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Chaos in China and a new Swiss haven

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Happy New Year to all of you. This is Kenji from Hong Kong, where Sunday’s reopening of the border with China has been making headlines lately.

The return of mainland visitors for the first time in three years is expected to boost the stagnant local economy, but there is also cause for concern — the reopening coincides with a sharp increase in infections in China after the country’s sudden exit from strict regime. Zero covid policy.

The tech industry has already seen how rapid easing of restrictions can be a double-edged sword. At first, manufacturers welcomed Beijing’s policy shift, hoping it would ease their operational burden. But the sudden spike in infections and the general uncertainty that followed ended up severely affecting domestic production and hitting the global supply chain.

The Eurasia Group, which predicted a year ago that China’s anti-Covid policy was doomed to fail, warned this week of renewed risks on this front. The US think tank said the “misguided” approach of President Xi Jinping, who gained unfettered power last fall, could lead the disease to “spread widely in China and beyond”. For now, the situation remains murky, with the World Health Organization saying on Wednesday that Beijing “does not underrepresent” Covid deaths.

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supply chain crises

Beijing’s sudden shift away from a non-coronavirus policy of mass testing and strict quarantine should have given the ailing economy a boost. But the rapid shift from stringent controls to just about anything has thrown the country’s technology supply chain into disarray as rapidly rising infection levels have led to serious staff shortages, according to the Nikkei Asia Index. Cheng Ting Fang And Sissy Chu Report.

With demand for tech products already faltering due to the slowing economy, Apple has alerted suppliers that it is cutting orders for components used in MacBooks, AirPods and more. It’s been a similar story for the component makers that supply Samsung and Chinese smartphone brands.

Wet demand and the shift of the Covid virus are not the only headaches for China’s technology supply chain. Escalating tensions between Washington and Beijing are encouraging more companies to reduce their dependence on suppliers in Asia’s largest economy.

Koji Arima, president and CEO of Japanese auto parts maker Denso, told Nikkei that Toyota’s largest supplier is trying to gradually reduce its dependence on China by teaming up with two leading Taiwanese chipmakers and joining the local initiative to mass-produce cutting-edge semiconductors.

Meanwhile, US computer maker Dell aims to phase out its use of chips made in China by next year, while greatly reducing its reliance on other components made in the country.

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As one supply chain executive told Nikkei Asia, “This trend appears to be irreversible.”

A milestone in iPhones

Apple is preparing to recruit another manufacturer, China’s Luxshare Precision, to produce its premium iPhone models, breaking Taiwanese supplier Foxconn’s hold on production after worker protests erupted at its massive factory in Zhengzhou last year, according to the Financial Times. Qianer Liu.

The Chinese contract manufacturer is set to get its first big order from Apple, according to three people familiar with the situation.

Luxshare has already acquired a small portion of the iPhone 14 Pro Max at its Kunshan factory to make up for lost production at Foxconn since November last year, two people with direct knowledge of the matter said, and that initial production prompted Apple to put in a more significant order.

The new orders mark a milestone for Luxshare, which is steadily gaining a growing share of Apple’s business and has emerged as a strong competitor to Taiwanese rivals Foxconn and Pegatron. Analysts said orders for the iPhone Pro models will be a testament to Luxshare’s strength and open the company up to a more diverse clientele.

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With geopolitics making listing in the US more difficult, Chinese companies wanting to trade their shares abroad have found an unlikely alternative: Switzerland.

Although the Swiss Stock Exchange, or SIX, does not match the New York Stock Exchange or Nasdaq in terms of size, liquidity and investor diversity, Chinese companies raised more equity funds in Zurich than they did in America last year. According to research by Kenji Kawase of Nikkei Asia, at least 30 other companies have listings in the pipeline.

SIX has attracted a number of tech names, including lithium battery producers Gotion High-Tech and Sunwoda Electronic, medical device maker Lepu Medical Technology Beijing, and hand tool manufacturer Hangzhou GreatStar Industrial.

LONGi Solar Technology said Wednesday that its application has been accepted by the Chinese regulator, bringing it a step closer to joining its compatriots in Zurich.

Doctor’s orders

Often Taiwanese chip manufacturers such as Taiwan Semiconductor Manufacturing Co. They are the first targets for countries looking to bring cutting-edge semiconductor production to their shores.

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But the less well-known companies in the chip supply chain are also feeling the clouds moving out of their home range. Ex: Material Analysis Technology, a prominent troubleshooter for chipmakers known in Taiwan as “chip doctor”.

Hsieh Yong-fen, MA-tek’s founding president and CEO, told Nikkei Asia’s Cheng Ting-Fang that he plans to expand into Japan, where TSMC is jointly building a plant on the western island of Kyushu.

Hsieh said she sees opportunities in Japan but is undecided about whether to follow TSMC to the United States, where the world’s largest chipmaker is building a $40 billion chip facility in Arizona. There are more challenges in the desert state, she said, including “much higher costs, not easy access to enough talent, and management in a completely different culture.”

Suggested reads

  1. From electric cars to US-China tensions: 5 things to watch at CES2023 (Nikkei Asia)

  2. Huawei has declared that it is ‘business as usual’ despite the US restrictions (Presented)

  3. Inside the Chinese Nationalist Army Online (Nikkei Asia)

  4. Panasonic, Tesla’s supplier, is seeking to balance the US and Chinese markets in the technology war (Presented)

  5. Japanese police fight ransomware attacks by recovering locked files (Nikkei Asia)

  6. The lawmaker said selling TikTok to an American company could avoid an outright ban (Presented)

  7. Why 2023 could be the best and worst year for venture capital in Asia (Nikkei Asia)

  8. A startup dream in India is troubling the laid-off tech workers (Presented)

  9. An Indian court has rejected Google’s attempt to impose an antitrust fine of $162 million (Presented)

  10. ‘Crypto Winter’ to ‘Ice Age’? What the year 2023 holds for digital assets (Nikkei Asia)

#techAsia is coordinated by Catherine Creel of Nikkei Asia in Tokyo, with assistance from the FT Technical Office in London.

Participation here at Nikkei Asia to receive #techAsia every week. The editorial team can be reached at techasia@nex.nikkei.co.jp

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Pakistan’s Finance Minister Meets IMF in Geneva as Bailout Stalls By Reuters

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© Reuters. FILE PHOTO: The logo of the International Monetary Fund is seen outside the headquarters building in Washington, US, on September 4, 2018. REUTERS/Yuri Gribas/File Photo

Written by Gibran Nayyar Bashimam

ISLAMABAD (Reuters) – An International Monetary Fund (IMF) delegation will meet Pakistan’s finance minister on the sidelines of a conference in Geneva starting on January 9, as Pakistan struggles to restart its bailout programme, an International Monetary Fund spokesman said on Sunday.

The lender has yet to agree to release $1.1 billion that was due to be disbursed in November last year, leaving Pakistan with only enough foreign exchange reserves to cover one month’s imports.

“The IMF delegation is expected to meet Finance Minister (Isaac) Dar on the sidelines of the Geneva conference to discuss outstanding issues and the path forward,” an IMF spokesman said in a message to Reuters.

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The conference in Geneva, co-hosted by Prime Minister Shahbaz Sharif and UN Secretary-General Antonio Guterres, will seek to galvanize international support for the country in the wake of last year’s devastating floods.

The floods killed at least 1,700 people and caused billions of dollars in damage to critical infrastructure.

The plan setting out a timeline and funding for the rebuilding effort has been a sticking point in talks to articulate a ninth review that would unlock $1.1 billion in IMF money and unlock other international financing as well.

Dar recently criticized the International Monetary Fund, saying publicly that the bank was acting “abnormally” in its dealings with Pakistan, which entered its $7 billion bailout program in 2019.

An IMF spokeswoman also said that its managing director, Kristalina Georgieva, had a “constructive conversation” with Sharif regarding the Geneva conference and supported Pakistan’s efforts to rebuild.

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White House Says It Doesn’t Want to “Round Congress” on Debt Ceiling By Reuters

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© Reuters. White House Press Secretary Karen Jean-Pierre holds the daily news conference at the White House in Washington, December 7, 2022. REUTERS/Jonathan Ernst

WASHINGTON (Reuters) – The White House said on Sunday that it does not plan to circumvent Congress in order to raise the U.S. debt ceiling, a regular flashpoint in times of divided government.

“We are not considering any measures that would circumvent Congress,” White House press secretary Karen Jean-Pierre told reporters, calling on lawmakers to raise the cap without preconditions.

The Republicans, who recently assumed control of the US House of Representatives, have promised to fight without question over any move to increase the cap. They say they plan to extract concessions to prevent the US government from defaulting.

Jean-Pierre told reporters aboard Air Force One that the White House under Democratic President Joe Biden will not make any concessions on the debt ceiling.

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“Attempts to use the debt ceiling as leverage will not work,” she said. There will be no hostage-taking.”

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Romer says the Fed faces a “difficult” call to avoid exaggerating interest rates

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© Reuters. The Federal Reserve building is seen before the Federal Reserve signals plans to raise interest rates in March as it focuses on fighting inflation in Washington, US, January 26, 2022. REUTERS/Joshua Roberts

Written by Howard Schneider

NEW ORLEANS (Reuters) – The Federal Reserve’s efforts to shock the economy back to the low inflation rates in its early days, making it difficult for the US central bank to avoid hitting interest rates higher than needed, a senior US economic advisor said. The Obama White House said after a new review of Fed policy since World War II.

The Fed raised its target policy rate by more than 4 percentage points in the past year, and “we are now entering the window where the effects may start to be noticed,” Christina Romer, professor of economics at the University of California, Berkeley, and chair of the White House Council of Economic Advisers (CEA) from 2009 to 2010, in front of a national gathering of economists late Saturday.

“Because of the delays involved, policymakers will face a very difficult decision about when to stop or reverse interest rate increases,” Romer said in a keynote address to the American Economic Association’s annual meeting in New Orleans.

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“Policy makers will need to go back before the problem is fully resolved if they want to bring down inflation without causing more pain than necessary,” she said.

Federal Reserve officials have acknowledged how difficult it is to judge how high and how long to raise interest rates, and have scaled back the pace of increases in borrowing costs to try to avoid missteps.

Minutes of the Fed’s last policy meeting in December showed central banks grappling with risks, while economists see a high probability that an interest rate hike could lead to a US recession next year.

Policy shock

Roemer, the outgoing president of the AEA, is an expert on the causes and recovery of the Great Depression of the 1930s and has argued as CEA president for the fiscal response to the 2007-2009 recession to be far greater than was approved. She teamed up with Berkeley economist David Romer, her husband, to extract transcripts of a Fed meeting and minutes from the 1940s to review US central bank policy.

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They identified 10 cases when the Fed purposely tried to change the course of economic growth, in all but one of the cases to try to reduce inflation, which it felt was too high.

Since the transcripts are only available up to 2016, they relied on the minutes alone of recent years and concluded that the current tightening cycle is the eleventh monetary policy “shock”.

These events contrast with other Fed decisions on interest rates that aim to stay in sync with the business cycle or respond to external economic events, such as the housing market crash and the onset of a recession in 2007. Isolating the shocks, she said, allows for a clearer view of how reserve rate increases will affect Federal on economic production and employment, and in what time frame.

It found that as interest rates rose, overall output began to slow about six months after the policy shock began, and after nine quarters it was 4.5% lower than it would otherwise have been. The unemployment rate begins to rise after about five months and rises by an average of 1.6 percentage points after 27 months, with the effect fading after five years.

The Fed began raising rates last March, but accelerated the rate hikes in June to one similar to the rapid tightening former Fed Chairman Paul Volcker used in the late 1970s and early 1980s. The central bank’s policy rate now stands in a range of 4.25%-4.50% and officials are widely expected to raise it by another quarter percentage point on Jan-Feb 31. One meeting, with an eye on driving it above 5% in the coming months.

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