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Category Archives: Trade

Charts: China Buys Fewer Chip-Making Machines as US Restrictions Start

Source : Bloomberg

Charts: U.S. Container Freight Volume Is Shrinking in September 2022

Confirming the slackening of merchandise trade and downturn in the business cycle.

See more charts . . . . .

Charts: Port of LA Has the Quietest October Since 2009

According to Gene Seroka, head of the Port of Los Angeles.

Source : Bloomberg and Wolfstreet

Chart: Ocean Freight Rate Dropping

Source : Freightos Baltic Index

Charts: Chinese Trade Sees Major Drop in October 2022

Source : Statista


Globalization Is in Retreat for the First Time Since the Second World War

Douglas A. Irwin wrote . . . . . . . . .

World economic integration has been in decline since the 2008–10 global financial crisis, ushering in an era of “slowbalization” or even deglobalization.

Tracing global trade openness—the ratio of world imports and exports to world GDP—reveals five distinct eras of globalization since 1870. Advancements in transportation deepened international economic integration prior to the outbreak of World War I. The economic dislocation of war and protectionism during the Great Depression led to a reversal of globalization from 1914 to 1945.

Economic integration rebounded after the Second World War and continued to increase for the latter half of the 20th century. An embrace of economic liberalization saw the removal of trade barriers in large emerging markets and led to unprecedented levels of international economic cooperation, peaking in 2008 at 60.1 percent.

Since this era of peak globalization, economic integration has been in retreat, falling to 57.2 percent on the openness index in 2021. Since 2008, China and the United States have turned toward erecting mutual trade barriers that have disrupted supply chains and prompted the spread of trade barriers elsewhere. Under President Xi Jinping and President Joseph R. Biden Jr., China and the United States are seeking greater self-sufficiency in technologically-advanced sectors.

The global pandemic and Russia’s invasion of Ukraine have added further momentum to the retreat of globalization. Product shortages caused by measures to contain COVID-19 and decisions from governments and companies to reduce or sever business ties with Moscow have prompted firms to reconsider their supply chain organization. For example, the United States has proposed “friendshoring”—the relocation of supply chains to allied countries—as a possible solution to recent instability.

The world is at an inflection point over growing fears about globalization and economic interdependence. Even if the “slowbalization” trend abates, reversing the damage that has already been done will likely prove difficult.


Source : The Peterson Institute for International Economics

China’s Auto Exports Jump in First Three Quarters

In the first nine months, China shipped 2.26 million vehicles, up 51.6 per cent from a year earlier and surpassing the 2021 total, according to the General Administration of Customs.

Exports of new-energy vehicles grew 93 per cent to 656,000 units during the first nine months, data showed.

The top five exporters were SAIC Motor, Chery Automobile, Chang’an Automobile, Dongfeng Motor and Tesla, data from China Association of Automobile Manufacturers showed.

China’s auto exports topped 2 million units for the first time in 2021 with sales of 2.12 million, nearly double from the previous year.

The surge growth of Chinese exports, led by demand from the European market, partly reflected inadequate supplies in the overseas market affected by a semiconductor shortage, an energy crisis and geopolitical tensions, analysts said.


Source : Business Times

Chart: Shipping Companies Cut Services as Freight Rates Plunge

International container shipping rates continue plunging amid weakening demand, prompting shipping companies to slash services.

The Shanghai Containerized Freight Index published by the Shanghai Shipping Exchange, the world’s most-used benchmark for sea freight rates, fell Friday to a reading of 1,814, down nearly 70% from the beginning of this year.


Source : Caixin

U.S. Aims to Hobble China’s Chip Industry with Sweeping New Export Rules

Stephen Nellis, Karen Freifeld and Alexandra Alper wrote . . . . . . . . .

The Biden administration published a sweeping set of export controls on Friday, including a measure to cut China off from certain semiconductor chips made anywhere in the world with U.S. equipment, vastly expanding its reach in its bid to slow Beijing’s technological and military advances.

The rules, some of which take immediate effect, build on restrictions sent in letters this year to top toolmakers KLA Corp, Lam Research Corp and Applied Materials Inc, effectively requiring them to halt shipments of equipment to wholly Chinese-owned factories producing advanced logic chips.

The raft of measures could amount to the biggest shift in U.S. policy toward shipping technology to China since the 1990s. If effective, they could hobble China’s chip manufacturing industry by forcing American and foreign companies that use U.S. technology to cut off support for some of China’s leading factories and chip designers.

“This will set the Chinese back years,” said Jim Lewis, a technology and cybersecurity expert at the Center for Strategic and International Studies (CSIS), a Washington D.C.-based think tank, who said the policies harken back to the tough regulations of the height of the Cold War.

“China isn’t going to give up on chipmaking … but this will really slow them (down).”

In a briefing with reporters on Thursday previewing the rules, senior government officials said many of the measures were aimed at preventing foreign firms from selling advanced chips to China or supplying Chinese firms with tools to make their own advanced chips. They conceded, however, that they had not secured any promises that allied nations would implement similar measures and that discussions with those nations are ongoing.

“We recognize that the unilateral controls we’re putting into place will lose effectiveness over time if other countries don’t join us,” one official said. “And we risk harming U.S. technology leadership if foreign competitors are not subject to similar controls.”

The expansion of U.S. powers to control exports to China of chips made with U.S. tools is based on a broadening of the so-called foreign direct product rule. It was previously expanded to give the U.S. government authority to control exports of chips made overseas to Chinese telecoms giant Huawei Technologies Co Ltd and later to stop the flow of semiconductors to Russia after its invasion of Ukraine.

On Friday, the Biden administration applied the expanded restrictions to China’s IFLYTEK, Dahua Technology, and Megvii Technology, companies added to the entity list in 2019 over allegations they aided Beijing in the suppression of its Uyghur minority group.

The rules published on Friday also block shipments of a broad array of chips for use in Chinese supercomputing systems. The rules define a supercomputer as any system with more than 100 petaflops of computing power within a floor space of 6,400 square feet, a definition that two industry sources said could also hit some commercial data centers at Chinese tech giants.

Eric Sayers, a defense policy expert at the American Enterprise Institute, said the move reflects a new bid by the Biden administration to contain China’s advances instead of simply seeking to level the playing field.

“The scope of the rule and potential impacts are quite stunning but the devil will of course be in the details of implementation,” he added.

Companies around the world began to wrestle with the latest U.S. action, with shares of semiconductor manufacturing equipment makers falling.

The Semiconductor Industry Association, which represents chipmakers, said it was studying the regulations and urged the United States to “implement the rules in a targeted way – and in collaboration with international partners – to help level the playing field.”

Earlier on Friday, the United States added China’s top memory chipmaker YMTC and 30 other Chinese entities to a list of companies that U.S. officials cannot inspect, ratcheting up tensions with Beijing and starting a 60 day-clock that could trigger much tougher penalties.

Companies are added to the unverified list when U.S. authorities cannot complete on-site visits to determine if they can be trusted to receive sensitive U.S. technology, forcing U.S. suppliers to take greater care when shipping to them.

Under a new policy announced on Friday, if a government prevents U.S. officials from conducting site checks at companies placed on the unverified list, U.S. authorities will start the process for adding them to the entity list after 60 days.

Entity listing YMTC would escalate already-rising tensions with Beijing and force its U.S. suppliers to seek difficult-to-obtain licenses from the U.S. government before shipping them even the most low-tech items.

The new regulations will also severely restrict export of U.S. equipment to Chinese memory chip makers and formalize letters sent to Nvidia Corp and Advanced Micro Devices Inc restricting shipments to China of chips used in supercomputing systems that nations around the world rely on to develop nuclear weapons and other military technologies.

Reuters was first to report key details of the new curbs on memory chip makers, including a reprieve for foreign companies operating in China and the moves to broaden restrictions on shipments to China of technologies from KLA, Lam, Applied Materials, Nvidia and AMD.

South Korea’s industry ministry said in a statement on Saturday there would be no significant disruption to equipment supply for Samsung and SK Hynix’s existing chip production in China.

However, it was necessary to minimise uncertainty through consultation with U.S. export control authorities, it added.

China’s commerce ministry said in a statement on Monday that it firmly opposes the U.S. move as it hurts the normal trade and economic exchange between companies in the two countries and threatens the stability of global supply chains.

“The U.S. should stop the wrongdoings immediately and give fair treatment to companies from all over the world, including Chinese companies.”

On Saturday, China’s foreign ministry spokesperson Mao Ning called the move an abuse of trade measures designed to reinforce the United States’ “technological hegemony”.


Source : Reuters

‘No Possibility of Reconciliation’ as US Chip Rules Slam China

The Biden administration’s new restrictions on technology exports to China could undercut the country’s ability to develop wide swaths of its economy, from semiconductors and supercomputers to surveillance systems and advanced weapons.

The US Commerce Department on Friday unveiled sweeping regulations that limit the sale of semiconductors and chip-making equipment to Chinese customers, striking at the foundation of the country’s efforts to build its own chip industry. The agency also added 31 organizations to its unverified list, including Yangtze Memory Technologies Co. and a subsidiary of leading chip equipment maker Naura Technology Group Co., severely limiting their ability to buy technology from abroad.

The moves are the Biden administration’s most aggressive yet as it tries to stop China from developing technological capabilities it sees as a threat. Depending on how broadly Washington enforces the restrictions, the impact could extend well beyond semiconductors and into industries that rely on high-end computing, from electric vehicles and aerospace to simple gadgets like smartphones.

Chinese state media and officials over the weekend raged against the action, warning of economic consequences and stirring speculation about potential retaliation. He Xiaopeng, the chairman and CEO of Chinese EV maker Xpeng Inc., warned last month that escalating US restrictions on chip exports will set back the nation’s autonomous driving sector.

The two countries are now officially in an “economic war,” Dylan Patel, chief analyst at SemiAnalysis, said. A Chinese analyst said there is “no possibility of reconciliation” any longer.

“This is the US salvo against China’s efforts to build its domestic tech capabilities,” said Patel, who estimates the restrictions could reduce global technology and industry trade by hundreds of billions of dollars. “It’s the US firing back, making clear they will fight back.”

European and Chinese semiconductor stocks tumbled on the news. ASML Holding NV, the most advanced maker of equipment for producing semiconductors, fell more than 3%. Bellwether Semiconductor Manufacturing International Corp. fell as much as 5.2% in Hong Kong on Monday, the most since Aug. 15, as Bloomberg Intelligence analyst Charles Shum slashed his estimate on 2023 growth by 50%. Hua Hong Semiconductor Ltd. plunged 10%, while Shanghai Fudan Microelectronics Group Co. plummeted 25%. Naura fell by its daily limit of 10% in mainland China, the biggest fall since April.

“The rules are a directional signal about US policy on China: a very hawkish consensus is now cemented in place,” wrote Dan Wang, technology analyst at Gavekal Dragonomics.

US officials said the new restrictions are necessary to stop China from becoming more of an economic and military menace. They are seeking to ensure the country’s chipmakers don’t secure the capability to make advanced semiconductors.

China “has poured resources into developing supercomputing capabilities and seeks to become a world leader in artificial intelligence by 2030,” said Assistant Secretary of Commerce for Export Administration Thea D. Rozman Kendler. “It is using these capabilities to monitor, track and surveil their own citizens, and fuel its military modernization.”

Reaction in China was furious. The nationalistic Global Times newspaper warned the “savage attack on free trade” would have dire consequences for the US.

“Only arrogant and ignorant people can truly believe that the US can block the development of China’s semiconductor or other technology industries by these illegitimate means,” it said in an editorial. “The US hegemony in science and technology that harms others without benefiting itself may bring some short-term difficulties to China’s semiconductor industry, but will in turn strengthen China’s will and ability to stand on its own in science and technology.”

Chinese Foreign Ministry spokesperson Mao Ning said the measures are unfair and will “deal a blow to global industrial and supply chains and world economic recovery.”

“The reality is the US is determined to use chips as a tool to contain China,” Gu Wenjun, head of Chinese chip researcher ICwise, wrote in an online commentary. “There is no possibility of reconciliation.”

The new US regulations broadly limit chipmakers from selling to China artificial intelligence semiconductors and those that can be used for supercomputers. Nvidia Corp. warned in September that government restrictions on exporting AI chips to China could affect hundreds of millions of dollars in revenue, sending its stock tumbling.

Chipmakers can request a Commerce Department exception to those rules. But they should presume such requests will be denied, senior officials said.

Commerce also put in place a raft of restrictions on supplying US machinery that’s capable of making advanced semiconductors. It’s targeting the types of memory and logic chips that are at the heart of state-of-the-art designs.

Specifically, the restrictions cover production of logic chips using so-called nonplanar transistors made with 16-nanometer technology or anything more advanced than that, 18-nanometer dynamic random access memory chips and Nand-style flash memory chips with 128 layers or more. Generally speaking, the smaller the number of nanometers, the more capable the chip.

Analysts pored over the Commerce Department’s announcement that ran to more than 135 pages for implications. Chinese AI chip designers like Biren could face some restrictions on their orders with TSMC, according to Patel.

Stacy Rasgon and a team from Sanford C. Bernstein explained the restrictions on AI, supercomputers and advanced chip-making equipment, while pointing out that the standard CPUs used in personal computers and servers would not be blocked from export to China, as some had feared.

“The changes represent a further escalation, and we do not know what China might do in response,” the Bernstein analysts wrote. “Potential retaliation remains a risk.”

One question is how the US rules will affect the ability of companies like ASML to sell into China. The Dutch company is effectively the most important arms dealer for chipmakers around the world.

ASML has had to strike a challenging balance between the US and China. It has been selling its deep ultraviolet, or DUV, machines to Chinese customers, but has held back from selling its more advanced extreme ultraviolet, or EUV, machines. Under the new Commerce Department restrictions, the company may be limited from selling DUV technology to Chinese customers too, Citigroup analysts wrote.

“We are assessing the potential implications of the new regulations, if any, and cannot comment at this moment,” said Monique Mols, a spokesperson for ASML.

Patel of SemiAnalysis believes the unverified list is a serious threat to China’s tech ambitions. In the past, the Commerce Department cut off access to critical technologies for companies like Huawei Technologies Co. when they were added to the so-called entity list, meaning the agency had gathered evidence against them. The unverified list simply means the Commerce Department can’t verify that a company’s activities are safe.

“That is huge,” he said. “They can pretty much blacklist any company they want in China within two months.”


Source : BNN Bloomberg