Hundreds of large Korean and Japanese corporations rush to flee China

Faced with growing threats from Beijing, Japanese, Korean and other companies are now accelerating their exit from China. On July 23rd, Japan's Nippon Steel announced that it would end its 20-year joint venture with China's Baosteel. The contract will expire at the end of August. Nippon Steel has found it difficult to expand its business in China, and plans to shift investment to India and the United States. Nippon Steel also stated that it plans to sell all of its shares in the joint venture with China's Baosteel for $241 million, though the sale will require regulatory approval. During the joint venture, Nippon Steel sued China's Baosteel in a Japanese court in 2021, accusing the Chinese side of stealing Japanese patents on electroplated steel sheets, which China supplies to Toyota for electric vehicles. The case is still ongoing. This is a typical example of foreign companies rushing to withdraw from China. On July 12th, Japanese construction machinery manufacturer Kato Works announced the dissolution and liquidation of its subsidiary that produces and sells hydraulic excavators in Kunshan, Jiangsu. Construction machinery company Kato Nakajima also announced that it would liquidate in August to exit the Chinese market. This trend is spreading from the manufacturing sector to the beauty products sector, with high-end skincare brands such as Shiseido also announcing their withdrawal from the Chinese market. Shiseido's flagship stores in China have recently stopped accepting new orders and have begun to close. Another Japanese company, Bridgestone, has also announced its withdrawal after more than 20 years of operations in China. Bridgestone has ceased producing and selling commercial tires in China and will likely focus on high-performance passenger tires. According to public information, in the past year, most of the globally renowned companies leaving China have been Japanese. These include manufacturing plants of Canon, Sony, Toshiba, and Nikon. Other companies that have exited China include Amazon, LinkedIn, and the R&D center of Astellas Pharmaceuticals. These companies have moved their supply chains to Thailand, the Philippines, or back home. Hyundai Korea and Credit Suisse sell assets at low prices to flee China. Not everyone is facing difficulties, but let's see which car dealer in Chengdu is faring worse than me. In the warehouse, there are still 2,000 new unsold cars priced at about $2,800, $4,200, $7,000, $14,000, and even $21,000. These cars have been sitting there for two or three years and remain unsold. It's baffling. They're brand new cars. What should I do? This confession comes from a car dealership owner in China, shedding light on the reality of the country's auto market amid a plummeting Chinese economy. In January, Hyundai announced that Beijing Hyundai had sold its Chongqing factory to Chongqing Liangjiang New Area Yufu Industrial Park Construction Investment Company, Lely T, for 1.62 billion yuan, 226 million US dollars, at the end of last year, a figure less than half of its initial listing price the previous year, as reported by Yonhap News Agency. The Chongqing factory, Beijing Hyundai's fifth complete car manufacturing plant in China, was hailed as the company's most advanced factory. Construction began in 2015, and the factory officially commenced operations in August 2017. Spanning an area of 1.87 million square meters, the factory boasted a total investment of 7.7 billion yuan, 1.07 billion US dollars, and an annual production capacity of 300,000 vehicles. However, due to various reasons, it ceased operations in December 2021. Initially listed for sale on August 11, 2023, with a base price of 3.68 billion yuan, 513 million US dollars, the sale did not materialize by the deadline. After an unsuccessful auction, the factory was relisted on September 27, with a reduced base price of 2.58 billion yuan, 360 million US dollars, a decrease of 1.1 billion yuan, 153 million US dollars. Subsequently, it underwent a third listing with a base price of 1.917 billion yuan, 267 million US dollars, until it was finally sold for 1.62 billion yuan, 226 million US dollars. Hyundai Motors stated that this sale is part of an effort to reasonably adjust the operational model of its factories in China to enhance efficiency. However, industry insiders speculate that South Korea's Hyundai Group is accelerating its exit from China by selling factories there and shifting production to India and Indonesia. Recently, Yonhap News Agency also reported that Hyundai Motor may consider selling its Changzhou factory. Credit Suisse reportedly disbands its China Wealth Management Unit. Credit Suisse has disbanded its entire wealth management team in China, abandoning plans to become part of the country's largest foreign fund management company. UBS Group AG, which acquired Credit Suisse, decided not to hire these employees. Those familiar with the situation informed Bloomberg that the layoffs included at least 20 account managers and investment advisors, as well as Wang Jing, the chief executive of Credit Suisse Securities Venture Capital. The layoffs coincide with Credit Suisse's efforts to find a buyer for its securities business in China. Following the closure of the Wealth Management Unit, Credit Suisse's securities business in China now consists solely of investment banking and brokerage operations. UBS has yet to merge Credit Suisse's entities in China and must divest the securities company. As UBS already controls a securities company in China and cannot hold two licenses for the same business, Credit Suisse postponed the opening of its China Incorporated Bank last year, marking the second delay since the project's inception in 2020. People familiar with the matter cited slow progress in the permitting process as the reason for the local bank's project delay. Additionally, some Credit Suisse executives have raised concerns about the project, particularly amidst China's economic downturn due to coronavirus lockdowns and Beijing's crackdown on private companies. The business of Wall Street firms in China has slowed due to the sluggish economy and a lack of deals. Another foreign company shrinks its business in China. Skadden Arps will close its Shanghai office. Due to the downturn in China's economy and sluggish business in China, the famous law firm Skadden Arps will close its Shanghai office and lay off employees. This is the latest case in a series of foreign companies shrinking their business in China. Skadden Arps, which has nearly 2,000 lawyers, recently announced that it will close its office in Shanghai. The statement said, changes in market dynamics have prompted us to decide to start reducing our business in Shanghai and readjust the size of our business in China. Bloomberg quoted an insider on Monday, October 21, as saying that Skadden Arps has merged its Shanghai business with its Beijing department and will lay off some Chinese employees, but some lawyers have been given the opportunity to transfer. Due to the slowdown in China's economy and the continuous tightening of the regulatory policies of the Chinese Communist Party authorities, China's business environment has continued to deteriorate. China's capital market and private enterprises have been hit repeatedly, prompting foreign companies to accelerate their withdrawal from China. Since last year, many large American law firms and asset management companies have withdrawn from China or significantly reduced their business in mainland China and closed their offices in China. According to public information, earlier this year, Vanguard Group, an American fund management giant, VanEck Associates, an asset management company, Matthews International Capital Management, an American registered investment advisory company, and Fidelity International, a global asset management giant, have successively cut some or all of their businesses in China. As for law firms, on September 4 this year, Pittsburgh-based Reed Smith LLP issued a statement saying, the company has decided to strategically integrate the resources of our Shanghai office, which will work closely with our offices in Hong Kong and Singapore. In early July this year, Deshare, an American law firm, announced that it would close its Beijing and Hong Kong offices by the end of this year and completely withdraw from the Chinese market. Morrison Forster, which has more than 1,000 lawyers worldwide, announced internally in May this year that it would close its Beijing office. In early July, a spokesperson confirmed to the that the firm will complete the wind-down of its business in Beijing this fall. Sidley Austin closed its Shanghai office in May and said it would move employees to Beijing and Hong Kong by September. Shocking that Beijing, Shanghai, and Shenzhen are in such a severe recession. This is the Fourth Ring Road in Beijing at 7 o'clock in the evening. In my memory, I have never seen such smooth traffic flow on the North Fourth Ring Road during rush hour. Anyway, except for SARS and the epidemic, I have never seen it since I came to Beijing. Such a big depression is rare. If you tell me the real situation in Shanghai now, you might not believe it. Many big companies are cutting salaries and laying off employees. Many small companies are struggling to survive on the verge of losses and bankruptcy, and many can no longer pay wages. In the past, the mall was packed with people on weekends, and now it's deserted as if it's about to close. I tell you the current real situation in Shenzhen, which may seem unbelievable. Large companies are constantly laying off employees, small companies are closing down, and the houses are unrented. What is surprising is that Shenzhen's finances are also facing problems. There are two major signals. First, many places in Shenzhen have reduced district-level expenditures this year. Second, Shanghai's foreign trade has stalled. In the first four months of this year, Shanghai lost its position as the number one foreign trade city after nine consecutive years. When two super cities send out strange signals, it means that we don't have much room for redundancy. China's economy is in a slump, and the Beijing authorities have finally lost their composure. The political bureau of the CPC Central Committee held an emergency meeting and stopped promoting the bright prospects of China's economy, rarely admitting that there are problems in the economy. Rich people are fleeing in a low-key manner, and there is a trend of going abroad in Beijing, Shanghai, and Guangzhou. The life of ordinary people is becoming increasingly difficult, increasingly severe. China's economy faces major challenges. Ming Zhuzheng, professor emeritus of the Department of Political Science at National Taiwan University, recently said on the YouTube program Political and Economic Frontline that in addition to domestic economic problems, China is also facing increasing pressure from the international environment. Among them, the Sino-US trade war has had a huge impact on China's export-oriented economy. Since the outbreak of the trade war in 2018, the United States has imposed tariffs on many types of Chinese products, greatly compressing the market share of Chinese companies overseas. This has not only led to a decline in China's exports, but also prompted some manufacturing companies to transfer production to lower-cost countries such as Vietnam and India, further weakening China's global supply chain position. At the same time, the technological competition between China and the United States has also brought huge challenges to the Chinese economy. The United States has blocked China's access to high-tech products such as advanced semiconductors and communication technologies through a series of restrictive measures. This technological blockade has greatly restricted China's technological progress in areas such as 5G, artificial intelligence, and chip manufacturing. Causing related companies to suffer unprecedented pressure and development bottlenecks. Not only the United States, but European countries are also becoming increasingly cautious about China. Although economic ties between the EU and China occupy an important position in the process of globalization, in recent years, Europe has raised more questions about China's policies on market access and technology protection. Chinese companies have entered the global market with a low-price competition strategy, which has brought a great impact on European small and medium-sized enterprises, prompting the EU to increase its scrutiny of Chinese imports and gradually adopt more restrictive measures. In addition, the withdrawal of foreign capital is also a major test facing the Chinese economy. In recent years, more and more multinational companies have chosen to transfer production lines from China to other regions, which has not only weakened China's traditional advantages as the world factory, but also caused China to lose a lot of foreign exchange income and employment opportunities. In particular, a series of laws and regulations involving national security issued by China, such as the counter-espionage law and the data security law, have further triggered a crisis of confidence in the Chinese market environment for foreign-funded enterprises. Although these measures are aimed at strengthening national security protection, they have also caused more doubts from the outside world about the openness of the Chinese economy. Xi Jinping's dream is shattered. It's hard to save it with huge investment. U.S. media revealed that China is working hard to cope with the U.S. chip ban, trying to achieve semiconductor self-sufficiency, and spending $96.3 billion to support the industry. But key semiconductor equipment issues cannot be solved by just investing money. China faces great difficulties in breaking through the technological ceiling. CNBC reported that since the United States implemented a strict export ban in October 2022, the Dutch government has also banned semiconductor equipment giant ASML from exporting advanced equipment to China. In order to cope with the restrictions, China has spent a lot of money to support the semiconductor industry and tried to break through the chip ban imposed by the United States and its allies. Since semiconductor equipment is key to China's promotion of the localization of the chip industry, CNBC estimates that the scale of China's three major national funds to support the semiconductor industry is as high as $96.3 billion. Last week, China announced that its latest exposure machine can support 65-nanometer resolution, referring to a process node of about 65 nanometers, which is an improvement over the 90 nanometers developed in 2022, but it is still far behind ASML's advanced exposure machine. Leping Huang, managing director of Huatai Securities, said that going from the current 65 nanometers to ASML's latest deep ultraviolet exposure machine requires major technological breakthroughs. In addition, ASML is still selling unregulated products to China. In the second quarter of this year, ASML's sales revenue to Chinese customers almost doubled from 17 percent in the fourth quarter of 2022 to 49 percent. John Lee of EastWest Futures, a consulting firm based in Singapore, bluntly stated that this growth shows that the Chinese industry believes they have no viable local alternatives yet. Paul Triolo, partner and senior vice president for China at the U.S.-based DGA Group, pointed out that it would be a daunting task for any Chinese company to recreate the advanced exposure machine equipment that ASML has spent decades developing and commercializing. He bluntly stated that no matter what equipment Chinese companies produce, it is unlikely to fully replicate ASML's achievements, and the technical level cannot be matched. Camille Boulinois, deputy director of the U.S.-based Rhodium Group, also said that in the field of electric vehicles, China's subsidies have stimulated demand and created a large and protected market for domestic companies to expand rapidly. But in the complex chip industry, breaking through the technological ceiling is much more difficult. Foreign media believe that key semiconductor equipment issues cannot be solved by investing money, and it is difficult for China to break through the technological ceiling.