Exodus of Business from China...?

Trade war and historical hostile business environment are alarming international businesses and they are leaving China in masses… Nearly 40% of American corporations are seriously mulling over leaving China. South Korea is actively moving its factories to Vietnam, and other Asian countries out of China… Although there is a temporary truce on trade war by US-China the future is not certain. Even if there is a reasonable trade agreement between two major trading partners there will always be a suspicion. China’s aggressive global domination posturing has not denigrated its strategic intent. However, the looming 1.5 billion consumers and producers must not be taken lightly.

Meanwhile, the USA is flouting the best economic expansion in 50 years... Can you imagine the growth when and if China-US trade war ameliorates positively...? China, India, Russia, Japan, Germany, France, Great Britain, Canada, Mexico, South Korea... are not unaware of the economic power of the USA. Will America continue to dominate...? What say ye?

Market closed on 7/5/2019: DOW: 26,922.00;  S&P500: 2990.41; NASDAQ: 7,841.33;    Gold: $1,412.50; Oil: $57.59;  US 10-Year: 2.037% 

Here are the highlights of the 27th week of 2019:   

1.   The Exodus of Businesses from China…?             Nearly 40% of US corporations operating in China are mulling leaving the country amid the ongoing trade dispute between the two countries, the latest poll by lobby groups in China revealed. And, Samsung and other South Korean companies’ exodus from China should be an example to Western firms as they are fleeing trade war tariffs and belligerence. Lotte, Kia and Hyundai are also gradually winding down their China business due to political risks, tariffs and losing market share. Western companies fleeing Donald Trump’s tariffs may not, however, have the luxury of a managed exit but should look at the South Korean case studies closely. Thank you for your subscription. Samsung Electronics opened its first plant in Vietnam in 2008 and this long-term presence has enabled it to build a supply chain of South Korean companies, which in turn makes it easier for other South Korean firms to establish a base in the Southeast Asian nation. As a result, South Korean investment into Vietnam climbed to US$1.97 billion in the first half of 2018, exceeding the country’s investment in China of US$1.6 billion over the same period for the first time. Overall in 2018, South Korea’s total investment to the Southeast Asian country totaled US$3.2 billion. Its exports to Vietnam also increased to US$48.6 billion, 121 times that of 1992. Perhaps consider India, Malaysia, Thailand, Philippines, Indonesia… 

2.   Winners of the US-China trade war.             Vietnam, Taiwan, Bangladesh and South Korea are coming out as victors in the US-China trade war. Americans are buying less from China. But rather than leaning on US producers, they're avoiding Trump’s tariffs by turning to suppliers in other Asian countries. The trend, which has emerged throughout more than a year of inconclusive trade negotiations between Washington and Beijing. . During the first five months of the year, the United States imported 12% fewer goods from China during the same time period a year ago. But imports from Vietnam are up 36%, and they increased 23% from Taiwan, 14% from Bangladesh, and 12% from South Korea.  Trump's tariffs have made consumer goods like baseball caps, luggage, bikes and handbags that are manufactured in China more expensive. Read More And, imports from countries outside China have significantly increased this year, some production was already moving outside of China to places with even lower wages long before Trump began imposing tariffs. US imports from countries like Vietnam and South Korea have been steadily increasing over the past decade as those countries have ramped up manufacturing of apparel and electronics, respectively.  

3.   Huawei Reconnect…?   Olive branch…? U.S. companies tentatively step back into business with Huawei, but a long fight looms. American semiconductor companies and Microsoft are making plans to continue business as usual with Huawei as experts make sense of amendments to Trump’s ban. Trump’s willingness to use Huawei as a bargaining chip in trade negotiations has been met with skepticism by some lawmakers and intelligence officials. Chip stocks, including Qualcomm and Broadcom, rose sharply Monday morning on the news but leveled off by the afternoon. Huawei will, however, remain on a list of entities banned from certain business activities, and licenses to sell to the company will be restricted if the U.S. has national security concerns. Members of the intelligence community, who have long argued Huawei’s close ties to Beijing make it impossible to allow the company to supply technology infrastructure in the U.S., have been skeptical of giving the company concessions as part of an economic deal.  

4.   Longest US Economic Expansion in History.         This is now the longest US economic expansion in history. The U.S. is officially in its longest expansion, breaking the record of 120 months of economic growth from March 1991 to March 2001, according to the National Bureau of Economic Research. Starting in June of 2009, this record-setting run saw GDP growing cumulatively by 25%, far slower than previous expansions. While the unemployment rate has dropped to 3.6% in May, the lowest since 1969, job growth has been relatively slower than during other post-war recoveries. This month marks the 121st month of the economic expansion arising out of the great financial crisis, making it the longest run on record going back to 1854. And, Job Report for June is strong adding 224,000, unemployment 3.7%, and wage growth at 3.1%. 

5.   Social Activism…? Nike Nixes Betsy Ross Flag Shoe.       Nike Inc. yanked a U.S.A.-themed sneaker featuring an early American flag after NFL star-turned-activist Colin Kaepernick told the company it shouldn’t sell a shoe with a symbol that he and others consider offensive, according to people familiar with the matter. The sneaker giant created the Air Max 1 USA in celebration of the July Fourth holiday, and it was slated to go on sale this week. The heel of the shoe featured a U.S. flag with 13 white stars in a circle, a design created during the American Revolution and commonly referred to as the Betsy Ross flag. After shipping the shoes to retailers, Nike asked for them to be returned without explaining why. The shoes aren’t available on Nike’s own apps and websites.  Nike officials said that he and others felt the Betsy Ross flag is an offensive symbol because of its connection to an era of slavery. Time to boycott Nike, or have you already done so after Kaepernick…?

6.   Voting Right in America…?   What is the legal right to vote in America? Citizenship…? Well, the Trump administration will continue legal efforts to put ask people on the 2020 census if they are U.S. citizens, Justice Department lawyers told a federal judge in a new court filing. On Tuesday, Commerce Secretary Wilbur Ross and a Justice Department lawyer said that that the Census Bureau was printing the census questionnaire without the citizenship question. But President Donald Trump in a tweet Wednesday said, “The News Reports about the Department of Commerce dropping its quest to put the Citizenship Question on the Census is incorrect or, to state it differently, FAKE!” The filing came at the deadline set by a federal judge in Maryland for the government to say whether it would abandon its controversial quest to have the citizenship question in place for the upcoming census, or whether it would continue the legal battle.  The Trump administration has claimed that adding the citizenship question would help the government better enforce the Voting Rights Act. Illegal aliens, non-citizens vote on the sovereign election of America? 

7.   Pope Francis Praises Trump-Kim Meeting.      Vatican City, June 30 - Pope Francis praised on Sunday the meeting between U.S. President Donald Trump and North Korean leader Kim Jong Un and said he hoped it would lead to peace.  "In the last few hours we saw in Korea a good example of the culture of encounter. I salute the protagonists, with a prayer that such a significant gesture will be a further step on the road to peace, not only on that peninsula, but for the good of the entire world," he told thousands of people in St. Peter's Square for his weekly address and blessing.  Trump became the first sitting U.S. president to set foot in North Korea on Sunday when he met its leader, Kim Jong Un, in the Demilitarized Zone (DMZ) between the two Koreas and agreed to resume stalled nuclear talks.  When he met the pope last year, South Korean President Moon Jae-in, who is Catholic, relayed a verbal invitation from Kim to Francis for the pontiff to visit North Korea. Vatican officials have said the pope, who has made many appeals for rapprochement between the two Koreas, would consider such a trip under certain conditions if it could help the cause of peace. 

These are my researches and analysis of the highlights of the week. Perhaps you should take a closer look at them, do additional research and analysis if these are interesting to you. This “7–7 Market Highlights” is presented for general knowledge, the resource for management, and perhaps as a tool for career development, and building wealth. As always, “Think for Yourself”, you decide on your own final analysis and position. 

Mahalo. I welcome your thoughtful comments, “like” notes, and “share” of this publication. 

 ~ S. Vincent Shin

   www.dhirubhai.net/in/vshin

References and Image credits to Bloomberg News, Getty image, AP Photo, Reuters, CNBC..., and special thanks to Image & Visual Consultant @U.Y.  All references, news, and images are from open source and public domain.