THE CRAZE OF COMING TO CHINA THESE DAYS . . .

Over the past several years, China has faced numerous challenges, including the impact of the Covid-19 pandemic and economic fluctuations. Despite this, it is important to recognize the resilience and significance of China's position in the global landscape.

China's long history of defying skeptics showcases its ability to adapt and overcome obstacles. With a population of 1.4 billion, the Chinese people are actively engaged in various activities and contributing to economic prosperity on a daily basis.

While China has been widely acknowledged as the "factory of the world," it has also transformed into a major consumer market. The future of China's economic growth and prosperity, as well as its increasingly dominant position in the world, lies in its role as a populous consumer marketplace.

Consider this: Wouldn't you want to tap into a consumer base of 1.4 billion individuals, regardless of the product or industry you're involved in?

Elon Musk, the visionary entrepreneur behind Tesla, understands the significance of the Chinese market. He has invested billions of US dollars to manufacture and sell products in China. His recent visit to China garnered global excitement, shedding light on China's prominent position in the global electric vehicle market and its role as a consumer marketplace of the future.

Tesla's CEO visiting China holds immense importance, given that China accounts for 60% of Tesla's vehicle sales and 20% of its global production capacity. While international brands like General Motors still dominate the Chinese automotive market, local Chinese brands are gaining traction with their product quality and increasing global recognition, amidst ongoing global trade tensions.

Musk's visit to China can be seen as more than a mere business endeavor; it can be viewed as a "political statement." Business leaders like Musk and JPMorgan CEO Jamie Dimon are emphasizing the importance of political stability for successful business operations. By engaging with China, they are signaling the need for mutual cooperation and understanding between nations.

It's worth noting that the macro environment for electric vehicles (EVs) in China has presented challenges, including the termination of subsidies on new EV purchases and rising interest rates in the US. To counter these conditions, companies have resorted to price reductions to stimulate sales, albeit impacting their profits. Tesla, for instance, adjusted prices for its EV sales in China last year, and despite subsequent price increases, the overall pricing remains lower compared to the beginning of 2023.

The fact that Tesla had to adjust prices in response to market conditions underscores the significance of the Chinese market for the US electric carmaker. Bill Russo, founder and CEO of Automobility, emphasized the importance of China's scale and relevance for Tesla's global success. However, Tesla faces stiff competition in China's highly competitive EV market, where local companies are vying for supremacy. Unlike other regions where Tesla stands as the dominant player, in China, it must wage a price war and contend with intense competition.

Elon Musk's visit to China resonates with the Chinese government's ongoing efforts to attract American executives and signal openness to foreign investment. JPMorgan CEO Jamie Dimon and Starbucks CEO Laxman Narasimhan have also visited China recently, reinforcing their commitment to their respective business interests. These visits align with Beijing's attempts to engage the American business lobby, which has traditionally opposed more confrontational China policies pursued by Washington.

During Musk's visit, he was accorded the customary hospitality, including lavish dinners and meetings with senior officials. Such engagements not only highlight the importance of business relationships but also carry geopolitical undertones, which are atypical for executive visits.

China's state media has celebrated the growing trend of American executives recognizing the significance of the Chinese market. The "craze of coming to China" has gained momentum, with prominent business leaders attending events and affirming the necessity of establishing a presence in the Chinese market.

However, ?it is important to note that being a foreign executive visiting China in the current geopolitical climate requires careful navigation to avoid offending either Beijing or Washington. Executives like Jamie Dimon have called for genuine engagement between China and the United States on trade policy, emphasizing the importance of maintaining a constructive relationship.

To quote an old adage, can 1.4 billion people be wrong? China's enduring importance and influence in the global landscape are undeniable.

Best regards from Shanghai!

Alexander Glos