first half of this year — rose 22.4 percent in the second quarter.

The world’s leading industrial technology companies are also realizing how much they need China. Companies like Dutch high-tech chip device manufacturer ASML have recognized this. In its most recent earnings announcement in July, the company’s chief executive officer, Peter Wennink, said, “We need to recognize that China is a major player in the semiconductor industry” with the production capacity for certain types of chip making that “the world needs.” Still, ASML became embroiled in geopolitics, with the US urging the Netherlands to ban the company from sales to China.

There’s bad news, no doubt, but if you look at the headlines about ongoing lockdowns, struggling businesses in non-priority sectors and electricity rationing, it’s clear that Beijing’s intention to prevail remains solid.

So while some Sichuan firms are having to balance power consumption and production levels, others have said their operations will not be affected. Indeed, one optimistic view is that as the country expands its modernized factory floors, it may eventually ease the pressures of unemployment, particularly for the growing mass of unemployed college graduates.

The market’s memory is short, but it’s important to remember that China’s troubles — the crumbling real estate sector, creaking small banks and seething short-term money markets — were a long time in the making. All of this should come as no surprise. Time to look through a new lens.

Anjani Trivedi is a columnist for Bloomberg Opinion covering industrial companies in Asia. She was previously a reporter for the Wall Street Journal.

Bloomberg Do not believe the gloomy forecasts. China is just good

Brian Lowry

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